Farmland Partners Q1 2023 Earnings Call Transcript

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Provided by Quartr
May 4, 2023

Key Takeaways

  • Farmland Partners says its assets are worth about $1.4 billion in private markets versus $1.1 billion implied by its stock price, and has repurchased 2.6 million shares at an average of $10.33 to narrow that discount.
  • The company has sold roughly $10 million of farms, has $42 million under contract and is auctioning $40 million more this spring/summer, with proceeds earmarked to pay down debt and buy back stock.
  • Despite broader market turmoil, farm profitability remains near record highs—the USDA projects 2023 will be the second-best year ever—and farmland prices and financing conditions remain very strong.
  • In Q1, net income rose to $1.7 million (up from $1.1 million a year ago) while AFFO fell to $1.6 million ($0.03 per share versus $0.04), and 2023 AFFO per share guidance is $0.17–$0.25.
  • The company renegotiated interest rates on about $109 million of MetLife debt at lower fixed rates (around 5.87%) and gained greater prepayment flexibility on its loans.
AI Generated. May Contain Errors.
Earnings Conference Call
Farmland Partners Q1 2023
00:00 / 00:00

There are 8 speakers on the call.

Operator

Welcome to the Farmland Partners Inc. Q1 2023 Earnings Call. My name is Chatch, and I'll be the coordinator for this conference. After the presentation, there will be a Q and A session where you can ask a question by pressing star 4 by 1 on your telephone keypad. I would now like to hand over to Luca Fabry, President and CEO, to begin.

Operator

Please go ahead.

Speaker 1

Thank you, Chachwan. Good morning, and welcome to Farmland Partners' Q1 earnings conference call and webcast. We truly appreciate you taking the time to join us for these calls because we see them as a very important opportunity to share with you our thinking and our strategy in the form of Less formal and more interactive than public filings and press releases. I will now turn over the call to our General Counsel, Christine Garrison, for some customary preliminary remarks. Christine?

Operator

Thank you, Luca, and thank you to

Speaker 2

everyone on the call. The press release announcing our Q1 earnings was distributed after market close yesterday. The supplemental package has been posted to the Investor Relations section of our website under the subheader Events and Presentations. For those who listen to the recording of this presentation, Remind you that the remarks made herein are as of today, May 4, 2023, and will not be updated subsequent to this call. During this call, we will make forward looking statements, including statements related to the future performance of our portfolio, our identified and potential acquisitions and dispositions impact of acquisitions, dispositions and financing activities business development opportunities As well as comments on our outlook for our business, rents and the broader agricultural markets.

Speaker 2

We will also discuss certain non GAAP Financial measures, including net operating income, FFO, adjusted FFO, EBITDAre and adjusted EBITDAre. Definitions of these non GAAP measures as well as reconciliations to the most comparable GAAP measures are included in the company's press release announcing first Order earnings, which is available on our website, farmlandpartners.com, and is furnished as an exhibit to our current report on Form 8 ks dated May 3, 2023. Listeners are cautioned that these statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally These risks and uncertainties can cause actual results to differ materially from our current expectations, And we advise listeners to review the risk factors discussed in our press release distributed yesterday and in documents we have filed with or furnished to the SEC. I would now like to turn the call to our Executive Chairman, Paul Pittman. Paul?

Speaker 3

Thank you, Christine. So we find ourselves in a very, very tough economic environment for Sort of every asset class with the exception of farmland. The farmland market Continues to be incredibly strong, but our stock price reflects the turmoil in the markets generally. I won't talk much about the turmoil in the markets generally because you're all, of course, living it. But on the farmland side, Farms are actively being bought and sold every day.

Speaker 3

Farmer profit is high. Lenders are lending on farms, and our assets are highly liquid and highly valuable As the sales we've made in the last 1.5 months or so clearly show. Farmland as an asset class Has always been, and frankly always will be, an asset class where roughly 2 thirds of the return Comes from appreciation and onethree comes from the current yield. It appears to us The market only values us based on that current yield, and that is a deep mistake. We will continue to sell truck farms at very high prices, buy back our stock and pay down debt.

