Earnings Call Transcript - LAND Q2 2020

Operator, Operator

Ladies and gentlemen, thank you for standing by and welcome to the Gladstone Land Corporation Second Quarter ended 6/30/2020 Earnings Call and Webcast. (Operator Instructions). I would now like to introduce today's conference call Mr. David Gladstone. You may begin, sir.

David Gladstone, CEO

Okay. Thank you, Kevin for that nice introduction. This is David Gladstone and welcome to the quarterly conference call for Gladstone Land. Thank you all for calling in today. We appreciate you taking time out of your day to listen to our presentation. We're going to start with Michael LiCalsi, he is our General Counsel and Secretary. And he is also the President of Gladstone Administration, which is the administrator for all the Gladstone funds. Michael, why don't you go.

Michael LiCalsi, General Counsel and Secretary

Thanks, David. Good morning, everybody. Today's report may include forward-looking statements under the Securities Act of 1933, Securities Exchange Act of 1934 including those regarding our future performance. These forward-looking statements involve certain risks and uncertainties that are based on our current plans, which we believe to be reasonable, and many factors may cause our actual results to be materially different from any future results expressed or implied by these forward-looking statements including all risk factors that we listed in our Forms 10-K and 10-Q documents we filed with the SEC that can be found on our website, specifically the Investor Relations page. We undertake no obligation to publicly update or revise any of these forward-looking statements whether as a result of new information, future events, or otherwise, except as required by law. Today, we will discuss FFO, which is Funds From Operations, and FFO is a non-GAAP accounting term defined as net income excluding the gains or losses from the sale of real estate and any impairment losses from property plus depreciation and amortization of real estate assets. We'll also discuss core FFO, which we generally define as FFO adjusted for certain non-recurring revenues and expenses, and adjusted FFO which further adjusts core FFO for certain non-cash items such as converting GAAP rents to normalized cash rents. In all, we believe these are better indications of our operating results and allow better comparability our period over-period performance. Please take the opportunity to visit our website once again gladstonefarms.com, sign up for the email notification service so you can stay up to date on the Company. You can also find us on Facebook keyword there is The Gladstone Companies and on Twitter the handle there is @gladstonecomps. Today's call is an overview of our results, so we ask that you review our press release and Form 10-Q, both of which were issued yesterday for more detailed information. Again, you can find them on the Investor Relations page of our website. With that, I'll turn the presentation back to David Gladstone. David?

