Good day, ladies and gentlemen, and welcome to Gladstone Land Corporation’s Third Quarter 2015 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 this conference today is being recorded. I would now turn the call over to your host, David Gladstone. Please go ahead.

All right. Welcome to the conference call for Gladstone Land. This is David Gladstone. And thank you Stephanie for that nice introduction. She is very efficient and thanks to all you people we have on the line today. We really appreciate these call-ins and having time with you and we enjoy them. Hope you do too. I wish there were a lot more times to talk about the company and give you more information about it and by the way, as I do every time if you are ever in the Washington DC area we are located in a new branch suburb called McLean Virginia and if you have a chance, stop by, say hello, you will see some of the great team that we have working here, about 60 people. We are nearing $2 billion in assets under management in our four public companies. So we start every session with Michael LiCalsi. He is our General Counsel and Secretary. He also serves as a President of Gladstone Administration that Administrates all of the Gladstone funds. Michael?

Good morning. This report you are about to hear may include forward-looking statements as defined in the Securities Act of 1933, and the Securities Exchange Act of 1934, including statements with regard to the Company’s future performance and these 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 risk factors listed in our Forms 10-K and 10-Q that we file with the SEC and they can be found on our website at www.gladstoneland.com and the SEC’s website, www.sec.gov. The Company undertakes 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 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. The National Association of REITs has endorsed FFO as one of the non-GAAP accounting standards that we can use in discussing REITs. We’ll also be discussing core FFO or CFFO, which adjusts FFO for certain non-recurring charges and adjusted funds from operations or AFFO, which further adjusts CFFO for certain non-cash items. And we believe these metrics improves comparability of our results period-over-period. And please review our quarterly report on Form 10-Q filed yesterday with the SEC for a more detailed description of FFO, CFFO and AFFO. Now the reports from our President and CFO, that you are about to hear will be an overview of our operations and performance. We encourage all listeners to read yesterday’s press release and the Form 10-Q, which includes a wealth of information for our investors. You can find them at our website gladstoneland.com. And to stay up-to-date on the latest news involving Gladstone Land and our other affiliated publicly traded funds, please follow us on Twitter, username GladstoneComps; and on Facebook, keywords, The Gladstone Companies. And you can go to our general website to see more information about this company and our other affiliated public funds at www.gladstone.com. And now, I will turn the presentation back to David Gladstone.

All right. Nice report, Michael. And before we get into the results of this third quarter, as I do every time, I’d like to review the market environment and the nature of our business for all of our listeners follow this as a new company and a new condo company. Our business consists solely of owning farmland and leasing it to independent and corporate farmers. The independent farmers we lease to, these are farmers who are usually in the top 10% or 20% of the largest and best farmers in any of the farming growing areas that we are in. So we try to pick the best farmers for all of our tenants. We don’t farm any of the land ourselves, and thus we don’t take any direct farming risk. Almost all of the farms we own are concentrated in locations where farmers are able to grow high-value annual row crops such as berries and vegetables. As you may have read about, we’ve taken advantage of the depressed farmland prices in the Midwest and we acquired two quality farms in Nebraska producing a variety of both greens and produce and if we find more farmland in the Midwest, we’d plan to go back farmers growers primarily produce, produce such as potatoes and onions and those kinds of things. Almost all of our tenant farmers that we have growing items, these are items that you’d see in the produce section of a grocery store and that’s because, I used to own one of these farms. I owned a farm that was in the produce area and it was the second largest produce of strawberries and other berries in the US and I sold that produce company to Dole and kept the land. And that’s how we got the beginning of this…

All right, thank you, David, and good morning everybody. I’ll begin our discussion with our portfolio activity and the balance sheet. [Audio gap]

Ladies and gentlemen, please standby. Again, please remain on your lines. Your conference will resume momentarily. Please standby.

Mr. Gladstone, you may resume your conference.

