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Edited Transcript of LAND earnings conference call or presentation 8-Aug-19 12:30pm GMT

Q2 2019 Gladstone Land Corp Earnings Call

Mclean Sep 2, 2019 (Thomson StreetEvents) -- Edited Transcript of Gladstone Land Corp earnings conference call or presentation Thursday, August 8, 2019 at 12:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* David John Gladstone

Gladstone Land Corporation - Founder, Chairman, CEO & President

* Erich Hellmold

Gladstone Land Corporation - Assistant General Counsel

* Lewis Parrish

Gladstone Land Corporation - CFO & Assistant Treasurer

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Conference Call Participants

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* John James Massocca

Ladenburg Thalmann & Co. Inc., Research Division - Associate

* Robert Chapman Stevenson

Janney Montgomery Scott LLC, Research Division - MD, Head of Real Estate Research & Senior Research Analyst

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to the Gladstone Land June 30, 2019, Quarterly Shareholders' Conference Call. (Operator Instructions)

As a reminder, today's conference is being recorded. I would now like to turn the call over to Mr. David Gladstone. Sir, you may begin.

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David John Gladstone, Gladstone Land Corporation - Founder, Chairman, CEO & President [2]

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Okay. Thank you, Victor. That was a nice introduction. And this is David Gladstone, and welcome to the quarterly conference call of Gladstone Land. And thank you all for calling in today. We'll start with Erich. Erich Hellmold is our Assistant General Counsel. Erich?

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Erich Hellmold, Gladstone Land Corporation - Assistant General Counsel [3]

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Thanks, David, and good morning. 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 forward-looking statements involve certain risks and uncertainties that are based upon 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 risk factors in our Forms 10-Q, 10-K and other documents we file with the SEC. Those can be found on our website, www.gladstonefarms.com, specifically the Investor Relations page or on the SEC's website, www.sec.gov. 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 defined as net income, excluding the gains or losses from the sale of real estate and any impairment losses from property, plus depreciation and amortization of real estate assets. We'll also discuss core FFO, which we generally define as FFO, adjusted for certain nonrecurring revenues and expenses and adjusted FFO, which we further adjust -- which further adjusts core FFO for certain noncash items, such as converting GAAP rents to normalized cash rents. We believe these are better indications of our operating results and allow better comparability of our period-over-period performance.

Please take the opportunity to visit our website, www.gladstonefarms.com, and sign up for our e-mail notification service so that you can stay up-to-date on the company. You can also find us on Facebook, keyword The Gladstone Companies. And we have our own Twitter handle, @glatstonecomps.

Today's call is an overview of our results. So we ask that 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.

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David John Gladstone, Gladstone Land Corporation - Founder, Chairman, CEO & President [4]

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All right, Erich. Thank you. As of today, we've acquired $112 million worth of farms, and our current backlog of potential farms to acquire remains very strong. With these new acquisitions which are part of higher yielding than in the past, together with our ability to lock in low interest rates in our long-term farm mortgages. We think these new acquisitions are going to result in a nice boost to the bottom line. In addition, we're seeking rent to tick up, and the team is lowering our property operating expense.

We are also hearing some good news with regard to the crop yields on our farms. So we expect strong results from our participation rents in the next few months. Looking at our total farmland ownership, we currently own about 80,000 acres or 92 farms in 10 different states across the United States. And these farms are valued at about $735 million. And more important than the number of states our farms are in, we are in 22 different growing regions. Each of these growing regions has their own number of farmers. We've got about 40 different crops in these farms that we are in now. Great news is that our farms are 100% occupied, they're all paying their rent and released to 64 different tenants, all of whom are unrelated to us. During the quarter ending June 30, 2019, we acquired 4 new farms for about $46 million that grow a variety of crops such as pistachios, blueberries, cranberries and olives.

Lewis, when did we close that big orchard? Was that last -- first quarter?

