Gladstone Land Corporation (LANDO) Q4 2014 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Gladstone Land Corporation's Fourth Quarter and Year Ended December 31, 2014 Earnings Call and Webcast. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, today’s conference call is being recorded. I would now like to turn the conference over to Mr. David Gladstone. Sir, you may begin.

All right. Thank you, Candice that was a nice introduction. And welcome all of you to the conference call for Gladstone Land as stated Gladstone. I appreciate you calling in. We love to have these meetings and wish we could do it once a month, but we only do it once a quarter. So you have an open invitation that if you are in the Washington DC area to come by and say, hello. We are in a suburban area called McLean, Virginia and you have an open invitation to stop by and see us here, you will see some great team members at work and it’s about 60 people here now we no longer are small, we’re managing about 1.7 billion in assets and we’ll begin with Michael LiCalsi, our General Counsel and Secretary who also serves as President of the Administrator. Michael?

Good morning, everyone. This report you are about to hear may include forward-looking statements within the Securities Act of 1933, the Securities Exchange Act of 1934, including statements with regard to the company’s future performance. These forward-looking statements involve certain risks and uncertainties that are based on our current plan, which we believe to be reasonable. And there are many factors that may cause our actual results to be materially different from any future results expressed or implied by these forward-looking statements, including all of the items listed under the caption Risk Factors in our Forms 10-K and 10-Q that we filed with the SEC. And these can be found on our website www.gladstoneland.com and on the SEC's website at www.sec.gov. The Company undertakes no obligation to publicly update or revise any of these forward-looking statements or whether as a result of new information, future events or otherwise except as required by law. And in our report today as a Real Estate Investment Trust or REIT, we plan to discuss funds from operations or FFO. FFO is a non-GAAP accounting term defined as net income, excluding the gains or losses from the sale of real estate and any impairment losses, plus depreciation and amortization of real estate assets. And The National Association of REITs or NAREIT has endorsed FFO as one of the non-GAAP standards that we can use in discussion of REITs. And please review our Form 10-K filed yesterday with the SEC for more detailed description of FFO. And the report from our President and CFO, that you are about to hear is an overview of our operations and performance. And we encourage all listeners to read yesterday's press release and the annual report on Form 10-K filed with the SEC yesterday, which includes a wealth of information for our investors. You can find them all at our website, www.gladstoneland.com and the SEC's website www.sec.gov. To stay up-to-date on the latest news involving Gladstone Land and our other publicly traded funds, please follow us on Twitter, username GladstoneComps; and on Facebook, keyword is The Gladstone Companies. And you can go to our general website to see more information about this Company and our other affiliated publicly traded funds as well at www.gladstone.com. Now, I will turn the presentation back over to David Gladstone.

