Gladstone Land Corp (LAND) 2015 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Gladstone Land Corporation's second-quarter 2015 earnings call and webcast. (Operator Instructions) as a reminder, this conference today is being recorded.

I would now like to turn the conference over to David Gladstone. You have the floor, sir.

Thank you. Welcome to the conference call for Gladstone Land. This is David Gladstone and thank you, Andrew, for that nice introduction and thanks to all of you people we have on the line today. We appreciate you calling in.

We always enjoy this time that we can be with you and hope we have a lot of good questions at the end. We wish we had more time to be with you, but this is sort of once a month -- once a quarter, I mean, that we do this.

By the way, if you're ever in the Washington DC area, we're located in a suburb nearby called McLean, Virginia. And if you have a chance, come by and say hello. You will see a great team at work here.

We have about 60 members; many of them are on the road. We are no longer a small business. We are about $1.8 billion in assets across all of our companies.

So we will start now with Michael LiCalsi. He is our General Counsel and Secretary. He also serves as the President of Gladstone Administration, which serves as the administrator to all the Gladstone funds, including this one. Michael?

Good morning, everyone. This report you are about to hear may include forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, including statements with regard to the future performance of the Company.

These forward-looking statements involve certain risks and uncertainties that are based on our current plan, which we believe to be reasonable, and there are many factors that may cause our actual results to be materially different from any future results expressed or implied by these forward-looking statements, including all the items listed under the caption Risk Factors in our Form 10-K and 10-Q that we file with the SEC. These can be found on our website at www.GladstoneLand.com and on the SEC's website at www.SEC.gov.

The Company undertakes no obligation to publicly updated or revise (technical difficulty) whether as a result of new information, future events, or otherwise except as required by law.

And in our report today, as a real estate investment trust or REIT, we plan to discuss funds from operations or FFO. FFO is a non-GAAP accounting term defined as net income excluding the gains or losses from the sale of real estate and any impairment losses, plus depreciation and amortization of real estate assets. The National Association of REITs, or NAREIT, has endorsed FFO as one of the non-GAAP accounting standards that we can use in discussion of REITs.

We will also be discussing core FFO, or CFFO, which adjusts FFO for certain non-recurring charges, and adjusted funds from operations, or AFFO, which further adjusts CFFO for certain non-cash items. And we believe these metrics improve comparability of our results period over period. Please review our quarterly report on Form 10-Q filed yesterday with the SEC for a more detailed description of each of FFO, CFFO, and AFFO.

The report from our President and CFO that you're about to hear is an overview of our operations and performance, and we encourage all listeners to read yesterday's press release and the Form 10-Q, which includes a wealth of information for our investors. You can find them all at our website, GladstoneLand.com.

To stay up-to-date on the latest news involving Gladstone Land and our other affiliated publicly-traded funds, please follow us on Twitter, username Gladstonecomps, and Facebook, keywords The Gladstone Companies. You can go to our general website to see more information about this fund and our other affiliated publicly-traded funds at www.Gladstone.com.

Now I will turn the presentation back to David Gladstone.

All right. Thank you, Michael. It is nice to have a good lawyer tell listeners about the warnings of any reports from public companies and we aim to follow all the government guidelines in this area.

Before we get into the results of quarter ending June 30, I would like to give a brief overview of the market environment and the nature of our business for all of our listeners out there. Our business consists solely of owning farmland and leasing it to independent and corporate farmers. These independent farmers are large, not small farmers. They are usually in the top 20% of the largest and best farmers in any of the farming areas that we go into.

We don't farm any of the land ourselves and, thus, don't take any direct farming risk. Almost all of the farms we own are concentrated in locations where farmers are able to grow high-value, annual row crops such as berries and vegetables.

There's been some recent media coverage about declining values of Midwest farmland that is growing corn and other grains. And that includes many of the geographic areas that grow corn, such as Virginia and North Carolina, but please know that we are not in that area except one small farm. The corn sector is just not part of our primary focus.

However, land values in regions in the Midwest where we are currently looking seem to have hit bottom, which may provide a good opportunity to buy some farmland. But if we buy farmland, say in Nebraska, for example, we'll back farmers growing produce, like potatoes and onions. Almost every farmer we have the tenants are growing items that you would see in the produce section of the grocery store. That is our specialty.

