Earnings Call Transcript - LAND Q3 2023

Operator, Operator

Greetings and welcome to the Gladstone Land Corporation Third Quarter Earnings Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. David Gladstone, Chief Executive Officer. Please proceed, sir.

David Gladstone, CEO

Thank you all for calling in today. We appreciate the time you take to listen to our presentation. Before I begin, we will hear from Michael LiCalsi, our General Counsel and Head of Administration. Michael?

Michael LiCalsi, General Counsel and Head of Administration

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 we believe to be reasonable. 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 the risk factors in our Forms 10-Q, 10-K and other documents that we file with the SEC. You can find them on our website, the Investors page at gladstoneland.com and on the SEC’s website, which is www.sec.gov. And 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. 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 also discuss core FFO, which we generally define as FFO adjusted for certain non-recurring revenues and expenses and an adjusted FFO, which further adjusts core FFO for certain non-cash items, such as converting GAAP rents to normalized cash rents. And we believe these are better indications of our operating results and allow better comparability for a period-over-period performance. Once again, please visit our website gladstoneland.com and sign-up for our email notification service. You can also find us on Facebook, keyword there is the Gladstone Companies and on Twitter, that’s @gladstonecomps. Today’s call is an overview of our results, so we ask that you review our press release and Form 10-Q, both issued yesterday for more detailed information. And with that, I will turn it back to David Gladstone.

David Gladstone, CEO

Alright. Thank you, Michael. I’ll start with a brief overview of our Farmland Holdings that currently own about 116,000 acres on 169 farms and about 45,000 acre-feet of banked water, that’s water that’s in the acre-foot we can tap into. One acre-foot is equal to about 326,000 gallons, so we own nearly 15 billion gallons of water. And together, they are valued at approximately $1.6 billion for both the land and the water. Our farms are in 15 different states and more importantly, in 29 different growing regions. So stored water, mostly in California. So you can see we are pretty well diversified. Just to show you a little more diversification, our farms are leased to over 90 different tenant farmers, all of whom are unrelated to us. The tenants in these farms are growing 60 different types of crops, but mostly fruits and vegetables and nuts like you’d see in the produce section of a grocery store, which is where most of our products are sold. And now, I’ll give you a quick update on some of the tenant issues we have been working through, still farming on one farm in California with the help of a third-party farm management group. We have been in discussions with the same group to sign leases and not just farm it for us. The property lease will be closed and finalized hopefully soon. In addition, short-term leases on 4 blueberry properties in Michigan, encompassing about 14 different farms expired in October. Since then, we’ve been farming three of these properties to 11 other farms with the help of third-party management groups. The fourth property, which consists of 3 farms currently vacant, is okay to be vacant this time of year, because there are no blueberries on the blueberry bushes. We are in discussions with groups to take over all of these farms and we hope to also have an agreement in place by the end of the year. Finally, during the year, we had two other tenants who had gotten behind in their rental payments to us; one tenant was replaced, the farm being fully leased as of July 1, and the other tenant was able to catch up on their rents and is now no longer falling behind. Total year-over-year impact on our operations as a result of these issues that I mentioned above was a decrease in operating income of about $201,000 in the third quarter and about $814,000 for the year so far. I think a lot of that will be replaced by the fact, we will get some properties that actually sell their crops and make up some of those problems that we had. As mentioned in the past couple of calls, we continue to have a more selective approach to the types of farms we review for potential acquisition because our cost of capital is so much higher. For example, we financed most of our farms that we buy with a first mortgage for about 60% or 70% of the price we pay. As a result, acquisition activity remains slow for us because those costs have gone up so much. It is changing, and it will change over time. With inflation still above the Fed’s target rate, interest rates remain high for us for the foreseeable future. Having gone through these cycles before, we know it will change. But overall, our existing Farmland portfolio continues to perform pretty much as we expected it would, with the exception of the issues I mentioned above. We are having a couple of tenants that have problems, but we always work through those. On the leasing front since the beginning of the quarter, we renewed and amended 9 leases on farms in two different states. Overall, the results were as expected, leading to an increase in annual net operating income of about $275,000 or 4.7% above that of the prior leases. Looking ahead, we have 3 leases scheduled to expire over the next 6 months, and in total that makes up less than 5% of our total annualized lease revenue. We are in discussion with groups to lease these farms and we are also looking into possibly selling one of these farms as it’s in one of those development areas. Hopefully, we will have some information for you before the end of the year, but we are not currently anticipating any vacancies on any of these farms as a result of the upcoming expirations. We also recently entered into a water transfer agreement with a local water district in California that will allow us to purchase up to 15,000 acre-feet or nearly 5 billion gallons of water per year through February 2031. So far, we have purchased about 7,000 acre-feet of water for 2023 at a total consideration of about $1.2 million. We have recently completed the construction of some groundwater recharge basins. These basins own some of the unformed acreage on a couple of our large properties in California. This will enable us to pump the water onto these basins, allowing us to store it as it goes underground for further use in our farms. We are in good shape in terms of needing water in the future. I think this year is going to be a wet year, but who knows, maybe it’s the beginning of a 5 or 6-year drought period. So, we have got a lot of water to get us through any problems we face. Inflation continues to slow down as the impact of the Fed’s interest rate hikes is now being felt throughout the economy. However, the latest headline inflation rate is about 3.7%, which still remains above the Fed’s target of 2%, and core inflation has not been moving in the right direction, according to the Federal Reserve. Food prices are also showing signs of cooling down after a substantial increase post-pandemic, but we continue to keep pace and outpace inflation as we see them now. We believe food prices will continue to keep pace or again outpace inflation, which should help mitigate the increases in the operating costs many of our tenant farmers are experiencing as we look into the future. I want to stop here and turn it over to our CFO, Lewis, to talk to you more about the numbers. Lewis?

