Hello, and welcome to Farmland Partners Inc.'s Q3 2023 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star one on your telephone keypad. I will now turn the conference over to Mr. Luca Fabbri, President and CEO. Please go ahead. Thank you, Sarah. Good morning, everybody, and welcome to Farmland Partners' Q3 Earnings Conference Call and Webcast. Thank you so much for giving us the opportunity to share with you our thinking and our strategy in a format a bit less formal and more interactive than public filings or press releases. Before we really get started, I will turn over the call to our General Counsel, Christine Garrison, for some customary preliminary remarks. Christine? Thank you, Luca, and thank you to everyone on the call. The press release announcing our Q3 earnings was distributed after market closed 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, October 26, 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, EBITDAARe, and adjusted EBITDA ARe. 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 Q3 earnings, which is available on our website, farmlandpartners.com, and is furnished as an exhibit to our current report on Form 8-K, dated October 25, 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, 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, Paul Pittman. Paul? Thank you, Christine. So I'll make a few general high-level comments before I turn it back to my colleagues. You know, the most important point from my perspective is that our stock continues to be very deeply discounted compared to its fundamental intrinsic value. You know, sort of as proof of my belief, you may or not noticed, but I bought $1 million worth of stock during the quarter. You know, I have never sold a share in the company and continue to grow my position because I'm a firm believer that we will ultimately access that value. We will continue selling assets at good gains and using those funds to pay down debt and buy back stock as long as this significant discount exists. And it's important to recognize that our gains to date have been very strong, but we are not selling the assets we like the most. We are selling assets that probably have been laggards in terms of appreciation compared to the rest of our portfolio. There is, as you may note in the financials, we had one sale that was actually at a substantial discount to what we had it on the books for. It's Grassy Island Groves. It's a relatively modest size transaction, but it is a citrus farm in Florida, and we fundamentally threw in the towel and got rid of the farm because that is an industry, in our opinion, that will not recover. That is the only citrus farm in Florida we had. But as many of you may know, in the last, you know, decade or 20 years or so, you've seen almost a 90% reduction in volumes of citrus in Florida. That is a tide that we just couldn't swim against, and so we've just let that farm go and move on. It's important to recognize that despite that loss on that farm, the overall returns on the asset sales we've made are still very, very strong. What we need to do next is obviously focus some on cost control as we have shrunk the size of the portfolio. We will turn to that as we get later in this year and the beginning of next year. But this strategy, you know, is fundamentally creating significant value for our shareholders, who decide to stick with us as we continue to execute on the strategy. With that, I'm gonna turn it over to Luca Fabbri, our CEO. Thank you, Paul. I would like to draw your attention to a few data points to kind of outline how we have executed on our strategy so far, as Paul has outlined and as we've discussed in past conference calls. In the first three quarters of the year, we have sold 54 properties for total proceeds of about $122 million at approximately 24% gain over net book value. After the close of the Q3, we have closed on an additional about $2.5 million in asset sales, and we have approximately $65 million of asset sales under contract or in advanced negotiations that we expect and hope to close by the end of the year. Of course, you know, there is, especially on the ones in advanced negotiations, there is still some degree of uncertainties about that. So we are projecting total asset sales for the year at about $190 million. So far this year, including slightly after the quarter, we have repurchased about 6.4 million shares at an average price of $10.98. So of those $124 million of proceeds, so far, we used about $70 million in common stock repurchases. We've also paid down about $8 million of Series A Preferred. We are now completely out of the market on the asset purchases side. We have completed a few transactions. We purchased about $20 million of assets, so we are really focused on improving our portfolio, not just selling assets. Last but not least, I want to draw your attention on the lease renewal cycle, you know, and how we are progressing. So far, we are about two-thirds of the way, and we are expecting to finish the year and end the lease renewal cycle up about 18%-20%, and, you know, hopefully even a little bit more than that. I will now turn the call over to James Gilligan, our CFO, for his overview of the company's financial performance. James? Thank you, Luca. I'm going to cover a few items today, including summary of three and nine months ended September 30, 2023, review of capital structure and interest rates, comparison of year-to-date revenue, and updated guidance for the year. I'll be referring to the supplemental package in my remarks. As a reminder, the supplemental is available in the investor relations section of