I know the produce area because I used to own the second-largest producer of strawberries and other berries in the US, and I sold that produce company to Dole and kept the land. And that was the beginning of this REIT.

Corn cropland has declined anywhere from 8% to 12% and two other REITs that have almost exclusive holdings in corn land, well, they have been damaged. Now they see their errors and they are seeking to going into blueberries. I don't think they have a clue what's going on in the blueberry marketplace, but they are trying to move out of corn into berries.

Another small REIT is trying to raise money to move away from corn and buy land in California. I really wonder if they have studied the California marketplace enough to make that kind of jump.

But the geographic regions where our fruits and vegetable farms are located have continued to increase in steady appreciation in both underlying land and the value of the rents charged on those lands, which is evidenced by the several strong lease renewals that we have executed so far this year. And that is because the fruits and vegetables they are growing have not gone down and prices probably gone up, mostly in prices.

I would like to dispel people's concern regarding the drought in California and its effect on the water availability for our farms. There is a drought in parts of the state, mainly in the Central Valley, which is not where our farms are concentrated. All of our farms in California are on the coast with the exception of one small farm in the Valley that is growing peppers.

All of the farms, including the one in the Valley, have wells. They sit on very nice wells and so far the wells have been doing fine, and we've been growing crops just fine.

A number of California communities where we have farms have large processing plants that take the effluent from the city and convert it to extremely clean water that can be used to grow crops. The clean water is piped out from the city -- city's processing plants to our farms, which allow the farmers that are renting our land to use either our wells that are on the farms or the city water. So they have plenty of opportunities for water.

In addition, many of the coastal cities in California are constructing plants that convert seawater into drinking water. All other citizens there appreciate that, because that is really an unlimited supply.

So at this point we don't believe any of the farms are at risk of going dry or being without water and a major relief may be on the way. This year the El Nino, which typically brings heavy rainfall to California during the fall and winter seasons, is expected to rival the strongest one on record, which --. And so this spring of 2016 may be the last you see of the drought.

One more point: we have two kinds of leases that we offer farmers. First, there is the strictly cash basis in which the rent has a modest increase. They have a percent or 2% or 3% every year or so, and then it goes up to the current market value. It doesn't go down, but it can go up if market values are going up faster.

All of our farmers so far have wanted cash rents. Our second type is a participating rent and down South we always call those sharecropping. These kind of leases we would charge a little less current basis, say 1% cap rate less than the cash base rent, but in return for lower fixed cash rent we'd get a percentage of the gross sales of the crop on the land. That would be, say, 20% or 30%.

This is something many small farmers like because they have a smaller amount of cash needed to stay in business. The large farmers make so much money that they don't want to give up part of their revenue, and since we deal mostly with the larger farmers, the cash rents are almost always requested.

Well, now back to the business. We currently own about 11,500 acres in 36 farms across five states in the United States. We also have some cooling facilities and box barns. These are structures that are on the farmland and are used by the farmers there. However, investors should expect that the bulk of our assets will always be farmland that is leased to farmers to grow food.

We have been extremely successful with our leasing strategy to date, as we have been able to average an increase in rentals of over 16% on all of our lease renewals since our IPO. We believe this underscores the real value that local farmers see in the underlying land, which is our properties, and where they are located. And also indicates the upward market trends expected in these areas.

You know, I am not sure what drives all these rental rates up except the basics and that is superior farmland, like we have, is decreasing in amount in both California and Florida. And that, of course, drives up demand for the remaining farms. If you have superior land where you can deliver high-yield and superior crops, it's in very high demand these days.

There is a stronger demand also driving prices. There's a stronger demand for fruits and vegetables and even nuts, because people are eating more healthy foods, especially organic, so demand is up. We have some of these organic farms and some of our farmers want to convert from what they are today to organic farmlands.

There are -- another thing that's pushing all the prices, the population increase. As the more people there are to feed, it takes a lot of pressure -- puts a lot of pressure on the value of farmland.

Then, finally, I think the buying power of the dollar is going down as the government prints billions more in dollars. Everyone I know that buys fruits and vegetables complains about the price of produce in the produce section of the grocery stores. However, you want to know we never complain about how much money that our farmers are making from selling produce to the grocery stores. It's a good sign for us.

