Gladstone Land Corporation (LANDO) Q1 2018 Earnings Report, Transcript and Summary

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 just look at it as dirt but you could wax and wane for a long time about all the ingredients in farmland. And the farmers we lease to are typically among the well established farmers in the growing regions wherein we prefer to keep the same farmer on the property for as long as possible because they know the nuances of operating that particular farm. So our objective is to be the long term real estate partner for all of the farmers so long as they want to be on the farm. Currently about 85% of our revenue comes from farms that are growing the types of foods you can find in either the produce section of the nut section or the local grocery store. We consider these foods to be among the healthiest type foods and we're seeing a growing trend toward organic among these groups. We do have some large organic farms. For example, we have a large organic potato farm in Colorado. About 45% of the fresh produce acreage is either organic or in transition to become organic and about 30% of the permanent crop is of the tree crops and those kind - that organic - that has about 30% organic. U.S. government has strict definition of organics, so we feel fairly comfortable that all of our farmers are following the strict definitions. We believe the organic section will continue to be a strong growth area. In addition, just so you know about 90% of our farms grow food that are GMO-free. We currently own about 63,000 acres of farmland, 75 farms in nine states across the United States. The value of these farms is about $537 million. Across our farmland holdings, we now have 19 different growing regions. We're growing about 40 different crops and we have leases on 53 different tenants, all but one of whom is unrelated to us. Diversification as you can see we're very heavy in diversification, is extremely important. We believe that a well diversified portfolio of farms growing lots of different types of crops in different locations provide additional security to our stockholders and their value of the stock and also our dividend. We still have only a few farms growing grain crops, like corn weeds, soybean because the U.S. grain prices are just too low to make a reasonable profit. There is just too much grain in the world today and as a result growers of these grain crops are continuing to have difficulty. We own a few farms in the Midwest for a majority of those who are growing things like the organic potatoes that I mentioned. The trend we continue to see in most of our growing regions is a steady decrease in the number of farms as the farms are being sold and converted to suburban and urban uses, and that's probably the main thing is I point out regarding the factors continuing to drive up the long-term values of most of the farmland. The amount of farms in these regions is relatively finite especially in California in the West, and there are no new farms being developed because there are no trees to cut down, no more land can be converted to farms. So all the arable land in many of these regions is already being farmed but now some of these farms are being converted to other uses such as housings, schools and factories and once they are converted to urban or suburban usage, it's almost never going back to farming. Water availability is another factor that drives rental rates and land values. Farmers are seeking farmland with water. It's not too difficult to get or too expensive to obtain and this is driving up rents as prices of land with a good wells and access to multiple sources of water is in high demand and that's why whenever we buy a farm we're always spending a huge amount of time and effort and due-diligence phase determining the water conditions to make sure the farms will have plenty of water for the long-term. We want to know that the water availability is sufficient enough to withstand extraordinary situation such as what happened in the drought in California a few years ago. And just a note about that, we didn't see any significant reduction in production or rents during that period of time in California. Finally, one other factor driving farmland values or to say it another way, to reduce value of the dollar is just continuing to go down in terms of value because it is printing so many dollars. And the government will tell you there's little inflation today but anyone buying food can tell you that food prices especially fresh produce prices have been going up steadily. Higher inflation in food prices is good for us and our farmers because they can make more money and this in turn is good for our land values because it allows us to earn more rents on our farms. Now about some recent activity. During the quarter we acquired two new farms 337 acres in two different states about $5 million, we’re about one small farm without a lease on it in place at the time of the acquisition which is the first time we've ever done that but we felt the value we were getting on the farm was too great to pass up and we expect to have a lease on debt on that farm during the second quarter. In fact it's pretty far along. Hopefully it signs soon. The other farm is a small blueberry farm in Michigan area. We know the area well and we know the tenant well. The initial yield or platform will be about 6.3%. As far as leasing activity during the quarter, we terminated lease on two of our farms in Arizona and immediately re-leased them to a new tenant. The current tenant is a much better than the one that we had on their - the one w had on their looks like it's going to go to bankruptcy, they’re heavy in corn. For these we changed the lease structure to get the new tenant onboard and the old leases were both fixed cash rent leases and the new leases are for lower cash rents on a current basis but they include revenue sharing component. That is when the harvest is finished and the harvest is done, we get a percentage of that revenue for the corn, that’s for all of most farms. So while our annual base rent on these farms will be a bit lower, we expect it in the annual proceeds from the participation will bring it back. I think that difference is about 200,000, is that right? The base rent effort. So we just have to make up the 200,000 with the participation. Each of these new leases is for one year which we believe will allow sufficient time to possibly reposition one of the farms from corn to a more profitable crop but if not it looks like the current farmer will keep farming and so we may be just fine. And I think it's important to note that we didn't incur any downtime on either these two farms during the re-leasing period, nor did we have to pay any tenant improvements which is pretty common in the business of REITs or leasing commissions. Looking ahead briefly only about 3% of the total minimum annualized rents from these leases that are expiring in 2018. I think we have about three of them. We've begun negotiation with attendance on all of these farms and expect to be able to renew the leases on all of them with the existing tenants and with no decrease in rent. We also are close to finalizing new lease on the strawberry farm in California that we think is currently - we're currently operating ourselves. So think we will be out of the farming business, come signing that lease in the near-term and given the nature of our farms, I think the future is strong and long-term for all of our properties that we have. Just to give you a quick update on the property we're farming ourselves. During the quarter we made about $2.5 million of revenue, crop sales and recorded an additional income of operations about 108,000. So a little bit below where we would have been had we continued to rent the farm out under the prior lease but we're hoping that the second quarter sales come in a bit stronger than plan. Berries sales are behind where we expected them in Southern California. We're also selling to the non-fresh marketplace. These are the companies that makes jams and juices, as well as freeze-dried berries for serial. The interesting thing about these buyers that we can give them all of the berries that we harvest not just the ones that go to the fresh marketplace. When you pick in strawberries for fresh marketplace, you can't pick the very ripe ones, they just thrown in the ditch because they’ll not make it to market but when you pick for the non-fresh market, you can pick the very ripe ones because it taken down the road to the processes, so there is no problem with that. On the equity side as you know, we launched a continuous offering of our new non-traded Series B preferred stock during the quarter. As we discussed on the last call, this is a very different from the typical overnight offering. These shares are going to be sold on the best efforts basis over the next five years so money will be coming in small manageable amounts. The ideas that this will allow us to invest the proceeds in new farms on a more real time manner as the money comes in. And after five years we will list the Series B preferred stock on NASDAQ so the shareholders will have liquidity. We look at this preferred security as a way to augment our long-term debt needs as it's a fixed coupon allowing us to lock in the spread, achieve the new investments that we've identified to acquire for these securities. However, getting the Series B preferred stock off the ground and onto a very selling platforms has been - well it’s just taken much longer than we ever expected so in the meantime we did a small common offering just about 1 million shares to pay down some of the debt and provide us with some more buying power. Well that's enough from my side. I’m going to change over to Lewis Parrish, he's our Chief Financial Officer talk about the numbers. Lewis?