David Gladstone, CEO

Okay. Thank you, Michael. When it comes to buying additional farms, things are still moving a bit slow for us. We are seeing significantly more opportunities than we did earlier in the year, and we expect the activity to pick up for us. We have four farms with the purchase agreements signed, but we are in due diligence and they may fall out somewhere along the way, it's about $70 million there. We have four more farms, which we are negotiating a PSA and some of those are probably going to fall out, but that's about $80 million. So, we are lining up things, hopefully many of those can close before the end of the year. I know many of the farmers have been extremely busy because sales in grocery stores have been strong, and that's where most of our tenants sell their crops. We invested about $21 million in new farms during the quarter. Operations on our farms remained strong, and our team continues to have success leasing our existing farms at increased rental rates. We believe these increased rental rates are indicative of the continued strong demand that we're seeing for farms that we own and the products grown on our farms. One thing to remember about the first quarter is that we received an early lease termination payment that one of our tenants wanted to get out of their lease, and we said that's fine, but we need to be paid and they paid us about $3 million; this was a large long-term lease. This $3 million is a non-recurring event, of course all of you know that, and we immediately leased the farm out to a different grower under a new long-term lease. So, two things that you should keep in mind when you're looking at the second quarter. First, leases of about 1/4 of our farms include what we call participating rents. That's where we receive a certain percentage of the gross revenue earned on the farm, from the grower selling his or her crops. This participation rent is in addition to the minimum fixed base guaranteed under the lease. We don't know whether we will get anything out of that or not. If the crops come out strong, we get plenty. If it doesn't, obviously we don't get anything there. However, these are not known until really the second half of the year. The expectation is that these rents will provide us with an earnings boost in the third and fourth quarter as they did last year, when we recorded about $2.3 million in participation rents. Of course, the size of the crops can be much smaller, meaning we get less. I don't put a lot of stock that we're going to get all of that money every year. The second thing you should know is that each year we receive a refund for a portion of the interest that we paid on our loans if we borrowed the money from the Farm Credit Group in the prior calendar year. This is called patronage, and those payments are generally recorded during the first quarter of the year. We recorded about $1.3 million of income, like that from last quarter, not last quarter meaning second but the first quarter. The second quarter is usually status quo for us, as it was last year, and we think we came out fine from an operating standpoint. On a year-to-date basis, we have about $0.09 per share of excess dividend coverage with adjusted FFO through the second quarter. Now just to provide an update on the impact of the government's closings on our farms. About 90% to 95% of the products grown by the farmers who lease our farms are sold to grocery stores like Kroger, Safeway, Costco, Walmart, and similar outlets; very little of the produce is being sold to the food service industry including restaurants and institutions like schools. That's where product sales have been hurt by the coronavirus reduction in openings. Demand for produce and most other foods at grocery stores remains high, and I read an article that says those sales are up by 10% over 2019. We expect this to continue to be the case for the rest of the year. People obviously have to eat, and so they are buying their food at the grocery stores since they are not going out to restaurants. So in short, our farmers are not seeing significant impact from the government shutdown on their operations; supply chains are still tracking and running smoothly and the prices remain very good for most of the crops. So, we feel like we are in an area that is not being impacted very much. An area where we are seeing impact is the timing of payments from the processors to the growers, particularly those farmers growing permanent crops like nuts and blueberries. With the government-mandated shutdowns forcing many offices to close in the country, a lot of the smaller companies don't have the ability to get checks out and they often times are just not getting into the office at all. Payments from other third parties to these processors are getting delayed and that delay trickles down to some of our growers and ultimately to us. It's not a huge problem in the sense that there is a lot of money, but it's just new since you're always fighting to get a few payments in. In the fresh produce side, there is less there