Good day, ladies and gentlemen. And thank you for standing by. Welcome to the Gladstone Land Corporation's First Quarter Ended 03/31/2018 Earnings Call and Webcast. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's presentation Mr. David Gladstone. Sir, please begin.

All right, thank you Howard, very 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 out of your schedule to listen to the presentation. We always enjoy talking to shareholders and those who might become shareholders on the phone today. Please have some good questions for us at the end of this confrontation. Please feel free to come to visit us here in Washington DC area, we're located in nearby suburb called McLean, Virginia and if you have a chance to come by, you'll see a great team or at least some of them, many of them are on the road. We have about 65 people here now, and we’re managing about $2.4 billion in assets across the four public funds that we manage. We always start off with Michael LiCalsi, he's a General Counsel and Secretary, he also serves as the President of Gladstone Administration, which is the administrator for all the Gladstone funds including this one. Michael go ahead.

Thanks, David and good morning. Today's call 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 on our Forms 10-Q, 10-K and other documents that we file with the SEC. You can find all these documents on our website, which is www.gladstoneland.com, specifically on the Investor Relations page, or on the SEC's website 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. 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 or CFFO, which is generally define as FFO adjusted for certain non-recurring revenues and expenses. Furthermore, we'll discuss adjusted FFO or AFFO, not further adjusts core FFO for certain non-cash items such as converting GAAP rents to normalized cash rents. And we believe these are better indications of our operating results, and allows better comparability of our period-over-period performance. And 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 also on Twitter, and our Twitter handle is @GladstoneComps. Today’s call is simply an overview of our results. So we urge ask to you review our press release and Form 10-Q both issued yesterday for more detailed information. Again, those can be found on the Investor Relations page of our website. Now I’ll turn the presentation back to David Gladstone. David?

Okay. Thank you, Michael. Before I get started on the details of the event of the quarter, I’ll just give a brief overview of the nature of our business. This company invests in farmland which is often called an alternate asset and that's because these assets that we buy are considered to be relatively illiquid. And while the assets the company owns are relatively illiquid, your investments are in our stock and it's not since its traded on NASDAQ. So we think the company is essentially a natural resource company and we think the company has a low correlation to the overall stock market which is one of the benefits. Our business consists of owning high-quality farm land and leasing it to farmers. We typically don't farm any of the land ourselves but rather lease the farms to farmers and though we're currently operating one farm that we took over when two of the principal owners of the farmland operation passed away, the business began and that business began in bankruptcy. We typically don't do the farming. Our primary investment focus on the farms growing variety of high value fresh produce these are vegetables and berries, and annual row crops and with the secondary focus of farms growing more permanent crops such as almonds, blueberries, pistachios, wine grapes, and a few apples and cherries. These are permanent crops which are planted wants and then farmed for many years as they harvest the produce from those trees and grape vines. We like the fresh produce segment because it usually provides a greater return and has less volatility than other crops types. We look to buy crop land that's irrigated and has good access to water and we also look for ground that's excellent in soil. Soil has many attributes. Most people…

All right, thank you David, and good morning everybody. We begin by discussing our balance sheet. During the first quarter our total assets increased by about $11 million or 2% due to our new farm acquisitions which were ultimately funded through a combination of new fixed rate borrowings and common equity raised to our March overnight offering and recent ATM sales. David already talked about the asset side, so I’ll focus on the financing side here. During a subsequent to the quarter, we obtained a total of about $3 million of new long-term borrowings from two existing vendors. On a weighted average basis, these new borrowings carry an effective interest rate of 4.3% which is fixed for the next 7 plus years. In addition to the March offering through which we raised about $15 million including the show that closed in April, we also sold a little over $4 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 in the debt bucket, our loan to value ratio was about 58% at March 31. We are comfortable at this level given the relative low risk of farmland as an overall asset class. While interest rate volatility remains a concern of ours, about 99% of our borrowings is currently at fixed rates and on a weighted average basis these rates are fixed for another 6 plus years out. So we believe we are pretty well protected on the debt side against any near term interest rate hikes. The overall weighted average effective interest rate on our long-term borrowings is currently about 3.32% and while interest rates are rising, credit remains readily available to us and we continue to be able to borrow money on…

