Q4 2023 Farmland Partners Inc Earnings Call
Participants
Luca Fabbri; CEO & President; Farmland Partners Inc
Christine Garrison; General Counsel & Corporate Secretary; Farmland Partners Inc
Paul Pittman; Executive Chairman; Farmland Partners Inc
James Gilligan; Chief Financial Officer, Treasurer; Farmland Partners Inc
Scott Fortune; Analyst; ROTH Capital Partners LLC
Alex Fagan; Analyst; Robert W. Baird & Co Inc
John Massocca; Analyst; B Riley Securities Inc
Presentation
Operator
Hello, my name is Jeannie, and I will be your conference operator today. And I would like to welcome you to the Farmland Partners Inc. Q4 and fiscal year 2023 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again, thank you and I would now like to turn the call over to Luca February, President and CEO. You may begin your conference.
Luca Fabbri
Thanks and good morning, and welcome to Farmland Partners full year 2023 Earnings Conference Call and Webcast. We truly appreciate your taking the time to join us for these calls because we see them as a very important opportunity to share with you our thinking and our strategy in a format less formal and more interactive than public filings and press releases.
I will now turn over the call to our General Counsel, Christine Garrison, for some customary preliminary remarks. Christine?
Christine Garrison
Thank you, Luca, and thank you to everyone on the call. The press release announcing our fourth quarter earnings was distributed after market close yesterday. The supplemental package has been posted to the Investor Relations section of our website under the sub header Events and Presentations for those who listen to the recording of this presentation, I remind you that the remarks made herein are as of today, February 29, 2024, and will not be updated subsequent to this call.
During this call, we will make forward-looking statements, including statements related to the future performance of our portfolio, our identified and potential acquisitions and dispositions, impact of acquisitions, dispositions and financing activities, business development opportunities, as well as comments on our outlook for our business rents and the broader agricultural market.
We will also discuss certain non-GAAP financial measures, including net operating income, FFO, adjusted FFO or EBITDA, RE and adjusted EBITDA RE. Definitions of these non-GAAP measures, as well as reconciliations to the most comparable GAAP measures are included in the Company's press release announcing full year 2023 earnings, which is available on our website, Farmland Partners.com and is furnished as an exhibit to our current report on Form eight K dated February 28, 2024. Listeners are cautioned that these statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond our control these risks and uncertainties can cause actual results to differ materially from our current expectations, and we advise listeners to review the risk factors discussed in our press release distributed yesterday and in documents we have filed with or furnished to the SEC.
I would now like to turn the call to our Executive Chairman often calls.
Paul Pittman
Thank you, Christine. So megawatt makes or four or five, very general sorts of comments and points about the Company before I turn it over to Luca and James to go into more detail.
So the first point is we continue to be significantly undervalued comparing ourselves to the underlying asset value of the portfolio. Land values across the country have continued to go up in the grain producing regions of the country. The growth rate slowed some in 2023, and we think that rate will slow yet again in 2024, but that needs to be taken in the context of in light of the prior years. So in '21 and '22, we saw as rapid appreciation in farmland values as we've probably ever seen in history in the grain growing regions of the country that can't go on forever. So we will see sort of a flattening or plateauing.
Yes, in my opinion, as we move into 2024 but what that has led us to and this is an overwhelmingly our row crop oriented portfolio as there is a huge disconnect between the market value of our land in the private markets and the public company trading value of our common stock. And as many of you know, I bought a significant amount of stock personally last year, a company bought back a lot of stock, and we're likely to continue that effort as long as that gap continues.