Okay, thank you

Okay, good morning everybody. Sorry about the interruption there. For this portion, I will begin with our discussion on the portfolio activity and the balance sheet. We acquired five new farms during the quarter, adding about $30 million of new assets to our books. We invested $11 million into two farms in Nebraska representing our first foray into the Midwest and $19 million into three farms in California that will be planted with almond trees. The two Nebraska farms were acquired at a net cap rate, net rental income, net of property expenses were responsible to cover such as property taxes of 5.3%. And the leases we put in place will run for about 3.5 years. Our $19 million California acquisition also includes the development plan to convert the current grounds into an almond project. We expect this project to be completed during the summer of 2016 at a total cost of about $8 million on which we will earn additional rent as the costs are expended by us. In addition, as David mentioned, we will also be sharing in a portion of the tenants’ gross revenues from crop sales. As GAAP only allows us to record the minimum rental amounts guaranteed and leased, our initial cap rate on this deal is 4.4%. However, using conservative estimates for prices in crop yields, we expect an overall cap rate that’s over 7.5% once these contingent variable amounts are figured in. The lease we’ve put in place rents are 15.5 years and includes one ten year extension option. In the first quarter we’ve acquired one additional farm at Florida for about $3.8 million. We put a six year lease on the property that will give us a 5.6% net return. No leases were renewed or extended during the quarter, but given that…

Okay. Sorry about the problems with the phones. This is the second time we’ve had some problem, but thank you Lewis. That was good presentation. The main point again to report is to tell you that we are continuing to execute the plan that we promised we would do. It’s over $184 million in new farm acquisitions since 2013 when we went public and we have several other deals in the pipeline that we expect to close in the coming months. With an increase in the portfolio of farms comes greater diversification and protection for investors and we also expect to see some increased earnings. We expect that many of the farms that we’ve acquired will be purchased from farm owners that don’t own the farm in terms – don’t farm their farm everyday, but rather lease it to other farmers, and it’s about 38% of all the farms in the United States owned by individuals, but not farmed by them. They rent the land out to different farmers just as we do. So many times we buy those and we just become the new owner and the farmer that’s there, stays on that farm. In those situations, we want to add new things in our leases, but it’s straightforward for all of these leases that we do. In general, we want to keep the same farm on the property forever. We don’t want to kick anybody off and so as long as we can agree on things going forward, there is not going to be a problem with leasing the land. In addition to the drought in California we’re asked questions about why we are not investing so much in growing of corn and other hard grains out in the Midwest and the reason is, price unpredictability. For example,…

[Operator Instructions] Our first question comes from John Roberts with Hilliard Lyons. Your line is open.

Morning, David.

Good morning, John.

This is more a high-level strategic question. Lewis, addressed this to some degree, but given the stock price - I am sure you don't want to be issuing stock at these levels given as dilutive as it would be to asset value. And you are coming up against, sort of the limit of your ability to add debt. Do you see strategically, if the stock stays here more operating the company just to generate the best possible outcome from the existing properties, rather than to continue leveraging up, and potentially causes some risk on that side of things?

Sure, we look at it everyday, trying to figure out which way to go. Obviously, if you could put the money to work at a very high rate, which is not exactly what we can do, you’d raise money at this price. We do have an ATM program working for us. We haven’t done much, we sold maybe, 2000 shares to-date. So, we are not really in that marketplace and I think the next thing we need to look at is, where we go in terms of the equity side and the debt side, we will spend more time on that and see what we do. But you are right, maybe the right thing to do if we have to is just sit and let the increase in rents continue to go up and pass that on to shareholders. I hate to do that but tell on your inside people that are working on this go increase your golf game, but we don’t want to do that. So, we are working hard to figure out what’s the next round for us. Some people had mentioned we should do some preferred stock. We haven’t looked at that very close, but that’s another option. I don’t want to get too far out there on the leverage and as you know, I am not a great believer in leverage, but this asset does have some stability beyond what you would find in the normal real estate marketplace and as a result of that, I feel more comfortable about leveraging this up with mortgages. I mean, if you kind of mortgage to a real fixed rate long-term and you got your rents going up, it’s a good multiplier. So, we are doing the numbers and I don’t have a good answer for you today, John.

Right, thanks, David.

Okay, we have another question?

Our next question comes from Amit Nihalani with Oppenheimer. Your line is open.

