Greetings, and welcome to the Gladstone Land Second Quarter Earnings and Webcast Conference Call. At this time, all participants are in a listen-only mode. A brief 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, David Gladstone, Chief Executive Officer and President. Thank you, sir. You may begin.

Thank you, Latonia, for that nice introduction. This is David Gladstone, and welcome to the quarter, the conference call for Gladstone Land. Thank you all for calling in today. We appreciate you taking time on your busy day to listen to our presentation. We always start out with Michael LiCalsi. He's our General Counsel and Secretary. He's also president of the administration side of the business. Michael?

Thanks, David. Good morning, everybody. Today's report may include forward-looking statements under Securities Act of 1933 and 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 the risk factors in our forms 10-K and 10-Q that we file with the SEC. You can find them on the Investors page of our website at gladstoneland.com. You’d also find them on the SEC's website and that’s sec.gov. We undertake no obligation to publicly update or revise any of these forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. And today, we'll discuss FFO, which is, funds from operations. FFO is a non-GAAP accounting term, defined as net income, excluding the gains and losses from the sale of real estate and any impairment losses from property, plus depreciation and amortization of real estate assets. We may also discuss core FFO, which is generally FFO adjusted for certain non-recurring revenues and expenses, and adjusted FFO, which further adjusts core FFO for certain non-cash items, such as converting GAAP rents to normalized cash rents. We believe these are better indications of our operating results and allow better comparability of our period-over-period performance. Please take the opportunity to visit our website, once again gladstoneland.com, sign up for our e-mail notification service, so you can stay up-to-date on the company. You can also find us on Facebook, keyword there is, The Gladstone Companies and on Twitter is @GladstoneComps. Today's call is an overview of our results, so we ask that you review our press release and 10-Q, both issued yesterday, for more detailed information. Again, go to the Investors page of our website to find them there. Now, with that, I’ll turn the presentation back to David Gladstone.

Okay. Thank you, Michael. We'll start with a brief note as I do each time. We currently own over 115,000 acres of farmland in the United States and 169 farms. And in addition to that, as some of you will remember, we have 45,000 acre feet of banked water, an acre foot is equal to 325,861 gallons of water. So that pencils out to about 14.6 million gallons of water that we have stored in the ground. And together, those two are valued at over $1.5 billion for this quarter end, that's both the land and the water. Our farms are in 15 different states and more importantly, they're in 29 different farming areas. Farms continue to be 100% occupied and leased to 90 different tenant farmers, all of whom are unrelated to us. And the tenants on these farms are growing over 60 different crops, mostly those fit into fruits and vegetables and nuts. Given the number of different growing regions, tenants, types of crops on these farms. We think we are sufficiently diversified to provide safety and security for the cash flows coming from the rents. We believe that diversification helps us protect the dividends that we pay to our shareholders. As we mention last quarter and we continue to do it this quarter and still doing it today, we are much more selective in the type of farms that we're looking to buy. In light of the uncertainties in the economy, we believe good times a good time to be more conservative with our capital. The team purchased five farms for about $60 million this year, from an operating standpoint it was the strongest quarter we've had in a while. We don't generally have much in the way of interest patronage from our banks or participation rents…

Thank you, David, and good morning, everyone. I'll begin by briefly mentioning our financing activity. During the quarter, we received about $5 million in loan proceeds. Those proceeds are expected to bear interest in an effective rate of 2.89%, which is fixed for the next five years. On the equity side, since the beginning of the second quarter, we've raised about $70 million of net proceeds from sales of the Series C preferred stock. Moving on to our operating results. First, I'll note that the -- for the second quarter, we had net income of about $613,000 and a net loss to common shareholders of $3.9 million or $0.112 per common share. On a quarter-over-quarter basis, adjusted FFO for the second quarter was approximately $4.5 million compared to $6.4 million in the first quarter. AFFO per share was $0.129 in the second quarter versus $0.185 in the first quarter. Dividends declared per share were about $0.136 in both quarters. Primary driver behind the decrease in AFFO was about $2.8 million of interest patronage or refunded interest recorded during the first quarter related to our loans from farm credit. That was partially offset by a $1.1 million incentive fee earned by our adviser in the prior quarter versus none in the second quarter. Fixed base cash rents increased by about $320,000 or 2%, primarily driven by additional revenues earned from recent lease amendments and renewals. On the expense side, excluding reimbursable expenses and certain non-recurring or non-cash expenses, core operating expenses decreased by about $1 million on a quarter-over-quarter basis. Most of this was driven by a decrease from related party fees due to the incentive fee earned during the first quarter, while G&A expenses increased by about $77,000. This is mostly related to the annual shareholders' meeting. Other related party…

