Gladstone Land Corp (LAND) 2016 Q1 法說會逐字稿

Good day ladies and gentlemen, and welcome to the quarterly call for Gladstone Land. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference, Mr. David Gladstone. Sir, you may begin.

Welcome you all to the quarterly conference call for Gladstone Land. This is David Gladstone. Thank you, Liliana, for that nice introduction and thanks to all of you for calling in today.

We really appreciate you calling in. We always enjoy these times that we have and hope that you have a lot of good questions at the end of this. Wish we had a lot more time to do these kind of things, but we only do them once a quarter, so this is your chance to ask some good questions.

By the way, folks, if you are ever in the Washington, DC area, we are located in the nearby suburb called McLean, Virginia, and if you have a chance just come by and say hello. You'll see a lot of great team members working here. We have over 60 team members now and manage about $2 billion across our four public companies.

We're going to start today with Michael LiCalsi. He is our General Counsel and Secretary. He also serves as President of Gladstone Administration, which is the administrator for this fund and all the Gladstone Funds, including this one. Michael?

Good morning, everyone. This report that you are about hear may include forward-looking statements within the meaning of the Securities Act of 1933 and 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.

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 risk factors listed on our 10-Q and 10-K that we file with the SEC. These can be found on our website, GladstoneLand.com, and on the SEC's website at www.SEC.gov. The Company undertakes no obligation to publicly update or revise any of these forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

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. And the National Association of REITs has endorsed FFO as one of the non-GAAP accounting standards that we can use in discussing REITs.

We will also be discussing core FFO today, or CFFO, which adjusts FFO for certain nonrecurring charges such as acquisition-related costs. And we also plan to talk about adjusted FFO, or AFFO, which further adjusts CFFO for certain non-cash items such as converting debt rents to cash rents. We believe these metrics improve comparability of our results period over period.

Now our annual shareholders meeting will be held next Thursday, May 12, at our offices here in McLean, Virginia, and we invite you all to attend the annual meeting. We also ask that you please vote your shares so we can ensure a quorum for the meeting.

Stay up-to-date on the latest news involving Gladstone Land and our other affiliated public-traded funds. Please visit us at twitter at the username @GladstoneComps and on Facebook; the keywords there are The Gladstone Companies. You can go to our general website to see more information about this company and the other publicly-traded affiliated funds at www.Gladstone.com.

Now the reports from our President and CFO that you are about to hear will be an overview of our operations and performance. 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, www.GladstoneLand.com.

Now I will turn the presentation back over to David Gladstone.

Okay. Thank you, Michael. A good report. Well, we had another strong quarter to open the year 2016, but before we get started I would like to give a brief overview of the market environment and the nature of our business.

Our business consists solely of owning farmland and leasing it to high-quality farmers. We don't farm any of the land ourselves and, thus, we don't take any direct farming risk. The farmers we lease our farms to are usually in the top 10% to 20% of the largest and best farmers in any of the farming areas that we go into. We generally prefer to keep the same farmer on the properties that we own for as long as possible, as they tend to know the nuances of operating that particular farm.

Our objective is to be the long-term real estate partner for all of our farmers so they know that they have that farm for the long term. Most of our farms and the investment focus continues to be on locating where the farmers are able to grow high-value annual row crops, such as berries and vegetables. Over the past year we've also taken advantage of some favorable circumstances in the Midwest where we found some excellent opportunities.

We've also furthered our expansion into permanent crops, such as almonds and pistachios orchards. However, you should expect that the large majority of our farmlands will continue to be leased to farmers to grow fresh food that you can find in the produce section of your local grocery store.

The geographic regions where our farms are located continues to experience steady appreciation in both the underlying land values and, therefore, the rents charged on the land. That's partly because we only purchased irrigated cropland with great soil and plenty of access to water that allows farmers to grow a variety of high-value crops.

We currently own 23,456 acres on 47 farms in seven states in the United States. Some of the people count the tax parcels that the farms are located on and if you did that we would have over 140 farms. We also own some cooling facilities, packing houses, and processing facilities as well; there is several other structures on the farms. These are part of the farming operation on our farms.

We have a couple of different lease structures that we use for our tenants and we have been extremely successful in our leasing strategy. We've been able to average an average annual increase of over 16% on lease renewals over the past three years.

