Farmland Partners Inc. (FPI) Q4 2018 Earnings Report, Transcript and Summary

Good day, everyone and welcome to the Farmland Partners Inc. Fourth Quarter 2018 Earnings Conference Call and Webcast. [Operator Instructions] And please note that today's event is being recorded. And I would now like to turn the conference over to Mr. Paul Pittman, Chairman and Chief Executive Officer. Please go ahead.

Thank you, William. Good morning, and welcome to Farmland Partners fourth quarter and full year 2018 earnings conference call and webcast. We appreciate you taking the time to join us for these calls. Please refer to the Investor Relations section of our website at farmlandpartners.com for our Q4 2018 supplemental package, it includes information that will be related to this call. The link for the presentation is directly below the webcast link and is also posted under presentations section of the Investor Relations portion 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.

Thank you, Paul and thank you to all who are listening to this webcast either live or recorded. The press release announcing our fourth quarter and full year earnings was distributed yesterday evening. A replay of this call will be available shortly after the conclusion of the call through March 28, 2019. The phone numbers to access the replay are provided in the earnings press release. For those who are listening to the rebroadcast of this presentation, we remind you that the remarks made herein are as of today, March 14, 2019, and have not been updated subsequent to this initial earnings call. During this call, we will make forward-looking statements, including statements related to the future performance of our portfolio, our identified and potential acquisitions and dispositions, the impact of such acquisitions, dispositions and also financing activities, as well as comments and our outlook for our business, rents and the broader agricultural markets. We will also discuss certain non-GAAP financial measures, including net operating income, FFO, adjusted FFO, EBITDAre and adjusted EBITDAre. Definitions of those non-GAAP measures, as well as reconciliations to the most comparable GAAP measures are included in the company's press release announcing fourth quarter earnings which is available on our website www.farmlandpartners.com and is furnished as an exhibit report on Form 8-K dated March 13, 2019. 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 result to differ materially from our current expectations, and we advise listeners to review the Risk Factors discussed in our press release yesterday after market closed 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. So to summarize the year, this was clearly a year with many challenges. The good news is that despite those challenges, the asset values remain stable to growing slightly in value, and we expect that trend to continue. The first group of challenges that we faced as a company was a combination of trade wars and weather events. Hurricane Michael in particular on our corn [ph] farms led to a loss of approximately $450,000 of crop share income. We also experienced a loss of crop share income related to excessive rain events, particularly in the southeastern United States. Beyond the weather events, we also had the effect of the trade war which had a negative impact on the prices received and to some degree on our crop share incomes, particularly for soybeans, but also to some degree for corn, wheat, walnuts and possibly, even almonds. This lost crop income was probably in the neighborhood of around $1 million related to those trade war and weather events. Obviously, we flagged this issue as a potential problem in the third quarter conference call. It's always a little hard to disaggregate whether it's directly related to trade war or to just a general excess supply of certain commodities. But in any rate, we ended up with lower crop share income for the year than we had actually expected. Beyond the trade wars and the weather impacts, we certainly had the negative effect of the Rota Fortunae article. That hurt our shareholders deeply and caused a deep loss in stock price due to that false and misleading article, and to the manipulative stock trading surrounding that article. We ended up losing business over that, it stopped the growth of this company essentially, and it has caused us to incur excess legal fees and excess employee retention payments and other negative impacts on the G&A line. It is also obviously been a negative moral factor for the company, for the company's employees, and for shareholders and tenants. But there is a silver lining; the trade wars will eventually end, and if you believe the current talk in the press, this will be very positive news for export gains for U.S. agriculture. The general supply and demand picture is returning to a potential tight stock's position, particularly for corn, beans is not such a good situation. RF, Rota Fortunae created the opportunity for all of us to buy into a pool of high-quality agricultural assets at a very low price. There is a deep, deep discount on our shares today. The company, me personally, and many of our shareholders have taken advantage of that. Long-term investors who understand the value of the underlying farmland assets we own will continue to see positive returns to those investments. Asset values remain stable to slightly upward as we all -- as many of us understand, near-term cash flows do not have a direct impact on farmland values. Turning to some operational issues in terms of lease-up of the portfolio. At this point in time, we have approximately 95% of our farms are leased for the 2019 crop year, the rest of those farms we believe will be leased before planting, we've not had a vacancy on one of our farms in the past and we do not expect one this year. On average, we saw rent increases of approximately 1% on the new leases we have put in place. As many of you know, about 1.5 years ago, we acquired a series of farms that we referred to all as the OLM [ph] transaction, that is a series of tree nut farms in the Central Valley of California. During the fourth quarter, as we had expected, OLM [ph] made their rent payment and that rent payment was fully in line with our expectations of our crop share participation on that farm. We had another farm sale in the first quarter of 2019 for a gain of approximately 10% over the purchase price. This false narrative that has been promoted anonymously by unscrupulous stock manipulators that we have systematically overpaid for assets is just not true, it never was, but now the proof of that falsity can be seen in the repeated sales of our assets at material appreciation over the price we've paid. Our financial results, as I said earlier, were hurt by lost crop share revenue, a modest amount of bad debt, higher interest rates and higher legal and G&A costs related to the RF litigation. Turning to net asset value of the stock as we look at it. As I always say, we look at this in three different ways. If you do a traditional cap rate-based analysis, you would come to a stock price of approximately $14.80. As I said in the prior conference call, we believe that methodology today overshoots and that our NAV is not in fact $14.80. If you look at the USDA methodology, where we take the purchase price of our farms and appreciate them through time based on the USDA data on a state-by-state basis, you come up with a stock price of approximately $13. We believe that is the most accurate reflection of the valuation of the underlying portfolio reflected, and should be reflected in stock price. In terms of book value, if you do just a simple book value analysis it would lead you to $9.89 per share. So management continues to believe that this is a stock that is worth at least $12, and that valuation is creeping higher. We think that appreciation of the stock will continue because of the gradual asset appreciation, and more importantly, the continued repurchase of deep discount shares. Since July of 2018, we have bought back approximately 3.2 million shares, that's 8.5% of the company at this point in time. We will continue to do that sort of buyback into the future until such time that our stock price more accurately reflects net asset value. Using a $12 share price, the benefits from a financial point of view of those buybacks are approximately $19 million of shareholder value created for the remaining shareholders. Now lastly, turning to the Rota Fortunae and related litigation; the perpetrators of this financial crime are still making an effort to hide by playing shenanigans in federal court. However, it is becoming clear that there were co-conspirators in that fraud and that Rota Fortunae was paid to write that article. We continue to believe this was part of a stock manipulation scheme, and we will pursue that scheme vigorously. We are pursuing that with an effort to recover money for shareholders who were hurt. The class action case that is based on exactly the same claims that were made by Rota Fortunae is driven by unscrupulous lawyers and is not fundamentally based on facts but are based on the desire of those lawyers to collect contingency fees. Our strategy for 2019 is really very simple. We will continue to rent farms to good tenants and collect those rents. We will control our overhead costs, we will selectively sell farms and buyback shares, both common and preferred, and we will continue to pursue Rota Fortunae and their co-conspirators to the point that they get a major financial recovery for our shareholders. Thank you. With that, I'll turn it over to Luca.

