Hello everyone, welcome to the Farmland Partners Inc. Q1 2023 earnings call. My name is Chatcha, I'll be the coordinator for this conference. After the presentation, there'll be a Q&A session where you can ask a question by pressing Star followed by one on your telephone keypad. If you would like to withdraw your question, you may press Star two. I would now like to hand over to Luca Fabbri, President and CEO, to begin. Please go ahead. Thank you, Chatcha. Good morning and welcome to Farmland Partners' first quarter 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. Thank you, Luca, thank you to everyone on the call. The press release announcing our 1st quarter earnings was distributed after market close yesterday. The supplemental package has been posted to the Investor Relations section of our website under the subheader Events and Presentations. For those who listen to the recording of this presentation, we remind you that the remarks made herein are as of today, May 4, 2023, 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 markets. We will also discuss certain Non-GAAP financial measures, including net operating income, FFO, adjusted FFO, EBITDARE, and adjusted EBITDARE. 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 first quarter earnings, which is available on our website, farmlandpartners.com, is furnished as an exhibit to our current report on Form 8-K, dated May 3rd, 2023. 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. 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, Paul Pittman. Paul. Thank you, Christine. We find ourselves in a very, very tough economic environment for sort of every asset class, with the exception of farmland. The farmland market continues to be incredibly strong, but our stock price reflects the turmoil in the markets generally. I won't talk much about the turmoil in the markets generally 'cause you're all, of course, living it. On the farmland side, farms are actively being bought and sold every day. Farmer profit is high. Lenders are lending on farms, and our assets are highly liquid and highly valuable, as the sales we've made in the last month and a half or so clearly show. Farmland as an asset class has always been, and frankly always will be, an asset class where roughly two-thirds of the return comes from appreciation, and one-third comes from the current yield. It appears to us that the market only values us based on that current yield. That is a deep mistake. We will continue to sell farms at very high prices, buy back our stock, and pay down debt. The stock is trading at a substantial discount to what it's worth. It appears to us that the market values our assets at about $1.1 billion. The private market values our assets at approximately $1.4 billion. That difference is what has created a huge discount in our stock. The kinds of assets we're going to sell are really a function of our long-term view of appreciation and yield on those assets. If we think that a set of assets does not have as strong a return profile going forward as other assets in our portfolio, we will look to sell those assets if we have strong offers. As a business, we've always said that we're not emotionally tied to any farm, so if someone makes a offer you can't refuse, even for a farm we love, we would of course sell it. Generally speaking, we are trying to trim from the portfolio those farms that we think will not appreciate as rapidly in the future as the other assets we own. Related to that is that this process will lead us to probably lighten up on farms that have long-term water risk. So what we've done so far is we have sold approximately $10 million of farms that the closings have already occurred on. We have $42 million of sales under contract, and we have approximately $40 million slated for auction this spring and summer. These sales are all occurring at very strong gains compared to what we have paid for those farms. The proceeds will go to pay down debt and repurchase stock. To date, we have bought back about 2.6 million shares at an average price of $10.33. We will continue to buy back stock until we have closed the gap between what we believe is the fair value of our stock and the price it's trading at. With that, I will turn the call over to Luca Fabbri to make some additional comments. Thank you, Paul. Today, I just want to spend a couple of minutes, kind of drilling down a little bit further in something that Paul already, kind of mentioned in passing. Specifically, agriculture and farmland markets in particular, are really kind of marching to a different drummer and, in general, and we are seeing this specifically in this environment. You know, as we look around in the general markets and we see a lot of turmoil, a lot of uncertainty, agriculture and farm economy are incredibly strong. The USDA projects 2023 to be the second or best year ever in terms of farmer profitability. Looking specifically at row crops, one specific benchmark that is widely used in the industry to predict profitability for row crop farmers is the spring pricing for crop insurance, and that was set at the second or third highest level ever for both corn and soybeans. This is in the context of yields per acre continuously