If you had to point to one thing that's driving up rental rates, I would say that the amount of farms in a region where our farms are is relatively finite. There are no new farms being developed in most of these areas because all of the arable land is currently being farmed or it has already been converted to other uses, such as housing, schools, or factories.

The trend that we are seeing is a steady decrease in a number of farms in our growing regions have been sold or converted to suburban uses. So California alone has been losing about 100,000 acres of farms per year. This has caused the farms that we own to be highly sought after and they have been rented for decades without ever being vacant.

We continue to closely monitor the long-term drought situation in California. The heavy rainfall that California received this past winter, along with the snow in the mountains that will melt in the summer and provide water to the farmers; there has just been a dramatic improvement in the water available to farmers now.

Agricultural business in California had its best year in 2015. Our due diligence phase -- I can't stress that enough. We always spend a lot of time determining the water conditions on each of the farms to make sure that the farms will have plenty of water for the long term. We want to know that the water is available and sufficient enough to withstand any situations, such as the one that we are going through here.

We only select properties that have been irrigated and overall water availability is in place at the time we buy the farm. And partly because of all this time and effort that we spend on the front end, our California farms continue to have significant access to water through on-site wells or city turnouts, as has been the case throughout the drought.

For example, in cities like Watsonville and Oxnard, they've built water plants that purify the water from the city so that it can be used for farming. We have turnouts on our farms and we use the water for irrigation, so we can either use the wells that we have on our farms or the turnouts from the city.

Now some details about the recent activity. During the quarter we purchased three farms in Colorado for $26 million at a yield rate of about 6.2%. That's the straight-line rent when you add it up and divide by the number of years. We start at 6% at the initial rate and then it goes up from there.

Colorado is a new state for us. Also, this is mostly an organic farm growing lots of potatoes. As you all know, organics are becoming a larger category in the food areas.

This farm purchased also represents our first transaction involving the issuance of a limited partnership interest in our operating partnership. These are called OP units and the transaction involved OP units that -- this is a great investment for sellers of farmland, because it allows them to defer the tax that they would otherwise incur as a capital gain if they sold the farm for cash. So we're exploring purchasing other farms using the same structure, but there's no guarantee that any of those will come to fruition.

Since the quarter end, we also acquired another farm in California. We paid $16 million in cash for that. It has a flat rate of 5%, but this lease is on a farm that also includes variable components, which allows us to share in the upside of the crop revenue. In these revenue-sharing arrangements we receive the stated amount of rent for the farm, that's the 5%, and then we have a percentage of the revenue from the sale of the crops on the farm.

Lewis, this is the pistachio orchard, isn't it? This is the first one that we've done that way.

We also have some additional farms under either a signed purchase agreement or a nonbinding letter of intent. However, we are still continuing our diligence process on these properties and there's certainly no guarantee that they will get to closing and we will only them.

During the quarter we did renew one lease that was originally scheduled to expire this summer. We had -- the annual rental increase was 18%. Combined with our 2015 lease renewals, which resulted in an average rental increase of over 15%, we believe this underscores the trend that we continue to see in the area where our farms are located; that is that the demand for prime farmland and the rents they command continues to increase. This sentiment seems to be shared by all the farmers in the area as well.

We only have one additional agricultural lease set to expire in 2016 and we are in negotiations with the current tenant and expect to be able to renew the lease without any downtime.

Now let's get to the net asset value. As most of you know, we fair value our farms every quarter. Then report to you what our net asset value would be if we used the value placed on the depreciated cost basis on our books.

So during the quarter we updated the valuation eight of our farms, six of which were valued internally and two of which had new appraisals by independent farm appraisers on them. In aggregate, these farms increased by about $7 million, or 16%, of their prior valuation. That's an increase of 16% from their prior valuation, which is between six and 15 months ago. The majority of this value appreciated -- over 75% of it came from valuations as determined by third-party appraisers, so it wasn't just our internal valuations.

As of March 31, 2016, our farms were valued at about $318 million with 68% of the value based on either third-party appraisals or actual purchase prices and 32% of the total value, or about $103 million, was determined internally. Of the amount valued internally, about 95% of that amount, or $98 million, is supported by third-party appraisals performed within 13 and 40 months ago with a difference of $5 million represented in the increase in value since that time.

