Gladstone Land Corporation (NASDAQ:LAND) Q4 2024 Earnings Call Transcript

Gladstone Land Corporation (NASDAQ:LAND) Q4 2024 Earnings Call Transcript February 20, 2025

Operator: Greetings, and welcome to the Gladstone Land Corporation Year-End Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce Mr. David Gladstone, Chief Executive Officer and President. Thank you. You may begin.

David Gladstone: Thank you, Darrell. That was a nice introduction. This is to repeat again David Gladstone, and welcome to the quarterly conference call that we give every quarter. It is our year-end as well. Thank you all for calling in today and we appreciate you taking the time to listen to our presentation. Before I begin, we have to hear from Michael LiCalsi, our General Counsel. Michael?

Michael LiCalsi: Thanks, David. Good morning, everybody. Today’s report may include forward-looking statements under the Securities Act of 1933 and the Securities Exchange Act of 1934, including those regarding our future performance. These statements involve certain risks and uncertainties that are based on our current plans, which we believe to be reasonable. The 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 Risk Factors in our Forms 10-K, 10-Q and other documents we filed with the SEC. Go to our website, gladstoneland.com, specifically, the Investors page or the SEC’s website, which is www.sec.gov and you, can find them all there.

We undertake 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. Today, we will discuss FFO, which is funds from operations. FFO is a non-GAAP accounting term. Definition is 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 may also discuss core FFO, which we generally define as FFO with some adjustments for certain non-recurring revenues and expenses, and then adjusted FFO, which further adjust core FFO for certain non-cash items, such as converting GAAP rents to normalized cash rents. And we do this, because we believe these are better indications of our operating results and allow better comparability of our period-over-period performance.

Now we once again ask you to visit our website that’s gladstoneland.com. While you’re there, you can sign up for our email notification service. You can also find us on Facebook, keyword there is the Gladstone Companies and on X, which is formerly Twitter our handle there is @GladstoneComps. Today’s call is an overview of our results, so we ask that you review our press release and the Form 10-K both issued yesterday for more detailed information. Now with that, I’ll turn the presentation back to David Gladstone.

Q&A Session

David Gladstone: Well, thank you, Michael. I’ll start with a brief overview, as I do each time. We have a lot of farmland. We currently own about 103,000 acres on 150 farms and over 55,000 acre feet, which is the way they measure water assets. One acre foot is equal to about 326,000 gallons. So we own over 18 billion gallons of water. And together, the land and the water are all valued at a total of about $1.3 billion. Our farms are in 15 different states and more importantly, in 29 different growing regions. And our water assets are mostly in California. Farms are leased to over 65 different tenant farmers and people who manage the farms; there are a lot of people involved. And the tenants on these farms are growing over 60 different kinds of — 60 different crops, mostly of fruits and vegetables and nuts.

You can find this produce in other sections of the grocery store as well as in the produce section, which is where most of the crops that are grown on any of our farms are sold. We mentioned in previous calls that we continue to be cautious with new investments because our cost of capital remains high. Cap rates on most row crops and farmlands are so low that today, because of those situations, the value of those crops and land remain very high. We also believe it’s a good time to conserve cash given the uncertainty of the produce and nut marketplace. And the Federal Reserve is holding interest rates too high today, so hopefully they’ll change their mind and reduce it down as time goes on. We completed some farmland sales recently. In December, we sold 11 blueberry farms in Michigan.

These are farms that have been giving us some problems. We recorded an impairment charge on these farms in the third quarter and then had a small loss in the fourth quarter when we completed the sale. But these farms had a negative impact on net operating income of about $400,000 in 2024. We didn’t see a clear path back to profitability, so we sold these farms. In January, we sold five farms in Florida at a sizeable grain that represented about a 40% premium over what we had paid for at 6.5 years. Farmland values in most parts of Florida have continued to go up at a faster pace than the rest of the market, but it still was a time for us to sell some of these. And finally, in February, we sold two farms in the Midwest for a total gain of about 9% over what we paid for them to.