All right, Michael. We had a strong quarter to close up the first full year as a public company, but before getting to that result, I’ll just briefly do an overview of the nature of our business. The business consists solely of owning farmland and leasing it to independent and corporate farmers. We don’t own the land ourselves just the farmers that we lease it to and thus we are not taking on a direct farming risk. Most of the farms we own are concentrated in locations where farms are able to grow high value annual row crops such as berries and vegetables so we’re in the produce side and if you think about us we are in the produce section of your grocery store and it’s where those products go. There is some media coverage in the past few months about declining values of Midwest farmland that is growing corn and other grain power [ph] this, that sector is not hard of our primary focus, the geographic regions were in our food and vegetables farms are located, have continued to experience steady appreciation in both underlying value and the value of the rents charged on the land. We currently own 8,370 acres across 33 farms, 15 are in California, 9 in Florida, 4 in Michigan, 4 in Oregon and one in Arizona. We also own three cooling facility that are on some of these farms and some other structures that are really credible to the farming operation. However, investors should expect the bulk of our assets to be in the farmland itself and that are leased to farmers to grow food. Generally we intend to enter into leases that are three to seven years. However, when we lease properties that grow longer-term crops such as blueberries, which might last for 20 years to 30 years, we anticipate entering into longer-term leases such as 10 or more years. Most farm land leases are typically for short term periods because the landlords seek to increase the rent frequently. The farms we owned are highly sought after and have been rented for many years without being vacant. For those who are trying to understand the concept here, our farms are like owning an apartment building in a highly desirable location. But unlike an apartment building constructed there are no new farms next doors being constructed. The supply of farms in our region is relatively finite. There are no new farms being developed. Most of these are in areas that are rented for many many years. The trend we are seeing is steady increase in the number of farms in our growing regions as they are being sold to build home, apartment buildings, offices, schools, industrial buildings and once they are converted to suburban uses they never really go back to farms. For our properties with short-term leases, we will be required to frequently renew the leases upon expiration. We expect that to generally be able to renew these leases with the same farmers as rather than bringing in a new farmer. And we believe this strategy also permit us to increase our rental rates on a frequent basis. We have been successful with this strategy to-date, as evidenced by our 2014 lease renewals which we were able to increase at an average of about 25% or a little over 25%. When we enter into long-term leases we seek to place provisions in the leases such as escalation clauses that provide for fixed increases in the amount of rent, such an annual escalation of 2% or 3%. And then in addition to that we have periodic market resets to the rent based on local rental rates, so if the rental rates in the area have increased faster than the 2% or 3% then the rent goes up to that. Fortunately all of us don’t have the ability to go down when that periodic market reset comes in, so and they are stuck with the 2% to 3% until such time as the lease expires. And just a footnote on our leasing practises. Generally we prefer to keep the same tenant on the property for as long as possible. Our objective is to be a long term real estate partner for all of our tenants. We don’t want to switch them out every year or two; we want to keep the same people in business. And now I like to touch on our recent activity, the highlights and the progress we’ve made in the past year. Since September 2014, as the quarter ending September 2014, we acquired three new strawberry vegetable farms in Ventura County, California, and just last month we acquired another strawberry and vegetable farm in Monterey California. So we acquired these farms for an aggregate purchase price of about $48 million at an overall weighted average initial cap rate of 4.3. And that’s a little bit low but now three of these four leases are leased we assumed and the acquisitions and they will expire in the next five to 20 months, so we expect our 2017 once the new leases are renewed at the more, I think at a higher price and the properties are placed in certain agricultural tax exempt contracts. These properties will be earning a cap rate well above 5% and leverage yields of over 8%. All these farms are prime strawberry ground, vegetable ground with amply water on site. For the second straight quarter we were able to add new lenders to our lending base. We closed on a $75 million borrowing facility with Farmer Mac that’s a government agency and giving a total of 3 lenders now we see that we are in very good shape having a diversification of lenders. And in January we hired a director in the Midwest to look for vegetables and farms. Vegetable farms in that region we are looking for not, not graining again, we are looking for things like green beans that is sold to somebody like [Indiscernible] or sweet corn, melons, potatoes all of these going into the produce section rather than being the hard grain variety. And now to highlight some of the progress we made since January 1, 2014. Well we invested $85 million during the last 12 months and to 12 new farms, and increased our overall acreage by 40%. We fully deployed the remaining proceeds from 2013 to IPO in the September 2014 follow-on offering. And the total value of our farmland portfolio increased by $94 million to $210 million as of today. At December 31, that was $193 million, so we’re at $210 million now versus the $94 million that we paid for. We increased the rents in 2014 lease renewals by an