Earnings Call Transcript - LAND Q4 2024

Operator, Operator

Greetings, and welcome to the Gladstone Land Corporation Year-End Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce Mr. David Gladstone, Chief Executive Officer and President. Thank you. You may begin.

David Gladstone, CEO & President

Thank you, Darrell. That was a nice introduction. This is David Gladstone, and welcome to the quarterly conference call that we give every quarter. It is our year-end as well. Thank you all for calling in today and we appreciate you taking the time to listen to our presentation. Before I begin, we have to hear from Michael LiCalsi, our General Counsel. Michael?

Michael LiCalsi, General Counsel

Thanks, David. Good morning, everybody. Today's report may include forward-looking statements under the Securities Act of 1933 and the Securities Exchange Act of 1934, including those regarding our future performance. These statements involve certain risks and uncertainties that are based on our current plans, which we believe to be reasonable. The 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 in our Forms 10-K, 10-Q and other documents we filed with the SEC. Go to our website, gladstoneland.com, specifically the Investors page or the SEC's website, which is www.sec.gov, and you can find them all there. 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. The definition is 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 may also discuss core FFO, which we generally define as FFO with some adjustments for certain non-recurring revenues and expenses, and then adjusted FFO, which further adjusts core FFO for certain non-cash items, such as converting GAAP rents to normalized cash rents. We do this because we believe these are better indications of our operating results and allow better comparability of our period-over-period performance. Now we once again ask you to visit our website that's gladstoneland.com. While you're there, you can sign up for our email notification service. You can also find us on Facebook; the keyword there is The Gladstone Companies, and on X, which is formerly Twitter; our handle there is @GladstoneComps. Today's call is an overview of our results, so we ask that you review our press release and the Form 10-K both issued yesterday for more detailed information. Now with that, I'll turn the presentation back to David Gladstone.