Based on these new asset valuations our net asset value per share at March 31, 2016, was $13.87 per share. This is down a little bit from the last quarter, but it's mainly because we incurred about $4 million, or $0.35 a share, of capital improvements on our existing properties during the quarter. That cost has not been included as a corresponding increase to the properties' fair value.

Most of the capital improvement costs were for the almond orchard development project that we have in California. We expect this project to be finished this summer, at which time we will have it appraised. We expect to capture a significant portion, probably all of it in the cost or maybe even more, of the costs through the value of that new appreciation.

And a small amount of the change in our net asset value was caused by the issuance of OP units for the purchase of the farm. Since it was below our net asset value, it did have an impact on the depreciation. Over time we expect our net asset value to tick upward as the values of our farmland appreciate, due in part to the increasing rents in the surrounding farms and growing areas that increase in price.

Well, that's enough about the business. We will turn it over to our Chief Financial Officer, Lewis Parrish, and talk about the numbers. Lewis?

Thank you, David. Good morning, everybody. I will begin the discussion this point with our balance sheet.

During the first quarter our total assets increased by $28 million, or about 12%, due primarily to new farm acquisitions which were funded through a combination of debt and equity. In connection with the purchase of our Colorado farms, we obtained about $16 million in new long-term borrowings at a weighted average interest rate of 3.05%, which is fixed for the next seven years. We also issued about $6.5 million of OP units as partial consideration for these farms.

And in connection with the pistachio far we acquired subsequent to quarter end, we obtained an additional $9 million of new long-term borrowings at an expected effective interest rate of 2.79%, which is fixed for the next five years. We borrowed these funds from a new lender, expanding our lending base to four different lenders now.

We're continuing to decrease our overall borrowing costs and further diversifying our lending base provides us with even greater access to cheaper sources of capital. Now on to our operating results.

For the fourth consecutive quarter we've continued to grow both our core FFO and adjusted FFO as they increased by 7.5% and 8.7%, respectively, over the prior quarter. Our operating revenues increased by 8% from last quarter, but we expect a more significant jump in Q2 considering the timing of our recent acquisitions and the additional income that we will be earning from certain capital improvements we made on some of our farms.

I would also just like to point out real quickly that when compared to the same quarter last year, our rental revenues on a same-property basis increased by 5.7%. That was mostly due to the leases on those properties being renewed higher rates.

Going into detail on the expense side, our core operating expenses, which strips out depreciation and amortization expense, acquisition-related expenses, and any fee credits received, increased by about 21% from last quarter or about $200,000. However, most of this increase was due to either annual or what we believe will be nonrecurring expenses.

For example, we recorded about $79,000 of additional G&A expense related to our upcoming shareholders meeting, proxy mailings, and certain annual state franchise taxes and filing fees. And we recorded $74,000 of additional professional fees related to having certain properties reappraised via third-party appraisals, structuring and completing our first UPREIT transaction, and other one-off property-specific expenses that we don't expect to be recurring.

Due to the timing of the annual shareholders meeting and the due dates of certain state filing fees, we do expect our operating expenses to be slightly higher in the first quarter of each fiscal year. But, overall, our operating expenses have begun to stabilize over the past several quarters, which have allowed us to increase our margins as our acquisitions and lease renewals drive our revenues higher.

Moving on to our per-share numbers, per-share earnings from core FFO and adjusted FFO for the quarter were $0.13 and $0.123, respectively, each fully covering a distribution of $0.12 per share. And our expectation that the coverage provided by these figures will increase upon holding our March acquisition for a full period, as well as the revenue we will be earning from our April acquisition, is what allowed us to increase the dividend for Q2.

Turning to liquidity, we currently have about $2.5 million of cash on hand and $10 million of availability under our MetLife facility. After factoring in certain operating obligations, we estimate that our current buying power is about $25 million of straight cash acquisition. That is not factoring in the issuance of any new OP units.

We have plenty of room to leverage up on our borrowing facilities should we pledge new properties to them and we've been in discussions with certain of our lenders for either modifications to the existing facilities or for overall new facilities. We expect that some or all of these discussions will result in additional borrowing availability for us; however, there is no guarantee that anything will materialize.

