That’s our business, holding farms and renting them out. So, probably not as desirous of some people who may want to just exit, but we are not going to go sell everything we have. There is, I believe, and no way of proving it today, a difference between what we are valuing these at and what we could get for them. But it’s not huge. These analysts – these brokers who buy and sell farms all the time are the people who know what the price of a farm is worth. Unfortunately, most of them have been hired by families that want to move the farm from dad to son or daughter. And as a result, they are looking for the lowest possible value for the farm. So, these guys that are in the valuation business have been trained to do very low-ball kind of values.
That helps us when we are getting ready to buy something, but it’s not the true value. So, I don’t know if any of the farms that we own today are worth so much more than what they have been valued at. So, for us, if somebody came in and said, your farm’s worth a $1 billion, it’s sold. So, we are not in the business of buying and selling farms for capital gains, as are some other people. Did that answer your question, Bob?
Rob Stevenson: Yes, David, that did and thank you very much.
David Gladstone: Okay. Do we have any more questions?
Operator: The next question comes from John Massocca with B. Riley. Please proceed.
John Massocca: Good morning.
David Gladstone: Good morning, John.
John Massocca: Maybe as I think about the farms you currently are operating or have under kind of the management agreement as opposed to a lease, what’s the likelihood of any of those moving to a more traditional lease here in the next couple of quarters, just given maybe where we are in terms of the growing season for whatever the affected farms are?
David Gladstone: Yes. Your point, one, is very pertinent for that. People don’t buy farms when they are out of the season that they use. They like to buy it a month or so before their season starts. But we are into that, and we know things will come along as time goes on. So, if I had a farm that was going to be leased and we were holding it an operating business, we make that known to everybody so that we are all feeling the effects of leasing. And I think a lot of these farms, it – John, it just depends on what the economy does if you have an economy that’s rolling along and people have money, they will buy berries and they will buy nuts, but given the strength of the economy now and the lower end that eats berries and nuts, that’s one of the things they are not doing.
They are not eating as much of those things as in the past. That’s not really true of strawberries, although berry prices have increased and a lot of other things have increased. But I don’t think that we are going to be out there trying to figure out a way to sell every single farm tomorrow, it’s just not our business.
John Massocca: Okay. I guess maybe as we think about for instance the other operating revenue line item, is the expectation that that is maybe not where it is in 1Q, but kind of notable for the next couple of quarters, just given you may have some operating farms in the portfolio here until 4Q?
David Gladstone: John, a couple of things on that. First, that other operating revenue, that was not due to direct farm operating revenue. That was due to water that we got granted by a water district for allowing others to store water in our water banks. So, that was non-cash income based on our estimated fair value of the water credits we received through those projects. But to your question about the farms that are under operating management agreements, the revenue we expect to recognize from those in the next couple of quarters is going to be pretty – very minimal. Converting it to a lease – converting those properties to a standard lease versus just outright selling them, that’s something we are currently working through.
I don’t know that we can put a probability of X percent will be leased, X percent will be sold. We are kind of, a lot of moving parts right now, talking with a few different groups, but the revenue recognized over the next couple of quarters from those operations, I would expect to be very minimal.
John Massocca: Okay. I appreciate the clarification there. And then as I think about – I think you mentioned you had – of the two tenants that are on a cash basis, one of them had paid either all or kind of partial rents. Was that in the quarter? Was that subsequent to quarter end, and how should I think about how much of maybe the annual rent owed would have been paid in that period?
David Gladstone: So, of those properties, nothing was recognized in Q1 because the tenant who is current, his payments are due in May and November. So, we have recognized basically six months of that revenue, six months of revenue from those properties in Q4, nothing in Q1. And then his next payment is due this month, so assuming we do get those amounts, we will recognize those amounts in Q2. In total, that’s probably about $300,000 or $400,000 of revenue across all of the farms of that one tenant leases from us.
John Massocca: That’s per period, per kind of payment period or annually?
David Gladstone: That is the six months amount. So, 2x that amount would be the annual rent amount from those farms.
John Massocca: Okay. And then with the California farm leases that are expiring in the quarter, I mean what percentage or what kind of amount of leases expiring this year does that make up?
David Gladstone: So, what we – I think we said we have five leases expiring over the next six months. Two of those are on nut farms. However, I don’t know the exact percentage, but the majority of the – let me back up, I think five of those five leases, they make up about 9% of our annualized revenues. I don’t know the exact breakout, but more than two out of five leases, 40%, but more than 40% of that revenue is attributed to those nut farms. I don’t have that exact breakout right now, but it is more than half of that 9% of annualized revenue amount.