All right. Thank you, Lewis. Nice presentation. As I mentioned before, we're still actively seeking new farms to buy. But as mentioned over and over again, we are being much more cautious in the acquisition front these days. We have some offer letters out to a few sellers these days and we'll try to continue moving forward with those, but maybe a good time to continue to go slow. Just a few final points I'd like to make we believe investing in farmland and growing crops that contribute to a healthy lifestyle such as fruits and vegetables and nuts, follows the trends that we're seeing in the marketplace today. Overall demand for prime farmland growing berries and vegetables remains stable to strong in almost all the areas that we farm in and particularly including places like California, Oregon, State of Washington and the East Coast, especially Florida. And overall, farmland continues to perform well compared to the other asset classes, the NCREIF Farmland Index, which has about $14.6 billion worth of agricultural properties, including all of those that we've listed with them, so that they have ours as well as others in the business have been averaging about a 12.6% overall return over the last 20 years with no negative years as you may know, some of the indexes have gone negative during the year. This is higher than both the S&P Index and the overall REIT index both of which have had three or four negative years the same periods of time versus 0 for Farmland Index. Please remember that purchasing stock in this company is a long-term investment in farmland. I think an investment in stock such as ours has two parts. One, it's similar to hard assets like gold. I mean, after all, farmland is mostly just dirt. And that's an intrinsic value because there's a limited amount of good farmland. And it's being used up, call it used up, it's been taken over by people who are developing houses as well as other properties in California and Florida, where we have many of our farms. And unlike gold, most alternative assets, it's an active investment which cash flows come in to investors. And we believe that's better than a bond fund, because we keep increasing the dividend as more money comes into us. We expect inflation, particularly in the food sector to continue increase and we expect the values of the underlying farmland to increase as a result. As we expected, this to especially be true in the fresh produce food section. Trend is, more people are eating healthy foods and continuing to grow healthy foods. Now, we'll have some questions from those who follow us. So, operator, if you'll come on and give instructions on how people can ask us questions, we'd appreciate that.

Thank you. We will now conduct a question-and-answer session. [Operator Instructions] Our first question comes from Rob Stevenson with Janney. Please proceed.

Hey, guys. David, where is pricing for farms that you're interested in today versus what it would have been for the same farm last year or two years ago?

It's up at least 20% from what it was a year ago. So it's continuing to go up. And unfortunately, most of the farmers that we bought from in the past who have wanted to raise money, don't need to raise as much money as -- because they're just not interested in expanding until they can see which way inflation as well as prices are going to go. So it's a bit of a stagnant marketplace today, but up at least 20%. And I think the number -- and as you well know, we don't do much in the way of corn and wheat rice and those farmlands have gone up at least 20%. If you looked at what's going on in Iowa, which is easily the best dirt for farming in the world. Anyway, that's about where we are, Rob.

Okay. So pricing is up 20%. And then where are -- it's tough to see -- it's not like apartments or office or whatever, where there's reliable volume data. But in terms of stuff that either has come to market or potentially would come to market if the bid was there, what are you seeing in terms of volumes or availability of farms. If the pricing is up, is availability down as well, the farmers holding on to the assets relative to what they would have been years ago? Is there not as much trading right now or not as much that the farmers are willing to sell? How would you characterize the sort of availability of assets independent of price?

Well, if you look at our business, it's different from the business that most people are in when they're in farming. They're in fleet and all the seeds areas. We're not in that business. And that one has really taken off. You've probably seen where the amount of wheat and corn is down dramatically in the marketplace, and therefore, prices have gone through the roof. So the happy farmers that are farming those products now have money and not as bad as drunken sailors on a Saturday night, but they're out spending money for all kind of things, and I guess, Deere and other manufacturers of farming equipment are having really good years. But the bottom line is these products that we're in don't come up that often to begin with. So we're out talking to the farmers. You have to go -- if you're in Iowa, there's usually a farm or an auction that's going on for the farmland there. If you're in California or Florida, there's not that much in the way of auctions. We've been to one that I remember in the last 20 years. So it's a fairly dominant marketplace for those who will figure out what might be for sale. And so that's what we do. We go to the farmers talk with the farmers and spend time with the farmers. And it's a wonderful place because the farmers are all good nature people. We've had a good, I think I've met maybe five or six farmers in the last 20 years who I would not deal with and the others have been good people. So we're happy with that. But I think if you looked at what's going on in our particular marketplace, you'd see people just saying to themselves, I can get more…

Okay. And then given your comments about being more cautious today with acquisitions, are there certain crops or geographies that you were happy to buy last year or even in 2020 that you probably wouldn't be as interested in today?