David Gladstone, CEO & President

Well, thank you, Michael. I'll start with a brief overview, as I do each time. We have a lot of farmland. We currently own about 103,000 acres on 150 farms and over 55,000 acre-feet, which is the way they measure water assets. One acre-foot is equal to about 326,000 gallons. So we own over 18 billion gallons of water. Together, the land and the water are all valued at a total of about $1.3 billion. Our farms are in 15 different states and, more importantly, in 29 different growing regions. Our water assets are mostly in California. Farms are leased to over 65 different tenant farmers and people who manage the farms; there are a lot of people involved. The tenants on these farms are growing over 60 different crops, mostly fruits, vegetables and nuts. You can find this produce in other sections of the grocery store as well as in the produce section, which is where most of the crops that are grown on any of our farms are sold. We mentioned in previous calls that we continue to be cautious with new investments because our cost of capital remains high. Cap rates on most row crops and farmlands are so low that today, because of those situations, the value of those crops and land remain very high. We also believe it's a good time to conserve cash given the uncertainty of the produce and nut marketplace. And the Federal Reserve is holding interest rates too high today, so hopefully they'll change their mind and reduce them as time goes on. We completed some farmland sales recently. In December, we sold 11 blueberry farms in Michigan. These are farms that have been giving us some problems. We recorded an impairment charge on these farms in the third quarter and then had a small loss in the fourth quarter when we completed the sale. But these farms had a negative impact on net operating income of about $400,000 in 2024. We didn't see a clear path back to profitability, so we sold these farms. In January, we sold five farms in Florida at a sizable gain that represented about a 40% premium over what we had paid for them 6.5 years prior. Farmland values in most parts of Florida have continued to go up at a faster pace than the rest of the market, but it still was a time for us to sell some of these. And finally, in February, we sold two farms in the Midwest for a total gain of about 9% over what we paid for them. We had originally budgeted these farms as potato farms, but the market shifted more toward corn and soybean in this region. So we felt that resulting cap rates didn't make sense for us to continue holding them. Regarding leasing activity, since the beginning of the fourth quarter, we've executed four new lease amendment agreements, all in the West, and on permanent crop farms. On two of these leases, we adjusted the lease structure in a similar manner to what we've done on a few other farms recently. That is, we eliminated the base rent or in some cases provided the tenants with some cash allowances to grow the produce. In exchange, we significantly increased the participation rent component of these leases, the majority of which will be recognized in the second half of 2025. So we won't have income from these leases in the near-term, but when we sell the crops, we'll get a big piece of it. I want to touch a little bit more on this. In prior calls, we discussed how marketing conditions around many of the permanent crop farms in the West, particularly nuts and some grapes, have been hampered by lower crop prices and higher input costs such as fertilizer. And, of course, borrowing costs have remained high. As such, we decided to adjust the lease structure on five farms to help the growers minimize that fixed cost, but also allow us to participate greatly in the upside. In essence, we're accepting a percentage of the gross crop sales instead of fixed rent payments. This may be a big win for us come the end of this year. If we assume the worst-case scenario and assume that we have a total crop loss on these five farms, meaning we have no crop proceeds from the harvest, we expect the crop insurance on these farms to pay us enough money to cover all of our costs and also provide us with a profit. It would be a small profit, but nonetheless a profit. And this is government insurance. So as a result, we don't worry about them not being able to pay. We've not done this that often, and of course our hopes are that we have good production overall and that we don't have to use the crop insurance at all. There are a few additional properties that we're looking at possibly doing a similar structure on. We're still reviewing the projections, and I think the projections will probably look good on another two or three of these. So we may end up in that. Our current plan is to move forward with the structure for 2025 and harvest for these farms and then hopefully revert back to a more traditional structure next year or we may sell some of these properties along the way. The other two leases we executed recently on permanent crop farms are expected to result in a year-over-year decrease in annual NOI of about $180,000. Net operating income is how we measure most of the things in our business. So that's a hit. I hate to say it; it's not that much, but nonetheless it's still a reduction. And just as a note on our annual row crops, which make up about half of our portfolio, we continue to see steady appreciation and consistent rent growth in this category. During 2024, we renewed 12 different leases on annual row crops, not permanent crops. These renewals are expected to result in an aggregate increase in annual net operating income of about $556,000, or about a 14% increase over prior leases. Looking ahead, we have three leases scheduled to expire over the next six months. In total, they only make up about 1.5% of our total lease revenues. So we should get those done this year and not lose anything there, I hope. We're in discussions with the current tenants and prospective new tenants to lease these farms, or if the price is right, we may look to sell a couple of these farms too. We believe we have some very valuable farms, so selling is an option for us. A quick update on some of the remaining tenancy issues that we continue to work on: during the quarter, we executed lease agreements on certain farms and sold other farms that have previously been either vacant or directly operated by us. So we currently have five farms that are vacant. One farm is in direct operation via a management agreement with an unrelated third party. These are third parties—we have some good people in there. In addition, we're recognizing revenue from leases with three tenants who collectively lease six of our farms on a cash basis; it's usually done on an accrual basis, but we're going to do cash on those just to keep them current. Regarding these farms, we're in discussion with various potential buyers or tenants to buy or lease these properties. We hope to get these remaining issues resolved later this year. If we're unable to come to an acceptable resolution, we may end up listing some of these farms for sale. The total year-over-year impact on our operations as a result of tenant issues is a decrease in net operating income of about $236,000 and that'll hit us in the fourth—I'm going to stop here. That's just a tasting, and I hope we get some good questions at the end. But Lewis is going to take over now as the CFO of the company. He works with the numbers every day. So Lewis, go ahead.

