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

David Gladstone: Well, thank you, Paul. That was a nice introduction and this is David Gladstone. And welcome to the quarterly conference call for Gladstone Land. This is also our year end, so you get a double barrel place in our systems of things if we are going to tell you about and thank you all for calling in today. We appreciate you taking the time to listen to our presentation. We always start off with Michael LiCalsi. He’s our General Counsel and Secretary and he is the President of Gladstone Administration, the administrator for all of Gladstone funds. Michael, you are up.

Michael LiCalsi: Thanks, David. Good morning, everybody. Today’s report may include forward-looking statements under the Securities Act of 1933, Securities Exchange Act of 1934, including those regarding our future performance. These forward-looking statements involve certain risks and uncertainties that are based on our current plans, which we believe to be reasonable. Many factors may cause our actual results to be materially different from any future results expressed or implied by these forward-looking statements including all risk factors in our Forms 10-Q, 10-K and other documents we file with the SEC. You can find these on our website at gladstoneland.com, specifically the Investors page or on the SEC’s website at www.sec.gov.

And 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. Now FFO is a non-GAAP accounting term, defined as net income, excluding the gains or losses from the sale of real estate and the impairment losses from property, plus depreciation and amortization of real estate assets. We may also discuss core FFO, we generally define as FFO adjusted for certain non-recurring revenues and expenses, and adjusted FFO, which further adjusts core FFO for certain non-cash items, such as converting GAAP rents to normalized cash rents. And we believe these are better indications of our operating results and allow better comparability of our period-over-period performance.

And please take the opportunity to visit our website, once again, gladstoneland.com, and sign up for our e-mail notification service, so you can stay up-to-date on the company. You can also find us on Facebook, keyword there is The Gladstone Companies and Twitter @Gladstonecomps. And today’s call is an overview of our results, so we ask that you review our press release and 10-K, both issued yesterday for more detailed information and you can find them on the Investors page of our website. With that, I will turn it back to David Gladstone.

David Gladstone: Well, thank you, Michael. I will start off with a brief overview of our farmland holdings. We currently own about 116,000 acres on 169 farms and about 45,000 acre feet of bank water acreage foot is equal to about 327,000 gallons. So that’s about 14.6 billion gallons of water that we have in the ground in California mostly. And together, they are valued at about $1.6 billion for both the land and the water. Our farms are in 15 different states, and more importantly, it’s in 29 different growing regions. Farms continue to be 100% occupied and leased to about 90 different tenant farmers, all of whom are unrelated to us. And the tenants on these farms are growing about 60 different types of crops, but mostly fruits and vegetables and nuts.

We have two slow paying tenants and partly due to excess supply and market for their respective crops. Markets sometimes get oversupplied and can be slow to cure themselves, but they usually do over a certain period of time, it’s slower sales, so it takes a while to get there. As we have mentioned in the past couple of calls, acquisition activities remained slower for us than in the past as we continue to be much more selective in the type of farms we are looking at. Higher interest rates also impact the level of returns we can be able to achieve on any new acquisition. That too will pass. With inflation and interest rates continue to rise and the risk of recession becoming more likely, we believe it’s a good time to be much more selective with our capital.

But overall, our existing farmland portfolio continues to perform pretty much as expected, with the exceptions of the issues we are having with two tenants, which led us to reverse out about $1 million in revenue in the fourth quarter and so we hope to collect that in the future, but there’s no guarantees on that. But despite those issues, we have another very strong quarter for you and from an operating standpoint. We have good results from our participation rents, has recorded about $4.7 million in additional income during this quarter. This resulted in a record total participation rents of about $7.7 million this year, compared with about $5.2 million in 2021. So a nice increase there in participation rents. The increase was largely driven by strong yields on our pistachio farms coupled with the continued strong demand for the crop.

We had lower results on our almond farms and this is due to a weaker almond prices as the amount of almond market continues to be hampered by oversupply and exaggerated by the supply chain disruptions that arose during the COVID pandemic. Almonds are sold all over the world, and quite frankly, almonds in California end up all over Europe and especially in India, for example. Finally, we continue to be able to renew all expiring leases without incurring any downtime on any of our farms. We did change up a couple of the leases structured wise, in which we reduced the fixed based rent in exchange for increasing the crop share component. We will see this nice wet year in California, if that was the right thing to do. We think we are in good shape for those once the numbers come in, but we will have to wait for the year-end in order for that to be proved out.

