Farmland Partners Inc. (FPI) Q3 2017 Earnings Report, Transcript and Summary

Good day, and welcome to the Farmland Partners Incorporated Third Quarter 2017 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Mr. Paul Pittman, Chairman and CEO. Please go ahead, sir.

Thank you. Good morning, and welcome to Farmland Partners Third Quarter 2017 Earnings Conference Call and Webcast. Please refer to the Investor Relations section of our website at farmlandpartners.com for our third quarter 2017 supplemental package, which I will be speaking to later during the call. The link for the presentation is directly below the webcast link and is also posted under Presentations in the Investor Relations section of our website. With me this morning is Luca Fabbri, the company's Chief Financial Officer. I will now turn the call over to Luca for some customary preliminary remarks. Luca?

Thank you, Paul, and I would also like to welcome everybody to this call. The press release announcing our third quarter earnings was distributed yesterday evening. A replay of this call will be available shortly after the conclusion of the call through November 23, 2017. You can find the phone numbers to access the replay in the earnings press release. And if you're listening to the rebroadcast of this call, we remind you that the remarks that we are making, that you are hearing, are as of today, November 9, 2017, and have not been updated after the initial earnings call. During this call, we will make forward-looking statements, including statements related to the future performance of our portfolio, our identified acquisitions and farm properties under evaluation, impact of acquisitions and financing activities as well as comments on our outlook for our business, rents and the broader agricultural markets. We also will discuss certain non-GAAP financial measures, including FFO, adjusted FFO, EBITDA and adjusted EBITDA. Definitions of these non-GAAP measures, as well as reconciliations to the most comparable GAAP measures, are included in the company's press release announcing third quarter earnings, which is available on our website, www.farmlandpartners.com, and is furnished as an exhibit to our current report on Form 8-K dated November 8, 2017. Listeners are cautioned that these statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond our control. These risks and uncertainties can cause actual results to differ materially from our current expectations, and we advise listeners to review the risk factors discussed in our press release yesterday after market close and in documents we have filed with, or furnished to, the SEC. I would now like to turn the call back to our Chairman and CEO, Paul Pittman. Paul?

Thank you, Luca. This was a very good quarter for the company. We were able to comfortably exceed Wall Street's consensus estimate even after absorbing the $0.03 a share in costs associated with our recently issued preferred security. I would like to discuss some of the highlights for the quarter and why it was such a successful quarter. The first is we had a 73% increase in revenue year-over-year; only a 25% increase in operating expenses, and that led to 179% increase in operating income. This is the effect of ever-increasing scale, meaning essentially a bigger portfolio, and efficiency in how we operate that portfolio. Net debt to gross assets went down from 48% to 34% year-over-year. Net debt divided by adjusted EBITDA went from 14.9 times to 9.4 times year-over-year. This is the effect of not only our increased scale but fundamentally of issuing the preferred security that I mentioned a few moments ago. This is frankly a very good security for our company. We would, of course, prefer to issue equity to continue growth at reasonable prices, but when the market has made that impossible, the preferred was a very good alternative. It has less risk than the debt and it frankly allows us to continue what is very accretive and positive growth. AFFO per share at $0.09 beat the expectations we had internally and of Wall Street. If it was not for the expenses of the preferred, we would have had $0.12 a share of AFFO. We put the Olam transaction under contract; that's $110 million deal of a very high-quality group of assets with an incredibly high-quality tenant at cap rates well in excess of our cost of capital. We have more deals with similar financial terms that we will be executing on in the coming months. What we are seeing in the core business is that revenues are in excess of our original expectations in virtually all parts of the country and in all crops. As it relates to guidance for the remainder of 2017, we are not changing our AFFO per share guidance. Since last night, I was asked why we didn't update revenue and why we didn't update other line items in our guidance. And the reason we didn't update the entire page, if you will, is for a very simple reason. With six weeks to go before the actual answers are known, we felt like it was a chance for additional confusion and noise with regard to our company to make all those individual line item changes, when sometime in early January, we will know the actual facts and we'll put some amount of data out at that point in time. But I do want to re-emphasize that despite the costs associated with the preferred, we are not changing the AFFO per share guidance. The company bought back $10 million of shares at an average price of approximately $8.92. We were able to extinguish a 5.7% dividend when we bought those shares back, but even more importantly, we are buying those shares back at approximately $2.75 or a 30% discount, in our view, to NAV. There is no place on the planet, besides our stock, where you can buy farmland at a 30% discount. So, we have deployed capital to do that. We are particularly strong in that point of view, given that credible sources, such as the USDA and others, suggest that farmland values across the United States are in fact continuing to increase and what we are seeing in terms of sales this fall in the Corn Belt in particular, reinforces that point of view. Those land values in the Corn Belt region are at least stable and probably increasing materially in our point of view. Turning for a moment to releasing efforts, we have gone through substantial re-leasing this fall of major portions of the portfolio in places in which we have already signed leases, particularly the Corn Belt. We are seeing substantial increase in rental rates for those farms. So, we would expect portfolio-wide to have on average modest increases in our rents when we have fully rolled over all expiring leases. With that, I'm going to turn it back over to Luca Fabbri. Go ahead, Luca.