Thank you, Paul. As usual, I'll run through some financial highlights for the fourth quarter and for the full 2018. Revenues in the fourth quarter were about $20.9 million, a 34% year-on-year increase with operating income of $13.5 million, approximately 33% up. For the full year, revenues were about $56.1 million, a 21% increase year-over-year with operating income of $29.7 million, up almost 32%. Adjusted EBITDAre for the fourth quarter was $16.2 million, up almost 26% year-over-year and for 2018 was little over $40 million, almost 19% up. Basic net income to common stockholders was $0.13 per share for the quarter, negative $0.01 for the year, and AFFO per share in the fourth quarter was $0.22, $0.24 for the full year. Couple of items of note on this financial performance is that as we have been clearly outlining since the beginning of the year, the usual seasonality of revenues due to crop share receipts that really focuses a lot of revenue and the lion's share of income in the fourth quarter effectively take place as we had clearly explained ahead of time. One other item of note regarding to pulse remarks, regarding the impact on revenues of some specific -- of some extreme weather events, those similar events did not have any material impact on the value of the assets going forward which is very important, it was just an issue with the cops that were knocked-off trees and stuff like that. Finally, I would like to discuss the stock repurchase activity in a little bit more detail. Already kind of painted broad strokes [ph] of it; in the fourth quarter we repurchased 1.1 million shares of common at an average price of $5.74. We also repurchased approximately 19,500 shares of Series B at an average price of $18.40. For the full year, we bought about 3.05 million shares of common at an average price of $6.76, and 23,913 shares of Series B in $19.32. After year-end, we purchased an additional 0.9 million shares of common at an average price of $5.39, and 16,800 shares of Series B at an average price of $18.51. The current common fully diluted share count is 34,295,802 shares. This concludes my remarks on our operating performance for the fourth quarter and full year 2018. Thank you for your time this morning and your interest in Farmland Partners. We would like to begin the question-and-answer session.