our website under the subheader Events and Presentations. First, I'll share a few financial metrics that appear on page two. For the three months ended September 30, 2023, net income was up over 280% to $4.3 million, and net income per share available to common stockholders increased to $0.07 per share, largely due to gains on dispositions of assets. AFFO was down to -$0.5 million, and AFFO per weighted average share was down to -$0.01, largely due to elevated interest expense, lower performance in farms under direct operations, and lower auction and brokerage revenue relative to last year. For the nine months ended September 30, 2023, net income was up over 160% to $13.9 million, and net income per share available to common stockholders increased to $0.22. Again, largely due to gains on dispositions of assets. AFFO was down to about -$50,000, and AFFO per weighted average share was down to $0.00. Again, largely due to elevated interest expense, lower performance in farms under direct operations, and lower auction and brokerage revenue relative to last year. Next, we'll review some of the operating expenses and other items shown on page five. Depreciation, depletion, and amortization was a little higher in the Q3 of 2023 due to more depreciable assets placed in service and approximately $150,000 of adjustments made in the quarter. As a reminder, we had approximately $400,000 of adjustments last quarter related to assets placed in service. Property operating expenses were flat in the Q3, but a little higher year-to-date 2023, caused by higher property taxes, including a one-time property tax of approximately $150,000 in the Q1. That amount was reimbursed by the tenant and appears as tenant rev-- as tenant reimbursement revenue. In addition, we incurred a non-recurring expense in the second quarter of approximately $140,000 due to the final reconciliation, reconciliation of cost sharing on a California farm. General administrative expenses were a little higher in Q3 2023 due to increased compensation expense, but lower for year-to-date 2023, due primarily to lower stock-based comp and lower travel. Legal and accounting expenses were lower in 2023 due to lower, due to lower litigation spend. Impairment of assets in the Q3 of 2023, that relates to property held for sale. This is what Paul mentioned a few minutes ago. These are properties that were under contract for sale as of 9/30 and will close in Q4. This impairment generally represents the early recognition of a loss on disposition, which, by the way, is added back for purposes of calculating FFO and EBITDAre. Gain on dispositions is up compared to 2022, demonstrating the appreciation of farmland sales values over net book value. Interest expense increased in 2023 due to higher rates. Income tax was a benefit in Q3 and year- to- date 2023, relative to an expense in 2022. This was caused by adjustments within the third quarter of this year 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 September 30, 2023, was $422.8 million, down approximately $50 million from the end of last quarter. Fully diluted share count as of October 20, 2023, was 49.4 million shares. Moving down the page, we had undrawn capacity on the lines of credit of approximately $157 million at the end of the quarter. We agreed to the last MetLife rate reset of the year. That's MetLife number ten, which was reset to 6.36% for seven years. As a reminder, we can prepay 50% of that loan in any calendar year without penalty. Next year, we have three MetLife rate resets on debt totaling approximately $44 million. Page 13 provides an overview of our income statement and the building blocks that generate revenue and cost of goods sold. I won't go through it in detail, but please feel free to contact me if you have any questions. Page 14 shows these building blocks for the first three quarters of 2022 and 2023, with comments at the bottom of the page to describe the differences between the periods. A few points to highlight are: fixed farm rent increased between the periods as we acquired properties last year and renewed leases. That was offset by dispositions in the current year. Solar and wind and recreation changes were primarily caused by a large solar project in the state of Illinois that began its construction phase in the Q3 of last year. That quarter, Q3 2022, had a little bump caused by the commencement of that construction process. The Q1 and Q2 of this year benefited from that construction relative to the same quarters in 2022. Q3 2023 variance was caused by small changes due to property dispositions in the quarter and the absence of that construction-related bump in the Q3 of last year. Tenant reimbursements increased in Q1 2023, with that one-time property tax assessment and related tenant reimbursement. Q3 2023 decreased due to property dispositions. In the Q4 of last year, 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 2023 compared to last year. Variable payments were down in the Q1 and Q2 of this year due to grapes, row crops, citrus, and tree nuts. Q3 2023 was up, largely due to variable payments on row crop farms in the High Plains. Direct operations is the combination of crop sales, crop insurance, and cost to goods sold. It was down year-over-year, largely due to citrus and walnuts. Other items decreased due to lower auction and brokerage activity compared to last year. In summary, while the items that comprised fixed payments were up year-over-year, the items that comprised the other categories, variable payments, direct operations, and other, were down year-over-year. On the next page, page 15, we have updated