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 terms that make the overall economics work for us. Regarding upcoming debt maturities, we have about $23 million coming due over the next 12 months. However about $16 million that represents maturities of three bullet loans that we expect to refinance with the existing lender and we begun those negotiations - or those discussions with the lender. So removing those maturities, we only have about $7 million of amortizing principal payments coming due over the next 12 months or just about 3% of our total debt outstanding. Now we’ll move on to the operating results. First, I’ll note that we had net loss for the quarter of $318,000 about $0.02 per share. When compared to the prior quarter, the majority of the changes in our total operating revenues and expenses were a result of the operations on the farm currently leased to our TRS. David already mentioned those numbers, so I’ll just discuss the changes from the prior quarter excluding the impact of these farming operations. So excluding our TRS, our operating revenues decreased by about $118,000 or 2% from last quarter primarily due to a $300,000 revenue-sharing payment received in the prior quarter from one of our pistachio farms in California partially offset by the additional income earned from our recent acquisitions. And on a same property basis compared to the prior year quarter, rental revenues increased in the current quarter primarily due to additional revenue recognized in connection with an early lease termination. Excluding that rental revenues on a same property basis, we're relatively flat from the prior year as additional income earned on capital improvements made on certain farms were more or less offset by lower rents on certain lease renewals executed over the past year. And on the expense side and again excluding our TRS, our core operating expenses which also exclude depreciation and amortization and acquisition related expenses remained relatively flat from the prior quarter. We had slightly higher property operating expenses in the current quarter but these were largely offset by lower G&A expenses. Moving on to our per share numbers, earnings from adjusted FFO for the quarter was $13.9 per share which was an increase of up to two-tenth percent or about 1.4% from the previous quarter. Since our recent offering didn’t close until last week of the quarter, it didn't have a significant impact on our per share numbers. I’d like to point out that this marked the 10th consecutive quarter which AFFO has fully covered our dividend and we expect this to continue. I’ll now move on to the net asset value. During the quarter we updated violations on 27 of our farms. All of which were revalued by independent third-party farmland appraisers. We had decreases in some regions, increases in other regions and safe side in others but in the aggregate these updated valuations resulted in an overall decrease of about $960,000 or just about 0.3% from their prior valuations. As a March 31, our farms were valued at about $537 million with over 91% of this value based on the third-party appraisals or the actual purchase price. And of the $46 million that were valued internally, about 97% of it or $45 million is supported by third-party appraisals performed between 22 and 32 months ago. Based on these updated valuations and including the fair value of our debt and Series A Term Preferred Stock, our net asset value per share at March 31 was $13.57 which is about a 3% decrease from last quarter. A large part of this decrease is due to the additional shares issued in connection with our common offering which closed right before the quarter end. And there was also a significant decrease due to ongoing capital improvements we're making on certain of our farms, the value of which won't be reflected in the farms fair values until the respected projects are completed. And I’ll note that, for majority of these projects we are earning additional rents as the funds are dispersed by us. Turning to liquidity, we currently have about $19 million of available funds which translates into roughly $40 million to $45 million of buying power for straight cash acquisitions and we also have the ability to issue new OP units as consideration for purchases. We also have plenty of rooms under our two largest borrowing facilities and are continuously reaching out to new lenders. So we have plenty of room and ability to continue borrowing and buying new farms that meet our investment criteria. And with that, I’ll turn the program back over to David.

