Farmland Partners Q2 2025 Earnings Report

Farmland Partners EPS Results

• Actual EPS: $0.03
• Consensus EPS: $0.04
• Beat/Miss: Missed by -$0.01
• One Year Ago EPS: N/A

Farmland Partners Revenue Results

• Actual Revenue: $6.02 million
• Expected Revenue: $9.50 million
• Beat/Miss: Missed by -$3.48 million
• YoY Revenue Growth: N/A

Farmland Partners Announcement Details

• Quarter: Q2 2025
• Date: 7/23/2025
• Time: After Market Closes
• Conference Call Date: Thursday, July 24, 2025
• Conference Call Time: 11:00AM ET

Farmland Partners (NYSE:FPI) is an internally managed real estate company that owns and seeks to acquire high-quality North American farmland and makes loans to farmers secured by farm real estate. As of December 31, 2023, the Company owns and/or manages approximately 171,100 acres in 16 states, including Arkansas, California, Colorado, Florida, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Nebraska, North Carolina, Oklahoma, South Carolina and Texas. In addition, the Company owns land and buildings for four agriculture equipment dealerships in Ohio leased to Ag Pro under the John Deere brand. The Company has approximately 26 crop types and over 100 tenants. The Company elected to be taxed as a real estate investment trust, or REIT, for U.S. federal income tax purposes, commencing with the taxable year ended December 31, 2014.

Farmland Partners Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: In Q2 2025, net income rose to $7.8 M (15¢/share) and AFFO reached $1.3 M (3¢/share), driven by $25 M in disposition gains, lower interest expense, and reduced G&A.
• Positive Sentiment: Year-to-date asset sales totaled roughly $80 M—primarily High Plains and mid-quality Illinois farms—realizing $25 M in gains and attracting family-office buyers, underscoring farmland’s appeal.
• Positive Sentiment: The company repurchased about 2.3 M shares (5% of fully diluted shares) at an average price of $11.24, deploying $26 M to enhance shareholder value amid perceived undervaluation.
• Negative Sentiment: Management recorded $16.8 M in impairments on four California farms—mostly a pistachio and a walnut property—each written down by about 50% due to restrictive water regulations and crop maturity factors.
• Neutral Sentiment: The SPI loan portfolio has nearly tripled since Q3 2024 as farm lending tightens, although management views financing as complementary to its core farmland ownership strategy.

Presentation

[Operator]

Good morning, ladies and gentlemen, and thank you for standing by. My name is Kelvin, and I will be your conference operator today. At this time, I would like to welcome everyone to the Farmland Partners, Inc. Q2 twenty twenty five Earnings Call. All lines have been placed on mute to prevent any background noise.

[Operator]

After the speakers' remarks, there will be a question and answer session. Thank you. I would now like to turn the call over to Luca Fabri, President and CEO. Please go ahead.

[Luca Fabbri, President, CEO & Director at Farmland Partners]

Thank you, Galvin. Thank you, everybody, and good morning. Thanks for joining us today for this second quarter twenty twenty five earnings conference call and webcast. I we will start as usual with some customary preliminary remarks from our general counsel, Christine Garrison. Christine?

[Christine Garrison, General Counsel & Corporate Secretary at Farmland Partners]

Thank you, Luca, and thank you to everyone on the call. The press release announcing our second quarter earnings was distributed after market closed yesterday. The supplemental package has been posted to the Investor Relations section of our website under the subheader Events and Presentations. For those who listen to the recording of this presentation, we remind you that the remarks made herein are as of today, 07/24/2025, 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 front and the broader agricultural markets.

[Christine Garrison, General Counsel & Corporate Secretary at Farmland Partners]

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 second quarter twenty twenty five earnings, which is available on our website farmlandpartners.com and is furnished as an exhibit to our current report on form eight k dated 07/23/2025. Listeners are cautioned that these statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond our control. These risks and uncertainties can cause actual results to differ materially from our current expectations, and we advise listeners to review the risk factors discussed in our press release distributed yesterday and in documents we have filed with or furnished to the SEC. I would now like to turn the call to our executive chairman, Paul Pittman. Paul?