Thanks, Paul. I will walk you through some of the key financial highlights for the quarter and for year-to-date. Revenues for the third quarter were $12 million, approximately a 73% increase over the same period last year. Year-to-date, the revenues were $31 million, also a 73% increase over the same period last year. Operating income for the quarter was $6.1 million, almost 3 times as much as the same period last year, and $12.4 million or a 69% increase for the year-to-date. However, in the first quarter of this year, we incurred in property operating expenses certain significant expenses that were one-time related to the AFCO acquisition. Basic net income per share available to common shareholders for the quarter was $0.01 and negative $0.05 year-to-date. I will refer now again to the press release for definitions of the non-GAAP measures that we use, specifically FFO, AFFO and so on and so forth. But specifically, for the third quarter, as Paul already mentioned, AFFO was $0.09 and it was $0.20 year-to-date, and that includes a negative $0.03 per share impact due to the participating preferred dividends. During the quarter, we also repaid $20.7 million of debt with - we used, for the time being, participating preferred proceeds, but we are planning to refinance this debt later in this quarter or early in the next quarter. As Paul also mentioned, we also repurchased 1.12 million shares between the third quarter and the first few days of the fourth quarter at an average price of $8.92. The fully diluted weighted average shares outstanding for the third quarter was 59 million. Through the purchase that we did in the third quarter and early in the fourth quarter, the fully diluted shares outstanding today are approximately 58.1 million. This concludes my remarks on our operating performance for the third quarter of 2017. Thank you for your time this morning and your interest in our company. Operator, we would like to begin the question-and-answer session.

[Operator Instructions] The first question comes from Collin Mings with Raymond James.

First question, Paul, maybe just going back to the decision to repurchase shares during the quarter and here a little bit in October as well. Clearly, stock trading at a significant discount to NAV, but how do you balance the opportunity to buy back at a steep discount to NAV with just leveraged goals? And just along those lines, maybe update us on how you're thinking about leverage targets going forward after the preferred, and what type of dry powder for capacity you think you have going forward.

Yes, so let me take those in reverse and if I forget one of the various sub-questions, just prompt me again, Collin, but in terms of dry powder, we have substantial additional dry powder we would expect to invest in the neighborhood of $70 million to $80 million of additional capital in farms in the next several months. That's kind of our expectation. As it relates to long-term leverage goals, as we've said, we're gradually in a bit of a delevering effort. Like to get our debt as a percentage of our total assets something in the neighborhood of 40%, maybe even a little bit lower. We're actually below that right now. That is of course partly due to the issuing of the preferred. I think a lot of people frankly misunderstand and miss - and look at the preferred in the wrong way. The preferred is fundamentally equity. I don't have to pay the dividend; I can convert it to common equity if I choose. I'd rather issue plain old common equity, don't get me wrong, but I'd rather issue that preferred than issue plain old common equity at $9 a share. So, we have de-levered substantially. We will continue to maintain or go down from here if we can get the stock price back to someplace more reasonable, certainly rather have more - as I call it - plain old common equity than preferred. But we view that preferred as a very good security in our capital structure and we can invest that security, and have been investing in that security, in an accretive way. As it relates to the buyback itself, for me, this is just super-simple, okay? I don't have anywhere to buy farmland at a 30% discount except our stock, and if people in the marketplace - this is to be blunt, it's like an IQ test. If people want to sell this back to us at a 30% discount, to the extent we have capital available to do it, we will continue to do so.