If I had to point out one thing, I would say that the amount of farms in our regions is relatively finite. There are no new farms being developed in most of these areas because it has all been converted. There isn't any more room. There are no more trees to chop down.

The trend we are seeing is a steady decrease in the number of farms in our growing regions as they are being sold to build homes, apartments, offices, schools, industrial buildings. And once they are converted to suburban use, they never go back to farms. This causes the farms we own to be highly sought after as they have been rented for many decades without ever being vacant.

Just a footnote to keep you in mind here, our leasing practices; we generally prefer to keep the same farmer on the same property for as long as possible. Our objective is to be the long-term real estate partner for all of our farmers so they know that they have the farm for as long as they need it or want it.

Some recent activity. We acquired two more farms in Florida during the quarter just ended for a total purchase price of about $16 million. The weighted average cap rate on that was about 5.6%.

We financed our farms using some of the government-sponsored programs at 2.6%, so we make 3 points spread on the land that we buy with those mortgages. And we can mortgage our property to about 60% loan to value. So we make 3 points on that 60% and 5.6% on the equity we invest in the farm. You add that up and when you start putting the numbers together you are usually somewhere over 8% and maybe as much as 10% return on equity when you start.

But that, folks, is just a start. That seems like a low start, but each year the rent increases here. Ours are generally 2% or 3% per year. The mortgage is fixed, so each time the rents bump up a little bit that means the return is going up.

And I think this is just like a snowball rolling down a snow-covered hill. It just keeps getting bigger and bigger over time and I think this will be one of the best investments anybody can make.

We completed a second offering during the period. We raised about $15 million in gross proceeds. Didn't want to raise a lot of money; didn't like the dilution that we really take when we'd raise money. This provided us with the additional capital we needed to close some new deals that we have coming down the pipeline.

Our marketing activities have been gaining significant traction in the marketplace and our list of possible acquisitions continues to grow. At this point in time, we have three farms worth about $30 million under signed purchase agreement. We expect to close during the third quarter that we're in right now.

We also have an additional three farms worth about $15 million under signed letter of intent and we are moving towards purchase agreements in most of these. But we are still continuing our diligence process on these last three, and in fact, everything we are working on up until the moment it closes is under due diligence.

Let me just talk about one of the areas I like to talk about, which is net asset value. As most of you know, real estate investment trusts don't publish their net asset value by going out and valuing their real estate.

During the quarter we updated the valuations of five of our farms, all of which were valued internally. In aggregate, these farms increased by about $900,000, or about 7%, from their prior evaluation, which were about a year ago. So in one year we got an uptick of about 7% on those farms.

As of June 30, 2015, our portfolio was valued about $231 million, with 49% of this value based on either third-party appraisals or actual purchase price and 51% of the total value of about $119 million was determined internally. However, the amount of value internally, over 96% of that amount, or about $115 million, is supported by third-party appraisals performed between 14 and 29 months ago, with the difference represented in increasing values since that time.

So everything is working here in terms of valuation. These new valuations, or our net asset value, showed at June 30, 2015, would have been up, but it was down actually to $13.42 per share. It's down $0.49 and $0.48 of that was the decrease in the dilutive effect of the offering that we completed during the quarter, which we sold at below net asset value. Otherwise, it would've been up if we haven't done that.

And one point I would like to make on net asset value and that is we've made a significant amount of capital improvements on some of these properties, most in the form of irrigation upgrades. And the cost of the improvements have not been included as a corresponding increase in the property's fair value as the projects are still ongoing. Or some of them are.

To put in the numbers, in the past 12 months we've made about $2.6 million of improvements on certain of our properties. That is about $0.29 a share. Once these improvements of these projects are completed, we will have properties reappraised and we expect to recapture a significant portion, perhaps all of it, of these costs through the value of appreciation.

One additional note. On many of these costs we have been receiving additional rent income upon completion of the project. So we are not just investing money to maintain, we are also investing to increase the rents on the extra money that we put into these farms.

Once we get past the dilutive effect of the recent offering, the value should begin to tick upward again on a regular basis as the value of our farmland appreciates due in part to the increasing rent and also the surrounding farms in the growing areas. And they continue to go up in price.