because this is sold directly to the market with no intermediaries to speak of, but in the permanent crops, such as nuts and blueberries, the processing adds to the grower takes about an extra three months. You know they have to crack the almonds and get the almonds out of the nut and then dry them and those kinds of things. And while they're doing that, they're not going to make any payments until they sell it. So that does slow down because of what's going on in the marketplace. Because of this situation, we granted rent deferrals to two blueberry growers who are waiting for payments from their respective processors. The products have actually been sold and the processors are getting them ready for delivery. This rent on the blueberry side is not really a concern for us; it's just a matter of timing. We've agreed to give them extra time, up to 120 days, and we should get those payments in October and November. It's about $43,000 of rent that we deferred, which is actually less than 1% of projected 2020 cash rents based on our current farmland holdings. Other than that, we have other tenants who every now and then we get a few weeks behind; one guy is at $53,000 behind on his rent because he had some insurance, he had rain insurance, and he hasn't gotten his payment from the insurance company even though that processor has been out there and talked to them. So, it's a few weeks, a few months; they will get it. I expect we'll collect all of that amount by the end of the quarter. Aside from these smaller situations, all of our other tenants are current on their rental payments to us. Moving on to the farmland ownership, we currently have about 89,000 acres, 150 farms valued at about $912 million. These farms are located in 10 different states and, more importantly, in 24 different growing regions. Our farms continue to be 100% occupied with at least 70 different tenants, all of whom are unrelated to us. And the tenants operating these farms are growing about 50 different crops. We now own a good number of farms in enough different regions, with many different farmers and many different types of crops. So that there is sufficient diversification in our holdings to provide some safety—hopefully a lot of safety and security—for cash flows coming in, and they are also used, of course, to pay dividends to our shareholders. Recent activity during the second quarter: the team acquired two farms for about $18 million and also invested another $3 million in existing farms. We needed to obtain approval from Napa County, for example, for additional venues to be planted on the property we own there. It's just additional time to get things done, and while that $3 million is being put in, it's counted against us on the valuations. It's counted against us because we've put the money out, but they haven't been appraised since the things have gone in, and then as a result, it looks like where values are going down. Overall, the initial net cash yield to us on these investments that we make, like this $3 million, is about 6.2%, and the leases on these farms also contain certain provisions such as annual escalations that should push that figure higher in the future. Just as a reminder, this year figure does account for operating expenses responsibilities under the respective leases. So, we're supposed to pay the taxes, which sometimes we do enter into that. These leases are mostly triple net, so there shouldn't be too many expenses incurred by the company. On the leasing front, during and after the quarter ending June 30, we either executed new leases or extended existing leases on three of our properties located in California and some in Florida. In total, the new leases are expected to result in a total increase in annual net income of about $173,000, which is about 24% over that of the prior leases. Looking ahead, we have farm leases scheduled to expire in 2020. These all expire in the fourth quarter of the year and total less than 5% of our total annualized leases. We are in discussions with the existing tenants and some potential new tenants, although we hope all the people that are leasing our properties will continue. We aren't expecting any downtime on these leases. Overall, we expect the new leases on these renewals to be pretty neutral from where they are today and maybe up a little bit. Finally, just a quick update on the impact of our farms from the current wildfires in California and the hurricane on the East Coast. We reached out to our Eastern located tenants and they reported no damage in Florida on our farms. And in California, none of the recent fires have posed a threat to any of our farms, though the largest fire out there, the apple fire, is more than three hours away from our nearest farm. They are usually up in the mountains, where there's a lot of brush. So we don't really expect fires in California. In fact, in the past, we have not lost anything. Well, that's enough about the operations, and I'll turn it over to our Chief Financial Officer, Lewis Parrish, to talk to you about the numbers.