Speaker 3

The stock is trading at a substantial discount to what it's worth. It appears to us The market values our assets at about $1,100,000,000 The private market values our assets At approximately $1,400,000,000 that difference is what has created a huge discount The kinds of assets we're going to sell are really a function of our long term view of appreciation and yield on those assets. We are if we think that a set of assets does not have as Strong return profile going forward as other assets in our portfolio. We will look to sell those assets If we have strong offers. As a business, we've always said that we're not emotionally tied to any farm.

Speaker 3

So if someone makes a offer you can't refuse, even for a farm we love, we would, of course, sell it. But generally speaking, we are trying to trim from the portfolio those farms that we think will not appreciate as rapidly In the future, as the other assets we own. Related to that is that this process will lead us to probably lighten up On farms that have long term water risk. So What we've done so far is we have sold approximately $10,000,000 of farms that the closings have already occurred on. We have $42,000,000 of sales under contract, And we have approximately $40,000,000 slated for auction this spring summer.

Speaker 3

These sales are all occurring at very strong gains compared to what we have paid For those farms, the proceeds will go to pay down debt and repurchase stock. To date, we have bought back about 2,600,000 shares at an average price of 10.33 We will continue to buy back stock until we have closed the gap between what we believe is the fair value of our stock And the price it's trading at. So with that, I will turn the call over to Luca Fabri to make some additional comments.

Speaker 1

Thank you, Paul. Today, I just want to spend a couple of minutes kind of drilling down a little bit further in something that Paul already kind of mentioned in passing. Specifically, Agriculture and farmland markets, in particular, are really kind of marching to a different drummer in general. We are seeing this specifically in this environment. As we look around in the general markets and we see a lot of turmoil, a lot of uncertainty, Agriculture and farm economy are incredibly strong.

Speaker 1

The USDA projects 2023 To be the 2nd or best year ever in terms of farmer profitability. Looking specifically at row crops, One specific benchmark that is widely used in the industry to predict profitability for row crop farmers It's the spring pricing for crop insurance, and that was set at the 2nd or third highest level ever for both corn and soybeans. And this is in the context of yields per acre continuously going up, thanks to technology and agricultural practices. So revenue For farmers, it's definitely going up. On the permanent crops, it's a little bit more difficult to make a widespread statement about The overall health of the farm economy because of the huge diversity of crops that we see there, but Specifically, as far as our portfolio is concerned, there has been a lot of uncertainty about specifically the impact of flooding and precipitation in California.

Speaker 1

And as far as our portfolio is concerned, we haven't seen so far any widespread damage, albeit we are monitoring pretty closely the situation as The snowpack in the mountains is melting. On the farmland market specifically, prices are I've seen significant, if not blistering appreciation in the last year and a half to 2 years. So they continue to be very strong. The appreciation itself after the huge gains that we've seen has slowed down or maybe flattened After these steep increases, we are seeing transaction volumes slowing down a bit, mostly because there is a Scarcity of quality assets for sale. Whoever wanted to sell a farm pretty much has sold it already in the last couple of years because of the high prices, And therefore, the markets have thinned down a little bit.

Speaker 1

Another important thing I wanted to point out, Andy, is that the Specialist lenders operating in this market are very much open for business. So not only Real Estate Transaction Board kind of markets are very healthy, but even the credit markets are very healthy. This is Frankly, similar to the situation that we saw in 2,008, when the overall real estate lending markets It was completely frozen, except in agriculture, where it was absolutely business as usual. So it's really what's impacting us and our stock Right now, it's mostly macro factors. It's interest rates, of course, that are impacting also specifically our P and L, even though the leverage industry wide is in the low teams and therefore is really not affecting The farm economy very much.