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Lewis Parrish, Gladstone Land Corporation - CFO & Assistant Treasurer [5]

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Q4, I believe, '18.

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David John Gladstone, Gladstone Land Corporation - Founder, Chairman, CEO & President [6]

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Okay. Okay. Since the quarter end, we've acquired 2 more farms for about $67 million. One of these is strawberry and vegetable farm, and the other farm is one that is pretty unique. In that farm, we're retaining water and cleaning it up, so this will help the water around the Everglades and the river that runs through the Everglades. So it's a bit different. But just so you know, if, for some reason, that rent stopped, and we got the farm back, the farmer next to this piece of property is a person that's in our portfolio. And he said he would like to take that farm if we ever get it back because it's organic.

Overall, the initial net yield on these farms is about 6%. And all of these leases contain certain provisions, such as annual escalations, and in some cases, participation rents. That should push that figure even higher, that is the 6% that we're talking about.

On the leasing front, during and after the quarter end, we either executed new leases or extended existing leases. On about 5 of the properties in total, the new leases will result in an increase in the minimum fixed cash rent of about $294,000 or about 24 -- 21% over the prior leases. The 2 leases expiring through the rest of 2019 make up about 2% of our total minimum annualized rent. We do have several leases scheduled to expire in 2020, and we've begun negotiating all of those now.

With the increase seen from our recent lease renewals and based on what we're hearing through negotiations, we're optimistic that the ability -- that we are able to renew all of these leases with no decreases in the rent. And hopefully, we'll even pick up some increases. We won't know that until the leases have been signed. Since the beginning of the second quarter, we raised about $22 million in proceeds through the sale of our non-traded Series B Preferred Stock, and we also raised $26 million of common stock. Most of which came through the overnight offering that we completed in June. We needed to add more capital at that time -- because we have a lot of additional acquisition opportunities and got a little bit ahead of ourself there by doing the offering before we were closer to the acquisitions and had some extra cash laying around for a while, which is not good.

But now, as you know, we've put the money from the common offering to use with the new purchases. Now in the process of selling the Series B, we've paid certain commissions and fees in Gladstone securities, that's an affiliated broker-dealer of our management company. However, Gladstone Securities is just a conduit of this Series B offering as it pays out almost all of these fees to other unrelated third-party involved in the offering. They need to get paid. So we run it through that way. To date, it's paid out about 94% of the fees it's earned to these people who are helping sell the shares of the Series B.

The management fee attributable to this portion of equity has always been credited back to the fund in the past and with the amendment to the advisory agreement that was executed after the quarter. It will now be explicitly excluded from the fee calculation.

Well, that's enough of the operations. Let's now turn it over to the Chief Financial Officer, Lewis Parrish, to talk about the numbers. Lewis?

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Lewis Parrish, Gladstone Land Corporation - CFO & Assistant Treasurer [7]

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All right. Thank you, David, and good morning, everyone. I'll begin by going over the balance sheet.

During the second quarter, our total assets increased by about $53 million or 9% primarily due to new acquisitions, which are funded through cash proceeds received through our new equity issuances and fixed rate borrowings. From a financing perspective, since the beginning of the second quarter, in addition to the proceeds from equity issuances David mentioned earlier, we also secured 7 new loans, including loans from 2 new lenders for a total of about $70 million (sic) [$17 million] in proceeds. On a weighted average basis, these new loans will carry an effective interest rate of 4% and will be fixed for the next 9 years.

From a leverage standpoint, on a fair value basis, our loan-to-value ratio on our total farmland holdings was about 49% at June 30. We're very comfortable at this level given the relative low-risk of high-quality farmland as an overall asset class.