average of over 25% and we also just executed another lease renewal in one of the properties that we acquired in 2014 and since the lease that when we brought has expired. We increased the cash rent by over 31%. Our annualized operating revenue increased by 78% to the current run rate of about $11 million a year. We have retained 100% occupancy on all of our farms and that is a testament to how dear these farms are to the farmers. We increased our lending base from just one lender to three and more than tripled our overall borrowing capacity and greatly broadened the range of financing options available to us. We also have a few banks that are looking at some of our transactions and we expect that somewhere along the way we’ll probably pick up some more potential lenders. Our marketing activity has been gaining significant traction and our list of profitable acquisitions continues to grow at a very nice pace. At this point in time we have submitted some non-binding letters of intent out and five properties worth about $43 million and we are trying to continue our diligence on those and those properties and hope to enter into sign purchase agreements and sale agreements and settle with them in the very near future and hope to close those during certainly the next six months. And now I’ll talk about our favourite part of the call, the net asset values. You know most of the REITs provide the – don’t provide the value of their properties; however, we intend to provide these update valuations on a quarterly basis. As a quick summary here the valuation policy we generally use purchase price if the property was acquired within the prior 12 months and we had each property upraised by an independent third party atleast once every three years. And these independent third parties are special honest people that do nothing but value and appraise properties in the farmland areas. They have their own association and so these are really skilled people in this area. In between those appraisal periods, the valuation will be determined internally by our full time valuation also using updated market and properties specific information. During the fourth quarter we updated values of non-farms all of which were valued internally and total of these farms increased by $2.4 million or about 6% from their prior valuation which was between 12 months and 15 months ago. As of December 31, 2014 our portfolio was valued at $193 million with 70% of this value based on either third party appraisals or actual purchase price and 30% of the total value about $58 million was determined internally. However, of the amount valued internally 95% of that amount or about $55 million was supported by third-party appraisals performed between 12 and 24 months ago, so it wasn’t just something we picked out of the air we had a lot to go on there. And the difference represents the increase in value since that time. This schedule of valuations is discussed in far more detail in our Form 10-K that was filed yesterday and when we substitute these new values for the book value or the current values of our properties in the financial statements in that 10-K we come up with a new network number that moves from $60 million at book value to a $108 million in current value, that’s the appreciation that has occurred. And remember many of these properties have just recently been purchased, so no increase in value of those properties have been reflected in our valuations yet. That’s the beat in the future. Using this network number, our net asset value per share at December 31, 2014 is now $13.94 that’s up $0.17 from $13.77 per share at September 30. So one quarter up by a good over 20%. Most of this was driven by the appreciation in the value of our farms that we value during the quarter. Up until this quarter we had one continuing drag on our net asset value and that was that we had been paying out more in distributions than our earnings or FFO. However, for the first time since our IPO our funds from operations that’s our earnings for December 31, 2014 quarter was fully covered by the – covering the distribution and we expect this to be the case on all future quarters. So, we believe we have now passed the start up period of our development and are now on to the growth phase. Overtime, we expect our net asset value to increase as our farmland values appreciate due to the rents going up and the farms in our growing area increasing in prices And our stock unfortunately is currently trading at $10.87 which is significantly below our net asset value thus we are hopeful the stock price will rise this year, so if you are buying stock today you are getting a discount from my estimated net asset value of about 22%. So buying at – you are buying $13.94 in assets for just $10.87; this is a wonderful opportunity that you buy some really strong assets. As most of you know we recently increased the distribution by 16.7% to a current annual run rate of $0.42 per share. Speaking of distributions we get our money to work from our lenders as we get that money to work that we borrow from money lenders. We will have the difference between what we pay the borrower and the amount we receive in rents and we can use that to increase our dividend. Now we have been buying properties with all of that now, and will leverage up about 50% of borrowing money and 50% stockholders equity, so we’ll cross that line a little bit later hopefully and I think, I think current stock holders including those who purchased on the IPO should be very happy that we expect 2015 to be even better than 2014 as we have leases increasing and rent payment as well as the appreciation of the land values. However, as we all know no guarantee that any of this will happen but we are pretty bullish about the future for this one. Now look at this farm land REIT is a way to hedge against inflation and food prices and other inflation items that are in the economy I think it’s really a much better hedge than buying gold. For those looking at assets that don’t co-relate to the stock market this company is – well that’s enough on the business side and now turn it over to Chief Financial Officer, Lewis Parrish, and Lewis go ahead.