Lewis Parrish, CFO

Great. Thank you, David, and good morning, everyone. I'll begin by briefly going over our recent financing activity. We did not borrow any new money during the quarter, but during and since the fourth quarter in connection with certain property sales, we did pay off about $23.5 million of loans. The majority of these loans were scheduled to re-price later this year. On the equity side, since the beginning of the fourth quarter, we sold about $20,000 of our Series E Preferred Stock and about $4.7 million of our common stock through the ATM program. Moving on to our operating results, adjusted FFO for the fourth quarter was approximately $3.4 million or $0.09 per share, compared to $5.4 million or $0.15 per share in the prior year quarter. Dividends declared per common share were about $0.14 in both quarters. On an annual basis, adjusted FFO for 2024 was approximately $16.7 million, compared to $20.3 million in 2023, and AFFO per share was $0.47 in 2024 versus $0.57 in 2023. Dividends declared per share were $0.56 in 2024 and $0.55 in 2023. Our FFO as defined by NAREIT was $0.58 per share in 2024, compared to $0.62 per share in 2023. Primary drivers behind the decreases in AFFO were recent changes in lease structures on certain farms, lost income from the large farm in Florida that we sold in January of 2024, and certain tenancy issues which led to vacancies on some of our farms and resulted in both lost revenues and increased costs. Year-over-year fixed base cash rents decreased by about $4.9 million on a quarterly basis and $9.7 million on an annual basis, primarily due to the reasons just mentioned: lost revenues from the Q1 farm sale and vacancies, as well as structural changes to certain leases where, as David mentioned, we reduced, eliminated, or in some cases provided lease incentives to certain tenants in exchange for significantly increasing the crop share components in these leases. The results of the crop share components won't be known until the harvest is completed in the fourth quarter of this year. The decrease in fixed base cash rents is partially offset by an increase in participation rents recorded during 2024. During the fourth quarter, we recorded approximately $4.8 million of participation rents compared to $3.3 million in the prior year quarter, and for the year we recorded participation rents of $9.4 million versus $5.9 million last year. The increase in participation rents was primarily driven by increased yields in certain of our almond and pistachio farms, partly due to the altered bearing nature of these crops and partially offset by lower prices during the 2024 marketing period. We mentioned this on last quarter's call, but I think it's worth noting again and just providing an update to some of the numbers. As a result of the change in lease structures we've made on a few farms, we are expecting a total year-over-year swing in our fixed base rents of about $13 million. This is 2025 versus 2024. This figure consists of the base rents that we recognized in 2024 under the prior leases plus the cash allowances that we granted to these tenants for the 2025 crop year. This will be shown as a reduction in our fixed base rent during 2025 at a rate of between $3 million to $3.5 million per quarter. Then the majority of the resulting crop share proceeds from these leases will be recognized as participation rent in the second half of 2025 with the remaining smaller portion being recognized in the second half of 2026. So, if things play out as we currently expect, we will essentially be just moving this money from the fixed base rent bucket into the participation rent bucket over the next couple of years. On the expense side, excluding reimbursable expenses and certain non-recurring or non-cash expenses, our core operating expenses decreased for both comparable periods. Total related-party fees decreased by $1 million on a quarterly basis and $1.8 million on an annual basis due to the incentive fees earned during each of the prior year periods. On a quarterly basis, our remaining core operating expenses remain relatively flat. The slightly higher property operating expenses were offset by slightly lower general and administrative expenses. On an annual basis, the increase in property operating expenses was primarily driven by the additional costs incurred on properties that were either vacant, directly operated, or in non-accrual status at some point during the year. These costs included additional real estate taxes, legal costs and property management. Finally, other expenses decreased primarily due to lower interest expense incurred as a result of loan repayments made over the past year. With that, we'll move on to net asset value. We had 37 farms revalued during the quarter and overall these valuations decreased by about $50 million from their previous valuations a year ago. Decreases were limited to certain of our permanent crop farms as our annual row crop farms continued to appreciate in value. As of December 31, our portfolio was valued at about $1.4 billion. 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 December 31 was $14.91, which is down from $15.57 at September 30. The majority of this change was due to the decreases in valuations of certain funds that were reappraised during the quarter, partially offset by the change in fair value of certain preferred securities due to changes in market rates. Note that this will be the last time that we will voluntarily publish our NAV calculation in our quarterly reports. As our portfolio has grown in size, the cost of these recurring appraisals has become quite substantial. As we look for ways to reduce costs, we no longer feel that the time and money required for this process is in the best interest of our company or its shareholders. Turning to liquidity, including availability on our lines of credit and other undrawn notes, we currently have access to over $195 million of capital, including about $50 million of cash on hand. We also have nearly $150 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 3.6 years. As a result, we have not experienced much of an impact on our operating results from increased interest rates over the past couple years. Regarding our current borrowings, we believe we are well protected should interest rates continue at elevated levels. Regarding our upcoming debt maturities, we have about $38 million coming due over the next 12 months. However, about $20 million of that represents various loan maturities and, given the value of the underlying collateral, we do not foresee any problems refinancing any of these loans if we choose to do so. Excluding those maturities, we only have about $18 million of amortizing principal payments coming due over the next 12 months, or less than 4% of our current debt outflow. Finally, regarding our current distributions, in January we declared a dividend of $0.467 per share per month for the first quarter of 2025. At our current stock price of $11.52, this works out to a yield of 4.9%, which is higher than the average dividend yield across the entire REIT sector. Given the changes we've recently made in lease structures at certain properties, we believe it prudent to hold the dividend steady at this time and we'll continue to reassess once the 2025 harvest becomes known. And with that, I'll turn the program back over to David.