Turning for a moment to specialty crops, we are now in the 2nd year of reasonably strong rainfall on the West Coast, the United States, particularly in California. On that, it will help the water situation and that will help the yield situation. And we believe that we will have pretty strong crops out in those markets of this year, although there continues to be price pressure due to overall planting of many of those commodities across the world, turning to the third point I want to make, which is about cost cutting, despite what I said about the gap between our underlying asset value and the stock price. We are re and we are valued in many ways on a FFO. I frankly think that's incorrect as it relates to our Company, but that is where our rigs are valued. So we must drive AFFO higher, and we're working quite hard to do that. So we have embarked over the last 12 months or so on an aggressive cost-cutting effort, and we are going to continue that effort in 2024. That cost cutting is coming from selective staff reductions, cutting our travel costs, bringing the size of our Board, which is always a challenging thing to do, but we have done it on. I'm going to take a $500,000 compensation cut in the 2024 year at 25% of the compensation I received for 2023, and Luca is going to stay flat in his compensation. These steps really are required for trying to drive AFFO higher as a major shareholder I think like an owner, not an employee and we are going to get this stockprice higher and that requires increasing of AFFO. just to put that cost-cutting effort in context, if you look back to 2022, four, G&A and legal and accounting in our financials, we spent approximately $14.9 million on those two line items in 2022 in the '24 projections. Those two line items add up to 11.9. That's a 20% reduction in just a couple of years. And there will be more to come.
Turning now to the sales program of the company in '23 and what the what that might look like in '24 on during the 2023 year. We've made many, many asset sales and others will address this in more details on go into it here. But the focus of those asset sales or to unload properties that we think had significant water challenges. This is why we exited so much of our Eastern Colorado portfolio to get rid of properties. We do not think we're appreciating rapidly and to get rid of properties that are very difficult to manage. We will continue on those themes in the 2024 year. There will be materially less asset, say, asset sales in '24 than there were in '23. Largely government driven by tax rules were limited this year to probably around seven transactions. And then any 1030 ones that we do on top of that. So expect sales this year of assets, but don't expect the same quantity as last year. And we want to continue to simplify the portfolio as we do this. It does make the cost reductions easier on the G&A line. It also lowers our property operating expenses in terms of the use of the proceeds from those asset sales some of that money will be recycled into the regions and the markets we like the most, which are generally the grain growing regions of the country and some of that money will be used for debt reduction and some of that money will be used for stock buybacks.
As far as interest costs, our perspective is those savings are going to come to us eventually, we don't know exactly when, but I think we are at the beginning of a rate reduction cycle instead of a rate increase cycle. So when we have excess cash we need to think very carefully about.
Do you sort of take the near term jolt of debt reduction, knowing that you just wait, you're going to get an interest cost reduction anyway or do we gain the four or five or maybe even $6 a share that comes from buying back our stock at such deeply discounted light levels. And so that's the trade-off we have to think about in our mind. So when you look at that as a final 0.5, when you look at 2024, if I had a crystal ball. This is what I think that crystal ball would say. I think we'll see in 2024 on the specialty crops, slightly better yields and price than we have had in recent years that is largely due on the yield side to two years of rainfall has solved a lot of agronomic problems and will help those crops on the price side, I think we'll get a modest recovery. Just looking at what's going on in pricing right now on the row crop side of the portfolio. Now we have fixed cash rents. So what's the underlying farmer performance won't directly affect us, but we always care about the profitability of our tenants and you're going to see somewhat lower grain prices and then you have seen in recent years probably reasonably strong yields. But we've seen that cycle over and over again, we will go into a slightly lower commodity price cycle for a couple of years, it will slow the appreciation of farmland values. It will make rent increases more difficult to get, but not impossible. That just won't be as big. And then we'll come out of that cycle and see farmland values surge again, we will continue to lower the overheads of the company, and we will we believe we will see late in this year, a gradual reduction in our interest costs. A substantial amount of our debt is variable, and that will hopefully start to flow through and give us wind at our backs in terms of our AFFO per share. And then the final point of 2024 plan, as I mentioned, is we will continue to make selective asset sales. So those will be of assets that we do not like that much or whenever we get a very high price for any asset, we're willing to let that asset go.
With that, I will turn it over to Luca to make some further remarks.
Thank you, Bob.