While interest rates continue to be volatile, essentially all of our borrowings are currently at fixed rates and on a weighted average basis, these rates are fixed at 3.65% for another 6-plus years out. So we believe we are currently well protected on the debt side against any future interest rate volatility. Regarding upcoming debt maturities, we have about $31 million coming due over the next 12 months. However, about $22 million of that represents the maturities of 3 bullet loans coming due either at the end of 2019 or in the beginning of 2020. Given that the 3 properties collateralizing these loans have increased in value by an aggregate $2.2 million since their respective acquisitions, we don't expect to have any problems refinancing each of these loans with either the current lenders or potentially new lenders. So removing those maturities, we only have about $9 million of amortizing principal payments coming due over the next 12 months or less than 3% of our total debt outstanding.

We now move on to our operating results. First to note that we had net income for the quarter of about $174,000, and we had a net loss to common shareholders of about $720,000 or $0.04 per common share. Compared to the prior quarter, our adjusted FFO decreased by about $127,000 or 5%, while AFFO per share decreased to $0.125 per share compared to $0.133 per share in the prior quarter. Dividends declared per share were $0.134 and $0.133 in the second and first quarters, respectively. The main driver behind the decrease in AFFO was about $700,000 of interest patronage received on certain of our borrowings from farm credit, while the per share metrics were impacted by the offering completed during the end of the quarter, and the proceeds not being put to work right away.

From a cash rent perspective, rental income increased by about 6% from the prior quarter primarily due to our recent acquisitions. We saw a significant drop in our core operating expenses, which decreased by about $575,000 or 31% from the prior quarter. This was aided by an increased credit to the management fee, granted to us by our adviser during the current quarter. And we also incurred significantly lower property operating expenses during the current quarter as they decreased by about $230,000 or 28% from the prior quarter. We have been incurring higher property operating expenses due to ongoing costs to rent generators to power newly drilled wells and additional repairs and maintenance we performed to one of our properties as well as one final payment made related to getting certain permits in place on another of our properties.

However, the permitting issue was resolved during the first quarter in almost all the new wells that we drilled were connected to either generators we own or to a permanent power source during the second quarter. So we currently expect to see our property operating expenses decrease a bit further in the third quarter.

And now I'll move on to net asset value. We had 27 farms revalued during the quarter, all via independent third-party appraisals. Overall, these farms increased in value by about $1.6 million or 1.2% over the prior valuations from about a year ago. As of June 30, our farms were valued at about $668 million, all of which was value based on either third-party appraisals or the actual purchase prices. And based on these updated valuations and including the fair value of our debt and all of our preferred stock, our net asset value per share at June 30 was $11.61, which is down by $0.69 or 5.9% from last quarter.

The primary drivers of this decrease were decreases in longer-term market interest rates, which increased the fair value of our fixed rate long-term borrowings and ongoing capital improvements we're making on certain of our farms. The values of which won't be reflected in the farms fair values until the respective projects are complete.

Turning to liquidity, including availability on our lines of credit, we currently have about $45 million of dry powder, which translates into roughly $115 million of burning power for straight cash acquisitions. We also have the ability and intent to issue new OP Units as consideration for purchases should the opportunity arise, as we did with one of our acquisitions subsequent to quarter end. And we're generally completing 2 closings per month of the Series B Preferred Stock, so we expect to receive additional proceeds through future sales of that as well.

Finally, we have ample availability under our largest borrowing facility, and we continue to be in discussions with both existing and potential new lenders for either additional facilities or individual borrowings. But credit generally continues to be readily available to us at favorable terms, and we have plenty of room and ability to continue borrowing and buying new farms that meet our investment criteria.

With that, I'll turn the program back over to David.

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David John Gladstone, Gladstone Land Corporation - Founder, Chairman, CEO & President [8]

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Okay. Nice report, Lewis and just a few final points. Currently, over 85% of our total revenue comes from farms that are growing the types of food that you can find in either the produce section or a nut section of your local grocery store. We've made our bet on this side, and we consider these foods to be among the healthiest type foods out there, and we are seeing a growing trend toward organic and other type of foods, and it is especially true of the produce section at your grocery store.

