Q1 2024 Gladstone Land Corp Earnings Call

Participants

David Gladstone; Chairman of the Board, President, Chief Executive Officer; Gladstone Land Corp

Michael LiCalsi; General Counsel & Secretary; Gladstone Land Corp

Lewis Parrish; Chief Financial Officer, Assistant Treasurer; Gladstone Land Corp

Rob Stevenson; Analyst; Janney Montgomery Scott LLC

John Massocca; Analyst; B. Riley Securities, Inc.

Presentation

Operator

Greetings and welcome to the Gladstone Land Corporation first quarter earnings conference call. (Operator Instructions) As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, David Gladstone, Chief Executive Officer. Thank you, sir, you may begin.

David Gladstone

Thank you, LaTonya. That was nice introduction and this is, as you said, David Gladstone and we welcome you all to the quarterly conference call for Gladstone Land. Thank you all for calling in today. We appreciate you taking time out of your day to listen to our presentation before I begin, we're going to start with Michael LiCalsi. He's our General Counsel, and Michael, go ahead.

Michael LiCalsi

Thanks, David. 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. These forward-looking statements involve certain risks and uncertainties that are based on our current plans, which we believe to be reasonable. Now, 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 in our Forms 10 K and 10 Q and other documents that we file with the SEC can find them on our website, which is w. w. w. dot Gladstone Land.com specifically go to the Investors page where you can find them on the SEC's website at w. w. w. dot SEC dot 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 that today will 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 may also discuss core FFO, which we generally define as FFO adjusted for certain nonrecurring revenues and expenses and adjusted FFO, which further adjusts core FFO for certain noncash items such as converting cash excuse me, GAAP rents to normalized cash rents. And we believe these are better indications of our operating results and allow for better comparability of our period-over-period performance, please visit our website. Once again, that's Gladstone. Land.com sign up for our e-mail notification service can also find us on Facebook keyword. There is The Gladstone Companies. We're also on Twitter and that's at GladstoneComps.
Today's call is simply an overview of our results. So we ask that you review our press release and our Form 10 Q both issued yesterday for more detailed information.
Now with that, I'm going to turn it back over to David Gladstone. David?