Thank you, David and good morning everybody. As you all know we officially became a REIT during the third quarter and we made was should be our final tax payment during Q4. All 2014 taxes were state taxes only to California and beginning with the first quarter of 2015 we do not expect to incur any further income taxes. And now discuss the financial results beginning with our portfolio and the balance sheet. We acquired three new farms during the quarter and one farm subsequent to year end adding about $48 million of new assets to our books that will provide us with $2.3 million of additional cash revenue per year. The initial cap rate on these acquisitions in aggregate is 4.2% however with all the leases we assumed on this deals expiring within three years from now and as certain of these farms are placed in the tax savings contract we expect the cap rates on these builds to be over 5% within the next couple of years. We didn’t have any lease renewals during the quarer; however we just recently renewed a lease on one property we acquired during 2014 that was scheduled to expire in 2016. The new leases for six years that will provide for an increase in annualized GAAP revenues of over 21% compared to that as a lease we assumed at acquisition. We are continuing to diversify our portfolio of properties and the tenants on our farms. Over the past year, we have increased our tenant base from 16 different growers to 30 today all of which are unrelated to us. A year ago, over 66% of our annual revenue came from one single tenant, whereas today that number is down to just 30%. And while the majority of funds and real operations remain concentrated in California our reliance on income from those farms continue to decrease. As of December 31, 2014, 67% of our revenues came from California compared to 84% a year ago. However, investors should remember that California is very large, there are many different growing regions in this state and we own farms in three of them that is far far from each other as from Virginia to Georgia. As such, we will continue to look at new properties in California. We have also become more diversified with regards to crop type as we now own eight farms that grow permanent crops as well as a couple of farms that grow grains. And while we intend to further diversify our portfolio, our primary focus for the time being remains in fresh produce row crops. During the fourth quarter, our total assets increased by $31 million or about 26% due to new property acquisitions. These acquisitions were funded almost entirely with new debt. And speaking of new debt, we closed on a new $75 million borrowing facility with Farmer Mac during the quarter, which will provide us with excess or cheaper debt at an effective LTV [ph] at 60%. In December we issued 3.7 million of bonds under this facility and just last month we issued an additional 10.2 million. Each of these borrowings which are non amortizing will bear interest at fixed rates of 3.25% for five years. For a discussion on operating results, I’m going to talk about both funds from operations or FFO and adjusted funds from operations or AFFO which we define as FFO, adjustment for certain non-cash items and non-recurring charges, which we believe makes it a more useful comparison metric period over period. Earnings from FFO and AFFO were $9.04 and $15.09 respectively, each for recovering the distribution of $0.09 per share. Compared with the September 30 quarter our FFO increased by $0.01 per share and our AFFO increased by $0.04 per share. This is largely driven by our operating revenues which increased by 32% over the prior quarter. 40 [ph] which in turn driven by the acquisitions over the past several months. 46% of this increase was driven by our fourth quarter acquisitions and 44% was from our Q3 acquisitions being held for four quarters. The increase in our operating expenses was almost entirely driven by increases in depreciation and amortization expense and an acquisition related expenses, both of which were results of increased acquisition and due diligence activities. However, if you remove these two items, our operating expenses increase by only $30,000 or 3%. And just a quick update on the property and casualty line item, the net recovery we have recorded to-date is based on insurance proceeds actually received. Repairs on one of their properties to core and Oxnard, California are essentially complete, while repairs on the other properties are expected to begin later this year. However, we are still in discussions with one of the insurance companies and we expect to receive at least another $36,000 during the first half of 2015, which will be recorded as an addition to the recovery line item upon receipt. Turning to liquidity, we currently have about $3 million of cash on hand and $7.3 million of availability under our MetLife facility. In addition, we have about $6 million of properties that we are currently working with certain lenders on pledging. Based on this overall availability and assuming all unpledged properties are pledged at LTV at 60%, our total buying power today is about $30 million. And regarding our future capital requirements, we have about $522,000 of principal payments coming due throughout the remainder of 2015. Going into 2015, we are very excited about the traction we are gaining and the acquisitions we’ve closed over the past year. We continue to anticipate strong growth in the upcoming year and hopefully being able to past the results of this growth on to our shareholders. And with that, I’ll turn the program back over to David.