Excluding those leases, we continue to execute renewals at higher rental rates. We won small acquisition during the fourth quarter of 443 acres. It’s an open ground piece. We bought it for about $3 million. This ground is adjacent to the farm we already own, right next door and has both surface water rights and groundwater pumping rights. So the intention is to use these water rights as an additional source of water for nearby farm. We also sell water — we also can sell water credits on our property to tenants on the other farms that are near ours. For the year-end, the team acquired over 3,000 new acres, six different states for a total of $65 million. Overall, the initial cash yield to us on these investments is about 5.8% and the leases on these farms contain certain provisions such as participation rents that we just mentioned and we also have annual escalations in which if you go from one year to the next year, it may be up by 3% or 4% and that should push the figures higher in the future for these farms.

On the leasing front, we renewed nine leases on the farms in four different states. In total, these renewals are expected to result in a decrease in annual net operating income of about $857,000 from the prior leases, mainly because we moved some of those leases from fixed rent to participation rents. However, this decrease was the result of lease amendments and we executed three of our permanent planting farms in which either reduced or fixed the base rent or agreed to cover some fixed amount of the farm’s operating cost. Excluding these three leases, lease renewals executed on our farms growing row crops are expected to result in an increase in net operating income of approximately $66,000. It’s about a 12% increase over the prior leases.

Looking ahead, we only have one lease scheduled to expire over the next six months. It makes up less than 1% of our total annualized lease revenue. We are in discussions with the current tenant on this farm regarding the extensions and we believe we will be able to achieve a slight rent increase on this firm, but we aren’t currently expecting any downtime to occur on the result of this upcoming expiration. A few other items to mention before we get over to Lewis in the financial world, inflation continues to be forefront in most people’s mind, as well as ours. The headline inflation numbers, of course, are about 6.4% per year that’s much higher than we want it to be at, and on the other hand, this is a category that’s going to benefit from that.

It’s called food-at-home. It’s a category that was up by 11.3%. So that’s way ahead of 6.4% for the entire nation. This is a category where nearly all of the crops grown on our farms falls into that category and most of our crops are sold in grocery stores. So when you go in the grocery store and you look at the produce section, that’s where you would find the products that our farmers are producing. We believe the increase in food prices will vary substantially cover — out cover the — outpace the inflation that’s going on now. That should mitigate the increase in operating costs that many of our farmers are experiencing now. Regardless — regarding the recent floods in California, that’s a new one to talk about there is floods in California.

We are always sad to hear about the devastation caused by natural disasters, especially this one in California. However, all of the rain and snow brought some relief to the region that has experienced drought conditions for most of the past three years. You are talking about extra feet of snow in the mountains that will melt this summer and flood all the areas down below, which is — I know all of our people in California are very happy about what’s going on. As a result of the storms, the snowpack levels are nearly 2 times their 20-year historical average. Most reservoirs in the state are also nearing their historical norms. In addition, there were no longer any areas in California that are in the two most severe drive categories, which is the first time in three years, that’s been the case.

No one is proclaiming the drought to be over, of course, much more rain is still needed to recharge most of the aquifers. We would love to see the aqua to get fully recharged. We won’t get that out of this rainstorm. But maybe as it happens over the next couple of years we can get there. All of our farms are in the West, have wells on them, as well as those in the East, and so far, none of our farms have suffered water shortages due to the wells not being able to reach the aquifers. In addition, we continue to look at the opportunities to provide additional sources of water in our farms and we are constantly working on that. The State of California hasn’t done all they could do in order to help us capture that water that’s coming down. One final note on the recent floods out West, none of our farms suffered any extensive damage as a result of the storms.

We had one farm that lost some shade structures, which were protecting blueberry buses from the wind and other adverse weather elements. But generally speaking, the bushes are fine and the structures are covered by insurance, so we will just build those back. They are forecasting rain out there all day today and for the next six days, so we are going to see a lot more water coming out there. Finally, regarding our capital plans, the offering of our Series C preferred stock was terminated in December after selling about $254 million of securities over the prior three years. Interest rates rose leading at — leading acquisition activity to slow down, it became difficult to put those proceeds to work at an effective manner so we just pulled that out.