Regarding upcoming debt maturities, only 2.5% of our total debt outstanding, or about $4.5 million, is coming due throughout the remainder of 2016. This includes a $1.5 million amortizing payment on our MetLife mortgage note that's due in July and about $2.1 million of short-term borrowings that come due later in the year. However, we expect to refinance $1.5 million of this before its maturity.

Just a note on our borrowings, as of March 31, 2016, 97% of our total indebtedness -- of our total borrowings was at fixed rates, and on a weighted average basis, these rates are fixed for another four-plus years out. So we believe we are pretty well protected against the near-term interest-rate hikes.

Continuing into 2016, we believe we are beginning to achieve economies of scale resulting in some stabilization of our operating expenses. And moving forward, we expect that you will see additional revenues arising from these new acquisitions and lease renewals have a more direct and positive impact on our bottom line.

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

Nice report, Lewis. This company just continues to get better every year.

The main point in this report is to tell you that we are continuing to execute our plan and we have invested over $435 million in new farm assets since 2013. We have some other farms in our backlog we expect to purchase during the summer. With this increase in portfolio of new farms coming on, it just gives greater diversification and protection for investors as we expect better earnings over the next few years.

As most people know, our funds specialize in farms that grow fresh fruits and vegetables. We have historically avoided being heavily in farmland that grows traditional commodity crops such as corn and wheat. Major reason for this is we believe investing in farmland growing crops that contribute to a healthier lifestyle is one approach to our life, such as fruits and vegetables and nuts. In addition, more than 90% of our portfolio is GMO-free and we're continually expanding our ownership of organic farms through both the acquisition of new farms and conversion of existing farmland to organic ground.

With the recent decrease in corn and corn land values, we've begun to look at some of the Midwest properties that grow corn as long as they can be complemented by other crops on the same portion of the land. Like our recent acquisition in Arizona, Colorado, Nebraska, as you may know rents in many parts of the Midwest are down anywhere from 8% to 12%. The decrease is mostly in single-crop grounds, such as farms that grow corn.

So far we have only bought irrigated farmland that can grow rotations of multiple crops on the land. And we are confident that our farms are insulated from most of the price and rental volatility that you're hearing coming out of the Midwest.

Lewis, on that Colorado farm how many wells do we have?

We have 85 wells there.

85 wells, I'd forgotten how many there were on that farm. Lots of ability to keep those organic farms irrigated and growing potatoes.

It's really unpredictable the nature of grain prices and other commodity crops that will prevent us from ever weighting our farmland portfolio too heavily in corn and commodity crops. Currently less than 10% of the total value of our portfolio of farms is invested in farmland growing corn, wheat, soybean. We believe in a good mix, but at this point the farming cycle, we just can't make much money when corn prices are as low as they are today.

Ultimately, we believe that farmland and GMO-free and growing healthier crops such as fruits and vegetables and nuts, those crops and the lands they are grown on are going to outperform the overall farmland market in terms of both cash returns and long-term value appreciation. As a farmland real estate company, it's our responsibility to be on top of these markets. We take pride in having built the foundation of our company across the healthiest sector of agriculture and we believe it is one of the Company's core strengths.

In terms of economic outlook, in general, farmland continues to perform extremely well when compared to other asset classes. There's a group called NCREIF that keeps a Farmland Index, which is currently made up of 665 agricultural properties worth about $7 billion in today's terms. They had a total annual return of 10.4% in 2015 and an average annual return of 14.3% over the past 10 years, compared with 9.1% for the S&P index.

Farmland has provided investors with a safe haven during recent turbulence in the financial markets marketplaces. Both land prices and food prices, especially fresh produce, have continued to rise steadily. And most of all, farmland has historically been an excellent hedge against inflation. After all, you do have to have dirt to grow any kind of food.

However, not all the farmland is the same according to the Department of Agriculture. Farmland that grows corn earns about $200 in rent per acre in the Midwest, whereas in California farmland growing strawberries would earn about $3,900 per acre. So every acre of strawberries, you need about 20 acres of corn farmland to get the same return in rent.