[Paul Pittman, Executive Chairman at Farmland Partners]

Thank you, Christine. My comments will be relatively short this morning. I'll be, of course, available in the q and a. This is a very good quarter for us. Land values have continued to stay strong in the Midwest as is demonstrated by the gains on the asset sales we made in geography.

[Paul Pittman, Executive Chairman at Farmland Partners]

We also have now liquidated nearly all of the portfolio that we owned in Colorado. We still have a very modest exposure there, one cattle feedlot that we still own as well as just a handful of row crop farms. We'd you know, as we talked about several months ago and several years ago, long term water concerns on the Eastern Plains Of Colorado drove us to decide to exit the market. I'm happy to say we did exit the market with substantial gains on sale. California is still struggling.

[Paul Pittman, Executive Chairman at Farmland Partners]

You've seen, I'm sure, in the press release that we took a write down on a handful of farms out there. Luca will address this a little more in his comments. Our position when we think about write downs is really that we are long term investors. So as long as we think a farm's value, will recover, we're not concerned about, you know, some given far you know, given a farm in our neighborhood sold high or sold low. It doesn't really affect our direct thinking about the value of our farms.

[Paul Pittman, Executive Chairman at Farmland Partners]

We think about most of our farms and what is the value in a two to five year or longer time frame. This group of farms though that we took the write downs on, we had reached a point where we believed that due to the crop types and the fact that they are specialty crops and the water issues in the region that we needed to take a write down, so we did. And what happens here just in a kind of common sense way is particularly on specialty crop farms. The idea that you can wait forever for, recovery, of value is just not true. In row crop in traditional row crop, long term appreciation will always help you out.

[Paul Pittman, Executive Chairman at Farmland Partners]

The problem you have in specialty crops is that while you're waiting, the trees on the ground are aging out. So you're losing a year of productivity. Every year you rate you wait, and you're gonna have to, you know, bulldoze those trees out and replant them. And so those factors led us to take this write down. As I said, Luca will talk a little more about it.

[Paul Pittman, Executive Chairman at Farmland Partners]

We can touch that in the q and a. The other thing I wanna address, just briefly because it's been in the it was in the press as recently as the last couple of days, is this idea, that Coca Cola is gonna replace a high fructose corn syrup with, a regular cane sugar syrups, as it as the sweetener in Coca Cola. And, you know, what does that mean to the marketplace? What does it mean, to corn markets? So on and so forth.

[Paul Pittman, Executive Chairman at Farmland Partners]

So a couple of kind of important facts. First, this is from an overall corn market perspective, a incredibly small percentage of the market. So high fructose corn syrup is around accounts for around 3% of total corn produced in the country. There's a University of Illinois research piece that was put out yesterday by a professor called Scott Irwin. That's where I get that number from if you wanna go look it up.

[Paul Pittman, Executive Chairman at Farmland Partners]

So about 3% of the market, and then, you know, Coca Cola, of course, is a fraction of that fraction. So the specific Coca Cola issue is is de minimis in the extreme. The entire high fructose corn syrup market is pretty small as well as a percentage of the overall corn production. Now just to the science of it for a second. Certainly, my view is that there's never been any really credible research that the type, you know, the the type of sweetener has, you know, significant, meaningful, measurable impacts on health outcomes.

[Paul Pittman, Executive Chairman at Farmland Partners]

You know, the percentage of glucose, fructose, and sucrose are modestly different in the different types of sweeteners, But the but there's really no difference, you know, no research that shows any kind of health difference between those types of sweeteners. The fundamental issue is that we probably all eat too much sugar, period, no matter what the form. So hopefully, this doesn't turn into a significant thing, even if you know, I think the science will dominate, at least for most food products, high fructose corn syrup is, is an incredibly low cost source of sweetening, much cheaper than cane sugar in most cases. So hopefully, like I said, the science kind of wins here. Even if it doesn't, I think the point is it's just not that big a piece of the corn market.

