Earnings Call Transcript
GLADSTONE LAND Corp (LAND)
Earnings Call Transcript - LAND Q4 2022
Operator, Operator
Greetings. And welcome to the Gladstone Land Corporation Fiscal Year End Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, CEO and President, David Gladstone. Thank you, David. You may begin.
David Gladstone, CEO
Well, thank you, Paul. That was a nice introduction, and this is David Gladstone. Welcome to the quarterly conference call for Gladstone Land. This is also our year-end, so you will get a double-barreled place in our systems of things if we are going to tell you about. Thank you all for calling in today; we appreciate you taking the time to listen to our presentation. We always start off with Michael LiCalsi. He’s our General Counsel and Secretary and he is the President of Gladstone Administration, the administrator for all of Gladstone funds. Michael, you are up.
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. 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-Q, 10-K and other documents we file with the SEC. You can find these on our website at gladstoneland.com, specifically the Investors page, or on the SEC’s website at www.sec.gov. 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 the impairment losses from property, plus depreciation and amortization of real estate assets. We may 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. We believe these are better indications of our operating results and allow better comparability of our period-over-period performance. Please take the opportunity to visit our website, once again gladstoneland.com, and sign up for our 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 Twitter @Gladstonecomps. Today's call is an overview of our results, so we ask that you review our press release and 10-K, both issued yesterday, for more detailed information, and you can find them on the Investors page of our website. With that, I will turn it back to David Gladstone.
David Gladstone, CEO
Thank you, Michael. I will begin with a summary of our farmland holdings. We currently own approximately 116,000 acres across 169 farms and around 45,000 acre-feet of banked water, which is equivalent to about 14.6 billion gallons, primarily in California. The combined value of our land and water is approximately $1.6 billion. Our farms are spread across 15 states and importantly, in 29 different growing regions. All of our farms are fully occupied, leased to about 90 separate tenant farmers. These tenants cultivate roughly 60 types of crops, mainly fruits, vegetables, and nuts. We are experiencing some slow payments from two tenants, attributed to an oversupply in their market segments. While market corrections can be slow, they generally do occur over time. As we have noted in previous calls, our acquisition activity has been more measured compared to prior periods, as we adopt a more selective approach regarding farm purchases. Rising interest rates also affect our potential returns on new acquisitions, a situation we expect will improve eventually. With inflation and interest rates on the rise, and the likelihood of a recession increasing, we believe it is prudent to be careful with our capital allocation. Overall, our existing farmland portfolio continues to meet our expectations, aside from the challenges with the two tenants, which led to a reversal of about $1 million in revenue in the fourth quarter. We hope to recover that amount, though there are no guarantees. Nonetheless, we experienced a solid quarter, and from an operating standpoint, our participation rents generated an additional income of about $4.7 million this quarter, bringing our total for this year to a record $7.7 million, up from approximately $5.2 million in 2021. This increase largely resulted from strong yields from our pistachio farms and robust demand for that crop. We saw lower returns from our almond farms due to falling almond prices, a situation worsened by oversupply and supply chain disruptions from the COVID pandemic. Almonds are marketed globally, with a significant portion from California destined for Europe and India. We have successfully renewed all expiring leases without any downtime across our farms. We made some adjustments to a few lease structures, reducing the fixed base rent in exchange for a greater crop share component. This wet year in California will help us evaluate whether those adjustments were beneficial. Despite these changes, we continue to achieve higher rental rates on lease renewals. We completed a small acquisition in the fourth quarter, purchasing 443 acres of open ground for about $3 million, located adjacent to our existing farm, which includes surface water and groundwater rights. We plan to utilize these water rights to support nearby farms and also sell water credits to tenants from those farms. Over the year, we acquired more than 3,000 new acres across six states for a total of $65 million. The initial cash yield on these investments is approximately 5.8%, with leases including provisions for participation rents and annual escalations of around 3% to 4%. This should enhance future income from these farms. In terms of leasing, we renewed nine leases across four states. These renewals are expected to lead to a decrease of roughly $857,000 in annual net operating income from previous agreements, primarily due to the shift from fixed rent to participation rents. Nonetheless, excluding three specific leases, we anticipate an increase in net operating income of about $66,000, approximately 12% higher compared to previous leases. Looking forward, we only have one lease set to expire in the next six months, contributing less than 1% to our total annualized lease revenue. We are in talks with the current tenant for an extension and