Just as a note, the stock price yesterday closed at $9.84, which is significantly below the net asset value. Thus, we are hopeful our stock price will rise in the future. So if you buy the stock today, you're getting a discount from the estimated net asset value of about 26%. So you're buying $13.42 worth of assets for $9.84, just a wonderful purchase in today's marketplace.

And, along the way, you are getting $0.04 per share per month in cash distributions, which is almost a 5% return. By the way, this return is greater than the average return you can receive on the entire REIT index, which is actually below that amount.

Well, that is enough business discussion. Now I would like to turn it over to our Chief Financial Officer, Lewis Parrish. He is going to talk to you about the numbers.

Thanks, David. Good morning, everybody. I will begin our discussion with our portfolio activity in the balance sheet.

We acquired two farms in a single transaction during the quarter, adding about $16 million of new assets to our books. These farms, both in Immokalee, Florida, are cropland farms for miscellaneous vegetables and were acquired at a net cap rate -- and that is rental income net of any property expenses we are responsible to cover, such as property taxes -- of 5.6%. The lease we put in place at acquisition runs for five years and includes two five-year renewal options.

We also renewed three leases during the quarter, all of which were set to expire in 2015, at an average increase in straight-line rents of over 9%. And coupled with the lease we renewed during the first quarter, which resulted in a 33% increase in rent, we believe this underscores the trend we are seeing in areas where our farms are located. That is the demand for prime farmland, such as ours, as well as the value of such farmland and the rents they command is continuing to increase. This sentiment seems to be shared by the tenant farmers in these areas as well.

We have no more agricultural leases coming due in 2015 and only one set to expire in 2016. The lease on the Salinas, California, property we acquired this past January comes due in October 2016. We've begun negotiations with the current tenant and we expect to be able to renew the lease at an increased rate without any downtime.

On to our balance sheet. During the second quarter, our total assets increased by $17 million, or about 10%, and that is primarily due to the new farm acquisitions which were funded primarily through our follow-on offering. Also during the quarter, we obtained about $13 million in new long-term borrowings at an expected weighted average effective interest rate of just 2.6%. And these rates are fixed for the next three to five years.

We're continuing to use cheaper debt available to us, including our Farmer Mac facility, new notes with Farm Credit, and our line of credit with MetLife. And we have plenty of room to leverage up on each of these facilities should we pledge new properties to them.

Now on to our operating results. Our operating revenues increased by 6% over the prior quarter, primarily driven by our Q1 acquisitions being held for a full quarter, as well as the lease renewals we have executed so far this year. All of which have resulted in increased rental income.

Our core operating expenses, which we define as total operating expenses less depreciation and amortization expense, acquisition-related expenses, any fee credits received, and certain other one-time expenses, decreased by about $30,000. This was due to decreases in professional fees and property operating expenses, partially offset by increases in our related party fees.

A quick note on real estate taxes. We are currently responsible for the property taxes on 15 of our 36 farms. However, beginning on November 1, 2015, due to the terms of the leases we have on certain of those properties, the tax burden for two of those 15 farms will revert to the tenant. This should result in annual savings to us of about $171,000.

You will note in our press release and our 10-Q that we have added core FFO to our disclosures of FFO and AFFO. As Michael mentioned earlier, core FFO is FFO adjusted for certain one-time charges, such as acquisition-related costs, and AFFO further adjusts core FFO for certain non-cash items, such as converting straight-line rents to cash rents.

We also modified how we present AFFO this quarter. We were previously adjusting AFFO based on the cash rental payments received during the periods. However, unlike most other REITs, the majority of our tenants pay on either an annual or semiannual basis.

As these payments are not made monthly, this can skew comparability on a period-over-period basis depending on the timing and size of the rental payments. To improve the comparability of our AFFO, we modified the adjustment for cash rents to include only the portion of cash rents due for the lease that pertain to their respective periods.