Lewis Parrish, CFO

Alright. Thank you, David and good morning everyone. I’ll begin by briefly going over our financing activity. We do not incur any new borrowings during the quarter, but we have repaid about $7 million of loans since the beginning of the quarter. On the equity side, since the beginning of the quarter, we have raised net proceeds of about $2 million from sales of our Series E preferred stock and $1 million from sales of our common stock to the ATM program early in the quarter. Moving on to our operating results. For the third quarter, we had net income of about $3.1 million and a net loss to common shareholders of $3 million, or $0.08 per common share. For the following discussion of operations, I will be comparing the third quarter of 2023 with the corresponding third quarter of 2022. Adjusted FFO for the current quarter was approximately $5.6 million, or $0.155 per share compared to $7.2 million, or $0.207 per share in the prior year quarter. Dividends declared per common share were $0.139 in the current quarter compared to $0.137 in the prior quarter. The primary driver behind the decrease in AFFO was lower year-over-year revenues coupled with an increase in related party fees and higher financing costs, with the proceeds from a portion of such financings remaining uninvested. Fixed base cash rents decreased by about $400,000, or 2% from their prior year quarter. This is primarily driven by a decrease in revenues from self-operated and non-accrual properties as well as a lease we executed in the fourth quarter of 2022, in which we reduced the fixed base rent in exchange for increasing the participation rate component in the lease. The result of this increase in the participation rate component won’t be known until the fourth quarter. Participation rents also decreased by about $600,000 from Q3 of last year. These figures are largely dependent upon the timing of when such information is made available to us. From what we’ve received so far, we are seeing lower yields coupled with lower pricing for last year’s crop. The lower yields were expected due to the alternate year bearing nature of the trees and due to the fact that these crops were harvested at the end of a multi-year drought. Pricing continues to be somewhat lower due to oversupply, particularly in the almond market. On the expense side, excluding reimbursable expenses and certain non-recurring or non-cash expenses, our core operating expenses for the current quarter increased by about $370,000 from last year. This is primarily driven by an increase in related party fees, particularly a higher incentive fee earned by our advisor during the current quarter. Removing related party fees, our recurring core operating expenses remain relatively flat from the prior year quarter. Finally, other expenses decreased due primarily to lower interest expense incurred as a result of loan repayments made over the past year. With that, we will move on to net asset value. We had 43 farms and our banked water all valued during the quarter, and these valuations increased by about $1.1 million over their previous valuations from about a year ago. As of September 30, our portfolio was valued at approximately $1.6 billion, all of which was supported by either third-party appraisals or the purchase prices. Based on these updated valuations and including the fair value of our debt and all preferred securities, our net asset value per common share at September 30 was $20.33, which is up from $19.15 at June 30 and up from $16.56 at Q3 of last year. The majority of this change was due to a decrease in the fair value of our preferred securities driven by the high interest rate environment. Turning to liquidity, including availability on our lines of credit and other undrawn notes, we currently have access to over $170 million of liquidity in addition to about $155 million of unpledged properties. Over 99.9% of our borrowings are currently at fixed rates, and on a weighted average basis, these rates are fixed at 3.35% for another 4.3 years. As a result, we have experienced minimal impact on our operating results from increases in interest rates. With respect to our current debt load, we believe we are well protected against any further interest rate hikes for the foreseeable future. Regarding upcoming debt maturities, we have about $41 million coming due over the next 12 months. However, about $24 million of that represents various loan maturities, and the properties collateralizing these loans have increased in value by a total of $7 million since their respective acquisitions. We don’t foresee any problems refinancing any of these loans if we choose to do so. If we remove those maturities, we only have about $17 million of amortizing principal payments coming due over the next 12 months, or less than 3% of our current debt outstanding. One other item to note here, our lines of credit with MetLife are currently set to expire in April of 2024. We are close to finalizing a long-term extension with MetLife for each of these, and we hope to have this wrapped up during the fourth quarter. Finally, regarding our common distributions, we recently raised our common dividend again to $0.464 per share per month. This marks the 32nd time we have raised our common dividend over the past 35 quarters, resulting in an overall increase of 55% over that period. With that, I’ll turn the program back over to David.