Luca Fabbri
And I will further articulate and emphasize some of the points that full array raised in 2023. We really have three main strategic strategic objectives. One was to demonstrate value embedded in our portfolio by selected asset sales, then we wanted to reduce debt. And finally, we wanted to buy back stock at a discount. As to the first strategic objective, we sold about $200 million in assets, generating significant taxable gains to the extent that we actually had to distribute a special dividend in order to meet our requalification requirements. Those are those asset sales were mostly focused on assets that were not a good fit long term for our portfolio. I suppose I was mentioning is because the there were water challenge that they had some uncertainties about long term appreciation potential or because there were about crops that in regions where frankly we do not believe that there was a significant potential for recovery, like, for example, blueberries in Michigan. So we have effectively left the core of our portfolio. We see that as the core of our portfolio, which is the core of the Corn Belt and then the Midwest virtually untouched. And we believe that the the appreciation, the embedded appreciation is actually most significant in that part of our portfolio. Our second objective was reducing that we did. So we reduced that by about $76 million. At the same time, we increased liquidity by about $30 million. So we maintain access to sources of liquidity. And finally, we repurchased about 6.5 million shares at an average price roundabout of $11 and however, you measure the real value of our portfolio on a per share basis, that's a sharp discount to that value. Other things that we've done that were kind of very meaningful in 2023 is that we renew the expiring leases at about 20% increase in rents and, as Paul mentioned, would reduce overhead, a general, a general administrative expenses and legal and accounting by about 15%. Looking forward in 2024, as Paul mentioned, we will continue some selective asset sales will continue to purchase assets, whether whenever we see the good strong opportunities, which always come up will further reduce overhead expenses and the E&O.
As far as our projections go that we put out in our supplemental, there is a degree of variability there. And I always remind you that we grow crops outside. So we tried to be reasonably realistic in our assumptions, but we there is always the potential for some better than or worse than expected returns and Mother Nature can be very capricious.
With that, I will now turn the call over to our Chief Financial Officer, James Gilligan for his overview of the Company's financial performance gains.
James Gilligan
Thank you, Luca. I'm going to cover a few items today, including summary of full year 2023 review of capital structure and interest rates comparison of full year revenue guidance for 2024. I'll be referring to the supplemental package in my remarks. As a reminder, the supplementals available in the Investor Relations section of our website under the SAP at our Events and Presentations.
First, I'll share a few financial metrics that appear on page 2. For the full year ended December 31, 2023, net income was up over 160% to $31.7 million and net income per share available to common stockholders increased to $0.55, largely due to gains on disposition of assets. As Luca mentioned a minute ago, FFO was down $8.1 million and FFO per weighted average share was down $0.16, largely due to elevated interest expense and lower revenue in the non fixed payment categories as we will review in a couple of minutes.
Next, I will review some of the operating expenses and other items shown on page number five, depreciation, depletion and amortization was higher in 2023 due to more depreciable assets placed into service and approximately $500,000 of adjustments made in the year related to assets placed into service property. Operating expenses were higher in 2023 caused by higher property taxes, including a one-time property tax of approximately $150,000 in the first quarter. That amount was reimbursed by the tenant. In addition, a nonrecurring expense in the second quarter of approximately $140,000 was due to final reconciliation of a cost sharing on the California farm.
