Gladstone Land Corporation (LAND) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Gladstone Land Corporation's first quarter ended March 31, 2020, conference call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host today, Mr. David Gladstone. Sir, please go ahead.

Well, thank you, Stacy. It's a nice introduction. This is David Gladstone, and welcome to the quarterly conference call for Gladstone Land. And I thank all of you for calling in today. We sure do appreciate you taking the time to listen to our presentation. Today's presentation is going to be an abbreviated version. If you want to listen to the full presentation that we did before: the IR page on our website that's at Gladstone Land. And go to events and presentation page, and you can listen to it as many times as you want. We will start today with Michael LiCalsi. He's our General Counsel and Secretary. And he is the President of Gladstone Administration, which is the administrator for this fund and our other funds that we manage. Michael, go ahead.

Thanks, David. And good morning. Today's report may include forward-looking statements under the Securities Act of 1933 and the Securities Exchange Act of 1934, including those regarding our future performance. And these forward-looking statements involve certain risks and uncertainties that are based on our current plans, which we believe to be reasonable. And many factors may cause our actual results to be materially different from any future results expressed or implied by these forward-looking statements, including all the risk factors that we list in our Forms 10-K and 10-Q or the documents that you see that we filed with the SEC. And those can be found, again, on our website at www.gladstonefarms.com, specifically go to the investor relations page; or on the SEC's website at www.sec.gov. We undertake 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. Today, in this discussion we'll also discuss FFO, which is funds from operations. 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 from property, plus depreciation and amortization of real estate assets. We'll also discuss core FFO, which we generally define as FFO adjusted for certain nonrecurring revenues and expenses; and then adjusted FFO, which further adjusts core FFO for certain noncash items such as converting GAAP rents to normalized cash rents. And we believe these are all better indications of our operating results and allow better comparability of our period-over-period performance. As always, we ask everyone to take the opportunity to visit our website, once again, gladstonefarms.com. Sign up for our e-mail notification service. It could also be found on Facebook. Keyword there is "the Gladstone companies." And on Twitter, the handle there is at @GladstoneComps. And once again, today's call is an overview of our results, so we ask that you review our press release and Form 10-Q, both issued 2 days ago, for more detailed information. And once again, you can listen to the original version of this earnings call that we did yesterday at 8:30, and that can be found on the investor relations page of our website. Now I'll turn it over to David Gladstone. David?

Okay, thank you, Michael. Most of you know March 31, 2019, started very slow and turned out to be a terrific year in terms of acquisitions. Well, much like last year, this year ending March 31, 2020, has begun from an acquisition standpoint getting off to a really slow start. However, we had another strong quarter of operations, as you saw in the numbers for March 31, 2020. Our team continues to have success with lease renewals as well as continue to be able to renew leases on our existing farms and increase the net rents rates on some of our new farms. We believe these increased rental rates are indicative of the strong demand for the company's farms and are also signs of continuing appreciation of the value that we're seeing in the farms that we own as well as a lot of the farms up and down the West Coast and also in California. Now just to touch on the impact from the government's closings on the farm business. Quite frankly, we're not having significant impact on any part of the farming tenants and tenant business. And this is really because 90% to 95% of the products that have grown on our farms are sold in grocery stores like Krogers and Safeways and Costco and Walmart and similar outlets. Very little of the produce that's being sold to the food services industry comes from our farms. And these are -- the food servicing industry is made up mostly of restaurants and institutions like schools and other places where food is served. And I think, if you look at it, the whole shift has been towards grocery stores. People haven't stopped eating. They're just eating more in terms of -- from the grocery stores, so it's been a nice transition that's benefited our farmers and our farm-related products. Regarding the disruption in supply. Somebody asked a question on that. We're not hearing of any problems with deliveries from our farmers. Most of the large farmers who sell to the large grocery stores are just fine. Companies like Walmart and Kroger have control over their distribution and logistics and shipping and all of that. Our farmers usually don't get involved in that, other than loading up the trucks from the coolers that they have out in California or in Florida. Supply of available trucks seems to be fine, and while in high demand, they remain steady. There's plenty of gasoline at cheap prices, so driving produce to market is not costing very much. In addition, most of our tenants have contracts for sales of their produce and delivery contracts in place well before the season begins. This is just a part of the program. People, back in December and January, were making contracts for delivery of strawberries all through the spring and summer. So we don't see anything happening at this time with regard to all of that. As most of you know, as was covered in our press releases, we have about 88,000 acres on 113 farms, and we are in 10 states. Based on either third-party appraisals or prices we paid for the farms, our farms are now estimated to be a total fair value of about $892 million. I think, by this time next year, we'll be well over $1 billion. Great news: Farm continue to be 100% occupied and leased to 70 different tenants, all of whom are unrelated to us. We have 1 slow payer who owes us about one payment, and this is due to the late payment that, that farmer has seen from their processing plants. So I think we've been dealing with this farmer for 7 year. We have a good credit history with him, and I think this is just going to be cleared out pretty soon. We -- I just want to make this one point. We now own a good number of farms, and they are in enough different regions with many different farmers and many different crop types that there's sufficient diversification here to provide safety for the cash flows coming in and thus the dividends that we pay out. I think, with regard to diversification, we are in good shape and have complete diversification. During the first quarter, the team acquired 2 new farms for $7.5 million. And lease to these farms contain certain provisions such as annual escalations that -- you're going to see the price of those go up. And just as a note: These yield figures do account for operating expense that we're responsible for. I'm going to slow down at this point in time and just ask you if you have any questions because I'd rather use this time to answer questions. And if you need to read about us from what we've published on our website, you can do that. Is there any questions out there, Stacy? We will come on, and let's see if there are any questions from some of the people that are signed on.