Okay. Lewis. Good report. I think the main point of this report is to tell you we are executing our plan as we’ve told you reduce and so IPO will use the proceeds and invested the proceeds from IPO and follow-on. We have availability to-date to continue acquiring more farms through the summer. We are currently looking at different ways to access the capital marketplace and continue our growth in a very nice list of potential properties and we’re interested in acquiring. And with the increase in the portfolio of the farms comes much greater diversification than we had at the beginning and protection is there for investors from that diversification. And we also expect some very good earnings as evidenced by the recent increase in our monthly distribution. We anticipate that many of the farms we purchase will be acquired from farmers or agricultural companies and if they or other farmers will simultaneously lease those farms from us. That’s been the normal course of business since we started. We also expect that many farms we acquire will be purchased from farm owners that don’t want to farm the property any more, but rather lease the property to a farmer. So about 38% of the farms in the U.S. are owned by individuals, but not farmed by the owner and they rent the land to different farmers. In that situation, we intend to put our own lease in place soon after buying the property or simultaneously with acquiring the farm and that always helps us in the long term. And a couple of points to make, people often ask us about the drought in California and its affect on the water availability for our farms. There is a drought in parts of the states but all of the farms that we own have wells on site and so far the wells have been doing fine. And in a number of the communities like Watsonville California, they have a large processing plants, in fact, they have two large processing plants that take the affluent from the city and convert that into good water that can used to grow crops. So they used portable water and could, you drink it, but I think that’s something people in Watsonville are going to do. So we’re using on the farms, Oxnard has finished their plan and now we must run the pipes out to the farms, I think that will happen in the next year. In addition, many of you have heard the northern part of the state receives substantial participation this winter which has helped to recharge primary aquifers and aqueducts in that area. The other question you may ask is why we are not investing in corn or other hard grains and the reason is that price variability is something that’s very hard for us to judge. Corn is about $3.90 a bushel today and now it was – and now it is $3.90 and it was as high as $8.50 just a few seasons back. These kinds of variations in price really distort the ability of the farmer to figure out how they’re going to make money and it’s very difficult in that business. So we stayed away from that and stated what we know best which is produce area. We believe that investments in U.S. farmlands have performed extremely well in the last 10 plus years compared to other assets classes and farmland has provided investors with the safe haven doing the recent turbulence in the financial marketplace. This is evidenced by the continued increase in price in fruits and vegetables. Somebody told me that lettuce was up 11% last year. That’s all being seen in the grocery stores and as the farmers are able increase their prices, so what we in terms of rent on the farmland. And most of all, farmland historically been an excellent hedge against inflation, you can look at it over and over again and that’s our business thesis. It’s a very straight forward. There are more people in the world every year. More people have to eat more food. Farmers need farmland to grow food. Farmland is being converted to non-farm uses, so there’s less farmland to grow food. So there’s no replenishment of farmland and there is no more trees to cut down and turn in to farmland where our farms are for example. So farmland is becoming more valuable every year and it pushes up the price of food and also we are able to charge more for the land that we own. I’m sure some day one of our farms will be sold through a developer, but don’t look for that over the next 10years. We tend to buy farms that are going to be farms for the long period. In January 2015, the Board voted to increase the monthly distributions by 16.7% to $0.350 per common share for the first quarter of 2015. As up today we’ve made 24 consecutive monthly distributions to shareholders for total payer of a $1.89 per share, since our IPO in January 2013 and during our first year as a public company we did pay out a $1.47 per share of earnings and profits from prior years when I owned the company and we were operating, buying a few farms here and there. So, that money got paid out. We’re now at about 42%, $0.42 in terms of what we’re operating at today. We’re projecting strong production and income growth in 2015 and if our expectations are met we hope to be able to increase the distributions up. Again, sometime this year, I am after all the largest stockholder and I’m working hard to increase the distributions. I like those monthly dividends. With the stock price now at about $10.87 the distribution run rate on stock is currently just a little below 4%, about 2.9% and the entire REIT index is trading about 3.7%. So we are now pass that mark. We’re above the average of all the REITs out there and we hope to be able to increase the dividend further as we move forward this year. Please remember that purchasing this stock is a long term investment in farmland. It is in part an asset investment just like gold. The only difference of course is it’s an active asset rather than a passive one like gold. We expect inflation of food to be strong especially in the produce area. And so the value of our farmland should increase. That’s our business model and it seems to be working for us today. So with that, if we have some questions from our loyal stockholders and analysts who follow this wonderful company, we’d like the operator to come on and tell them how they can ask their questions.

