Good day, ladies and gentlemen. And welcome to the Gladstone Land Corporation’s Fourth Quarter and Year Ended December 31st 2017 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 call may be recorded. I would now like to introduce your host for today’s conference Mr. David Gladstone. Sir, you may begin.

Alright, thank you Crystal, nice introduction. And welcome to the quarterly conference call for Gladstone Land, and thank you all for calling in today. We appreciate you taking time to listen to our presentation. We do always enjoy talking to you all on the phone and hope to get some good questions at the end. Please feel free to come visit us if you're in the Washington DC area, we're in a suburb called McLean, Virginia and if you have a chance to come by, you'll see some of the great team at work here and we have about 65 people, members now manage about 2.2 billion, maybe a little more than that, and assets across our four public funds. We'll start with Michael LiCalsi, he's our General Counsel and Secretary, also serves as the President of Gladstone Administration, which is the administrator for all the Gladstone funds including this one. Michael?

Thanks, David and good morning. Today's report may include forward-looking statements under the Securities Act 1933, the 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 listed in our Forms 10-Q, 10-K and other documents that we file with the SEC. All these documents can be found on our Web site, www.gladstoneland.com, specifically the Investor Relations page of that Web site, or on the SEC's Web site at www.sec.gov. We undertake no obligations 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. Now in the presentation today, we will discuss FFO which is funds from operations. 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 from property, plus depreciation and amortization of real estate assets. We’ll also discuss core FFO, which is generally FFO adjusted for certain other non-recurring revenues and expenses, and we believe this is a better indication of our operating results and allows better comparability of our period-over-period performance. We ask everyone to take the opportunity to visit our Web site once again gladstoneland.com sign-up for our e-mail notification service that will allow you to stay up-to-date on our company. You can also find us on Facebook, keyword there is The Gladstone Companies and we even have our own Twitter handle these days and that’s @GladstoneComps. Today’s call is simply an overview of our results. So we urge everyone to read our press release and Form 10-K both issued yesterday for more detailed information. Again, those can be found on our Investor Relations page of our Web site. With that, I’ll turn the presentation back to David Gladstone.

Okay, Michael. Thank you. 2017 was a big year for us as we acquired about $120 million worth of new farms. These acquisitions span across six different states including two new states that we enter this year. And include a multitude of different crops, a significant portion of which are organic. But before I get into the details and other events, I’d like to give you a brief overview of our nature of our business. As many of you know, because you call in every quarter this company invites invest in farm land, which is often called an alternate asset and that’s because these assets are considered to be relatively illiquid. Many experts in the asset management business also classify our assets as being in the natural resource segment along with timber, and you should know these timber REITs that are out there or companies owning oil wells, coal mines, gas pipelines all of those kinds of natural resources. What makes us very different from most of the alternate asset managers is that we are publicly traded, which provides our stockholders with liquidity, since they can buy and sale with stock anytime they like. We choose to be a real estate investment trust, so that our stockholders can get cash dividends that have been packed at the corporate level. Our business consist of owning high quality farm land and leasing it to top tier farmers, except for in unique circumstance, we typically don’t farm any of the land ourselves and as thus generally don’t take on any direct farming risks. We pride ourselves in only acquiring the best farms and leasing them to the strongest farmers. We are the real estate partner for our farmers, we’re not their competitors. Our investment focus is on farms in locations where farmers are…