In last month, January 2023, we began selling a new Series E preferred stock, which carries an interest rate of 5%. Sales are beginning slow as we expected. So don’t expect this to sell at the same pace as Series C was selling, but we like having multiple sources of capital available to us. So we know we have it when we need it. In addition, we started using our ATM program that’s at-the-market program, which allows us to keep selling common stock directly to anyone who shows up once it, again, a few months ago, the plan to continue to do so as long as the price is fixed sense for us. We stopped selling that when the price dropped below 2019 and we will see what happens over the next six months. Got a great strong company, so we think it will start selling again.

I am going to stop at this point, that’s enough on the operations and now I will turn it over to our CFO, Lewis Parrish, to talk more about the numbers. Lewis?

Lewis Parrish: Thank you, David, and good morning, everyone. I will begin by briefly going over our balance sheet. We did not incur any new borrowings during the quarter, but we did repay about $19 million of loans during the fourth quarter that were scheduled to mature. That putting aside , since the beginning of the fourth quarter, we raised net proceeds of about $27 million from sales of our Series C preferred stock, about $800,000 from sales of our new Series E preferred stock and $20 million from sales of our common stock through the ATM program. Moving on to our operating results. First, I will note that for the fourth quarter we had net income of $1.1 million and net loss to account shareholders of $4.8 million or $0.14 per common share.

For the year, we had net income of about $4.7 million and a net loss to shareholders of $15 million or $0.43 per share. On a quarter-over-quarter basis, adjusted FFO for the fourth quarter was approximately $6.8 million or $0.195 per share and that was compared to $7.2 million or $0.207 per share in the third quarter. Dividends declared per common share were $0.137 in both quarters. And on an annual basis, adjusted FFO for 2022 was approximately $24.8 million, compared to $20.4 million in 2021, an increase of 22%. Compared AFFO per share was $0.716 in 2022 versus $0.668 in 2021, an increase of 7%. Dividends declared were $0.546 in 2022 to $0.541 in 2021. Common dividend payout ratio was about 76% of AFFO in 2022 versus 81% in 2021. Primary driver behind the increase in AFFO was higher topline revenues, partially offset by increases in related party fees and additional financing costs.

Fixed base cash rents decreased by about $1 million or 5% on a quarter-over-quarter basis and increased by about $11 million or 16% on a year-over-year basis. The increase for the year was primarily driven by additional revenues earned from recent acquisitions and completed CapEx projects. This increase was partially offset by the execution of certain lease amendments through which we reduced the fixed base rent in exchange for increasing the participation rent component. In addition, as David mentioned, we reversed about $1 million of previously recognized revenue in Q4 as a result of credit issues with two tenants. Going forward, revenue from these leases will be recognized on a cash basis until such time the full collection of the future rental payments is again deemed to be probable.

During the fourth quarter, we recorded about $4.7 million of participation rents and that compares to $3 million in the prior quarter. And for the year, we had about $7.7 million of participation rents versus $5.2 million last year. On a same property basis and including participation rents, our 2022 lease revenues increased by about $418,000 over that of 2021. On the expense side, excluding reimbursable expenses and certain non-recurring or non-cash expenses, our core operating expenses increased by about $890,000 on a quarter-over-quarter basis and by about $2.5 million on a year-over-year basis. Quarter-over-quarter, total related party fees increased by about $1.1 million and that was driven by a higher incentive fee earned by our adviser in the fourth quarter.

And on a year-over-year basis, related party fees increased by about $1.8 million. This is primarily driven by a higher base management fee due to additional assets acquired. Removing related party fees, our core operating expenses decreased by about $240,000 on a quarter-over-quarter basis, an increase by about $735,000 on a year-over-year basis. The increase in the annual fee was primarily due to higher professional fees, particularly audit fees and appraisal costs, as well as an increase in certain property tax obligations. One final note on 2022 expenses, during the third quarter, we wrote-off about $800,000 of deferred and unallocated costs related to the Series C offering as a result of an amendment that reduced that offering size. With that, we will move on to net asset value.

We had 30 farms revalued during the quarter, all via 30 — third-party appraisals. Overall, these farms increased by about $9 million or 2.5% over the previous valuations from about a year ago. So as of December 31st, our portfolio was valued at approximately $1.6 billion and all of this valuation was supported by either third-party appraisals or the purchase prices. Based on these updated valuations and including the fair value of our debt and all preferred stock, our net asset value per common share at December 31st was $17.08, which is up by $0.52 from last quarter. Turning to liquidity, including availability on our lines of credit and other undrawn notes, we currently have over $200 million of dry powder and we also have over $90 million of unpledged properties.

