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Gladstone Land Corp (NASDAQ:LAND)
Q2 2020 Earnings Call
Aug 7, 2020, 8:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Gladstone Land Corporation Second Quarter ended 6/30/2020 Earnings Call and Webcast. [Operator Instructions].

I would now like to introduce to today's conference call Mr. David Gladstone. You may begin sir.

David J. Gladstone -- Chairman, Chief Executive Officer and President

Okay. Thank you, Kevin for that nice introduction. This is David Gladstone and welcome 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. We're going to start with Michael LiCalsi, he is our General Counsel and Secretary. And he is also the President of Gladstone Administration, which is the administrator for all the Gladstone funds.

Michael, why don't you go.

Michael LiCalsi -- General Counsel and Secretary

Thanks, David. Good morning, everybody. Today's report may include forward-looking statements under the Securities Act of 1933, 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 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 risk factors that we listed in our Forms 10-K and 10-Q of the documents we filed with the SEC can find them all on our website, which is www.gladstonefarms.com, specifically the Investor Relations page on that website could also go to the SEC's website at www.sec.gov. Now, 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. And today, we will discuss FFO, which is funds From operations and FFO was 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, we generally define as FFO adjusted for certain non-recurring revenues and expenses. And then adjusted FFO which further adjusts core FFO for certain non-cash items such as converting GAAP rents to normalized cash rents. In all, we believe these are better indications of our operating results and allows better comparability our period over period performance. Now, please take the opportunity to visit our website once again gladstonefarms.com, sign up for email notification service. So you can stay up to date on the Company. You can also find us on Facebook keyword there is The Gladstone Companies and on Twitter the handle there is at @gladstonecomps. Today's call Is an overview of our results. So we ask that you review our press release and Form 10-Q, both of which were issued yesterday for more detailed information. Again, you can find them on the Investor Relations page of our website.

With that, I'll turn the presentation back to David Gladstone. David?

David J. Gladstone -- Chairman, Chief Executive Officer and President

Okay. Thank you, Michael. When it comes to buying additional farms, things are still moving a bit slow for us. We are seeing significantly more opportunities than we did earlier in the year, we expect the activity to pick up for us. We have four farms with the purchase agreements signed, but we are in due diligence and they may fall out somewhere along the way, it's about $70 million there. We have four more farms, which are We are negotiating a PSA and some of those are probably drop out, but that's about $80 million. So, we are lining up things hopefully many of those can close with for the end of the year. I know many of the farmers have been extremely busy because sales in grocery stores have been up strong and that's where most of our tenants sell their crops. We invested about $21 million in new farms during the quarter. Operations on our farms remained strong and our team continues to have success releasing our existing farms at increased rental rates. We believe these increased rental rates are indicative of the continued strong demand that we're seeing for farms that we own and products are grown on our farms. One thing to remember about the first quarter, it's when we received an early lease termination payment that is one of our tenants wanted to get out of their lease and we said that's fine but we need to be paid and they paid us about $3 million, this was a large long-term lease. This $3 million is a non-recurring event, of course all of you know that and we immediately leased the farm out to a different grower under a new long-term lease. So two things that you should keep in mind when you're looking at the second quarter. First lease Is of about 1/4th of our farms include what we call participating rents.