going up thanks to technology and agricultural practices. Revenue for farmers is definitely going up. On the permanent crops is a little bit more difficult to make a widespread statement about the overall health of the farm economy because of the huge diversity of crops that we see there. Specifically as far as our portfolio is concerned, there has been a lot of uncertainty about specifically the impact of flooding and precipitation in California. As far as our portfolio is concerned, we haven't seen so far any widespread damage, albeit we are monitoring pretty closely the situation as the snowpack in the mountains is melting. On the farmland markets specifically, prices have seen a significant, if not blistering appreciation in the last 1.5 years- 2 years. They continue to be very strong. The appreciation itself after the huge gains that we've seen has slowed down or maybe flattened after the steep increases. We are seeing transaction volumes slowing down a bit, mostly because there is a scarcity of quality assets for sale. Whoever wanted to sell a farm pretty much has sold it already in the last couple of years because of the high prices, and therefore the markets have thinned down a little bit. Another important thing that I wanted to point out is that the specialist lenders operating in this market are very much open for business. Not only real estate transaction kind of markets are very healthy, but even the credit markets are very healthy. This is frankly similar to the situation that we saw in 2008, when the overall real estate lending markets was completely frozen, except in agriculture, where it was absolutely business as usual. It's really what's impacting us and our stock price right now is mostly macro factors. It's interest rates of course, that are impacting also specifically our P&L, even though the leverage in industry-wide is in the low teens and therefore is really not affecting the farm economy very much. The overall market turmoil with bank failures and global uncertainty and so on and so forth. As Paul said, I'm not gonna rattle down the list. You're all more than familiar with that. In this overall kind of scenario where we see a very strong farm economy and farmland markets and uncertainty in the market turmoil, we're very committed to creating value for our shareholders, effectively arbitraging between that healthy, active, and liquid private asset market and the public stock market that is very much in turmoil and a little confused. With that, I will turn now the call over to the company's CFO, James Gilligan, for his overview of the company's financial performance. James. Thank you, Luca. I'm going to cover a number of items today, including summary of the first quarter of 2023, review of capital structure and interest rates, detail on revenue build up, and updated guidance for 2023. I will refer to the supplemental package in my comments. As a reminder, the supplemental is available in the investor relations section of our website under the subheader Events and Presentations. Page numbers one through page nine contain the press release and related financial information, and page numbers 10- 19 contain the supplemental information. First, I'll share a few financial metrics that appear on page two. For the three months ending March 31st, 2023, net income was $1.7 million compared to $1.1 million for 2022, an increase of $0.6 million. Net income per share available to common stockholders was $0.02 compared to $0.00 for 2022, an increase of $0.02. AFFO was $1.6 million compared to $2.1 million for 2022, a decrease of $0.6 million. AFFO per weighted average share was $0.03 compared to $0.04 for 2022, a decrease of $0.01. If you'll turn to page five, I'll make a couple of comments on the expense side. Q1 2023 operating expenses were lower by $1.7 million compared to 2022, driven by lower cost of goods sold, general and administrative expenses, and legal and accounting expenses. It should be noted that property operating expenses were higher in Q1 2023 compared to 2022, driven by a one-time property tax expense of approximately $150,000. That tax was reimbursed by the tenant, increasing tenant reimbursements by that same amount. In other income and expenses, gain on dispositions was up $1.2 million in Q1 compared to 2022, while interest expense was $1.1 million higher in Q1 compared to 2022 due to higher rates. I'll skip ahead to Page 12 to make a couple of comments about our capital structure. Total debt at March 31st, 2023 was approximately $443.6 million. Fully diluted share count as of last Friday, April 28th, was 53.1 million shares. If you look at the table on the bottom of Page number 12, between the MetLife credit facility and the Rutledge Farm Credit Mid-America credit facility, we had undrawn capacity in excess of $159 million at the end of the first quarter. As discussed in previous quarters, $174 million of MetLife debt has or had rate resets in 2023. These would be loan numbers one, four, five, six, seven, and 10. In the first quarter, we renegotiated rates for loans representing approximately $109 of that $174 million, as shown in the table. In the second quarter, we have agreed to reset the rate on the $15.7 million