Okay. All right. And then maybe just along the lines of having another $75 million to $80 million that you're looking to deploy beyond Olam, just maybe talk a little about that pipeline of opportunities that you're seeing, any particular region, particular cap rate, just how is that pipeline shaping up heading into 2018?

Now, the overwhelming majority of that money will end up going into specialty crops of some form or fashion. Obviously, that's where cap rates are highest. We would expect deployment of that capital would be in the neighborhood of a 7.5% gross cap and NOI caps that are solidly in the 6s. With leverage, that's frankly quite accretive just on a cash flow basis, to say nothing of the fact that the common equity shareholders get half of the appreciation on those assets into their own pockets over a period of time. So that's the view of the pipeline. We have more than enough ideas already sort of in the door to deploy all of that capital. We're in the process of diligencing and exploring those various alternatives and we'll frankly deploy that capital, in our view, probably sometime prior to the end of the first quarter. So, we will get essentially full revenue recognition of those assets - of the returns from those assets during the 2018 year.

Okay, very helpful details. Two more for me and I'll turn it over. Just going back to the guidance, and to your point, I don't want to focus too much on that recognizing that again, we're close to year-end here, but just can you maybe give us a little bit of a sense of how much, as you think about the ability to maintain guidance, and how being able to offset the drag associated with that preferred, how much of that is just better revenue? Is that cost control? How would you bucket it between the revenue and cost control side that's allowing you to really offset that $0.09 drag?

Yes, we will - so first, I'll just apologize for everyone that we didn't update every single line item, but I will be quite simple in why. We are a small company with a small team; that is an incredibly difficult amount of work to do well and accurately, and we thought not frankly worth the investment of that time and effort with six weeks to go. So, we focused on what would be the bottom line impacts of what we're seeing in the portfolio. So, apologies on our part. In a different company, and if the market gave me another billion dollars of capital to invest, we'd have a staff member to do that, but we don't right now. So, because I get why it's a little frustrating, particularly to the analysts who are trying to update their models, but what we are - what you should expect to see is significant increase in revenues from where we had originally projected for the year. We have seen that; we have surprised our internal expectations both in the second quarter and in the third quarter. We would anticipate doing so in the fourth quarter as well. What is driving that is fundamentally incredibly high yield per acre in the row crop regions of the United States in almost every one of those regions. Corn prices aren't very good; bean prices aren't very good, as you all know, but as we always say, revenue per acre and ultimately, income per acre, is what matters. Price of the grain is a head fake [ph]. People can't seem to let go of that, but that's the truth. We will be receiving significant bonus rents in several parts of our portfolio during the fourth quarter, so it is largely revenue-driven. On the cost-containment side, as a percentage of revenue, cost will be lower. Absolute cost will be down a little bit. We've had a few people leave the company and with the stock price where we've had it, those were all frankly voluntary departures, more or less, but we're just not going to put the headcount back in place. This is a company that was fundamentally built for growth. We're not growing very fast by the standards, historical standards, that we've grown in the past. And so, we can get by at least for a time with a few less people, and so we're cutting on the corners everywhere we can in terms of cost control. But it's largely a revenue-driven set of - beating expectations is largely driven by revenue.

Okay, very helpful detail there, Paul. And then the last one for me was just going back to the comments about upbeat in terms of the leasing trend. Is there a way to maybe quantify or think about, at this point, how much of your leases that would roll over next year you either have new tenants for or you have renewals? Just trying to get a sense of how much is already behind you as far as getting some of these increases already locked in.