David Gladstone

Okay. Thank you, Michael. I'll start with a brief overview, as I always do, we currently own about 112,000 acres on 168 different farms and about 49,000 acre feet of water assets, and we're currently increasing that 1 acre foot is equal to about 326,000 gallons. So we're nearly 16 billion gallons of water. This is protecting our land because without water lands not worth much. And together, the land and all the water are valued at a total of approximately $1.5 billion of frams are in 15 different states. More importantly, in 29, different growing regions and our water assets are all in California.
Our farms are leased to 90 different tenant farmers and the tenants on these farms are growing 60 different types of crops, mostly fruits, mostly vegetables and a lot of nuts. And you can find all of these in the produce section of your grocery store, which is where most of these crops are sold, may just deviate here a minute when we have diversification like this and we are well diversified, you have some problems in each of the regions. And so those are in the diversification that you're trying to maintain. For example, almonds and pistachios are both have reduced demand.
So prices are low today and it may take years for the balance to come back. Almonds are an international crop and people are not eating as many almonds as they did in the past. And the price of producing almonds has risen due to inflation and farming costs. So some people cannot afford to buy almonds and pistachios and that reduced demand makes it a problem for all our farmers in that area and their farms that have problems. For example, Michigan blueberries had a good pretty good crop this year and reasonably good sales, but are farmers.
Our one farmer there had a very tragic accident. He was injured and he couldn't farm. So we are moving forward with the sale of those farms and we believe will be okay once we've sold them. Hopefully that happens this year. And we have a few great farms that do not have the varieties that people want to make wine, so selling them. We're going to sell a couple of those as well, such is the nature of owning farmland is just like owning businesses. You own one stock. I didn't want stock or just think that owning farmland is immune from the ups and downs of the economy or the business of farming. I think during the rest of the calendar year 2024, we'll sort out these problems. There are other parts of farming that have problems such as tomatoes.
Mexico has been subsidized, subsidizing tomatoes and hurt tomato farmers. We are very lucky not to be in tomato farms. So we miss that problem. Likewise, we invest did not invest in citrus. It's been terrible for the citrus farmers in Florida. At this, we have a few citrus trees, but there, not in Florida and the trees have been devastated in Florida by disease and they may never turn around. There aren't just coming in from being produced other where other countries and there's reduced drinking of orange juice. I remember as a child drinking, lots of orange juice people don't drink as much orange juices they did 20 years ago. So our smart not to be in Florida orange juice business.
So I'll just give you that overview. I thought of that last night and decided put that into our discussion. And now I'll give you a quick update of some of the tenants issues that we've been working through, and we've been telling you about them. We currently have two properties encompassing four out of there 168 farms that were that we have and these are vacant and properties encompass 11 farms in direct operating the management agreement.
So we've had to take over a number of farms and doing on our own. In addition, we are recognizing revenue from leases with two tenants who were collectively leaking leasing four of our farms from a cash basis regarding the vacancy in our farms that now are operating farms. We're in discussions with various potential buyers or tenants to buy or lease these properties. And I think we'll have a lot of this done during the next six months. So I'm hopeful that when we report to you, Ian in July that now we fixed a lot of that, there are two tenants on nonaccrual status.
No one of them is now current on their rental payments to us. And we are continuing to work with a collection of other tenants on a total year over year impact on our operating results, various tenants issued decreased our net operating income by about $750,000 for the first quarter. And as mentioned on the past several calls, we continue to be cautious with new investments because our cost of capital remains high, more farmland rental rate, having increased enough to cover all the extra costs that farmers have. And because farmland values remain high, that is the farmers who are the people who own the land has remained, the values have remained high and they want the high price for it. We just don't feel like it's worth taking that risk.
So as a result, acquisition activity remains slow for us and probably be for that for another couple of quarters and with inflation still above the Fed's target, that's the main problem right now is the Federal Reserve needs to cut rates and that might begin sometime this year. But they won't near be nearly good enough for the very large farmers. We don't have many of those, but for the small farmer, it really pushes them down pretty bad. But overall, the existing farmland portfolio continues to perform more or less as expected, with the exception of those issues I just mentioned.
As you know, we so one of the properties that resulted in a nice gain for us. This was a large farm in Florida and that we bought for about $54 million years ago. We've gotten rent, nice rents on it as we've gone along, but we sold it and we got $66 million for it. Net of closing costs is about a $10 million gain for us and that's been a tremendous winner for us. And I'll note that the price was sold. It was sold for about $2 million more than we had it appraised at at prior to the sale.
So during the quarter, we valued it lower and we sold it for. I think that's a good indication that we have an oil price, a lot of our farms on the leasing front, since the beginning of the quarter, we renewed or amended for leases on farms in two different states. In total, these renewals are expected to result in a decrease and an increase of annual net operating income of about $800,000 per year. That's on the prior leases. However, a majority of the decrease is due to one lease agreement executed on another farm in California in which we reduce that fixed base rent in exchange for increasing the upside potential in participation rents.
Looking ahead, we have five leases scheduled to expire over the next six months in total makes up about 9% of our total lease revenue. We're in discussion with groups to lease these farms and aren't currently anticipating any additional vacancies as a result of these. However, two of the expiring leases on not farms in California, and those will likely decrease the base rent in exchange for increasing participation rents. That's how some of the problems that are.
I just one other item I'd like to mention, as mentioned on the last quarterly call, our team in California has been working to implement various projects and strategies to take advantage of the surplus water supplies that have come to count to be available in California.
As many of you know, there have been huge rains. We've had two very wet winters, which is unusual for California. And the rains have not just been a little things that we sometimes see in the East have been rains of biblical proportions and people have had wash away. And we've had a few farms that worse were impacted a bit, but that one farm actually took on too much water, so they couldn't do as much forward. So it's coming back this year.
One such project involves construction of a live groundwater recharge facility on two of our farms and both of which were completed last year. These these are, in essence water banks, allowing us to enter into various agreements with both local water districts and private individuals that are expected to result in additional ground water credits by allowing water to be stored on our water banks. During the quarter, we were able to obtain an additional 2,676 acre feet or that's 872 million gallons of water credits for a total cash cost of approximately $345,000, or right at $129 per acre foot, which is significantly below market.
These will come in handy as time goes on. Valuations of farms are now based on how much water they have and usually they have to have two sources of water. We still believe these type of projects are important in achieving long term sustainable water supplies for our farms in California, and we intend to continue to focus on water security for our farms throughout 2024.
And just to note, our portfolio currently has adequate supply of water to date, none of our farms have been followed or not from because of the uric here, irrigation problems due to the inadequacy of water. In some places, there have been problems and we're not seeing that on our farms. We also wonder about the effects of government regulations and they do regulate used. So we gone through that with many of our farms and we seem to be in good shape there. And we do look forward that this projects that we have with their reserved water that we have formed could go at least one year unabated, but I think they may go on as much as two years based on how much water we've captured.
So let me stop here and I'll turn it over to Lewis Parrish. He is our CFO, and if he knows the numbers. Lewis?

