Gladstone Land Reit Corp Stock

Greetings, and welcome to the Gladstone Land Corporation Second Quarter 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the call over to your host, Mr. David Gladstone, Chief Executive Officer. Please go ahead, sir.

Well, thank you, Melissa, for that nice introduction. This is David Gladstone, and this is the quarterly call for Gladstone Land. And thank you all for calling in today. We appreciate you taking time out of your busy day to listen to our presentation and get some updates from us.

First, we'll hear from Catherine Gerkis, she is our Director of Investor Relations, to provide a brief disclosure regarding certain regulatory matters concerning this call. Catherine, go ahead.

Thank you, David, and good morning, all.

Today's call may include forward-looking statements, which are based on management's estimates, assumptions and projections. There are no guarantees of future performance, and actual results may differ materially from those expressed or implied in these statements due to various uncertainties, including the risk factors set forth in our SEC filings, which you can find on the Investors page of our website, gladstoneland.com. We assume no obligation to update any of these statements unless required by law.

Please visit our website for a copy of our Form 10-Q and earnings press release, both issued yesterday for more detailed information. You can also sign up for our e-mail notification service and find information on how to contact our Investor Relations department. We are also on X at Gladstone Comp as well as Facebook and LinkedIn, keyword for both is the Gladstone Company.

Today, we'll discuss FFO, which is funds from operations, a non-GAAP accounting term defined as net income, excluding gains or losses from the sale of real estate and any impairment losses on property plus depreciation and amortization of real estate assets. We may also discuss core FFO, which we generally define as FFO adjusted for certain nonrecurring revenues and expenses and adjusted FFO, which further adjusts core FFO for certain noncash items, such as converting GAAP rents to normalized cash rents. We believe these metrics can be a better indication of our operating results and allow better comparability of our period-over-period performance.

Now I'll turn it back to David Gladstone.

All right. Thank you.

Let me just talk about the portfolio we have. We currently own about 98,000 acres across 142 farms and about 56,000 acre feet of water, which is about 18 billion gallons. Our farms are in 14 different states and our water assets are all in California. We didn't have any acquisitions or dispositions this active quarter. But quarter end, we sold a property consisting of 2 citrus farms in Florida for about $3 million. It was a small amount of acreage. The original tenant had defaulted on the lease and the replacement tenant was at a substantially lower rental rate.

And given the continued weakness of the citrus markets, we felt it was best to sell the property and use the proceeds to pay off some related mortgages or some other assets that we want to do something with. We may consider selling some additional farms over the next few quarters as part of our ongoing portfolio review. If we use most of the proceeds to pay down debt and buy back preferred stock, it will be very strong for us.

We continue to take a disciplined approach to the acquisitions and staying active in the market, so we're ready when the conditions improve. And it makes sense for us to start growing the portfolio again. And that will be when interest rates have gone down. So anything you can do talking to the Fed and telling them to lower that rate, we'll be pleased to do some more transactions. As we've discussed in all of our prior calls, I think, forever now, due to the market permanent crops, particularly nuts and wine grapes, we modified the lease structure there so that a handful of farms to reduce the grower's fixed cost while allowing us to participate more in the upside with higher crop share participation. So we are becoming much more involved in the operations.

Overall, the 2025 almond and pistachio harvest were very strong with yields generally exceeding expectations. While the final pricing of the pistachio crop has not yet been determined, believe that, it just takes forever to get all these things done. We received indications from certain processes that our final price is expected to be higher than the prior year. So we expect to recognize a meaningful amount of additional revenues from that harvest in the fourth quarter of this year. We entered into similar arrangements for most of these farms for 2026 crop. So we're continuing down the same path that we set up to get us through all of that past problems. Majority of the related revenues and earnings again being recognized during the fourth quarter. So you'll hear from our accounting staff about how much we've got of that later.

And I also want to remind everyone that the crop insurance continues to play an important role here as it helps to limit the downside risk on the farms, particularly given their strong production history. If we could be a big year and then have some problems insurance always protects us from the big downside. Our goal is still eventually transition these farms that we're doing on a shared basis back to more traditional lease structures with fixed base rent. But the time of that will depend on several factors, such as crop production, pricing, interest rates, input costs and most importantly, water availability, we're finding some problems out there with the water availability.

Looking ahead, we have 6 leases scheduled to expire over the next 6 months. In total, these leases are about 3.5% of our leasing revenue for the year ending 2026. We're currently in discussions with both existing and prospective tenants that we expect to be able to renew each of the leases prior to the expiration. We're also pursuing several alternative revenue opportunities, including water leases. We've got farms that have water, and we can lease that out. And following the programs and some of the solar things that have been talking about in 4 of our tenants, we've received some cash rent payments from a couple of these tenants during the quarter. But we'll keep them on nonaccrual status until we see a consistent pattern of timely payments.

We'll stop here and turn it over to our Executive Vice President, Bill Reiman. He's out in California. Is that where you are today, Bill?

Yes. Actually in Idaho today, David. Thank you.

As David said, the second quarter really is highlighted by really strong demand in almond and pistachio markets. We've seen almost weekly price increases in almonds and really strong bumps in pistachio grower pricing. We also reported last quarter about early marketing bonus that was announced in February. We received that in April. So yes, and I also read that just yesterday that these are the strongest almond prices we've had in 10 years. Haven't done that research myself, but those trends are really good. This upward trend in crop prices, coupled with really a largely uneventful quarter as far as weather and growing conditions are concerned, has kept our budget projections on track to outperform the 2025 crop year and tracking really well for 2026.

Our primary pistachio processor recently announced an expected final pricing for 2025 crop of at least $2.70 a pound per split in-shell, certainly is higher than we have projected all year. They also announced initial pricing for 2026 of $2.50 a pound per split in-shell, which is 2/3 higher than it was for last year. So these are significant gold price increases that will have a major impact on all of our properties under modified lease arrangements, ones we operate directly and even our crop share lease agreements. We began shaking almonds on July 28. So harvest season is here. The almond crop in our properties looks slightly larger than last year's crop. So we expect at least the same yields, maybe a little bit better. Reports across the state are saying yields in general are slightly lower, which is one of the factors supporting these price increases.

Pistachio ordered everywhere extremely light like we reported last quarter. We believe the overall industry was a little overly optimistic initially, but because we were projecting a much lower crop than many of our neighbors. But in the last 30 days or so, that reality has settled in. And that in turn has caused buyers to bump up offers for new crop to levels that are way above last year.

Crop expenses continue to track within our original budgets. There's been a lot of discussion in marketing circles about how to handle such a down year without jeopardizing what's likely to be a very strong production year in 2027. We feel our processors are positioned in the industry to maintain pricing so that 2027 will be 2025, even if we have a barn door busting crop yield.

Wine grape market really hasn't changed a lot. The 2026 crop is early, harvest has started all over the West. So we expect that '26 crop to be down and not just because of removals, just the crop looks light. It's an encouraging sign and couple that with bulk wine inventories finally getting closer to manageable levels. We hope to see better demand for new crop this year and in the next couple of seasons. So we may be finally -- we may finally be at a place where the industry is on the backside of the oversupply situation.

In real estate markets, we talked last quarter, we think in the Western U.S., we think most real estate markets have bottomed out and are starting to get stronger again, are seeing a strong divergence in valuations around water cost and availability. So properties with good cash flow potential are also getting strong attention. Coastal California values remain flat with higher than normal inventory. Pacific Northwest is stable with really good properties transacting swiftly. I'd say values and rents are stable. Stable interest rates, combined with profitable crop price and tree nuts is resulting in a little more lending activity. We're seeing growers a little bit easier getting lines of credit, appears these banks have money to lend. There's a clear path to cover debt payments, financing deals can get done.

And I'll end my portion on water. Winter was a little disappointing, particularly from a snowpack perspective and federal water allocations were really disappointing. We did get an additional 3% bump in allocation yesterday, which doesn't sound like a lot, but it helps not only free up a little bit of water, but lowers the pricing in some of our water deals that we have in place. We're finding decent purchase opportunities, but we remain diligent and conservative with what we go after. Our goal is to only acquire water at a price that fits into the economics of a particular crop in a particular area.

Look at the long-term forecast, weather forecast, I think everybody sees it in the newspapers and online, a very strong El Nino situation coming this winter. So we're making preparations for a long water situation for next -- this upcoming winter. So there should be some really good opportunities for water acquisitions and beyond just acquisitions, flood flows, that's kind of what we're keeping an eye on being able -- being prepared to take on excess water during storming periods. So the team continues to evaluate all these opportunities and the goal continues to be to strengthen the overall water security of the portfolio, both through long-term, short-term strategic water purchases and continue to invest in water delivery, storage infrastructure and identifying opportunities to create synergies across our farm assets.

That's it for me, and I'll turn it over to our CFO, Lewis Parrish.

All right. Thank you, Bill. Good morning, everyone.

I'll start with a brief update on some recent financing activity. We did not secure any new borrowings or repay any loans during the quarter. However, after quarter end, we repaid a $3 million mortgage loan in connection with the property sale that David mentioned earlier. In addition, during the quarter, we added several unencumbered properties to certain existing and new credit facilities that increased our immediately available capital by about $50 million. We issued about $14 million of common stock under the ATM program earlier in the quarter at an average cost of capital of about 5.5%. Those proceeds were used to repay our line of credit and fund preferred stock repurchases. We have not issued any additional shares since April, given where the stock has been trading. Also since April 1, we've repurchased $13 million of preferred stock at an average repurchase yield of 7.2%, resulting in a total gain of about $1.1 million over that time.

Turning to our operating results. For the second quarter, we reported a net loss of about $8.5 million and a net loss to common shareholders of $13.5 million or $0.32 per share. Adjusted FFO for the second quarter was negative $1.6 million or negative $0.04 per share compared to negative $3.5 million or negative $0.10 per share in the same quarter last year. The improvement in AFFO was primarily driven by higher operating cash revenue and lower interest costs, partially offset by higher property operating expenses.

Year-over-year fixed base cash rents increased by about $900,000 and it was driven by rent that we collected from certain tenants that remain on nonaccrual status as well as leases executed over the past year. These increases were partially offset by the lost revenue from farms that were sold over the past year. Participation rents increased slightly, primarily due to higher almond prices for the 2025 crop. Direct farming operations generated a net profit of about $590,000 during the quarter, primarily driven by the harvest and sale of an orange crop on a Florida farm following the early termination of a prior tenant's lease as well as higher almond prices.

On the expense side, our recurring cash operating expenses increased by about $560,000. Total related party fees increased primarily due to a higher administration fee and the increase in property operating expenses was largely driven by higher professional fees associated with protecting water rights on certain farms in California and also additional costs related to properties that were vacant, directly operated or on nonaccrual status. And G&A expenses increased primarily due to higher stock-related expenses and increased professional fees. And finally, cash flows from operations increased largely as a result of higher cash receipts from participation rates and crop sales, a decrease in cash allowances paid to certain tenants and lower interest payments.

Turning to liquidity. We currently have about $125 million of immediately available capital, and we also have about $110 million of unpledged properties that could be used as additional collateral. Over 95% of our borrowings are currently at fixed rates with a weighted average interest rate of 3.45% locked in for an average of another 2.3 years. Looking at upcoming debt maturities, we have roughly $33 million of loans maturing over the next 12 months. Given the value of the underlying collateral, we do not anticipate any issue refinancing these loans should we choose to do so.