Yes, you have a question from Rob Stevenson.

David, how competitive is the environment today, whether or not it's today-today or pre-COVID today, for essentially farm sale and leasebacks in your markets? I mean how many decently capitalized competitors are out there in your core markets today that are doing deals where the farmer, sells you the land and gets to stay on it or where you're buying up farms and -- for a bigger player to farm and et cetera? Talk about the competitive landscape.

Sure. Competition comes mostly from other farmers who have the farm next door, and they come and bid on it. It's not as bad as it has been, but there are several groups that are private that have decided what we're doing is very, very strong; and they are out there bidding. You see them most on the West Coast. Florida is interesting in that it sort of goes up and down by the week, and it's really hard to figure out who's down there and who's going to bid. Sometimes, we see people that we've been working with buy a farm without us. We've seen that once last year. So it's -- there are people there, but it's not like it is when you go to, say, some of the Midwestern states. If you were in Iowa, there are many buyers there. People look at what the land is actually rated at and determine what they're willing to bid. And I think every square inch of Iowa is known in terms of quality of the dirt, and most all of the people who are bidding know the quality of the dirt and they bid accordingly. We're not in that marketplace. As you know, we've got some transactions in the Midwest, but they're not in the corn and wheat and soy areas. We're out doing potatoes in Colorado and things like that. We don't see those kind of people out there. So it's a one-on-one kind of relationship. And unless you're willing to go out there and knock on doors and work with people, you got to have people out there doing it. And as you know, we have people in all of these marketplaces that we're in. And so competition is competition for the ears of the seller. And I think there's going to be a massive transfer of wealth as people begin to sell their farms and move on. Farms are -- it's a hard business to get any kind of scale on. You need hundreds and hundreds of acres in order to make a farm work. You can't just have 100-acre farm as you could 20, 30 years ago. So I don't know if we have answered your question, Rob.

Yes, very helpful. And then Lewis, with you guys kicking off the Series C, what's the company's target for the percentage of preferred in the capital stack? And where is your sort of upper boundary on how high you guys would be willing to take that before needing to issue common to sort of bring it back down into the sort of more day-to-day range?

Right now, the target is -- we definitely don't want to go over a 1:1 equity mix between common and preferred. So right now, we're at 50% leverage on a debt basis, and that's excluding all preferred stock. So I think we have some runway to move on the Series C.

Ben Zucker.

Can you hear me all right?

We can.

Great. I had a quick question. I noticed in your press releases you were talking about how actually some of the farmers are experiencing unusually strong sales volume due to the virus, and I'm trying to wonder if there can be an implication or a read-through there with respect to your participation rents. I guess my question is 2-pronged. First of all, we know that you've been adding more rents with those participation features, but that aside, would you expect this off of what you've seen so far to be a particularly strong year for those participation rents? And the second part is, could they even come up earlier in the year, maybe start trickling in, in 2Q now given the strength that the farmers have had to start off the year?