Hi, good morning. I'd like to know, if you could provide what the CapEx run rate is going forward? And if there is any additional CapEx to model out for drilling and so on?

Yes, you should remember two things about CapEx, most of the time when we have CapEx, we actually increase the rent to the farmer for that. So it’s not typical CapEx where it’s just shot at the ground or into a building and you don’t get anymore rents for it. So from that standpoint, it’s a little bit different. And I would say, maybe we spend $1 million or so every year in terms of CapEx. It’s just an ongoing thing. There is a well here or something over there that we have to do, but it’s not a lot and you should expect it to be anything like you would see in – say an office building, CapEx model or industrial REIT cap model. How much will we spend in that Lewis?

It varies right now, because some of the properties we agreed upon acquisitions we’ve improved the property and then increased the rent thereafter. But, Amit, if you take a look at our commitment and you see, footnote you will see a lot of operating obligations that we have detailed there. And most – everything that we have listed in the footnote there should be completed by December of 2016. So, it’s hard to say a run rate right now, because we have a lot of one-off projects going on, but, after December 2016, these should start to normalize a bit.

Got it, and could you provide some more color on the pipeline? For example, what the expected cap rate is, the type of assets and how you expect to finance it?

Yes, most of that – if you look at the cap rates, this business has been running on the same cap rate for as long as I’ve been in it and I talk to some of the appraisers that go back into the 30s and your cap rates are running in the 5% to 6% rate right now on the things that we are looking at, but you end up, if you are doing, say, tomatoes and water melon, you are going to get a higher cap rate than if you are doing strawberries. And so, the cap rates do vary by crops, by farms and by a lot of different things. But if you use the cap rate in just that, I am going to assume it’s going to be 5.5%, you’d probably be okay. Every now and then as you mentioned, as we mentioned the almond farm is going to be at a lower start rate because we are putting money into the ground and you got to get the trees up and running in terms of producing almonds. So as a result, that one starts out a little lower, but it will have a much deeper period on it over time. And all of these are going up by a rate of 2%, 3% per year, but every two to three years, we go in and determine that rates have gone, I mean, rates have gone up, but the value of the properties have gone up and therefore if you use the same cap rate, let’s say 5.5% on a higher number, you are able to raise the rents to that number and this is pretty standard across the United States. If you are in the Midwest doing corn for example, just to use that as the first example, corn would be rented once and then, I mean, per year. And so, every year, the negotiations go on between the farmer and the holder of that property. It’s a little different out west and down in Florida, you are normally doing two and three year rents with 2% to 3% bumps every year and then, you are going in and sampling the marketplace and coming to an agreement of what the new rent should be. So this is a different business model than you see in an apartment rent. Although an apartment, you are obviously renting new apartments and people are leaving and coming and so the rates did move up, but it’s different in the sense that, you are sort of locking people in for two to three years, that they do that in apartments. But certainly different from office rents, triple net rents. It really is a triple net deal, but at the same time it’s short-term duration in the sense that we might sign a 10 year lease but have the transaction re-negotiated every three years just based on the model that we put together.

Great, thank you.

Do you have another question?

Yes, like what type of farmland specifically is in the pipeline right now? And, how you expect to finance it?

Yes, we’ve got a lot of stuff that we are looking at and all of the things we’ve got a number of farms that are in potatoes, potatoes if you go into the part of the grocery store, potatoes are probably one of the largest areas in the grocery store in a sense that they pump out a lot with the different others in terms of the amount of throughput that’s going through the stores. It’s a staple obviously, so we like that area. We’ve got some peppers that we are doing, we’ve got – and some of these are in tomatoes and we’ve got one water melon and these are all things that are going to have good rates to them. We do have a number of things that are coming along in the berry area. So, you look – I hate to mention these, because, I think to mention these kinds of things that the deal falls through and so I’ve got to replace it with something else. So just generally speaking, if you are in the produce section of your grocery store, that’s what we are looking for. Now, some of these farms, even strawberry farms during the interim period will plant lettuce and some of them will plant barley, some of the farms that are in potatoes will go to alfalfa for a short period of time. These are all rotational crops. They go back and forth. So there is no one crop that’s on one property for ever. Yes, every year, they may plant strawberries, but in the interim they will plant barley and it’s just a way of farming that goes on in everywhere in the world. Any other questions?