David Gladstone, CEO

Okay. Thank you, Lewis. That’s a nice report. We continue to stay active in the market should a good opportunity present itself. But we are being more cautious on the acquisition front. As changing out there, people have begun to reduce the price on some of their farms. It happens much quicker in other REITs, but on the land side, the owner of the property can always continue to operate the farm and make a few bucks. Additional points to make, just the final point I’d like to make. We believe that investing in farmland, growing crops that contribute to a healthy lifestyle such as fruits and vegetables and nuts follows a trend that we are seeing in the market today. Overall, demand for prime farmland, growing berries and vegetables remains stable to strong in almost all areas that we are in today. When our farms are located today, particularly on both the coast, East and West, we are getting good value increases. Overall, Farmland continues to perform well compared to other asset classes. For example, the NCREIF Index, Farmland Index, which is currently made up of about $16.4 billion worth of agricultural properties, has an average annual return over the last 25 years of 11.4% with no negative years going down. This is so much better than the S&P index and the overall REIT index, each of which have had 6 or more negative years in which, if you were getting out, you were going to lose money if you were in at a certain amount. We have had zero in the farmland index. So, it shows its strength by being something that is always available for us to go out and finance. The banks that we use are very interested in lending us more money, but, of course, they are at a higher price. In closing, just remember that purchasing stock of this company is a long-term investment in Farmland. I think an investment in our stock is two parts. It’s similar to gold. It’s a hard asset, it’s Farmland, it’s dirt. That has an intrinsic value because there is a limited amount of good farmland and it is being used up by urban developers, especially in California and Florida, where our many farms are located. And second, it’s unlike gold in that it’s an alternate asset, but it’s an active investment with cash flows, and investors getting money every month. We believe in it. It’s better than a bond fund because we keep increasing the dividend, which doesn’t happen in a bond fund. We expect inflation, particularly in the food sector, to continue increasing over time and we expect the values of the underlying farmland to increase as a result, especially in the fresh produce food sector as more and more people in the U.S. continue to eat healthy foods. Now, we will have some questions from those who follow us. Operator, would you please come on and help us listen to some of these questions?

Operator, Operator

Thank you. Our first question comes from Rob Stevenson with Janney. Please proceed.

Rob Stevenson, Analyst

Good morning, guys. David, other than the 4 blueberry properties, what are the other crops that are among the challenged operator farms that you guys are talking about?

David Gladstone, CEO

Well, we have an oversupply of almonds in the marketplace today. So I would count that as one that is a problem. The good thing about almonds is they are nuts and you can pack them up and hold them for a while. We found that international purchases of almonds have been down substantially, and I don’t know why that is other than very expensive. But we think that will change and it will change, I think, in the next year.

Rob Stevenson, Analyst

Okay.

David Gladstone, CEO

Go ahead.

Rob Stevenson, Analyst

No, I was just going to ask, beyond the Michigan blueberry stuff. I think you said that there was one in California. Are there any other markets where you’re having issues at this point?

David Gladstone, CEO

We have a vineyard that’s not making as much money as it should, so I keep an eye on that.

Rob Stevenson, Analyst

Okay. And how are you guys thinking about the opportunity to release these assets and what you’d get from that versus just selling them, taking the proceeds and either repaying debt or buying something else and moving on?