Over 99.8% of our borrowings are currently at fixed rates and on a weighted average basis, these rates are fixed at 3.26% for another five years. As a result, we have experienced minimal impact from the recent increases in interest rates. However, the rate increases do impact our ability to finance new acquisitions and also play a factor in our decision to repay versus refinance maturing loans. With respect to our current debt load, we believe we are well protected against few — further interest rate hikes for the foreseeable future. Regarding upcoming debt maturities, we have up $53 million coming due over the next 12 months. However, about $36 million of that represents various loan maturities and the properties collateralizing these loans have increased by about — by a total of $14 million since their respective acquisitions.

So we do not foresee any problems refinancing any of these loans if we choose to do so. So removing those maturities, we only have about $17 million of amortizing principal payments coming due over the next 12 months and that’s less than 3% of our current debt outstanding. Finally, regarding our common distributions, we recently raised our common dividend again to $0.459 per share per month. This marks the 29th time we have raised our common dividend over the past 32 quarters, resulting in an overall increase of 53% over that period. And with that, I will turn the program back over to David.

David Gladstone: Thank you, Lewis. A very nice report. It’s nice when we have a number — good numbers to report to the market. We continue to stay active in the market should a good opportunity present itself, but as mentioned over and over, as we have gone through this, we are being very selective and cautious in our acquisitions. It’s a time to be careful. And just a few final points before we close it out and ask for some questions, I believe that investing in farmland and growing crops that contribute to healthy lifestyles, such as fruits and vegetables and nuts. We are following the trends that we see in the marketplace today. Overall demand for prime farmland, growing berries and vegetables remains stable to strong in almost all of the areas where our farms are located, particularly along the West Coast, including farms in California, Oregon, the State of Washington and on the East Coast, especially in Florida and some of the other states as we have gone up the coast in the East.

And overall, farmland continues to perform comparatively well to other asset classes. There’s a group called NCREIF that run the NCREIF Farmland Index, which currently is made up of about $15.3 billion worth of farmland and our 116 acres is included in that. So we know that they have averaged an annual return of about 12.8% over the past 20 years per year with no negative year during that period. This is better than both the S&P Index and the overall NCREIF Index, each of which had three or more negative years over that same time period versus zero for farming. I just wanted to mention one thing. As you know, we are all publicly traded and we have no control over the stock price. But if we were a fund, closed-in fund with no market, we would have had a return in terms of percentage gain of 23.17% last year and 21.43% in 2021.

These are really strong returns in the private marketplace where there’s no way of selling your stock. If our company was a fixed fund these days, we think the institutional shareholders would be very pleased with the progress that we have made. But please remember that purchasing stock in this company is a long-term investment in farmland. I think investments in our stock, is really two parts similar to gold, a lot of gold bugs around in this world today. It’s hard — this is a hard asset. It’s farmland. It’s dirt. It has an intrinsic value because there’s a limited amount of good farmland and it’s being used up by urban development, especially in California and Florida, where we have a lot of farms. And unlike gold and other alternative assets, it’s an active asset with cash flows coming in and we believe it’s much better than a bond fund, because it keeps increasing the dividend and the value of the assets are going up.

We expect inflation, particularly in the food section to continue to increase and we expect values in the underlying farmland to increase as a result, and we expect to especially be true in the fresh produce and food sector that we are in. The trend in United States is eating more healthy foods and thank goodness, we are in the right spot for that. As to the future, I think we are going to have income — strong income during the next few years, and there’s one statement that you can make on that and that’s because people have to eat and since we are producing food, we are going to get it sold, the question at what price. Now I will have some questions from those who follow us. Operator, if you will come on, please, and help the listeners ask some questions.

Operator: Thank you. Our first question is from Gaurav Mehta with EF Hutton. Please proceed with your question.

Gaurav Mehta: Good morning. First question on the $1 million write-off, can you maybe provide some color on what drove the write-off and possibility of collecting those rents?