That's it. Thank you.

Well, the financing part of this is, all related to three of four very aggressive lenders in the business. The mortgages come from these government-related industry entities such as Farm Credit, and they use the ability to sell-off the loans at very, very low rates because suppose to live the guarantee, although they are not correctly, you got Farmer Mac, who is another, it’s a public company. But at the same time, they are having tremendous volume of financing farms and then we deal with MetLife who is the largest mortgage lender in the United States and maybe the world, but in the United States. We have a very large credit line with them. We’ve dealt with others over the years. But none of them standout the way that those three do. So, those would be the preferred way of going. We may find somebody else that we haven’t done. We haven’t done any of that today.

Our next question comes from Rob Stevenson with Janney. Your line is open.

Thanks. Good morning. David, and Lewis, can you just talk a little bit about the pricing recently on some of the Farmer Mac and some of these other deadlines, I mean, have you heard or seen anything? I know it's probably a little too soon. But you've had some disruption or some people talking about what's going on with Freddie Mac. Any of that flowing its way through to Farmer Mac and any of the other sort of capital sources you’ve seen any sort of bump up in rates or lack of availability on any of the financing?

We have actually seen a slight decrease in rates from the previous quarter. I mean, you know that that will continue especially with the meeting upcoming in December, but rates continue to be favorable and there don’t seem – we haven't experienced any restrictions on lending from the lenders that we have dealt with.

Yes, in fact, it’s been very nice because they’ve all been relatively aggressive in terms of looking for transactions and we enjoy that and getting berry a little late. So, at this point in time, the farmers of the United States, the whole Midwest particularly is very aggressive in terms of locking Congress to get things. They got a very nice farm bill through over the last time which have been a year and a half, but that was passed and what has happened that’s interesting on the farming side it used to be very heavily subsidized and so a farmer would get paid to do certain things. They don’t do that anymore, they’ve now gone to an insurance model whereby the farmer can buy insurance and the smaller farmers normally do that and pretty much it will get you to breakeven and even if your corn doesn’t perform very well, you can live to another day to farm again because you get most of your money back. And that’s going to stabilize the food production in the United States, I think dramatically, because it used to be some of the smaller farmers would blow up and do lot of business. And I think that’s going to be reduced with all of this insurance that’s now being written.

In terms of that insurance, I mean, is there any movements – so this quarter, you guys are doing the redevelopment of the almond in the California farms. Has there been any movement to ensure the, sort of permanent crops for more than just one year from the farmer standpoint, because, I mean obviously, if they have the first year or whatever, on strawberries or some sort of fresh produce, that basically covers you and then, they can go and plant them for the next year and it's unaffected. But in something like almonds, where it's a multi-year period to grow the trees or whatever if you are only really being protected in the first year or so, there is potential downside there. Is there programs that are coming up that are producing?

There is only in this case with the government cop insurance, meaning that the crop is insured, so you get your money there. Obviously, when you are growing trees, you insure the trees, so as the trees blow down or die from some insects, you can get paid through that insurance, you are buying that insurance as well. I think most people, maybe some of the large ones and I don’t know, the strategy of some of the really large ones like Del Monte and Dole what they are doing with regard to insurance, but I am assuming they don’t insure. They self-insure if you want to think about it that way. This is primarily for the mid-size and smaller farmers. Anytime we are with the mid-sized farmer, we are asking them and make it a condition that we get insurance. So, we are protecting ourselves, obviously it’s trees, we want to know that all the trees are being insured. So that we get paid back on that, but there really is no insurance that says, we will insure your crops for the next 20 years.

Okay. Thank you, guys.

All right. We have other questions?

Our next question comes from John Massocca with Ladenburg Thalmann. Your line is open.

Good morning, everyone.

Good morning.

Just touching again on the development deal, I know, it didn't sound like – just, is there anymore opportunities to do these kind of deals, the cap rate was very attractive? It seems like your cadence with it was kind of a one-time thing; but, is this, kind of a transaction that there are more of in the market?