Per-share earnings from core FFO and AFFO for the quarter were $0.101 and $0.085, respectively, compared to distributions of $0.12. These figures represent a decrease of $0.032 and $0.038 per share, respectively, from the previous quarter. However, the first quarter was aided by a $321,000 credit we received from our advisor, which accounted for a $0.04 per share increase in the quarter. If we remove that credit from Q1, on a quarter-over-quarter basis, core FFO would have increased by $142,000, or $0.01 per share, and AFFO would've increased by about $82,000.

For the six-month period, our per-share earnings from core FFO and AFFO were $0.233 and $0.207, respectively, compared to distributions of $0.225.

And just a quick update on the property and casualty recovery. We received $21,000 of insurance proceeds during the quarter and we received the remaining $76,000 subsequent to June 30, which will be recognized during Q3. The claims have now been closed and we are not expecting any additional recoveries.

Turning to liquidity, we currently have about $2 million in cash on hand and $17 million of availability under our MetLife facility. All of our current properties are now pledged under one of our borrowing facilities, and if we assume an LTV of 60%, our current buying power is about $41 million.

Regarding upcoming debt maturities, we only have about $100,000 in principal payments coming due through the remainder of 2015. And we also have a $2.3 million amortization payment due in our MetLife mortgage note that is due in January 2016.

Going into the second half of 2015 we believe we are beginning to achieve economies of scale, resulting in some stabilization of our operating expenses. Going forward, we expect that you will see the new acquisitions to have a more direct and positive impact on our bottom line.

With that, I will turn the program back over to David.

All right, Lewis. Thank you very much. Good report. Main report at this time is to tell you that we are continuing to execute our plan.

We've invested $143 million in new farm acquisitions (technical difficulty) IPO and we have several deals in the pipeline that we expect to close in the coming months. With an increase in the portfolio of farms comes greater diversification and protection for investors and we also expect better earnings.

I expect many of the farms we acquire to be purchased from farm owners that do not farm the property, but rather, lease the property to the farmers. About 38% of farms in the United States are owned by individuals, but not farmed by the owners. They rent them out. In those situations, we just intend to put in our lease as soon as that lease expires and, simultaneously with the acquisition, just bring them under the roof here and continue to work with them.

In addition to the drought in California, another question people ask us is why we're not in hard grains like wheat and corn. And the reason is prices are very unpredictable. For example, corn can be about $3.60 a bushel and then go as high as $8.50 a bushel as it was three years ago. The price of corn has been under $4 for the last three years and farmers just don't make any money with corn at under $4.

We stay away from corn because of large variations in price. People always say you can store grain, but it's very expensive and you have to sell it at some point. You can't keep it dry and protected for long, long periods of time.

In terms of economic outlook, we think farmland has performed extremely well in the past 10-plus years compared to other asset classes. And farmland has provided investors with a safe haven during the recent turbulence in the financial marketplace. This is evidenced by the increase in price of fruits and vegetables that we are seeing at the grocery store. And most of all, farmland has historically been an excellent hedge against inflation.

Our business thesis is very straightforward. There are more people in the world every year. People have to eat. Farmers need farmland to grow food.

Yes, I know, I'm reminded from time to time about greenhouses, but I'm telling you we would all starve to death if we had to live off the very tiny amounts of food that's grown in greenhouses. It's just not there. It's farmland.

Farmland today is being converted to non-farm uses so there's less farmland to grow food. There is no replenishment of farmland. There are no more trees to cut down and turn into farmland where our farms are.

We are buying -- power of the dollar. It's just the buying power of the dollar continues to be a decreasing amount in terms of what the government is printing, and therefore, farmland is becoming much more valuable every year as such a limited supply.

Now we have increased our monthly cash distribution rate to shareholders twice so far this year, resulting in a 33% increase in our monthly cash distributions. Probably would have done it again if we hadn't raised the money as we did, so we've got to put that money to work before we can raise the dividend.

In July, the Board voted to maintain the monthly cash distribution of $0.04 per common share per month for the third quarter. As of today we have made 30 consecutive monthly distributions to shareholders. We are projecting a strong production and income growth in 2015, and if the expectations are met, we hope to be able to increase the dividend again in the future.

As the largest shareholder, I'm working hard to increase the distribution. I like dividends as much as anybody does.