Speaker 1

In the overall market turmoil with bank failures and global uncertainty and so on and so forth, As Paul said, I'm not going to rattle down the list. You're all more than familiar with that. So in this overall kind of scenario where we see A very strong farm economy and farmland markets and uncertainty in the market turmoil, we are very committed to creating value for our shareholders, Effectively arbitraging between that healthy, active and liquid private asset market and the public stock market that is Very much in turmoil and a little confused. With that, I will turn now the call over to the company's CFO, James Gilligan, for his overview of the company's financial performance. James?

Speaker 4

Thank you, Luca.

Speaker 5

I'm going to

Speaker 4

cover a number of items today, including summary of the Q1 2023, Review of capital structure and interest rates, detail on revenue build up and updated guidance for 2023. I will refer to the supplemental package in my comments. As a reminder, the supplemental is available in the Investor Relations section of our website under the subheader Events and Presentations. Page numbers 1 through 9 contain the press release and related financial information, and Page numbers 10 to 19 contain the supplemental information. First, I'll share a few financial metrics that appear on Page 2.

Speaker 4

For the 3 months ended March 31, 2023,

Speaker 5

net income

Speaker 4

was was $1,700,000 compared to $1,100,000 for 'twenty two, an increase of 600,000 Net income per share available to common stockholders was $0.02 compared to $0.00 for $0.22 an increase of $0.02 AFFO was $1,600,000 compared to $2,100,000 for 'twenty two, a decrease of 0 600,000 AFFO per weighted average share was 0 point 0 $3 compared to 0 point 0 $4 for 0.22 dollars a decrease of 0 point 0 $1 We will review revenue changes in a couple of minutes, If you'll turn to Page 5, I'll make a couple of comments on the expense side. Q1 2023 operating expenses We're lower by $1,700,000 compared to 2022, driven by lower cost of goods sold, general and administrative expenses and legal and accounting expenses. It should be noted that property operating expenses were higher in Q1 2023 compared to 2022, driven by a onetime property tax expense of approximately $150,000 That tax was reimbursed by the tenant, increasing tenant reimbursements by that same amount. In other income and expenses, gain on dispositions was up $1,200,000 in Q1 compared to 2022, while interest expense was $1,100,000 higher in Q1 compared to 2022 due to higher rates. Next, I'll skip ahead to Page 12 to make a couple of comments about our capital structure.

Speaker 4

Total debt at March 31, 2023, Was approximately $443,600,000 Fully diluted share count as of last Friday, April 28, was 53,100,000 shares. If you look at the table on the bottom of Page number 12, between the MetLife credit facility and the Rutledge Farm Credit Mid America credit facility, We had undrawn capacity in excess of $159,000,000 at the end of the Q1. As discussed in previous quarters, dollars 174,000,000 of MetLife debt Has or had rate resets in 2023. These would be loan numbers 1, 4, 5, 6, 7 and 10. In the Q1, we renegotiated rates for loans representing approximately $109,000,000 of that $174,000,000 as shown in the table.

Speaker 4

In the Q2, we have agreed to reset the rate on the $15,700,000 MetLife Loan 7 to 5.87%. This goes into effect the 1st week of June. The RESET loans also have increased flexibility to prepay without penalty, Up to 40% of original principal balance per year. We have approximately $49,000,000 under loan number 10 that will reset in the Q4 of 2023. It should also be noted that the Rutledge Farm Credit line had a decrease in the spread over SOFR that went into effect April 1, 2023.

Speaker 4

The rate decreased from SOFR plus 1.95 to SOFR plus 1.80. Next, I will turn to Page 13 to provide an overview of our income statement. In 2022, we presented numbers in the categories shown in the top table on Page 13. We talked about fixed payments, variable payments, direct operations, gross profit and other items. This is an effort to make the business easier to understand.

Speaker 4

However, this presentation may have made it a little difficult to model the business because it did not detail out the building blocks that comprise The second table on Page 13 does just that. It shows the building blocks for both the GAAP revenue line items and the supplemental categories. Reading down the columns, you can see what makes up the supplemental categories. And reading across the rows, you can see what makes up the GAAP line items. Page 14 shows these building blocks, the ones described on 13, for 2022 and the Q1 of 2023 with comments at the bottom to describe the differences between the periods.