Well, Ben, the big pickup was when the shutdown started and people went to the grocery store to get their food. And as a result of going to the grocery store, they decided to pick up some produce. And so as a result, there was a big change there. I think that prices are up 20%, 30% in those first 2 weeks. And then it sort of leveled off and came back down. And we've seen spotty pricing. Sometimes, onions were a little bit off for a while, and then all of a sudden, they came back strong. I think the Vidalias came in, in Georgia. That sort of brought the sales of onions up. We get the statistics from the U.S. government. It lags a little bit, but I don't think there's going to be much of a change in terms of pricing other than the normal increase that comes every year with some of the farms. But I don't think there is going to be any early payouts of percentage rents, and hopefully, we'll have another good year on percentage rents. Right now, I'm expecting to be about the same or a little less than last year. So I don't know that the -- at the end of the day, what we're going to end up with. That's the wild card that comes in late every year, and we're always trying to figure out what it's going to be. And I'm always harassing the guys here to give me a number, and they resist because they don't know any more than anybody does who's rolling dice at Las Vegas. So it's very difficult to know what's going to come in. I'm sorry. I can't give you a better idea, Ben.

No, no, that's helpful still. I guess, just turning to kind of the market and the pace of new acquisitions. You mentioned that you guys got off to a slower start, which I guess is usual for the beginning of the year as I kind of think activity sometimes gets pulled forward into fourth quarter every year. And you did just announce a recent acquisition of $3.5 million, so could you kind of describe how you feel your liquidity is at quarter end kind of based on the operating backdrop and your near- to intermediate-term pipeline?

So I'll talk about the liquidity. And I mean, right now, we have lots of cash. We have about $55 million of liquidity. And that's included about $25 million, $30 million of cash on hand; and $25 million of availability on the -- on our lines of credit. We have a couple of unencumbered properties that we can leverage up as well. So from a liquidity standpoint, we have plenty of capital and our lenders are still giving us credit at favorable terms, so there's no concerns from a capital standpoint.

And in terms of deals coming, there's a good number on here, and hopefully, they do all bunch up -- I'd rather have them bunch up than not bunch up but not the closing. So we've got a good number of things that are coming. I don't know. There is one in here. It's a potato farm. It's about $20 million. We've reached basic terms, but it's going to be on hold until June. A lot of these farmers are very busy. In the beginning of this year, they were planting. They were planning. They were buying seeds as well as plants, so that's the reason for it to go slow. We've taken some off the list that I've got here, just saying, well, they want too much for their farm, and therefore, we will wait for them. If they want to come back to meet our number, it will be fine. If you look at some of the other new ones on the list, and I've got a list here of -- I've probably got 30 or 40 on here, but some of them are early stage. Some of them are a little bit later stage. Just trying to give you a feel for some of them in the pipeline, organic feed grains and oil seeds. We've looked at that. I don't know. I would say there's a good $100 million that we will get done over time. And if you look at just what's out there now, maybe $95 million is high probability, and I think they will get done. It's -- I don't know. As -- we closed one of our best deals last year. And that had been in the pipeline for about 10 years, when I talked to them years ago. So these farmers will talk to you for a long time. And we've tried to get into some different areas. We've got a couple of guys that we're looking at in North Carolina that should come to fruition at some point in time. That would be nice, to get some more in North Carolina. Once you get into an area and the people in those growing area hear that as -- John down the road sold his farm and leased it back, they want to know more about it and they start asking. And so it's a penetration problem, being able to penetrate the farming community and get to know the people, but I think we're good. I don't know that we will do as much as we did last year. And I'm hopeful, but we should do a nice number and get us in the $1 billion mark.

That's helpful. And then on that farm that you guys just bought in Nebraska. I saw it was a triple -- it's contracted under a triple net lease. Can you just -- would you be able to disclose if it's also subject to participation rents and what the initial going-in cap rate is for that farm?

Well, 5.5% is the cap rate. We do not have participation rents on that.

Okay, great. And then last one for me. Obviously, the new Series C preferred program was recently implemented. I guess, would it be fair to assume that in the current environment -- is investor demand for that? How would you describe the investor demand coming out of the gates in this environment for the Series C relative to the remarkable pace with which we saw Series B shares being sold? Just so we can kind of think about that and pull that into our model.