MetLife loan number 7 to 5.87%. This goes into effect the first week of June. The reset loans also have increased flexibility to prepay without penalty, up to 40% of original principal balance per year. We have approximately $49 million under Loan number 10 that will reset in the fourth quarter of 2023. It should also be noted that the Rutledge Farm credit line had a decrease in the spread over SOFR that went into effect April 1st, 2023. The rate decreased from SOFR+ 195- SOFR+ 180. I will turn to Page 13 to provide an overview of our income statement. In 2022, we presented numbers in the category shown in the top table on Page 13. We talked about fixed payments, variable payments, direct operations, gross profit, and other items. This was an effort to make the business easier to understand. However, this presentation may have made it a little difficult to model the business because it did not detail out the building blocks that comprise the different categories. The second table on Page 13 does just that. It shows the building blocks for both the GAAP revenue line items and the supplemental categories. Reading down the columns, you can see what makes up the supplemental categories, and reading across the rows, you can see what makes up the GAAP line items. Page 14 shows these building blocks, the ones described on Page 13, for 2022 and the first quarter of 2023, with comments at the bottom to describe the differences between the periods. A few points to highlight are fixed farm rent increased as we acquired properties and renewed leases between the periods and decreased with disposition of farms between the periods. Solar increased in 2023 compared to 2022 as a large project in the state of Illinois commenced its construction phase late last year. Tenant reimbursements increased with that one-time property tax assessment of $150,000 and the related tenant reimbursement that occurred in the first quarter. In the fourth quarter of 2022, we acquired land and buildings for four agricultural equipment dealerships in Ohio under the John Deere brand. The accounting treatment classifies those acquisitions as financing transactions, so they appear on the balance sheet as loans and on the income statement as interest income. This accounts for the increase in interest income in the first quarter of 2023 compared to 2022. Variable payments were down $0.5 million due to lower performance in grapes and row crops, caused primarily by lower yields during the Q4 harvest period on particular farms. This was largely expected and a topic we covered on the last earnings call. Direct operations is the combination of crop sales, crop insurance, and cost of goods sold. Altogether, it was down $1.1 million in the first quarter of 2023 because of lower crop insurance payments and lower crop sales compared to 2022, largely in citrus. Other items decreased $0.3 million due to lower auction and brokerage activity at our subsidiary, Murray Wise Associates, in the quarter compared to 2022. It should be noted that there was a large transaction where our colleagues did a great job, but the seller decided not to sell. That accounts for nearly all the shortfall between the periods. On the next Page 15, we have the outlook for 2023 using those same building blocks described on Page 13 on the revenue side. Assumptions are listed out at the bottom of the page. I'll note some changes from the projections that we shared back in February. We sold approximately $7 million of assets in the first quarter and are projecting to sell in the neighborhood of $80 million-$100 million over the entire year, as Paul described a few minutes back. This number is an estimate, actual results may differ. On the revenue side, fixed farm rent has a net decrease of approximately $1 million-$1.3 million as a result of the projected dispositions. Solar and wind and recreation have small changes due to potential asset sales and updated views on solar options. There's an increase in tenant reimbursements due to that tax reimbursement that we talked about earlier. No changes on the direct operations revenue items at this time. Other items decreased compared to last quarter due to the lower revenue from auction and brokerage fees in the first quarter of 2023. Cost of goods sold is projecting a little higher due to updated expenses provided by third parties on properties under direct operations. On the expense side, property operating expenses are increasing due to that same one-time property tax item that we've mentioned a couple of times. No changes to general and administrative expenses at this time. Legal and accounting decreases with lower spend than we saw in the first quarter. Interest expense decreases slightly with the combination of projected changes in debt balance as a result of the potential asset sales, plus updated pricing and updated forward curves. We're estimating the last remaining interest rate reset for 2023, that MetLife Loan number 10, prices in the 5.5%-5.6% range. Weighted average shares decreases with projected share buybacks. This results in lower AFFO and also lower weighted average share count, generating AFFO per share in the range of $0.17-$0.25, slightly higher than back in February. This