the outlook for 2023 using the same building blocks described in the previous pages. Assumptions are listed out on the bottom. This contemplates that we dispose of approximately $190 million of farms in total for the year, as Luca described. As a reminder, this number is an estimate, and actual results may differ. On the revenue side, fixed farm rent will change with dispositions and new leases signed. Solar, wind, and recreation, tenant reimbursements, and management fees, and interest income all have small changes from last quarter. Variable payments decreased due to the outlook for tree nut farms that pay variable rent. Direct operations, again, that's crop insurance plus costs, plus crop sales, less cost to get sold, is up significantly due to lower expected cost to get sold on walnut farms under direct operations. Other items have small changes as we have improved visibility as we approach year-end. On the expense side, general and administrative decreases with lower spend year to date 2023. Legal and accounting also decreases with lower spend year to date 2023. Interest expense change with updated rates and higher expense year to date 2023. Weighted average shares decreased with share buybacks thus far. This results in AFFO in the $7.3 million-$9.9 million range, or $0.14-$0.19 per share, an increase from projections provided last quarter. Down at the bottom of page 15, we provide some additional information regarding next year. We've had various people asking about 2024, so we wanted to provide information where we have visibility. Please keep in mind these values consider the $190 million of dispositions we're currently considering, and of course, actual results may differ. Fixed farm rent will be approximately $3 million low, lower than guidance shown above, due to the full year impact of farm sales offset by positive lease renewals. Solar, wind, recreation will be approximately in line with guidance shown above. Tenant reimbursements will be approximately $500,000 lower than guidance shown above. This is due not only to asset dispositions, but also the one-time, tax reimbursement in the Q1 of this year that we don't anticipate occurring next year, and also, certain lease renewals that traded higher fixed rent for lower tenant reimbursements. Hopefully, this helps describe where we stand, given what we know today. This wraps up my comments for this morning. Thank you all for participating. Operator, you can now begin the Q&A session. Thank you. If you have a question, please press star one on your telephone keypad. To withdraw your question, simply press star one again. Your first question comes from the line of Rob Stevenson with Janney. Your line is open. Good morning, guys. Any clarity on this point, at this point on the need for special dividend and potential size of one? This is Paul. We will obviously end up, I believe, with some sort of special dividend. It hasn't been declared by our board yet, but I think we signaled that last quarter, and it's still likely to happen. The exact size is, you know, unknown at this point because you've got so many transactions that are under contract but not closed. Now, our history is most things that go under contract actually do close, but there's, you know, no assurance at this point. So I think it'll be, you know, probably into December before the exact number is known and put out into the public domain. Okay, and just to follow up on that, Paul, I mean, you know, I think that we're all sort of, you know, cognizant of the fact that in... You know, if you're selling office buildings or whatever, that lining up financing today on the buy side of that, to be able to finance the purchase is difficult. Can you talk about what the environment right now is for farmers and other interested parties to be able to go out there and line up financing at reasonable rates to purchase the assets from you and close in a timely manner, whether or not that's being held up at all? Yeah, I mean, this is, this is, it's a good question because, you know, one of the cores of our frustration and my personal frustration is we're not like all those other real estate assets for the following reasons. The food economy, the farm economy, is still incredibly strong, number one. Number two, it's not driven by institutional investors who have to go finance everything they buy. We're not a, we're not office buildings. It's not a REIT-dominated culture in agriculture. It's a farmer-dominated culture, and they got a lot of money in their pocket based on the last couple of years. Of all the farms we put under contract this year, we've only had one transaction that didn't close. It was an institutional buyer, largely for the reasons you're talking about. The farmer buyers are solid, and they close these transactions. The final point is that the debt levels in agriculture, on farmland ownership overall, is something like 13%. This is a cash-dominated market. Most of these purchasers don't get any financing, and so it's just not really in effect for us. Our asset values are appreciating rapidly and continue to do so because they're so tied to inflation. Market doesn't get it. I mean, I, I don't know what else I can do than, than make a big stock buy to prove to people that at least I am highly confident we are seriously, seriously undervalued. But no, we're not, we're not really worried about the financing market impacting the ability of these sales to close. Okay. Rob, just add that, it's an important distinction that Paul's drawing. In our sector, buyers and sellers are getting together. Our tenants are doing really well. To the extent