Speaker 4

A few points to highlight are fixed farm rent increased as we acquired properties and renewed leases between the periods And decrease with disposition of farms between the periods. Solar increased in 2023 compared to 2022 As a large project in the state of Illinois commenced its construction phase late last year. Tenant reimbursements increased with that onetime property Tax assessment of $150,000 and the related tenant reimbursement that occurred in the Q1. In the Q4 2022, we acquired land and buildings for 4 agricultural equipment dealerships in Ohio under the John Deere brand. The accounting treatment classifies those acquisitions as financing transactions.

Speaker 4

So they appear on the balance sheet as loans and on the income statement as interest income. This accounts for the increase in interest income in the Q1 of 2023 compared to 2022. Variable payments were £500,000 due to lower performance in grapes and row crops, caused primarily by lower yields during the Q4 harvest period on particular farms. This is largely expected and a topic we covered on the last earnings call. Direct operations is a combination of crop sales, crop insurance and cost of goods sold.

Speaker 4

Altogether, it was down $1,100,000 in the Q1 of 2023 because of lower crop insurance payments and lower crop sales compared to 2022, largely in citrus. Other items decreased $300,000 due to lower auction brokerage activity at our subsidiary, Murray Weis Associates, in the quarter compared to 2022. It should be noted that there was a large transaction where our colleagues did a great job, but the seller decided not to sell. That accounts for nearly all the shortfall between the periods. On the next page, Page 15, we have the outlook for 2023 using those same building blocks described on Page 13 on the revenue side.

Speaker 4

Assumptions are listed out at the bottom of the page, and I'll note some changes from the projections that we shared back in February. $7,000,000 of assets in the Q1 and are projecting to sell in the neighborhood of $80,000,000 to $100,000,000 over the entire year, as Paul described a few minutes back. This number is an estimate, and actual results may differ. On the revenue side, fixed farm rent has a net decrease of approximately $1,000,000 to $1,300,000 as a result of the projected dispositions. Solar, wind and recreation have small changes due to potential asset sales and updated views on solar options.

Speaker 4

There is an increase in tenant reimbursements due to that tax reimbursement that we talked about earlier. No changes on the direct operations revenue items at this time. Other items decreased compared to last quarter due to the lower revenue from auction and brokerage fees in the Q1 of 2023. Cost of goods sold is projecting a little higher due to updated expenses provided by third parties on properties under direct operations. On the expense side, property operating expenses are increasing due to that same one time property tax item that we mentioned a couple of times.

Speaker 4

No changes to general and administrative expenses at this time. Legal and accounting decreases with lower spend than we saw in the Q1, And interest expense decreases slightly with the combination of projected changes in debt balance as a result of the potential asset sales, Plus updated pricing and updated forward curves. We are estimating the last remaining interest rate reset for 2023 at MetLife Loan 10, Price is in the 5.5 percent to 5.6 percent range. Weighted average shares decreases with projected share buybacks. This results in lower AFFO and also lower weighted average share count, generating AFFO per share in the range of $0.17 to $0.25 Slightly higher than back in February.

Speaker 4

This wraps up my comments for this morning. Thank you all for participating. Operator, you can now begin the Q and A session.

Operator

Thank The first question today is from Rob Stevenson from Janney. Please go

Speaker 6

ahead. Good morning, guys. Paul or Luca, the 11 farms for 42,000,000 Under contract, what are they expected to close? Is that a second quarter thing? Is that ratably throughout the year?

Speaker 6

How should we be thinking about that?

Speaker 3

The bulk of those will be in the Q2, some will drift over into the Q3.

Speaker 6

Okay. And then what about the auction process On those other

Speaker 3

farms? The auction process, 2nd, 3rd quarter.