[Paul Pittman, Executive Chairman at Farmland Partners]

With that, I'll turn it over to you, Luca, to make your comments.

[Luca Fabbri, President, CEO & Director at Farmland Partners]

Thank you, Paul. And just to add a couple of kind of final points to this last topic that Paul was addressing. Coca Cola is proposing to not replace its regular product based on HFCS, but to add a new product, that uses cane sugar. And by the way, in most grocery stores, you already can find that product. It's called typically referred to as Mexican Coke or Mexican Fanta because it comes from the company's manufacturing facilities in Mexico that use cane sugar.

[Luca Fabbri, President, CEO & Director at Farmland Partners]

The other important thing that you have to think of think about is that still this is a product that comes from agriculture, comes from as produced on farmland. And that's still the overall picture of farmland as an asset class. This is reconfirming that even with shifting consumer preferences from one product to another, whether it's HFCS Coke versus cane sugar Coke or organic versus traditional, you know, fruits and vegetables, at the end of day, everything comes from farmland and that strengthens the value proposition of farmland as an asset class, which I'll return to as a point here in in a minute. Kind of going back to the performance of the company in the last quarter, as Paul mentioned, we have completed some additional asset dispositions. Year to date so far, we've sold about $80,000,000 in assets realizing gains of approximately $25,000,000 And as Paul was saying, mostly these sales were in the High Plains, which is a region that we intended to exit long term anyway.

[Luca Fabbri, President, CEO & Director at Farmland Partners]

And about this time, we also sold some mostly Class B soil farms in Illinois. So not the top of the kind of quality scale that know, including our portfolio in the Corn Belt. One thing that I wanted to highlight is that the buyers in the two major transactions that we've done so far this year were family offices. These are super ultra high net worth individuals and families that have access to all sorts of assets and investment vehicles and so on and so forth. And they are choosing to put their money in farmland.

[Luca Fabbri, President, CEO & Director at Farmland Partners]

And this really strengthens the value of farmland as both a very reliable long term store of value as well as a long term appreciation play. And this goes back to our kind of the reason why we started our company years ago, which is to make these asset class accessible not only to high net worth individuals, but also to, everyday kind of everyday investors like the vast majority of our investor base. We used a portion of the proceeds from these asset sales in stock repurchases. So far this year, we bought back about 2,300,000.0 shares, which is about 5 percent of our fully diluted shares outstanding prior to the buybacks at an average price of about $11.24 which we consider you know, very attractive and there was a total of about $26,000,000 that we used in these stock repurchases. The last point I wanted to discuss, as Paul mentioned, this quarter we took a relatively unusual step of, recording some impairments on some of our farms, specifically these were four farms in California.

[Luca Fabbri, President, CEO & Director at Farmland Partners]

And the vast majority of those $16,800,000 impairments were on two very specific farms. One is a pistachio farm that has a kind of very delicate water situation, delicate not from a physics and physical availability of water standpoint necessarily, mostly from a regulatory standpoint, meaning that because of California regulations on water access, this will be progressively more and more challenged in accessing the, in being able to use water to the extent necessary to support production farm wide. And which is why we decided to take this impairment because we don't see this water situation resolving at all, given that it's regulatory driven. The other one is a much smaller farm, our only Walnut farm in our portfolio. And there, in addition to the regulatory water issue that led to the impairment of the first farm, We also had a longer term view that walnuts as a crop are in a delicate position, especially in The U.

[Luca Fabbri, President, CEO & Director at Farmland Partners]

S. Given the significant production worldwide that has emerged in China and therefore has made that crop relatively less attractive as an investment in The U. S. So we don't see that situation resolving itself. Those were all the comments I wanted to highlight.

[Luca Fabbri, President, CEO & Director at Farmland Partners]

So with that, I will now turn the call over to our Chief Financial Officer, Susan Landy, for her overview of the company's financial performance. Susan?