they draw on working capital lines of credit to support their seasonal needs, banks are absolutely lending and open for business, and farmers are taking advantage of dedicated ag lenders. That's an important part of the sector. So it's a very different sort of market outlook than you might find in a different asset class as you referred to. Yeah. Rates are high, but to the extent somebody needs financing for an ag property, then there's plenty of people offering that money. Much better to have rates available at an elevated interest cost than no financing available at all. Okay. Speaking of the dispositions, how are you guys viewing where the sweet spot is right now in terms of the trade-off between, you know, paying down debt and repurchasing stock with the proceeds? Well, we're likely to continue to do both. The exact sweet spot frankly depends on, you know, interest rate outlook and stock price at the time. You know, I think we've been, you know, running more like, you know, this most recent quarter, we put a lot more money to debt reduction than we did to stock buybacks. You know, if you had to ask me to guess for the Q4, it'd be a 50/50 split, something like that. How much of that is determined also by the fact that some of these lines have a 50% max on the payment and wanting to get that done in calendar 2023 versus, you know, doing something the first week of January 2024? Not a big impact, although I'll let James add to that. Yeah. Yeah, Rob, we're, we're generally paying our, our floaters off first, which are higher rate today. And should we find ourselves in a position with so much, cash that we would want to make additional paydowns, there's a, there's a lot of, that we can pay without, without, any penalties. We have on our, on our MetLife lines, the lowest amount we can pay in a year is about 20%, and the highest is 50%. So that gives us quite a lot, that we could choose to pay down should we find ourselves with a lot of cash. Anything that's at an interest reset date could be fully paid off without penalty. That's right. So we have a huge balance sheet flexibility, should we suddenly find ourselves with substantial cash from asset sales. Okay. James, while I have you, I missed your comment on the crop insurance and why the guidance went up about $400,000 from the prior. What was that in relation to? Yeah, so some of that is kind of a mix between crop sales and crop insurance, and generally just better visibility as we are, you know, in different products, as we are sort of into or through harvest. We have visibility as to what's come off the trees and how that looks, and so we've just updated our guidance accordingly. Okay. And then last one for me. Luca, are there any known non-renewals in the 35% of the leases that you're left to renew at this point? Not really. I mean, we tend, as always, to kind of work with our current stable of tenants. If certainly not no renewals, I mean, we're not expecting to end up with any farms not leased by the end of the year. That's not what happens in this industry at all. You know, occasionally we choose to kind of improve the quality of our tenant pool by cycling some tenants off and getting new ones, but no negative expectations along those lines at all. Okay. And you said that you expect that that 35% is gonna be up similarly to the 65% in that sort of 18%-20% range? Roughly, yes. Okay, perfect. Thanks, guys. Appreciate the time this morning. Thanks, Rob. Thanks, Rob. Once again, ladies and gentlemen, if you have a question, it is star one on your telephone keypad. Oh, my apologies. We do have a question from the line of Tousley Hyde of Raymond James. Your line is open. Hey, guys. Thanks for taking my question. I was just wondering if you could speak to the current environment or sentiment surrounding the renewable energy side of your business. With rates rising and companies kind of looking at areas they can cut costs, have you seen any pullback in demand from these types of projects? No. The renewable energy demand across the country for AG properties is high and probably accelerating. You know, it's really gotta be looked at on a kind of a state-by-state basis because each state, you know, sort of has its own set of policies about that. But the states that have really become aggressive, there is just, you know, endless demand. I don't have the exact statistic at my fingertips, but we have an immense amount of optioned acres at this point with solar and wind potential. Optioned acres, as you probably understand, means they're basically paying you to stand still while they do a three to five year study of the property to see if it's feasible. You know, the percentage that end up from option into permanent projects has gradually grown through time. And early in this process, you know, six, seven years ago, kind of, you know, people were throwing mud against the wall and optioning every property. Now they're—because of the size of the option fees, which are often $50, $60, $70 an acre per year, the solar developers are actually doing quite a bit of due diligence before they even put it under option. So I—we're not seeing really any pullback there. As you know, it's very driven by government policy more than economics, and, you know, as long as those policies don't change, I think there'll still be quite a bit of demand for that. Got it. Thanks. All I had. Congrats on the quarter. Thank you. Your next question comes from the line of John Masoka with B. Riley. Your line is open. Hi. Good morning. Morning. Quick question. On the disposition front, sorry if I missed this in the prepared remarks, but what