In addition, we had $17 million of scheduled principal amortization payments over that time, representing less than 4% of our total debt outstanding. We also have about $148 million of loans with fixed rate terms that are scheduled to reset over the next year, though the loans themselves are not maturing. This includes about $130 million of loans under our MetLife facility that are scheduled to reprice in January of 2027. We are actively evaluating all of our options with respect to these loans ahead of the scheduled resets.

Finally, regarding the common distributions in July, we declared a monthly dividend of $0.0467 per share for the third quarter of 2026, keeping the dividend flat. At current stock price of $8.21, a 6.8% annualized yield, which is well above the REIT sector average.

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

Well, thank you, Lewis.

Overall, demand for prime farmland growing berries and vegetables remains stable across most of the regions, particularly along the coast of California. We're also starting to see some signs of improvement in certain permanent crops, both the pricing and the broader economics around those crops. So we are very hopeful that the worst is over and behind us, but it's still too early to say that we are fully in the clear.

In closing, over the long run, we expect inflation, particularly in food sectors that we're in to continue to move higher, and we expect the values of the underlying farmland to increase over time as a result. And we expect this especially to be true with regard to healthy foods such as fresh fruits and vegetables and nuts, and long-term trends toward healthier eating habits continue to grow.

Now I'll open up for questions. Operator, would you come on and please direct us?

[Operator Instructions] Our first question comes from the line of Gaurav Mehta with Alliance Global Partners.

I wanted to ask you on the participation rents. If you could provide some color on how much participation rents are you expecting in the second half of this year?

I don't think we're prepared to give a final number yet just because the pistachio pricing is still in flux, the bonus for the '25 crop. We do have a pretty good handle. We know what the initial pricing for the '26 crop is, but yields are still unknown at this point. But I'll let Bill comment on this more. But given where we think we see yields and given higher pricing, we are expecting higher amounts this year, but I don't think we're prepared to give a final range of what that number is going to be. But Bill, anything you want to add to it as far as what yields are looking like?

Yes. I would just say it's so early. Of course, we're starting almonds, like I mentioned, but it's -- we're literally just less than 2 weeks in. So it's just too early to have a lot of confidence in any trends we see so far. So far, so good, but there's a long way to go. And then pistachios, we probably aren't going to start anything until closer to the 1st of September. So yes, just way too early on the crop yield side to give any decent guidance there. But pricing is so much stronger than a year ago. So we feel that those things are pushing us towards the positive.

Second question on the -- second question, a follow-up on the second quarter fixed revenues. Were there any nonrecurring onetime items in the revenue number for the second quarter?

There was one item that we received some cash payment from a tenant who we placed on nonaccrual status last quarter, Q1 of '26. We did receive a cash payment from them this quarter. I think for the quarterly revenue, that was about $700,000. We would like for that to be recurring. But given that we're keeping that same on nonaccrual status, I wouldn't bake it in as a recurring payment at this time.

All right. And the last question, can you provide some details on the impairment charge you recognized on 4 farms in Arizona?

Yes. That was one property that property has -- consists of 4 different farms down in Arizona, we signed a PSA with a buyer subsequent to -- well, subsequent to quarter end. So we marked it down to the purchase price -- sale price per that agreement. That transaction has not closed, but we are expecting it to close hopefully in late Q3, possibly early Q4 at this point.

Our next question comes from the line of Craig Kucera with Lucid Capital Markets.

I want to walk through the pistachio market update. I appreciate the additional color. I think last quarter, we were discussing how you received about $0.50 a pound in your first quarter marketing bonus. I thought it might be anywhere from an additional $0.40 to $0.90. Based on this update, it looks like you may be expecting towards the high end of that range, like an additional dollar per pound this year.

I would definitely say it's on the upper end of that range.

Craig, just to add to that, just based on what the processor said, they didn't kind of commit -- would necessarily commit to it, but with the expectation being at least $2.70, that would imply an additional bonus of at least $0.70 per pound. Read into that "at least part" what you will, but that does have us thinking that it's going to be on the higher end of that range that we gave.

Got it. Okay. And I guess just mechanically, how should we think -- you're starting here at $2.50, which is up 2/3 from last year. How should we think about the timing of when that's recognized? Like should we think maybe 1/3 this year and then 2/3 next year? Or how should we think about that?

Well I think a lot of it is going to play into the -- a lot of it is going to depend on the yield. But just speaking from a pricing standpoint, that $2.50 is the initial guaranteed price. So we will get $2.50 per pound that gets delivered to the processor. The bonus on top of that, which could be $1, could be more, that will be recognized in 2027 of Q4. Now the yield piece of that equation is what's not known yet. Again, I won't -- I'll let Bill comment further, but this is an off year for pistachios, couple that with the weather event, the yields are expected to be down from last year. Is it going to be fully offset by the large increase in pricing? That's kind of TBD at this point.

Bill, any further from your side on that?

Yes. I mean, yields, obviously, we haven't started yet, but it is a down year. The fruit on the trees is kind of a mess. There's blanking -- you start with a down year to begin with and naturally down year. And then you have this heat spell in March that messed up pollination. So you had a lot of crop drop and the crop is hanging in the trees, a lot of blanks, a lot of issues, small sizes. We're seeing that in almonds as well, and that's across the border, small sizes. So that puts downward pressure on yield. So it's just -- this year is just a bit of a wildcard on crop yield.

But we'll know by mid -- it should be in by mid-November on pistachios. And so we'll know what that -- our total production is going to be. And like Lewis said, multiply that by the $2.50, and that's this year's pistachio revenue, plus any blocks that we have in crop insurance claims on which we've already opened some crop insurance claims because we know we have some blocks that we know we're going to be under our crop insurance breakpoint. So it's a little bit hard to forecast at this point in time crop yield and how the crop insurance is going to get paid out.

[Operator Instructions] Our next question comes from the line of John Massocca with B. Riley Securities.

So maybe starting with the vacant assets you still have today, any update on potential resolutions for those 10 farms?

Yes. Quite the majority of the acreage, we think we are close on getting some alternative leases in place, as David mentioned, solar leases, maybe some cattle leases on couples some of that following programs. We do think we'll have some of those executed before the end of Q3. Others, we're looking at -- we're still talking with new tenants, hoping to get somebody on. Bill, any more progress that you want to note on some of these alternative leases that we're working on?

Yes. I mean everything just seems to move slower these days, but we have activity on virtually all of them of getting something in place. In some cases, the deal is already made and we know what we're going to receive and when we receive it. We just don't have the contracts completed. So there's minutia there that we're dealing with. But yes, I would say, in most cases, we're getting there.

I would also note that most of the acreage that's been vacant recently the reason for that was a transition. A lot of -- we pulled a lot of almond trees out, and those are properties that are classified as vacant. But just -- it took a long time to get the trees out, took a long time to get those properties cleaned up. And then at the same time, working on what is next for those has been going on. So I don't think that is -- I just think it's important to note that there was sort of a -- the timing here is -- didn't stretch out primarily because of that transition that we had to go through.

And just maybe kind of rough brackets, any potential ballpark on what the NOI contribution could be from those vacancies being resolved?

Well, some of -- we could get close to their historical performance.

From the 3 that we think we're closest on that, we think that could be an annual add of about $1.5 million.

Okay. And then in terms of upcoming lease expirations, any color you can provide on how discussions are going with existing tenants, new tenants, just outlook for those properties as those leases roll?

Just looking at the next, I guess, the next 6 months out, they're pretty standard leases we expect to probably renew with each of the existing tenants at similar terms. The rent from these expirations over the next 6 months that makes -- they make up about 3.5% of our current annualized rent. So we would expect those numbers to stay pretty flat.

Anything to maybe be aware of going forward that could cause kind of oscillations in property operating expenses? You mentioned water. I know some of your leases have kind of water contribution agreements. I don't know if that could be kind of a variable given we might be in a bit of an interesting patch in terms of water availability between now and El Nino. But just kind of curious how to think about that operating expense line item going forward.

So there is one -- I'm sorry, go ahead, Bill.

No, go ahead. I was just going to say that with this -- with yesterday's announcement on federal water allocations, and I touched on it that it was a 3% increase. And without getting too complex in how water is priced, there's a published tiered system on water pricing. And by increasing allocation by 3%, it bumped us into the next category or bumped down to the next category in terms of pricing. So the domino effect is that pricing and valuation of supplemental excess water for now until the next water year starts, all goes down, right? So I would say maybe even last quarter, we were feeling like, maybe water pricing as we get towards the end of the year is going to be up and that might cost us a little bit more money to finish out the year.

Now we're looking at the opposite where that feels like it's going to -- that water -- that pressure -- upward pressure on water expense is actually going to be reversed. So just that little move is going to have a -- could have a big impact for us. And then we see more water becoming available here as we get towards the end of the season. One of the things that happens, the state has been a little more aggressive than the Feds, but they've been pretty conservative with releasing water out of reservoirs. So reservoirs are above average for their historical levels. And then with the threat of a wet season coming, they need to make room. So different owners of different water are going to be looking to sell stuff. And as we get closer to winter, those prices go down. So we feel like water as an operating expense, there's some downward pressure here as we head into winter.

And John, just to add a little bit more color as far as how that impacts the financial statement line items. There is one property where we are responsible for bringing a portion of the water to the property. I think in Q -- we usually recognize the cost of that water usage 1 quarter in a arrears. And that's just because it takes time for the final numbers and costs to get processed through the water district and made known to us. So I think in Q1, we recognized about $200,000 of that water cost, and that's water that was actually used in Q4. Most of this water is probably going to get used in the second half of the year. So I would expect maybe a slight uptick in Q4, recognizing water that was used in Q3 as well as Q1 of '27.

Okay. And then lastly, just because it's kind of topical. I mean any tenants with exposure to kind of leafy green cultivation and any impact you're seeing there at all? I know it's probably not a big portion of the portfolio. I just kind of want to check.

I was wondering when this question might come up. Definitely negative impacts from that. The -- a lot of our farms are -- in those areas are growing berries. But the cyclospora outbreak, which hasn't been linked to any domestically grown fresh produce, it just seems that the way that information is moving around has caused a decrease in demand for all fresh produce. And it's -- look, in fresh produce, we're used to it. We're used to quick moving markets and ups and downs. So as long as this doesn't last very long, it will be just a blip on the screen. But as of right now, across all of fresh produce, demand is down, markets are down, and we'll see planting sort of back off. And we'll just see how this plays out as we transition into winter.

Operator, any further questions?

No, Mr. Gladstone, there are no other questions. I'll turn the floor back to you for final comments.

Okay. Thank you very much. Well, this is a kind of bumpy call that we have, but the second quarter is probably our worst quarter in trying to figure out what's going on in the marketplace. We'll have a lot more for you next quarter, and hope you save up all those good questions for us to answer. That's the end of this.

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.

Greetings, and welcome to Gladstone Land Corporation, First Quarter Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I would now like to turn the call over to Mr. David Gladstone, Chairman and Chief Executive Officer. Thank you. You may begin.

Well, thank you so much for that nice introduction. This is David Gladstone, and welcome to the quarterly conference call for Gladstone Land. Thank you all for calling in today. We appreciate you taking time out of your day to listen to our presentation. First, we're going to hear from Catherine Gerkis -- she's Director of Investor Relations. She's going to provide a brief disclosure regarding certain regulatory matters concerning this call today. Catherine, go ahead.