Lewis Parrish

Thank you, Dave, and good morning, everyone. I'll begin by briefly going over our recent financing activity. We did not incur any new borrowings during the quarter, but we did repay about $16 million of bonds that matured in. On the equity side, we raised about $250,000 in net proceeds from sales of the Series E preferred stock during the quarter.
Now moving on to operating results. For the first quarter, we had net income of about $13.6 million and net income to common shareholders of $7.4 million or $0.21 per share. Adjusted FFO for the current quarter was approximately $5.1 million or $0.143 per share compared to $5.9 million or $0.166 per share in the prior year quarter.
Dividend declared per common share were $0.140 in the current quarter compared to $0.138 in the prior-year quarter. Primary drivers behind the decrease in AFFO from the lost income from the farm we sold in January and a decrease in the revenues associated with certain properties that were either vacant or on nonaccrual status during portions of the quarter. This was partially offset by decreases in certain operating expenses during Q1 2024.
[six] base cash rents decreased by about $1 million on a year-over-year basis is primarily due to the reasons just mentioned, that is the lost revenues from the farm we sold and certain other workout properties. This decrease was partially offset by additional rents earned from craft capital improvements we made on certain of our farms participation rents decreased by about $200,000 during the current quarter. This is really just due to the timing of when certain information about crop sales is made available to us as a filing. We had not yet received enough information to record certain participation rate amounts during the first quarter. So we'll continue to press release information and hopefully be able to finalize it in time for the second quarter filing.
On the expense side, excluding reimbursable expenses and certain nonrecurring or noncash expenses, our core operating expenses decreased by over $500,000 during the current quarter. Property operating expenses decreased in the current quarter due to lower amounts spent to protect water rights on certain farms in California as well as a decrease in both legal and property management fees and G&A expenses decreased due to lower amounts recorded relating related to the upcoming shareholders' meeting. And also a decrease in certain professional fees. Of note, total related party fees remained relatively flat year over year.
Finally, other expenses decreased primarily due to lower interest expense incurred as a result of loan repayments we've made over the past year.
With that, we'll move on to net asset value. We had 35 farms revalued during the quarter, all via third party appraisals. Overall, these valuations decreased by about $3.7 million or 1% from their previous valuations from about a year ago. So as of March 31, our portfolio was valued at about $1.5 billion. And all of this value was supported by third-party appraisals or the actual purchase prices. Based on these updated valuations and including the fair value of our debt and our preferred securities.
Net asset value per common share at March 31, was $18.50, down from $19.06 at December 31. And the majority of this decrease is due to the change in fair value of our preferred securities as well as a decrease in valuations of certain farms that were reappraised or not turning to liquidity, including availability on our lines of credit and other undrawn notes. We currently have access to over $200 million of liquidity, including nearly $60 million of cash on hand.
We also have over $130 million of unpledged properties. Over 99.9% of our current borrowings are at fixed rates and on a weighted average basis, these rates are fixed at 3.39% for another 4.2 years. As a result, we have experienced minimal impact on our operating results from increases in interest rates and with respect to our current borrowings, we believe we are well protected, should interest rates remain higher for longer.
Regarding upcoming debt maturities, we have about $35 million coming due over the next 12-months. However, about $17 million of that represents various loan maturities. And given the value that is real underlying collateral we do not foresee any problems, refinancing any of these loans if we choose to do so. So removing those maturities, we have about $18 million of amortizing principal payments coming due over the next 12-months, which is about 3% of our current debt outstanding. In addition, we have about $6 million of loans that they aren't maturing, but they have a fixed rate term that is expiring over the next six months or sorry, over the next 12 months.
Finally, regarding our common distributions, we recently raised our common dividend again to $0.0466 per share per month. This marks the 34th time we've raised our common dividend over the past 37 quarters, resulting in an overall increase of more than 55% over that period.
With that, I'll turn the program back over to David.