General administrative expenses were lower for 2023, primarily due to lower travel expenses and lower compensation expenses. Legal and accounting expenses were lower in 2023 due to lower litigation spend. Impairment of assets in 2023 relates to two items. First, as we covered on last quarter's call, there was a sale transaction to close in early Q4 of 2023 that resulted in the $3.8 million loss. However, the sale was carried over quarter end at [$9.30 million]. So it was considered a held for sale asset at [$9.30 million], and that loss is considered an impairment. Second in the fourth quarter of 2023 after reviewing the portfolio as we do every year, we decided to take a $2 million impairment on one farm in California due to our estimate of a decrease in value gain on dispositions was up significantly compared to 2022, demonstrating the appreciation of farmland sales values over net book value. It should be noted we deferred an additional gain of $2.1 million that we think we will recognize in 2024 interest expense increase in '23 due to higher rates. Income tax was a benefit in 2023 relative to an expense in 2022. This was caused by an adjustment within the third quarter of 2023 adjustments that were made to prior period estimates Next, I'll skip ahead to page 12 to make a couple of comments about our capital structure. Total debt at December 31, 2023, with $363.1 million, down approximately $60 million from the end of the third quarter and down approximately $110 million from the end of the second quarter. Floating rate debt net of the swap as a percent of total debt stood at approximately 13% at the end of the year. That's down from approximately 24% at the end of the third quarter and down from approximately 32% at the end of the second quarter. Fully-diluted share count as of February '23 was 49.2 million shares we had undrawn capacity on the lines of credit of $201 million at the end of 2023. In 2024, we have three MetLife rate resets on debt totaling approximately $44 million. That's loans Number 9, 11 and 12 shown on the table.
Page 13 provides an overview of our income statement and the building blocks that generate revenue and cost of goods sold. Please note that our GAAP financials have a small presentation change this quarter. Tenant reimbursements are now included in rental income on the income statement in Note two of the 10-K, we show the components of rental income, fixed farm rent, solar, wind, recreation, tenant reimbursements and variable rent. It is very similar to what we've been providing the supplemental, but it is a small change from the past 10-K's and 10-Q's.
Page 14, we show these building blocks for the years 2022 and 2023 with comments at the bottom to describe the differences between the periods, a few points to highlight our fixed farm rent increase between the periods as we acquired properties in 2022 and renewed leases in 2022 and 2023 that was offset by dispositions in 2023. Solar wind and recreation changes were caused primarily by rent on land with a large solar project in the state of Illinois. The project was under construction from the third quarter of '22 through the fourth quarter of '23, causing an increase in rent during that time. There was an outsized increase in the fourth quarter of 2023 when that project began operations and ended its construction phase Tenant reimbursement increased in the first quarter of '23 with a one-time property tax assessment was mentioned a little a couple of minutes ago of $150,000 that was reimbursed by the tenant. Variable payments were down in the first and second quarters of '23 due to grapes row crops, citrus and tree nuts. Q4 '23 was down compared to 2022, largely due to almonds direct operations as a combination of crop sales, crop insurance and cost of goods sold was down relative to 2022, largely due to citrus and walnuts. Other items being decreased due to lower auction and brokerage activity compared to 2022.
In summary, all the items that comprise fixed payments were up year over year. The other categories were down.
Next on page 15, we show the outlook for 2024 using the same format as previous pages. There are assumptions listed at the bottom we have three acquisitions targeted for the first quarter of 2024 no other transactions are included in these projections.
On the revenue side, fixed format changes reflect the full year impact of 2023 dispositions plus the three Q. one 2024 acquisitions that we're targeting, plus, of course, lease renewals from late last year. Solar wind and recreation decreases relative to '23 due to the absence of the solar rent associated with the 2023 construction project that was mentioned a minute ago, Tenant reimbursements decreased because of farm sales in 2023, along with the absence of that onetime tax and reimbursements that occurred in the first quarter of 2023.
Management fees and interest income increased due to loans issued in the fourth quarter of 2023. Variable payments decreased due to the outlook for citrus plus the absence of tree nut and great farms that were sold during last year.
Direct operations, again, that's cross sales. Both crop insurance less cost of goods sold is up slightly due to higher expected performance in citrus farms under direct operations. Other items, small improvements expected for auction and brokerage in 2024.