Well, we have to figure out how many contracts were going to get signed. I think we only have 5 or 6, maybe up to 10. We were running at about 55 sales contracts. You have to contract with the brokerage house that has the men and women that are selling in it before they can even go out on the streets and start to sell. So I would say it's going to take us a while to get up to the 50 or so that we needed to get going on a good pace. The good news is this is a much larger transaction, and we might transact -- we are transacting with some much larger groups. And if we hit 1 or 2 of those, it will go very fast. I don't really like to go fast because that means I've got to find farms and close. We can't have a lot of money on the balance sheet, not earning. So my guess is it will start get cranking probably in the fall, as opposed to early summer, and that's due to the fact that it's harder to get people to go through the due diligence process. Each of these groups have due diligence officers and they have to sign off on it. And even though they signed off on the B, they've got to go back and sign off on the C. So it's a bureaucratic mess from that perspective, but they're doing their job. So Ben, I think it will go well once we get all the selling agreements in place.

Got you. Well, I guess the good news is now under the revised management fee, even though you'd have the interest expense from excess liquidity from preferred offering, the management fee does not increase until you've actually deployed the capital. So I guess shareholders can take some comfort in knowing that. That was it for me, guys.

Your next question comes from Henry Coffey.

We only hear the bad news on the press. When you look at the range of properties and farm types and product types you own, where are the real strong points? Where are the real weak points within the portfolio?

Well, the strongest points, of course, are in all of the farms that we bought are paying as agreed. So I'd say that the portfolio today is as strong as it's ever been, Henry. The negatives, of course, is that you don't know what mother nature is going to throw at you because -- you're producing plant here is a live plant sitting outside. And so we had a lot of rain this year in California. It was good for a while and then got to be too much. Everything is planted now, so that's good. If you looked at the Midwest, those guys had rain last year that kept them from getting stuff planted. And so I think we're in good shape there. Potatoes have been in high demand. I guess, when you're sitting at home, eating a potato is better than going out. And so as a result, you've got some people that are -- just can't dig them up quick enough and get them out there, and you've got others that go at the normal pace. So there's nothing out there today that's coming at us. COVID-19 is not the problem. It's what the nutty government is doing to stop the COVID-19. And until you get people back out there and working and eating and going out to restaurants and all of these things, I think things just go along as they are for us right now. We're in a good place. We've not suffered any -- no one in the group has -- we don't -- I don't even know of anybody that's had COVID-19. So as a result, all of our people are in good shape. All the people we work with are in good shape, and everything is going as if there was no tomorrow in terms of people buying food. I feel really strong about it today, Henry. And we don't really see anybody out there that's near bankruptcy or problems. The few deals that we had that were slow, we got rid of, in terms of bringing in new people. So right now, everything is rosy. It doesn't mean it's going to be rosy next week, but it's rosy today.

It doesn't sound like any of your farms are having labor problems either in terms of the ability to get people in to harvest the crops and manage the crops, et cetera.

That's right, yes. And there was some worry at the beginning of the season that there wasn't enough people that -- in Mexico to satisfy the needs out in the marketplace, but they all showed up. And the fact that they aren't doing construction means that they've got to find work. And many of the construction workers come to pick strawberries or pick apples or something whenever that want to come. So right now, labor is not a problem. I worried about labor because the -- I was worried that the administration wasn't going to let people in Mexico come here. Probably 70%, maybe even more, of the people that are working on the farms of our larger groups are just permanent. They never go back. And I don't know how many of them are legitimate, but they've all got green cards. And so as a result, I think we're in good shape on labor.

And then I -- there was some discussion about your preferred issuance and how you've been managing that. Are there -- with rates so low, have you had any discussions with institutional investors about putting in permanent debt instead of preferred? Or is the market too crazy for that?

No, the market is not too crazy. We get really low rates on our long-term mortgages that we put on the farms. I mean we're probably running, what, 2.5%, 2.75%...

The most recent one we did this quarter, 4 years fixed at 2.66%.