[Susan Landi, CFO at Farmland Partners]

Thank you, Luca. I'm going to cover a few items today, including a summary of the three and six months ended 06/30/2025, a review of capital structure, comparison of year to date revenue, and updated guidance for 2025. I'll be referring to the supplemental package, is available in the investor relations section of our website under the subheader events and presentations. First, I'll share a few financial metrics that appear on page two. For the three months ended 06/30/2025, net income was 7,800,000.0 or 15¢ a share available to common shareholders, which is higher than the same period for 2024, primarily due to gains on dispositions of 32 properties during the current quarter, in addition to lower g and a, costs and interest expenses and higher interest income.

[Susan Landi, CFO at Farmland Partners]

AFFO was 1,300,000.0 or 3¢ per weighted average share, which is higher than the same period of 2024. AFFO was positively impacted by significantly lower interest expense as a result of our debt reductions and higher interest income due to increased activity under the SPI loan program. For the six months ended 06/30/2025, net income was $9,900,000, or 18¢ a share available to common stockholders, which is higher than the prior year with largely due to the impacts of 34 dispositions that occurred in the current year to date period, in addition to significant debt reductions resulting in interest savings, lower g and a expenses, as well as interest increased interest income due to a higher balance on loans under the SPI loan program. AFFO was 3,600,000.0 or 8¢ per weighted average share, which is higher than the same period for 2024. AFFO was positively impacted by lower interest expense, higher interest income, and proceeds from a solar lease arrangement with a tenant.

[Susan Landi, CFO at Farmland Partners]

Next, we'll cover some operating expenses and other items that you can find on page five. Gain on disposition of assets is higher, due to the dispositions of the 34 properties in 2025 that had an aggregate consideration of 81,600,000 resulting in a net gain on sale of 25,000,000, compared to a loss of 100,000.0 in 2024, which was related to the sale of fixed assets. There were no property dispositions in the first half of twenty twenty four. As a result of significant reductions in debt that occurred since October, interest expense decreased $2,800,000 during the quarter versus the same quarter in the prior year and $5,200,000 year to date versus the prior year. In addition, the dispositions resulted in lower property operating expenses and depreciation expenses.

[Susan Landi, CFO at Farmland Partners]

General and administrative expenses decreased for the three and six months ended 06/30/2025, primarily due to a one time severance expense of $1,400,000 during the the six month period in June, which is partially offset by slight increases in other expenses in the current period. Moving on to page 12, there's a few capital structure items that I'd like to point out. We had undrawn capacity on the lines of credit of of approximately 160,000,000 as of 06/30/2025. We had no debt subject to interest rate resets in 2025, and as a result of our swap, no exposure to variable interest rates, with the exception of whatever we draw on our line of credit. In addition, we have repaid our lines of credit in full with payments totaling $23,000,000 in early July.

[Susan Landi, CFO at Farmland Partners]

Page 14 will break down the different revenue categories then, along with some comments at the bottom to describe the differences between those periods. A few points to highlight are, as expected, fixed farm rent decreased largely due to dispositions in the last 2024 and thus far in 2025. Solar, wind, and recreation changes were caused primarily by proceeds from the solar revenue sharing arrangement with a tenant that we received in the 2025 and partially offset by dispositions. Management fees and interest income increased primarily due to the increased loan activity under the FBI loan program. Page 15 has our outlook our updated outlook for 2025.

[Susan Landi, CFO at Farmland Partners]

The can find the assumptions listed at the bottom of the page. On the revenue side, changes from the May guidance include the the expected decrease in fixed farm rent as well as solar wind and recreation rent due to property dispositions that occurred in the current period, an increase in management fees and interest income as a result of increased activity on the FCI loan program, and changes in variable payments, crop sales, and crop insurance as a result of updated outlook on properties with variable rent and properties that we directly operate. On the expense side, changes from the May guidance include an increase in impairment related to the current period impairment ex expense for, certain properties in the West Coast, an increase in the gain loss on disposition of assets due to the 32 property dispositions that closed in q two, a decrease in interest expense due to a lower average out balance outstanding on the debt as a result of principal repayments during the current quarter and subsequently in July, and a decrease in weighted average shares related to the impact of the share repurchases that we've made since May. The forecasted range of AFFO is 12,800,000 to 15,500,000.0 or 28¢ to 34¢ per share.