David Gladstone: Yeah. So there’s two tenants. One of them is an almond grower in California. One is a blueberry grower up in Michigan. Each of them has — there were three leases with each of those two tenants that led to this write-off. I think it was about $939,000 of previously recognized revenue. And on top of that, of course, we lost about $400,000 of net loss, but we didn’t record $400,000 of revenue that would have been recorded as they stayed on accrual basis. For the almond grower in California, this is one of our, I guess, compared to our other almond tenants, one of our smaller tenants are on the smaller side compared to the other almond growers out there. And in addition to that, they also own a processing plant where they process about $30 million of almonds per year.

So with the weaker almond market, they were kind of hit double, if you will, not just on the growing side, but also to the processing operations. So being their size and getting hit on two sides like that impacted them more than it has our other almond tenants. The grower in Michigan, so a couple of things with this one. From an operational standpoint, he has made good money on our farms. However, he had a kind of a medical emergency earlier in the year. He was on — in ICU for several months and that led to a slow — we didn’t put much pressure on him during that time because of his situation and he also might — we think he also overextended himself in terms of just expanding its operations too quickly. So just put them in a little cash crunch.

But we are working with both of these tenants to try to get caught up with payments. But until we have a clear path forward, both these — both — revenue from both all of these leases will be recognized on a cash basis and we will just recognize it when the cash comes in. We have received a couple of payments from one of these tenants subsequent to year-end. So we will have some income recognized in 2023 from these. But right now, we just can’t put a full faith in all of the future rent up ends from each of these leases.

Gaurav Mehta: Okay. Second question, I was hoping if you could provide some color on the cap rates that you are seeing in the acquisition market for the farms.

David Gladstone: Cap rates haven’t changed much. If you are not willing to let them lease the ground at 5%, 5.5%, then cap rate, they won’t lease it. So since we are borrowing money at about that rate, it’s really hard for us to justify the risk reward ratio of buying farms and then just capturing enough money to pay the cap rate on that. So we are very slow right now. It’s going to change, Gaurav. The — what happens is that you get this adjustment of interest rates going up and the farmers are willing to wait it out. Some of them won’t be able to wait it out. So we will see some good opportunities as time goes on. I hate to take land at that rate, but it’s awfully good for our shareholders.

Gaurav Mehta: Okay. Thank you.

David Gladstone: Do we have any other questions?

Operator: Thank you. Our next question is from Rob Stevenson with Janney Montgomery Scott. Please proceed with your question.

Rob Stevenson: Hi. Good morning, guys. David, are you going to need to re-tenant that almond grower in California, the blueberry grower in Michigan this year?

David Gladstone: I don’t know. My guess is the almond grower will catch up. He will eventually sell enough almonds to pay us. And so even though we put some of that money on write-off or hold whatever you want to call it. So we will get that one. The blueberry guy is, we are really worried about him. He’s gone through a hell of a — he had an explosion on the farm and it burned him pretty bad. So we are hopeful that he recovers. His son is helping him now. So seems to be coming back, but it’s hard to know. We hate to put pressure on these farmers when they get in a situation like that, because it sends the wrong message. We are really in partnership with our farmers and we hate to push them too hard. But on the other hand, we have a lady sitting at the table with me today that collects on all of these.

And I am going to send her out to California. She will collect it for us. I am just teasing now. She’s sitting here laughing. Anyway, the bottomline of it all is, these people are going to pay. We have got money coming in from all of our farms with the exception of these. And at the end of the day, we will get this money and we will be fine. So I am not worried about that. It’s not like a disaster that would — that everybody had back in 2008 and 2009.

Rob Stevenson: Okay. Lewis, what is your incremental cost of debt today, if you guys did go out there and issue something new, what are you going to pay for that and is it the line of credit or one of the farm bureaus on a net basis that your cheapest source?

Lewis Parrish: Cheapest source would definitely be one of the farm credit associations, and right now, our line of credit is quite expensive in the high 6s. So that explains why we aren’t making much use of that. If we were to borrow from one of the farm credit associations on a net basis after patronage, we would probably be in the high 5s, maybe low 6s at the high end.

Rob Stevenson: Okay. That’s helpful.

Lewis Parrish: Maybe little double , 150 basis points higher than that.

Rob Stevenson: Okay. And so you guys have a fairly decent amount of cash on the balance sheet. So, and given the commentary about the slow acquisition environment expected in the first half of the year, how are you guys thinking about utilizing the common ATM, as well as the Series E preferred in the first half of the year, assuming that the stock price goes back up to a point to where you would issue ATM. Are you guys still going to ratably issue in the first half of the year and prefund, hopefully, more acquisition in the back half? Are you guys going to hit pause on all of that, because you have got enough capital for now? How are you guys thinking about that?