Thank you, David, and good morning. Today's call may include forward-looking statements, which are based on management's estimates, assumptions and projections. There are no guarantees of future performance, and actual results may differ materially from those expressed or implied in these statements due to various uncertainties, including the risk factors set forth in our SEC filings, which you can find on the Investors page of our website, gladstoneland.com. We assume no obligation to update any of these statements unless required by law.

Please visit our website for a copy of our Form 10-Q and earnings press release, both issued yesterday for more detailed information. You can also sign up for our e-mail notification service and find information on how to contact our Investor Relations department. We are also on X, @GladstoneComps as well as Facebook and LinkedIn. Keyword for both is the Gladstone Companies.

Today, we'll discuss FFO, which is funds from operations, a non-GAAP accounting term defined as net income, excluding gains or losses from the sale of real estate and any impairment losses on property plus depreciation and amortization of real estate assets. We may also discuss core FFO, which we generally define as FFO adjusted for certain nonrecurring revenues and expenses and adjusted FFO, which further adjusts core FFO for certain noncash items, such as converting GAAP rents to normalized cash rents. We believe these metrics can be a better indication of our operating results and allow better comparability of our period-over-period performance.

Now I'll turn it back to David Gladstone.

Well, thank you, Catherine. And just to remind you all, we still own about 99,000 acres across 144 farms. About 56,000 acres of -- acre-feet of water, which is more than 18 billion gallons. Our farms are in 14 different states and our water assets, well, they're all in California. That's where it's the driest. We didn't have any acquisition or sales activity during the quarter, but we may consider selling some additional farms during the next few quarters. If we're able to complete some of those, we'd like to use most of the proceeds to pay down debt and buy back preferred stock. We've been doing a lot of that. We continue to take a disciplined approach as we always do to these acquisitions and active -- there's some activity in the market now, but not much, still kind of slow. When conditions improve, it may make sense to start growing again. So we're watching all the numbers and trying to determine where we're going to go from here.

Let me talk about a couple of leases. Prior to the call, due to market conditions affecting certain of our permanent crops, particularly the nuts and the wine grapes, we modified the lease structures -- lease structures so that we can handle a couple of different things. Fixed costs were allowed to participate more in the upside because we're in the higher crop share participation. We've modified our leases so that we're taking a lot more risk in terms of growing, and we continue to operate 2 properties with the help of third-party growers. Overall, 2025 harvest came in very strong. We were all wrong, including the U.S. government. Imagine that they projected things wrong. Particularly on the almond side and pistachio side, the yields were generally meeting or exceeding our own projections. And the 2025 crop just continues paying. We keep getting money in.

We signed up most of these same farms under the similar agreement that we had in '26. So we expect to see some similar earning patterns this year. I think it would be very hard to meet or exceed those things that we did last year. That was quite a year of 2025. And I also want to remind everyone that the crop insurance continues to play a very important role to all of us. It helps us limit the downside risk on the farms that is if something happens, which sometimes does, we can call on the insurance to give us some money back.

Our goal is to eventually transition all of our farms back to more traditional lease structures with fixed-based rents. But the timing of that will depend on several factors that are out there today. Most importantly, we've got to get some lower interest rates. I don't know what's going on over at the Federal Reserve, but they just aren't playing the game they need to play. Looking ahead, we have 5 leases scheduled to expire over the next 6 months. In total, these leases represent about 4% of our total lease revenue for the year-to-date in 2026. We're currently in discussion with both of the existing tenants that are in these -- that 2 of these properties are in and the prospects of new tenants about leasing any of these farms. I think we'll have them all back in shape.

And now I'll give a quick update to some of the ongoing tenancy matters that we're working through. Currently have 8 farms that are wholly or partially vacant, and we're actively working towards solutions to get these farms back into a stable. We think we're getting close to a few of these, and I think we'll be in good shape before the year ends. We're also currently recognizing revenue in a cash basis for leases with 4 tenants. We were able to resolve one of those situations during the quarter, but we're adding 2 new tenants to the list after they fell behind on their rent payments. I'm going to stop here, and we'll call in the guy who's really in touch with the world of farming. That's Bill Reiman. He's been reporting much of our current management focus. And Bill, do you want to come on board?

Yes. Thanks, David. Good morning, everybody. As we've been reporting, much of our current management focus is on these properties being operated under the modified lease agreements or farmed directly utilizing third-party farm operators. with the marketing season for almonds and pistachios for the 2025 crop about half done, we're seeing prices firming up, especially with pistachios. Couple that with our crop yields being larger than forecasted, our final crop revenue and profit numbers for 2025 should beat our expectations. Looking forward to the 2026 season, we are through winter, which ended with a very meager snowpack in most Western U.S. watersheds, although many areas where our farms are located received above normal rainfall, especially in the early spring. This means spring soil water content is high, and it should get crops off to a potentially strong start.

As of April 1, our almond bloom was complete. And while across California, bloom was mixed, our locations are pretty darn good with initial crop sets stronger than last year's. March had an unusual hot spell right in the middle of pistachio bloom, and this weather event caused quite a few issues around the state. Specifically, some trees have aborted a significant percentage of their crop. It's difficult to tell the impact to our orchards at this time, mainly because the 2026 crop year is considered what we call a down year for pistachios. Pistachios are what we call alternate bearing, meaning that crop yields on a year-to-year basis can vary from very high to very low and can be very dramatic. Since this is a low production year or a down year, as we say, some of our pistachio blocks didn't have as much crop -- didn't have much crop on there before the heat spell. So it's possible that impact we feel will be minimal.

Another reason it's hard to predict is just how the remaining fruit set develops. There's a long way to go in the growing season, and we just don't know how it will shape up. So -- and also another factor this impact is with a major reduction in supply, it's definitely going to continue putting upward pressure on pricing. There's a chance that pricing outweighs the crop loss. So we'll just have to wait and see.

Currently, all of our properties where we have invested capital in the crops are tracking according to budget. And we may have an increase in water expense on a couple of ranches, we should end up right in line with budget targets. Talk about markets a little bit. We think most ag real estate markets in the Western U.S. have bottomed out, and we're starting to see a little more activity with transactions. In particular, we've seen several pistachio acquisitions completed in the last 6 months at prices we haven't seen in a few years. We don't believe valuations are necessarily making a comeback just yet, but there are some strategic buyers willing to pay a higher price for orchards with good cash flow potential.

Coastal California values remain flat with higher-than-normal inventory and the Pacific Northwest is stable. When really good properties come on the market up there, they sell very quickly. Medium, lower-quality properties sit and wait. I'd say values and rents in the Pacific Northwest are stable. And then last note on real estate markets, particularly in California, but really all over the West, we're seeing a divergence of values between properties with really good water and those without. Due to regulations and policy, we expect that to really be a permanent situation.

The war in Iran, continued tariff drama, trade tensions are all still in the headlines. The crop markets seem to have settled in and kind of accepted this uncertainty to a large degree. Net crop markets continue to show notable resilience and strength, particularly for pistachios, see tremendous growth in demand for all things pistachio in global markets. Growth prices are continuing to move upward. We expect our minimum pricing for 2026 to be significantly higher than 2025. So that's good news. I would say the general sentiment in the pistachio industry is even with a large number of nonbearing acres, it's underplanted. So this is really good news for growers and the value of their crop going forward. And for us, it's really important. It's the largest crop in our portfolio.

Almonds have been pretty steady, some minor ups and downs due in large part to the drama in the Strait of Hormuz, but prices have lately been trending upward after recent crop size projections were released, showing a similar crop to last year. It appears the market was expecting a larger crop and therefore, lower prices. We've reported in the past that we believe the market is underbought. So these lower-than-expected predictions are driving buyers to fulfill their needs.

Wine grape markets continue to underperform, although we're beginning to see some varietals, particularly some white grape varietals, become short in supply. At the moment, this isn't causing any increase in prices or providing any incentive for wineries to contract for supply, but it is the first encouraging sign we've seen in a couple of years. Vineyard removals continue at a rapid pace in California and around the world. So we're hopeful that this pullback in supply will soon bring the market back into balance. There's been a lot said about fertilizer fuel prices jumping up due to the war. While this is true, our exposure is somewhat limited. Overall fertilizer cost as a percentage of total cultural cost for most of the crops growing on our farms is relatively small. In the case of our operated farms, there were many purchases made pre-war. So that limits the impact in those particular cases.

Finally, water. We initially had a strong start to the winter in terms of snow and rain. However, once we got past early January, we only had a few storms come through, and they came in late winter and early spring. The result was a very weak snowpack, but reservoirs above normal and good spring moisture set the season off on a good note. We're in the market looking for good opportunities to acquire water for this year and beyond. We're still experiencing the positive effects of this recent wet year trend that's resulted in availability of water at economical prices. Our team continues to evaluate these opportunities with the goal of strengthening the overall water security of the portfolio through both long and short-term strategic water purchases, continuing to invest in water delivery, storage infrastructure and identifying opportunities to create synergies across our farm assets. Now I'll turn it over to our CFO, Lewis Parrish.

Thanks, Bill, and good morning, everyone. I'll start with a brief update on our recent financing activity. We did not incur any new borrowings or repay any loans during the quarter, but we did add some unencumbered properties to certain existing and new credit facilities that increased our immediately available liquidity by about $50 million.

In January, we redeemed all of our Series D Term Preferred Stock to avoid a step-up in the coupon from 5% to 8% -- that redemption was funded through a combination of common stock issued under our ATM program and a draw on our line of credit, which has since been repaid. So far in 2026, we've raised about $50 million through our ATM program. And along with the majority -- along with the proceeds from the recent property sales, the majority of this capital has been used to reduce leverage on the balance sheet, including the redemption of the Series D Term Preferred Stock, repaying the line of credit and buying back Preferred Stock through our repurchase program. And speaking of that last point, we've bought back over $6 million of Preferred Stock so far in 2026 at an average repurchase yield of 7.4%, resulting in a total gain of nearly $700,000.

Turning to our operating results. For the first quarter, we recorded a net loss of about $4.3 million and net loss to common shareholders of $10 million or $0.24 per share. Adjusted FFO for the first quarter was $3.1 million or $0.08 per share compared to $2 million or $0.06 per share in the same quarter last year. The increase in AFFO was primarily driven by an early pistachio crop bonus payment we received, partially offset by ongoing tenant-related issues we continue to work through.

Year-over-year fixed base cash rents decreased by about $2.4 million for the quarter, primarily due to lost revenues from 1 property that was transitioned to direct operations last year and 2 tenants that were placed on nonaccrual status this quarter. The prior year quarter also included a $2.4 million termination fee from an outgoing tenant. This decrease was largely offset by an increase in participation rents of about $4.4 million, primarily due to receipt of an early partial bonus payment on the 2025 pistachio crop.

Typically, this bonus is paid in either late 2026 or early 2027, but one of our processors paid a portion of it early, which allowed us to recognize that revenue earlier than normal. The remaining portion of the bonus is still expected to be recognized on the normal schedule and recognized in the fourth quarter. Net income generated from crop sales on our direct operated farms was about $1.9 million during the first quarter, and that was also primarily due to the early pistachio bonus payment. And also similar to participation rents, we expect to recognize the remaining portion of this marketing bonus later in 2026.