[Susan Landi, CFO at Farmland Partners]

This summarizes where we stand today. We will keep you updated as we progress through the year. This does wrap up our comments for this morning. Thank you all for participating. Operator, you can now begin the Q and A session.

[Operator]

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Your first question comes from the line of Robert Stephenson, Janney.

[Robert Stevenson, MD & Head - Real Estate Research at Janney Montgomery Scott]

Luca, how much more can you guys sell in 2025 given the multiyear disposition program that you guys have been operating under?

[Luca Fabbri, President, CEO & Director at Farmland Partners]

So, so far this year, we've we actually have done three transactions sale transactions that count under the REIT rules. So we are we have four more transactions. So we are really relying this year on the safe harbor based on seven transactions rather than the dollar amount, because of the prior history on sales. And therefore the total dollar amount will of course very much depend on the potential size of each of those remaining four transactions assuming that we do all four.

[Robert Stevenson, MD & Head - Real Estate Research at Janney Montgomery Scott]

Okay. And if you do all four of those, is that trending towards needing to pay a special dividend again at the end of the year this year?

[Luca Fabbri, President, CEO & Director at Farmland Partners]

Very hard to say because it also depends on given the dynamics between, GAAP accounting and tax accounting. For example, if we end up selling some of the farms where we recorded impairments, those impairments will turn into tax, will have a tax impact. And so it's really hard to tell at this point.

[Robert Stevenson, MD & Head - Real Estate Research at Janney Montgomery Scott]

Okay. And then I guess the opposite side of that coin, how are you guys thinking about acquisitions? Does anything really make sense at this point, especially versus repaying debt and buying back stock? How are you guys thinking about capital deployment in the back half of this year?

[Paul Pittman, Executive Chairman at Farmland Partners]

Me Luke, I'll take this one. So as far as capital deployment goes, Rob, we are very disciplined in terms of acquisition strategy right now. But a farm that adjoins something we already own comes up or an especially good bargain for some reason comes up, you know, we'd certainly look at it. But we're, you know, we're pretty slow in terms of our pursuit of acquisition opportunity for the reasons you stated. Buying back stock is a more, is, most cases, more effective.

[Paul Pittman, Executive Chairman at Farmland Partners]

You know, we're still long term believers as you can as you can see with what we've done in the last year year or two. We are much, much more concentrated on The US, Midwest, Illinois in particular part of the marketplace. That gives us a much, much safer and more stable portfolio than we have had in the past. The only downside is it's relatively low current yield because cap rates in that margin in that region because of the safety are, you know, are pretty low. But the long term appreciation in that region is better than anywhere else.

[Paul Pittman, Executive Chairman at Farmland Partners]

And so, you know, long winded answer, but we're just not very acquisitive and not likely to be.

[Robert Stevenson, MD & Head - Real Estate Research at Janney Montgomery Scott]

Okay. Susan, the legal and accounting guidance went up about $300,000 at both the low and high end. Anything major driving that increase?

[Paul Pittman, Executive Chairman at Farmland Partners]

Again, I'll I'll I'll just address that. Nothing really significant. We have an ongoing tenant dispute in on a Louisiana farm from from long ago and, you know, not we don't believe we did anything wrong. We've never been, you know, never had one of these disputes in the past. But that being said, we thought it was appropriate to to kind of ex expect to pay some money at some point in the future, because, we'll probably settle it at some point. So that's what's driving that.

[Robert Stevenson, MD & Head - Real Estate Research at Janney Montgomery Scott]

All right. And then the last one for me. The preferred units are eligible for conversion in a little over six months. Any thoughts at this point on how you guys might address those?

[Paul Pittman, Executive Chairman at Farmland Partners]

Yes. There will be almost no chance that we convert those into shares. Given that our stock is so deeply undervalued, we will pay that off either with cash from asset sales or from borrowings under our lines of credit. There there is no, you know, I shouldn't probably say a 100%. So there's a 99% probability that that is not going to be converted.