Speaker 6

Okay. And when you think about that sort of $80,000,000 ish in whole, are those dispositions focused on The tree and some of the other specialty crops that you've talked about, the volatility in reducing your exposure to or these mainly mid rest row crops, How should we be thinking about that in terms of what the portfolio looks like going forward following these sales?

Speaker 3

Well, one thing we won't start doing to keep people like you informed and up to date is as we make closings, we may not do it on every transaction Because there's a lot of times there'll be 2 or 3 closings in a week maybe, but we'll put out a press release so you can clearly see which farm we sold when it finally happens We don't want to close this. But to your broader question, most of these sales have been row crop, but not in the Midwest, Roll crop in other regions of the United States. The auctions are going to be a lot of our Eastern Colorado assets And some Nebraska assets where we have water risk, and then we haven't yet, but we may consider Selling some of the specialty crops for the reasons you and I talked about that you mentioned a second ago, As well as the fact that, of course, those things, California has long term water risk on many of the assets.

Speaker 6

Okay. And James, I mean, with some of these sale proceeds, if you're going to pay down debt, do you just pay down The Farmer Mac and Rutledge facilities, is there other stuff that you would hit on before that? How do you think about the priority If you're going to wind up, paying down some debt as to what segments of debt that's going to wind up being?

Speaker 4

Yes. It's a good question. I'd say, in general, we're going to pay down the highest cost debt first. Today, that would be in some of our floating lines. The Farm Credit Mid America line, Farmer Mac line next.

Speaker 4

We also have the ability to make repayments on our MetLife lines, those that we've reset in 2023, we can repay about 40% in any one calendar year. And the balance, We can repay about 20% in any one calendar year. 1 of the loans allows a higher percentage, but that's sort of a good rule of thumb. So We have a good amount to sort of in terms of use of proceeds that we could go after on that side.

Speaker 6

Okay. And last one for me. Any updates in terms of timing and or events with the SabrePoint litigation?

Speaker 3

I don't think there's anything to report. Just we're on appeal and waiting. So No news. No real activity in that in the last several months.

Speaker 6

Okay. Thanks, guys. Appreciate the time this morning.

Operator

The next question is from Wes Golladay from Baird. Please go ahead.

Speaker 7

Hey, good morning, guys. Can you talk about how you balance Scaling the business versus buying the stock at a discount, is there a limit to how much you'll sell?

Speaker 3

Yes. I mean, obviously, it's a balance. But the way I look at it The cheapest farmland on the planet today is our stock, and we're in this to make money For our investors. And so, if I can buy our farms For, call it, dollars 0.30 less than they're worth. And I can, on a dollar 30% discount kind of numbers.

Speaker 3

Why shouldn't we? I mean, that's our business is buying farmland Inexpensively and the cheapest department out there is our stock by miles. So that's what we're really doing. As far as your question, look, we're not trying to go out of business. I mean, the team here, me in particular, we built this business, we founded this business, But we're not too proud to aggressively buy back our stock if we think it's trading at a discount.

Speaker 3

And as Luca said, It's frankly trading at this deep discount in our opinion for two reasons. The first is a general market environment And the second is the market appears unwilling to accept that appreciation is an Incredibly big driver of farmland value and farmland investing. And We're demonstrating that, that appreciation is real and that it's there. We're trying to signal, to be frank in this phone call, loud and clear That our stock is deeply undervalued, and we're out there putting our money where our mouth is on that point.

Speaker 7

Got it. And then when you look at the assets that you're looking to sell, are any of them at trough cash Flows where maybe we're not going to lose they already trade at low cap rates, but even lower cap rates than normal just because the business was maybe under a little bit of pressure for some of the farms?

Speaker 3

Well, obviously, when I said we focus on farms in which the long term and what

Speaker 1

I mean by that is both

Speaker 3

Increased rent opportunity and increased depreciation opportunity. What we think is less, it's less than it is in other places in our portfolio. Obviously, relatively lower cap rate assets will often are on that list. But it's an important there's an important piece of this that's for everybody to recognize. In general, the lowest cap rate assets in the portfolio Are the Illinois type farms, the core of the Corn Belt Farms?