We had originally budgeted these farms as potato farms, but the market shifted more toward corn and soybean in this region. So we felt that resulting cap rates didn’t make sense for us to continue holding them. Regarded leasing activity, since the beginning of the fourth quarter, we’ve executed four new lease and amended — four amendment agreements, all in the West, and permanent crop farms. On two of these leases, we adjusted the lease structure in a similar manner to what we’ve done in a few other farms recently. That is, we eliminated the base rent or in some cases, provided the tenants with some cash allowances to grow the produce. In exchange, we significantly increased the participation rent component of these leases, the majority of which will be recognized in the second half of 2025.

So we won’t have income from these leases, but in the near-term, but when we sell the crops, we’ll get a big piece of it. And I want to touch a little bit more. We started prior — in prior calls, marketing conditions around many of the permanent crop farms in the West, particularly nuts and some of the grapes have been hampered by lower crop prices and higher input costs that is fertilizer and those kind of things. And of course, the borrowing cost has remained high. As such, we decided to adjust the lease structure on five farms to help the growing, minimize that fixed cost, but also allow us to participate greatly in the upside. In essence, we’re accepting a percentage of the gross crop sales instead of fixed rent payments. This may be a big win for us come next year — come the end of this year.

If we assume the worst case scenario and assume that we have a total crop loss on five of the — on these five farms, meaning we have no crops, proceeds from the harvest. We expect the crop insurance on these farms to pay us enough money to cover all of our costs and also provide us with a profit. It would be a small profit, but nonetheless a profit. And this is government insurance. So as a result, we don’t worry about them not being able to pay. We’ve not done this that often, and of course, our hopes are that we have good production overall and that we don’t have to use the crop insurance at all. There are a few additional properties that we’re looking at possibly doing a similar structure on. We’re still reviewing the projections, and I think the projections will probably look good on another two or three of these.

So we may end up in that. Our current plan is to move forward with the structure for 2025 and harvest for these farms and then hopefully revert back to more traditional structure next year or we may sell some of these properties along the way. The other two leases we expect — we executed recently on permanent crop farms are expected to result in a year-over-year decrease in annual NOI of about $180,000. The net operating income is how we measure most of the things in our business. So that’s a hit. I hate to say it, it’s not that much, but nonetheless, just hate to lose anything. And just as a note on our annual row crops, which make up about half, we continue to see a steady appreciation and consistent rent growth in this category. During 2024, we renewed 12 different leases on annual row crops, not permanent crops.

And these renewals are expected to result in an aggregate increase in annual net operating income of about $556,000, or about a 14% increase over prior leases. Looking ahead, we have three leases scheduled to expire over the next six months. And in total, they only make up about 1.5% of our total lease revenues. So we should get those done this year and not lose anything there, I hope. We’re in discussions with the current tenants and prospective new tenants to lease these farms or if the price is right, we may look at sell a couple of these farms too. We believe we have some very valuable farms, so selling is an option for us. And now I’ll give a quick update on some of the remaining tenancy issues that we continue to work on. During the quarter, we executed lease agreements on certain farms and sold other farms that have previously been either vacant or direct operated by us.

So we currently have five farms that are vacant. One farm is in direct operation via a management agreement with an unrelated third-party. I know some of the people in this business have their own way of doing it with captive. These are third-parties. So we have some good people in there. In addition, we’re recognizing revenue from leases with three tenants who collectively lease six of our farms on a cash basis, it’s usually done on an accrual basis, but we’re going to do cash on those just to keep them current. Regarding these farms, we’re in discussion with various potential buyers or tenants to buy or lease these properties. And we hope to get these remaining issues resolved later this year. And if we’re unable to come to an acceptable resolution, we may end up listing some of these farms for sale.