So, in the Corn Belt in particular, we are largely fully re-leased. We have either actually signed leases or reached a handshake agreement and exchanging pieces of paper to sign, so I don't see really much risk in our general rollover in the Corn Belt changing. We are somewhat behind that in the South, which is frankly typical, and probably a little bit behind it in the High Plains. The only region of the United States where our farmers are experiencing relatively difficulty operating climate is the High Plains. What happens in the - the High Plains is the most tertiary grain production region in the United States. Transportation costs of the product out of that region are higher than anywhere else in the US. And so, when there is excess grain in the marketplace, which there frankly is right now, there is more volatility in terms of farm-gate price, meaning the price paid to the farmer on those commodities. So those guys are suffering frankly more than anyplace else, but we still think we'll be okay in that region, and whatever bad things are happening in that region are balanced by the positive things in the other regions.

The next question comes from Dave Rodgers with Baird.

Paul, just to follow-up on a lot of the same lines, with regard to your comments about substantial increases in rental rates, and following up on Collin's question, where are you seeing the substantial increases? Can you quantify what substantial is? And it sounded like you were talking about Corn Belt is where you have the most confidence that you're getting substantial increases, but as we look at this past year, Corn Belt rents rolled down some 20%. So why are we back up some substantial number? So, tie that together; maybe I'm just not putting the pieces together. Thank you.

So yes, there's - it's partly what's going on and it's partly people's challenges putting the pieces together, so let me hit the history first. So, what happens in a downturn market is you - is that - so the negative events in grain price didn't happen between '16 and '17. They happened largely between '14 and '15, but because we normally have three-year leases, it takes a while for that pain in the actual producer incomes to show up as pain for us in the lease negotiations. So, it's important to kind of have that context. When you renegotiate a high-dollar, all-cash lease in a down market with a farmer, there is a tendency to convert that lease to a base bonus-style lease instead of 100% cash lease. So, when you make that conversion to a - and the reason you're doing that as the landlord is you don't want to lock in a bad rental rate in a down market that then when things turn back to the positive, it takes three years for the benefit to show up, right? You like the fact that the lease term lag saves you from the downturn for an extra couple of years, but you certainly don't want that as the landlord going the other way. You want to get right back up as soon as you can. So, we tend - and any manager would do this - substitute all cash leases for base bonus leases in the down cycle. When you forward-project a base bonus lease under GAAP, you don't get any benefit for the bonus. So, part of the 20% decline is an artificial decline by the mathematical methodology of not giving credit to the bonus in a base bonus lease. And so, you're making not really an apples-to-apples comparison. Then on the ground itself, as I said a few moments ago, grain prices are not very good in the central part of the Midwest, but a lot of farmers had an opportunity in the early part of the summer to market grain on Chicago Board of Trade prices where corn was in excess of $4 and soybeans were higher than they are today. And so, the farmers had marketed crops at prices quite a bit better than you're seeing in the harvest lows in the markets today. On top of that, they are getting yields materially in excess of their expectation. So, for example, a farmer is running an Excel spreadsheet in his budget, has got 200 bushel of corn in it. All of a sudden, he ends up with 250 bushel of corn, so he's got an extra 50 bushels. Even if that corn sells for $3 a bushel, he's got an extra $150 in his budget and a lot of operating leverage in his business as it relates to the yield breaker. And that's an extra $150 in the context of a model that was showing a $75 an acre profit or a breakeven or something much more modest than $150. So, these guys are doing reasonably well. Now that is largely the situation with reasonably big, strong producers, but when people look at the USDA data, what they have to understand is approximately 12% of US producers on the grain side represent 90% of the actual output. So, for our business model, it's not about whether some very small farmer in some frankly out-of-the-way marginal production region is having a good or bad year; it's about whether those 12% of commercial producers that actually produce most of the grain we eat are having a good or bad year. And the truth is, they're having a so-so year, but we had projected that they'd have a bad year and we're seeing - and so we're seeing bonus rents come in and bonus rents come in for the '18 year and projecting going forward to some degree. And so, to your specific question, in the Corn Belt, because we had dipped so deeply, we're seeing $25 to $50 an acre improvements in some of those leases. Those would be the stronger of the improvements. I think portfolio-wide, it may be more like $10 or $11 an acre, but that's still a significant jump on rents in the $250 an acre range to even pick up $10. And certainly, if you pick up $25 to $50, you've made a big difference. So that's kind of what we're seeing.