For us, over 40% of our fresh produce acreage is either organic or in the process of becoming organic. And our permanent crops acreage falls into the organic care and 20% of our organic crops are permanent crops. And we believe the organic section is going to continue to be a strong growing area.

In addition, over 95% of our portfolio is GMO-free. Another major reasons why our business are -- business strategy is to focus on farmland and growing fresh produce is due to the effect of inflation on a particular segment. According to 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 food category has outperformed the total food CPI by a multiple of 1.6x.

I must skip ahead now to the overall demand for private prime farmland continues to be strong. It's stable in almost all the areas and in other areas, it's -- we're seeing a pretty good uptick. Where our farms are located, this is particularly true. And as you know, our farmland is primarily in California, Oregon and Washington on the West Coast as well as the East Coast, especially Florida. And overall farmland continues to perform extremely well compared to other asset classes despite some of the recent downturn in certain regions, the NCREIF Farmland Index, which is an index that covers about $10.5 billion worth of agricultural properties, by the way, including all of ours, has an average annual return of 14.7% over the past 15 years compared with just 6.9% for the S&P Index. And I should also note that during that 15 years, the Farmland Index has never had a negative year like it did for 2 years in the S&P during the great recession.

Farmland has generally provided investors with a safe haven during turbulent times in the financial marketplace, as both land prices and food prices, especially for fresh vegetables have continued to rise steadily. Distributions, as you know, we recently raised our dividend again, it was a small amount, but we had $0.04455 per share per month now, and over the past 55 months, we have raised the dividend 15x resulting in an overall increase of more than 48% in our monthly distribution rate to shareholders. And this has reflected wonderful accomplishments of our team, of agricultural experts that are running the company today. They are very experienced at finding and managing high-quality farms. Nonetheless, we do make a mistake every now and then, but we are pairing this with strong tenants. We're generally reliable in their rental payments. Our goal is to continue to do this and increase the dividend at a rate that outpaces inflation.

Since 2013, we've made 78 consecutive monthly distributions to shareholders as a total of $4.18 per share in total distributions. Paying distributions to shareholders is paramount to our business outlook, and we are in essence just a dividend-paying company like many other real estate investment trust.

At our current distribution rate and where the stock price closed yesterday, $11.54, this means you are getting a yield of about 4.6%. And this is even slightly just above or even with the average of all the REITs in the REIT index today. When you consider the relative stability of the underlying assets, I think the stock offers a wonderful alternative to other yield securities.

Please remember that purchasing this stock, though, is really a long-term play, it's not a technology company that might go up tomorrow. And this is a long steady outlook. Now I have some questions from those that follow us. So operator, would you please come on and help the listeners ask some questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question will come from the line of Rob Stevenson from Janney.

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Robert Chapman Stevenson, Janney Montgomery Scott LLC, Research Division - MD, Head of Real Estate Research & Senior Research Analyst [2]

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David, what are the crops that you acquired on the $112 million of acquisitions in the second and third quarter?

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David John Gladstone, Gladstone Land Corporation - Founder, Chairman, CEO & President [3]

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I'm just looking at the list…

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Lewis Parrish, Gladstone Land Corporation - CFO & Assistant Treasurer [4]

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One strawberry and vegetable farm and then that water retention farm.

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David John Gladstone, Gladstone Land Corporation - Founder, Chairman, CEO & President [5]

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Do you just want the ones after the quarter end?

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Robert Chapman Stevenson, Janney Montgomery Scott LLC, Research Division - MD, Head of Real Estate Research & Senior Research Analyst [6]

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Yes. I mean those as well. I mean just kind of figure out what you're buying in terms of crops at this point? I mean is that any nuts, sticking with the fruit and berries, any row crops in there, et cetera?