No. There's -- every crop has its own statistics with it. And so as long as it falls in those areas of that statistics on how you grow that crop and sell it, we're interested. So there are none that are -- we haven't said, no more of this or no more of that. We are getting a little heavy in some of the nut crops. I don't want to be a nut business, but it's a good business as well. So the bottom line is no. Everything is on the table, but we want to be in the areas where they grow a lot of strawberries and vegetables, simply because we know that business very well. So then we're not in Kansas trying to grow strawberries, even though they could grow strawberries there, but the season is maybe three weeks long and growing strawberries in Kansas, whereas it's nine months in California. So the bottom line is every one of these deals that we do has its own peculiarities and you just have to look at it, analyze it. We've got some good people that can do that. But there's nothing off the table right now other than I don't want to be in Texas. I don't want to be more in some of the other grain crop areas. We're not grain people.

Okay. And then the last one for me. You guys have talked about in the past, and in business update about adding wind turbines and solar panels to properties. Are those generally going on undevelopable land? Is this in place of crops? How should we be thinking about how that sort of fits in? Are these on the -- just on the roofs of barns, how should we be thinking about when we see you guys putting wind turbines or solar panels up? Are they in lieu of a crop in a field, or are they on land that would not otherwise be developable for crops?

No, everything is -- for example, we do wind turbines. You have to put a wind turbine where the wind is obviously -- blows pretty steadily. And we have some farms in the Midwest that are very windy and we get calls from a lot of the power-generating people that want to put turbines up and it's fine, you can build a turbine. And if you get the tall ones that are a couple of stories tall, it's okay, it works. You kill a lot of birds unless you get up around 3 stories. So -- as a result, we're not very happy doing short turbines, but we've got a turbine company that wants to put probably a dozen turbines at the top of the hill of one of our farms -- and they're willing to pay us, I think it's $350 a month, is it or year?

$332,000 per year.

$32,000--?

$332,000 per year.

$332,000 to save the place for them to put the turbines up. So, we haven't even dusted the dirt out of the way for them to put the turbines up. So, it's getting to be a very telling area. In New Jersey, the government subsidizes all of these things and they finally had to pass a law that says that you can't do that anymore for farmland. We want them to grow farmland products because they were taking the farms and just putting -- I mean, they were everywhere. There was no room for a crop. So, we don't -- we're not -- we're in New Jersey, and we have crops in New Jersey. We grow strawberries in New Jersey, you can believe it and blueberries, but -- after all, it is the

Garden State.

The Garden State of New Jersey, anyway great place. And I think at the end of the day, when you look at these turbines and all of those, those are wonderful ways to capture the wind and capture the sun, but they're not going to take over for quite a while as a mainstay for us to -- us or anybody else to generate electricity. Not much I can say other than that, Rob.

Okay. Thanks guys. Appreciate the time.

Okay. We can hear question number two, anybody?

Our question comes from Edward Riley with EF Hutton. Please proceed.

Morning guys. Sorry, just some housekeeping. How much of your debt, did you say it was variable versus fixed?

Now almost all of our debt is fixed, isn't it Lewis?

9.98% of it is fixed on average for a little over five years from now.

Okay. Got you. And then wondering if you could give us an expectation for participation rents this year versus last year that you expect?

If I can believe what we're being told by all the farmers and the people who are following them, it's going to be up substantially.

Okay. I just want to dig in a little bit more on that question. Do you know how many more farms you have with participation rents versus last year?

I forget how many we had last year. I think we had a about 40 farms that have participation rent components. I'd have to -- go back to the 10-K to see what it was for 2021. But as I said, we are expecting to be up, and that's largely a factor of -- a lot of the farms we purchased recently, they're either coming into full maturity or that participation rate component is now coming online for the first time this year or just its additional farm we bought in the past couple of years. So, it's a lot of that driver is just the pure number of acres and farms that are falling into that participation in categories. But I think the number is 40 as of today.

Okay. Thanks. And then when you're talking with your farmers, how do they – do they mention that their expectations for harvest yields this year versus last year, is it roughly the same or lower?

I think it's about the same. It's not a huge amount of difference from last year.

It's a little bit higher.