Pretty good way of going about getting out of them is listing them for sale. Total year-over-year impact of our operations, as a result of tenant issues, these properties will decrease in net operating income of about $236,000 and that’ll hit us in the fourth — I’m going to stop here. That’s just a tasting, and I hope we get some good questions at the end. But Lewis is going to take over now as the CFO of the company. He works with the numbers every day. So Lewis, go ahead.

Lewis Parrish: Great. Thank you, David, and good morning, everyone. I’ll begin by briefly going over our recent financing activity. We did not borrow any new money during the quarter, but during and since the fourth quarter in connection with certain property sales, we did pay off about $23.5 million of loans. Majority of these loans were scheduled to re-price later this year. On the equity side, since the beginning of the fourth quarter, we sold about $20,000 of our Series E Preferred Stock and about $4.7 million of our common stock for the ATM program. Moving on to our operating results, adjusted FFO for the fourth quarter was approximately $3.4 million or $0.09 per share, compared to $5.4 million or $0.15 per share in the prior year quarter.

Dividends declared per common share were about $0.14 in both quarters. On an annual basis, adjusted FFO for 2024 was approximately $16.7 million, compared to $20.3 million in 2023 and AFFO per share was $0.47 in 2024 versus $0.57 in 2023. Divided declared per share were $0.56 in 2024 and $0.55 in 2023. And our FFO as defined by NAREIT was $0.58 per share in 2024, compared to $0.62 per share in 2023. Primary drivers behind the decreases in AFFO were recent changes in lease structures on certain farms, lost income from the large farm in Florida that we sold in January of 2024, and certain tenancy issues which has led to vacancies on some of our farms and resulted in both lost revenues and increased costs. Year-over-year fixed base cash rents decreased by about $4.9 million on a quarterly basis and $9.7 million on an annual basis, primarily due to the reasons just mentioned that is lost revenues from the Q1 farm sale and vacancies, as well as structural changes to certain leases whereas David mentioned, we reduced, eliminated, or in some cases provided lease incentives to certain tenants in exchange for significantly increasing the crop share components in these leases.

The results of the crop share components won’t be known until the harvest is completed in the fourth quarter of this year. The decrease in fixed base cash rents is partially offset by an increase in participation rents recorded during 2024. During the fourth quarter, we recorded approximately $4.8 million of participation rents compared to $3.3 million in the prior year quarter and for the year; we recorded participation rents of $9.4 million versus $5.9 million last year. The increase in participation rents was primarily driven by increased yields in certain of our almond and pistachio farms, partly due to the altered bearing nature of these crops and partially offset by lower prices during the 2024 marketing period. We mentioned this on last quarter’s call, but I think it’s worth noting again and just providing an update to some of the numbers.

As a result of the change in lease structures we’ve made on a few farms, we are expecting a total year-over-year swing in our fixed base rents of about $13 million. This is 2025 versus 2024. This figure consists of the base rents that we recognize in 2024 under the prior leases plus the cash allowances that we granted to these tenants for the 2025 crop year. This will be shown as a reduction in our fixed base rent of about during 2025 at a rate of between $3 million to $3.5 million per quarter. And then the majority of the resulting crop share proceeds from these leases will be recognized as participation rent in the second half of 2025 with the remaining smaller portion being recognized in the second half of 2026. So things play out as we currently expect them to will essentially be just moving this money from the fixed base rent bucket into the participation rent bucket over the next couple of years.

On the expense side, excluding reimbursable expenses and certain non-recurring or non-cash expenses, our core operating expenses decreased for both comparable periods. Total related party fees decreased by $1 million on a quarterly basis and $1.8 million on an annual basis due to the incentive fees earned during each of the prior year periods. On a quarterly basis, our remaining core operating expenses remain relatively flat. The slightly higher property operating expenses were offset by slightly lower general and administrative expenses. On an annual basis, the increase in property operating expenses was primarily driven by the additional costs incurred on properties that were either vacant, direct-operated or non-accrual status at some point during the year.