[Operator Instructions] And the first question of today will be from Rob Stevenson with Janney.

Paul, is there any insurance on the weather events that you talked about in terms of the hit to the earnings?

So the underlying assets generally have some level of insurance on them. For example, I didn't mention it, we had a -- because it was fully insurance covered but we had most of the pivots on a farm that we own in the Florida Panhandle wiped out by the -- by one of those hurricanes, I don't remember which one but it was all was almost entirely covered by insurance to replace those pivots. So generally, on the underlying assets we don't have any harm, we've got insurance coverage, it's never perfect but it's pretty good. In terms of the crop itself, generally we did not have insurance coverage per se on these things that would cover our additional bonus rents. What we lost is not all the rent on a farm, we lost the bonus upside on those farms due to pricing and the rest. Insurance will -- in the row crop area, in particular, it will protect the farmer and therefore for us from the downside, meaning that the base rents and all of that are covered but it won't really give you enough recovery to get what should have been your full bulk return on that farm for the year, and that's basically what happened.

And then, as you're sitting here today do any acquisitions really make sense at this point given where you could buy your own stock back?

We will continue to do from time to time, add on acquisitions of a very specific property that either can be acquired at a really good value or is foddering [ph] a property, for example, that we already own. So we're not completely out of the acquisitions business at this point in time but largely, we will devote our capital to the repurchase of our own stock because we can essentially buyback an ownership interest in the farms we already know well and already owned at such a deep discount. And so that's the primary focus but not the entire focus of our capital spend.

Are you guys marketing anything for sale or have anything under contract for sale at this point?

We're not -- we don't talk about what we have under contract. We will continue, as I have said, to make occasional asset sales and use those funds to repurchase stock. So just stay tuned, you will see them as we report each quarter.

Luca, I mean under the REIT rules, how much assets could you really sell in a year without having to pay a special dividend?

The issue more than a special dividend is more on the tax side. We still have a lot of ability to sell assets and still comply with the rules, it kind of depends also on the number of transactions. So we have a lot of flexibility.

Yes, those issues we will not be a meaningful limit on our ability to sell assets at the pace we intend to [ph].

Specifically to address your question, the dividend is really not very much on the radar screen, it's an issue of course, theoretically but it's not relevant really about the -- related to the extent of assets sales that we are truly considering.

And then, you guys -- unless I missed it somewhere are providing earnings guidance for '19? Can you talk a little bit about what brought that decision?

We did not put the earnings guidance in the supplemental, we may provide guidance in the future. But at least for right now we did not put it out and for the following reason; guidance to you, numbers of the analyst community in particular, when this portfolio was in aggressive growth mode was very, very important. Today, you can look at last year's revenues, last year's cost structure; if you need help with it we can tell you what the lost revenue was from asset sales. And so we found guidance not to be particularly additive to really just projecting what we've done in the past going forward. So at this point we're not going to put out a guidance.

On one thing that may be variable on a year-over-year basis, I mean when you guys look at the legal fees going forward related to the lawsuit you guys are pursuing against RF and the shorts, as well as the legal fees to defend yourselves against any of these class action lawsuits; how significant a number are you guys anticipating that's likely to be in 2019?

Yes, give me just one second, please. I'll give you -- I'll answer it right here. So we're at -- I would estimate that you might see it somewhere between $0.02 and $0.04 impact next year from those things. It -- obviously, if we did a full insurance coverage which would be our desire, that number will be lower. But if you want to be conservative, use $0.02 to $0.04 of cost on those legal fees. And we'll get a recovery from RF, which we will, I just don't know when. Then we'll get some of that back but we're not going to give up on that because too much harm to the company and the shareholders. They know they've committed a crime and they're going to pay for it.

And our next questioner today will be Dave Rodgers with Baird.

Paul, can you talk about the roll over in leases that you're kind of repricing here in the first quarter? What kind of the percentage of revenues that you'd expect to roll? And what the change in the year-over-year rent is going to be on that component of the portfolio?