Yes, they are literally hundreds of those out there. We are tiptoeing into that marketplace. Even though it’s a nice cap rate, there is development risk and so, as you develop, you have development risk, just as if you were building a building, you are building a business, a new business and so, we are tiptoeing into that business. We may do more of it. There are people out there that will finance that and so, we do have competition for those deals, but those are highly lucrative on the upside, you make an enormous amount of money when we take some farmland and convert it to really new tree or buying crops. So, yes, we will do more of that as time goes on until we get bigger, I just don’t want to make a big debt on that today.

And is that cap rate you get on that development typical of cap rates for those types of deals?

I’d say it is. I’d say it’s a very good deal for the farmer and it’s a very good deal for us, because there is some risk there. So, they are paying up for the risk and I think it will be one that you will see great benefit from and an increase in. I know on some of these questions, people are going to start asking me, well, what was the yield on the farm and you have for almond that we are going to ask and start getting into some kind of discussion about the production capacity and the sellers and all of those kind of intermediaries, because you go from, I don’t know, if you know it or not, but one of our other companies has a company that manufactures the machinery that harvest these almonds. And so, as a result, that company would hopefully make a lot more money as more almonds are grown, but that point being is that, we like the permanent side of the business and that you don’t have planting risk every year like you do in the annual crops. We like it because it’s long-term. You plant it once and you don’t have to think about it anymore. And then the other side of it is that, these trees are very long-lasting. You can get an almond tree to produce for 20, 30 years. So, it’s like a wonderful thing. Every year you get good crop of almonds, you make a lot of money. And the almond business has been extremely strong. A lot of it’s driven by almonds converted into almond milk and that is a product that has ballooned in terms of sales as against the just regular milk or coconut milk. So it’s become a very strong product out there and it’s chewing up a lot of – unintended chewing up a lot of the product in terms of that. The other side of that which is a little bit scary is that the Chinese and Asians have been eating more and more almonds. So as they become more middle-class, they are stepping up to buy almonds and that has jacked up the price dramatically, there is huge demand from Asia for almonds coming out of California. So, I think it’s a typical deal. We believe this is a typical deal. The person that we back there is a long-term farmer in that area. That family is probably been growing almonds for the last 50 years. They know everything to know about it. They’ve got other huge amounts of almond growth. So we just partnered with him and we became their real estate partner for developing new transactions and we think that family is one of the best in California for growing almonds.

And then, touching on kind of cap rates again, if you were to buy, say, permanent crops, orchard-based crops - the land on kind of, an already established basis. Are those pieces of land generally going at higher cap rates than even more like the berry and vegetable farms?

No, they are actually in the same ranges that we have and that’s why it was acceptable. So, if you found an almond orchard and you wanted to buy it, it might be slightly less, because there is less risk in it, so that you might get a 4.5 or 5 cap rate on an existing farm and that has its own risk profile and if the tree is five years old, there is less risk, if the tree is ten years old, you are starting to turn the corner and if it’s 15 or 20 years old, you are going to have the program some money and to plant trees again 25 or 30 years. So there is a lot of sinking, you need to have a sinking fund to be ready to plant those and quite frankly, a lot of the trees don’t make it that long and you will take out one tree out of, say, 10,000 that you have on the farm, you might take out one or two in the first year and then you plant new ones obviously and they would be a little behind the existing ones. And then some more will die and then as time goes on, you are replacing trees that aren’t producing as well and putting in new trees and it becomes a farm that’s rotating in and out of old trees to new trees. Other questions?

All right, that's it for me. Thanks very much.

[Operator Instructions] I am showing no further questions. I will now turn the call back over to David Gladstone for closing remarks.

All right, thank you all for calling in. And we will try to edit this down. We’ve got a pretty long presentation and we’ve done that primarily because, this is a relatively new area and new people want to learn about it. So, we will edit this back so that, Lewis and I aren’t covering the same things so many times. And that’s the end of this conference call. Thank you all for calling in.

Thank you ladies and gentlemen. That does conclude today’s conference. You may all disconnect and everyone have a great day.