And these costs included additional real estate taxes, legal costs and property management. Finally, other expenses decreased primarily due to lower interest expense incurred as a result of loan repayments made over the past year. With that, we’ll move on to net asset value. We had 37 farms revalued during the quarter and overall these valuations decreased by about $50 million from their previous valuations a year ago. Decreases were limited to certain of our permanent crop farms as our annual row crop farms continued to appreciate value. So as of December 31, our portfolio was valued at about $1.4 billion. And based on these updated valuations and including the fair value of our debt and all preferred securities, our net asset value per common share at December 31 was $14.91, which is down from $15.57 at September 30.

The majority of this change was due to the decreases in valuations of certain funds that were reappraised during the quarter, partially offset by the change in fair value of certain preferred securities due to changes in market rates. Note that this will be the last time that we will voluntarily publish our NAV calculation in our quarterly reports. As our portfolio has grown in size, the cost of these recurring appraisals has become quite substantial. As we look for ways to reduce costs, we no longer feel that the time and money required for this process is in the best interest of our company or its shareholders. Turning to liquidity, including availability on our lines of credit and other undrawn notes, we currently have access to over $195 million of capital, including about $50 million of cash on hand.

We also have nearly $150 million of unpledged properties. Over 99.9% of our borrowings are currently at fixed rates, and on a weighted average basis, these rates are fixed at 3.35% for another 3.6 years. As a result, we have not experienced much of an impact on our operating results from increased interest rates over the past couple years. And regarding our current borrowings, we believe we are well protected should interest rates continue at elevated levels. Regarding our upcoming debt maturities, we have about $38 million coming due over the next 12 months. However, about $20 million of that represents various loan maturities and given the value of the underlying collateral, we do not foresee any problems refinancing any of these loans if we choose to do so.

For removing those maturities, we only have about $18 million of amortizing principal payments coming due over the next 12 months, or less than 4% of our current debt outflow. Finally, regarding our current distributions, in January, we declared a dividend of $4.67 per share per month for the first quarter of 2025. At our current stock price of $11.52, this works out to a yield of 4.9%, which is higher than the average dividend yield across the entire REIT sector. Given the changes, we’ve recently made in lease structures at certain properties, we believe it prudent to hold the dividend side of this time and we’ll continue to reassess the new industry in 2025 harvest becomes known. And with that, I’ll turn the program back over to David.

David Gladstone: Thank you, Lewis. Nice report. We’ll continue to stay active in the market show a good acquisition opportunity present itself; and so that we’re ready if interest rates come down as well. But as mentioned in prior calls and today, we’re still being more cautious on the acquisition front because our cost of capital remains high. And while we have seen a decrease in the pricing of certain permanent crops, farms in the West that is most. That and most of the value of the farms like those growing strawberries remains high. The cap rates on most of these farms are just high enough to cover our financing costs so that make it very advantageous to somebody to rent them. So as a result, acquisition activity remains slow for us, probably will last for another couple of quarters.

Interest rates are still too high today and projections for further rate cuts seem to be getting — keep getting reduced and pushed out farther. So the amount and time of any additional rate cuts remains uncertain to us. But we do hope that rates come down at some point in the near future, so that we can start looking at buying more farms. And just a few final points. We believe that investing in farmland and growing crops that contribute to healthy lifestyles such as fruits and vegetables and nuts, follows the trend that we see in the market today. Overall demand for prime farmland, growing berries and vegetables remains stable to strong in most of the areas that we’re in. As mentioned earlier, crop prices are certainly and — certainly permanent crops, particularly nuts and grapes have been depressed lately.

People just not eating enough nuts. We need more of that in order to push the price up. We have impacted the values of our underlying farmland, especially nuts and grapes. And we’re seeing prices that are overall economies of some of these crops just start — just starting to turn around. We got a report yesterday that pretty much the country’s out of all of the old nuts and pistachios. And we’ve got new feeling that things are going to go up because there are just not many left. When people stop eating doesn’t mean the trees stop producing, they keep producing. So we ended up with prices being cut down to price that didn’t work very well for us. But please remember that purchasing stock in this company is really a long-term investment in farmland.