Lewis Parrish, CFO

All right, thank you, David, and good morning to everyone. Again, with our balance sheet during the second quarter, our total assets increased by about $16 million, primarily due to new farm acquisitions and proceeds from equity issuances. From a financing perspective, we carried about $16 million of new long-term borrowings during the quarter at a weighted average rate of 2.81%, which is fixed for the next nine plus years. On the equity side, during and subsequent to the quarter ended June 30th, we've raised about $6 million of net proceeds through sales of our common stock under the ATM program. We also started selling our Series C Preferred Stock during the second quarter after completing the offering of the Series B Preferred Stock during the first quarter. So far, we've raised about $6 million of net proceeds from sales of the Series C Preferred Stock. As with the Series B, our plan with the Series C Preferred Stock is to sell it in small amounts over the course of the next several years so that we are better able to timely acquire farms with the proceeds as they come in. Just to remind everyone, in the process of selling the Series B and now the Series C Preferred Stock, we do pay certain commissions and fees to Gladstone Securities and our affiliated broker dealer. However, Gladstone Securities is just a conduit for this offering, as it pays out about 94% of these fees to other third parties including brokers and wholesalers who are helping to sell the shares. The rest of the fees kept by Gladstone Securities, that remaining 6%, these amounts are used to cover various expenses related to selling the stock, which are actually greater than the fees retained by Gladstone Securities. Please note that the preferred stock is not included in the calculation of the fees we paid to our advisor and it has never resulted in an additional fee paid to the advisor. Now, I'll move on to our operating results for the quarter. First, I'll note that we had net income of about $182,000 and a net loss to common shareholders of about $2.1 million or $9.5 per common share. Adjusted FFO for the current quarter was $10.1 per share, versus $25.3 per share in the first quarter. Dividends declared were $13.4 cents per share in each quarter. We had a sizable decrease in adjusted FFO, but that was mainly due to the two significant events in the first quarter that David mentioned rather than shortcomings in the current quarter, and that's the $3 million lease termination payment and $1.3 million of interest payments that were both recorded during Q1. On a quarter-over-quarter basis, cash rents decreased by about $139,000 or 1%, primarily due to a lease we executed during the first quarter that includes the rent-free period for calendar year 2020. This decrease was partially offset by additional rent earned on recent acquisitions. On the expense side, our core operating expenses decreased by about $1.3 million on a quarter-over-quarter basis, which was driven by the incentive fee earned by our advisor in the first quarter at $1.3 million. Removing related party fees, our core operating expenses increased by about $92,000, and this was largely due to additional repairs and maintenance costs, legal fees incurred on certain properties, partially offset by a decrease in G&A expenses, specifically lower corporate legal fees and advertising costs. Moving on to net asset value, we had 44 farms we valued during the quarter, and these are all via independent third-party appraisals. Overall, these farms decreased in value by about $700,000 or 0.4% from their previous valuations from about a year ago. As of June 30th, our farms were valued at about $912 million, all of which was valued basically with the third-party appraisals or the actual purchase price. Based on these updated valuations and including the fair value of our debt and our preferred stock, our net asset value per common share at June 30th was $11.6, which is down by $0.40 or 3.5% from last quarter. The main drivers of the decrease were ongoing capital improvements on certain properties and an increase in the fair value of our long-term borrowings due to changes in market rates. One note on the ongoing capital improvements: two of the farms we acquired in Q3 of last year were purchased with the intention of spending some money on improving irrigation, infrastructure, and other improvements on the farms. Essentially buying a B farm and turning it into an A farm. We spent about $3 million fixing up those farms and with the projects nearing completion, we're hopeful of being able to recoup at least the majority of those costs when those farms are reappraised in a couple of months. Turning to our capital mix of overall liquidity, from a leverage standpoint, our loan-to-value ratio and total farmland holdings on a fair value basis and net of cash was about 52% at June 30th. We're comfortable at this level given the relatively low risk of high-quality farmland as an overall asset class. In addition, over 99% of our borrowings are currently at fixed rates. On a weighted average basis, these rates are fixed at 3.55% for another six years out. So, we believe we are currently well protected on the debt side against any future interest rate volatility. With the weighted average maturity of these borrowings being over 10 years away, we also feel that we're protected against any potential liquidity issues should the current recession continue for a prolonged period. Regarding upcoming debt maturities, we have about $26 million coming due over the next 12 months. However, $14 million of that represents the maturities of two bullet loans coming due towards the end of this year. The two properties collateralizing these loans have increased in value by a total of $2.3 million since their respective acquisitions, so we do not foresee any problems refinancing either of these loans. Thus, removing those maturities, we only have about $11 million of amortizing principal payments coming due over the next 12 months, which is about 2% of our total debt outstanding. From a liquidity standpoint, including availability on our lines of credit, we currently have over $50 million of dry powder. Regarding our access to additional credit, based on conversations we've had with our lenders, we do not currently foresee a credit freeze on ag lending in the near-term future. Credit continues to be readily available to us and at very favorable terms. We have ample availability under our largest farm facility and we continue to be in discussions with potential new lenders for additional borrowings. We also have the ability and intent to issue new OP Units as consideration for purchases should the opportunity arise. In short, we have plenty of room and ability to continue borrowing and buying new farms that meet our investment criteria. Finally, I will touch on our common distributions. We recently raised our common dividend again to $4.48 per share per month. Over the past 22 quarters, we have raised our common dividend 19 times resulting in an overall increase of 49.3% in our monthly common distributions over this time. Since 2013, we paid 90 consecutive monthly dividends to common shareholders totaling $4.71 per share in total distributions. Paying dividends to our shareholders is paramount to our business plan, and our goal continues to be to increase the dividend at a rate that outpaces inflation. We're not quite there yet, but we believe we're heading in the right direction. In our current distribution run rate and with regard to where our stock price is today, the yield on our stock is about 3.3%, and when considering the relative stability and security of the underlying assets, we believe the stock offers a compelling investment alternative. And with that, I'll turn the program back over to David.