That's where we received certain percentage of the gross revenue earned on the farm, from the grower selling his or her crops. This participation rent is in addition to the minimum fixed base guaranteed under the lease. We don't know whether we get anything out of that or not. If the crops come out strong, we get plenty. If it doesn't, obviously we don't get anything there. However, these are not known until really the second half of the year. The expectation is that these rents will provide us with earnings boost in the third and fourth quarter as they did last year, when we had recorded about $2.3 million in participation rents. Of course the size of the crops can be much smaller, meaning we get less. I don't put a lot of stock that we're going to get all of that money every year. The second thing you should know is that each year we receive a refund for a portion of our interest that we paid on our loans if we borrowed the money from the Farm Credit Group, during the prior calendar year. This is called patronage and those payments are generally recorded during the first quarter of the year we recorded about $1.3 million of income. Like that from last quarter, not last quarter meaning second but the first quarter, the second quarter is usually status quo for us, as it was last year and we think we came out fine from an operating standpoint. On a year-to-date basis, we have about $0.09 per share of excess dividend coverage with adjusted FFO through the second quarter. Now just to provide an update on the impact of the government's closings are having on our farms. About 90%, 95% of the products grown by the farmers who lease our farms are sold to grocery stores like Kroger, Safeway, Costco Walmart and similar outlets, very little of the produce is being sold to the food service industry including restaurants and institutions like schools. That's where product sales have been hurt by the coronavirus reduction in openings. Demand for produce and most other foods at grocery stores remains high, just read on article it says those sales are up by 10% over 2019.

We expect this to continue to be the case for the rest of the year. People obviously have to eat. And so they are buying their food at the grocery stores since they are not going out to the restaurants. So in short, our farmers and not seeing significant impact from the government shutdown on their operations, supply chains are still tracking and running smoothly and the prices remain very good for most of the crops. So, we feel like we are in an area that is not being impacted very much. An area where we are seeing impact is the timing of payments from the processors to the growers, particularly those farmers growing permanent crops like nuts and blueberries. With the government mandated shutdowns forcing many offices to close in the country, a lot of the smaller companies don't have the ability to get checks out and they often times are just not getting into the office at all. Payments from other third parties to these processors are getting delayed and that delay trickles down to some of our growers and ultimately to us. It's not a huge problem in the sense that there is a lot of money, but it's just new since you're always fighting to get a few payments in. In the fresh produce side, there is less there because this is sold directly to the market with no intermediaries to speak of, but in the permanent crops, these are nuts and these kind of things like blueberries even the processor add to the grower takes about an extra three months. You know they got to crack the almonds and get the almonds out of the nut and then dry them and those kind of things. And while they're doing that they're not going to make any payments until they sell it. So that does slow down because of what's going on in the marketplace. Because of this situation, we granted rent deferrals to two blueberry growers who are awaiting who are waiting for payments from their respective processes. The products have actually been sold and the processor as getting them ready for delivery. This rent on the blueberry side is not really not a concern for us. It's just a matter of timing.

We've agreed to give them extra time up to 120 days and we should get those payments in October and November. It's about $43,000 the rent that we deferred which is actually less than 1% of projected 2020 cash rents based on our current farmland holdings. Other than that, we have other tenants who every now and then we get a few weeks behind, one guy is at $53,000 behind on his rent because he had some insurance, he had rain insurance and he hasn't gotten his payment from the insurance company even though that processor has been out there and talk to them. So few weeks few months, they will get it. I expect we'll collect all of that amount by the end of the quarter. Aside from these smaller and smaller situations, all of our other tenants are current on their rental payments to us. Moving on to the farmland ownership, we currently have about 89,000 acres, 150 farms valued at about $912 million. These farms are located in 10 different states and more importantly in 24 different growing regions. Our farms, continue to be 100% occupied and at least 70 different tenants, all of whom are unrelated to us. And the tenant operating these farms are growing about 50 different crops. We now own a good number of farms in enough different regions, with many different farmers and many different types of crops. So that there is sufficient diversification in our holdings to provide some safety hopefully a lot of safety and security for cash flows coming in and they also use of course, to pay dividends to our shareholders. Recent activity during the second quarter. The team acquired two farms for about $18 million and also invested another $3 million in existing farms. We needed to obtain approval from the Napa County for example for additional venues to be planted on property we own there. It's just additional time to get things done, and while that $3 million is being put in. It's counted against us on the valuations so. It's counted against us because we've put the money out, but they haven't been appraised since the things have gone in and then as a result it looks like where values are going down.