So right now, the mortgages are the cheapest thing we can get in terms of debt or preferred. I like preferred, and I have to pay a little bit more for it because I like permanent preferred. I don't like it coming due like debts. And the accountants treat it a lot better for us in the analysis, but it is something that's got to be met. We've never missed a dividend on the preferreds or the common, so this company has got a good track record. I think we're in good shape, Henry. I know there is something out there that will come in. We certainly never figured that we were going to have this kind of problem with the virus, but here we are with people scared half to death because the virus is somehow going to get them. But in reality, if you think about it, it's just another virus and it's not killing any more people than some of the other regular viruses. So I feel relatively good about where we are today. I just wish the government would get us all back to work.

Your next question is from John Massocca.

So maybe kind of a little bit to that last point. Can you comment on kind of have transaction volumes been slowed at all by coronavirus either due to kind of just the technical nature of closing and things that maybe can't happen in terms of underwriting or other factors like that? Or even you have maybe market participants kind of paused on their selling and buying just because they're trying to figure out where pricing is going to go, given all the kind of changing dynamics in the economy. Essentially, kind of have you seen any shift in transaction volumes starting in kind of late March?

Actually, for us, it was poor in January, February and March, as you know, John. We just didn't close much, and it wasn't because of any virus. It's just the way the market works. I think the virus has slowed down some people because they're trying to figure out, "What if I got sick and -- what happens?" They're going -- the press has scared everybody to death, so they don't know really what they're supposed to do at this point in time. There's no direction. On the other hand, the virus has told some people get liquid, get light. And we've got one group in Florida that is really laboring over what they should do, and we are there for them. We will buy all of them and lease them back, but everybody is sort of stirred up for this thing of having to sit at home. Obviously, none of the farmers are sitting at home. They're all out on the farm. They're all exempt. They're working hard. Some of them wear masks. I think most of them don't. And so as a result, you've got people that know that they're in good shape and that being outside and farming is good for them as opposed to bad for them. And this is a business that's going to go on almost no matter what happens. I mean you've got a plant. Or you've got a tree and it's growing, and it's producing its product. And you better find some place to put the product because it's coming. So there's no shutdown unless there's a hurricane or something and blows the blooms off the trees. We don't have any of that at this point in time, but John, it's just one of those things that's going to go on. This is not dependent on anything other than just getting the plants in the ground. Once they're in the ground, you can look out on the farm and you'd know it's coming. If you look at your strawberries and they've got white blooms all over, you better get ready because there's going to be a lot of strawberries coming on those plants, and they're going to go for 6 months producing strawberries. I just think people are equating this as some kind of machinery thing that you can turn on and off. You can turn it off. You could plow your fields under, but you can't turn it back on very easily. And so when they turn it on, it's coming. And I think the transition volume has been filed up some by the coronavirus and the shutdowns and people just not knowing what's going to happen next and just worried about it, but a lot of these farmers are self-sufficient. They're planting other things. So if the government is going to stay shut down, they'll plant enough food to feed their families. Go back to the old days where you bought 100, 150 acres; and you planted not only your cash crop but you planted food for yourself. I think farmers are resilient, and they'll be here day in and day out. And we just have to recognize that this is a different situation and that it's going to keep going. Can it blow up someway? Sure. You could have some kind of -- I guess, some kind of something going on in the fields with some kind -- I don't know. I was reading in the papers about the ones in Africa where they've got all of those huge storms of locusts eating up absolutely everything. And I remember and -- reading about them in the Midwest. I don't think we've ever had them in Florida or California, but something like that could come along and tear up -- tear them up. It's just a different world compared to the world that most of us live in. And we'd go home. We get in our house and have our dinner and then get up the next morning, and we go to the office and sit here and work on things. Or you -- like a farmer, you know you've got some time during the winter to goof off, but you've got to get ready to get things in the ground and get going because it's going -- the weather is going to change and it's going to go. Hard to predict which way the government is going to go, but it's pretty easy to predict that it's going to get warmer. I always remember that song. The sun will come up tomorrow, and so it's going to come up. It's going to produce, and you've just got to get ready and get the stuffs taken off the vines or trees and put in boxes and shipped out. We've got a box barn in California in which they start producing boxes because all of these things are shipped in boxes and also in plastic boxes. So it's an amazing thing because they're delivered folded up. And they have unfolding machines that are just running day in and day out because the use of those are just magnificent in terms of the number of those that go. So it's a different business, and people need to wrap their brain around that. I think the farmers out there -- and there are some really big farmers. If you looked at some of the strawberry guys or vegetable guys, they're doing, I don't know, $1.5 billion, $2 billion in sales. And that's at the gross level, not to say what it's going to sell at retail. So it's a big volume business, and John, I just think they're in good shape today. And we feel really good about the situation that we're in.