Alright, thank you, David, and good morning everybody. I'll begin by discussing our balance sheet. During the fourth quarter, our total assets increased by about $6 million driven by our recent new farm acquisitions, which were openly funded through a combination of new fixed rate borrowings and common equity raise to our September overnight offering and recent ATM sales. David already went into detail about the asset size, so I'll focus on the financing side here. During the quarter, we obtained an additional $4 million of new long term borrowings, including borrowings from one more new lender. On a weighted average basis, these borrowings carry an effective interest rate of 4%, which is fixed for the next nine plus years. We also sold a little over $1 million of common stock through our ATM program during the quarter. From an overall leverage standpoint on a fair value basis and including our term preferred stock and the debt bucket, our loan to value ratio was just under 61% at December 31st. And we're comfortable at this level given the relative low risk of farm land as an overall asset class. While interest rate volatility remains a concern of ours, about 97% of our total borrowings is currently at fixed rates and on a weighted average basis, these rates are fixed for another 6.4 years out. So we believe we are pretty well protected on the debt side against the near term interest rate hikes. The overall weighted average effective interest rate on our long term borrowings is currently about 3.31%, which is up by about 19 basis points from a year ago. While interest rates have risen, credit remains readily available and we continue to be able to borrow money on terms that make the overall economics work for us. Regarding…

Nice report. Company just continues to get stronger every quarter as we continue to execute our plan. We invested about $435 million in new farms and assets since our IPO in 2013 and we expect to continue to adding to the figures. We are listing -- list of possible acquisitions remains very strong today. We currently have two properties for about $21 million under signed purchase agreements, portion which is expected to be paid in OP units. So that’s like issuing equity and we expect these acquisitions to be completed by March 31st, possibly all over a little bit into the next quarter, but any rate we’re close to closing. We also have a few other farms that we hope to have signed up soon, but it’s too early to really put any probability of closing on those. We currently have enough dry powder to close all these farms. So we got plenty of money to do that. Under the signed purchase agreements and we need additional capital -- we don’t need additional capital prior to the purchase price, it’s expected to paid-out in OP units. One of the ones that we’re looking at, just came back the other day is over $50 million. It would be in the second quarter if we can close it. I just don’t know if that’s going to close or not, it’s 25% in OP units. However, we’re still continuing to do due diligence and process the property, and there is really new guarantee that any of these will close, but we keep plotting along. And just a few final points I’d like to make. As most of you know, our funds specializes in farms that grow fresh fruits and vegetables and more recently farms that grow nuts and other tree crops, such as…

Because it's somewhere between there.

Somewhere between there, okay. The total value of our farms is invested in farmland growing corn, wheat and soybeans and the nature of the beast is that people grow more than one crop per year. So you might have corn and something else, or wheat and something else. And so that makes the calculation between 10% and 15% is the way we have to catch it. At this point in the farming cycle for grains, it's really difficult for farmers to make much money. In fact, many of the corn prices are so low today that they are just not buying additional farms in the area, and I'm worried that a lot of the farmers are not going to be able to make ends meet. Ultimately, we believe farmland that is GMO free and growing healthier crops such as fruits and vegetables, and nuts are going to continue to outperform the overall farm market in terms of both cash returns and long term value appreciation of the land itself. Now let's set this record straight. We don't own any farms that are growing, cannabis or hemp. We don't like those crop and they’re illegal, and anyway the report I have read says that growing in those areas is not the profitable area, it's the distribution area. So we’re not in that farming area and don't intend to be ever be in that area. In terms of the economic outlet in general, farmland like ours continues to perform well compared to other asset classes. Despite some of the recent downturns in certain regions, the NCREIF Farmland Index, which currently is made up of 727 agricultural properties worth about $8.5 billion has an average annual return of 14.9% over the past 15 years compared to 9.1% for the S&P. And you know…

Thank you [Operator Instructions]. And our first question comes from Rob Stevenson from Janney Montgomery. Your line is open.

David, could you talk a little bit about why Dole didn’t want to stay in that property where you replaced them as a tenant?

Dole is going through a pretty significant transition, you may have read about it. They were thinking about doing a public offering. And now it looks like about half the company is being purchased by a large British company that’s in the fresh fruits area. So they’ve been pulling away from growing berries and this is berry farm as long as I can remember the one that they got off of. And so I think it’s just a change at Dole, change in the attitude of what they’re going to grow and who they’re going to be partners with.