was kind of the rough split between row crops and kind of permanent crops in terms of the assets that were capital recycled out of? Luca, do you know in dollar terms? Because that's what's relevant, not acres. Yeah. I would say it's a relative minority of permanent crops, although we did sell some, and we have some under contract still. James is trying to quickly kind of- Yeah, I- Pull some numbers together. Yeah, it's... As Luca said, it's mostly row crops that we sold. Probably on the order of $25 million of permanent crops is what we sold year to date. So the vast majority has been in the row crop side of the portfolio. Yeah, but that's, that's largely reflective of the overall portfolio, just to put it in context, right? Okay. You know, we're about a 25%-30% specialty crop portfolio, and that's roughly what we've sold of specialty crops. Okay. And I know most of kind of disposition proceeds are going into kind of paying down debt and, and buying back stock, but, is there a significant difference or a meaningful difference in terms of the yield on dispositions versus what you're maybe seeing in the acquisition market or, or the acquisitions you have closed recently? Yeah. Yeah, I can take that one. So when we think about sort of what we're selling and plan to sell this year, we're looking at, you know, again, if everything closes, we're looking at selling kind of NOI yield that's approximately 3%, 3.1%. And we think what we've got in the portfolio today, given where we're at today, we're sort of trading at a higher yield. And our new acquisitions, we're targeting stuff that's north of that. And again, it depends on the region. We're being very selective, but we're generally looking at 4% or higher where we can find it. Okay. Yeah, I just wanna, I wanna amplify- But- I wanna amplify the point, though, 'cause it's incredibly important, and we talk about this almost every quarter. Two-thirds of the total return to farmland investing is the appreciation side. So what we're selling are the farms that are laggards in appreciation for a variety of reasons. That is largely the sales we've made. And, you know, the investments we're making are places where we think there is huge upside value going forward. You know, appreciation rates on Illinois farmland have materially higher through the last decade or so than almost anywhere in the United States. That is our largest location of investment. You know, Illinois is half the portfolio or something like that. And, you know, we're not selling there, and, you know, haven't at least yet to any major degree. So it's really important to recognize where the total return to the asset class comes from, and current yield is a, you know, highly secondary consideration. It's total value creation that we're focused on. Okay. Understood. And then one last one. In terms of the in-place portfolio, you kind of mentioned that you're largely out of or entirely out of the kind of citrus business in Florida. Any other places where maybe you're seeing distress on the permanent crop side? Has any of that kind of, you know, gotten worse, gotten better? Just any kind of color there would be helpful. Yeah, let... Yeah, I mean, what, what's going on? There's, there's-- first, on citrus, we're out of Florida. We still have substantial citrus holdings in California, and those have performed reasonably well over time. Complete-- due to a disease called citrus greening, which is a-- exists in Florida and essentially doesn't exist in California, has been a huge driver of that reduction in Florida citrus I talked about. To your question of other specialty crops, many of the specialty crops today suffer from two different problems. First is exposure to water risk in California in particular, and that's exposure to the actual availability of water, but frankly, more significantly, the exposure to political risk surrounding water in the state of California. We're, you know, as we've said several times, we're kind of lightening up on anything in our portfolio that has significant water risk. We sold a lot of assets in eastern Colorado, for example, for that reason. The specialty crops that, you know, are-- have been struggling, some of the tree nuts, walnuts in particular, are difficult at this juncture. You know, we own a blueberry asset in Michigan. That's-- the blueberry business in Michigan is under a significant amount of pressure. The reason for that is that there's been a massive amount of planting of blueberries in the Pacific Northwest and some in the southeastern United States. You know, in my opinion, that's not as good a blueberry, but you don't get to taste them before you buy them in the grocery store. They're big, plump, easy to market berries, and they, you know, they're taking a lot of demand away from a Michigan berry, which is much closer to a wild strain berry and is, you know, frankly, way more flavorful. But the, you know, the person that goes in the grocery store buys the ones that look really, you know, big and uniform in size. And so it's hurt the Michigan blueberry business. So those are, you know, places we have, you know, some challenges. They're luckily relatively small portions of the portfolio. Okay. I appreciate the color. Thank you very much. There are no further questions at this time. I will turn the call back to Luca Fabbri for closing remarks. Thank you all for joining us this morning. We appreciate your interest in our company and look forward to updating you on our activities and results in the coming quarters. This concludes today's conference call. We thank you for joining. You may now disconnect your line.