expect a slight rent increase without any anticipated downtime. On other topics, inflation is a significant concern for many, including us. The current inflation rate stands around 6.4%, which is higher than desired, yet the food-at-home category has increased by 11.3%, outpacing overall inflation. This category encompasses most of the crops we grow, all of which are sold in grocery stores, indicating that food price hikes will likely outpace current inflation trends, helping ease rising operational costs for our farmers. Concerning the recent floods in California, it's unfortunate to witness the destruction from natural disasters, yet the rainfall has relieved areas suffering from drought over the past three years. The snowpack levels are now almost double the 20-year historical average, with most reservoirs approaching normal levels. For the first time in three years, no areas are classified under the two most severe drought categories, though more rain is still required to recharge the aquifers thoroughly. Our farms are equipped with wells and, fortunately, none have experienced water shortages. We are continually seeking additional water sources to support our farming operations, and while the State of California could enhance efforts to capture incoming water, so far, our farms have not sustained significant damage from the storms, aside from one losing shade structures for blueberries, which we will replace. Forecasts predict continued rainfall over the coming days. Lastly, regarding our capital plans, we concluded our Series C preferred stock offering in December, having raised about $254 million over three years. Rising interest rates have hindered acquisition activity, prompting this decision. In January 2023, we initiated sales of a new Series E preferred stock at a 5% interest rate, with slower initial sales anticipated. Additionally, we've begun using our ATM program to sell common stock. We plan to continue this approach as long as market conditions remain favorable. We've paused sales when stock prices dipped below 2019 levels, but we expect sales to resume in the coming months. I'm going to conclude here and hand it over to our CFO, Lewis Parrish, to discuss the financial details further. Lewis?
Lewis Parrish, CFO
Thank you, David, and good morning, everyone. I will begin by briefly going over our balance sheet. We did not incur any new borrowings during the quarter, but we did repay about $19 million of loans during the fourth quarter that were scheduled to mature. Setting that aside, since the beginning of the fourth quarter, we raised net proceeds of about $27 million from sales of our Series C preferred stock, about $800,000 from sales of our new Series E preferred stock, and $20 million from sales of our common stock through the ATM program. Moving on to our operating results, I will note that for the fourth quarter, we had net income of $1.1 million and a net loss to common shareholders of $4.8 million or $0.14 per common share. For the year, we had net income of about $4.7 million and a net loss to shareholders of $15 million or $0.43 per share. On a quarter-over-quarter basis, adjusted FFO for the fourth quarter was approximately $6.8 million or $0.195 per share, compared to $7.2 million or $0.207 per share in the third quarter. Dividends declared per common share were $0.137 in both quarters. On an annual basis, adjusted FFO for 2022 was approximately $24.8 million, compared to $20.4 million in 2021, an increase of 22%. Compared to AFFO per share was $0.716 in 2022 versus $0.668 in 2021, an increase of 7%. Dividends declared were $0.546 in 2022 compared to $0.541 in 2021. The common dividend payout ratio was about 76% of AFFO in 2022 versus 81% in 2021. The primary driver behind the increase in AFFO was higher topline revenues, partially offset by increases in related party fees and additional financing costs. Fixed base cash rents decreased by about $1 million or 5% on a quarter-over-quarter basis and increased by about $11 million or 16% on a year-over-year basis. The increase for the year was primarily driven by additional revenues earned from recent acquisitions and completed CapEx projects. This increase was partially offset by the execution of certain lease amendments through which we reduced the fixed base rent in exchange for increasing the participation rent component. As David mentioned, we reversed about $1 million of previously recognized revenue in Q4 as a result of credit issues with two tenants. Going forward, revenue from these leases will be recognized on a cash basis until such time that the full collection of future rental payments is again deemed to be probable. During the fourth quarter, we recorded about $4.7 million of participation rents, which compares to $3 million in the prior quarter. For the year, we had about $7.7 million of participation rents versus $5.2 million last year. On a same property basis and including participation rents, our 2022 lease revenues increased by about $418,000 over that of 2021. On the expense side, excluding reimbursable expenses and certain non-recurring or non-cash expenses, our core operating expenses increased by about $890,000 on a quarter-over-quarter basis and by about $2.5 million on a year-over-year basis. Quarter-over-quarter, total related party fees increased by about $1.1 million, and that was driven by a higher incentive fee earned by our adviser in the fourth quarter. On a year-over-year basis, related party fees increased by about $1.8 million. This is primarily driven by a higher base management fee due to additional assets acquired. Removing related party fees, our core operating expenses decreased by about $240,000 on a quarter-over-quarter basis and increased by about $735,000 on a year-over-year basis. The