[Operator]

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

[Craig Kucera, MD - Equity Research at Lucid Capital Markets]

Hey. Good morning, guys. I want to circle back to the pickup in variable payment expectations. Was that entirely due to sort of an improved outlook on the citrus and avocados? Or did you restructure any leases to have a larger variable payment component like one of your competitors has been doing?

[Paul Pittman, Executive Chairman at Farmland Partners]

Susan or Luca, you need to take that. I don't know the specific facts.

[Luca Fabbri, President, CEO & Director at Farmland Partners]

Yeah. No. No. We haven't we haven't had the the need to restructure any lease arrangements. So it's just essentially based on cross dynamics.

[Luca Fabbri, President, CEO & Director at Farmland Partners]

And as we refine our views throughout the year, we have a better view on crop yields and crop prices. Susan, I don't know if there is anything else you want to add.

[Susan Landi, CFO at Farmland Partners]

No, I don't have anything else.

[Craig Kucera, MD - Equity Research at Lucid Capital Markets]

Okay. That's helpful. Changing gears, we're hearing more and more about some tighter lending, to farmers and your loan portfolio has nearly tripled since the third quarter of last year. Are you seeing rising demand? Is there a ceiling on what that portfolio might be as a percentage of assets?

[Paul Pittman, Executive Chairman at Farmland Partners]

Yes, I'll take that. So yes, we do see more and more inquiries about farm lending. You know, there's we're in a, know, we're in a somewhat difficult I won't say very difficult, but somewhat difficult operating environment for farmers, for row crop farmers in particular. You know, so so we would expand the lending program, you know, if there were good loans to make modestly. That being said, you know, we don't want that to become too big a percentage of our portfolio at any point in time, just because it's it's you know, our core business is owning farmland, not not loans.

[Paul Pittman, Executive Chairman at Farmland Partners]

We like that business. We like the loan business because of the returns. It certainly helps us generate cash flow for dividends and operating overheads, but we're not likely to expand it significantly now.

[Craig Kucera, MD - Equity Research at Lucid Capital Markets]

Okay. Got it. I want to circle back to the impairment charges you took in California. The back of the envelope looks like it was about 6% of your total cost basis there. But you mentioned most of it was at two farms.

[Craig Kucera, MD - Equity Research at Lucid Capital Markets]

Can you give us a sense of what the write down was on a percentage basis at those farms? Was it somewhere in the order of 30% at several?

[Luca Fabbri, President, CEO & Director at Farmland Partners]

On One where we took the majority of that impairment was actually a little over 50%. You know, we were Okay. Very aggressive. We want to just take you know, bite the bullet once, to be honest. Susan, I don't know if she have to she has handy the the details.

[Luca Fabbri, President, CEO & Director at Farmland Partners]

That's the one I remember off the top of my head.

[Susan Landi, CFO at Farmland Partners]

Yeah. They're they're both in the neighborhood of about 50%, the the two large ones.

[Craig Kucera, MD - Equity Research at Lucid Capital Markets]

Got it. That's okay. That's helpful.

[Paul Pittman, Executive Chairman at Farmland Partners]

Yeah. When you let me just add to that. When when you see the regulatory environment fundamentally take away about half of your water on a California farm, it is incredibly detrimental to the value. And they that's what's going on out there. And so that's we took you know, we put two pretty significant write downs on those farms for that reason.

[Craig Kucera, MD - Equity Research at Lucid Capital Markets]

Got it. And and just one more for me. I mean, given you took the charges, I know you look longer term, two to five years or even longer. Are you are you actively looking to sell some farms in California, and is there a bid?

[Paul Pittman, Executive Chairman at Farmland Partners]

Yeah. There's yeah. We are actively looking. We've got a couple of the farms we took the impairments on actually listed, and we're trying to see if we can get them sold. Because we just you know, when we when we when we decide a farm isn't going to you know, I don't know, you don't want a day trade, if you will, farmland.