With the stock price currently around $9.84, the distribution run rate is just a little shy of 5%, which is higher than the entire REIT Index if you take all 172 of them out there. And the writers of farmland REITs always talk about how the stock has not grown, but they forget that we all pay out our income in the form of dividends and never seem to count the dividends we've paid out. Since our public offering in 2013, we have paid out $2.11. Not shabby.

But please remember that purchasing stock -- this is really a long-term investment in farmland. It is, in part, an asset just like gold, except it's an active asset with cash flow to investors. We always love Warren Buffett's comment that he would rather have all the farmland in the US than all the gold in the world. His son has a lot of farmland out in the Midwest and we agree with Warren on this one.

We expect inflation of food to be strong and the value of farmland to increase. That's our business model and it seems to be working.

I look at this farmland REIT as a way to hedge against inflation as food prices and other things go up in price. I think it's a better hedge than buying gold, and for those looking for an asset that does not correlate with the stock market, well, this is it.

Now we will have some questions from our loyal shareholders and analysts who are out there about this wonderful company. So, operator, if you will come on and tell them how they can ask some questions.

(Operator Instructions) John Roberts, Hilliard Lyons.

Morning, David. Given -- and this is sort of correlated to the same question I asked you on the commercial call. Given the current stock price, it would seem to be somewhat constraining on your ability to raise capital. I mean, given your last offering was, what, $0.49 dilutive.

I would assume you wouldn't want to do a whole heck of a lot more offerings in here. Any thoughts on what you're going to do for capital beyond the $42 million you have got in buying power?

I think the $42 million is going to allow us to move forward pretty strong. And then we do have some people that have evidenced a desire to take up REIT shares. We haven't done any of that, so we're hopeful not to do a lot of that as well.

We are planning to take a look at the AGM program to see if we can put smaller amounts of stock out, rather than doing large offerings, but at the end of the day some point in time, maybe sometime next year, we're going to have to raise money. Don't want to do it at this price and so we may have to take a little vacation in terms of doing deals if that's what it takes.

Can't keep this kind of dilution. The $0.48 hurts a lot, but at the same time you are going to see the $0.48 go away from the appreciation of the properties. So from my perspective it was not a good thing to do, but sort of a necessary evil. But you're right; it is constraining.

Yes, yes. Any thoughts on non-traditional stuff, preferred, etc.?

Well, unfortunately we would like to do some preferred. It's very expensive, but we will consider that. Preferred trading at maybe 6.5% that would pretty much eat up most of the profits that we would be able to make with that. But with a preferred that we could take out, say, in two or three years, that might be a way of looking at the world; paying a little higher price for our equity in terms of what we had to pay in the past and at the same time keep things rolling along.

But you're right on target. We have to use -- not use our common stock, but use some preferred in order to keep the growth going.

I guess, unlike some of the others, where your yield on investment is a little higher, because the yield on these farms is so low it would make preferred a little more difficult.

Well, it's not that difficult. If you use preferred and you were getting 6% or 6.5% for your preferred and you are getting return on equity, which the preferred would be counted as, of 8% of the 10%, there is a spread. It's just a much smaller spread.

All right. Thanks, David.

Rob Stevenson, Janney Capital Markets.

Good morning, guys. David, in addition to the three farms that you have under purchase agreement and letter of intent, what has been the sort of magnitude of the deals that you've looked at over the last three, six months? And if you had a stock price that was closer to your NAV, how much opportunity are you seeing out there at returns that are acceptable to you guys to be able to buy on a quarterly basis?

We see a lot of farms and, quite frankly, we -- just for an example, we turned down one of the blueberry farms that somebody else did simply because it was a very poor farm with not a very good farmer. So we are just -- Rob, at this stage of our growth we can't make any mistakes. I can't get on the phone and tell you and others that one of our farms is not working the way we thought it was going to work and that's an exception. We're just going to make every one of them count.

Once we get up around $400 million or $500 million in assets I think we can take a few more risks. We are looking at other areas. As you know, we opened the office in the Midwest. We now have three farms that we are looking at. I think two of them will close.

So we are starting to see some things in the area. The area in the Midwest is quite a bit different because it's mostly very staple-oriented, that is potatoes, onions, carrots. Those kind of things are grown in the Midwest, at least as far as we are looking at. We're not looking at the corn farms or the wheat farms, for that matter.