increase in the annual fee was primarily due to higher professional fees, particularly audit fees and appraisal costs, as well as an increase in certain property tax obligations. One final note on 2022 expenses, during the third quarter, we wrote off about $800,000 of deferred and unallocated costs related to the Series C offering as a result of an amendment that reduced that offering size. With that, we will move on to net asset value. We had 30 farms revalued during the quarter, all via third-party appraisals. Overall, these farms increased by about $9 million or 2.5% over the previous valuations from about a year ago. As of December 31st, our portfolio was valued at approximately $1.6 billion, and all of this valuation 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 stock, our net asset value per common share at December 31st was $17.08, up by $0.52 from last quarter. Turning to liquidity, including availability on our lines of credit and other undrawn notes, we currently have over $200 million of dry powder, and we also have over $90 million of unpledged properties. Over 99.8% of our borrowings are currently at fixed rates, and on a weighted average basis, these rates are fixed at 3.26% for another five years. As a result, we have experienced minimal impact from the recent increases in interest rates. However, the rate increases do impact our ability to finance new acquisitions and also play a factor in our decision to repay versus refinance maturing loans. With respect to our current debt load, we believe we are well protected against further interest rate hikes for the foreseeable future. Regarding upcoming debt maturities, we have about $53 million coming due over the next 12 months. However, about $36 million of that represents various loan maturities, and the properties collateralizing these loans have increased in value by a total of $14 million since their respective acquisitions. So we do not foresee any problems refinancing any of these loans if we choose to do so. Removing those maturities, we only have about $17 million of amortizing principal payments coming due over the next 12 months, and that’s less than 3% of our current debt outstanding. Finally, regarding our common distributions, we recently raised our common dividend again to $0.459 per share per month. This marks the 29th time we have raised our common dividend over the past 32 quarters, resulting in an overall increase of 53% over that period. And with that, I will turn the program back over to David.
David Gladstone, CEO
Thank you, Lewis. A very nice report. It’s nice when we have good numbers to report to the market. We continue to stay active in the market should a good opportunity present itself, but as mentioned repeatedly, we are being very selective and cautious in our acquisitions. It’s a time to be careful. And just a few final points before we close it out and ask for some questions: I believe that investing in farmland and growing crops that contribute to healthy lifestyles, such as fruits, vegetables, and nuts, is a positive trend that we see in the marketplace today. Overall demand for prime farmland growing berries and vegetables remains stable to strong in almost all the areas where our farms are located, particularly along the West Coast, including farms in California, Oregon, Washington, and on the East Coast, especially in Florida and some of the other states as we have moved up the coast in the East. Overall, farmland continues to perform comparatively well against other asset classes. There’s a group called NCREIF that runs the NCREIF Farmland Index, which currently consists of about $15.3 billion worth of farmland, and our 116 acres is included in that. They have averaged an annual return of about 12.8% over the past 20 years per year, with no negative years during that period. This is better than both the S&P Index and the overall NCREIF Index, each of which has had three or more negative years over that same time period versus zero for farming. I just wanted to mention one thing: we are all publicly traded, and we have no control over the stock price. If we were a closed-end fund with no market, we would have had a return in terms of percentage gain of 23.17% last year and 21.43% in 2021. These are really strong returns in the private marketplace where there’s no way of selling your stock. If our company was a fixed fund these days, we think institutional shareholders would be very pleased with the progress that we have made. But please remember that purchasing stock in this company is a long-term investment in farmland; it’s really two parts similar to gold. It’s a hard asset. It’s farmland. It has intrinsic value because there’s a limited amount of good farmland, and it’s being used up by urban development, especially in California and Florida where we have many farms. Unlike gold and other alternative assets, it’s an active asset with cash flows coming in. We believe it’s much better than a bond fund because it keeps increasing the dividend and the value of the assets are going up. We expect inflation, particularly in the food sector, to continue to rise, and we expect values in the underlying farmland to increase as a result, especially in the fresh produce and food sector that we are in. The trend in the United States is toward eating more healthy foods, and thank goodness we are in the right spot for that. As for the future, I think we are going to have strong income during the next few years, and there’s one statement that you can make on that: people have to eat, and since we are producing food, we are going to get it sold; the question is at what price. Now I will take some questions from those who follow us. Operator, if you will come on, please, and help the listeners ask some questions.