David Gladstone: Well, the company is in extremely good shape today. We have got money coming in from all of the rest of the farms. We only mentioned the two farmers that aren’t doing as well. So we are in great shape to meet our dividends and go forward. But you are right, the question is going to be and is today, I have got other people sitting around the table, listening for this one, that is what are we going to do with our cash? Can we buy some more farms? We have got people that are looking at good opportunities, but there’s no reason to take that much risk at this point in time in our farmland fund. So we are going to be slow in using up our equity and not going to jump out there ahead of time. And besides, the farmers are not going to make much money if they have to pay 5% or 6% rent on a cap rate basis.

So there’s no use pushing this one, and saying, let’s put the things on the books and then, hopefully, we can refinance them or do something with them later. I’d rather play it safe at this point in time, especially since we are so strong in terms of cash flows coming in from the other farms. I hope that’s the right answer you wanted to hear, so you can write, buy the stock on this one.

Rob Stevenson: One last one for me, David. How are you guys thinking about the indoor vertical farms? Yesterday, Realty Income announced a partnership with Plenty. Just curious as to whether indoor vertical farms or something you guys spend any time on?

David Gladstone: Yeah. I know them well. The State of Virginia is backing one of the large strawberry growers and we are certainly interested in that. But generally speaking, the indoor farms have one major problem and that is if there are more than one story high, you are giving up an enormous amount of light energy from the sun. And second of all, there aren’t any — even if you go with the high wattage bulbs, they just aren’t strong enough to grow the way sun does. You could take 1 acre of lettuce farms in California and grow more lettuce than you could ever grow indoors. So for us, we are watching it. We have someone here in the office and he’s actually sitting at the table now. So he comes out of that business. His parents were in that business, building those vertical farms.

But I haven’t seen any of the 2-story or 3-story. I think they have even gotten some 6-story ones out there, grow anything other than small greens, those seem to work okay. We are not in the small greens business and there aren’t that many restaurants that are willing to pay the price for those small greens. You have some of them. And they are higher quality in terms of cleanliness, generally speaking, and so it’s coming. I don’t know when, but we will be there if it comes. And we are watching all of these people pour money into them. I don’t know, Rob, I don’t think there’s any of them that make a decent amount of money. And the glass ones are still better than the ones that are 6 stories tall. And I think we will one day find one of those that we think is right and do it just to be in the business.

But right now, we are on the sidelines and not doing those.

Rob Stevenson: Okay. Helpful. Thanks, guys. Appreciate the time.

David Gladstone: Okay. We have any other questions?

Operator: Our next question is from John Massocca with Ladenburg Thalmann. Please proceed you are your question.

John Massocca: Good morning.

David Gladstone: Good morning, John.

John Massocca: Maybe what’s the outlook for some of the non-permanent crop types in the portfolio? You mentioned the positive with almonds, sorry, the negative almond, the positive with pistachios. But what are you seeing in terms of berries, fresh vegetables, other crops on the inflation front?

David Gladstone: They are all strong. And if you go to the grocery store and pick up some strawberries, you will see how much you are paying for each of those strawberries. It’s getting a little bit ridiculous sometimes, but it’s only for a few months out of the year. For example, Florida makes a lot of money in these months that we are in and then it turns over to California and they start making money. We do see imports coming in from lots of different places, mostly if there are blueberries, they are coming out of, I don’t know, one of the Latin American places. And strawberries are special, and I would say, 90% of the strawberries are for the United States have grown in California, not to diminish the good ones that come from Florida either they are wonderful in.

So we are seeing things in the strawberry and lettuce. We have the largest cabbage farm in the world. So eat plenty of slaw would you please and it’s just a wonderful business to be in right now. And so we are really happy with where everything is, except for a couple of guys that are a little slow on their payments.

John Massocca: Okay. And then on the almond side, has any of the kind of oversupply issues in that crop type impacted land pricing for almond farms at all, any of the transactions you are seeing in the market today?