All right, Lewis, very good report. And while the year started off a bit slow for us on the acquisition front, at least the possible acquisitions remains very strong. We currently have one property for about $37 million under sign purchase agreement and we’re going through the due diligence process, we expect the acquisition to be completed sometime over the next few months. I am hopefully we’ll do it in this quarter but we'll see. We expect to be able to close on this farm without any need for additional equity capital. However, we're still continuing our due diligence process and you know there's never any guarantee that we're going to be able to close on any of these deals until the papers are signed. We also have several other farms that we hope it's about $6.9 million and there we signed up soon, and but it's really too early to say anything regarding the probability on timing of these transactions. And just a few final points I’ll make. Almost, - well as all of you know, the fund specialize in growing fresh fruits and vegetables and some of the farms grow not other crops on trees, vines and bushes, one of the reasons for this is we believe that investing in farm land growing these crops will contribute to healthier lifestyle. These fruits and vegetables and nuts mirrors the trends that are going on in the marketplace now and we continue to switch toward more healthy foods. Another major reasons for why our business strategy is to focus on farmland growing these fresh produce is due to the effects of inflation on this particular segment. According to the Bureau of Labor Statistics, the overall annual food CPI generally keeps pace with inflation however over the past 20 years the…

[Operator Instructions] Our first question or comment comes from the line of Lisa Springer from Singular Research. Your line is open.

I wanted to ask you about what factors determine if you're going to build a revenue share and component into a lease, and should we expect to see more of those in the future?

Yes, sharecropping as it's called is an interesting area. It does help the farmer because on a monthly basis they may not be picking anything during that time, so they'd like to have less cash flow and sometimes they're willing to trade that for a participation in the revenue of - really the high profit areas are unlikely to be in that area some of the others such as the ones that we have, I think fit better into what they're doing. They may only get one crop per year for example - potatoes or some of the others, you’ll have one crop that we have one that does any number of things in that area. But I think for us we try to be flexible for our farmers and if that's a better way for them to operate, we don't particularly like it because we obviously have cash flow needs and meeting dividends. So we’re not going to do a lot of those but from time to time will do some just to make sure the farmer is in better shape than say his neighbor.

And regarding organic farming does organic land so with the premium to a normal farm and how difficult is it to convert farm to organic?

So organic farms are much in vogue right now. Lots of people trying to figure out how to become organic and organic usually is three years in the making and that is your existing farm has to convert to organic ways of doing business on day one. And then three years later, you can declare that the crops coming off of that farm are organic. The problem with organic is that during those three years you're not spraying, you're not doing anything in order to destroy the pest that are in the ground as well as on the plants. And as a result your yields go down pretty substantially. So you're taking some real hits in terms of cash flow. So there is an investment on the part of many of the organic peoples that are looking at that. The other side of organics is while we have shortages in some of the organic areas for example if you have organic almonds today, you're sitting in the catbird seat. But everybody knows that as people start rushing towards the organic area but soon supply will catch up with demand and then prices will come back to reality. So as a result making that investment of three years without any income being at the organic level for the products that you’re getting out of the plant is a risk profile that some farmers just aren’t willing to take and we're trying to work with some of the farmers and give them some kind of break during that period of time, but it's hard for us since we need the cash flow in order to make our dividend. But it is a big decision for most farmers to go from what they're doing today into organic.

Our next question or comment comes from the line of [Brandon Travis] from Ladenburg Thalmann. Your line is open.

It’s John Massocca. Can you give some more color on the vacant farm you acquired in the first quarter, why did it originally go vacant and possibly some color on central future tenant?

Well it wasn’t vacant what it was is that it was being farmed by somebody who is getting out of the business and he didn't want to sign up for us so as a result we went ahead and purchased it not having somebody in place. So unusual for us to do that, but as we get bigger a little more daring and can take on a little more risk of something like that. It is a beautiful farm, the 150 acres. Yes about 150 acres, and I think we’ll end up with a lease on that. I was told yesterday by the folk on the West Coast that they were pretty close to signing up that lease. Doesn't mean we got, it does mean it's over but I think we're pretty far along and if that happens even though it's a long-term lease at a fixed rate with the very - I think it’s a 0.5 bump every year. I think we’ll be fine on that farm and I love the farm its good dirt, good location, good water, it has all the attributes we like, it just didn't have a farmer at the time we were buying it. And by the way farms come up and the difficulty in buying a farm is that, when you buy a farm you have to hit the season right. The reason we ended up farming the farm in Oxnard is that the two people that owned the farming operation died and they died at an appropriate time not only for them but also for us. And that everybody in Oxnard already had all their farms in place they didn't want to add something quickly. And so as a result we just stepped in and farmed it, but now we have people that are looking at it and I think we are not too far away from having something signed up. Anyway that’s an overview.