And then what geographic areas in crop types were the farms where you have the decreases and appraise value this quarter, as well as possibly last couple of quarters. Any trends there in terms of is it Central Valley California, is it other place, is it specific type of crop that’s being devalued?

Well, I mentioned that in the call, the one hit of about $200,000 was the corn farms in Arizona. That was unfortunate but I think that will recover quickly. And Lewis, what are the others?

In Oxnard the Santa Clara lease…

The Santa Clara lease that we have in Oxnard went to a vegetable grow instead of a berry grower, that should change over the next three years. But I can’t point to anything other than obviously the corn area is very difficult. And as we had the switch and Oxnard from berries to veggie ground that’s the kind of think that happens from time-to-time. I think it will come back. But we get a little less rent there. So no trends other than changes happen in every marketplace.

And then last from me. Can you talk a little bit about how you’re viewing the Series B preferred in terms of how much you’re willing to issue, how high you’re willing to take-up effective leverage if you’re assuming that the preferreds are in fact leverage. I mean, others were similar non-traded preferred albeit with a common conversion option have used on to jack their effective leverage well above 75%. What’s your feeling on this at this point?

I like where we are now we had about 60% and that’s a good number for us. And we do a lot of transactions. We’re doing more transactions as we get bigger with OP units. So that’s really common stock, which you think about it and that’s a good number for us. If we could do 30% or 40% in OP units in the rest of it in loans, I would -- mortgages I would love that because then I wouldn’t have to go to the marketplace for common stock issuance. And also the people that have done that have made out very well as our stock prices gone up. So we have a lot of happy campers that have OP units. From the standpoint of the quickness I wish I had a gauge for how quick the Series B is going to be sold. We've got -- I guess we've been -- one of our people has been into 12, 13 different shops. We've been received very well. Obviously, we're the only farm land in that category and the strength of farmland does let people get very excited in the fact that the down stroke in farmland is much less than in some of the other categories that have been out there. You'd probably seen the non-traded area. They’ve had some people that have been very, very high in terms of performance and then fell off pretty dramatically later on and people have lost lot of money, we're not in that category. And I think we'll be well received. When you go into one of these shops and RIA shop, they need to go through their due diligence and it usually takes a couple of months for one of them to get on. Our goal is to select enough so that we get a steady stream and then not add anymore. So we don't really want to get to waste some of the non-trades are where they're growing at $100 million a month, I don't know what we would do with that much money. So we are going to make sure that we don't grow at a fast pace in terms of money coming in, because we don't think we can put it to work in good shape that quickly. But we are hiring, we’re hiring some other people expecting that to pick up, the Series B to pick up. And I don't know, we'll see. But 60% is good for me given the fact that we've remained 100% leased or our properties have been 100% occupied since 1997.

And then one more for me here. In terms of the OP units that you guys either have issued or will issue, how are you looking at that versus common -- versus where the common is trading? Are these deals typically at where the common is trading on around that date with some trailing 10, 30 day period? Are you more or less issuing OP units effectively at some premium to the common stock price in some of these deals? How are you guys arranging these deals typically when you're using OP units and pricing units?

It's obviously a negotiation between us and the seller. And many times in these deals, the seller is going to be the person renting it afterwards. And so they are doubly involved in our operations. So I would say that 90% of the time, it's a premium, maybe a small premium to the current price. We push very hard on the idea that we're trading below net asset value and as the shareholder they might want to know when. The negotiations are hilarious sometimes, Rob, but the bottom line is to-date we've been above the current stock price and I think we'll stay there.

Thank you [Operator Instructions]. And our next question comes from John Massocca from Ladenburg Thalmann. Your line is open.

Just following up again on the Dole property. Is the new tenant farming the same crop at the same crop as that property?