wraps up my comments for this morning. Thank you all for participating. Operator, you can now begin the Q&A session. Thank you. To ask a question, please press star followed by one on your telephone keypad now. If you change your mind and wish to withdraw your question, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. The first question today is from Rob Stevenson from Janney. Please go ahead. Good morning, guys. Paul or Luca, the 11 farms for $42 million under contract, what are they expected to close? Is that a second quarter thing? Is that ratably throughout the year? How should we be thinking about that? The bulk of those will be in the second quarter. Some will drift over into the third quarter. Okay. Then what about the auction process on those other farms? The auction process, second and third quarter. Okay. You know, when you think about that sort of $80 million-ish in whole, are those dispositions focused on the tree and some of the other specialty crops that you've talked about the volatility in reducing your exposure to, or are these mainly Midwest row crops? How should we be thinking about that in terms of, you know, what the portfolio looks like going forward following these sales? Well, one thing we're, we'll start doing to keep people like you informed and up to date is as we make closings, we may not do it on every transaction because there's a lot of times there'll be two or three closings in a week maybe, but we'll put out a press release so you can clearly see which farm we sold when it, when it finally happens, or, you know, when it closes. To your broader question, most of these sales have been row crop, but not in the Midwest. Row crop in other regions of the United States. The auctions are going to be a lot of our eastern Colorado assets and some Nebraska assets where we have water risk. We haven't yet, but we may consider selling some of the specialty crops for the reasons you and I talked about, you know, that you mentioned a second ago, as well as the fact that, of course, those things, California has long-term water risk, you know, on many of the assets. Okay. James, I mean, with some of these sale proceeds, if you're going to pay down debt, do you just pay down the Farmer Mac and Rutledge facilities? Is there other stuff that you would hit on before that? How do you think about the priority if you're gonna wind up paying down some debt as to what segments of debt that's gonna wind up being? Yeah, it's a good question. I'd say in general, we're gonna pay down the highest cost debt first. Today, that would be in some of our floating lines, the Farm Credit Mid-America line, Farmer Mac line next. We also have the ability to make repayments on our MetLife lines. Those that we've reset in 2023, we can repay about 40% in any one calendar year. The balance, we can repay about 20% in any one calendar year. One of the loans allows a higher percentage, but that's sort of a good rule of thumb. We have a good amount to sort of, in terms of use of proceeds that we could go after on that side. Okay. Last one from me. Any updates in terms of timing and/or events with the Saba Capital litigation? I don't think there's anything to report. Just, it's, we're on appeal and waiting. No, no news, no real activity in that in the last several months. Okay. Thanks, guys. Appreciate the time this morning. The next question is from Wes Golladay from Baird. Please go ahead. Hey. Good morning, guys. Can you talk about how you balance, you know, scaling the business versus buying the stock at a discount? Is there a limit to how much you'll sell? Yeah. I mean, obviously it's a balance. But, you know, the way I look at it is the cheapest farmland on the planet today is our stock. We're in this to make money for our investors, so, you know, if I can buy our farms for, you know, call it a, you know, $0.30 less than they're worth. I can, you know, on a dollar, on a, you know, 30% discount kind of numbers, why shouldn't we? I mean, that's the business is buying farmland inexpensively, and the cheapest farmland out there is our stock by miles. That's what we're really doing. As far as your question, look, we're not, we're not trying to go out of business. I mean, the team here, and me in particular, we built this business, we founded this business, but we're not too proud to, you know, aggressively buy back our stock if we think it's trading at a discount. As Luca said, it's frankly trading at this deep discount, in our opinion, for two reasons. The first is the general market environment, and the second is that the market appears unwilling to accept that appreciation is an incredibly big driver of farmland value and farmland investing. So we're, you know, we're demonstrating that that appreciation is real and that it's there. We're trying to signal, to be frank, in this phone call, loud and clear, that our stock is deeply undervalued, and we're out there, you know, putting our money where our mouth is on that point. Got it. Then when you look at the assets that you're looking to sell, are any of them at, you know, trough cash flows where maybe we're not gonna? They already trade at low cap rates, but even lower cap rates than normal just because