On the expense side, property operating expenses decrease due to lower property taxes largely because of asset sales last year lower insurance and other items. General and administrative decreases with lower spend on compensation, travel and marketing in 2024 legal accounting and small changes due to cost inflation and estimates of litigation spend. Interest expense is lower due to rates and lower debt balances. Weighted average shares decrease with the full year impact of the 2023 share buybacks as Luca mentioned a minute ago, this impact on FFO in the $7.6 million to $11.1 million range or $0.15 to $0.23 per share, an increase over 2023. Hopefully, this helps describe where we stand given what we know today. We'll keep you updated as we progress throughout the year.
That wraps up my comments for this morning. Thank you all for participating. Operator, you can now begin the Q&A session.
Question and Answer Session
Operator
If you would like to ask a question, press star followed by the number one on your telephone keypad.
And your question comes from the line of Scott Fortune with Roth MKM. Your line is open.
Scott Fortune
Yes, good morning and thank you for the questions. On this one you can look at your portfolio and kind of since look at the pipeline there of potential assets that they're out in the market and within your network? And are you continuing to see more opportunities, obviously, with the focus of the Corn Belt, that's kind of where you've talked about moving away from from the water-stressed or are those other properties and the value there in your portfolio? And then just kind of follow up on that kind of a mix between row crops and the permanent crops in any change to that mix as you look at the potential pipeline or acquisitions there?
Paul Pittman
Yes. So this is Paul, and I'll take that question. So first one is just to define our view of the row crop regions that we find attractive. It's going to be the core of the Midwest, the corn belt in Illinois, Indiana, Missouri, at the heart of the country. We will also continue, though to make acquisitions in the Delta, Arkansas, Louisiana, Mississippi area. And we will make acquisitions in the southeastern United States largely that would be the Carolinas, Georgia, Florida, maybe Alabama. And those regions are very strong grain producers. They have relatively high quality tenants in all of those regions. And water is seldom if ever an issue in those regions, we think they will continue to appreciate rapidly and as farmland becomes ever more scarce and they are very, very easy to operate, particularly in the Midwest, very low property operating costs, very low overheads to manage those properties very consistent and predictable rents and rent growth. So we are highly attractive to those regions and we'll continue to invest there.
So what that means by implication is that the drier further west parts of the U.S. So think of that, as you know, starting about halfway across Nebraska, water starts to become a challenge on Eastern Nebraska, really no problem, but the Western Nebraska, Eastern Colorado, so on and so forth, relatively dry. We still own quite a few properties in those regions, but we will continue to lighten up on that exposure. We may five years from now still on some farms there, but it will be a lower percentage of the overall portfolio than it is today.
Now moving closer to the West Coast. The West Coast is a mixed mixed bag on the some of the places I have very, very strong water, have surface water rights, groundwater rights that make the farms highly productive. It's a unique climate environment on. So again, five years from now, we may still own some farms in California, but it will be a lower percentage by quite a bit of the overall portfolio. And the reasons for that are number one, water Number two, we do think there is significant over planting of many of those commodities going on across the world, which leads to tough pricing. We don't think there's any way to solve the volatility problem with regard to those farms, it's very hard to get cash rents on those farms. Therefore, we have a lot of crop share and the crop share is number one, volatile and number two complex to manage. So if we can lighten up on that it feeds back into this sort of simplify the portfolio, make it more stable and predictable from an investor perspective and also easier and less expensive to manage. I hope that answers your question, Scott?
Scott Fortune
Yes. Again, it's really good color. Obviously, did opportunities as you look at the row crops going forward here. And just to follow up on that and looking at our pipeline and the potential acquisitions. What's the environment here from the farmer standpoint or other interested parties or partners here as far as the financing at these higher rates?
Right from that standpoint, processing and close on these assets to deliver. It's obviously more challenging, but just kind of help us understand the environment for that side of things.