On the expense side, our recurring cash operating expenses increased by about $750,000. Total related party fees declined slightly, primarily due to a lower base management fee resulting from recent farm sales. Property operating expenses increased, mainly driven by the cost of supplemental water we were required to provide on one of our properties pursuant to the lease as well as higher professional fees associated with protecting water rights on certain farms in California. G&A expenses increased primarily due to higher legal and accounting fees incurred during the current quarter. And finally, cash flows from operations increased largely as a result of higher cash receipts from participation rents and crop sales, partially offset by the receipt of that termination fee in the prior year quarter.

Turning to liquidity. We currently have about $150 million of immediately available capital and over $110 million of unpledged properties that could be used as additional collateral as needed. Currently, over 99% of our borrowings are at fixed rates with a weighted average interest rate of 3.41% locked in for another 2.5 years. This has helped shield us from the interest rate volatility we have seen over the past few years. Looking ahead, we have about $17 million of scheduled principal amortization payments due over the next 12 months, which is less than 4% of our total debt outstanding. We also have about $155 million of loans with fixed rate terms that reset over the next year, though the loans themselves are not maturing. This includes about $133 million of loans under our MetLife facility that are scheduled to reprice in January 2027.

Finally, regarding our common distributions. In April, we declared a monthly dividend of $0.0467 per share for the second quarter of 2026. At our current stock price of $9.44, this represents a 5.9% annualized yield, which is above the REIT sector average. I'll turn it back over to you.

Okay. Thank you, Lewis. Overall, demand for prime farmland growing berries and vegetables is very stable right now in our regions, particularly along the coast where we are. We're also starting to see some signs of improving in certain permanent crops, both in the pricing and the broader economies for those crops. So we're hopeful that this is the worst that all the things that happened to us in the last couple of years are behind us. But it's too early to say that. You don't know what's going to go with the crop, and that makes it difficult. We're just like many other REITs that is different. It belongs to the fact that -- our manufacturing facilities are outside, and they're also alive and growing. So it's a different world that we're in, obviously, and it's very hard to predict.

In closing, over the long run, we expect inflation, particularly for the food sector to continue to move higher. There doesn't seem to be any slowdown there. We expect the values of the underlying farmland to increase as well. And over time, as a result, we should be in good shape in terms of collateral for all of our loans. We expect this especially to be true of healthy foods such as the ones we grow. These are fresh fruits and vegetables and nuts and long-term trends toward healthier eating continue to push these products. Now we'll open it up for some questions. So Victoria, if you'll come on and guide us through that.

[Operator Instructions] Our first question comes from Craig Kucera with Lucid Capital.

I think last quarter, you had thought you were going to get the marketing bonus in early April. Clearly, a lot of it was recognized here in the first quarter. Is there any left that you will expect to recognize in the second quarter? Or will we expect all of it kind of in the back half of the year?

So as far as cash -- well, speaking for the bonus specifically, we do expect to record -- to be able to recognize the remaining part in Q4. As for the amount, I'll just give you -- we don't know yet, of course. But if we had to guess, and I'm going to let Bill Reiman chime in on this, too. But last year, the marketing bonus was -- when I say last year, I mean for the '24 crop, it was $0.90 a pound. And we don't know the full bonus yet, but the early bonus payment equated to about $0.50 a pound. So right now, I think we expect the total bonus to be higher than last year, but we don't know that for sure. But I think if we had to guess at a range, it'd be somewhere between that $0.40 per pound coming in Q4 or it could be much higher than that. I'll let Bill chime in with any more insight to that bonus amount or what we're seeing prices doing.

Yes, Lewis, you nailed it. We're -- it's supposed to be higher than last year, and nobody is really revealing their cards yet. But yes, $0.90 a pound last year. We've got $0.50 so far. It could just be $0.40. It could be a full $0.90. We just -- nobody is really hinting at anything at this point, except that it's going to be larger than last year.

Got it. So roughly 50% plus or minus sounds probably pretty reasonable with maybe some upside.

Yes.

Okay. Great. In the 10-Q, you referenced that less than 5% of California was in sort of a drought designation, and you had some commentary on that. But I'm curious to hear your thoughts on how your Florida farms are performing thus far in 2026.

So I think this is the first time since I've been here where California was not in a drought and Florida was. So definitely a reversal of importance there. We've had some -- we haven't heard of any news on our farms being short on water to the extent where it's impacting the operations on the farms. And it is in a drought, and there are regulations coming through for certain farmers having to be called on to cover losses of wells going dry. But we haven't heard of any issues with our farmers having -- being short on water and covering their crops. Bill, if you have anything more to add on that?

Yes. No, that's true. There hasn't been any restrictions, any -- there hasn't been any crop losses due to lack of irrigation water. We did have in the wintertime for frost control, we had some issues, but that's using water for frost control, uses a large amount of water, but -- and we had a few issues with neighbors there. But other than that, there haven't been any crop impacts whatsoever.

Okay. That's helpful.

And there's one footnote here that you should know about. We have a water farm in Florida. and it's got plenty of water. So we're not seeing any severe drought situations down there. I think we're going to be fine in Florida forever because you pretty much put a stick in the ground and it's water down there. So it's a situation which the wind blows one day and it's cold and then all of a sudden, everything is bright and shiny as it is most days. Keep going, Craig, any more questions?

I do. I've got a handful more. David, you mentioned you're going to sell -- might sell a few farms in the next couple of quarters. Last year, I think you sold about $90 million, maybe $70 million the year before. Can you kind of bracket the dollar amount you think you might wind up selling? Or can you do that at this point?

That's a difficult one. I don't know if you know it in farming, selling a farm is a big to do, and you never know when they're going to follow through. We have one now in which we have a letter saying they're going to buy it, and we'll see the lawyers are drafting. And I'm glad to get rid of that one because it gave us some problems in the past. But I don't really have a number. I'm hopeful that we can sell a couple of farms, but I don't think we need to sell more than that. We're pretty well covered in tenants that are working farms and the ones where we don't have a strong tenant and we've taken them over, these are the ones in California.

We've got some good growers. I've been surprised. I didn't think it would work out as well. But last year, it was just a boomer in terms of return on investment. So I guess we will do maybe what we're doing somewhere between 2 and 5 farms.

It's a good range, yes.

Okay. That's helpful.

He's gonna sell 2 to 5 farms. What you got, Craig?

Change gears. I'm curious about your leasing activity year-to-date. It looks like you moved one farm from fixed to participation rents. Can you give us some color on where that farm is located and what the crop type is?

That's a potato farm in Colorado. The base rent was basically cut in half and -- but we are expecting the variable rent component of that farm to get us pretty much right to where we were with the prior lease. But that's another variable that won't be known until the second half of the year.

Okay. And just one more for me. I mean you've been pretty aggressive on issuing equity to take down the preferred. You got through the first round. You've got a couple of others at 6%. Are you anticipate continuing to do that throughout the year?

The repurchase program on the Series B and C, we would like to continue being active in that repurchase program.

[Operator Instructions] Our next question comes from John Massocca with B. Riley.

This is Max stepping in for John. What is the outlook for re-leasing at truly vacant properties, either in terms of dispositions or re-leasing?

So I think... Sorry. We have a few farms that we're working on right now are not producing income. They're vacant, as you mentioned, that we think we're pretty close to getting deals in place. Now it's not necessarily the traditional types of ag leases. We're working on alternative streams, for example, fallowing incentive programs, water leases, solar leases. We've got -- we're discussing terms with potential tenants on these. And hopefully, within the next 3 months or so, we can get some of these executed. But the ones -- the ones I'm specifically talking about, these are some of the larger farms in that vacant category. So hopefully, for the next 3 to 6 months at most, we can get at least half of this acreage back to income producing.

Great. And could you remind us why the cost of sales is so low relative to crop sales? Was that because you already booked costs associated with that revenue? Or was it something else?

Yes, exactly. This is related to the '25 crop. All those expenses were recognized in Q4 of last year as the crops were sold. But with pistachios, at that time in Q4, we only had -- we were only able to recognize the minimum payment associated with that crop. This is the bonus payment that we were not able to measure at the end of last year. So that's just straight revenue straight to the bottom line for us as will be the remaining part of that crop, the bonus payment.

Got it. And apologies if this was already discussed, but is there a time line for getting the participation-based farms back to fixed base rents?

We wish we knew that answer as well. It's definitely not for the '26 crop year and '27 crop year is still in flux, but if I had to guess, I think we'd be in a similar situation for the '27 crop year as well. Bill, what's your outlook on this?

Yes. I mean it's really the tenant pool, it's really difficult. Capital is constrained -- working capital is constrained for a lot of growers. And so until that loosens up, I just don't see the number of growers willing to take on the risk on leasing. I just don't see that pool increasing in the near future. So hopefully, that turns around sooner rather than later. But as of right now, we're probably stuck in this for at least another season.

Got it. And are there -- is there any new distress in the portfolio? Has the rebound in tree nut prices potentially mitigated credit risk somewhat?

A little bit, a little bit. But for a lot of growers, that downturn in almond pricing, they're still paying the price for that, right? It takes time. Prices have rebounded, obviously, for the last little over a year, 18 months, but it takes a couple of years of good prices to fill in the hole that we've done for ourselves. So it takes a little bit of time to fully recover.

And then one more for me. On the Series B buyback, how are you thinking about that as a use of cash flow capital raising versus paying down amounts on the revolver?

So the revolver now is fully repaid to the minimum balance. That was our -- with the ATM proceeds and also some proceeds we had from farm sales last -- at the end of last year. We used that to pay down the line of credit, which is, again, fully down to this minimum balance. And then most of the excess has been going into the preferred repurchase program. So Series B, Series C, we'd love to buy more of it back than we are right now, but these are 2 thinly traded securities. So we're limited with how much we can buy back on a daily basis. But we want to continue making the best use that we can. We're buying back at a 7.4% yield right now. So the common that we raised was at about 5.5%, 5.6%. That's a spread we'll take any day.

And just to remind Max, this is a situation that's ongoing day by day. If you could lob a few calls into the people who set interest rates and get them to push them back to 3.5% where we used to borrow, that would be nice because we could eliminate a lot of preferred stock, and that would help our earnings. Latoria (sic) [Victoria ] , would you come on now and close this up for us? That's the end of the day.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.

Greetings, and welcome to the Gladstone Land Corporation Year-End and Fourth Quarter Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, David Gladstone, President and Chief Executive Officer. Thank you. You may begin.

Well, thank you for that nice introduction. And this is David Gladstone, and welcome to the quarterly conference call for Gladstone Land. Thank you all for calling in today. We appreciate you take time out of your day to listen to our presentation. Hopefully, we give you some indication of where we're going. Now, we'll hear from Catherine Gerkis, our Director of Investor Relations, to provide a brief disclosure regarding certain regulatory matters concerning this call and this report. Catherine, go to it.

Good morning. Today's call may include forward-looking statements, which are based on management's estimates, assumptions and projections. There are no guarantees of future performance, and actual results may differ materially from those expressed or implied in these statements due to various uncertainties, including the risk factors set forth in our SEC filings, which you can find on the Investors page of our website, gladstoneland.com. We assume no obligation to update any of these statements unless required by law. Please visit our website for a copy of our Form 10-K and earnings press release, both issued yesterday for more detailed information. You can also sign up for our e-mail notification service and find information on how to contact our Investor Relations department. We are also on X @GladstoneComps as well as Facebook and LinkedIn. Keyword for both is the Gladstone Companies.