The number of acres are not nearly as important as the revenue per acre. For example, a farmer growing 1,000 acres would pay rent of $200,000 per year, whereas we would only need about 51 acres of strawberry land to get the same amount of rent. As noted before, we specialize in the higher-rent, higher-quality farms. That differentiates us from most other farm owners in the United States.

As you all know, our Board voted last month to increase the dividend again. Over the past 16 months we've raised the dividend three times, resulting in an overall increase of 37.5% in our monthly distribution rate to our shareholders over this time period. And we are optimistic that this won't be the last increase in 2016.

We are earning the cash we need, based on the rents we receive, in order to pay our dividend. Since 2013 we have made 39 consecutive monthly distributions to our shareholders totaling $2.48 a share in total distributions. Paying distributions to our shareholders is paramount to our business. We have constructed ourselves to be a dividend-paying company.

We are projecting good production and income growth for the rest of 2016 and that's our expectations. And hope to be able to increase the dividend again in the near future. As the largest stockholder, you can imagine I'm working hard to increase the distribution. I certainly like receiving dividends as much as anybody else.

Our current stock price is about $10.38, which is significantly below the net asset value, so hopeful that the stock price will rise in the future. If you buy the stock today, you are getting a discount from my estimated net asset value of about 25%. You are buying $13.87 of assets for just $10.38. This is a wonderful purchase in today's marketplace.

And of course, along the way you are getting $0.04125 per share per month in cash distributions. That's about a 4.8% yield, which is much higher than the average return you can get on the entire REIT index.

Please remember that purchasing the stock of this company is a long-term investment in farmland. It is in part an asset investment, just like gold, except this is an active investment with cash flow to investors. We always love the point that Warren Buffett makes on farmland. He commented that he would rather have all the farmland in the US than all the gold in the world and we certainly agree with Warren on this. Maybe we can corner the marketplace on land in the United States.

We expect inflation, particularly in the food sector, such as the produce in the grocery stores, to be strong in the future and we expect the values of farmland to increase as a result. I think it's a good way to look at our farmland REIT as a hedge against inflation in both food prices and other areas.

And as for those looking for an asset that doesn't correlate to the stock market, this is that.

Now I have some questions for my loyal stockholders and analysts who follow this wonderful company, so, operator, if you would come on, please, and help our listeners so they can ask some questions.

(Operator Instructions) Rob Stevenson, Janney.

Good morning, this is Venkat in for Rob. You had touched on this during your opening remarks. Regarding the issuance of the OP units in the quarter, do you have any sense that sellers are more willing to take OP units today?

Well, it's hard to say. Some of them do need a substantial amount of cash because they do have loans on the properties and that makes it difficult for them, as in the transaction we had. So they ended up taking part of it in OP units. And I think that's probably more likely than people taking 100% in OP units, although we do have one group that is interested in 100% of OP units.

So, Venkat, I think this is just one of those things that every deal is going to be different.

Okay, thanks. How many additional irrigation projects do you have in process or expect to start during the year? And can you discuss the costs involved?

We had one that we completed during the quarter at about just under $1 million. We're getting a 5.4% return on that. That began in February.

We have two that were completed subsequent to quarter end. We will begin earning rent on those in April. We spent overall just over $1 million. I think the return on that is about 24%, $232,000 between the two of them.

And the other main project we have going on right now is the almond orchard development in California. That will be completed this summer.

We don't really have a lot. Every time we do a transaction we look at it from two perspectives. Obviously, we look at it to see that the existing water is there, but also some of these forms can be enhanced by drilling one or two wells. And in some cases, you put in a lot of different wells because the water is there and you want to make sure that you have water in case there's a drought.

Okay, thank you. That's it for me.

John Roberts, Hilliard Lyons.

Good morning, David. On your capital structure, any thoughts on potential for equity issuance, etc., to increase your capacity for purchases?

You know, these OP units obviously are equity. I like to do those because, generally speaking, we can get a little higher price than the current market price because of the huge tax savings that these farmers get from selling a farm that way. But, if anything, we'd probably look to doing some preferred stock issuance if that's available to us. We will just have to see what the market looks like.

Right now we have enough for this quarter that we are in and if we -- every time we do an OP unit you have to think about that; that's an equity offering. Let's say you bought a million-dollar farm for OP units, we can go finance 60% of that, so that gives us another 60% to go out and buy more farms with.