the, you know, the business was maybe under a little bit of pressure for some of the farms? Well, obviously, when I said we focus on farms in which the long term, and what I mean by that is both increased rent opportunity and increased appreciation opportunity, where we think it's less than it is in other places in our portfolio. Obviously, relatively lower cap rate assets will, you know, often are on that list. It's an important piece of this that's for everybody to recognize. In general, the lowest cap rate assets in the portfolio are the Illinois type farms, the core of the Corn Belt farms. They are the highest return total assets we own. You combine appreciation, I mean, at that region of the country, those assets have gone up 25% in the last couple of years. It's not just a cap rate thing. That's the point we wanna make. You're right, there'll be a lot of, you know, there'll be more lower cap rate assets, I think, than higher. It's total return is what drives this asset class. It's what drives our. Yeah, I guess- Not just cap rate. I mean, cause the cap rate thing... Yeah, I just didn't understand it. The problem with the cap rate thing. Yeah, the cap rate thing, just to be blunt, the highest cap rates in the asset class are on the lowest quality properties. That's just how it works. Uh. We don't wanna chase the lowest quality properties. We wanna chase the best properties. The other thing that's important to grasp, is that what's really happening here is the market's valuing some asset at, you know, call it a 4 cap, and we're selling it at a 3.2 cap or something like that. I mean, it's different on every farm, but that is the crux of what's happening. The public market values us at a much... You know, and there's some sensible reasons for this, you know, the overheads of being a public company and all of that. The gap is just way too wide, and we're taking, you know, we're taking that as an opportunity, instead of just sitting on our hands and being frustrated about it, although we're frustrated about it as well. We're doing something about it. Got it. Maybe if you can just give us your view on any. Do you expect any weather-related impacts, you know, this year, whether it be a drought, you know, heavy, you know, snow pack in California? Maybe it could actually be a beneficiary if some crops are, you know, out of service or your crops can do well, your farmers can do well. Just your view on that. I am not going to predict the weather on this phone call, except to say the following. First, let's start with California. The incredible amount of rain and snowfall that California received in the last year is a great thing. There will be highly localized negative events for certain people. That's, you know, that's a natural disaster of the... that we should all feel bad about. The state of California is not going to flood. The hyperbole in the press is ridiculous. A ton of snow and a ton of rain is a really good thing for California in every way. Agriculture, your front yard's greener, the reservoirs for drinking water are more full than they've been in years. This is all good news. Don't get sidetracked by somebody giving you a headline in the popular press. Like I said, I mean, you know, sympathy to all the people that have a localized flooding event because there will be some. We think we're pretty safe on our farms. To the more general things, the drought on the weather. The drought continues in parts of the Western Grain Belt, you know, at Western Kansas, to some degree Eastern Colorado, Texas Panhandle. There's been more rain than there's been in quite a few years here in the last few months, and that's good. Hopefully, you know, that's gonna be, you know, the gradual global weather shifts to El Niño and La Niña are gonna, you know, make some improvements, we think. The rest of the country is off to a pretty good planting start, you know, so on and so forth. Obviously, we're mostly a cash rent in the row crop regions. We're not directly affected by any weather in a, you know, in any given year. We want our farmers to succeed, of course. We, you know, we think it's setting up to be a pretty good year across the regions from a weather perspective. I did predict the weather even though I said I wouldn't. Yeah. Thanks for that. I appreciate that. Being from California, it is nice to see the grass green now. Thanks for the time. Yep. The next question is from Craig Kucera from B. Riley Securities. Please go ahead. Hey, good morning, guys. Paul, I know you achieved 16% rent growth on your fixed cash rents in the row crops last year, you know, I think food CPI is sort of flattened out here in the, in the first quarter, lagging in the indicator, of course. Can you talk about the rent growth on the leases that rolled over in the quarter and maybe your expectations for the remainder of the year? Yeah. Hey, Craig. I'll take that. Remember our rent rolls, our rent lease duration is about three years. Now we are looking at rent leases that last renewed, you know, two years ago for a lease starting, you know, at the beginning of 2024. There has been quite a lot of appreciation in farmland values. There has been a lot of yield increases that happened in the