Yes, it's an incredible piece of property and has been growing berries. I got that property in 1997 and it had been growing berries for at least 10, 12 years before I got it. So it's been a berry farm forever and a day. It's very much part of the crop that's been grown by this tenant, and their berry farmers. So it’s right in line. Dole is just moving out of berries and fresh produce and I don't know if that's going to stay, but maybe the new person who is buying a big chunk of Dole will want to continue. As you know, we have them on one farm in Oxnard as well, so that lease comes up in 2020. So we don’t have any worry about re-leasing. It has also been a wonderful berry farm. A lot of these farms also take second crops. For example, when I farmed the one in Watsonville the Dole farm that we were talking about, we grew radicchio and some barley and other things during the off-season. And so some of these farms make pretty good money growing vegetables and other things during the non-berry season, the berry season is about nine months in California and in Oxnard it’s probably closer to six or seven months. So there's another part of the season that they can make money on, but Dole seems to be going out of the berry business.

And then so the 11%, if I heard that correctly, increase you got when you signed a new tenant on that farm. I mean is that indicative you think of the strength of the California berry market or is that just it’s a great asset and it was kind of -- the lease was under market that sold.

The lease was under-market would have probably been marked up at our next period, but anyway they wanted out and we felt it was better for them to get out, especially if we could make 11% more. But they're good folks and we like the relationship so it was just what the market would bear at the time in terms of berries. And it was already at a pretty substantial price but I was surprised that it was -- that it needed to go up a little bit more, but that's what they're willing to pay. Again one of those farms that we’ll probably be in berries for until they build apartment buildings there cause it’s within walking distance with the ocean. It’s a wonderful farm and I'd hate to see it go to something else, but we love the fact that this new tenant has been a berry farmer forever and a day and I've known them for a long time, competed against them a couple of times when I was running farms out there so they're very happy to get this farm.

And then looking at the acquisition market more in general, have you seen cap rates tick up for farmland given the rise in interest rates or is it been fairly stable market?

It's been stable, but it's going to have to change. We're seeing of course the debt market place move up some. So as we see our cost to own going up, we have to have a -- I mean, it’s wonderful on all the farms we have in place today because we've locked in the spread for the next seven-eight years, six years on some of them, so that's locked in. But the new ones, we can't buy them at the same price we paid. You've seen our rates go up from about 3.6 to what do we have -- 4%. So we've got to make that back up and increase rent in order to keep our spreads the same. And I think it’s happening and people get the message, because they know what the bank's charging in terms of mortgages. And so they're looking at assets a way of not leveraging themselves up of just leasing the property. So we’ll see but right now everything is working.

And then you started addressing there, but on the financing front, as treasury yields have going up. Have you seen mortgage spreads contract a little bit or is it just been pretty much a one for one movement up in interest rates on mortgages?

The banks we’ve been dealing with haven’t hit us with the higher rates yet, so we’re expecting to see some movement now. And every deal that we have is dependent on A, an appraisal of the company which would go down if interest rates are going higher. And so may lose some deals overtime because one of the caveats than our purchase agreement is that we have to have an appraisal that meets the price that we’re paying. And in the farming business, unlike some of the other real estate business have been in, we don’t have people that will make sure that they value at exactly what you’re paying. So they’re pretty straight forward and honest and we lost a deal in Arkansas, a rice farm there, because the appraisal came in much lower than we had thought it was going to come in. And so as a result, we went back to the seller and said you got to drop to price or we can’t buy it, and he refused. So it’s outright now. Although, I suspect he will reconsider at some point in the future. So yes on the financing front, it’s going to have an impact on the price we can pay for farm because we’re financing 50% to 60% of every farm with debt and we can’t bear the cost of that debt we got to get it out of the financing. So that’s it.

Thank you. And I am showing no further questions from our phone lines. I would now like to turn the conference back over to Mr. Gladstone for any closing remarks.

Thank you all for calling in. We really do enjoy this. I wish we had more questions and could spend more time on the phone. But this is it and we’ll see you in next quarter that’s the end of this call.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Everyone, have a wonderful day.