David Gladstone, CEO

Okay. Nice report, Lewis. Currently, I think the farmers who grow produce sold to the grocery stores are flat-out working night and day as much as possible, so they can make as much money as they can, and it's impacting our ability to buy more farms. The farmers are busy working on the farm; they don't have time to spend on negotiating contracts and those kinds of things. Additionally, when doing our due diligence on titles and other legal records, many of the government offices are just closed, so we can't close on our loan without knowing whether there are liens out there or problems on the property. So it's taking longer to determine the title, if the title is clean or if there are other problems with the property. Also, the offices of some of the mortgage lenders who finance our acquisitions are not fully staffed; our people in the office are not there, so it just takes longer to get everything done. But we are seeing a good number of opportunities coming our way; it's just taking a bit longer than normal to get things through the system that we put it through, what we call due diligence. A couple of points to make: we believe investing in farmland, growing crops, contributes to a healthy lifestyle such as fruits and vegetables and nuts. Following the trend we're seeing in the market today, currently about 85% of our total revenue comes from farms that are growing the type of foods you find in either the produce section or the nut section of your local grocery store. We consider these foods to be among the healthier types of foods, and we continue to see a growing trend toward organic among those foods. About 40% of our fresh produce acreage is either organic or transitioning that way, and over 10% of our permanent crop acres fall into the organic category. We believe the organic section will continue to be a strong growth area for us. Additionally, the non-GMO of our products is more than 95% of our non-GMO. Another major reason why our business strategy is focused on farmland growing fresh produce is due to the effect of inflation on particular segments. According to the Bureau of Labor Statistics, the overall Annual Food CPI generally keeps pace with inflation. However, over the past 40 years, the fresh fruits and vegetable segments of the food category have outpaced the total CPI by a multiple of 1.6 times. While the prices of commodity grain crops like corn and wheat are typically more volatile and susceptible to global supply and demand, fresh produce is mostly insulated from global volatility mainly because the crops are generally consumed locally within a short time after being harvested. So, this is not as much in the way of storage costs and other things to get to the consumer. I'm telling you this because we are often confused with owning farms where farmers grow corn, soy, and wheat; those grain crops and we mostly stay clear of these crops because they have to compete with other countries like Brazil and Ukraine where the cost of production and government subsidies and even after shipping costs are much lower than ours—those farmers can undercut the price of our grain farmers pretty easily. Overall, demand for prime farmland growing berries and vegetables remains stable to strong in this environment in almost all the areas where our farms are located, particularly among the West Coast, including most of California, Oregon, and Washington, and the East Coast, especially Florida. Overall, farmland continues to perform well compared to other asset classes despite some recent downturns in certain regions. The NCREIF Farmland Index, which is currently made up of about $11.9 billion worth of agricultural properties including ours, has averaged an annual return of about 13.6% over the past 15 years compared to the 10.5% in the S&P Index. You should know that during those 15 years, the Farmland Index did not have a negative year, unlike the S&P, which I think had three negative years over the same period. Farmland has generally provided investors with a safe haven during turbulent times, and these turbulent times that we're in are no exception. As land prices and food prices, especially for fresh produce, have continued to rise steadily, please remember that purchasing stock in this Company is a long-term investment; it's not going to have a spike tomorrow morning. I think investments in our stock really have two parts. Similar to gold, it's hard asset farmland; dirt is not going away and has an intrinsic value because there is just a limited amount of it, and it's being used up by urban development especially in California and Florida where we have many. So, one day you wake up and they want to take your farm and turn it into a school and they will pay you a good amount for it. Second, you should remember that unlike gold and other alternative assets, it's an active investment with cash flow to investors and we believe we are better than a bond fund because we can keep increasing the dividend. We expect inflation, particularly in the food sector, to grow and we expect the values of the underlying farmland to increase as a result, and we expect this to be true in fresh produce as people in the US are eating healthier. I think a good way to look at our farmland fund is as a hedge against inflation, both in food prices and the value of the underlying land that grows the food, and I think it's a great opportunity to own once you get just a little bit larger in terms of asset size. I'm hopeful that we'll get listed on the RMZ index that is for real estate investment companies and that will bring in additional institutional ownership that will increase the daily liquidity of our stock. But folks, Gladstone Land wouldn't be anything without the good people that we have. We have great operators and great buyers, and we're managing that; we keep up with everything. Buying and leasing farmland is a complex business and I think we're doing a good job. So, if you like what you're hearing, please buy some stock, keep eating fresh fruits and vegetables and nuts, and now I'm going to stop and the operator will come on; we'll be able to answer some of your pressing questions.