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Lewis Parrish, Gladstone Land Corporation - CFO & Assistant Treasurer [7]

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What we've acquired so far this year, it's been a mixture -- as we just said, that subsequent to quarter end, we had one strawberry and vegetable farm, which fits right in with our -- where our focus has been since the IPO. During the quarter, we acquired some more permanent plantings, pistachios blueberries, cranberries and that all of orchard. Looking at our backlog of farms, we're looking at today to buy -- it continues to be a mixture of row crops and permanent plantings.

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David John Gladstone, Gladstone Land Corporation - Founder, Chairman, CEO & President [8]

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We’re very strayed from the -- until we started buying some of the tree crops, we aren't really strayed from that idea. As you know, we've had some blueberries in the portfolio a long time, and those are permanent crops. So that was our first foray into permanent crops. We now have a whole list of items that we own in that permanent crop area, but it's still not more than about 40% of our portfolio in that quarter. Again, I thought all of those were listed in K. They're in the K. Sorry. We'll get you -- we'll get an update list out.

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Robert Chapman Stevenson, Janney Montgomery Scott LLC, Research Division - MD, Head of Real Estate Research & Senior Research Analyst [9]

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Okay. I mean I'm just curious as to know, I mean, especially with some of the feed crops and nuts being probably more impacted by China and not buying any more agricultural goods, at least at this point than others, and that's generally a focus of investors at this point.

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David John Gladstone, Gladstone Land Corporation - Founder, Chairman, CEO & President [10]

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You're onto something there because about 1/3 of the almond crop in the United States was purchased by China. I don't know if they're still hungry for almonds or not, but mostly the almonds are being used for almond milk and other things. The candy people use a lot of almonds. But you should know that most of our almonds are in the area of organic, and they're very expensive. And in addition to being very expensive, they're not really sold to China. So we are less impacted because we are heavily in the organic side of the almond business. And when our next farm comes in, we will have a lot of almonds in the portfolio. I'm sorry, go ahead and ask your question.

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Lewis Parrish, Gladstone Land Corporation - CFO & Assistant Treasurer [11]

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Rob, just one more point on your last question, you mentioned also feed crop, we might have 3% to 5% of our portfolio in that. And one more point on the nut crops, and global prices of nut crops are on the rise with what we are seeing. And we are not prepared to give a number, but we are optimistic that, that will come through with our -- the amount of participation rents that we will be reporting over the next 2 quarters.

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Robert Chapman Stevenson, Janney Montgomery Scott LLC, Research Division - MD, Head of Real Estate Research & Senior Research Analyst [12]

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Okay. In terms of what are you guys seeing out there for pricing on farms? I mean if you were going to buy a farm 2 years ago versus today, is that farm value higher what you'd have to pay, about the same? How do you sort of categorize what you've seen in sort of seeing -- what would equivalently be like a same farm type of number over the last couple of years?

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Lewis Parrish, Gladstone Land Corporation - CFO & Assistant Treasurer [13]

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If we look at our -- I mean just the appreciation we see in our portfolio, and you can also look -- back this up with the data that the USDA points out. In the regions we are -- in the regions, we're focusing in, generally, we are seeing year-over-year price increases. How much -- it might not be -- it's more in California than it is in Nebraska, for example. But generally, in California, the West Coast, the states that David mentioned, in Florida, we are seeing steady, if not muted in some areas, there's still steady appreciation.

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Robert Chapman Stevenson, Janney Montgomery Scott LLC, Research Division - MD, Head of Real Estate Research & Senior Research Analyst [14]

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Okay. And then in terms of the actual farmers own balance sheet at this point? I mean how are they faring today versus the last couple of years in your view?