Speaker 3

They are the highest return total assets we own. You combine appreciation, I mean that's that region of the country, those assets have gone up 25% in the last couple of years. And so it's not just the cap rate thing. That's the point we want to make. But you're right, there'll be a lot of there'll be more lower cap rate assets, I think, Higher.

Speaker 3

But it's total return is what drives this asset class. It's what drives our operating, not just cap rate. Because I mean

Speaker 7

Yes, I just didn't understand it.

Speaker 3

The problem with the cap rate thing is to be Yes, the cap rate thing, just to be blunt, the highest cap rates in the asset class are on the lowest quality properties. That's just how it works. And we don't want to chase the lowest quality properties. We want to chase the best properties. So the other thing that's important to grasp What's really happening here is the market is valuing some asset, call it a 4 cap, We're selling it at a 3.2 or something like that.

Speaker 3

I mean, it's different on every farm, but that is the crux of what's happening. The public market values us At a much there's some sensible reasons for this, of the overheads of being a public company and all of that. But the gap It's just way too wide, and we're taking that as an opportunity Instead of just sitting on our hands and being frustrated about it, although we're frustrated about it as well, but we're doing something about it.

Speaker 7

Got it. And then maybe if you can just give us your view on any do you expect any weather related impacts this year, whether it be a drought, Heavy snowpack in California maybe could actually be a beneficiary if some crops are out of service and your crops can do well, your farmers can do well. Just your view on that.

Speaker 3

So I am not going to predict the weather on this phone call, Except to say the following. First, let's start with California. The incredible amount of Rain and snowfall that California received in the last year is a great thing. There will be highly localized Negative events for certain people. That's a natural disaster that we should all feel bad about.

Speaker 3

But the state of California is not going to flood. The hyperbole in the press is ridiculous. A ton of snow and a ton of rain is a really good thing for California in every way. Agriculture, your front yard is greener, The reservoirs for drinking water are more full than they've been in years. This is all good news.

Speaker 3

Don't get sidetracked by somebody giving you a headline in the popular press. And like I said, I mean, sympathy to all the people that have a localized flooding event because there will be some. But we think we're pretty safe on our farms. Then to the more general things, the drought on the weather, the drought continues in parts of the Western Grain Belt, Western Kansas, to some degree Eastern Colorado, Texas Panhandle, there's been more rain than It's been quite a few years here in the last few months, and that's good. And so hopefully, that's going to be the gradual Global weather shifts to El Nino and La Nina are going to make some improvements, we think.

Speaker 3

The rest of the country is off to a pretty good planning Start, so on and so forth. So and obviously, we're mostly a cash rent in the row crop regions. So we're not directly affected by any weather in any given year, but we want our farmers to succeed, of course. So we think it's setting up to be a pretty good year across the regions from a weather perspective. So I did predict weather even though I said I wouldn't.

Speaker 7

Yes. Thanks for that. I appreciate that. And being from California, it is nice to see the grass green now. Thanks for the time.

Operator

The next question is from Craig Kucera from B. Riley Securities. Please go ahead.

Speaker 5

Hey, good morning, guys. Paul, I know you achieved 16% rent growth on your fixed cash rents in the row crops last year, but Yes. I think food CPI is sort of flattened out here in the Q1, lagging in the indicator, of course. But Can you talk about the rent growth on the leases that rolled over in the quarter and maybe your expectations for the remainder of the year?

Speaker 1

Yes. Hey, Craig. So I'll take that. Remember, the our rent rolls, our rent lease duration is about 3 years. So now we are looking at leases that last renewed 2 years ago For a lease starting at the beginning of 2024.