Yes. So speaking on a cash basis because when you get straight lining involved it gets materially more confusing, frankly, than it needs to be. So as we said in the third quarter conference call, we had a roughly one-third of the leases of the company up for renewal. At the third quarter we'd already leased I think about 50% of them, you can look back at the transcript of that time. Now we've leased about 95% of the open leases, and we'll have the rest of them done here over next few weeks. And what we have seen is a sort of on an average, about a 1% bump in rents. To put that in context though, that's not a result we're particularly proud of, right? The long-term expectation would be something like a 3% to 4% per annum rent bump. So that would mean you're giving 8% to 10% when you're doing at lease that's 3 years old. So we're able to squeeze out small rental increases in the rent roll process but they're not sort of a historical number you would underwrite to over the long-term. So we're -- we feel pretty good about that but it's not as high as we would have expected or wanted. But everything the farmer faces in his operating budget gradually goes up, right? His seed price isn't really going down, his fertilizer price isn't really going down, property taxes aren't going down, tractor prices are going down, and neither are rents in most cases; so that's kind of what we're seeing. And that's where we're going to until you see operator meaning farmer profitability and income substantially recover. These farm operators are having working capital declines in their balance sheets during this phase of lower profitability for farmers, it's not a disaster out there by any means but it's -- you're seeing the pressure of a relatively challenging row crop farming environment show up in our rent rules.

I appreciate that color, that's helpful. Maybe on the G&A side excluding any of the legal and professional costs. Is there any ability to squeeze more on out of that or is it kind of 7 plus or minus…

We'll squeeze a little bit out of it. Again, talking on a cash basis not a GAAP basis because it's just easier to think about. We're not -- we as a company, for example, aren't traveling as much because we're not nearly as acquisitive; that saves us some money. We're not raising capital at the pace we had been, so that saves us all kinds of G&A costs of both, travel and legal and accounting and the like. So yes, on the margin we will continue to pull our G&A costs down but realistically, this is a company with -- I forget, 13 or 14 employees at this point in time, there is not an opportunity for material reductions in personnel costs. And we've run a pretty tight shift and we'll keep doing that.

And then I wanted to add to Luca maybe on the interest rate resets for 2019. I think -- if I remember right, and correct me if I'm wrong, you said maybe $0.05 previously; do you have another updated estimates for that in terms of what the impact would be from '18 to '19 on the reset?

Probably a little less than that. I mean the outlook on interest rates has changed quite a bit, of course, in the last few months. So it should be a little less than that. I don't feel comfortable giving you a precise number.

And our next questioner today will be from Paul [ph] with Raymond James.

Colin [ph] is traveling but we've got a couple of questions for you. On the $1 million of revenue that you talked about, could you break that out between weather and trade? I guess what we're trying to do is maybe roll that forward into '19. So your comments on that would be helpful?

So kind of stepping back and looking at the big picture, we feel like we've lost around $1.5 million of crop share income during the calendar year. We think -- and I'll explain why it modified us with words like think; we think about $1 million of that was related to specific weather events and the trade wars. And the other $500,000 or so -- that's just the general excess supply of soybeans, excess supply of corn last year, operating challenges that might have occurred on a given farm that weren't directly related to specific weather issues; and it's very hard Paul to disaggregate that perfectly, of course, because when you -- let's use soybean as an example. Today there is an excess supply of soybeans in the world, there is an excess supply in the United States; that was all true to some degree before the trade war and was exacerbated by the trade war. So where do you draw the line between kind of pricing challenges you had anyway and then the trade war? And so we're giving you our honest opinion but it's an opinion, there is no specific [ph] -- there is no absolute certitude behind it. So the weather events, let's kind of talk about them. The weather is the bigger and easier to measure. So we have -- as I said, the pre-corn [ph] farm where our crop share potential was taken to essentially zero because the nuts were literally knocked off the trees by the hurricane. We have farms that we have historically received bonus rents in on the eastern seaboard, North Carolina, in particular, where we didn't get any bonus rents at all this year. And the reason for that is you had fantastically huge rainfall amounts; I'd have to go look at a chart but you're talking sometimes as much as 30 or 40 inches more than normal, so double the rainfall. And some of that was hurricane-based and some of that was just generally being too wet. We had some more issues in Delta in terms of our crop shares. And then in the Western part of the United States, the Eastern Colorado, Western Kansas; we also have crop shares, those crop -- those farms are normally corn and wheat, not soy. We take the loss there and look at it probably not trade weighted average rate-related, just general excess supply-related. So all of those issues will correct themselves. We would assume that $1.5 million of revenue will come in next year, and we'll start the year believing that and update our perspective on these calls as we go through the year. But you don't have a really bad productivity every year. We'll just frankly have to wait and see; this is why we try to run a portfolio that is very [indiscernible] fixed rents and has a relatively modest portion of crop share rents because from time to time you're going to get positive surprises but you're also going to get negative surprises, and this was a negative surprise year. I mean, I've been in farming or land ownership of Farmland for now -- approaching 30 years of my life, I'm not surprised in a broad sense this happens and we'll start this year and the new assuming that it won't happen this year. I hope that is helpful.

Yes, it helps. Let me just go to another topic. On development in CapEx, can you just talk about the spending you're anticipating for this year? We're trying to remember what development costs you have left on any of your farms.