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David John Gladstone, Gladstone Land Corporation - Founder, Chairman, CEO & President [15]

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They're fine. They've continued to sell their produce and continue to move along. We've not seen any diminution, as you would see, in say, Iowa, where the farmer is having a lot of problems because they're in corn or soy or wheat, all of which have had tremendous drops in the price of those. You might know also that if some of the corn farmers would convert over to organic, it's probably 2 or 3x higher price. There's higher expenses and different ways of getting to market. So many of the farmers are reluctant to go into something as new as organic. We've looked at a couple of situations, and we may end up doing something in the Midwest, if we could figure out how to convert them to organic, and it's not easy. So we'll see how that works out. But generally speaking, we have a couple of farms, one farm in Arizona that does some corn that's actually sold right there in that area to the farmers that raise beef and some of the dairies. But generally speaking, we're in good shape. For example, we're in Colorado, we have organic potatoes. They are one of the largest potato farms in the United States. Organic potatoes sell for a much higher price than regular potatoes. Nobody can taste the difference, and I'm not sure if there's any reason to eat organic potatoes, but generally speaking, there you are. And some of these people also have long-term contracts with manufacturers of french fries, for example, that some people are starting to demand organic fries. So I think we're on the right area, Rob, by being an organic and healthy foods. So I think we're in the good area of farming now.

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Robert Chapman Stevenson, Janney Montgomery Scott LLC, Research Division - MD, Head of Real Estate Research & Senior Research Analyst [16]

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Okay. And then a couple for Lewis. In terms of the $0.69 hit to NAV quarter-over-quarter. You mentioned that a chunk of that was the debt mark-to-market. Can you quantify how much of that was that versus the additional capital raising and other factors that led to it if it's not -- the book of it so far...

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Lewis Parrish, Gladstone Land Corporation - CFO & Assistant Treasurer [17]

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Sorry, the book of that decrease was the debt fair value, and I believe that was $0.39 or $0.40 of it by itself.

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Robert Chapman Stevenson, Janney Montgomery Scott LLC, Research Division - MD, Head of Real Estate Research & Senior Research Analyst [18]

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Okay. That's helpful. And then how much was the generators costing you? And then how much lower should third quarter expenses on that be relative to second quarter as a result?

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Lewis Parrish, Gladstone Land Corporation - CFO & Assistant Treasurer [19]

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So the generators by themselves were about $200,000 in the second quarter, and I believe that was $125,000-or-so less than what it was in the first quarter. In the first quarter, we also had about a $50,000 payment to get a permit finalized, and that also went away. I'm not sure that -- so we were about $200,000 for the second quarter. Not sure we'll see that go completely to 0 for Q3, but it should be cut down pretty significantly.

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Robert Chapman Stevenson, Janney Montgomery Scott LLC, Research Division - MD, Head of Real Estate Research & Senior Research Analyst [20]

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Okay. And then last one for me. What are you guys thinking about in terms of the limits that you're willing to go with the Series B Preferred in the capital stack.

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David John Gladstone, Gladstone Land Corporation - Founder, Chairman, CEO & President [21]

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We -- that maxes out at 150 -- $150 million is where it maxes out.

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Robert Chapman Stevenson, Janney Montgomery Scott LLC, Research Division - MD, Head of Real Estate Research & Senior Research Analyst [22]

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Okay. And even if you're willing to go that high, even at the current market caps. So it's not a situation where you're thinking that it's 20% of your overall capital stack or anything was you're at this and then grow into it, that you'd be willing to go to $150 million on that? What's on your current market cap...

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David John Gladstone, Gladstone Land Corporation - Founder, Chairman, CEO & President [23]

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It's growing. We do about $3 million every 2 weeks. So we'll be out of $150 million over the next year. We should be finished by next summer this time.

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Operator [24]

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And our next question comes from the line of John Massocca from Ladenburg Thalmann.

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John James Massocca, Ladenburg Thalmann & Co. Inc., Research Division - Associate [25]

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So is the transaction you disclosed back in April with RTS Orchard -- is that still in the pipeline today? And if so, kind of, how close maybe are you to closing that transaction?