Overall, the initial net cash yield to us on these investments that we make like this $3 million, about 6.2% and the leases on these farms also contain certain provisions, such as annual escalations that should push that figure higher in the future. And just as a reminder, this year figure does account for operating expenses responsibilities under the respective leases. So, we're supposed to pay the taxes which sometimes we do enter into that. These leases are mostly triple net, so there shouldn't be too many expenses incurred by a company. On the leasing front, during and after the quarter ending June 30, we either executed new leases or extend existing leases on three of our properties located in California and some in Florida. In total, the new leases are expected to result in a total increase in annual net income of about $173,000, which is about 24% over that of the prior leases. Looking ahead, we have farm leases scheduled to expire in 2020. These all expire in the fourth quarter of the year and total make up less than 5% of our total annualized leases. We are in discussions with the existing tenants and some potential new tenants, although we hope all the people that are leasing our properties will continue. We aren't expecting any downtime on these leases. Overall, we expect the new leases on these renewals to be pretty neutral from where they are today and maybe up a little bit. Finally, just a quick update on the impact of our farms of the current wildfires in California, and the hurricane on the East Coast, we reached out to our Eastern located tenants and they reported no damage in Florida on our farms. And in California, none of the recent fires have posed a threat to any of our farms though, the largest fire out there, the apple fire is more than three hours away from our nearest farm. They are usually up in the mountains, where there's a lot of brush. So we don't really expect fires in California. In fact in past, we have not lost anything.

Well, that's enough about the operations, and I'll turn it over to our Chief Financial Officer, Lewis Parrish to talk to you about the numbers. Lewis?

Lewis Parrish -- Chief Financial Officer and Assistant Treasurer

All right, thank you David and good morning to everyone. Again, with our balance sheet during the second quarter, our total assets increased by about $16 million primarily due to new farm acquisitions and proceeds from equity issuances. From a financing perspective, we can carry about $16 million of new long-term borrowings during the quarter at a weighted average rate of 2.81%, which is fixed for the next nine plus years. On the equity side, during and subsequent to the quarter ended June 30th, we've raised about $6 million of net proceeds through sales of our common stock under the ATM program. We also started selling our Series C Preferred Stock during the second quarter after completing the offering of the Series B Preferred Stock during the first quarter. So far, we've raised about $6 million of net proceeds from sales of the Series C Preferred Stock. As with the Series B, our plan with the Series C Preferred Stock is to sell it in small amounts over the course of the next several years. So they were better able to timely acquisition of farms with the proceeds as they come in. And just to remind everyone in the process of selling the Series B and now the Series C Preferred Stock, we do pay certain commissions and fees to the Gladstone Securities and affiliated broker dealer of ours. However, Gladstone securities is just a conduit this offering as it pays out about 94% of these fees to other third parties including brokers and wholesalers who are helping to sell the shares. In the rest of the fees kept by Gladstone Securities that remaining 6%, these amounts are used to cover various expenses related to selling the stock, which were actually greater than the fees retained by Gladstone Securities. And please note that the preferred stock is not included in the calculation of the fees we paid to our advisor and it has never resulted in an additional fee paid to the advisor.

Now, I'll move on to our operating results for the quarter. First, I'll note that we had net income of about $182,000 in a net loss to common shareholders of about $2.1 million or $9.5 per common share. Adjusted FFO for the current quarter was $10.1 per share, versus $25.3 per share in the first quarter. Dividends declared were $13.4 cents per share in each quarter. We had a sizable decrease in adjusted FFO, but that was mainly due to the two significant events in the first quarter that David mentioned rather than shortcomings in the current quarter and that's the $3 million lease termination payment and a $1.3 million of interest payments that were both recorded during Q1. On a quarter-over-quarter basis, cash rents decreased by about $139,000 or 1% primarily due to a lease,we executed during the first quarter, that includes the rent free period for calendar year 2020. This decrease was partially offset by additional rent earned on recent acquisitions. On the expense side, our core operating expenses decreased by about $1.3 million on a quarter-over-quarter basis, which was driven by incentive fee earned by our advisor in the first quarter at $1.3 million. We're moving related party fees, our core operating expenses increased by about $92,000 and this is largely due to additional repairs and maintenance costs, legal fees incurred on certain properties, partially offset by a decrease in G&A expenses, specifically lower corporate legal fees and advertising costs. Moving on to net asset value, we had 44 farms we value during the quarter and these are all via independent third-party appraisals. Overall, these farms decreased in value by about $700,000 or 0.4% from their previous valuations from about a year ago. As of June 30th, our farms were valued at about $912 million, all of which was valued basically with the third-party appraisals or the actual purchase price.