Speaker 1

So there has been quite a lot of appreciation in farmland values. There has been a lot of yield increases that happened in the meantime. So we are expecting this to be still a relatively strong rent Lease renewal cycle, but we haven't really started in kind of full depth because, again, we're looking Lease is starting now in at the beginning of 2024. Let me just add a couple of things to that. We've got

Speaker 3

round numbers, 10% rent increases on the row crop stuff 2 years ago, something in that bracket, maybe 10%, maybe 15% that kind of bracket. We got 15%, 16% in the year we just Pat, closed out. And now in the rent cycle we're in right now, I think we'll still get strong increases. Don't know if they'll be quite as strong as the 16% you referred to, Craig. And the reason for that is, as Luca alluded to, The year that the sort of vintage of leases we're renegotiating right now, some of them were still negotiated under a relatively tough Farm economy, so they didn't get big increases 3 years ago.

Speaker 3

And some of the ones we negotiated later in that year actually had pretty strong increases. So we're kind of working off a higher base on an average basis than we have been for the last couple of years. So I still think we'll get strong increases, but may not be quite To the level we had last

Speaker 5

year. Got it. And understanding that you're still kind of early in the process here, Are you as you discuss things with your tenants, are they looking maybe at any shift in maybe a rising amount of participating rents? Or Are you expecting things to be relatively constant?

Speaker 1

No. I mean, the structure of lease agreements is really More kind of a regional kind of crop basis. So we just the different environment And different farm profitability really wouldn't drive any changes in structures.

Speaker 5

And we are on

Speaker 3

the road crop side, Overwhelmingly a cash rent model and we want to stay that way. And we're that we do that for two reasons. Number 1 is It's just stability and the simplicity of managing the business from a standpoint of our accounting team and our back office efforts on the operations side. Cash rents are way more efficient and easier to manage. But the second thing is, is we think that in the marketplace, Over the long term, the risk adjusted returns to using a cash rent model are higher than using some sort of flex model.

Speaker 3

In other words, you don't get enough on the upside to make up for what you're given on the downside. So we drive a cash rent model. I think James has something to add Yes.

Speaker 4

I'd just add in that in our cash rent business, we generally are paid 50% to 100% of that rent before planting, so kind of Q1 timeframe. Whereas if you're participating or getting variable rent, that would, by definition, be after harvest, kind of on the back end in Q4. So from a cash flow perspective, derisking perspective, It's a very nice feature to be derisked on a meaningful portion of our rents very, very early in the year.

Speaker 5

Right. Thanks. I appreciate that. Just one more for me. As you go through the auction process of this roughly $40,000,000 of assets, Is that something that MWA is going to handle?

Speaker 5

Or is that going to 3rd parties? And is that included in guidance if it is run through MWA?

Speaker 3

So whenever we're doing so number 1, let me answer the question in a more broad sense. We are not incurring very many expenses for brokerage services and the like in these asset sales, but there will be obviously some. But many of these transactions are occurring based on the relationships that the people here in Farmland Partners have with potential buyers of assets. We kind of know everybody in the market. On the specifically on the auctions, MWA is handling the Nebraska asset sales And then they are partnering with some people on the Colorado asset sales that we worked with in the past.

Speaker 3

And it's really kind of market dependent. It's all about the depth of MWAs, not only licensing, but experience in a given state In terms of how they're involved. As far as the guidance question goes, I'm going to turn that over to I mean, It's all kind of consolidated, so I'm not sure. I'll let James answer that.

Speaker 4

Yes. Craig, in those numbers we're considering for kind of guidance, but those are really sort of Internal revenue sources, the internal revenue would be consolidated out. On actually, on a cash basis, we are making sure to pay Our colleagues, arm's length rent as they would receive in any other type of transaction to make sure we're complying with all the necessary rules. So But yes, as you think about it, that would be truly kind of 3rd party fees that would flow through in the projections we've got so far, and we'll continue to update As we go throughout the year and see how the pipeline looks on their side.

Speaker 5

Okay. Thanks. Appreciate it.

Operator

It appears we have no further questions. So I'll hand back to the management team to conclude.

Speaker 1

Thank you. We appreciate your interest in our company and look forward to updating you on our activities and results in the coming quarters. Have a great day.

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