David Gladstone, CEO

Yes, that’s a daily conversation in this place. And as a result, we have one property in Florida, it’s a fairly large farm, it’s growing berries and produce now, but the push in that direction is directly competing with Mexican produce coming in. As a result, most of the produce guys don’t want to pay as much. What we did was locate a couple of people who want to buy that, as it is directly in the line of development in Florida and somebody will make a lot of money. But if you think about it, we’d have to carry it with a negative carry in order to get to the period where we’d be able to sell that off. There are some investors out there that don’t really care for income; they just want to hold it and sell it to some of the developers. We hope to get that done before the end of the year, but maybe not. I don’t want to get myself in trouble mentioning that something is going to happen. But it’s moving along, we have a letter of understanding, but it’s not binding. We’re currently getting the property in shape so it will be transferred, and I think it’ll happen in the next 90 days for sure.

Rob Stevenson, Analyst

Okay. And then the last one for me, what’s the rationale for buying incremental water at this point, right, given the environment right now, and given your cost of capital versus spending that money on an income-producing farm?

David Gladstone, CEO

Well, an income-producing farm would be lovely, but we don’t have many of those for sale because the price they’re willing to take is so much higher than we can justify based on the cash flows. That’s throughout the industry. Now, inflation has driven up the price of all the inputs to grow. Almonds, and pistachios are much more expensive to grow today than they were 2 or 3 years ago. The guys who are running our farms and renting from us are able to sell and make money, but they’re not making a lot of money. As soon as the Fed stops raising rates for good and things level out, we’ll go back into a mode that will allow us to do that. We’re already seeing some of the farms in California, and certainly in Florida, come up for sale at lower prices. If you want to get out now, as you probably remember, about FDA, 80% of the farms are in the hands of families that are wanting to get out of the business or find a way to be more profitable. For us, that’s the thing that’s driving everything right now. If you want to get out, you’ve got to sell at a lower price than you had hoped to get. That’ll change. In a year or two, those prices will be back. We’ll be back in business; we’ve already seen three or four farms that are coming up for sale that we turned down because the price was too high. They’re now starting to come down. I think we’ll be back in the business of buying farms within the next year.

Rob Stevenson, Analyst

Okay, thanks, guys. Appreciate the time this morning.

David Gladstone, CEO

Okay, Latanya, who is next?

Operator, Operator

Our next question comes from Mike Albanese with EF Hutton. Please proceed.

Mike Albanese, Analyst

Yes. Hey, guys, thanks for taking my questions. Despite the tenant issues, I think that was largely a nice quarter. Just a couple of quick ones for me. Again, on the acquisition front, you talked a little bit about pricing any insight into implied cap rates. Are there any deals out there that have closed? Obviously not with you guys, that you could point to or just to give us some sense of where cap rates stand for that.

David Gladstone, CEO

I think cap rates are around 5.5%, maybe higher today. But it’s got to go back down for us to get involved. There are some non-profits that buy properties just for ESG reasons; they want to make money, but it’s not their primary driver. If you wanted to pay eight cap rates, you could have all the deals you want. I don’t know how you’d ever finance that in today’s marketplace. So for us, it means making sure that the farms we have are in good shape. We’re currently doing some deals now with our existing farmers that will give us more income on a straight-line basis instead of extra money at the end of the year. We’re in great shape; we’ve got cash, and we can stay alive for 3 or 4 years if we needed to do that. But I’m expecting the marketplace to change pretty substantially in 2024.

Mike Albanese, Analyst

Yes, you’re right, you do have a healthy balance sheet, you have plenty of liquidity, you are in a position to wait this out a little bit. Just to dig into the tenant issues from their perspective. They’re seeing expenses going up in general from an inflationary perspective. You mentioned an oversupply of almonds. Where are you seeing more of the issues arising from? Is it really on the supply-demand side? Is it the inflationary side? What would help them out more, inflation coming down or just a balancing out in their particular crops? You had two tenants that fell behind; one you were able to replace at a higher lease income, and the other caught up. Using the one that caught up as an example, what changed for them?