Let me just add to that, David. So, do not extrapolate what I just said to the entire portfolio, because we didn't take quite as deeper cuts in the other parts of the country, so you're not going to see nearly as good a snap-back if you.

Yes. That's fair and appreciate all the detail and color there. With regard to the capacity that you raised with the preferred, I think on a levered basis, you talked about maybe something in the $240 million range in terms of added liquidity. You kind of bought Olam; I think a minute ago, you said 70 million or 80 million of capacity to buy. That kind of leaves an extra 50 million or 55 million if my math is right, which it might not be. But if it is, did you decide that 50 million or 55 million is better earmarked for debt reduction, better earmarked for the stock buyback program?

Yes, your math is very close. Just for everybody's benefit, there's about 40 million to 50 million of the preferred not going into - preferred plus leverage not going into purchases of new assets. Now recognize the other uses of that money we can't lever, so it's not really - it's 40 million or 50 million of theoretical capacity, it's only 20 million or 30 million of actual dollars. Those dollars are being spent the following way. Some of it is on debt reduction. Most of the loans we had rolling over this year are 60%, 6-0 percent, LTV loans. We will refinance those at 50% LTV, so there's a use of cash there. That's obviously consistent with our view of gradually delivering taking the LTV on anything we refinance down is part of that process. We obviously have used some for the buyback and may continue to use some for the buyback, have some in terms of increasing our balance sheet reserves and strength, and have some capital going into actual property improvements on properties we already own. You don't get to get any leverage on those until you refinance the property a few years later, but we may be building grain bins; we may be adding irrigation; we may be planting new trees; we may be expanding an orchard or a grove somewhere in the original AFCO portfolio. And those are unlevered uses of cash, all of which have cap rates well in excess of 6% expected return to the company. And so that kind of bridges the gap for you on where the extra money has gone.

The next question comes from Jessica Levi with FBR.

Most have been asked and answered. One last is you mentioned 70 million to 80 million of dry powder to invest over the next few months into acquisitions. What kind of split are you thinking about between grow and specialty crops?

Yes, in terms of added that capital investment, it will be almost entirely in the specialty crop area, but not 100%, but the overwhelming majority into the specialty crop area because - and that's what we said and intended when we raised that money. And that's because that's where we can get higher cap rates off of that capital. In terms of the portfolio-wide split, we had moved ourselves to almost 80% primary row crop and livestock-related business, and 20% specialty. This set of investments obviously cranks that back. When we're all done, my estimate would be we'd be in the neighborhood of 70% primary crop side and 30% specialty side. We view 80-20 as the extreme on one end, and probably 65-35 as the extreme on the other end. Obviously, we are - we look at transactions on an individual basis. Good deals come in, we don't try to manage to an exact target on the split between specialty and primary row crop, but those are the goalposts on each end of the range we want to stay in.

The next question comes from [indiscernible], an investor.

I have just a couple of quick questions. One of the big questions for a lot of our shareholders I think is, and in talking with a few of them, is we are always wondering, of course, sustainability of the dividend. So that's my first question I'd like to try to see you guys address.

Yep, so we don't anticipate dividend reductions. I am a large shareholder myself, as those of you who track the history since the beginning. I contributed my personal farmland in exchange for shares. I didn't take any cash out, so I'm a huge shareholder personally and I think I own maybe 4% or 5% of the share capital of the company, the common and OP share capital of the company. So, we do not want to see a dividend decrease. The board has approved the continuation of the dividend for the next quarter. We're likely to continue that dividend as long as the business continues to grow, and improve as it is right now. So, you can never promise that it would never change, but I think it is reasonably unlikely that you see any dividend reduction in the next year or so, and certainly not after that, but who knows after that?