David Gladstone

Thank you, Louis. And we continue to stay active in the market should good opportunities present themselves. But many of these farmers all just waited out, they're not going to sell their farm at a discount, which they would need to do today's in today's market. So prices of farms have not decreased, not decreased. Some of them have a little bit, but need to increase and decrease a lot so that we don't have as much problems, renting them out. Interest rates are still too high today, but we're hopeful that rates will be lower by this fall so that we can start buying more farms again and just a final note, I'd like to make we believe that investing in this farmland and the farming crops that contribute to the healthy lifestyle, such as fruits and vegetables and nuts follows the trend that we're seeing in the marketplace today. So we're in good shape on that area of selecting where we were going to put our money overall demand for prime farmland growing berries and vegetables.
Certainly that side is stable to strong in almost all the areas where we farmed are located, particularly along both the Coast East Coast and West Coast the East Coast of Florida and the West Coast, California. This is where the good farmland is for us. And please remember that purchasing stock in this company is a long-term investment in farmland. It's similar to other hard assets such as goal, farmland, dirt that just stays where it is and continues to produce is wonderful. And as long as we have water in California, I think we're going to be in good shape. A lot of things are being driven by urban developers, especially California and Florida, where we have many farms.
And unlike gold and other alternative assets. It's this is an active investment with cash flows to investors, and we believe we are better than a bond because of bonds, no debt. You don't get the bond interest rate going up on the existing bonds. So we're expecting inflation, particularly in the food sector to continue to increase over time. And we expect the values of the underlying farmland to increase. As a result, we expect this especially to be true in fresh produce and on the food sector and the trend of more people in the U.S. eating healthy foods continues to grow. So rather than make continued explain what we do and maybe we get some questions later, you want to come in and tell them how to do that.

Lewis Parrish

Hi, we're ready for the Q&A, please.

Question and Answer Session

Operator

(Operator Instructions) Rob Stevenson, Janney.

Rob Stevenson

Good morning, guys. David, or all of the 14 of the Michigan farms are leased to the same operator that you talked about as having the accident or there are multiple operators in there?

David Gladstone

Multiple. But I think it's only two now we're down to two.

Lewis Parrish

It was it was the same operator, but now we are working with a couple of different groups for them to lease, operate and potentially sell down the road.

Rob Stevenson

Okay. So all of the 14 Michigan farms that you talked about are blueberry farms.

David Gladstone

Yes.