Today, we'll discuss FFO, which is funds from operations, a non-GAAP accounting term defined as net income, excluding gains or losses from the sale of real estate and any impairment losses on the property plus depreciation and amortization of real estate assets. We may also discuss core FFO, which we generally define as FFO adjusted for certain nonrecurring revenues and expenses and adjusted FFO, which further adjusts core FFO for certain noncash items, such as converting GAAP rents to normalized cash rents. We believe these metrics can be a better indication of our operating results and allow better comparability of our period-over-period performance.

Now I'll turn it back over to David Gladstone.

Thank you, Catherine. Folks, we sold a few more farms during the fourth quarter, which brought us to 6 property sales for the year totaling $95 million in proceeds, and we recognized an aggregate gain from these sales of about $21 million. So your company is in good shape today. After these sales, we still own nearly 99,000 acres across 144 farms, so about 56,000 acre-feet. In case you forgot, I'll translate that to 18 billion gallons of water that we've got stored in aquifers, and so we're in good shape for that part of our work. Our farms are in 14 different states and our water assets are all in California. And right now, there's plenty of water in California. So we're all in good shape from that perspective.

Regarding the two sales we completed during the quarter, one was a small blueberry farm down in North Carolina. The tenant had fallen behind in his rents, and it was a tough property for us to get to new tenants. So while we took a small loss in the sale, we thought it best just to get rid of that farm since it was out of the normal territory that we're in. The other sale was a really nice farm in Colorado, where the lease was set to expire at the end of the year, and we were likely facing a downward rent bump and reset. So we took the opportunity to sell the property for more than we had in it originally and paid. So it was decided to go ahead and take the gain and move from that area of farms.

We may consider selling some additional farms. In fact, we've got several that we're talking to buyers over the next few quarters and this part of ongoing portfolio review. If we're able to complete some of those, we'd like to use most of the proceeds to pay down debt and also to buy back some of that more expensive preferred stock that we have and trigger a gain there. But we're still evaluating the opportunities. And at this point, we're hopeful of a good transaction that will come and show how good we are in buying and holding these properties. On the acquisition side, financing costs, which seem to be slowly moving closer to where we like them to be, but we're not quite there yet. We're hoping interest rates will continue to move in the right direction. That is down. So we can get back to growing the portfolio as we've been out of the business for quite a while. We've got a lot of land that we own, but it'd be nice to pick up some now because prices seem to be moving in the right direction.

We're still taking a disciplined approach to any new investments. Interest rates and our overall cost of capital remain elevated and the capital rates on most row crop farmland is still too low to make it economically work for us today if we have to use a lot of debt to buy it. On the leasing side, first, we've talked about on prior calls due to the market conditions affecting certain permanent crops, particularly nuts and wine grapes, we adjusted the lease structure on a handful of properties to help our growers reduce their fixed costs. And as a result of doing that reduction, in essence, we're taking a larger percentage of the gross crop sales instead of fixed rent payment. We also decided to direct operation of two properties ourselves with the help of third-party operators. We believe a lot of the farms in the United States are just set up like that. So people bring in farming expertise as we are. And well, I'll let Bill and Lewis, the two next speakers talk about that. But overall, we had a successful harvest, particularly with almonds and pistachios.

We're still expecting significant amounts of revenue from the 2025 pistachio harvest to come during 2026. So they're not in there yet. But we won't know the exact amount until the processes of those nuts have their finalized, their settlement with us. I wanted to remind everyone about this modified structure that we're using because we're simple approach to most of these farms for 2026 crop year is going to be exactly the same as we used last year. And I think it's also important to again highlight the role of crop insurance. In these cases, one of the reasons we feel so confident in taking this approach, which is a little bit like gambling on these special farms is their strong history of high production. And since insurance coverage is largely based on historical yields, we're able to secure relatively high levels of insurance.

So to give you an example of this, if one of our crops was that's insured is wiped out by some strange disease or whatever, the insurance allows us to recover the amount of capital that we put into these farms. And that's nice to know that the downside is covered. Our goal is still to eventually transition these leases back to more traditional structure with fixed base rents. But our ability to do so will depend on many factors actually, external factors such as crop productions, crop prices, interest rates, input cost of growing the nuts or whatever strawberries and water availability. We've kind of got the last one covered to some degree, water availability, as you probably read in the newspapers and reports. Water is plentiful in California and the amount of snow in the mountains, which will melt during the summer and run off is pretty good shape.

In other leasing activity, we executed 5 renewals during the quarter. We saw a modest increase of about 7% on two of these row crops as a renewal. For three permanent crops, we reduced the fixed base rent in exchange for additional crop share component, which is what we've done a lot of time. We should have roughly flat compared to those of prior leases on those farms. Looking ahead, we have 5 leases scheduled to expire over the next 6 months. In total, this represents about 3.6% of our total 2025 lease revenue. We're currently in discussions with existing tenants and prospective new tenants about leasing each of these farms. So I'm pretty optimistic about getting those rented.

And now I'll take a quick update of some of the ongoing tenancy matters that we're working through. We currently have 9 farms that are wholly or partially vacant, and we're growing crops on some of these. Encompassing 4 of the farms we've been direct operators under management agreements with unrelated third-party growers. We also recognize revenue on a cash basis for leases with 3 tenants who collectively lease about 5 of our farms. That should be okay. We are actively working towards solution for each of these situations. We think we are close to having a resolution in place for a few of these farms soon. And hopefully, we can get some of them off of this list over the next few months.

I'm going to stop here. We've got Bill Reiman on the call, and Bill is the man who really understands us since he's been working in the farming area for most of his career. So Bill, take it away.

Thank you, David, and good morning to everybody. Yes, much of our current management focus right now is on the properties that are being operated under these modified lease agreements or farmed directly utilizing third-party farm operators. We've completed harvest for 2025, and we're pleased to report that the overall yield objectives that we had in our budgets, we exceeded all of that. And so really good results there. We're renewing some of these modified lease arrangements, particularly on 5 of the 8 farms. 2 of the remaining 3 are redevelopment projects and the last one, our wine grade vineyard in Napa is now leased to a local grower. So we're happy to have that done.

The 5 farms that we ended up, that we're renewing agreements on were really our top performers from this group last year. So we're expecting another really strong year of results. The winter, David touched on a little bit about some recent weather. The winter for us has been about average for precipitation with a couple of our wettest months left to come. Recently, we've had some major storms that really boosted the snowpack levels. So there's significant optimism that the surface water allocations for 2026 will be very strong. Those reservoirs, both state and federal water projects are above historical averages. So for the short term, there's plenty of supply.

Chilling hours, we're projecting a low to medium level of chilling hours this winter in California. It means we should meet all chill requirements in all of our permanent crop locations. So that's very good news. Almond bloom, as of today, we're probably 2/3 complete. The bloom's has been a bit uneven. There's been reports of flash bloom in many locations around the valley, Central Valley. And also with the cold and rainy weather, the bee activity hasn't -- it's been somewhat limited in quite a few areas. This could possibly cause almond yields to be lower across the state.

Pistachios, wine grapes, of course, are still in dormancy. So they've actually reaped the benefit of some of this colder wet weather and haven't had the bloom exposed yet. Markets, tariff drama, trade tensions still exist as we all read the headlines. However, crop markets seem to have settled in and accepted this uncertainty to a large degree. Nut crop markets continue to show notable resilience and strength, particularly for pistachios. The important story lately is the fact that the supply chain seems to be pretty light. There's minimal product in both almond and pistachio buyer side supply chains, which we think has provided upward pressure on pricing. As a result, our base guaranteed price for the current crop remains consistent with 2024, and we believe there's a strong likelihood that the final price for 2025 crop will actually be higher than our final 2024 pricing.

One of our processors, in fact, recently announced an extra $0.50 per pound bonus to be paid with our scheduled April crop payment for pistachios for the 2025 crop, that's really good news. This momentum could also result in a higher base price for the 2026 crop when that gets announced in July of this year. So things are looking up in pistachios. Almond prices dipped in January, but since then, they've rebounded quite a bit and climbing again as we move through boom season. I don't expect these prices to vary too much as there's strong demand and confidence in the market. There will be some slight bouncing around as projections for the 2026 crop start to come out and we get to this point in bloom and everybody has an opinion on what the crop is going to do. So we will definitely see that reflected in the market. But it is -- the market is, in general, severely underbought and the supply chain is light. So those are things and growers are reluctant to sell right now. So those are all things that continue to put upward pressure on almond prices.

Wine grape market continues to underperform, but we're beginning to see some varietals, particularly some white grape varieties that are showing up short in supply. At the moment, this isn't causing any increase in prices or really provide any incentive for wineries to contract for supply, but it is the very first encouraging sign that we've seen in a couple of years. Vineyard removals are continuing at a rapid pace in California and really around the world. So we're hopeful that this pullback in supply will soon bring the market back into balance, likely flipping it the opposite way and will be underproduced. And then the weakening dollars as long as the dollar continues to weaken, that works in our favor, making our products more attractive to international buyers.

Circling back to water, we're experiencing, like I mentioned, we're experiencing a normal to potentially wet year as far as precipitation is concerned. So it's really good news in that we're continuing to experience an extended wet period. 4 out of the last 5 years or 5 out of the last 6 years have been average or wet. Full reservoirs, good rainfall, snowpack. They are all key factors for the water market to be full of water for sale at prices that are attractive for our water banking activities. So we've been working hard to identify the best water deals for our properties and looking for infrastructure improvements that will yield us the best return on those capital expenditures. Our goal, as always, remains to further strengthen the overall water security of the entire portfolio through long-term and short-term strategic water purchases. We're looking to continue investing in water delivery storage infrastructure, pipelines, water banks and then identifying opportunities to create synergies across the farm assets.

Now I'll turn it over to our CFO, Lewis Parrish.

Thanks, Bill, and good morning, everyone. I'll start with a brief update on our recent financing activity. During the quarter, we repaid a $4 million note that was secured by a property that we also sold during the period. And subsequent to year-end, we redeemed our Series D term preferred stock to avoid a step-up in the coupon from 5% to 8% -- that redemption was funded through a combination of common stock issued under our ATM program and a draw on our line of credit. Since the beginning of the fourth quarter, we raised about $50 million of common stock through our ATM program with the majority of those proceeds used to fund that redemption.

Turning to our operating results. For the fourth quarter, we recorded net income of about $4.2 million and a net loss to common shareholders of $1.8 million or $0.05 per share. For the year, we recorded net income of $13.5 million and a net loss to common shareholders of $10.5 million or $0.29 per share. Adjusted FFO for the fourth quarter was $14.4 million or $0.38 per share compared to $3.4 million or $0.09 per share in the same quarter last year. And for the year, AFFO was $14.4 million or $0.39 per share compared to $16 million or $0.47 per share last year.

The decreases in AFFO were primarily driven by the recent changes to lease structures on certain farms, timing differences in revenue recognition related to crop sales in certain direct operated farms, lost revenue from farm sales over the past year and ongoing tenancy issues that have led to vacancies resulting in both lower revenues and higher costs. Year-over-year, fixed base cash rents decreased by about $1.9 million for the quarter and by about $19.8 million for the full year. This is primarily driven by the reasons just mentioned, but mainly the lease modifications on certain properties where we reduced or eliminated fixed base rents or in some cases, provided cash lease incentives in exchange for significantly increasing the crop share components. Partially offsetting that and largely for the same reason, participation rents increased by about $9.3 million on a quarterly basis and by $10.6 million for the full year. This increase was further driven by stronger pistachio pricing compared to last year.