Operator, Operator
Thank you. Our first question is from Gaurav Mehta with EF Hutton. Please go ahead with your question.
Gaurav Mehta, Analyst
Good morning. First question on the $1 million write-off. Can you maybe provide some color on what drove the write-off and the possibility of collecting those rents?
David Gladstone, CEO
There are two tenants involved. One is an almond grower in California, and the other is a blueberry grower in Michigan. Each has three leases that contributed to the write-off, which totaled around $939,000 in previously recognized revenue. Additionally, we experienced a net loss of about $400,000, but we didn’t account for the same amount in revenue since they remained on an accrual basis. The almond grower in California is one of our smaller tenants compared to others in the region. They also operate a processing plant that handles approximately $30 million of almonds annually. Due to a weak almond market, their operations were negatively affected on both the growing and processing fronts, making their situation more difficult than that of our other almond growers. As for the blueberry grower in Michigan, he has previously performed well financially on our farms, but faced a serious medical emergency earlier this year that required an extended ICU stay. During that time, we didn’t apply much pressure regarding payments, and he also appeared to have overextended himself by expanding his operations too quickly, resulting in a cash crunch. We are currently collaborating with both tenants to help them catch up on payments. However, until we have a clearer recovery plan, revenue from these leases will be recognized only on a cash basis as payments are received. We did collect a couple of payments from one of the tenants after year-end, so we will recognize some income in 2023 from that. At this time, we cannot fully rely on the future rent owed from these leases.
Gaurav Mehta, Analyst
Okay. Second question, I was hoping you could provide some color on the cap rates that you are seeing in the acquisition market for the farms.
David Gladstone, CEO
Cap rates haven’t changed much. If you are not willing to let them lease the ground at 5%, 5.5%, then there won’t be a cap rate; they won’t lease it. Since we are borrowing money at about that rate, it’s really hard for us to justify the risk-reward ratio of buying farms and then just capturing enough money to pay the cap rate on that. So we are very slow right now. It’s going to change, Gaurav. What happens is that you get this adjustment of interest rates going up, and the farmers are willing to wait it out. Some of them won’t be able to wait it out. So we will see some good opportunities as time goes on. I hate to take land at that rate, but it’s awfully good for our shareholders.
Gaurav Mehta, Analyst
Okay. Thank you.
Operator, Operator
Thank you. Our next question is from Rob Stevenson with Janney Montgomery Scott. Please proceed with your question.
Rob Stevenson, Analyst
Hi. Good morning, guys. David, are you going to need to re-tenant that almond grower in California and the blueberry grower in Michigan this year?
David Gladstone, CEO
I don’t know. My guess is the almond grower will catch up. He will eventually sell enough almonds to pay us, and so even though we put some of that money on write-off, or hold whatever you want to call it, we will get that one. The blueberry guy, we are really worried about him. He’s gone through a hell of a situation; he had an explosion on the farm and it burned him pretty bad. We are hopeful that he recovers. His son is helping him now, so he seems to be coming back, but it’s hard to know. We hate to put pressure on these farmers when they get into a situation like that because it sends the wrong message. We are really in partnership with our farmers, and we hate to push them too hard. On the other hand, we have a lady sitting at the table with me today that collects on all of these. I’m going to send her out to California. She will collect it for us. I’m just teasing now; she’s sitting here laughing. The bottom line of it all is these people are going to pay. We have money coming in from all of our farms, with the exception of these. At the end of the day, we will get this money, and we will be fine. So I’m not worried about that. It’s not like a disaster that everybody faced back in 2008 and 2009.
Rob Stevenson, Analyst
Okay. Lewis, what is your incremental cost of debt today? If you guys did go out and issue something new, what are you going to pay for that? Is it the line of credit or one of the farm bureaus on a net basis that is your cheapest source?
Lewis Parrish, CFO
The cheapest source would definitely be one of the farm credit associations, and right now our line of credit is quite expensive in the high 6s. So that explains why we aren’t making much use of that. If we were to borrow from one of the farm credit associations on a net basis after patronage, we would probably be in the high 5s, maybe low 6s at the high end.
Rob Stevenson, Analyst
Okay. That’s helpful.
Lewis Parrish, CFO
Maybe just a little double, 150 basis points higher than that.