Paul Pittman
Yes. So And James, or Luca may want to add to this, but but ag land as a marketplace is completely different. Then all other commercial real estate assets on there is no, with the lack of borrowing capacity. We, for example, are have liquidity of approximately $200 million available to us right now on the lenders in that space, both traditional banks and farm credit and Farmer Mac, some of the large insurance companies that lend into that space are active and there is absolutely money available. The challenge is that and despite the fact that I am a huge believer in the appreciation story of agriculture. It is frankly, as a person as a personal matter, made me wealthy over the last 20 or 30 years, but you cannot run to negative spread on borrowing cost versus current yield off of a farm property. I'm frankly willing to run a negative spread, but today that's negative spread might be four or five percentage points, not one or two. And so it makes it challenging to do acquisitions. There's plenty of opportunity, but our cost capital makes it makes it difficult. So our acquisition program is likely to be limited to very specific transactions where for some reason, we think there's deep value opportunity and those do come along or on. It's an add-on property philosophically, we, as an institution, believe that increasing scale is well rewarded over time, both in higher rents and higher overall land values.
So on a profit, some of the acquisitions we've done in the first quarter, for example, will come will have been a farm adjoining something we already know. And we always will will reach very deep trying to get those deals done.
James Gilligan
Luca, James, I'd just add, Scott, that I to echo Paul's point. The mortgage penetration in our in our sector, if you think about it, unlike an LTV basis, is like 10%. That's according to USDA data, so much lower leverage in the system than you would see in other areas of commercial real estate, farmers are look outlook for property lease down a little bit, still very strong relative to pre sort of historical averages on the last three years have kind of been like the top three years of farmer profitability. This year might be number five in terms of that rank on. So while it's down a little bit, farmers are still doing pretty well, but maybe not as well. And so maybe to your question about competition from acquisitions, maybe people won't be as likely to buy a farm that they would have been in '23 or 2022, but still still quite a bit of appetite still folks doing pretty darn well.
Scott Fortune
Thank you. If I may add on to that one more real quick one. You mentioned after few years of a Sea Farm values and rent increases going forward here, kind of is there any kind of preliminary expectation for the rent increases levels in 2024? Obviously, you said 20% here last year, but just kind of a ballpark that if we can look forward into '24 here.
Paul Pittman
Yes, I think you're going to see in 2024. I'll give you the answer and I'll give you the rationale. I think it will be more in the 5% to 10% bracket on those rents. We have to roll over in the 2024 year. It's still a little bit early to say, but that would be my estimate that is sort of closer to historic norm than the last couple of years have been, but I think we're going to kind of revert to that historic norm and here are the reasons for that. First sort of a portfolio specific reason we started to push rent increases very strongly now three years ago. And so we've had three years of very strong rent increases. So when we start the re-leasing cycle, this time it will be off a relatively high base already because we got three years ago. I forget the exact statistic, but in a high single digit high single digit, the jumps in rents that year. And then an even two years ago, we got like 15%, I think and then this year, like 20%. And so we're going to be coming off a higher base. So I think 5% to 10% is kind of the right rate level than during the macro environment. Rents are a function of a farmer's three to year view of farm profitability, and that's going to be a little more negative due to lower grain prices than it has been in the past couple of years on where as land values, and this is important point. Land values are a function of a farmer's view of the 50 year five zero year outlook for farmland appreciation. So it's farmland values are largely unaffected by by crop price declines, but rental markets are somewhat more effective. Thus, we'll get a slightly lower increase in rents than we've gotten in the last few years.
Scott Fortune
Guy, that's very helpful. Thank you for all the color here. I'll jump back in the queue.
Operator
Your next question comes from the line of Alex Fagan with Baird. Your line is open.
Alex Fagan
Hi, good morning and thanks for taking my question. And first one for me is which staffing roles in the company were reduced? Were they corporate specific or property-specific? Any more color on that would would be great.