Net profit from crop sales in our direct operated farms was about $2.6 million for 2025, which is our first harvest year. However, the full impact of this 2025 harvest is not yet reflected in our financial results. While we did expense a full year of growing costs, we have not yet recognized a full year of revenues, particularly on the pistachios. As David mentioned, the final marketing bonus payment for the 2025 pistachio crop will be recognized later in 2026, thus creating a timing difference compared to 2024 when this property was fully leased.

In addition, we recorded about $4.4 million of termination-related revenue in 2025, including $2 million in the fourth quarter compared to 0 last year. On the expense side, our recurring cash operating expenses increased for both comparable periods. Total related party fees fell by about $200,000 for the year, and that's primarily due to a lower base management fee resulting from recent farm sales, but was offset by a higher administration fee during the fourth quarter. Property operating expenses increased for both periods and is mainly driven by the cost of supplemental water we were required to provide on one of our properties pursuant to the lease as well as higher insurance costs and property taxes incurred on one of our direct operated properties.

G&A expenses declined in both periods, primarily due to lower professional fees incurred during the current year. And one note on cash flows. Cash flows from operations declined largely due to timing differences between leasing versus operating farms, which is particularly true in the first year of operations. Again, for our direct operated farms, almost all the cash for growing costs went out during 2025, while most of the cash proceeds will be received in 2026. In addition, regarding the increased participation rents from the lease modifications, a significant portion of the cash payments was received in early 2026, creating another year-over-year timing difference in operating cash flows.

Turning to liquidity. We have about $85 million in immediately available capital and over $185 million of unpledged properties that can be used as additional collateral. We are in discussions with a couple of lenders to add certain of these properties to either existing or new facilities. Currently, about 98% of our borrowings are at fixed rates with a weighted average interest rate of 3.39% locked in for another 2.7 years. This has helped shield us from the interest rate volatility we've seen over the past few years.

Looking ahead, we have about $17 million of scheduled principal amortization payments due over the next 12 months. We don't have any loans maturing over the next year, but we do have about $160 million of loans with fixed rate terms that are scheduled to reset over the next 12 months, though the loans themselves are not maturing. This includes $135 million of loans under the MetLife facility that are scheduled to reprice in January of 2027. And finally, regarding our common distributions, in January, we declared a monthly dividend of $0.0467 per share for the first quarter of 2026. At our current stock price of $11.51, this represents a 4.9% annualized yield, which is above the REIT sector average.

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

Thank you, Lewis. Good report. Nice to know that we're in a strong capital position. We are staying active in the market, so we're ready to go if a good acquisition opportunity comes along. But as mentioned earlier, we're still being cautious on the acquisition front because our cost of capital remains very high. Overall demand for prime farmland growing berries and vegetables remains stable across most of our regions, partially -- particularly along the coast. We also started seeing some signs of improvements in pricing and broader economics around those crops. So we are hopeful that the worst may be behind us, but it's still too early to say whether we are fully in the clear or not.

Overall, in the long run, we expect inflation, particularly in the food sector to continue to move higher, and we're expecting the values of underlying farmland to increase over time as a result. We do expect this to especially be true with healthy foods such as fresh fruits and vegetables and nuts like we grow for people, and we are a big producer these days.

So now I'll open it up to some questions from those who are listening in. Operator, would you come on, please, and show them how they can ask some questions.

[Operator Instructions] Our first question comes from the line of Craig Kucera with Lucid Capital Markets.

I wanted to revisit your commentary regarding the 5 repositioned farms. So basically, are you saying that they're under similar leases where there won't be any base rents and you'll have a portion of higher participation rent expected in '26 and then will some of that dribble into 2027 as we saw this past year? Or how should we think about that?

Yes, that's exactly correct. Well, it's the same structure that -- I mean that they'll be either with no base rent or possibly with a lease incentive, but it will be the same structure as we had in 2025. With the '25 crop, we had a good amount of the revenue recorded in '25 and then a portion carryover in '26, and we'll have the same thing. But 2026, we'll be able to benefit from the carryover from the '25 crop plus the initial payment from the 2026 crop.

And to add to that, it won't dribble into '27. It will be just like most of it. For most of '26 crops, revenue will come in '27. So it's -- it won't be a little bit. It will be just like this year.

Okay. And what was -- I think at the time that you restructured those leases, you thought that I want to say maybe 75% would come through in fourth quarter of '25. When you kind of step back, and I know you've still got some marketing with the pistachios. But as you think about that, what was sort of -- what would you say the percentage was that was recognized here in fourth quarter '25 and kind of what you expect in '26?

It's really on a farm-by-farm basis. I think for the pistachio farms, it probably will be close between the 65% to 75% in the first year, but that is us estimating what the marketing bonus is going to be. It could turn out to be higher than that. And if that's the case, then it would push a higher percentage in the following year. Almonds, a bit of a different story because some of our properties were in, and Bill can expand on this more, but we're in what's called a call pool where we decide when to sell the crops -- and for those -- for example, we have one property for the '25 crop where we haven't pulled the trigger yet because we're seeing prices trend in the positive direction and we want to wait and take advantage of that pricing.

So for pistachios, I think the percentage will generally hold true, assuming that bonus payment stays where it's been, but -- and I'll let Bill talk on this, too, but we are seeing signs of that possibly being higher. So again, that would push the percentage higher in the subsequent year. Bill, anything you want to add to that?

Yes. I mean that's correct. Certainly, on pistachios, we feel the likelihood of increased bonus payments, that's increasing every day. So we feel pretty strong about that. And Lewis mentioned the almonds on the call pool, one particular farm, we decided to make the call of when we'll sell, and we're kind of holding out for some higher almond prices. But in that particular farm, we did get crop insurance payout. So we're already in positive territory as far as whether we made money or lost money on that farm. But we still have the crop -- a small amount of crop to sell, and we're just holding out for higher prices.

Got it. And just one more on this topic. I guess, are you saying then that you would probably recognize more sort of variable payments throughout the year than you typically would because you have more control over when and at what price you sell the crop? Or should we think about this that this will mostly be recognized in the fourth quarter as far as what was earned in 2025?

I think we'll have a little bit more in the first half of the year than we typically do. Just as Bill mentioned, that we do have one pistachio processor who announced they will pay a portion of that marketing bonus early in April. So we will probably be able to pull some of that into Q1. But other than situations like that or maybe further adjustments to almond pricing, we would probably see the most bulk of it coming in Q3 and especially Q4 again.

The other impact if the pistachio market continues its current trend and our guaranteed base price goes up, that will increase the amount that we are able to claim in within this calendar year. But we won't know that until probably the end of -- usually end of July.

Okay. Changing gears, Lou, what are your expectations for interest paid for this year in the first quarter?

I'd expect it to be anywhere from 10% to 15% less than what we recognized in 2025, and that's assuming the percentage of interest that gets paid, that gets refunded is the same, but reflecting just the loan balance decrease over the past year as we've paid off some loans.

Okay. I see you raised $33 million in ATM this quarter. Was the remainder of the Series D funded with cash on the balance sheet or the line of credit?

Line of credit. We currently have about $10 million outstanding on the line of credit, and that's currently at a 5.69% variable rate.

Got it. Okay. Just one more for me. I know one of your competitors have been generating significantly higher returns through lending to farmers and is seeing decent demand there. Given the somewhat tougher farming economy, is that something you guys are looking at a little harder? I believe you capped that type of activity to 5% of assets, but would just like to get your read on that situation.

We've had discussions about getting a loan program started up, but we haven't pulled the trigger yet. It's something that we may continue to discuss. But at this point, we don't have any plans to -- any solid plans to put that program in action yet.

I'll add to that. I was just going to say, I would say long term, that's something we're really keeping an eye on. But I think just current economic conditions, we've been really -- we've looked at some loan deals, but with current economic conditions, it's just something we just haven't -- we haven't felt that the risk return profile was really right for us at this time, but it's something that we continue to look at, continue to get inquiries and probably long term is something we want to, we'll eventually make some moves on.

Other questions?

Our next question comes from the line of John Massocca with B. Riley Securities.

So maybe kind of sticking with the variable rent questions from earlier. With the current season that just closed on pistachios, do you have kind of brackets as to what you think the amount remaining to be collected is just given you have some color into the bonus payments. I was kind of curious if there was a range for what more to expect in '26 you were seeing out there.

Well, as far as our direct operated farms go, we do have -- we are expecting about hopefully, at least $3 million to come in. Now it's certainly not guaranteed, but if we are to use prior year bonus payment as an estimate as a proxy for this year, and all indications are pointing to the fact that the marketing bonus amount should be at least equal to last year. So if that does hold true, then that would result in about $3 million more coming in during 2026. Of course, that could change, but signs today are pointing positive for that outcome.

Okay. And then maybe as I think about your like kind of truly vacant assets, not the ones that you're operating yourself, what are kind of brackets around the value of those 5 properties? And would you -- I guess, how expeditiously could you sell those if you wanted to?

So the ninth -- I don't have the exact book value or fair value, but if I had to ballpark a figure, I'd say maybe $50 million. However, the largest of those properties, 3 of those vacant properties, we are close to putting together agreements that would get those back into an income-producing position. Again, nothing is finalized or fully guaranteed at this point, but we are hoping that those -- the 3 largest of those farms will come off the list, hopefully, within the first half of this calendar year.

And those 3 largest -- one reason that they're vacant and timing is a big factor, right? We lost, the tenant left and trees needed to be removed. But because they were so big, it takes a while to get that done. So a lot of that, the big portion for those being vacant right now is because we've had to clean the farms, so we have to pull the trees out and they're so big, it takes time. But yes, we are -- as Lewis said, we're really close to getting those back into revenue production.

Okay. As a reminder, what is the crop type on those farms?

They were almonds.

Those 3 biggest were almonds. Yes.

Switching gears a little bit. As I think about the Series D repayment having been completed, how are you thinking about ATM usage going forward? I mean was the ATM, particularly ATM quarter-to-date really tied to that repayment? Or are you looking to kind of delever on a more kind of organic basis?

A lot of the ATM usage was for that redemption specifically. But now that that's out of the way, we would like to focus more on the other preferred securities. So if we continue -- right now, we can sell ATM at 5%, we could buy back preferred at 7.5%. If we're able to get a 2.5 point spread on transactions like that, then that's something that we would look on favorably and hopefully be able to implement.

Okay. And then lastly, on the water, how are you looking at kind of your own water kind of holdings, acquiring further water holdings, just giving, now since I've got a couple of pretty strong seasons in terms of precipitation out West, but just kind of curious if that's impacting your strategy there at all.

Yes. I mean it's super positive, right? So when there's plentiful supply, the price comes down. And we -- our driver on buying water is all about the cost, right? And so what we buy it for what it cost to move it and what it costs to hang on to that and hold it for use during reuse in the future in the next drought. And so as these prices come down, I mean, in fact, this week, there's some what we call Article 21 water release being released next week, and that is like prices $50 to $80 an acre-foot. So this is -- these are the opportunities that we jump on, and we try to grab as much of that as we can for the future. So it's all cost driven for us because that's your future water cost for some crop down the road. And the lower we can get that, the better we are.

We have any more questions?

And there are no further questions. And therefore, I'll hand it back over to you.

Well, thank you very much, all of you for listening to this and a little bit disappointed that we're not getting enough questions. We hope you'll mark them down during the year and ask us when it comes up in March or April, whenever we're talking to you again. But thank you all for calling in, and that's the end of this session.