Yes, we have several farms still in development in the supplemental, I think, we've got it some data on that, let me find it, hold the page -- it's in the…

Page 17, maybe.

Yes, on page -- we've got properties still in development worth approximately $13.4 million; this is on Page 17 of the supplemental if anybody's looking. And we've got ongoing construction in progress of about $10.3 million. Those things will overtime end up as revenue producing properties for us and rented properties. Today they are not big contributors, that -- those are a combination of specialty crop farms not in full productivity yet, that will gradually get there, and then occasionally a row crop where we're making something [ph] of some sort. But most of those things will give us a blended average return as they come into the portfolio, that's certainly well above 5% because a lot of that development is either specialty crop or irrigation or grain storage improvements where we tend to get cap rates certainly higher than the portfolio average.

And the spending for this year?

Spending for this year will be reasonably low, I think we're looking at a CapEx spend -- total CapEx spend of the year that's in about a $4 million range.

And then on the balance sheet, should we assume that when you sell a farm you're going to buyback stock in preferred? How do you think of that the debt side of the balance sheet?

So when we think about -- when we sell a farm this is how you should think about it, 45% of whatever the sales price will go to repay debt, it's probably slightly lower than that. If we continue selling at an average of 10% above, most of our properties are levered about 43% range; so generally speaking, you'll see 45% though conservatively will go to repay straight debt. The other 55% will go on in for a combination of repurchasing stock or repurchasing preferred.

And then as far as selling farms, could you just talk about sort of the cap rates we should think about? And how active is the market if you really want to step up the sale process?

We could sell a lot of -- I mean, we've turned offers down that are at material premiums to what we paid. We're not trying to go out of business here but when we have a chance to sell a farm at either a very good price or a farm that we -- for whatever reason, it's in a region of the country that we don't have very much so the management costs are higher or the cap rate we don't particularly like; we're reasonably selective in the sale process. But if you looked backwards, we have now sold -- somebody find this, it's in the supplemental; since the Rota Fortunae, we've now sold almost $37 million of properties, that's been in round numbers in 6 to 7 months. We'll sell probably that kind of number in the next 6 to 7 months, and we're not changing the pace here, positively or negatively; we'll just keep plugging away at making selective asset sales and redeploying the capital. In terms of the cap rates to what we sell; I think if you would use an average cap rate of around 4% of our blended average asset sales, you'll be close. We're not likely to sell our highest cap rate returning farms, although, if somebody really overpaid we would -- but we're more likely to be pruning on the lower end of the cap rate scale.

And our next questioner today will be Ryan Watson [ph], a private investor.

Now that the new Farm Bill is passed, would you guys have any interest in the hemp-related farm acquisitions?

We probably aren't going to -- yes, we're interested in hemp but probably not a farm acquisition. Our view on many -- it's not just hemp, it's hemp, it's organic, it's non-GMO; the value is not -- the land value doesn't change really very much from growing those crops on the ground, it's the return per acres that changes, and you can get a higher rent but you don't want to fall for the trick of overpaying for those farms because they could go back to traditional row crop farms 3 or 5 years after you on them. So yes, we have quite a bit of -- we are seeing a lot of interest in growing hemp, as of today we have not had hemp grown on any of our farms or other cannabis products, in the future we may, it's something we and many of our tenants are certainly learning about and paying a lot of attention to. But those are -- hemp, in particular, is an incredibly high input cost crop; so there is a limit to how much -- and a market that while I believe is here to stay is also rapidly changing. So there is a limit to how much risk either we or our tenants would want to take at this point in time on any given crop, hemp, in particular.

And our next questioner today will be Craig Kucera with B.Riley FBR.

I think you mentioned in the fourth quarter that you might see some participation income shift in the early '19 on the expectation of maybe a better pricing. Did any of that occur?

Yes, we did have some of that occur. We, for example, would have some modest inventories of unpriced corn, which means you couldn't record it in the 2018 year as a revenue that we don't -- I mean, we would have drawn that number out specifically if it was going to be a huge number. But there will be some catch up of revenue that shows up in '19 when those sales occur but I wouldn't think of it is something that's going to move the dial in a really significant way or we'd called it out specifically.

And with all the weather events that the portfolio went through, is there any way to assess any sort of lingering damage at this point or do you anticipate any lingering damage?