So it is a give-and-take kind of situation of do you need to raise equity? If not, you're probably going to use cash. If you need to raise equity, it would be nice to do it with OP units. As a last resort we would probably use preferred stock today, because I think the stock price is just significantly too low compared to what we've got going.

Got you. You talked about that you've got a number of properties under letter of intent or due diligence at this point. Do you want to give us any thought as to the amount that you are looking and the amount that might be closed?

It's about 12 farms but how many dollars?

It's [about] $12 million. We have one farm in Florida and one in Colorado for about $12.1 million total.

But those are relatively firm compared to the backlog of things that we see.

Okay, very good. Thanks, David.

John Massocca, Ladenburg Thalmann.

Good morning. Just a quick, clarifying question. The least that was renewed, that's Espinoza Road, correct?

No, that was on [Macintosh]. Espinoza is the only lease we have due in 2016 still, but we are finalizing negotiations right now with them.

Could we --? With Espinoza are you expecting kind of rent bumps similar to what you got with Macintosh or was that kind of (multiple speakers)?

We expect it to be in the range, yes.

Okay. Then kind of staying in the same vein. I know it's a long way out, over a year. But your 2017 expiration, do those also look good for kind of double-digit rent bumps on renewal, particularly the Oxnard properties?

Yes, we haven't really started on that yet. Oxnard is late in 2017, isn't it?

Mostly in the summer and fall.

Oxnard is the one that we are thinking about right now to work on. We're just gathering data in order to get that going, so it's a little early for us to be pushing that out.

Farmers don't like to be too far out. They always hope that something will give them a better deal, but right now everything is working in our favor.

Okay, that makes sense. And then with the California property you acquired subsequent to quarter end, are those yields that kind of -- when you take into effect the profit sharing, those 7% to 11% yields, is that typical of a profit sharing arrangement on a farm?

There's no typical in that business because you are dependent on whatever revenue comes out and obviously it can be high or low. It can be high because of huge production and it can be low because of pricing, so there's no way of knowing.

We just take a chance there. We thought a 5% base was good and that we would get some extra during the year. Hard to know at this point in time. We look at it and say what would it be over, say, the last five years and that's how we estimate the 7% to 17% or whatever (multiple speakers) 12%. So it's really hard to know.

And the problem is we won't know until 2017 because all of the paperwork won't have been done and things been sold. As you can imagine, when you get into the nut business, they don't have to sell immediately as you do in strawberries or fresh vegetables. They can actually store them for some period of time and then sell them later, so it's hard to know at this point in time.

And almond prices, for example -- we do have the almond area -- have gone up and down pretty dramatically in the last few years, simply because so much was sold to China. Not as much in terms of pistachios, so we don't see the volatility there.

It's a different crop decision, because you've got permanent crops. And permanent crops, obviously, you've made a bet for 10 to 15 years as sort of a minimum that you are going to dedicate the property to, simply because you don't pull up the trees and plant something else that easily. So it's a different economics.

I like it on one regard because every year the trees will give you, or vines or bushes -- we're in blueberry bushes as well -- they will give you a crop and you haven't had to put any money in the ground. You've had to take care of the plants a little bit, but you don't have the same planting that you do in the crops like corn or in strawberries or any of the vegetables. So it's just a different business and hard to know, but we think that's the way to go when it comes to permanent crops.

Okay, that makes sense. Are you seeing any more opportunities for acquisitions like the one in California, pistachio orchards?

There are farms every day that we see. There's a lot of activity in the farming world these days, mainly because many of the farmers are -- I think the average age is 58 and they are starting to look for some way to get liquid, simply because two things. One, many of the children don't want to be in the business, so they don't have a successor.

And the second side of it is, even if you do have children that want to be in the business, the difficulty is that transferring that to the children is a huge tax event. That's the way we think the UPREIT units or OP units are going to be one of our big -- we're going to be both use that a lot in our transactions going forward.

That makes sense. That's it for me.

(Operator Instructions) I'm not showing any further questions at this time. I would like to turn the call back over to David Gladstone for any closing remarks.

Thank you all for calling in. Again, we will see you next quarter and hopefully have some good numbers for you again. That's the end of this conference call.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude today's program. You may now disconnect. Everyone, have a great day.