Thank you. This concludes today's conference, and you may disconnect your lines at this time. Thank you, and have a great day.

Greetings, and welcome to the Gladstone Land Corporation Third Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Mr. David Gladstone, Chief Executive Officer. Thank you, sir. You may begin.

Thank you, Latanya. It's a nice introduction. This is David Gladstone, and welcome to the quarterly conference call for Gladstone Land. I want to thank you all for calling in today. We appreciate you taking the time to listen to our presentation. Before we begin, we always ask Catherine Gerkis to -- she's the Director of Investor Relations and ESG.

Catherine, why don't you go with your part now?

Thanks, David, and good morning. Today's call may include forward-looking statements, which are based on management's estimates, assumptions and projections. There are no guarantees of future performance, and actual results may differ materially from those expressed or implied in these statements due to various uncertainties, including the risk factors set forth in our SEC filings, which you can find on the Investors page of our website, gladstoneland.com. We assume no obligation to update any of these statements unless required by law. Please visit our website for a copy of our Form 10-Q and earnings press release, both issued yesterday for more detailed information. You can also sign up for our e-mail notification service and find information on how to contact our Investor Relations department. We are also on X at GladstoneComps as well as Facebook and LinkedIn. Keyword for both is the Gladstone Companies.

Today, we'll discuss FFO, which is funds from operations, a non-GAAP accounting term defined as net income excluding gains or losses from the sale of real estate and any impairment losses on property plus depreciation and amortization of real estate assets. We may also discuss core FFO, which we generally define as FFO adjusted for certain nonrecurring revenues and expenses and adjusted FFO, which further adjusts core FFO for certain noncash items, such as converting GAAP rents to normalized cash rents. We believe these metrics can be a better indication of our operating results and allow better comparability of our period-over-period performance.

Now I'll turn it back to David Gladstone.

Well, thank you, Catherine. I'll start with a brief overview of our farmland holdings as we do every time. Currently, we own about 100,000 acres. It's on about 148 farms and nearly 56,000 acre feet of water assets, which is more than 18 billion gallons. Our farms are in 15 different states and the water assets -- well, all of them in California, that's where it's driest. Our farms are leased to over 80 different tenant farmers who grow over 60 different types of crops on our farms. Most of these are the type of food that you will find in the produce section of the local grocery store, such as fruits and vegetables and nuts. So we're continuing to take a very disciplined approach to new investments, in fact, not doing any except in our existing farms. But no new farms simply because the interest rates are so high that we can't finance them. So we continue to be disciplined as we call it, in investments given interest rates and their cost of capital remains elevated. We're hopeful that the banks will drop their rates in the future.

At the same time, cap rates in most row crop farmlands are still too low to make the economies work. During the quarter, we completed the sale of 1 property consisting of 2 farms within that property. Those are in Florida, the sale price was $21.5 million. This is a transaction representing a 36% premium over our original purchase price and generating a gain of about $6 million. We may consider additional selected farms for sales over the next few quarters as part of our ongoing portfolio review. But we are still evaluating the opportunities and being very conservative every time we look at a new deal.

And now I'll provide an update on modifications that we've made to certain lease structures and some of our permanent crops farms, those are all in the West. As we discussed in prior calls, due to the market conditions affecting certain permanent crops, particularly nuts and grapes, we adjust adjusted the lease structures on 6 properties to help us grow and with our partner, the grower, reduce their fixed costs while also allowing us to participate in the upside since we're putting up some of the money. In essence, we're accepting a percentage of gross crop sales instead of a fixed rent payment. We also decided to operate 2 properties ourselves with the help of third-party operators. One of the reasons we felt confident going this route in particular farms is that their strong history of higher production. Because crop insurance coverage is largely based on the historical yields, that means we were able to secure a high level of insurance coverage on these farms that we're going to hit our numbers. And we more than did that this year in a number of farms. We're still progressing through the harvest that we did for last year, post-harvest activities on our almonds, pistachios and grape properties in this group, but we're wrapping up the pistachio harvest on 3 farms earlier this month, and we're now receiving proceeds statements confirming the volume delivered to the seller or persons that are working for us to sell the different things such as almonds and pistachios, along with the first cash installment. Based on those statements, we expect to recognize about $17 million in revenue in the fourth quarter from these 3 orchards alone. We also received the first cash payment, a little over $5 million.

In addition, subsequent to the quarter end, we transitioned one lease on a large vineyard in Napa, California from structured that included a sizable lease incentive payment back to traditional crop share arrangements. Our goal is to eventually transition all of our leases back to more traditional structure. That is we like receiving fixed-based rents that come in every month rather than waiting to the end of the year to get part of the crop, even though the latter of those alternatives is usually much more profitable than taking monthly payments from someone leasing our property.

In other leasing activity, we executed 2 renewals subsequent to the quarter end, expect to result in an aggregate increase in annual NOI of about $65,000 or about 7% on those farms. Looking ahead, I have 11 leases -- we have 11 leases scheduled to expire throughout the rest of 2025 due to some of these leases containing no fixed base rent and others including cash lease incentives, both in exchange for increasing the participation rent component. These leases actually account for negative $651,000 of lease revenue, but not -- doesn't accrue any of the payments we're going to get from selling the crops in our percentage. And that's largely because of the participation rents resulting from these leases, they won't be recognized until after the fourth quarter. That is when we get the numbers in, we'll know what we made. And I think things are looking good on our nut crops. So, we're all happy about that.

We're in discussions with both existing and prospective new tenants about leasing these farms, including reverting some of these leases back to the standard lease that we started out with, that is fixed monthly rents or quarterly rents, but in essence, not participating greatly in the sale of it. So, the farmer is doing the farming, and we are just leasing to them. But we've got these farms that we've converted over to where we are putting up some of the money and we get a lot of the money coming in from the sales. So, we'll see how that works out. The first one that we talked about looks good. And I think the rest of these that we have in that with the exception of grapes look good.

And now I'll give a quick update of some of the ongoing tenant matters that we're working through. We currently have 6 farms that are vacant and 2 properties encompassing 4 farms are directly operated under management agreements with an unrelated third party. In addition, we recognize the revenue on a cash basis for leases with 4 tenants who collectively lease 7 of our farms. We're actively working towards solutions for each of these situations and are hopeful that a number of them will be resolved over the next -- well, I say several months, but it usually is not working until about 6 months after the year-end. So I'm going to stop here. We've got Bill Reiman online, and Bill is going to give us positive news. Hey Bill, take away.

Thank you, David. Yes, just to expand a little bit on the 8 properties that are under modified lease agreements or being direct operated with third-party operators. Harvest for the 2025 pistachio, almond and grape crops is nearly complete. Pistachios are all in the barn, as we say. And like David mentioned, we did receive our first payment for that crop. Grapes have just a few tons left to pick and some of the almond crop remains in stockpiles as a whole, but it has all been removed from the field. We expect that to wrap up in the next few weeks.

Last quarter, we reported that growing conditions have been nearly ideal and those favorable conditions pretty much continued throughout the fall. We had some higher-than-normal rainfall in the Central Valley of California, but harvest was very smooth and uneventful, which we really like. Our Pistachio orchards performed well above state averages and also exceeded our own internal projections, both crop quality and volume. We had a few almond blocks that underperformed, but the majority surpassed our internal expectations as well. We expect to receive crop insurance payouts for a few blocks that fell short that should make us whole with respect to the growing costs. Fine grapes also delivered strong yields across the board with excellent quality.

Excellent growing and harvest conditions we experienced in 2025 have positioned the trees and binds very well for the upcoming 2026 season. While we still need sufficient chilling hours, winter precipitation and favorable weather next year, and it's early, but we're off to a strong start for the 2026 crop. Irrigation, fertilization practice is already underway, and we'll get started on some curing activities as well here into the winter.

A few words about crop markets. We have tariffs, trade tensions, geopolitical rhetoric continue to create some uncertainty across many export markets. Nut crop markets are showing notable resilience and strength, particularly for pistachios. Seeing stronger-than-expected demand from -- really from 2 specific markets right now with pistachios, the EU and the Middle East. That's significant because it reduces our reliance on the Chinese market. The Chinese market is still extremely important, but spreading the crop around certainly helps reduce that risk.

The result for -- in pistachio, our base guaranteed price of current crop remains consistent with 2024, and we believe there's a strong likelihood that the final price, even though it's going to -- won't be announced for a year from now, and we have a lot of marketing to do, we believe that final price for the 2025 crop will be comparable to 2024 levels.

Almond prices rebounded from their mid-summer dip, returned to the levels we saw early in the spring. Since then, prices continue to trend upward, gaining a few cents per pound each week. Sellers that I talked to, marketers are all enjoying this with pricing and demand just continuing to rise each week, and everybody expects this to continue for the next several months.

Wine grape markets are the opposite, continue to underperform. Strong yields in the past couple of years combined with declining global consumption created one of the most severe oversupply situations the industry has ever experienced. As a result, a lot of vineyards are being removed around the world. At the pace that this is happening, we expect -- hopefully, within the next year, 18 months, we expect markets to start to turn around.

And overall, macroeconomically, the weakening U.S. dollar really works in our favor on all these products that we export, particularly when that’s -- makes our products much more attractive to international buyers.

Lastly, I'll touch on water. Nearly identical report as last quarter. We've been in this normal to wet cycle the past few years, including the most recent winter. We remain focused on enhancing our water delivery storage infrastructure across the portfolio. With these wet years, the availability of inexpensive water is strong. So, we've been very strategic about making those acquisitions. So, we continue to build on our nearly 56,000 acre feet of water assets, positioned several of our farms with enough water supply to meet immediate irrigation needs regardless of weather conditions. So, we feel pretty good about that regardless of how this winter ends up. Storage situation in both the federal systems, we're expecting a minimum of 35% and as high as a 50% allocation if we get a dry winter. So, if we get a normal to wet winter, we expect that to be even stronger. So very positive news on the waterfront.

And now I'll turn that over to Lewis Parrish, our CFO.

Thanks, Bill, and good morning, everyone. I'll start with a brief update on our recent financing activity. During the quarter, we repaid a $10 million bond that was maturing, and this bond was secured by a property that we also sold during the period. On the equity side, since the beginning of the third quarter, we've raised about $10 million through our ATM program. These issuances were made in anticipation of redeeming our Series B term preferred stock, which matures at the end of January 2026. This will allow us to avoid the scheduled increase in the coupon rate from 5% to 8% and also reduce our reliance on our variable rate line of credit to fund that redemption.

Turning to our operating results. For the third quarter, we recorded net income of about $2.1 million and a net loss to common shareholders of $3.9 million or $0.11 per share. Adjusted FFO was $1.4 million or $0.04 per share compared to $4.5 million or $0.13 per share in the same quarter last year. The year-over-year decline in AFFO was driven by recent changes to lease structures on certain farms, loss of revenue from farm sales over the past years and ongoing tenancy issues that led to vacancies, resulting in both lower revenues and higher costs.

Fixed base cash rents were about $5.4 million lower than in the prior year quarter due to the reasons just mentioned, but mainly the lease modifications on certain properties where we reduced or eliminated fixed base rents or in some cases, provided cash lease incentives in exchange for significantly higher crop share participation. And the results from these crop share components won't be known until the harvest is complete and the crops are sold, which is currently underway.