Rob Stevenson

Okay. Then they are off five. Are the California farms, not farms or is there something else in there as well that's causing you issues?

David Gladstone

It's all that's sorry to say it that way.

Rob Stevenson

It's that's okay. And then I guess lastly, well, just to wrap it up, what was what is the Washington farm?

David Gladstone

No nonaccruals that was on cherries, apples and wine grapes. We're in the process of removing the Permian plantings and now marketing it to either be sold or leased as open ground or kind of a new development project for a potential buyer.

Rob Stevenson

Okay. And then I guess what we're talking about and what's what farms will grow like the Florida farm that you had, the big gain on was what was that growing without oranges?
Or is that something else?

David Gladstone

Now as vegetable produce kind of stuff that you'd see in the grocery store?
I don't think there was let us there. But I think it was a lot of lot of produce that you'd see in the grocery store in the produce section. It was a very nice farm. Unfortunately, you have bombarded from from the people in Mexico and they can't make as much money. So people wanted us to lower the rent and we decided we wouldn't play that game of trying to beat the people in Mexico. So we put it up for sale. And as you probably have guessed, there are a lot of people who want farmland in Florida because it's being redeveloped. In fact, if you look around not too far from where that farm is, you'll find a lot of new golf golf outing places. And and just as a note we have the big farm right next to this one.
So there may be another one that comes along, we'll so we'll see it's a it's a different kind of farm water farm and the state of Florida is paying us to clean up the water that's coming down there. So we're in we're in good shape on that. So we have to keep that one for a while. But ultimately, we may want to wear, you may want to get out of that. And there are people that like having a farmland that's leased to Florida.

Rob Stevenson

Okay. Then I guess to wrap up this topic, the Louis, the [$750,000] impact from the 20 farms, is that spread relatively evenly on a per farm basis among the 20? Or is there certain of those farms represent a disproportionate amount of that [$750,000]?

Lewis Parrish

Net farms with it would be weighted more heavily in terms of the income differential.

Rob Stevenson

Okay. That's helpful. And then I guess the other question I have is you guys talked in detail about the water. You bought some more. You have a bunch of it on the on the books now on this get mark to market on a regular basis. And I guess the question here is it with all of the rain and everything in the aquifers four is got water worth less today than if we were in a drought situation. And so that that's going to fluctuate like securities mark-to-market on a quarterly basis or is that or GAAP not treating it?

Lewis Parrish

Similarly now these are being held at cost on our books and the water. We've got the water we've acquired lately. It's including the cash paid the cash amount we paid of about $130 per acre foot. Some of that we did get granted from a water district. So we didn't pay any money directly for the water. But so in our books, including the cash we pay, plus the income recognized that as a result of receiving that water, I think it's on our books for maybe $290 or $300 per acre foot. That is still below market even in a wet year as we were last year or average year as they're calling it right now on. But keep in mind that just a few years ago and water was trading regularity for between [$1,500 to $2,000] plus per acre foot so that's the that's the time that we're really holding it forward. That doesn't mean we're going to sell it for that amount.
We very well may keep it to them to use our own farms and make sure that our farms are optimizing their production potential.
But even even in that average or wet year, it's the rate that we're able to acquire water.
And as a result of some of these projects, it's still below market and will be just even that much more So better off during a drier critical years.

Rob Stevenson

Okay. And then last one for me. How are you guys thinking about selective pruning in the portfolio? So obviously, you know, you may wind up selling some or all of the 20 farms that you talked about, et cetera, there that that are having issues. But any other farms similar to the Florida asset, which isn't under any real duress, et cetera, that you guys are thinking about monetizing and either redeploying into something else or buying back stock or reducing debt or anything along those lines at this point, given some market prices for land in certain markets.