[Paul Pittman, Executive Chairman at Farmland Partners]

That's not how to do it. You don't even want a yearly trade farmland. What you wanna do is is is basically hold for long term appreciation potential. But once you decide that, you know, something's something's in trouble and going to stay in trouble for a meaningful period of time, you know, half a decade or more, and you're losing money on it owning it. And when you think about your cost of capital and everything else, you just gotta get rid of it.

[Paul Pittman, Executive Chairman at Farmland Partners]

And so we're gonna we're gonna get rid of it. And, yes, there are bids out there. You just have to be disciplined on not asking too much. You know, I think I think some investors are unwilling to do what we did, just take the write down and then reprice the asset and see if you can move it.

[Craig Kucera, MD - Equity Research at Lucid Capital Markets]

Got it. Okay. That's it for me. Thanks.

[Operator]

Your next question comes from the line of John Massocca, B. Riley Securities. Please go ahead.

[John Massocca, Senior Research Analyst at B Riley Financial]

Good morning.

[Luca Fabbri, President, CEO & Director at Farmland Partners]

Good morning.

[John Massocca, Senior Research Analyst at B Riley Financial]

If I kind of look at the full year outlook, right, not that there were huge moves, but variable payments kind of increased versus your last provided guidance in crop sales, you know, came down a little bit. And I'm guessing is that I'm imagining that's just crop type mix. And maybe if you could provide any color on kind of how, you know, the various pushes and pulls are there in terms of crop type, you know, what's doing well, what's doing poorly, and and may maybe kind of, you know, why.

[Paul Pittman, Executive Chairman at Farmland Partners]

Yeah. Let me let me let me just address that in a very general sense. And if somebody wants to add specifics, from the rest of the team, they can. What happens here is about once each quarter, we reevaluate the budget for both the farms we're operating, which is crop sales, generally speaking, a handful of farms that we direct operate. And, again, for everybody's benefit, direct operate doesn't mean we have employees.

[Paul Pittman, Executive Chairman at Farmland Partners]

It means we have a contract with some farmer, but we're taking the economic risk on the crop. And then variable pay variable payments is, of course, crop share leases or bonus leases in in California. So what happens on that once a quarter review is the crop you know, you start with a good faith budget faith budget based on, you know, what happened last year and what happened on average in the last five years, etcetera, etcetera. And then you refine it as you get into the crop season, and you actually could see the fruit on the tree. And so all that's happening here is we're seeing certain types of farms do a little better than we expected.

[Paul Pittman, Executive Chairman at Farmland Partners]

In the second quarter, in particular, you see the citrus harvest get essentially completed. It goes on in the first and second quarter. You now can look at the tree nuts, which are a late summer or early fall harvested crop. You can start seeing whether you've got a really high volume of nuts on the tree or not, so on and so forth. And we make, you know, some adjustments and and budgeting updates based on that, and that's what's driving that those those numbers.

[John Massocca, Senior Research Analyst at B Riley Financial]

K. That that makes sense. Maybe on California specifically, how much kind of yep. Yeah. How long was kind of the outlook into some of these water issues and some of the farms that, you took the write down in?

[John Massocca, Senior Research Analyst at B Riley Financial]

And I guess, there any other farms in the portfolio today that are at risk of of kind of having some of these issues with access to water just given the regulatory change? Or is it something that's, I guess, kinda how sudden is it and how, you know, you know, how much kind of, you know, how far over the horizon can you see when some of these, water regulatory issues are gonna occur?

[Paul Pittman, Executive Chairman at Farmland Partners]

Well, so on a water regulatory issue, most of this is based on a on on what's called SIGMA, which was a groundwater management law, that was put into place, you know, four or five years ago now. And then as and the implementation of Sigma, is largely based on water districts or counties, you know, kinda smaller subunits, not the whole state, coming up with plans. As those plans are developed, you basically, hopefully, get to a point in which you've got maybe a worse water situation than you used to have based on the regulations, but at least you now have predictability and certainty. So that process, you know, is is largely well underway in most water districts and counties in California. So what we were seeing here in, like, take the the the in particular, the pistachio farm, what came out of that regulatory process and that water district process as it came to the final rules related to the sigma law was, you know, pretty negative.