Participation rents increased by about $1.9 million, largely due to the accelerated recognition payments related to the 2024 harvest on certain farms as additional information became available to us earlier this year. This increase was further driven by much stronger pistachio pricing compared to last year. We continue to expect higher participation rents in the fourth quarter of 2025 as a result of the lease modifications we made on certain permanent crop farms. As we discussed on prior calls, these changes have led to lower fixed base rents in fiscal year 2025 compared to '24 and the majority of the resulting crop share proceeds are expected to be recognized as participation rent in the fourth quarter of 2025, with most of the remaining smaller portion being recognized in the second half of '26. So, in essence, we are shifting revenues from fixed base rents to participation rents over the next couple of years. And as a result, most of our 2025 earnings will be realized in the fourth quarter with wider earnings during the first 9 months of the year.

On the expense side, excluding reimbursable items and certain nonrecurring or noncash charges, our core operating expenses decreased by about $140,000 this year -- this quarter. Total related party fees fell by about $110,000, driven by a lower base management fee due to recent sales. And our remaining recurring cash operating expenses remained relatively flat as higher property operating costs were offset by lower G&A expenses. Finally, other expenses decreased mainly due to lower interest expense driven by loan repayments made over the past year.

Turning to liquidity. We currently have over $170 million of immediately available capital. We also have nearly $150 million of unpledged properties we could use as additional collateral if needed. Over 99% of our borrowings are at fixed rates with a weighted average interest rate of 3.39% locked in for minimum 3 years. This has helped shed us from the volatility in interest rates over the past few years. Looking ahead, we have about $17 million of scheduled principal amortization payments due over the next 12 months. We also have about $25 million in loans with fixed rate terms expiring in the next year, so the loans themselves are not maturing.

And finally, regarding our common distributions, in October, we declared a monthly dividend of $0.0467 per share for the fourth quarter of 2025. At our current stock price of $9.24, this represents a 6.1% annualized yield, which is well above the REIT sector average.

And with that, I'll turn it back over to David.

Thank you, Lewis. We continue to stay active in the marketplace should a good acquisition come along. But quite frankly, I'm not sure we're going to do any acquisitions this year, but we'll keep looking, maybe one day one will pop up that we like. But as mentioned on prior calls, we're still being much more cautious on the acquisition front because the cost of capital remains very high. Market outlook. Overall demand for prime farmland growing berries and vegetables remains stable in almost all of the areas where our farms are located. So, a lot of underlying value there in those farms. As mentioned earlier, prices for certain permanent crops have been depressed recently, which along with other factors, has impacted the value of the underlying farmland. However, we are seeing signs of improvement as both crop prices and broader economics of some of these crops. So, we are still in a good position for long term. So hopefully, that the worst may be behind us. When all of the crops were having problems, we clearly were covered by the price of the land that we own.

In closing, we expect inflation, particularly in the food sector to continue to increase over the time, and we expect the values of the underlying farmland to increase as time result. We expect this especially true of the healthy foods such as fresh nuts, fruits and other vegetables, which is the trend in America and all over the world for that matter. Trend is more for people in the U.S.A. eating healthy foods and that continues to grow. Now we'll stop and have some questions from those who follow us.

Operator, would you please come on and help them how they can ask the questions?

[Operator Instructions] The first question comes from Rob Stevenson with Janney Montgomery Scott.

David or Bill, I might have missed it, but can you talk about how that $16.9 million of revenue from the Pistachio harvest was versus what you were expecting? And how does this compare with what that crop would have generated a few years ago?

Well, if you're talking about a few years ago, they were leased. And so, all you would have gotten in is whatever we were charging on the lease. Now we've moved and increased the probability of getting higher rates, who knows. But at the point now, we are probably 2 or 3x the amount that we would have received. So it was a very positive thing that we're getting now from feedback of where the leases have gone, that is from fixed rate to variable rate. And the variable has been very nice. Now we've gotten some nice numbers in. And we believe when you hear us in the fourth quarter, we will have a lot of this ironed out and you'll know what we made on what we invested. That's close as I can get to just giving you a straight number.

Okay. And then, Lewis, the -- you talked about redeeming the Series B. What's the cost associated with that and the timing?

So, the Series D, that's coming due January 31, 2026. Right now, it's at a 5% coupon. At that date, if not redeemed, it goes up to 8%. So, we plan -- at this time, we've looked at all options, leaving it out there, absorbing 8%, which is obviously not what we want to do. Refinancing it is still expensive and also a lot of upfront costs. So, the plan right now is to take it out, redeem it to avoid that coupon with a mixture of common stock and line of credit. We've been issuing common stock at about 6.1%. The line of credit is just south of 6%. So right now, the cost would look to be about 6%, higher than the 5% that the security is currently yielding, but of course, much lower than the 8% that it would otherwise go up to.

Okay. And there's roughly $60 million of debt out there?

Correct. Yes, $60.4 million.

The next question comes from Craig Kucera with Lucid Capital.

I think you mentioned that you might sell some of the permanent crop farms out West if you can't restructure the lease, and you're obviously looking at a number of different options there. But I'd be curious to get your thoughts on the depth of the transaction market out on the West Coast right now.

Well, the banks aren't lending as lower rate as they used to when we first bought these, but they're circling in that direction, and we're hopeful they'll come up with a lower rate. But nice thing about this note that we're paying off is it doesn't come due, it just changes its rate. So, liquidity is not a problem. We know the money is there, and we don't have to give it back. On the other end of it, if we give it back, we cut the rate to 0, obviously. So, I think we're in very good shape. Last year this time, there were some dim moments here in the office as we contemplated what was going on in the marketplace. But today, we have a breath -- I think there's maybe one farmer that's having some real problems, and we may lose that farmer. But otherwise, there seems to be a breath of fresh air in the marketplace out there. And I'm talking mostly about California, other stuff we have in Florida and in the Midwest, they're paying as agreed, and we're in good shape.

Got it. And -- yes. Yes, it does. It does. Just thinking about your commentary on wine grapes, I guess when we think about when you restructured the leases last fall, should we take away from this that any sort of weakness in wine grapes has more or less been offset by strength in tree nuts as far as sort of what you had budgeted at the time you renegotiated those leases?

That's exactly right. How’d you get so smart?

[Operator Instructions] The next question comes from John Massocca with B. Riley.

Maybe kind of thinking about both the repayment of the Series D and just generally kind of the market out there to pay down debt or even potentially even buy back common stock, how are you looking at the disposition market right now? Are there disposition opportunities, particularly maybe outside of California that are interesting? I know you closed the deal in Florida recently. So just kind of curious what potential for generating capital via selling farms there is today?

I think on the East Coast, it's very good. The West Coast is still pretty poor in terms of generating new farmers with lots of equity credit to pay their debts. So, we're still waiting for that to come back. And it has moved in the right direction. But it's still going to take a while for it to catch up where last year was and maybe the year before. John, more I look at that, the more I say, gee, this is going to work out just fine. And I hope you are on the call for the fourth quarter because I think the fourth quarter will tell you whether we made a great decision to go variable rates or fixed rate. That is fixed, meaning we have an amount that we get every month or every quarter, whereas variable, we have to wait until the products are sold. And while they're all growing, this has been a great growing season. There's really nothing going on other than these plants will continue to grow no matter whether -- as long as they're fed water and any kind of stimulant such as some of the things we put on those crops. I think, John, this is a real turning point in this. And we're seeing some really good numbers. And the lady who does all the projections for these crops is sitting here at the table and smiling, and she wasn't smiling a couple of years ago. She was pretty frustrated. We've gotten a new guy out on the West Coast who's going to go to the farms more than we have in the past, although the last person that was there was going to the farms on a -- recently a very frequent basis. And now we're going to have somebody that knows growing and can go out and spot the crops and help us adjust things that needs to be adjusted. This is a great time to be in the business. There are going to be some people that buy crops and we talked to some people. We've had people who want to buy -- want to buy crops, but they want to pay us with promises, and we'd rather have cash than promises. So, we're working hard to get cash in as we have -- how much do we have, Lewis? Cash?

Right now, we have $25 million in the bank and a fully undrawn $75 million line of credit and other undrawn notes as well.

So, we're not in problems’ territory now because liquidity is pretty much assured. We expect the fourth quarter to be a great quarter. We only got $5 million last time we got a payment coming in. I think we'll do much better in the fourth quarter. In fact, we're making sure of that by cutting deals as soon as we can. We have one large farm that a group who's trying to start over again is saying they will buy it from us. I don't know. John, you have to play your cards when you get them. But this time, I think if they come up with the amount of money that we're talking about, it would certainly send us in a direction of maybe buying some good farms. Sure miss the ability to go out and buy farms. It's a different world out there for the nut guys. Not that they're nuts, but they're growing nuts.

I just think on the disposition front, I mean, the Florida transaction seemed like it was kind of opportunistic. Is there more potential for those type of deals as we look into the remainder of the year and '26 to maybe sell more assets either to capital recycle if you do have attractive buying opportunities or to kind of pay down pieces of the capital stack?

Well, certainly, we will pay down the loans in the capital stack. If they're close to maturity, we're definitely going to get them out of the way. So, I don't have any worry about that happening. As Lewis mentioned, the rate might go to 8% unless we do something to get rid of the loan altogether, but the loan itself is not due. It's just the rate is going to change if we don't pay it off. So, we're working on that. And I think we're going to be in good -- once the money starts rolling in from our variable rate charge to some of the farmers, I think we're going to be in extremely good shape. Nothing is taken for granted though. So, we're still praying a lot that things will continue the way they're going in the direction now. And quite frankly, after the downturn that we had in which people weren't eating nuts nearly as much as they had in the past, it was a real shocker when those people didn't step in and order again. They're back ordering now. They're not ordering as much, but we can live where they are now. So, I feel comfortable today. And I just hope our projections are correct. If they are, we will have made a lot of money on the switch from fixed payments to variable payments from the farmers.

Other questions?

And then Lewis, maybe thinking about the Series B a little more, where do you think you are today in terms of having the liquidity you'd like to fully pay that down? It seems like you could, given the availability on the line, the cash today. But I mean, is there any need for kind of fresh capital in your mind to finish that repayment? And I guess, could you also maybe if you wanted to partially redeem it? Or does it have to be fully redeemed or fully kind of left out there to kind of pay that higher rate or that higher dividend yield?

So, a few things there. We definitely could do a partial redemption but having any kind of -- any product in our capital stack at 8% is not ideal for us right now. We -- and yes, we do have the current liquidity to take it out today if we wanted to, but it's at 5% and which is lower than the current cost of capital we would use to take it out it, so it makes sense to let it go at that 5% as long as we can. But the idea between the -- mixing the common stock and line of credit is while the line of credit is a little bit cheaper, based on yesterday's closing price for our common stock, it's variable. So just having to draw less on our line of credit just reduces our exposure to future interest rate volatility there. And as David mentioned, there are some farm sales that are potentially in the works down the line, so that could be some additional capital. But to answer your question, we could take it out today if needed, but it's just a matter of managing interest rate risk and getting the lowest cost of capital and [indiscernible] that we can.

Okay. Any more questions?

Mr. Gladstone, there are no further questions in queue. I would like to turn it back to you for closing comments, please.

We don't like that. We'd like you to ask more questions. It's more fun when you do that. We'll live with it, and we'll see you next quarter and don't miss the opportunity to listen in next quarter and see how well we did in projections. That's the end of this. Thank you very much.

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a great day.