Greetings and welcome to the Gladstone Land Corporation Earnings Call for the Quarter ended September 30, 2020. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. David Gladstone, Chief Executive Officer. Thank you, sir. Please go ahead.

Well, thank you, Donna. Nice introduction. This is David Gladstone and welcome to the quarterly conference call for Gladstone Land. And I want to thank you all for calling in today. We appreciate taking time, you taking the time to listen to our presentation. Let's start with Michael LiCalsi, he’s the General Counsel and Secretary. He is also the President of Gladstone Administration, which is the administrator for all of the Gladstone funds including this one. Michael, it's your turn.

Thanks, David, and good morning. 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 and 10-K and other documents we filed with the SEC, you can find them all on our website, www.gladstonefarms.com, specifically the Investor’s page or on the SEC's website at www.sec.gov. Now, 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. And today, we’ll discuss FFO, which is funds from operations and FFO was a non-GAAP accounting term defined as net income excluding the gains or losses from the sale of real estate and any impairment losses from property plus depreciation and amortization of real estate assets. We'll 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 allows better comparability of our period over period performance. Now, please take the opportunity to visit our website once again gladstonefarms.com, sign up for email notification service. So you can stay up-to-date on everything involving the company. You can also find us on Facebook keyword there is The Gladstone Companies, we even have our own Twitter handle and that’s @gladstonecomps. Today's call is an overview of our results. So we ask that you review our press release and Form 10-Q, both issued yesterday for more detailed information. Again, you can find them on the Investor’s page on our website. With that, I'll turn the presentation back over to David.

Okay. Thanks, Michael. Acquisition activity is picked up for us recently, and we acquired about $75 million in new farms over the past two months or so. And we're continuing to see significantly more opportunities than we've seen in quite a while, began getting information on some of our farms with regard to crop yields and pricing, which allows us to record approximately $1.1 million and participation rents during this quarter. That puts us about $1.2 million in participation rents for the year through the third quarter. We're currently expecting a total participation rent for the year to be similar to what we had last year is about $2.3 million. We're hopeful to be able to report an increase in participation rents for the next year. That's 2021 as we have a few more farms that are scheduled to pay participation rents in 2021. Overall, the operations of farms remain strong. Our team continues to have success and releasing our existing farms at an increased rental rate. I think these increases in rental rate are all indicative of continued strong demand for what we're seeing for our farms and all the products that are grown on those farms. With regard to the government closings from COVID-19, the demand for products grown and most of our farms remains high. These are products like berries and vegetables and nuts. I think that's because the vast majority of the crops grown by the farmers we leased to are sold in grocery stores like Kroger, Safeway, Costco, Walmart and similar outlets. Very little of our produce is sold to the food servicing industry, including restaurants and institutions like schools, which is where produce sales have been hurt the most because of COVID-19. Demand for produce and many other foods grocery stores remained high, it’s…

Hi. Thank you, David, and good morning, everyone. Again by going over our balance sheet, during the third quarter our total assets increased by about $22 million. That was primarily due to the new farm acquisitions. From a financing perspective, during a subsequent to third quarter, we secured about $45 million of new long-term borrowings at a weighted average rate of 2.59%, which is fixed for the next eight years. On the equity side, we raised about $8 million in net proceeds through sales of our common stock under the ATM program, in an average issuance price of $16.13 per share. And last month, we completed a follow on offering of common stock in which we raised about $26 million in net proceeds at a public offering price of 1440 per share. These proceeds were needed to help fund new acquisitions that we're hopeful of closing on in the coming months. And all of these potential new acquisitions are expected to be accreted to AFFO in year one. We also raised about $11 million in net proceeds from sales of the Series C Preferred Stock. As with the Series B Preferred Stock, which we recently listed on NASDAQ under the ticker LANDO, our plan with the Series C Preferred Stock is to sell in small amounts over the course of the next several years, so that we're better able to find new farms to buy as the proceeds come in. And just to remind everyone, in the process of selling the Series B and now the Series C Preferred Stock, to pay certain commissions and fees to Gladstone Securities and affiliated broker dealer of ours. However, Gladstone Securities is just a conduit in these offerings as it pays out about 94% of these fees to other third parties, including brokers…