[Paul Pittman, Executive Chairman at Farmland Partners]

And that's why we took that big write down on the on the pistachio part. So so the so the you know, if we believe there was a a need to write something else down, we would have already done it. So, you know, hard to answer with with with certainty, but, you know, we don't see anything we're gonna write down right away where we would have done it now. I I can't tell you because it's this whole Sigma thing is probably 75% done, not a 100% done at this point. What other, you know, what other sort of turn may occur that leads us to need to write something down? But right now, we don't see any need to.

[John Massocca, Senior Research Analyst at B Riley Financial]

Okay. And when you say, like and I know you're using rough numbers, but the Sigma thing's about 75% done. Is that, like, 75% of water districts kind of already have their plans in place, or is that something where we can see a wave of

[Paul Pittman, Executive Chairman at Farmland Partners]

Yeah. Yes. That's that's that's what I meant by that.

[John Massocca, Senior Research Analyst at B Riley Financial]

And k.

[John Massocca, Senior Research Analyst at B Riley Financial]

And and then last one that's on the balance sheet. You know, how should we kind of think about utilization and the $50,000,000 of cash you kind of have on hand today just given, you know, your prior comments on the series a versus maybe, you know, the attractiveness of buying back stock versus debt? I mean, I'm just just kind of thinking, like, you know, is there a potential that you carry a relatively large cash balance through the remainder of the year just given, the preferred unit, you know, potential need to repay the preferred units next year?

[Paul Pittman, Executive Chairman at Farmland Partners]

Luca, I'm going turn that over to you because you you talked about that all the time.

[Luca Fabbri, President, CEO & Director at Farmland Partners]

Yeah. You know, as as always, my answer to that question is that we this is a juggling of different bolts, looking at different variables on an ongoing basis. Whenever we have liquidity available, we always look at the stock price to evaluate how attractive is to go in the market and do stock repurchases to create value for the remaining shareholders. What are interest rates? What are our specific repayment opportunities on specific pieces of debt?

[Luca Fabbri, President, CEO & Director at Farmland Partners]

So for example, of the $50 odd million that we have on the balance sheet as of the end of the quarter, we already used some to pay down lines of credit. So now we don't have any expensive, fully expensive debt outstanding at this point in time. So it's it's I know it's not the the clean answer that you can plug into your model, but unfortunately, the world is not as clean and straightforward. It's just an optimization model that we run we run-in our discussions on an ongoing basis.

[Paul Pittman, Executive Chairman at Farmland Partners]

Let just add one thing to that because it's important. Right now, we're investing that cash at a positive spread above what the cost of the preferred is. So just sitting on a bunch of cash kind of waiting to pay off that preferred next year, you know, is actually making us a little bit of money right now. You know, just that's that's worth keeping in mind.

[John Massocca, Senior Research Analyst at B Riley Financial]

K. Understood. And that's it for me. Thank you very much.

[Operator]

There are no further questions at this time. And with that, I will turn the call back to Luca Fabri for closing remarks. Please go ahead.

[Luca Fabbri, President, CEO & Director at Farmland Partners]

Thank you, Galvin. We appreciate your interest in our company. Thank you again for joining us today and we look forward to updating you on our Q2 results in the coming quarters. Have a great rest of your day.

[Operator]

Ladies and gentlemen, this concludes today's conference call. We thank you for participating and ask that you please disconnect your lines.

Participants

Executives

• Luca Fabbri, President, CEO & Director
• Christine Garrison, General Counsel & Corporate Secretary
• Paul Pittman, Executive Chairman
• Susan Landi, CFO

Analysts

• Robert Stevenson, MD & Head - Real Estate Research at Janney Montgomery Scott
• Craig Kucera, MD - Equity Research at Lucid Capital Markets
• John Massocca, Senior Research Analyst at B Riley Financial