David Gladstone, CEO

Probably got a hold of all their costs and recharged the way that they were doing things. The difficulty in selling to who we sell to, which is the grocery stores, that’s where most of our products end up. Grocery stores aren’t passing all the costs on; they’re holding a lot of it. We’re not getting better prices for our almonds and pistachios and strawberries. We’re getting good returns, but if we could get past the markup that stores do, we’d be better off. Once grocery stores realize they need us more than anybody else because they have to have product to sell, you’ll see changes in the marketplace. The person who caught up, they are good farmers, but they just had a bad four-year spell. They are in better shape today than they were when they stopped paying or asked us to accrue something and not get paid cash for it. We are in the business of paying dividends, and that’s our cost if you want to think about it that way. We view this as just another blip in the marketplace, and hopefully in the next 30 to 90 days things will change. People are surprised at what’s going on in the marketplace considering interest rates. This has happened before. I think many will go ahead and pay the 7% or 8% for mortgages, knowing that in a year, they’ll refinance down to a lower rate. Most farmers are in a good position in the marketplace and who they’re selling to. It can get tight every now and then.

Mike Albanese, Analyst

Certainly, there are a lot of moving pieces. I think the velocity at which rates have risen has put a lot of you guys on their heels. Just two more from me, I want to go back to pricing, particularly blueberries and strawberries. What is the propensity for grocery stores to pass on some of those costs? Do the groceries just hold the cards there as consumer-driven? What have you seen in the past?

David Gladstone, CEO

Grocery stores have to have the produce. As long as there is produce at a lower price, they will go with the lower price ones unless you are in a high-end grocery store and you want the best berries you can get and are willing to pay for them. Right now, we’re in the middle of the cycle. At some point, grocery stores will realize they have to pay up and they will pay up. Grocery stores are making money today and probably always will because people need to eat. As a result, grocery stores are places where our products go. We’re not in places that are difficult to defend. All our farmers know these grocers. I remember when I had a farm out there we would entertain people from Kroger or Safeway. We couldn’t do much in the way of perks because their buyers can’t receive incentives from sellers. It changes; they will have to cap the products we are making. We have got 60 products, and most of them are in front of the store in the produce section. They move fast, and we must keep up because there is a limited time to keep produce fresh. We will be fine; people need food and will visit grocery stores to buy it.

Mike Albanese, Analyst

Got it. Thank you very much.

David Gladstone, CEO

Any other questions?

Mike Albanese, Analyst

Yes, that was really very helpful context, much appreciated. My last question is really geared towards Lewis. Just regarding NAV, excuse me, the NAV increase. What are the drivers? Is this more so on property pricing or the changes in the cap stack rates, or valuation techniques with the balance sheet items that are driving the increase in NAV?

Lewis Parrish, CFO

Yes. The majority of the increase for both the quarter-over-quarter and from Q3 of last year was just due to the preferred valuation, particularly for the year-over-year period of the Series C, once we listed that. Previously, we had valued it based on a waterfall approach, so held it at par $25. Once it got listed, it’s mark-to-market based on its closing stock pricing, which has been trading in the $17 and $18 range compared to the par value of $25. So, that’s been the bulk of it. There are components driven by the increases in fair value of our portfolio, but it hasn’t been as significant as the change in valuation of preferred.

David Gladstone, CEO

Also, remember we do value our properties every quarter. When we get these third-parties in, they are impacted; the pricing for all the farms has been impacted by high interest rates. As a result, the prices of farms have been impacted by the fact that you can’t borrow cheap money now. Those valuations are accounting for the extremes in the interest rate market now. If rates come back down, you may see a big bump in our valuations because right now, the valuation people are saying you can’t sell it for that at present. That’s what we’re waiting on as those at the Fed try to get off the dime and stop increasing rates. When they do, valuation changes occur.

Mike Albanese, Analyst

Yes, that was a great point. That was really the basis for my question because I am surprised at how well the NAV has held up, given how quickly and dramatically interest rates have gone up. But obviously, you see that affect you in a couple of different places, so that makes sense. That’s very helpful. Thank you. And that’s it on my end. Appreciate you guys taking my question.

David Gladstone, CEO

Okay. Latanya, do you have anyone else who wants to ask a question?

Operator, Operator

Yes. The next question comes from John Massocca with B. Riley. Please proceed.

John Massocca, Analyst

Good morning.

David Gladstone, CEO

Good morning.

John Massocca, Analyst

So, just participation rents in the quarter were down about 20% year-over-year. I know you didn’t really give guidance for participation rents. But as we think about Q4, which is obviously a big quarter from a participation rent perspective, should we expect a similar kind of downtick, or is there something unique about the third quarter?