[Operator Instructions] And our first question comes from the line of John Roberts of Hilliard Lyons. Your line is now open.

Hi, David.

Hi, John.

First question, I had the same issue here that I had with the commercial and that you provided in your press release sort of agleam – you didn’t breakout the line items in the income statement. Is there -- were restatements in earlier quarters that will make it so that if I subtract the first three quarters in the fourth, it won’t line up?

No. There is no restatement, if you would take the numbers into 10-K and subtract out the year-to-date numbers from the 930, 10-Q it should give you the Q4 numbers.

Right.

Why we do this John. We’ll do what we do what we did in commercial as we will put those in our Q&A section on the website and that where you and everybody else can pick them up.

Super. Appreciate that David. How is the pipeline looking?

Well, I think it’s very strong, but I would warn you that deals fallout sometimes. We can get pretty far along and we are pretty far along when couple of them, I think they’re going to close. I don’t what we’ll do this quarter. It should be okay. I think the first six months are going to be strong, but it’s always up in the year. When you’re this small and every closing has a big impact. It’s really hard to forecast earnings and dividends. But my guess is this year we should be able to increase the dividend again and earnings should go up, because we close more deals.

And how is the Midwest? Do you any deals pending there, looking like you’re coming with some?

We do, we have a couple. We have a very large potato farm that we’re looking at in Colorado. We’re looking at some interesting farms in Ohio where we’re working with one of the large farmers out there. It’s very early. The fellow who we hired out there used to work for U.S. bank and he is to buy farms for individuals who wanted to own the farms and have the company, I’m sorry U.S. Trust. And U.S. Trust will help individuals that they manage their money to buy farms. So he is to do that. And he struck out on his own and we convinced them to be part of our teams. So it’s little early for us to judge him or judge what we’re going find out there. He has been talking with some green bean guys. They grow green beans for [indiscernible] or Libya to get rich and that’s an interesting business as well. So we’re looking at some produce that wouldn’t go in to the produce department. It would go into canning. So we’re looking at little different mix of things that might happen there.

Super. And finally, Lewis mentioned, you got about $30 million in capacity. Any thoughts on what you do once you hit that number, because you got to be – it’s got a few farms really going to go through that in the first quarter to second quarter?

We’re looking at a number of different subordinated debt, I guess, you could call more like preferred stock something in that areas that we might place. We have thought about doing an underwriting, but I don’t want to do a large one, because I don’t like the dilution, at the price there we’re in.

Yes. I wouldn’t assume you’d want to sell stock at these prices?

Yes. It’s a tough thing. Do you want to grow or do you want to sit and so we’ve got to figure out a way to continue to get the equity money. We’ve got the debt money in place. So that’s no problem anymore. The question is, how do we fund the debt side? Do we fund it with small loans or do we fund it with preferred stock or do we fund it with preferred stock. We have not determined that yet.

Right. Well, thanks David.

Okay. Next question.

Thank you. [Operator Instructions]. And our next question comes from the line of [indiscernible]. Your line is now open.

Good morning. Following on the previous question about debt and funding, do you have a figure in mind that you consider the maximum amount of debt with which you’re comfortable debt as a percent of the capitalization?