Operator, Operator

Our first question comes from Craig Kucera with B Riley FBR.

Craig Kucera, Analyst

Sorry about that. I am here, hi. Well, I just wanted to ask, you mentioned that you're seeing more opportunities than you were earlier this year, do you have any sense of what you would attribute that to?

David Gladstone, CEO

Yeah, the farmers are busy as can be, and as a result I don't get out to the farm as long as they're farming. So, they're out there in the farm backing up the truck and getting as much as they can into the truck and taking it to town. They are very busy right now. That's been a problem, and then the local governments and their reaction to the coronavirus, shall we say the Chinese virus, has been extreme in terms of shutting down things. So, there have been problems in getting people to do what you need to do to get something purchased. The lawyers are all there; we can get the lawyers to work, but some of the government workers and some of the others that are in our need to find out things just aren't in the shop, so it takes a little time to get that done. I think we are now getting to the point where some of the things that we started even last year are coming through, and I think this will be a good quarter—maybe not as good as we had hoped, but by the time year-end comes, we should have done a pretty good job of buying this year.

Michael LiCalsi, General Counsel and Secretary

You have another question, Craig?

Craig Kucera, Analyst

Yes, yes, I do actually. I was going to ask—it sounds like there's a lot of procedural and institutional challenges related to Covid. Has that impacted pricing at all or has that remained fairly steady?

David Gladstone, CEO

Although it's fairly steady, grocery store prices are up about 10%, especially, and maybe more in the produce section. I don't know specifics. We get some information from the Department of Agriculture, but it's spotty. They do a good job of bringing together the prices that are going from the field to the buyer, but we don't know how much the stores are marking up the product and sometimes marking it down in order to flow it through they have, but there is a lot of strawberries and blueberries in the marketplace today and sometimes they use strawberries as a marketing mechanism to get the buyer to come into the store, because the buyers of strawberries tend to buy four times more produce than anybody else. So when you look in the newspaper, you'll see the discounting on strawberries in order to make somebody come in and buy strawberries, but at the same time buy all the other things that they buy in the fresh fruit section.

Craig Kucera, Analyst

Got it. So, I feel like earlier this year you felt that even though there was an initial spike in pricing that it didn't last; sounds like things are maybe up 10%. Based on your commentary, does that lead you to be a little bit more confident about seeing some rising percentage rent in the back half of this year?

David Gladstone, CEO

I hope so. I love percentage rents. It's the easy way for us to participate in the farming operation rather than owning the farm. I think it's just a good way to get another bite at the apple—no pun intended.

Craig Kucera, Analyst

Got it. So just based on the commentary you had on some of the opportunities you're looking at, I think you mentioned you had four farms that were a little closer to maybe closing at about $70 million and another four for $80 million. Would you handicap what you think you're going to close by year-end of that $150 million?

David Gladstone, CEO

Oh, you're doing your projections again, aren't you? I think we will close the four farms with $70 million; how much we get with the $80 million, I don't know. We may have a couple of people that say they now want to close before year-end and we only have anything from them other than a good discussion going.

Craig Kucera, Analyst

Got it.

David Gladstone, CEO

Craig, there's no way of handicapping that; you just never know.

Craig Kucera, Analyst

That's fair. And you mentioned using both the OP Units. I know you don't have a tremendous amount of OP Units outstanding, but are any of the potential acquisitions you're looking at involving OP Units coming up in the discussion?

David Gladstone, CEO

They are always in the discussion, and we push it pretty hard, but I don't know. It's hard to sell OP Units to somebody for their farm because many of the people want to buy another farm and you can't use the OP Units for that. So they're usually like any business that's dependent on real estate—they need the cash to buy the next whatever, the next farm or the next warehouse or whatever they're buying.

Craig Kucera, Analyst

Well, that makes sense. And you mentioned CapEx. Can you remind us of what you expect your CapEx budget will be for the rest of the year?