David Gladstone, CEO & President

Thank you, Lewis. Nice report. We'll continue to stay active in the market should a good acquisition opportunity present itself, and so that we're ready if interest rates come down as well. But as mentioned in prior calls and today, we're still being more cautious on the acquisition front because our cost of capital remains high. While we have seen a decrease in the pricing of certain permanent crop farms in the West, most of the value of farms growing strawberries remains high. The cap rates on most of these farms are just high enough to cover our financing costs, which makes it very advantageous for somebody to rent them. As a result, acquisition activity remains slow for us and will probably remain slow for another couple of quarters. Interest rates are still too high today and projections for further rate cuts keep getting reduced and pushed out farther. So the amount and timing of any additional rate cuts remains uncertain to us. But we do hope that rates come down at some point in the near future so that we can start looking at buying more farms. A few final points: we believe that investing in farmland and growing crops that contribute to healthy lifestyles such as fruits, vegetables and nuts follows the trend that we see in the market today. Overall demand for prime farmland growing berries and vegetables remains stable to strong in most of the areas that we're in. As mentioned earlier, crop prices in certain permanent crops, particularly nuts and grapes, have been depressed lately. People just not eating enough nuts; we need more consumption in order to push the price up. We have seen the values of our underlying farmland, especially nuts and grapes, impacted. We're seeing prices and overall economics of some of these crops just starting to turn around. We got a report yesterday that the country is essentially out of all of the old nuts and pistachios, and we've got a feeling that things are going to go up because there are just not many left. When people stop eating it doesn't mean the trees stop producing; they keep producing. So we ended up with prices being pushed down to levels that didn't work very well for us. But please remember that purchasing stock in this company is really a long-term investment in farmland. Historically speaking, long-term returns remain strong, but there are occasionally some ups and downs in the marketplace, just like with any investment in areas like this. A portion of our portfolio is in a down cycle that we're working to maneuver through. We expect inflation, particularly in the food sector, to continue to increase over time, and we expect the values of underlying farmland to increase over time as a result. We expect this to be especially true in the fresh produce sector as trends toward healthier eating continue to grow in the U.S. Please keep in mind that an investment in our stock really has two parts. First, it's similar to gold in that it's a hard asset—it's farmland, it's dirt, it's not going anywhere. It's an intrinsic value because there's a limited amount of good farmland in the United States and it's being used up by urban development. The farm that we sold in Florida has got to be turned into some housing and while that's good for us on a one-time basis, once they're gone, they're gone. Second, unlike gold and other alternative assets, it's an active investment with cash flows to investors. So we believe farmland is a better hedge against inflation than gold for that reason. And now, we'll have some questions from those who follow us. Operator, if you'll come on, would you please tell them how they can ask some questions? We hope we get a lot of questions today.

Operator, Operator

Thank you. We'll now be conducting the question-and-answer session. Our first questions come from the line of Gaurav Mehta with Alliance Global Partners. Please proceed with your questions.

Gaurav Mehta, Analyst

Thank you. Good morning. I wanted to clarify your comments on the participation and fixed base rent amendments. I think you said $3 million to $3.5 million lower fixed base rent. Is that $3 million to $3.5 million lower from what you guys reported in 4Q?

Lewis Parrish, CFO

No, it's more the average base rent for the year in 2024 versus the average base rent in 2025. So it's not Q4 versus looking forward. If you took the annual base rent from 2024 divided by four, that's the baseline number we're using for that $3 million to $3.5 million swing.

Gaurav Mehta, Analyst

Okay. And so that lower base rent—majority of that you're expecting to get in 3Q and 4Q of 2025, right?

Lewis Parrish, CFO

Yes. The majority of that will be—based on our current expectation, we do expect to recover the majority of that and hopefully more if the harvest turns out well in the second half of this year. After the marketing period is over, bonuses and adjustments will get recognized in the second half of the following year.

Gaurav Mehta, Analyst

And so then in 2026, do the leases on these farms go back to how they were in 2024, or do you expect them to continue like in 2025?

Lewis Parrish, CFO

It remains to be seen. Our hope is that we can revert these back to the traditional lease pricing. We're going to be at the mercy of the market, as we were this time. We could have maybe leased it out for a very low base rent with very little upside. When we ran the numbers, we thought this was a better option for us to take. When these leases come due at the end of this crop year, we'll have to do that analysis again.