Okay. And maybe kind of specifically, I know it's not as big of an impact, a relative impact anymore as you've kind of grown the portfolio, but maybe just kind of what are you hearing or seeing from your tenants with regards to kind of the performance of early strawberry season? I know you've got a couple properties that are kind of relying on that early strawberry season. Just any color there would be helpful.

Yes. Of course, Florida had a phenomenal year this year because they kept going. The season started late out on the West Coast. So they got a lot of money they made this year in the strawberry side. Strawberry side in California has not really hit much of a stride yet, although I think they're coming on now. And I was looking at the pricing that they were getting in New York because New York tends to buy a lot of strawberries, and you can get those. You can go to the website for the Department of Agriculture and you can find those. And I subscribe to something that's sent to me every day in terms of pricings. And it's holding up very strong. Everybody is eating lots of strawberries and lots of nuts and lots of good stuff that we grow, so we're seeing things continue to go along at a great pace. And I feel for all my brethren that are in a different area, but [ this one ] tends to be really good right now. If you look at pricing, it's strong. It can be -- it can go from week -- have they done the Mother's Day pull yet? Mother's Day, Mama gets a lot of strawberries. So it's one of those things that just happens every year. There's a pull and everybody is trying to hit the grocery stores at the right time for that. Grocery stores use strawberries to draw people in. They'll discount them tremendously to get people come into the store. And nuts are just -- they're a once-a-year kind of thing. They're shaking the tree at the end of the year, scooping it up, cleaning it up and taking it to the crusher to get the shells off of them. It's a -- each one of these things that we do is different from the other. So if you're growing blueberries, that's different from strawberries. If you're growing something else -- and each one of those has a different way of getting to market. It has a different way of selling. So all of these are small industries, if you want to think about them, and I feel that we're on top of that because we've hired so many good people with good experience. And many of our people have been growers, and they've been out on the fields and they know what's the good time to sell and buy. And they're just part of the whole group of things that we have here. We don't have anything that's so bad or so -- product is so bad. I mean, many years ago, the blueberry business was overproduced in Georgia and they threw out half the blueberries. Most people don't know it, but half the strawberries that are picked are thrown in the ditch because strawberries produce huge amount of volume. In fact, if you looked at the Department of Agriculture and searched which one of those things that are grown in the United States produce the heaviest volume in terms of tonnage, it's 2 things. One is strawberries, and you wouldn't guess that. And the other, of course, is you got to pick up the whole stock when you're doing sugar. And it's -- sugar beets are huge, but they destroy the ground because they take out so much of the stuff that's in the ground that makes things grow. So John, I don't know how to explain it other than, if you take each one of the products that we work on and go through it -- I don't know why people eat so much lettuce, but they do. And California is a lettuce bread basket, if you want to think about it that way, massive amounts; everybody always predicting that these indoor farms are going to take away the -- and they do. They take away some of the volume, but they're not even close to what can be grown on an acre of land in California when it comes to the leafy greens. Anyway, great time to be in this business. I haven't seen any diminution of any of the parts, other than it's just a slow acquisition pace. And I wished I knew why, but I guess, if we double the price, they'd step up pretty quick. But we're not going to do that because then we wouldn't make any money.

Understood. And then one last kind of quick one for me. I know you completed those 2 kind of new leases subsequent to quarter end, but kind of outside of that, when you think about what you have expiring over the -- lease you have expiring over the remainder of the year, what should we maybe expect in terms of how those rents are going to shift either up or even potentially down? Just any color there would be helpful.

Well, a couple of those farmers are -- the soil needs some work on it. So we're going to have to put some money in. Or they'll put money in and pay less rent, but it's going to take us a while to get those done. I'm hoping that, by the time we get to the end of the year, we will be in a better position to negotiate the lease, but who knows, John? It might be down by 10% on that 5% -- we've got about 5% revenue that's...

Little less.

A little less than 5% of the revenue to be put into a legal form so that we know what we're going to get going forward. So we may lose a little bit there.

Your next question comes from Craig Kucera.