Paul, I appreciate your candid remarks earlier because I think there's been some misunderstanding and confusion. In part, there's a lot of commentary that comes out from various publications and sources. Certainly, if you listened to David Gladstone and Land, conference call yesterday which is, again, you guys are very different in your approaches. But his commentary was very negative toward grains and corn, almost - the remarks were, I would say in a way, kind of targeted towards your company. And the other side of it is, is I'm not really sure how these analysts seem to kind of miss the mark to me, and I think that it's unfortunate that you're under such scrutiny, and yet there's so much liberties given to the other company, Land. I don't quite understand that because you see so much commentary going on that is continuously just a lot of background noise. For your loyal, long-term holders, we're not really concerned about that; it's just for - it creates a lot of confusion, and like you said, if people are willing to give up their shares for a discount, then so be it. But I just don't understand what it is about your company that seems to again be under the microscope so much, where many of us could argue, you have tremendous upside compared to Gladstone's company. And I'm always careful with the gift of gab and everything like that, because if you listen to that call, it sounds like utopia; and when we listen to your call, it seems pretty measured, tailored, pretty concise, and you're not giving any fluff. Not to have you comment on another company, but I'm curious your thoughts on that.

Yes, I'll give you my thoughts and thank you for your kind remarks. Our current head of Investor Relations is about to circulate his resume. Those were very nice comments and I appreciate that, so thank you. But let me tell you what kind of my perspective. So, number one, I don't spend any time listening to David Gladstone's conference call. I probably will read the transcript a few months from now; I usually do, but it's not actually very high on the list. That company has a very, very different strategy than we do. Not going to tell you whether I think it is good or bad. I obviously like ours better because it's the one I execute. But they have chosen to invest largely in specialty crops, particularly vegetables in the coastal regions of the United States. We are in a period of time in which that looks quite good. There are periods of time through history in which that strategy would have looked quite bad if you back-test it. My fundamental world view is that this story is about increasing global food demand in the face of land scarcity. It is not about whether organic production is hot, or whether corn is strong, or whether avocados are strong or almonds. It is about a steady increasing march of global food demand and fundamental land scarcity. We invest on that basis. We think that our portfolio, if stress-tested by given downturns in any given part of the country will survive quite well and quite strongly. What that means is at any given point in time, I may, in fact, have some of our assets - we may be invested in some assets having a somewhat difficult time. But the commodities - the food commodities markets - and I don't just mean corn and soybeans in this instance - all food commodities tend to ebb and flow over time. Sometimes they have better years, whether it's weather-based or price-based, but food demand just keeps marching upwards. So, we truly believe in our principle of diversification and we will continue to do it. I am not going to window-dress our asset investments to make Wall Street happy. I'm not going to do it. I've got a lot of my own money in the company; I made a lot of money in this asset class in the last 20 years. And the way you make that money is you buy good properties, all across the country; you manage them efficiently. And you weather downturns with no real asset value declines, maybe modest rental declines, but you would - not trying to believe you have a crystal ball on what is the highest and best kind of food demand. If I had that crystal ball, I wouldn't buy farmland at all. I would be buying a retail marketing company related to a given food product. That's where most of the value will show up, not in the farmland if you get it perfectly right in terms of consumer demand. We just think it's impossible to get it permanently right. You look smart for a while and then you don't look smart a little while later. As far as the noise related to our company, okay, it seems to me that so many commentators in the press, that negative news sells, okay. So, you read all the time in the press, you will read farmers are having a hard time here or there. You will read about declining rural America. You will read about dicamba is hurting other crops and you just keep - you read about corn prices being down. What you aren't reading, and these are the statistics that truly drive the economic underpinnings of the industry are that we are growing ever-increasing primary grain crops every year and they are being consumed. Demand is steadily increasing for all primary grains. Revenue per acre is increasing. $250 bushel corn and $75 bushel beans in the Corn Belt compared to $250 bushel per acre respectively is a huge deal, okay. And the fact that the productivity of these farmers and I don't mean productivity in terms of yield; I mean efficiency in terms of operations, in terms of planters, combine technology, grain storage technology, decreased cost of seed on a per-bushel basis, decreased costs of chemicals, this is one of the biggest success stories in American industry. And all of those doomsayers, number one, have it wrong; and number two, you've got to wonder is there only - is their goal to inform the public or their goal is to get published in the newspaper and get on TV. And they got it wrong; they're misleading the public; they're misleading investors. And we're going to invest based on the real facts, not based on whatever these so-called pundits say about our industry and our assets. As I said, as it relates to the buyback, we are firmly committed to that point of view. As a reasonably large shareholder, myself, we look at it as a screaming buy opportunity for people to be willing to sell their stock back to us at $9 a share. That's all I got on that, Mike. Thank you so much. If you have any other questions, happy to answer them.