David Gladstone

Well, if you pay us enough, we'll sell it all the time. It's nice. The prices aren't that different. So we aren't out marketing right now. However, I do think that marketing on some of the farms that we have that we've identified as we've talked about for you to sell, may tell us we should sell some other land as well but we're not out there looking for sales every day. It's a it's an interesting market.
And Rob, I just I look at that and I see these farmers and you talk to them about selling the farm and to us and they go back to you two or three generations that they've owned the property. And so it's it's like an emotional thing to make a sale. We are the same way we have good farms and it would be kind of silly to sell them if we can keep them rented and making money for us. That's our business holding farms and renting them out.
So probably not enough as desirous of some people who may want to just exit, but we're not going to go sell everything we have there is I believe no way of proving it today. The difference between what we're valuing these assets and what we could get for them. But it's not huge. These analysts that these brokers who we buy and sell farms all the time are people who know what the price of a farm is worth. Unfortunately, most of them have been hired back families that want to move the farm from bed to son or daughter. And as a result, they're looking for the lowest possible value for the farm. So these guys that are in the valuation business have been trained to do very lowball kinds of values that helps us when we're getting ready to buy something, but it's not the true value.
But so I don't know if any of the farms that we own today are worth is so much more than what they've been valued at. So for us, as somebody came in and said your farms worth $1 billion, it's sold. But so we're not we're not in the business of buying and selling farms for capital gains as are some other people. Did that answer your question?

Rob Stevenson

Yes, David, that did, and thank you very much.

David Gladstone

Okay, guys, do we have any more questions?

Operator

(Operator Instructions) John Massocca, B. Riley.

John Massocca

Good morning.

David Gladstone

Good morning, John.

John Massocca

On JB's, I think about the farms you currently are operating or have under kind of a management agreement as opposed to a lease? And what's the likelihood of any of those moving to a more traditional lease you're in the next couple of quarters, just given maybe where we are in terms of the growing season for whatever the affected farms are you is very pertinent for that.

David Gladstone

People don't buy farms when they're out of the season that they use, they like to buy it and a month or so before their season starts. But we are aware into that and we know things will come along as time goes on.
So if I had a farm that was going to be leased and we were holding it at an operating business. We'd make that known to everybody so that we are all feeling the effects of leasing. And I think a lot of these farms it, Janet just depends on what the economy does. If you have an economy that's rolling along and people have money, they are buying batteries and they're buying nuts. But given the strength of the economy now and the lower end, that eats varies and and not hard, just that's one of the things they're not new and they're not eating as much of those things is that in the past, and that's not really true of our drug areas, although very prices have increased and lot of other things that increase. But I don't think that we are going to be out there trying to figure out a way to sell every single farm tomorrow. And it's just not our business.

John Massocca

And look, I guess maybe as we think about, for instance, the other operating revenue line item is the expectation that that is from where it is in 1Q but kind of notable for the next couple of quarters, just given you may have some operating farms in the portfolio here until 4Q.

Lewis Parrish

But John, a couple of things from that first that other operating revenue that was not due to direct farm operating revenue that was due to water that we got granted by water district for allowing others to store water in our water banks. So that was that was non-cash income based on the our estimate of the fair value of the water credits we received through that through those projects on to your question about the farms that were that are under operating management agreements.
The revenue we expect to recognize from those in the next couple of quarters is going to be pretty very minimal from converting it to a lease, converting those properties to a standard lease versus just outright selling them. That's something we're currently working through. I don't know that we can put a probability of X percent will be least X percent will be sold where I'm kind of a lot of moving parts right now talking with a few different groups but the revenue recognized over the next couple of quarters from those operations, I would expect to be very minimal.

John Massocca

But I appreciate the clarification there. And then as I think about I think you mentioned you had of the two tenants that are on a cash basis, one of them had paid either all or kind of partial rent. Was that in the quarter. Was that subsequent to quarter end? And how should I think about how much of maybe the annual rent owed would have been paid in that period?