Most of mine have been answered, but had a few I wanted to cover. I think, last year, you had a few blueberry farms that were throwing off participation rents, but you added a number of acquisitions last year that had participating rent clauses. Just given that demand has been as strong as it has in some grocery stores this quarter, is there any way to sort of encapsulate or think about, as far as how you're thinking about, what the impact of participating rents might be here in the second quarter?

I -- there's not going to be any in the second quarter, might be some at the end of this quarter or beginning of third quarter. It's a good business. I love it. There's a new product that came out. Most of it is produced in Peru and they're starting to plant some here. They're the giant blueberries. They're larger than your thumb in many cases and pretty good consistency on the inside. And a group in California invented that blueberry. So people are planting that. There's also a blueberry plant that I've not seen planted in a commercial space, blooms twice a year. That would double if you could get it going right for the -- for each one of the commercial people. So blueberries are a wonderful area. Everybody loves blueberries, and as a result, the number of the volume of blueberries is huge. I think one of the things that has always made me worry about blueberries is that you can pick blueberries -- and they come in bunches. You can take the bunch. You can take most of the blueberries off one bunch and put them on a pile, and you never know which one is going to be sour and which one is going to be sweet. I have no way of knowing, and I hope someday somebody figures it out of why the blueberry bush makes some of them not as sweet as others. But they do, and there doesn't seem to be a special variety of blueberries that will produce only the very sweet ones. Because you know, United States, people have sweet tooth, so they like everything sweet. Does that answer your question?

Yes, I think so. I mean I wasn't speaking so much specifically to blueberries just as -- were there any crop types that you bought last year, because you did really start to ramp up your participation rent clauses in your acquisitions, that would be where you might see a pretty positive benefit from the pickup in grocery demand here in the second quarter? And maybe it's just those blueberry farms in North Carolina. Maybe there's -- and maybe it's not. I just wanted to get perhaps a read on that.

Yes. I don't -- I'd have to go back and look at the yields that we got from all of those farms to come up with some kind of answer there, but I don't think there is going to be much of a change in terms of how much is coming from participation rents in this year that's ending in December.

Craig, we're not expecting much, if anything, in the second quarter. Similar to prior years, it's all going to come in -- or most of it is going to be coming in the third and fourth quarters.

Got it. That makes sense. And one more for me: In a lot of other highly competitive REIT sectors, a number of buyers knocked out due to financing considerations and access to capital. That's clearly not a problem for you, but are you seeing that in the competitive landscape, maybe fewer buyers? Or is it really just a different type of buyer pool than maybe we see in other REIT asset classes.

The stocks perform very well, so I don't think it's a problem with having buyers. The real question is how can we make this a $10 stock rather than -- and sell lots of shares. I guess we can do that by dropping the dividend, which I've never done, nor do I want to do. Anyway, if we can get this up around $20 a share, I'd be really happy. What do we have, $15 -- $14 now. $14 is a wonderful price. And I would, on the one hand, want to sell a lot of shares at $14 a share. The only difference is that this is a big holding of mine and I don't want to be diluted, so I'd rather have something like the preferred or -- and before we put a crazy number out. And I don't know. You know more about the marketplace than I do. If we can get the stock to move up -- we've got some REITs in this world that have 2% and 3% yields. Given the basis of this company, which is dirt, I just don't see why we aren't in the same category as some of them that seem to be so insulated from anything in the world. We seem to be so different from everything out there. I look at some of my compadres in the REIT business that have been damaged so badly by these shutdowns. I wonder, it may be 10 years before they can get back to strength. I see us going right through this and, over the next 10 years, just being solid production, continuing to go unless there is some -- as they call it, the black swan that comes in from some place that we didn't -- we don't know because we're not thinking way outside the box. But this is an interesting time that we're in, and I'm just happy that we're able to keep all of our people and not have to lay off or do anything like that. And I think it's a testament to the team here, in their selection of crops and their selection of sales and relationships that have kept the company going for so long and so well. And if we get this thing up to around $2 billion in assets, surely at that point in time we will be a 2% or 3% rather than where we are in terms of yield.

There are no further questions.

Okay, guys, sorry to do this in a 2 step, but it was good to hear from all of you. And that's the end of this conversation.

Ladies and gentlemen, this concludes today's conference calls. Thank you for your participation, and have a wonderful day. You may all disconnect.