Paul Pittman
Yes, they were they were corporate specific. I may have will almost always be. We are a very thin overall team here on. We are in the read itself, 15 employees, something like that. We have the farm, the brokerage business in Champaign, Illinois, a different group of staff, but we're running this pool of assets of the and all approximately $1.5 billion with a tiny tiny staff. But the cuts have been in the sort of headquarters rules, if you will, not out in the field. I don't think we could get any sooner there than we are and these cuts are not easy to make. And everybody in the tight team like this was you can't hide in a company this size, everybody was already working quite hard and now people are working a little bit harder. So specific roles were, you know, one role was a somewhat junior person in our operations functions here in the Denver office left to go back to graduate school. And we just didn't replace. We have had a very capable of PR and IR sort of person, I say IR, not not talking dollars, you'd necessarily that's really Luca on James and to some degree me, but one of the much smaller investors that might call in our in our Internet presence for us as our social media process. And we've left that person go and still have access to the access to them as a consultant on travel was down significantly from the past year and then the we're not as acquisitive. So just literally, there's not as much flying around as it used to be some.
And then and then the other major change as you look to the '24 year is we had a Board of nine and now we had a billboard of five when the annual meeting occurs or the Board will have been reduced to five clean asking the directors believe we just not re nominated quite a few less than we had in the past. And that's why it's always a hard discussion that the directors we had were great directors, but we had we have to get costs under control and directors are one of the costs.
Alex Fagan
Yes, that's great color. Thank you. And just one more for me. You kind of talked about rents increases in 2024, 5% to 10%, which is closer to historical norm. Can you confirm, is that what's embedded in the guide for 2024?
James Gilligan
So a couple of things to bear in mind. Our rent renewal season is at the end of the year. So kind of think how we through the end of the year, but a lot of that is coming in November and December. So the impact of rent rolls on 2024 is rather small. And when we make projections for 2024, we make a simplifying assumption and actually keep them generally flat. So the increases are not really baked in at this point.
Paul Pittman
Let me let me add something to that, though, because it's very important just to add to what James said, the rent increases you see in the 2024 projections are the 2023 rent increases that are already contracted for and fully leased. That's not a guess the Red 5% to 10% I'm talking about is what James just said will happen next November, and that will affect 2025 projection so that there's not a there's not a rent roll risk embedded in those projections because the leases are already signed that affect the '24 protection that are going down.
That makes sense now.
Alex Fagan
Yes, it does.
Thank you, guys. That's it for me.
Paul Pittman
Okay.
Operator
Your next question comes from the line of John Massocca with B. Riley. Your line is open.
John Massocca
Good morning.
Warning.
Do you can't limit on the number of transactions you could possibly do and just given kind of tax circumstances in 2024 remaining, just a bracket them on.
Yes.
And what that means in terms of disposition proceeds?
Paul Pittman
Yes, you know, I guess it's really really hard to say. So we have the seven transaction limit and we've actually already used one of them. So we've got six left and we used it, unfortunately, is a very small transaction, but it was a partial ownership of something we own that the controlling party sold. So we've taken all1 party off the table. So in the beginning of the year. We're not likely to do transactions unless they're pretty good size, $25 million or bigger. And that always exceptions, of course, have a great offer came in, but we don't want to burn through that opportunity to make asset sales from that too quickly. Obviously, we have a 1031 opportunity, which helps us a little bit, but as we get late in the year, we will probably shrink the hurdles of size for transactions we might do if we still have some left on some room left. But if I had to give you a number, it would be in the neighborhood of $50 million worth of asset sales during the year. But like I said, it's not modeled into the '24 projections, no assumptions of debt reduction due to asset sales or stock buybacks as modeled in because it's incredibly hard to predict. And if we did 50 of sales, we probably do 10 more purchases. So net 40, you know, if you have if you were trying to think about how to how to work with it, I'd say half of it will go to stock buybacks and half of that reduction. But at that, that's incredible price dependant in terms of the stock and interest rate outlook dependent in terms of debt.
John Massocca
I think that's very helpful. And then as I kind of think about the outlook for variable rent payments in 2024, how much of that decline versus 2023 is based on your yield and pricing outlook? And how much of that is already kind of seen it from your asset sales that occurred in '23?
Paul Pittman
I'll let James or Luca take that and then I'll add to it if I need to, but probably some more specific numbers.