Yes. We talked about this a few times, and generally it’s about 60%. In the early stages of your growth, it’s almost require that you take on a little bit more debt over time that should drop under 50% as we get bigger and are able to get long term debt.

Right. I think I heard you say, you’re looking at way and answer to the previous question, when you’re looking at ways to fund debt, I don’t understand that is debt, I don’t understand what you meant by funding debt if I heard it correctly.

Yes. Some of the lenders that lend to us, it won’t lend 60% against the value of the property, so what we would have to do to supplement that is get short term debt from some other source like MetLife. So that’s what I meant by that is that you’re – so I didn’t explain in it more detail.

Good. Thank you very much.

Okay. Next question.

[Operator Instructions] And our next question comes from the line of [indiscernible] of Oppenheimer. Your line is now open.

Hi. Good morning. My question pertains to how large do you see the pipeline going forward, and do you see cap rates compressing or do you see them static at this point?

It’s hard to know about cap rate other than in the area that we’ve been in caps rates have been in the 4.5 to 5.5 range sometimes its 6 range for just ever in a day. I go back to 1997 when I bought the first farm and have been studying in the marketplace in California and Florida more extensively. I’m not as knowledgeable as our Midwest person is on what goes on in the Midwest, but we generally agree that those are the ranges in terms of cap rates. It’s really hard to know about – I wish I could predict how much we’re going to close. I do know we look at a lot of thing. Sometimes the cap rate is just too low and the farmer or the person who owns the farm is trying to sell something at a very high price. We fund back East [ph] and places like Delmarva, which is Delaware, Maryland, Virginia area, prices are ridiculous there set for a equestrian or folks who are gentlemen farmers and don’t really care about making money. So we find it hard to compete in places like that. But if you’re looking at North Carolina or New Jersey you can usually find farms that are reasonably priced. We are looking at one very close in Georgia right now. So, sometimes the backlog falls down and if you think about a backlog it’s like a hug funnel. At the top of the funnel you have all of the things coming in and we have many, many farms that are in that level than as you begin to eliminate them. They fall into the mid section where you’re doing some of your due-diligence and you either find that you’re like what you see or you don’t like what you see. And when you see something you don’t like it goes out of the funnel and then you drop down to those half a dozen that you’re very interested in trying to close and you’re working on those full time and that tense to be a pretty good size number right now, much higher than it was a year, year and a half ago. So we think we are kind of like what Warren Buffett would call a snowball at the top of hill as it rolls down the hill it just keeps getting bigger and bigger as we get better known in all of the areas out there. And I think the pipeline will open up substantially. As a footnote to that, as we get bigger by guess is that we will start to buy some of the farms with UPREIT shares that is the farmer can exchange his or her farm for shares of the company. They still enjoy the dividends that we’re paying. Also they get dividends in lieu of rent payments and at the same time it’s a tax free exchange so they move from being a farmer that owns one farm to a person that owns stock in our company haven’t paid any new taxes on that exchange and now they have huge diversification. They can sell off some of the shares and take a partial income or they can put some of the shares in a trust for the children or give it to their charity. So we look at that, and that should be very strong for us as time goes on. Haven’t done any of those yet, but we’ve had a few enquiries and so we’re beginning to work on that as we get bigger. Other questions.

Thank you. And I’m showing no further questions. At this time I’d like to turn the conference back over to Mr. Gladstone for any further remarks.

Okay. Well, we appreciate all of you calling in. And if you do have questions you can always email and we’ll try to answer them over email and sometimes we deal with some of the analyst over the phone, but mostly its email back in forth. And some of the questions are fairly detailed and as a result we put those details in our question and answer section. So that anybody doing due diligence on our company can find out that information that we’ve given out, that might be different from what we’ve or not answered in one of these question and answer session. So that’s the end of this. And we thank you all for calling in and we’ll see you next quarter.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude today’s program. You may all disconnect. Have a great day everyone.