David Gladstone: Oh! Sure. When you get an oversupply like that and the farmer can’t make very much money if at all, it really does depress when we get our almond farms and we put them in front of our people that are doing the valuations, they pull them down in terms of what they are worth. Luckily, we are not in any of them to such an extent that it would have a big impact on us. But it always hurts when you have an oversupply. But that normally corrects itself as people go out of the business or if the product picks up again, we wish the people in India would start eating more almonds. They used to eat a lot, but it’s really hard to get. And we were blocked in trying to ship them to there for a while. You couldn’t even get them over there, much less get them eaten.

It’s like anything else. We are very lucky in that most of our products are not shipped outside of the United States. In fact, I’d say, maybe 80% or 90% are eaten here. But all the ones on the ground are great. Blueberries are doing well, except for the one farm up north. It’s a good business to be in right now. We are not suffering the way that some of the people are under this inflationary experience that we are all going through.

John Massocca: Okay. And then one quick detail one. Just kind of roughly, what’s the split in terms of the size of new rent from the blueberry farmer versus the almond farmer that are on cash accounting?

Lewis Parrish: I think the write-off was pretty much a 50-50 split. If you look at it from terms of kind of annualized basis, it’s probably about two-thirds almond grower and one-third the blueberry grower.

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

David Gladstone: And John, just so you know, we have some farmers that want to take over those farms. We are just reluctant to push somebody out and push somebody else in. However, we may have to do that and it really hurts my feelings, because so many of these farmers have worked so hard to make it work. Next question, please.

Operator: Thank you. Our next question is from Craig Kucera with B Riley Securities. Please proceed with your question.

Craig Kucera: Hey. Good morning, guys.

David Gladstone: Good morning, Craig.

Craig Kucera: Do you — as we — good morning. As we sit sort of midway through first quarter, do you have any thoughts on interest patronage that may be received here in the first quarter?

Lewis Parrish: No. We haven’t received — I don’t know if we received any communications from farm credit banks yet. It should be coming in probably later this month or next month. But, no, we haven’t received any communication, however, but we would expect the refund if we are talking about kind of basis point reduction to be a little bit lower than in the prior two years. And the only reason we say that is, because I think in the past two years, farm credit has tried to give back a little bit more to help out local growers with the pandemic, mostly — most people think the pandemic is kind of a thing in the past. I am not sure if that will continue. It might, but that’s just kind of our expectation, but we really don’t have any information yet to estimate that.

Craig Kucera: Okay. Great. I think you had about $20 million in CapEx this year. Do you have any large CapEx projects in the budget for 2023.

David Gladstone: Well, we keep twiddling those down simply because we want to conserve cash, but most of those are related to making sure that we have water for our farms. So we have a lot of that going on. We are always spending money to make our wells a little deeper or pipes that are running from one farm to another one source to another. But we don’t have. I think the biggest one is about $7 million in it.

Lewis Parrish: Yeah. I think we had two sizable ones that came from recent acquisitions. One was an acquisition in Florida at — in December of 2021 and another one, Vineyards up in the Pacific Northwest and the State of Washington and Oregon in July. So we are — both of those two acquisitions were bought with the understanding. They were development projects, either expanding plantable acreage or planting new wine vineyards and installing new irrigation infrastructure. So that was part of the original underwriting of both of those deals and we are earning additional rent on both those projects as the funds are paid out by us.

David Gladstone: How big are those?

Lewis Parrish: I think one is about — Florida is about $3 million and the other one is about $2.5 million or so.

David Gladstone: Okay.

Lewis Parrish: And both of those will — the farm — the one in Florida is mostly complete. The one in the Pacific North West will continue for the, probably, for the rest of this year and into next year as well.

Craig Kucera: Okay. Great. And just one more for me, circling back to the receivable write-downs. I think earlier last year, you had a renewal where you took lower base rent in exchange for higher participation income and I think you actually referenced that in your commentary in the press release. Were any of those farms where you restructured the lease last year related to the rent receivable write-downs this quarter?

Lewis Parrish: No. That was a different farm in the Midwest that, we got our crop share and came out making some money on that farm. These tenants hadn’t gone any restructuring of leases like that.

Craig Kucera: Okay. Great. Thanks.

David Gladstone: Paul, have you got any more questions?

Operator: David, there are no further questions at this time.

David Gladstone: Oh! Shocks. We wanted more questions. Anyway, we thank you all for calling in and if you don’t have any more questions, you are going to have to wait till next quarter. That’s the end of this call.

Operator: This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.