But the bottom line is, as we open that up, that will produce more. We're still seeing plenty of farms in Florida and California, and in addition, we are looking at some different crops. We have been offered some opportunities to go into the tree area, such as nut farms, which are very good right now.

Don't know what we will do, but we are looking at a lot of different things. And quite frankly, I have not been pushing as hard to get things closed simply because the stock price is so low that I was worried that we would run out of money. So we have been more particular than we would be. I would expect that instead of $30 million, we could probably do $60 million pretty easily if the stock price was right.

Okay. And then thoughts on what you are seeing just from a competition for the better deals? Article in the Journal yesterday about TIAA-CREF's fund of decent size not only targeting US but other markets as well. But how much -- yet another public company that could be coming out, etc.

I mean what you seeing when you go out there and you're looking for deals in your core markets? How competitive is it today?

Most of the folks that are in the public side of the business are doing corn and grains and so we are just not seeing them at all, other than the one blueberry farm I mentioned. But there is a listing for another public company that is pretty much all over the board in terms of things that they are doing. And pretty good folks there; they've got plenty of money, so they will continue to grow.

But they are doing a lot of development deals and a development deal would be something like taking 200 acres and -- that don't have anything on them, that is it was probably an unused farm, and trying to change it into a farm by planting trees on it. Say, nut trees. Those not trees won't start producing for three to five years, so they don't have any income in the early years. However, later it will be a big up charge in terms of the amount of stuff that is coming in.

So we don't do development deals. I would love to do some; we see them around, but quite frankly, again, we are very dividend-driven. So as a result, we are only looking at things that will increase our dividend.

And as far as TIAA-CREF is concerned, we've seen them mostly go overseas. They are heavy in a lot of different countries. For example, in Latin America and Australia, as well as in -- I think there's some in Africa as well.

We haven't seen them that much in the United States, although they have a lot of properties that they own in the United States. They were selling some trees in California. I think they were worried that those trees were in the Valley and they wanted to get rid of them because of the drought.

We did see them once. They were the stalking horse on the only auction that we've gone to in the last year and, quite frankly, we outbid them there. And that was a surprise to me, because I thought they would throw money at most anything. We got a very nice cap rate on a farm that I actually farmed when we owned the strawberry company.

Then we saw them once up in Oregon and they had some problems, some legal problems of getting the person were buying -- this was a sale and lease back. We were buying it from them and they were leasing it back, but they wanted the option that if someday we decided to sell, we would give them the right to look at it first and offer first.

We don't plan to sell anything, so it was no problem for us, but I think the guys in the pension area had some problem with that. I don't know what it is. It was a legal problem there. So we knocked them out of the box there. And those are the only times we have seen the CREF people.

They are a monstrous size. The pension fund itself has got to have $3 billion, $4 billion worth of land that they own all over the world. Hopefully that answers your question.

All right. Then just lastly, you expressed trepidation about issuing OP units. Is that just the same issuing stuff at 20% discount to NAV, or is there something about the structure that troubles you?

No, it's not the structure. You may remember I was on the Board of Capital Automotive REIT. We issued a lot of UPREIT shares and it worked extremely well.

I think the problem with offering UPREIT units right now is the fact that our stock price is so low. I mean if we could offer UPREIT units convertible at $15 a share, we'd do it all day long. But issuing it at under $10, and so far under net asset value, it's the same thing as offering stock. So we haven't been pushing the OP units.

And I think at this size -- and the farmers we deal with are not small farmers. These are very sophisticated and knowledgeable farmers. They want to know that we are a big, strong company, and at couple hundred million dollars in assets we look big to a lot of people, but we are actually small, as you know, when it comes to other real estate investment trusts. So it's a little bit harder to convince a farmer like -- I'm sure we would never be able to convince Dole or some of the other large farmers that UP units would be something they should own.

Okay. Thanks, guys.

(Operator Instructions) That looks like all the questioners that we have in the queue for today, so I would like to turn the call back over to Mr. Gladstone for closing remarks.

All right. Thank you all for calling in. We'll see you again next quarter. That's the end of this call.

Ladies and gentlemen, thank you again for your participation in today's conference. This now concludes the program and you may all disconnect your telephone lines at this time. Everyone, have a great day.