And based on these updated valuations and including the fair value of our debt and our preferred stock, our net asset value per common share at June 30th was $11.6 which is down by $0.40 or 3.5% from last quarter. The main drivers of the decrease were ongoing capital improvements on certain properties and an increase in the fair value of our long-term borrowings due to changes in market rates. One note on the ongoing capital improvements. Two of the farms we acquired in Q3 of last year were purchased with the intention of spending some money on improving irrigation, infrastructure and other improvements on the farms. Essentially buying a B farm and turning it into an A farm. We spent about $3 million fixing up those farms and with the projects nearing completion, we're hopeful of being able to recoup at least the majority of those costs and those farms are reappraised in a couple of months. Turning to our capital mix of an overall liquidity, from a leverage standpoint, our loan to value ratio and our total farmland holdings on a fair value basis and net of cash was about 52% at June 30th. And we're comfortable at this level given the relative low risk of high quality farmland as an overall asset class. In addition, over 99% of our borrowings are currently at fixed rates. In our weighted average basis, these rates are fixed at 3.55% for another six years out. So we believe we are currently well protected on the debt side against any future interest rate volatility. And with the weighted average maturity of these borrowings being 10 plus years out, we also feel that we're protected against any potential liquidity issues should the current recession continue for a prolonged period. Regarding upcoming debt maturities, we have about $26 million coming due over the next 12 months. However, $14 million of that represents the maturities of two bullet loans coming due toward the end of this year. The two properties collateralizing these loans have increased in value by a total of $2.3 million since their respected acquisitions, so we do not foresee any problems refinancing either of these loans. So removing those maturities, we only have about $11 million of amortizing principal payments coming due over the next 12 months, or about 2% of our total debt outstanding.

From a liquidity standpoint, including availability on our lines of credit, we currently have over $50 million of dry powder. And regarding our access to additional credit, based on conversations we've had with our lenders, we do not currently foresee a credit freeze on ag lending in the near-term future. Credit continues to be readily available to us and at very favorable terms. We have ample availability under our largest farm facility and we continue to be in discussions with potential new lenders for additional borrowings. We also have the ability and intent to issue new OP Units as consideration for purchases should the opportunity arise. So in short, we have plenty of room and ability to continue borrowing and buying new farms that meet our investment criteria. Finally, I will touch on our common distributions. We recently raised our common dividend again to $4.48 per share per month. Over the past 22 quarters, we raised our common dividend 19 times resulting in an overall increase of 49.3% in our monthly common distributions over this time. Since 2013, we paid 90 consecutive monthly dividends to common shareholders totaling $4.71 per share in total distributions. Paying dividends to our shareholders is paramount to our business plan and our goal continues to be to increase the dividend at a rate that outpaces inflation. We're not quite there yet, but we believe we're heading in the right direction. In our current distribution run rate and with the with where our stock price is today, the yield on our stock is about 3.3% and when considering the relative stability and security of the underlying assets, we believe the stock offers a compelling investment alternative.

And with that, I'll turn the program back over to David.