Okay. Thank you, Lewis. Nice report. Acquisition activity is picking up as I mentioned at the beginning, but certain aspects of our due diligence process are taking longer than normal to get through and due to various travel restrictions and office closures. For example, it's taking longer to determine, if a title is clean. Or if there's a lien on the property, getting a survey or out to survey the property, we almost always do that, and getting appraisers to go out and do their duty that we need the appraisal done in order to justify what we're paying as well as getting loans from the banks on these properties. So we're seeing a good amount of buying opportunities coming our way now is just taking a little bit longer than normal to get through the due diligence items that we require ourselves to do just to make sure we got the right deal done. Just a few final points, I'll make. We believe investing in farmland, growing crops that contribute to healthy lifestyle such as fruits and vegetables and nuts. Follow the trend that we're seeing in the market today. Currently, about 85% of our revenue comes from farms that are growing the type of foods that you can find in either the produce and nuts section of your local grocery store, we consider these foods to be among the healthiest type of foods. And we continue to see a growing trend toward organic among these foods. About 40% of our fresh produce acreage is either organic or transitioning to become organic, and about 10% of our permanent crops. This is the acreage falls into the organic category. We're a believer in organic, and we want to continue to be a strong area for us to grow in. In…

Thank you. Ladies and gentlemen, the floor is now open for questions. [Operator Instructions] Our first question is coming from Craig Kucera of Wunderlich Securities. Please go ahead.

Yes. Hi, good morning, guys. David, I wanted to circle back with you on your commentary regarding deal flow. You mentioned that you're seeing a lot more deals than you have in a while. Is that outside of what you sort of discussed in your recent equity offering or is that just inclusive of that?

I think it's inclusive. We picked up, primarily, I think some of the people, who owns farms are deciding it's time to sell and they don't want to farm anymore. So we're getting an opportunity that, I think will prove pretty successful for this year as well. As you know, we had a bang up here last year. And I think this one's going to be good. We could probably close $100 million to $120 million before the end of the year that would be aggressive. But I'm hopeful that we can get all of that done. It's really hard to get some of these appraisers up to the farm. And we have to go see all the farms, so people are getting on airplanes, and that's become a pain. So as a result, I think we will do well, Craig. So that's where we are today.

Do you have a sense of why or anything in particular that would maybe push some of these deals over the finish line? I feel like in the past, you've said some of these transactions, you've been talking to the farmers for upwards of 10 years, and then you all of suddenly had a number come together. Any thoughts there?

Craig, that was one farm that I worked on like that, and I had worked with the farmer for a while and then and Bill Reimann picked it up and close the deal later. Maybe it was because he's better than I am. I don't know, but the end of the day it got done. I think a farm from start to finish takes a good six months to get negotiated and get everything in place, and then get it closed and on the books. So thanks, do hang around. We have a very long list of farms that are in the queue. And we've worked on a number of them. We have purchase agreements in place. And now we're going through our due diligence. And as I mentioned, that's the hang up sometime. How it slows down? As you get to a certain point, the banks won't give you a commitment until they have the signed lease. They won't give you a commitment until their people show up at the office and many of them are working from home. So it becomes a longer process than it has in the past. I think we're going to do well this year, and next year should be just another great year.

Got it. And one more for me. I appreciated the color on the decline in operating expense year-over-year on sequentially. But as we think going forward, this operating expense kind of below $300,000. What you would expect or was this sort of an unusual quarter, because it was considerably short of what we were looking for.

I'd say we would expect somewhere in between where we were at last quarter and this quarter. Thanks to repairs and maintenance costs. Outside of some reimbursable expenses, which we use to classify as tenant recovery revenue, so it's also result. It also reduces our top line revenue. That was about $225,000. But the next biggest decrease was in repairs and maintenance. I think that was down by close to $100,000 from last quarter. These are hard for us to predict. Anytime, we could have a motor go down or another irrigation repair that that needs to be taken care of. I think, this quarter was lower than we would normally expect. But I would say somewhere between where the fence fell this quarter and last quarter would be where we generally expect it to fall.

Okay. Thanks. That's it for me.

Okay. Next question?

[Operator Instructions] Mr. Gladstone, we’re showing no further questions in queue. Did you have any closing comments today?

No, Donna. I think everything is doing so well. We don't want to comment. We might Jinx the place. So everything is going great right now and we're looking forward to a great quarter that'll end December 31. So with that, we'll say goodbye to all of you until next quarter.

Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines or log off the webcast at this time and have a wonderful day.