Gaurav Mehta, Analyst

Okay. And then maybe lastly on the sale of the Florida farm, I think you mentioned you paid off some debt from the proceeds. What was the use of remaining proceeds from that sale?

Lewis Parrish, CFO

Right now it's part of the $50 million that we have in cash on hand on the balance sheet. We're just holding that for other uses at this point.

Gaurav Mehta, Analyst

Okay. Thank you. That's all I have.

David Gladstone, CEO & President

Okay, next question.

Operator, Operator

Thank you. Our next questions come from the line of Craig Kucera with Lucid Capital Markets. Please proceed with your questions.

Craig Kucera, Analyst

Yes, good morning, guys. First one is for Lewis. What are your expectations around interest patronage here in the first quarter?

Lewis Parrish, CFO

We should be getting a similar percentage back from the Farm Credit borrowings, but we have paid off a portion of those loans over the past year. So if I had to ballpark it right now, I'd probably say about 10% less, and that's just because I think we paid off about 10% of those loans over the past year.

Craig Kucera, Analyst

Got it. That makes sense. You mentioned that you had three leases expiring here over the next six months and a relatively small amount of rent, maybe 1.5%, but for the year, this is actually a pretty big year; I think in the K you've got north of 17% expiring. Can you give us some color on the remaining lease expirations this year? Maybe a split between what's permanent versus row crop?

Lewis Parrish, CFO

Yes. So the leases expiring in the next six months are most likely row crop farms, and as you said, that's a small percentage of the overall amount. The remaining leases that are expiring in the second half of the year—the majority of those, probably 60% to 70%, are on permanent crop farms. Some of these are the leases that we discussed with lease incentives and a high upside on the crop share. Probably about half of the leases that are expiring fall into that bucket. The other half are permanent crop farms that are under traditional leases right now. For the half that's under traditional leases, we expect them to remain flat; maybe we can negotiate a rent increase. But it remains to be seen. For the permanent crop farms that are in the lease incentive and high upside bucket, we'll have to see how the harvest and marketing period play out.

Craig Kucera, Analyst

Got it. That's helpful. Given where the preferred is trading, you've been buying it, I think in the $20.50 range. It's still kind of around there. Will you anticipate continuing to be out in the market buying back the preferred, maybe getting a small gain?

David Gladstone, CEO & President

Yes. This is an easy way for us to make money.

Craig Kucera, Analyst

One more for me: looking at your real estate expenses here this quarter, there was a pretty decent increase. Is that just related to the taxes and some of the incremental costs with the directly operated farms or anything else going on there?

Lewis Parrish, CFO

Yes, exactly. It's that whole bucket of vacant, directly operated, and non-accrual properties. Some tenants had to terminate their leases early, so they didn't make those tax payments. We had to make them on their behalf. So yes, it is all related to the properties that have fallen into that bucket.

Craig Kucera, Analyst

Okay. Thanks for the color.

Operator, Operator

Thank you. Our next questions come from the line of John Massocca with B. Riley Securities. Please proceed with your questions.

John Massocca, Analyst

Maybe just going back to property operating expense again: is 4Q kind of the right run rate going forward for the remainder of the year, or was there something where either those leases didn't change over until mid-4Q that could cause it to skew higher or one-time expenses that could cause it to skew lower in the quarters of 2025?

Lewis Parrish, CFO

Our hope is that it comes down a little bit for a couple reasons. One, the Michigan blueberry properties that we sold contributed a decent amount to that increase throughout the year. I think they had negative NOI of about $400,000 over the course of the year. That should start to come down now. We will be pursuing the tenant for some additional rent owed, so some legal costs will remain related to those farms. But the costs attributable to those farms should come down quite a bit. I think we also had to recognize some catch-up real estate taxes in the fourth quarter—amounts that the tenant owed but was unable to make, so we had to record or pay those on their behalf in the fourth quarter. I don't have the exact number here, but we do expect that number to come down a bit in 2025.

John Massocca, Analyst

Okay. That's very helpful. And then on the dispositions completed in 1Q 2025, were those occupied, revenue-producing assets and if so, what's the NOI impact from those sales?