In regards to that, do you now expect [indiscernible] in the lightning strike in Arizona I know you know still assessing amount but do you know when to expect the timing on that?

I don’t know Lewis, when do you think they might settle out with the insurance company on that.

We’re still drafting up the claims and going to be - we’ll be sending over to the insurance company and the power company pretty shortly. So we expect something to happen either in Q2 maybe trickle into Q3 but it’s only about $100,000, so it’s not going to move the needle a whole lot.

[Operator Instructions] Our next question or comment comes from the line of [Mike Fritz] from [indiscernible]. Your line is open.

I wanted to ask a little bit about two leases in Cochise County, Arizona that ended up being terminated and I believe those were with - was that with premier grain or premier farms?

Well we don't really like to talk about our tenants but in this case you've already guessed it. So, yes.

So just to understand the dynamics there, one of those properties you had bought from premier farms and then leased it back and the deferred rent asset balance was at $50,000 in back rent that was not paid.

No, that was just a difference between the cash rent received and the straight-line rent recognized for GAAP purposes.

So they were current under rent at the time it was terminated.

Right, both leases they were current and the rent they owed.

And at the time that you did the original deal with premier farms, you described that relationship as something that was strategic and something that you look like doing more business with them, do they lease any land elsewhere from you folks?

No, they don't. Very nice people they are but as I mentioned before the corn business and the grain business has been very trying for lots of people and I think they're just one of many farmers in their area that are having that kind of situation drop up that prices for grains are very low and there's grains everywhere over the Midwest as well as outside the United States.

And so premier farms has filed for bankruptcy I understand and Gladstone Land is also named as a creditor for Spiech Farms in Michigan I believe that’s a blueberry grower. Can you explain the circumstances around that and your liability there or the credit?

Yes the credit is good, the land is wonderful. They are making payments. They extended themselves a bit too much and so really got over their heads in terms of how much land and how many blueberries and we're talking about Spiech now. These are wonderful growers and they have come back very strong blueberry prices were very high from Michigan this year. So they made back a lot of the money they had lost. But they did go through some really difficult times and the bank pressed them as banks will do sometimes and they had no alternative, but to go ahead and go through bankruptcy. I think they'll be out this year and be back just fine.

What is your lease revenue due from Spiech in terms of the amount of rent that you collect annually from them?

Yes, I don't have the number in front of me but they’re current paying as agreed.

It's a small amount, it’s small farm about $1.5 million to $2 million.

Do you have any other farms, any tenants in which I don’t know if you're monitoring them in terms of whether they have a tenuous financial situations, where there might be some risk in terms of what we’re seeing with Premier farms and Spiech?

No, we don't have that kind of down stroke and some of the others - many of the farmers have gone through difficult times. But right now things as far as West Coast and East Coast seem to be in good shape as I mentioned before. Florida has had an exceptionally good year, so most of the farmers there I think are in great shape and that includes all of ourselves. But I always expect problems to happen sometimes it's a divorce, sometimes it’s a death that puts some of our tenants in harm way.

Lastly, in terms of the types of lease structures you have originally it was a lot of triple net leases and then there's partial net leases and gross leases. Is this based on the type of crop. Can you just amplify on how that spread out by crop or particular crops that lend themselves like strawberries to triple net leases. And also as you look forward in terms of negotiating leases, do you see any movement toward or migration away from triple net leases to partial net leases or gross basis leases?

I don't think any of ours - there maybe one or two that are not triple net, every now and then we have a little dust up with who is going to pay the taxes, but agricultural land taxes are relatively low. So in most cases these are all triple net and have been as I come out of the strawberry and vegetable business and all the leases that we had on 5,000/10,000 acres were triple-net except sometimes we didn't pay the taxes. So it is a recognized way of doing it is that whoever rents the farm takes care of the farm and has to pay for things that go on. Now there are certain parts of farming that we take the risk on and that would be something like a well that doesn't function well. We might go in and fix that and pay for it ourselves, but other than that it’s pretty much triple-net on everything.

Thank you. I’m showing no additional questions in the queue at this time. I'd like to turn the conference back over to Mr. David Gladstone for any closing or additional comment.

Well, thank you very much for tuning in. And that's the end of this conference call.

Ladies and gentlemen, thank you for participating at today's conference. This concludes the program. You may now disconnect. Everyone have a wonderful day.