Well, what's higher too, is we have more farms this year than we had last year. So that's the increase. I don't know, Ed, it's a guessing game we play every year and you never know who's going to have a big year and who's not. I can say that, the guys in the grain side there's a huge increase this year in corn and wheat prices. So, they're going to be really happy. Many of them have already sold their pieces of their crop. They sell 60%, 70% of the crop before they even know it's out of the ground. So, it's an interesting business from that side. We don't have anybody doing that. They're not selling 20% of their strawberry crop in the beginning of the year. We've done some of that over the years, but it's a different game, and so we've stayed away from it. I don't think there's any way to predict how many – I mean sure, if we were having a drought like they had in the 30s, you could say, we're going to get nothing. But right now, with all the irrigation equipment we have and we don't buy unirrigated farms. So as a result, if you got water and decent dirt in California and Florida, you're probably going to produce a pretty good crop. It's a given. So we think we're going to be at least as good as we were last year. We may be a little bit better. We should be better in the sense that we've got more dirt than we had last year.

Okay. Great. That’s it for me. Thanks.

Okay. We’ve got a third question.

Our next question comes from John Massocca with Ladenburg Thalmann. Please proceed.

Good morning.

Good morning, John.

So maybe going back to the wind turbines and solar arrays. I mean, how big is the opportunity set for similar deals to the one in Colorado. Is that something that you kind of add a little bit of incremental rents beyond that transaction a quarter here, a quarter there?

If the power company comes in, they will rent the whole farm and we'll make much more money than we would growing something on the farm. So, it's an opportunity. You just don't have power companies like those that have a lot of money in their system that can do stuff like that. But a lot of people know that they've got to have wind and solar done in order to pass the test from their stockholders because the stockholders at least some of them are demanding that they move in that direction. So we are getting better deals than we got two years ago and I think it will keep going that way, probably cover the whole nation with wind power one day. We'd be like the guys in Europe who are putting up all of those things. Anyway, John, there's just no good way of knowing how many wind turbines we're going to be able to put up. And I think they'll -- quite frankly, I think they'll put more wind turbines up off the coast, like in Massachusetts, where you can see them from the beach and people are excited about that. And I think it's going to be a while before we get a lot -- I don't know, what it is. What is it, 9% now that we've got wind or solar that's producing for us? And, of course, we're one of the few nations that do that kind of stuff. And so, as a result, there's other countries where they're still burning lots of coal, like China. I think they open up a new coal mine every week. So, as a result, I don't think we're going to do much for the world in terms of shutting down the use of all of these things that put so much dust in the air. I wish I could give you better outlook. We debate it every now and then, especially when somebody comes in and wants to take one of the farms and put stuff up. But you can farm underneath these wind power. I mean you can farm right up against it. So there's no problem with pushing out the farmer. They like the idea that the farmer is going to stay and continue farming and they're going to just pick up the wind. It's a question that comes up a lot for us now.

Do you need farmer or tenant consent to put these projects in, if they're at already leased properties?

Sure. You got to go talk to your farmer before you drive big trucks in and haul in and you're going to have ways of putting those things up. And usually, they can do it in an off season, so it doesn't disturb them, and that works. And during the season, unless the wind is really making a lot of racket with the wind mills, it's nothing. You don't want to put them too close to houses, because people don't want the noise. It's a developing area and like all development areas, we don't know what's going to happen. We know there continue to be pressure to move more and more towards those. And hopefully, we're the beneficiary of that.

Okay. And then in terms of lease expirations, particularly looking into 2023 at this point, what are you seeing in terms of rent versus kind of currently in-place rents, especially given some of your comments on farmland values and crop inflation, et cetera?

I think we'll get many more increases than we will decreases. And so, as a result, I think you should be bullish on that area of increasing rents.

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

Okay. Do we have another question?

Our next question comes from Tony Dibon [ph], a Private Investor. Please proceed.

I'm sorry, my question was previously answered. So I have no further questions.

All right. Tony, if you don't have any questions, we'll move to the next one.

And Mr. Gladstone, there are no further questions in queue at this time. I would like to turn it back to you for closing comments.

All right. Well, thank you all for calling in and go out and buy lots of strawberries and blueberries and eat lots of vegetables and don't forget the nuts, because we need all the help we can get, help us from that side, as well as buy some more stock. That’s the end of this presentation, and we'll see you next quarter.

Thank you, ladies and gentlemen. This concludes today's teleconference and webcast. You may disconnect at this time, and have a great day.