Historically speaking, long-term returns remain strong, but there are occasionally some ups and downs in the marketplace, just like with any investment in areas like this. And now, there’s a portion of our portfolio in a down cycle that we’re working to maneuver through. We expect inflation, particularly in the food sector to continue to increase over time. And we expect the values of underlying farmland to increase over the time as a result. And we expect this to be especially true in fresh produce sector, all of those and trends as more and more people in the U.S. eating healthy foods continue to grow. And please keep in mind that an investment in our stock really has two parts. First, it’s similar to gold in that it’s a hard asset. It’s farmland, it’s dirt, it’s not going anywhere.

It’s an intrinsic value because there’s a limited amount of good farmland in the United States and its being used up by urban development. The farm that we sold in Florida has got to be turned into some housing and while that’s good for us on a one-time basis, once they’re gone, they’re gone. And second of all, unlike gold and other alternative assets, it’s an active investment with cash flows to investors. So we believe farmland is a better hedge against inflation than gold is for that reason. And now, we’ll have some questions from those who follow us. Operator, if you’ll come on, would you please tell them how they can ask some questions? And we hope we get a lot of questions today.

Operator: Thank you. We’ll now be conducting the question-and-answer session. [Operator Instructions]. Our first questions come from the line of Gaurav Mehta with Alliance Global Partners. Please proceed with your questions.

Gaurav Mehta: Thank you. Good morning. I wanted to clarify your comments on the participation and fixed base rent amendments. I think you said $3 million to $3.5 million lower fixed base rent. Is that $3 million to $3.5 million lower from what you guys reported in 4Q?

Lewis Parrish: No, it’s more the average base rent for the year in 2024 versus compared to the average base rent in 2025. So it’s not Q4 versus looking forward, if you took the annual base rent from 2024 divided by 4, that’s the baseline number we’re using for that $3 million to $3.5 million swing.

Gaurav Mehta: Okay. And so — and then that lower base rent majority of that you’re expecting to get in 3Q and 4Q of 2025, right?

Lewis Parrish: Yes. The majority of that will be — well, based on our current expectation, we do expect to recover the majority of that and hopefully more if the harvest turns out well in the second half of this year. And then, after the marketing period is over, bonuses and adjustments will get recognized in the second half of the following year.

Gaurav Mehta: And so then in 2026, do the leases on these farms, do they go back to how they were in 2024, or do you expect them to continue like in 2025?

Lewis Parrish: It remains to be seen. Our hope is that we can revert these back to the traditional lease price. We’re going to kind of be at the mercy of the market and like we were this time. We could have maybe leased it out for a very low base rent and very little, if any upside. But when we ran the numbers, we thought this was a better option for us to take. So when these leases come due at the end of this crop year, we’ll have to do that analysis again.

Gaurav Mehta: Okay. And then maybe lastly on the sale of Florida farm, I think you mentioned you paid off some debt from the proceeds. What was the use of remaining proceeds from that sale?

Lewis Parrish: Right now it’s part of the $50 million that we have cash on hand on the balance sheet. We’re just holding that for other uses at this point.

Gaurav Mehta: Okay. Thank you. That’s all I have.

David Gladstone: Okay, next question.

Operator: Thank you. Our next questions come from the line of Craig Kucera with Lucid Capital Markets. Please proceed with your questions.

Craig Kucera: Yes, good morning, guys. First one is for Lou. What are your expectations around interest patronage here in the first quarter?

Lewis Parrish: We should be getting a similar percentage back from the farm credit borrowings, but we have paid off a portion of those loans over the past year. So if I had a ballpark it right now, I’d probably say about 10% less, and that’s just because I think we paid off about 10% of those loans for the past year.

Craig Kucera: Got it. That makes sense. You mentioned that you had three leases expiring here over the next six months and a relatively small amount of rent, maybe 1.5%, but for the year, this is actually a pretty big year, I think in the K you’ve got north of 17% expiring. Can you give us some color on the remaining lease expirations this year? Maybe a split between what’s permanent versus row crop?