It's helpful. So somebody else can handle a consumer-first.
James Gilligan
Yes, so on, it's a mix of we sold a couple of great farms in 2023. So on some of the variable rent that in past years we received with respect to grapes goes away, we sold a couple of tree nut farms, which would have the same sort of characteristics that variable rent goes away. And in addition to that, we have a large citrus farm that performed pretty well in 2023. And that is just in some ways, reverting a little bit historical means. So projected outlook for that sort of citrus farm is a little bit lower. Again, good surprises to the upside, good surprises to the downside, but we're, I think, being prudently conservative there on that. That's really what's impacting the variable payments change from year to year.
Luca Fabbri
Yes, just to build on that, as I was mentioning earlier, it kind of we grow crops outside. So on the variable rent, we rely on the best expertise out there that we have access to in terms of coming up with an outlook on price for the market and on yield for our farms. But at this point, we are just relatively wild guesses or deep. Keep in mind that the yield can be affected very strongly by late season kind of weather events. So even right, if right now in certain funds that we have the outlook on crop yields looks potentially outstanding or that might be kind of tempered further down the road and on price. Often the ultimate price that we receive is determined by marketing to the packing houses for permanent crops that is very much leading in this year, if not early into the following year, even so we rely on the best information that we have. But you know, remind remember that there can be some significant variability, both on the upside and on the downside that we tried. We do our best to kind of take a middle of the road of the information that we have.
John Massocca
And that makes sense. Then maybe one last one on balance sheet. Can you just remind us the process and maybe the pricing outlook for some of the MetLife Term Loan resets in '24?
James Gilligan
Yes. So generally, and we've got we've got a little bit more detail in Note seven to our 10-K when it's filed later date, if you'd like that, but generally does MetLife traunches on prices, the spread to treasuries on depending on the duration of the resets. If we're talking a three year reset, we look at three year treasuries, five year, five year treasuries, et cetera. We have historically been a spread over treasuries in kind of a one 80 to 200 basis points over on a given where the world is today. We're probably on the high side of that where we tried as hard as we can to negotiate that down. And we've got some we certainly do what we can to bring competitive lenders to bear to make sure we're getting good execution. And so that's how we think about it. We've got a good dynamic with all the lenders. Metlife included. We engage with them early and often on. And we look out and really see where we can get best execution. So last year, we most of our resets. We did sort of three years towards the end of the year. We rolled one out to seven years to get a little bit more term. And throughout all these discussions, we maintain at least 20% and sometimes up to 50% ability to prepay these MetLife lines in any calendar year without penalty. So to the extent that rates move in our favor and we'd like to pay down on the fixed side, we can do that with really all of these lines, it's somewhere in that sort of 20% to 50% range every year.
John Massocca
That's very helpful. And that's it for me. Thank you very much.
Paul Pittman
I think one, I think one thing to add to that, because I know that James mentioned it in the 2024 projections we have are based on current yield curves sort of projected those rental rate increases on those MetLife loans?
That rollover, correct me if I'm wrong, but we've definitely investment. We've made an assumption of a rent. I mean, other than the interest rate jump in the projections that you saw in the supplemental pack unfavorable.
John Massocca
Thank you very much.
Operator
Again, if you would like to ask a question, press star followed by the number one on your telephone keypad. Pause briefly for any further questions.
There are no further questions at this time. I will now turn the call back over to Luca for brief closing remarks.
Luca Fabbri
Thank you, Jamie, and thank you, everybody. We appreciate your interest in our company, and we look forward to continue this conversation through the year on our quarterly updates. And if in the meantime, you have any burning questions, please never hesitate to reach out to us best way is through our Investor Relations e-mail address, which is IR. at our main partners.com. Thank you, everybody, and have a great day.
Operator
And this concludes today's call, you may now disconnect.
Paul Pittman
in breast, which is I our pharma partners.com. Thank you, everybody.
And Heather.