Rob Stevenson, Analyst
Okay. And so you guys have a fairly decent amount of cash on the balance sheet. Given the commentary about the slow acquisition environment expected in the first half of the year, how are you guys thinking about utilizing the common ATM and the Series E preferred in the first half of the year? Assuming the stock price goes back up to a point where you would issue ATM, are you guys still going to ratably issue in the first half of the year and pre-fund hopefully more acquisitions in the back half? Are you guys going to hit pause on all of that because you have enough capital for now? How are you guys thinking about that?
David Gladstone, CEO
Well, the company is in extremely good shape today. We have money coming in from all of the other farms. We only mentioned the two farmers that aren’t doing as well. So we are in great shape to meet our dividends and move forward. But you are right; the question is going to be, and is today, I have got other people sitting around the table, listening for this one, that is what are we going to do with our cash? Can we buy some more farms? We have got people looking at good opportunities, but there’s no reason to take that much risk at this point in time in our farmland fund. So we are going to be slow in using up our equity and not going to jump out there ahead of time. Besides, the farmers aren’t going to make much money if they have to pay 5% or 6% rent on a cap rate basis. So there’s no use pushing this one, and saying, let’s put things on the books and then, hopefully, we can refinance them or do something with them later. I’d rather play it safe at this point in time, especially since we are so strong in terms of cash flows coming in from the other farms. I hope that’s the right answer you wanted to hear so you can write and buy the stock on this one.
Rob Stevenson, Analyst
One last one for me, David. How are you guys thinking about indoor vertical farms? Yesterday, Realty Income announced a partnership with Plenty. I’m curious as to whether indoor vertical farms are something you guys spend any time on?
David Gladstone, CEO
I know them well. The State of Virginia is supporting one of the large strawberry growers, and we are certainly interested in that. However, indoor farms face a significant challenge: if they are more than one story high, a lot of sunlight is lost. Even using high wattage bulbs, they can't replicate the growth provided by sunlight. For instance, one acre of lettuce farms in California can produce more lettuce than any indoor farm could. We are observing the situation closely, and we have someone in the office with experience in that sector, as his parents were involved in building vertical farms. I've yet to see any two-story or three-story farms yield anything beyond small greens, which seem to perform adequately. Our focus isn't on small greens, and there aren't many restaurants willing to pay the price for them. Some of these greens might be of higher quality in terms of cleanliness, and improvements are on the horizon. I can't predict when we'll get involved, but we are keeping an eye on all the investments being made in this area. Frankly, Rob, I don't think many of them are making significant profits. Glass structures tend to perform better than the six-story ones. One day, we may find the right opportunity and enter that market, but for now, we are observing from the sidelines.
Rob Stevenson, Analyst
Okay. Helpful. Thanks, guys. Appreciate the time.
David Gladstone, CEO
Okay. We have any other questions?
Operator, Operator
Our next question is from John Massocca with Ladenburg Thalmann. Please proceed with your question.
John Massocca, Analyst
Good morning.
David Gladstone, CEO
Good morning, John.
John Massocca, Analyst
Maybe what's the outlook for some of the non-permanent crop types in the portfolio? You mentioned the positive with almonds, sorry, the negative almond, the positive with pistachios. But what are you seeing in terms of berries, fresh vegetables, other crops on the inflation front?
David Gladstone, CEO
They are all strong. If you go to the grocery store and pick up some strawberries, you will see how much you are paying for each of those strawberries. It’s getting a little bit ridiculous sometimes, but it’s only for a few months out of the year. For example, Florida makes a lot of money in these months that we are in, and then it turns over to California and they start making money. We do see imports coming in from lots of different places, mostly if there are blueberries; they are coming out of one of the Latin American places. Strawberries are special; I would say 90% of the strawberries grown in the United States have been grown in California. Not to diminish the good ones that come from Florida, either; they are wonderful. We are seeing things in strawberries and lettuce. We have the largest cabbage farm in the world, so eat plenty of slaw, would you please? It’s just a wonderful business to be in right now. We are really happy with where everything is, except for a couple of guys that are a little slow on their payments.
John Massocca, Analyst
Okay. And then on the almond side, have any of the oversupply issues in that crop type impacted land pricing for almond farms at all? Any of the transactions you are seeing in the market today?