Lewis Parrish: Yes. So the leases expiring in the next six months, those are — most of those are row crop farms. But yes, as you said, that’s a small percentage of the overall amount. The remaining leases that are expiring in the second half of the year, the majority of those probably 60% to 70% are on permanent crop farms. Some of these are the leases that we discussed about. We have lease incentive and a high upside on the crop share. So probably about half of the leases that are expiring fall into that bucket. The other half are permanent crop farms that are under traditional leases right now. The half that’s under traditional leases, we expect them to remain flat; maybe even can negotiate a rent bump upwards. But remains to be seen at this point.

And as we just answered, the remaining leases on the permanent crop farms that are in the kind of lease incentive and high upside bucket remains to be seen. We’d like to be able to revert them back to traditional leases but it’s — we can’t say right now what direction we’ll have to go on those.

Craig Kucera: Got it. That’s helpful. I guess, given where the preferred is trading, you’ve been buying it, I think in the 2,050 range. It’s still kind of around there. Will you guys anticipate to continue to be out in the market buying back the preferred, maybe getting a small gain?

David Gladstone: Yes. This is an easy way for us to make money.

Craig Kucera: And one more for me, just looking at your real estate expenses here this quarter, there was a pretty decent increase. Is that just related to the taxes and some of the incremental costs with the directly operated farms or anything else going on there?

Lewis Parrish: Yes, exactly. It’s that whole bucket of vacant direct-operated non-accrual properties. Some tenants had to terminate their leases early, so they were — they didn’t make those tax payments. We had to make them on their behalf. But yes, it is all related to the properties that have fallen into that bucket.

Craig Kucera: Okay. Thanks for the color.

Operator: Thank you. [Operator Instructions]. Our next questions come from the line of John Massocca with B. Riley Securities. Please proceed with your questions.

John Massocca: Maybe just going back to property operating expense again, I mean is 4Q kind of the good run rate for going forward for the remainder of the year or was there something where either those leases didn’t change over until kind of mid-4Q that could cause it to skew higher or one-time expenses that could cause it to kind of skew lower in the quarters of 2025.

Lewis Parrish: Our hope is that it comes down a little bit for a couple of reasons. One, the properties, the Michigan blueberry properties that we sold, they contributed a decent amount to that increase throughout the year. I think they had negative NOI of about $400,000 over the course of the year. That should start to come down now. We will — we are going after the tenant for some additional rent owed. So some legal costs will remain related to those farms. But the cost related attributable to those farms should come down quite a bit. And I think we also had to recognize some kind of catch-up real estate taxes in the fourth quarter. I don’t have the exact number here, but amounts that the tenant had owed but was unable to make the payments, so we had to record those or we had to make those payments on their behalf in the fourth quarter. So I don’t know exactly how — I can’t say how exactly how much, but we do expect that number to come down a bit in 2025.

John Massocca: Okay. That’s very helpful. And then on the dispositions completed in 1Q 2025, were those occupied in revenue producing assets and if so, what’s kind of the NOI impact from those sales?

Lewis Parrish: Yes. They were revenue numbers for the farms that we sold in 2025 I think was for the year was about $1 million, $1.5 million, $1.7 million.

John Massocca: Okay. That’s very helpful. And then kind of bigger picture, the — what percentage of kind of the California portfolio if you will today is on this kind of crop share, high upside lease structure and how much kind of remains in a more traditional structure. And I guess, what’s the outlook for those assets to stay in the more traditional structure or move to this more of a flow-through structure.

Lewis Parrish: So right now we have five farms that are on this kind of hybrid structure, if you will. As David mentioned, there’s another couple, two or three farms that we’re looking at. The other farms right now, we believe — the other farms that are — other permit crop farms that are in the traditional lease structure. We believe at this time that they will — we will be able to keep them in the standard structure. On a value basis I don’t have that number available or calculated right now. We can get back to you on that. But five farms are in that bucket; two or three more might go there, the rest we expect to stay in the traditional lease structure.