Lewis Parrish, CFO

Yes. They were revenue-producing. The farms that we sold in 2025 had revenue for the year of about $1.0 to $1.7 million.

John Massocca, Analyst

Okay. That's very helpful. And then bigger picture, what percentage of the California portfolio today is on this crop-share, high-upside lease structure and how much remains in a more traditional structure? What's the outlook for those assets to stay in the traditional structure or move to this flow-through structure?

Lewis Parrish, CFO

Right now we have five farms that are on this hybrid structure. As David mentioned, there's another two or three farms we're looking at. The other permanent crop farms are in the traditional lease structure. We believe at this time that most will stay in the standard structure. On a value basis I don't have that number immediately available, but five farms are in that bucket, two or three more might go there, and the rest we expect to stay in the traditional lease structure.

John Massocca, Analyst

Okay. That's very helpful. That's it for me. Thank you very much.

David Gladstone, CEO & President

Have any other questions?

Operator, Operator

Thank you, Mr. Gladstone. There are currently no other questions in the queue.

David Gladstone, CEO & President

Okay. Thank you very much. I just want everybody to know that this change is hopefully going to be for one year; maybe a few farms will go over into the next year. But our goal is to put everything back together as it was before. This downturn in tree crop prices just pushed us into a different area, which is helping to grow the crops and get money out of the crops as opposed to leasing them to somebody who does all that work. We do have a manager in between us who does that for a living. We've chosen people who do that for a living; they go out and they produce the crops. So we don't have anybody in our company who is out in the fields growing either strawberries or nuts. It's almost the same as it was before, except we put up some capital—not a lot—to help the people who grow the crops get them grown and then they will sell them as well. That's the difference. While it looks like there's more chance of losing money, it's really not, because the insurance policies that we get from the U.S. government are strong and I don't think we could lose money on these five farms that we have going in that direction. But you never know, and right now I feel very bullish that we're going to do a good job this year. If there are no other questions, I'll call this at the end. You got another question?

Lewis Parrish, CFO

Well, I'll just follow up with a point that John asked earlier. The five farms that are in this hybrid structure right now make up about 15% of the fair value of our California portfolio. On a total basis across the whole country, it's about 6% of our nationwide portfolio.

David Gladstone, CEO & President

So if you think about that, we've got most of it covered in the properties that are leased out on a monthly basis. The remainder, about 6%, is on this hybrid structure in which we put up some of the capital in order to have the people who are growing the crops get the growth done and we'll see if we made a good bet. My feeling is we're going to make some money on these crops and I don't like to do that because we like things that happen on a monthly basis so we can pay our dividend on a monthly basis. The idea that we get a big amount back when the crops come in doesn't bode well for trying to be on time with dividends. So I think we're in good shape, but we have to wait and see what our income looks like toward the end of the year—we'll know how successful we were and how much we've got to depend on insurance. But that's the end of this. We got one more question.

Operator, Operator

Mr. Gladstone, we do. Yes. Let me bring John back through. Give me one sec here. Next question is coming from John Massocca with B. Riley. Please proceed with your questions.

John Massocca, Analyst

Thank you so much. Sorry for coming in right at the end of the call. I had a quick question I forgot: with the NAV decision, is that something that's going to be provided semi-regularly now, if not quarterly, or is the intention to stop providing NAVs at all going forward? Is it going to be annual, or is the thought process that the cost is too burdensome in general?

David Gladstone, CEO & President

It became really difficult. We couldn't find brokers who would provide reliable valuations. We started getting second opinions, and as a result, we've been spending a lot of money trying to find people that can do this. We still will be setting numbers internally and maybe we'll present those. But generally speaking, trying to get brokers to value these things became costly and sometimes unreliable. We had one broker located in Indiana doing some valuations in Florida, which made no sense because he didn't know the Florida marketplace very well. As you can see, when we've done sales, we've beaten the valuations that were out there, so it didn't seem logical to keep paying for that process. We'll figure out something to do in April when we come back to you.

Lewis Parrish, CFO

Just to add, the cost of those appraisals was running us about $300,000 per year.

John Massocca, Analyst

I appreciate the additional color and taking that last-minute question. Thank you.

David Gladstone, CEO & President

Okay. We're assuming there are no more questions.

Operator, Operator

No more at this time.

David Gladstone, CEO & President

Okay. So we'll see you next quarter. Thank you all for calling in.

Operator, Operator

Thank you so much. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.