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 fresh fruits and vegetable segment of the fruit category has outpaced the total CPI by multiple of 1.7 times. This is very good for us. We like inflation because it helps our farmers get higher prices for their produce. And while prices of commodity crops are typically more volatile and susceptible to global supply and demand, fresh produce is insulated from the global volatility mainly because the crops that we're growing on our farm generally consumed locally and within a short time after being harvested. Ultimately we believe farmland that is GMO –free, growing healthier crops such as fruits and vegetables and nuts are going to continue to outperform the overall farmland marketplace in terms of both cash returns and long term value and appreciation. Overall demand for prime farmland growing berries and vegetables remain stable to strong in most of all the areas that our farms are located in. This is mostly along the West Coast including California, Oregon, Washington and on the East Coast especially Florida, now we have some farms in North Carolina. Florida in particular is coming off a very strong year in berries and the vegetable marketplace. And farmland overall continues to perform extremely well compared to other asset classes, despite some recent downturns in certain regions, the NCREIF index and NCREIF is an organization that keeps up with various categories of investments and they have a farmland index which is currently made up of about $8.5 billion worth of agricultural properties, that is they collect the data on that many, they don't own them. And that has an average annual return of 14.9% over the past 15 years. That’s a per year compared to the 9.1% for the S&P. And you should know that the farmland index is never had a negative year in about 20 years like the S&P had during the last recession. Farmland has generally provided investors with a safe haven during turbulent times and in the financial marketplaces both hard prices of food and prices of land, especially fresh produce have continued to rise steadily. As most investors know, farmland historically been an excellent hedge against inflation and we think that's true of the farms that we've been buying. As you know we recently raised the dividend again $4.43 per share per month over the past 40 months we raised the dividend 10 times resulting in an overall increase of 48% in our monthly distribution rate to shareholders over this time. And this is a reflection of the wonderful job our team for the Gladstone Land has done in finding and managing and accounting for high quality farms paired with strong tenants that we've been able to rely on for their rental payments. Our goal is to continue to increase the dividend at a rate that outpaces inflation. As you know, I'm a large shareholder and I'm definitely liking dividend increases and even if it's only a small amount for quarterly change. Since 2013, we've made 63 consecutive monthly distributions to stockholders. It’s about $3.51 per share of total distributions. Paying distributions to shareholders is our paramount business. We are in essence a dividend paying company and want to remain so. We currently trades at $12.69 which is below our net asset value, thus we're hopeful our stock price will rise in near future so we trade at the net asset value above the net asset value. So if you buy the stock today, you're getting a discount from our estimated net asset value to about 6.5%, buying $13.57 net assets for just $12.69. And along the way you're getting $4.43 per share per month in the cash distribution that's $4.23 annually. That yield is slightly lower than the average return you can get on the entire REIT index which is currently trading at about 4.66%. But when compared to timber REITs which is probably closest thing to what we do, they are trading at about 3.39%. So I think our stock offers a nice alternative to a lots of people who want long-term asset base. Please remember that purchasing stock in a company like this is a long-term investment. I think investments in our stock is really two parts similar to gold and in terms of its asset dirt has an intrinsic value because there is a limited amount of it and it's being used up by urban users and two, unlike gold it's an active investment with cash flows to investors. And we don't believe that we're bond substitute because we keep increasing the dividend and as you know bond funds don't do that. And you know I can have one of these calls without pointing out the Warren Buffet's comment that he'd rather have all of farmland in the U.S. than all the gold in the world. I understand his son is a large holder of U.S. farmland. We obviously agree with Mr. Buffett on this one. We expect inflation particularly food sector to grow and we expect values of underlying farmland to increase and expectation is especially true fresh code is in food sector. People in the U.S. are trending toward eating more healthy foods. I think that's a good way to look at farmland funds. First is a hedge against inflation in both food prices, as well as other areas. And second, looking for an asset that doesn't correlate to the overall stock market I believe that this is. Now operator, Howard, if you'll come onboard, let's have some questions from all the people out there that are listening in.

[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.

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