We don't anticipate any real lingering damage with one important exception, which I'll talk about in a second. Generally speaking, what we saw was -- Luca said this in the prepared comments, loss of crop not loss of underlying asset. Meaning, we had a pivot torn up that got replaced by insurance. If we had trees knocked down, we didn't have very many of them knocked down so you didn't -- you really lost the nuts off the tree but you did not lose the tree itself; and that's pretty consistent across the board, same thing on the row crop side. On the row crop side, your risk is that you could end up with our drainage improvement or a structure -- a drainage structure that got hurt or destroyed. But we don't feel like we have any impairments to the asset values of the properties by any means. Then turning to the one exception; we did have a -- there is a really major heat event in California that will have a negative impact on avocados, in particular, and that impact will show up in 2019, not 2018 because what it did was it effected fruit set going forward. When it occurred exact amount of that impact is incredibly hard to quantify at this point in time but that would be the one place we think you've got weather event in 2018 causing a 2019 negative event.

And even in that case at this point we don't believe that there is an asset impairment, I mean the asset value is still…

No, it doesn't…

No material change, it's just a crop issue.

We're certainly going to take the top end out of the avocado crop next year.

And last one for me, just looking to your guidance for the year-end and mid-November; your operating expense was up and was that weather related or could you give us some color on why that was a little bit higher than what you guys were looking for at that point in time?

Yes, if you look back at the guidance we had put out in mid-year, we ended up with around $400,000 of additional property operating expenses. And I think that is largely driven by under-estimation of the property tax increases that we experienced, it's largely what that is. We had G&A expense of about $1 million higher than our prediction, most of that surrounds Rota Fortunae related costs but some of it is additional cost of other types, legal and accounting, and so on and so forth. But the big driver -- truly, big driver was interest rate changes, they were higher than we had expected when we set guidance. And as Luca alluded, they are now probably coming back in the direction that's somewhat favorable to us but all of you have is good visibility on that as we frankly do.

And our next questioner today will be from Mike [ph], a private investor.

Paul and Luca, this is Dr. Mike. Thank you for taking my call, I know we spoke on previous calls in the past. So I cannot speak to more of the psychological phenomenon that's happened to your company and the stock. I cannot really get a sense and we're not good at predicting but I can feel like the analyst themselves on the calls are kind of pulling more for some execution, plans, guidance and things like that. But truthfully as a shareholder I'm not too concerned about them but what my question to you is, if I was a new investor, what's really the selling point here? Because you look to the market, right, we know with only two possibilities how you can get into farming? You either buy farm and if you want to do that that's great but what we have here is two available trading mechanisms that I know off, and there may be more, right. We know there is another company and we have you, and you're more of the pure-play and you're not involved in all the organic and I'll say the sexy kind of stuff, it sounds great like you said before, it looks smart for a while and then it kind of goes down from there. My question to you is, if I'm a new investor, how am I selling this to say, "Hey, look we're looking at this as $12 a share, this is a wonderful investment. Things are going to work out because I think there are some blind spots" you know what I mean?

Yes. So when I speak with new investors, and we are bringing new investors into the stock from time to time, these are the points that I always make; I make the point number 1 of our view of valuation which expressed all to you a few minutes ago of $12 a share or now in our opinion, even higher given this repurchase activity. As long as you think our stock was worth more than $6, we're gaining value on all of those repurchases. So we try to draw by discussing the purchase price, the USDA data, the long-term trends, so on and so forth; a roadmap to that kind of $12 share number. The second thing we emphasize because it's just so simple, is given the level we're trading at now, just look at even the book value per share, and we're so far below that $9.80 and $9 kind of number that would be book value per share that you don't have to believe me about $12, just believe us about $9.89 and you should be buying the stock at $6 levels. Then the other thing we really emphasize is the very high ownership of the company by management, and me in particular, and the continued buying of our securities. Look, there is a chance we are wrong. I don't think we are, I'm certainly betting with my own pocket-book that we are not, we certainly haven't seen the declines in asset values that we have seen in the stock price. And so you've got a vote of confidence with our own dollars repetitively in repurchasing the stock, both by the company and by members of management. So those are the messages that I give. I also think you've got to look through the headlines and the relatively negative headwinds that you see in the popular press today about agriculture. And you've got to look at the real facts. So let's use one article I just saw in the last few weeks. There is an article talking about "Increases in farmer bankruptcy." Well, that article is at some level true but also incredibly sort of misleading by a major omission it makes. Yes, they have to go like the article said, 10% increase in bankruptcy or 20% or some number like that. But that sounds a lot different if I told you that it went from approximately 2.3 in 10,000 to 2.5 and 10,000, right? It sounds like a big percentage change but the absolute numbers of bankruptcies is the industry is incredibly low. And the reason they are incredibly low is it's loaded [ph] industry, it's an incredibly stable industry, I mean every one of us on this phone call probably already ate today and we're going eat again tomorrow; this business -- you're not going to force the world's food production system to a negative margin posture for very long, that's why these assets are stable, that's why the business is stable. So we try to get people convinced that there is a deep discount on the stock and that the things that really drive the value of the company, not the stock price on a given day but the value of the underlying assets are generally speaking positive and stable, and we'll continue to move our way. If you've listened to these phone calls now for multiple years, and many calls I talk about this so I'll do it again, I think keeping focused on food demand is the most important thing. If you're -- when I lose sleep at night, is there something happening in demand for U.S. foods stuffs that is going to fundamentally change over the medium and long-term, and make it so United States is not the primary producer and the primary worldwide exporter of food stuffs. That we also have a huge domestic market and we're the only exporter with a big domestic market as well. If that changed, underlying asset values would change. I don't think that's going to change, there is not any kind of data that supports the theory that we are somehow going to go on a long-term secular decline for U.S. food stuffs of all types. So for that reason I just continue to bet my own money buying the stock. So that's the message we give new investors. This is actually a great entry point into the stock in our opinion but look, we want shareholders who understand the asset class and have a long-term vision of the asset class. We don't want that our stock should not be trading with anything close to the volatility it trades with, it should be a much more -- it should be like the underlying assets, which are -- great times are up 5% a year, bad times are down 5% a year but it's that's kind of -- that's what the stocks should but it certainly isn't what it's done. I hope that's helpful, Mike?