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Lewis Parrish, Gladstone Land Corporation - CFO & Assistant Treasurer [26]

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Yes. It's on the pipeline, we do -- as you know, it's expected to close in 2 phases. The first phase in Q3, second phase in Q4. And we are -- we still are expecting the first phase to close in Q3.

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John James Massocca, Ladenburg Thalmann & Co. Inc., Research Division - Associate [27]

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Okay. And lastly, what's the distribution between the 2 phases? I mean are they about equal in terms of cost?

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Lewis Parrish, Gladstone Land Corporation - CFO & Assistant Treasurer [28]

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Roughly half and half.

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John James Massocca, Ladenburg Thalmann & Co. Inc., Research Division - Associate [29]

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Okay. And then on more kind of general acquisition side. You saw some pretty robust -- sorry, the 6% kind of initial cap rate you guys had on acquisition is completed in 2Q and subsequent to quarter end or maybe a little higher than they have been in past quarters. Is that kind of indicative of a general kind of trajectory and where farmland cap rates are going? Or was that kind of deal specific, especially given in time in Q3, there were some unique transactions?

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David John Gladstone, Gladstone Land Corporation - Founder, Chairman, CEO & President [30]

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I'd say, generally speaking, if you look at where we are, then the tree crops are higher yielding in terms of yield to us than the ground crops. And so when we close more tree crops and ground crops, you're going to see that continue to go up. On the other hand, ground crops don't have as much risk. So as a result, you sort of trade off that. I'd say the ground crops are averaging 5.25% to 5.5% now. And the tree crops are usually much higher.

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John James Massocca, Ladenburg Thalmann & Co. Inc., Research Division - Associate [31]

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Very helpful. And then with the in-place portfolio, you saw some pretty robust rent increases on renewals and re-leasing. Is that a trend we should continue to expect into 2020? Or is that kind of unique to the specific leases in the quarter?

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David John Gladstone, Gladstone Land Corporation - Founder, Chairman, CEO & President [32]

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These rents are really hard to project out. We got 2 more to do this year. And those are about 2% of our total revenue. So I don't expect much of a change there. Maybe it bumps up a little bit. We've got about 13 in 2020. And I would say, half of those are sort of already locked in. People want them. So there's probably 5 or 6 that we haven't even touched in terms of negotiation. But all of those farms are in good areas with good tenants. So we can hope that they move up. And I think they will. I just don't know how much the -- we've seen rents come up in all of the areas now. Oxnard was a little bit slow and has been for some time. It seems to be coming back. And we've got one large farm there that I think will get done this year. And I think it will go up. It's been farmed forever in a day. It's just a matter of how much you can get from the farmer and strawberries and vegetables are doing very well in terms of what the consumer will pay for them. As you probably know that the -- all of them -- and this is across the board. If you look at your Sunday supplement, you'll find that strawberries are discounted heavily by the grocery stores. And they usually put a big picture of the strawberry box in the Sunday supplement. It turns out that the person who buys those usually will buy 4x more produce than other people going to the store. So all the grocery stores are pitching that person that likes those strawberries to come into their store. And sometimes, the stores will bargain hard in order to get something that they can discount a lot and other times, they will go ahead and pay up for it. I go to the grocery store every Saturday to see who won that grocery stores that week because it's such an important part of our portfolio. And there are some new entrants in it. So it will be interesting to see which way prices go. There's also a lot of work going on to automate some of the purchases and automate some of the plantings that are in as well as some of the pickings that have to go on. It's a very moving marketplace, but at the same time, it's within very narrow areas. So there's not a lot of overall change. It just changes a little bit 1 year up and a little bit next year down.

Any more questions?

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Operator [33]

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I am actually showing no further questions at this time. I'd like to turn the call back to David Gladstone for closing remarks.

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David John Gladstone, Gladstone Land Corporation - Founder, Chairman, CEO & President [34]

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Thank you very much for listening in and asking questions, and we'll see you next quarter at the end of it.

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Operator [35]

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