David Gladstone, CEO
Oh! Sure. When you get an oversupply like that and the farmer can’t make very much money, if at all, it really does depress land values when we get our almond farms and put them in front of our people doing the valuations; they pull them down in terms of worth. Luckily, we are not in any of them to such an extent that it would have a big impact on us. But it always hurts when you have an oversupply. That normally corrects itself as people go out of business or if the product picks up again. We wish the people in India would start eating more almonds; they used to eat a lot, but it’s really hard to get. We were blocked in trying to ship them there for a while. You couldn’t even get them over, much less get them eaten. It’s like anything else. We are very lucky in that most of our products are not shipped outside of the United States. In fact, I’d say maybe 80% or 90% are eaten here. But all the ones in the ground are great. Blueberries are doing well, except for the one farm up north. It’s a good business to be in right now. We are not suffering the way that some of the people are under this inflationary experience that we are all going through.
John Massocca, Analyst
Okay. And then one quick detail one. Just kind of roughly, what’s the split in terms of the size of new rent from the blueberry farmer versus the almond farmer that are on cash accounting?
Lewis Parrish, CFO
I think the write-off was pretty much a 50-50 split. If you look at it from an annualized basis, it’s probably about two-thirds almond grower and one-third blueberry grower.
John Massocca, Analyst
Okay. That’s it for me. Thank you very much.
David Gladstone, CEO
And John, just so you know, we have some farmers that want to take over those farms. We are just reluctant to push somebody out and push somebody else in. However, we may have to do that, and it really hurts my feelings because so many of these farmers have worked so hard to make it work. Next question, please.
Operator, Operator
Thank you. Our next question is from Craig Kucera with B Riley Securities. Please proceed with your question.
Craig Kucera, Analyst
Hey. Good morning, guys.
David Gladstone, CEO
Good morning, Craig.
Craig Kucera, Analyst
As we are now halfway through the first quarter, do you have any thoughts on interest patronage that might be received in this quarter?
Lewis Parrish, CFO
No, we haven’t received any communications from farm credit banks yet. We expect those to come in later this month or next month. However, we anticipate that any refunds related to basis point reductions will be somewhat lower than in the previous two years. The rationale for this expectation is that in the last two years, farm credit has aimed to provide a bit more support to local growers during the pandemic, which most people believe is now behind us. While it's uncertain if this trend will continue, that's our current outlook. We don’t have enough information at this point to make a more precise estimate.
Craig Kucera, Analyst
Okay. Great. I think you had about $20 million in CapEx this year. Do you have any large CapEx projects in the budget for 2023?
David Gladstone, CEO
Well, we keep twiddling those down simply because we want to conserve cash, but most of those are related to making sure that we have water for our farms. We are always spending money to make our wells a little deeper or pipes that are running from one farm to another one source to another. But we don’t have. I think the biggest one is about $7 million.
Lewis Parrish, CFO
Yeah. I think we had two sizable ones that came from recent acquisitions. One was an acquisition in Florida in December 2021 and another one, vineyards in the Pacific Northwest in Washington and Oregon in July. Both of these two acquisitions were bought with the understanding they were development projects, either expanding plantable acreage or planting new vineyards and installing new irrigation infrastructure. That was part of the original underwriting of both of those deals, and we are earning additional rent on both those projects as the funds are paid out by us.
David Gladstone, CEO
How big are those?
Lewis Parrish, CFO
I think one is about $3 million, and the other one is about $2.5 million or so.
David Gladstone, CEO
Okay.
Lewis Parrish, CFO
Both farms will be operational soon; the one in Florida is nearly finished, while the one in the Pacific Northwest is expected to continue its development for likely the remainder of this year and into next year.
Craig Kucera, Analyst
Okay. Great. And just one more for me, circling back to the receivable write-downs. I think earlier last year, you had a renewal where you took lower base rent in exchange for higher participation income, and I think you referenced that in your commentary in the press release. Were any of those farms where you restructured the lease last year related to the rent receivable write-downs this quarter?
Lewis Parrish, CFO
No. That was a different farm in the Midwest where we got our crop share and came out making some money on that farm. These tenants hadn’t undergone any restructuring of leases like that.
Craig Kucera, Analyst
Okay. Great. Thanks.
David Gladstone, CEO
Paul, have you got any more questions?
Operator, Operator
David, there are no further questions at this time.
David Gladstone, CEO
Oh! Shucks. We wanted more questions. Anyway, we thank you all for calling in, and if you don’t have any more questions, you are going to have to wait until next quarter. That’s the end of this call.
Operator, Operator
This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.