David Gladstone, CEO

I would say it’s difficult to analyze the participation rent amounts in any one single quarter because last year, we may have gotten information from properties A, B, and C, and this time we get properties from B, C, and D. It’s not always a one-to-one match. So, we need to look at it on a full-year basis to capture the full population. As for where Q4 is going, we are still gathering data. In the past, we have said that for the 2023 participation rent amounts, we expect they will come in somewhere between the ’21 amount of slightly north of $5 million and the ’22 amount of close to $7 million. Hopefully, we’re on the upper end of that range, but we’re still finalizing the numbers and vetting the information on our end.

John Massocca, Analyst

Okay. That’s very helpful. And then in terms of some of the leases where you are either self-operating or have had some tenant issues, is there any of that that wasn’t really reflected yet in the Q3 numbers and will flow through Q4, or any immediate recovery? Just how should we think about that impacting NOI or other line items that some of the self-operating stuff might be going through?

David Gladstone, CEO

Everything has been captured thus far. The self-operated properties haven’t been – we didn’t record any revenue from them in Q3. The tenants that were on a cash basis, assuming they eventually return to full accrual status and get back on GAAP rents, will lead to a small increase in GAAP lease revenue just from capturing data, the straight-line effect again, as we reverse that, which I think we noted back in Q1. We want to see more from those tenants with on-time rent payments before we put them back on accrual status. But everything we talked about was fully reflected in the Q3 numbers.

John Massocca, Analyst

Okay. If you do get something from the self-operated properties back, do you have a one-time hit and then over the next 12 months or so? How should we think about the potential impact?

David Gladstone, CEO

So, the self-operated properties under the costs have been deferred on the balance sheet as inventory. The gross revenue from those costs will offset the gross revenues as they come in as cost of sales. We will just recognize the net amount in the P&L.

John Massocca, Analyst

Okay. That’s it for me. Thanks very much.

David Gladstone, CEO

Latanya, do we have another question?

Operator, Operator

Yes. The next question is from Mike Whitaker with Newbridge Securities. Please proceed.

Mike Whitaker, Analyst

Good morning. This will be brief. I think most of the answers have already been given, but I am looking from an investor standpoint. I used to have LANDO when it went public. I had LANDP before it went public, and now it’s public. As I talk to all my clients, and it’s down almost 30%. Is there anything outside of interest rates, inflation, or any of the things that you have been speaking of, that’s caused us to go down roughly 30% since June? Is there any anticipation outside of interest rates going down and inflation going down that might cause these valuations to go back up?

David Gladstone, CEO

Well, remember, these securities are first out, so they get in front of the common stock. These guys are in a great position. The fact that it’s going down is just the fact that interest rates have been changed by the Fed. As a result, you are competing with 5% T-bills, and 5-year T-bills are wonderful to hold. These properties are good, but you can’t get something as secure as this because it has all of our land as the first call on that. I can’t believe people are willing to give up the return, but it’s just pure numbers. What do you want your piece of property to generate? If it’s got to generate more than 5%, that’s absolutely secure, then you’ll have to drop prices. This is a reflection of land ownership too. They used to get real high prices for their property, but now they can’t get the high prices. To sell that property the price has to drop to something someone will pay. The same is happening with those preferred positions and securities that your clients own. They will get their dividend, but that’s not enough today when they can jump out at all the price, which can generate just as much income.

Mike Whitaker, Analyst

LANDO went public and went down and obviously went back up to like $27 a share for a bit of time. So, it’s just the time we are in right now. We feel that this is going to possibly go back up at some point when the market starts to come back up. Is there anything that’s causing this outside of what we are talking about with inflation, interest rates, and so on?

David Gladstone, CEO

No, inflation and interest rates are very high now, leaving people many alternatives to achieve their desired returns.

Mike Whitaker, Analyst

I agree with you. Okay. That’s the only question I had. Appreciate it. Thanks for your time.

David Gladstone, CEO

Latanya, do we have any other questions?

Operator, Operator

There are no further questions. Thank you. I would like to turn it back to you Mr. Gladstone for closing comments.

David Gladstone, CEO

I don’t think anyone wants to hear any more closing comments. But nonetheless, we had a good quarter. It’s a lousy quarter when you think about it in terms of interest rates, but we are bound by those markets for securities that pay dividends. We are very happy that we are in good shape, no downsides we are looking at today. Thank you all for calling in, and we will see you next quarter. That’s the end of this call.

Operator, Operator

Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation and have a great day.