The next question comes from Robin Hyde with Hyde Properties.

Yes, Mr. Pittman, I appreciate your time this morning and just a quick question. In regards to your specialty crops, I have not seen many pecan orchards that have come up in your portfolio. And just wanted to see what your thoughts were about adding a small percentage of those.

We do have pecan properties in the portfolio. We are happy to add more. There is a gentleman in my office named Cort Barnes, who would be the right contact person for you if you know of any of those properties, feel free to give him a call. I think you can find his numbers on the website; if not, call me and I will get you to him. We do a pecan property; it's in Georgia and Alabama. Cort is sitting here next to me, I think that's the only regions, the only place we have them. Those are good properties, we're pretty happy with them. They of course had some nuts blown off the trees in the recent hurricane activity in the Southeast, but still had okay yields and we like the product. We basically like all legal forms of food production. You bring us a good idea; it adds to our further diversification whether it's organic or regular production or grow local, we will invest in almost any type of food production as long as it's a high-quality farmer with appropriate amounts of water available for that crop and a good nearby tenant base. We like it all; that's why we have 110 tenants and 26 or 27 different crop types in the portfolio.

[Operator Instructions] The next question comes from Charles Irsch with Lacebark.

I'd be curious to hear sort of the thought process that you and the board went through in terms of marketing the preferred, and taking some of the appreciation rights from the common unit holders and moving them to the preferred unit holders, curious to hear about that process and how that impacted the marketing of the deal?

So happy to do that, but I actually think the better way - the appropriate way to think about this is that what we did was we moved some of the appreciation on that invested capital from the preferred to the common, not the other way around. So, to be crystal clear, that preferred shareholder does not get any appreciation. We raised 100 - gross amount $151 million with that. The preferred shareholder only gets half - and I'll say it again, half of the appreciation on that $151 million. They get none of the appreciation on the monies already invested from other regular common shareholders or from our other preferred security. The common shareholders, in fact, get half of the appreciation on that $151 million. And that is really core to understanding that deal. As I said earlier, we would have rather done a regular common equity offering at prices at or near our NAV. Had we had a chance to do that, we certainly would have done it. As this quarter shows, there are substantial advantages and continuing to increase our scale in terms of the company. So, we went to find a way to continue to raise equity a different way. This preferred security was designed originally for some of the homes for rent companies. I think it was American Homes for Rent that did the first of these types of transactions. There's been several done. They were reasonably well accepted in the market and we kind of drafted in their tailwinds in terms of the structure and security. But we are very confident that that capital will be invested in a way that is, number one, accretive on a current yield basis to the shareholders, meaning it increases AFFO per share. And number two that those shareholders eventually will get 50% of the appreciation that occurs on the additional investments that we have made with those funds. I hope that clears that up.

This concludes our question-and-answer session. I would like to turn the conference back over to Paul Pittman for any closing remarks.

Thank you all for participating in this call. For all of you who are shareholders, as am I, it's been a difficult six months. We certainly hope times get better. I would frankly encourage you, if you have a long-term view, to continue to buy stock at these levels. We will create value over time, I'm quite sure, from these levels and hopefully the stock will have begun a recovery today that keeps going. Thank you all.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.