meantime. We are expecting this to be still a relatively strong rent, you know, lease renewal cycle. We haven't really started it, you know, in kinda full depth because, again, we're looking at leases starting now at the beginning of 2024. Let me, yeah, let me just add a couple of things to that. You know, we've got, you know, round numbers, 10% rent increases on the row crop stuff two years ago, something in that bracket, maybe 10% to maybe 15%, that kind of bracket. We got 15%, 16% in the year we just have closed out. Now in the rent cycle we're in right now, I think we'll still get strong increases. Don't know if they'll be quite as strong as the 16% you referred to, Craig. The reason for that is, as Luca alluded to, the year that the sort of vintage of leases we're renegotiating right now, some of them were still negotiated under a relatively tough farm economy, so they didn't get big increases three years ago. Some of the ones we negotiated later in that year actually had pretty strong increases. We're kind of working off a higher base on an average basis than we have been for the last couple of years. I still think we'll get strong increases, but may not be quite to the level we had last year. Got it. Understanding that you're still kind of early in the process here, you know, as you discuss things with your tenants, are they looking maybe at any shift in, you know, maybe a rising amount of participating rents, or are you expecting things to be relatively constant? No, I mean, the structure of lease agreements is really more kind of a regional kind of crop basis. Just the different environment, and different farm profitability really wouldn't drive any changes in structures. we don't-. Okay, good. ... we are on the row crop side, overwhelmingly a cash rent model. We wanna stay that way. We do that for two reasons. Number one is just stability and the simplicity of managing the business from a standpoint of our accounting team and our back office efforts on the operations side. Cash rents are way more efficient and easier to manage. The second thing is we think that in the marketplace, over the long term, the risk-adjusted returns to using a cash rent model are higher than using some sort of flex model. In other words, you don't get enough on the upside to make up for what you're given on the downside. We drive a cash rent model. I think James has something to add, too. Yeah. I'd just add in that in our cash rent business, we generally are paid 50%- 100% of that rent before planting, kind of Q1 timeframe. Whereas if you're participating or getting variable rent, that would by definition be after harvest, kind of on the back end in Q4. From a cash flow perspective, de-risking perspective, it's a very nice feature to be de-risked on a meaningful portion of our rent very, very early in the year. Right. Thanks. appreciate that. Just one more for me. As you go through the auction process, of this, you know, roughly $40 million of assets, is that something that MWA is gonna handle, or is that, you know, going to third parties, and is that included in guidance if it is run through MWA? So, whenever we're doing, you know. Number one, or let me answer the question in a more broad sense. We are not incurring very many expenses for brokerage services and the like in these asset sales. There will be obviously some, but many of these transactions are occurring based on the relationships that the people here in Farmland Partners have with potential buyers of assets. We kinda know everybody in the market. Specifically on the auctions, MWA is handling the Nebraska asset sales for us, and then they are partnering with some people on the Colorado asset sales that, you know, we've worked with in the past. It's really kind of market-dependent. It's all about the depth of MWA's not only licensing, but experience in a given state, in terms of how they're, how they're involved. As far as the guidance question goes, I'm gonna turn that over to. Yeah. It's all kind of consolidated, so I'm not sure. Yeah. I'll let one of the James answer. Craig, in those numbers we're considering for kind of guidance, those are really sort of external revenue sources. The internal revenue would be consolidated out. On, you know, actually, on a cash basis, we are making sure to pay our colleagues arm's length rent as they would receive in any other type of transaction to make sure we're, you know, we're complying with all the necessary rules. But yeah, as you think about it, you know, that would be truly kind of third party fees that would flow through in the projections we've got so far. We'll continue to update that as we go throughout the year and see how the pipeline looks on their side. Okay. Thanks. Appreciate it. As a reminder, if you would like to ask any further questions, please press star followed by one on your telephone keypad now. It appears we have no further questions. I'll hand back to the management team to conclude. Thank you. We appreciate your interest in our company and look forward to updating you on our activities and results in the coming quarters. Have a great day. This concludes today's call. You may now disconnect your lines and enjoy the rest of your day. Thank you.