David Gladstone, CEO

Lewis, what do you have?

Lewis Parrish, CFO

So, most of the—we are not disclosing that CapEx cap for the rest of the year, but most of the projects that we have been doing so far for the first half of the year are nearing completion. So, we do think you'll see depressed amounts through the third and fourth quarters versus what they were in the first half of the year.

Craig Kucera, Analyst

Got it. And one more from me: I know earlier this summer, you were looking at the walnut business. Have you come to a conclusion on whether or not that's a business that fits for Gladstone Land?

David Gladstone, CEO

Well, we have some, but not a lot. It's a little worrisome on the walnut side; it's a good product, but I don't know—we've gone back and forth on those, and if you sell me a farm cheap enough, we will be in the business, but I'm not going to pay off. Walnuts are a little hard to forecast right now.

Craig Kucera, Analyst

All right, sounds good. That's it from me. Thanks, guys.

David Gladstone, CEO

Okay, next question.

Operator, Operator

Our next question comes from James Villard with Ladenburg Thalmann.

James Villard, Analyst

Good morning, guys.

David Gladstone, CEO

Good morning.

Lewis Parrish, CFO

Good morning.

James Villard, Analyst

As we move into Q3, has the transaction trouble you guys with—you mentioned about local government; has that improved in Q2, and we see..

Lewis Parrish, CFO

It's better now. Yeah ahead.

David Gladstone, CEO

Finish, James.

James Villard, Analyst

Yeah. And as you move in the back half of 2020, do you expect there to be some pent-up acquisitions?

David Gladstone, CEO

I wish I knew. I think people are thinking about it. I think Covid-19 pushed somebody over the edge, and they now want to sell a farm and get some liquidity and just rent rather than have a lot of capital tied up in land. They don't know what tomorrow will bring in terms of this virus that we are fighting. I just don't know. It's really hard in this business because, unlike if you're in the real estate business solely, there is no way. This is all done retail. Our people are out actually talking to the farmers that own it rather than talking to the broker. Many of the real estate companies, as you probably know, are all based on brokers in the field, and there're lists of the products—you get 10 bids, ours are knocking on doors and talking to people and somebody heard from Joe that Joe is selling his land and renting it back, and they want to know how we do that. There is a lot of shoe leather put into getting these things done and a lot of discussions in educating people because it's not well known how this works in the farming business.

James Villard, Analyst

Yeah. I understand that. Just one more question from me: are you all, I guess, when you look at—when you're dealing with these farmers who are looking for a little liquidity, are you competing with federal rate programs that are just coming online I guess in the wake of this virus?

David Gladstone, CEO

I don't know. Do we have any competition with any of the farming products, I don't think so. They really have a chance to borrow money from Farm Credit and those kinds of people or insure some of their products. It's not a very well organized. There are parts of the Department of Agriculture that are extremely well organized. The disposition of farms and financing our farms, unless you look at the Farm Credit people or Farmer Mac, are not as well organized as other products out there. I mean if you got a warehouse, there are a lot of buyers that will buy warehouses today. So, I think we are in the early stages of it being organized. If we can just capture part of the $1.7 billion that we see out there, we'll be very happy.

James Villard, Analyst

That's all for me. Thanks for the color.

David Gladstone, CEO

Next question?

Operator, Operator

I'm not showing any further questions at this time.

David Gladstone, CEO

Okay, we're all just—one question was asked of us, why aren't we issuing more common stock? It’s cheap compared to where it was and quite frankly, I think it's still undervalued. We should be a $20 stock given the asset value and strength of our assets that we're holding and given the consistency of getting paid over and over, no matter what. I mean this is the worst recession I've ever been through, and these farmers continue to sell and it is only one phrase to set that your mind: people got to eat. So as a result, as long as the products keep coming—and they do—farms are not going to stop producing. It's a great place for us to be. So that's the end until next time. We will see you next quarter, and thank you very much for calling in.

Operator, Operator

Ladies and gentlemen, that concludes today's presentation. You may now disconnect and have a wonderful day.