John Massocca: Okay. That’s very helpful. And that’s it for me. Thank you very much.

David Gladstone: Have any other questions?

Operator: Thank you. Mr. Gladstone. There are currently no other questions in the queue.

David Gladstone: Okay. Thank you very much. I just want everybody to know that this change is hopefully going to be for one year, maybe a few farms will go over into the next year. But our goal is to put everything back together as it was before. This downturn in tree crop processes just tore us into a different area, which is this area of being able to grow the crops and get money out of the crops as opposed to leasing them to somebody who does all that work. We do have somebody in between us. We’ve chosen people who do that for a living. That is, they go out and they produce the crops. So we don’t have anybody on our group of people working in this company that are out in the fields growing either strawberries or nuts. So it’s almost the same as it was before, except we put some money up not a lot, as helping the people who grow the crops get them grown and then they will sell them as well.

But that’s the difference here. And while it looks like it’s more chance of losing money is really not because the insurance policies that we get from the U.S. government are so strong that I don’t think we could lose any money on these five farms that we have going in that direction. But never know and right now, I feel very bullish that we’re going to do a good job this year. If there are no other questions, I’ll call this at the end. You got another question?

Lewis Parrish: Well, and I’ll just follow-up with a question that John asked earlier. The five farms that are in this hybrid structure right now, they make up about 15% of the California — the fair value of our California portfolio. On a total basis across the whole country, it’s about 6% of our nationwide portfolio.

David Gladstone: So if you think about that, we’ve got most of it covered in the properties that are leased out on a monthly basis. And the rest of them that is the 6% is on this hybrid structure in which we put up some of the capital in order to have the people who are growing the crops get the growth done and we’ll see if we made a good bet. My feeling is we’re going to make some money on these crops and I don’t like to do that because we like things that happen on a monthly basis. So we can pay our dividend on a monthly basis. And this idea that we get a big whopping amount back when the crops come in doesn’t bode well for trying to be on time with dividends. So I think we’re in good shape, but we have to wait and see what we have as income in the end of the year — toward the end of the year, we’ll know how successful or how much we’ve got to depend on our insurance. But that’s the end of this. We got one more question.

Operator: Mr. Gladstone, we do. Yes. Let me bring John back through. Give me one sec here. Next question is coming from John Massocca with B. Riley. Please proceed with your questions.

John Massocca: Thank you so much. Sorry for coming in right at the end of the call. Just I had a quick question that I forgot. With the NAV decision, is that something that’s going to be provided semi regularly now, if not quarterly, or is the intention to stop providing NAVs at all going forward? Is that going to say it’s now annual or is that — is the thought process that that cost is too burdensome just in general?

David Gladstone: It became really ridiculous, John. We couldn’t find people and brokers that would do anything but give us things that we didn’t feel reliable. And so we started backtracking and getting a second — and second opinion. And as a result we’ve been spending a lot of money trying to find people that can do this. We still would be setting numbers for those internally and maybe we’ll go look at that. But generally speaking, trying to get brokers to value these things. We had one broker who was located in Indiana was doing some of the stuff in Florida, which just made no sense. He didn’t know the Florida marketplace very well. And as you can see, when we’ve done sales, we’ve beaten our — the valuation that’s out there, but just didn’t seem to be logical to keep doing that and paying for that. So we’ll figure out something to do in April when we come back to you.

John Massocca: I appreciate.

Lewis Parrish: And just — the cost of those appraisals were running us about $300,000 per year.

John Massocca: I appreciate that additional color in taking that last minute question. Thank you.

David Gladstone: Okay. We’re assuming there are no more questions.

Operator: No more at this time.

David Gladstone: Okay. So we’ll see you next quarter. Thank you all for calling in.

Operator: Thank you so much. This does conclude today’s teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.