Lewis Parrish

So net of those properties. Nothing was recognized in Q1 because the tenant who is current payments are due in May and November. So we recognized basically six months of that revenue, six months of revenue from those properties in Q4, nothing in Q1 and then his next payment is due this month. So assuming we do get those amounts down, we'll recognize those amounts in Q2 in total, that's probably about $300,000 or $400,000 of revenue across all of those the farms that went direct leases from us.

John Massocca

And that for a period for kind of time period annually

Lewis Parrish

That is the six months amount. So 2 times that amount would be the annual rent amount from those farms.

John Massocca

Okay. And then with the California four leases that are expiring in the quarter. I mean, what percentage or what kind of amount of leases Byron this year does that make up?

Lewis Parrish

So what we I think we said we have five liters of farm next six months. Two of those are on nut farms. However, I don't know the exact percentage, but the majority of the well, let me back up. I think five of those five leases, they make up about 9% of our annualized revenues. I don't know the exact breakout, but more than two out of five leases, 40% but more than 40% of that revenue is attributed to those net farms. And I don't have the exact breakout right now, but it is more than more than half of that 9% of annualized revenue amount.

John Massocca

That's helpful. And then kind of more big picture. I mean, given some of the stress we've seen in the California market, you've had some bankruptcies or are you seeing distress maybe acquisition opportunities, things where and you have some corporate farmers that are in a lot of trouble where maybe that the even with all the risks associated with the current operating environment in California, it makes sense for you to acquire assets?

David Gladstone

Well, we haven't seen that many good purchases. There have been some huge bankruptcies, not us, not our people, but some people that we've seen going under and they have then buyer sales. We've see one or two small farms that might be fire sales, but it's really has not had the impact yet that you would expect because many of these farmers are if you want to say it the right way or just small businesses and small businesses, especially in this environment probably impacted much more than large businesses because of the interest rates we have farm that people will lend us money on. We're not that's not a problem for us. The agricultural banks are constantly talking to us about borrowing more money. And they love us because we've always paid our debt.
So as a result, we've not had the problem of the lack of money. We had the problem of the cost of money, and that's true for all the small business people. If you looked at small business America the rates where they are today, including all the inflationary things that are going on have hurt small businesses more than large businesses. If you're a big business, you have huge amounts of money that you're holding on to?
So, John, I don't know how to tell you how to judge that. We all spend. I mean, I lie awake at night trying to say to myself why it has this quarter going to be it's a it's a moving target of trying to figure out what's going to happen in California. Florida is probably more stable than than California. So we're glad of that because we have a lot of land in Florida. And as you know, the dirt doesn't go away. Somebody will use it to farm at some point in time. And that's the good news. The bad news is you just don't know when some farmers coming being able to step up and rent more property and grow more food. It's the government needs to slow down the inflation rate because all the inputs go up.
But that doesn't necessarily flow through to the farmer. I mean, the person who's buying those products in the grocery stores. We had an odd situation in that. A lot of the grocery stores were increasing their prices, some of our products, but they weren't passing it on to the people who are growing them. So you had the grocery stores making more money and the people who are selling or not making more and given how fragmented all of these industries are. I mean they're really tons of people that are in all of these areas. You would think that they'd have some pressure on the grocery stores, but they don't.
And so the grocery stores really decide what they're willing to pay for things in of all the things that grocery stores worry about is do they have the product. If somebody produces strawberries and sells it to him, they're happy. They're just not willing to give up more money to get that certainty. It's happening a little bit more now that some of the farms aren't there competing with other farms, but it's still not a one to one kind of ratio. I don't know, John, does that help you?

John Massocca

No that's really helpful color. I appreciate it. And that that's it for me. Thank you very much.

David Gladstone

Okay, Latoya, I don't think we have any more questions. Do we?

Operator

No more questions back to you for closing comments.

David Gladstone

While our disappointed, we like people asking questions because we get to answer those and hopefully it helps everybody understand the business we're in. And that's the end of this conference, and we thank you all for calling in.

Operator

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a great day.