And our next questioner today will be Michael [ph] with DWS.

So with respect to the short report that came out last summer it seems like from the perspective of long-term shareholders, you don't need to sell in the near-term; it's much more of a positive than a negative and that it allows the company to sort of crank this money machine of selling assets above book value and repurchasing stock below book value. So I guess my question is, why don't we see it more -- I guess, as a positive then a negative? And specifically, why not just take some of the money that you're devoting to these legal costs and employee retention and just focus all your resources on buying stock at such a deep discount to book value?

Yes, I mean, that's -- it's funny you say this. The lawyers for this anonymous stock fraudster have tried to make the same point that this was somehow good for us. I will assure you sitting in the chair that I sit in, it seldom feels good to had to be accused of the things we were accused of falsely. But this is why we're not going to stop this pursuit of the legal claim, we are confident that these people took a substantial amount of money out of the market and we're going to get that money back if we possibly can and distribute it to our shareholders or keep it in the company and buy new assets or whatever. We are pursuing that because we believe there is a significant chance of recovery, and that we also believe that the pursuit of that causes these class action lawsuits to fall away because they are based on an anonymous guy that was trading stock -- is front-running his own false news. We just -- unfortunately, I think have to have that fight and clear the air reputationally [ph] on it, but also to recover the financial cost. And look, in the scale of this company, with the stability of our underlying assets that is not -- it is not a massive amount of money for us to continue to pursue this. It may have an impact if somebody is trying to value our stock purely as a multiple of next year's AFFO, it certainly will have an impact but if you're valuing our stock as it truly should be valued, which is sort of 80% of the way you look at our stocks should be based on what the underlying assets are worth, I mean they're just -- I mean, they are pouring hard assets, their farms; and 20% should be some level of looking at near-term earnings because I'm not saying earnings don't matter, at least it don't matter as much as the hard assets. And we think that it's money-good to pursue this and try to recover financially. So that's why -- you may disagree but that's the logic we have.

And then just one follow-up would be; what is the bottleneck, I guess towards -- what is the bottleneck to asset sales and using those proceeds to repurchase stock? Is there like a certain percentage of our average daily volume that you're not allowed to go above because it does seem like such a free money machine?

Yes, I mean basically, you've got -- when a company buys back it's own security, it has to do it within the bounds of the set of regulations and laws largely speaking where cap -- what is it…

25%.

25% of average daily volume and it's a complicated calculation but that's the approximate result. And obviously, we -- look, we don't want to force the stock price up artificially through repurchases. In fact, the way repurchases work we can only, I think, buy on a down tick in our repurchase program or flat. And so we've got some rules we have to follow, there is relatively low volume in our stock, so you're going to -- that's why you're going to see us gradually sell assets then buy some more stock and gradually sell assets and buy some stock, and just keep the money machine going. I'm proud of the $19 million of value we've created in our opinion based on the repurchases we've made, and we'll keep that moving. But if I hold a sudden shoot up in the market with $50 million to buy our stock, I could probably temporarily see our stock price go pretty high but the minute we backed away from the market, it probably fall back down and we're just -- we are trying to be judicious that -- we were dealt a hand and we're trying to out-of-play that hand as smart as we can, and I don't want to drive the stock up artificially against ourselves.

Well, I think you guys have done a great job so far of retiring shares outstanding and lowering the share count for the rest of the long-term shareholder, so keep up the great work.

Thank you very much, I appreciate that.

And our next questioner today will be from Tom Gimble [ph], a private investor.

My question goes to use of cash, a portion to either dividends or share buybacks, since REIT stock are significantly held by income investors and last August, in part as a result of the Rota Fortunae article, the dividend was cut by more than 50%. And last year there was $20 million spent approximately on share buybacks and $7 million -- $7.2 million spent on common stock dividends. How do you think about the alternative of paying the dividend or buying back shares?

Yes, so we -- I mean, obviously, a dividend cut is very painful for a company and it's shareholders, we've all now lived through that. We do not want to cut this dividend again, don't certainly intend too. Obviously, I always have to get this caveat that that's a board decision, not by any means solely mine; but I think our dividend will stay where it is. The judgment you're really asking is, what is a better return to shareholders; using all that money, taking the dividend, for example, to zero and using all of that money to buyback stock or alternatively seizing buying back stock and gradually raise the dividend again. For now, I think we'll stay where we are, we'll pay at 20% -- $0.20 per annum dividend, $0.05 a quarter, and do a little of both. And the reason we came to that point of view is, when we were thinking of the dividend cut, we tried to understand as many of our shareholders as possible and we've frankly have some in both camps. I get phone calls from people who would prefer we pay no dividend and poured all of that money into repurchases, but I also get phone calls from a bunch of people who have bought the stock in more recent times and they've bought it for the dividends stream that we now have, and they want us to leave it where it is. So our view is that that will be stable. Certainly, through this calendar year would be our intention and obviously with the caveat that that's fundamentally the board's call not mine, and so -- but that's kind of the balancing. I don't have a nice clean answer, Tom, it's a good question. You just got -- sort of based a little bit on gut feeling surveying our shareholders try to find the right happy medium and I think we're pretty close to it right now.

And our next questioner today will be Joseph Kyle [ph], a private investor.

The only other comparable company [indiscernible] in the public market is Gladstone; and they do quarterly, sometimes annual external appraisals of upto 100% of their portfolio. Have you considered performing an external appraisal in order to -- I guess, give shareholders a better idea of what your assets are worth because if -- it's like some people are saying you overpaid for assets in that book value of $9 or something -- the share is over inflated?

Yes, we have certainly considered it. We actually do have quite a few appraisals done internally from time to time for various reasons, sometimes based on lender requirements and things like that. We do not intend to appraise in the portfolio and release that information publicly. And one of the most important reasons that I would never do that is that an appraisal like that when I go to sell a farm on behalf of all of us as shareholders; that appraisal will serve us nothing but an anchor as on the top dollar I can achieve. And I just -- it's -- I've done this a long, long time. We know what our assets are worth, we have -- collectively, as a management team, me in particular, spent a lot of money and a lot of our own money buying and selling farms over the past decades. We don't need an appraiser to tell us what we think it's worth, we tell you what we think every quarter. If investors believe us they should buy, if they don't believe us, they should sell. I would -- it's not going it -- and the final point I want to make is, if we wanted to appraise every asset in our portfolio it would be an incredibly expensive proposition. And I just -- I think it's frankly a waste of money to appraise every single asset. So we're going to -- we're not meant to do that, we're going to kind of stick to our point of view, express our view of values every quarter. And at least for me and for the company, if we tell you it's worth $12 and is trading at $6, count on watching as buy it back, and that's an absolute winner for everybody who believes we're telling the truth. And so we'll keep doing that as long as we need to, and as long as we can.

And this will conclude our question-and-answer session. I would like to turn the conference back over to Paul Pittman for any closing remarks.

Great. So what I wanted to say just in conclusion is a sincere thanks to so many of you as shareholders. We get many, many supportive phone calls and e-mails from shareholders through what's been a difficult year for the company, and for the shareholders, and for the team of employees we have. So we really do appreciate that, we appreciate your support of our company. For those of you who have called us up, upset and there have been some of those calls, although frankly not very many, most calls are supportive. We empathize with you, we have lost money too, we know you have lost money as shareholders, that always is upsetting. We would encourage you to direct your disappointment at the people who have really caused it, Rota Fortunae and the co-conspirators, not at us, but we do understand why people feel negative. In the meantime, though we will continue to do what we've done which is to own high-quality farms and collect rents on them. And then, continue to gradually sell assets and repurchase our stock. Thank you very much.

And the conference has now concluded. Thank you all for attending today's presentation. And you may now disconnect your lines.