David J. Gladstone -- Chairman, Chief Executive Officer and President

Okay. Nice report Lewis. Currently, I think the farmers who grow produce sold to the grocery stores are flat out working night and day as much as possible, so they can make as much money as they can and it's it's impacting our ability to buy more farms. The farmers out busy working on the farm, they doesn't have time to spend time negotiating contracts in those kind of things. In addition, when doing our due diligence on titles and other legal records, many of the government offices are just closed, so we can't close on our loan, not knowing whether there is leans out there or problems on the property. So it's taking longer to determine the title, if the title is clean or if there are other problems with the property. Also the offices of some of the mortgage lenders who finance our acquisitions are not fully staffed, our people in the office, so it just takes a little longer to do everything. But we are seeing a good amount of opportunities coming our way, now it's just taking a bit longer to than normal to get things through the system that we put it through what we call that due diligence. Couple of points to make, we believe investing in farmland, growing crops, contributes to growing crops that contribute to a healthy lifestyle such as fruits and vegetables and nuts. Follow the trend we're seeing in the market today, currently, about 85% of our total revenue comes from farms that are growing, the type of foods you find in either produce section or the nut section of your local grocery store. We consider these foods to be among the healthier type foods and we continue to see a growing trend toward organic among those foods. By 40% of our fresh produce acreage is either organic or transitioning that way and over 10% of our permanent crops, acres fall into the organic category. We believe the organic section will continue to be a strong growth area for us. In addition, the non-GMO of our products is more than 95% of our non-GMO.

Another major reason why our business strategy is focused on farmland growing fresh produce is due to the effect of inflation on particular segments. According to the Bureau of Labor Statistics, the overall Annual Food CPI generally keeps pace with inflation. However, over the past 40 years the fresh fruits and vegetable segments, the food category has outpaced the total CPI by a multiple of 1.6 times. And while the prices of commodity grain crops like corn and wheat, these are typically more volatile and susceptible to global supply and demand. Fresh produce is mostly insulated from global volatility mainly because the crops are generally consumed locally within a short time after being harvested. So this is not as much in the way of storage cost and other things to get it to the consumer. I'm telling you this because often we are often confused with owning farms where farmers are growing corn, soy, wheat those grain crops and we mostly stay clear of these crops because they have to compete with other countries like Brazil and Ukraine, where the cost of production and the government subsidize and even after shipping is cost, they are much lower than ours and those farmers can undercut the price of our grain farmers pretty, pretty easily. Overall,demand for prime farmland growing berries and vegetables remains stable to strong in this environment in almost all the areas, where our farms are located particular among the West Coast, including most of California, Oregon and Washington and the East Coast especially Florida. And overall farmland continues to perform well compared to other asset classes, despite some recent downturns in certain regions. The NCREIF Farmland Index, which is currently made up of about $11.9 billion worth of agricultural properties including ours has averaged an annual return of about 13.6% over the past 15 years compared to the 10.5% in the S&P Index. You should know during those 15 years, the Farmland Index did not have a negative year unlike the S&P, which I think had three negative years over the same period. Farmland has generally provided investors with a safe haven during turbulent times and this turbulent times that we're in is no exception.

And as both land prices and food prices, especially for fresh produce have continued to rise steadily. Please remember that purchasing the stock in this Company is a long-term investment, it's not going to have a spike tomorrow morning. I think investments in stock in our stock really has two parts. Similar to go. It's hard asset farmland, dirt is not going away, has an intrinsic value because there is just a limited amount of it and it's being used up by urban development especially in California and Florida, where we have many. So, one day you wake up and they want to take your farm and turn it into a school and they will pay you good amount for it. And second, you should remember that unlike gold and other alternative assets, it's an active investment with cash flow to investors and we believe we are better than a bond fund because we can keep increasing the dividend. We expect inflation, particularly in the food sector to grow and we expect the values of the underlying farmland will increase as a result, and we expect this to be true in fresh produce as people in the US are eating healthier. I think a good way to look at our farmland fund is a hedge against inflation, both in food prices, and value of the underlying land is to grow the food and I think it's a great start to own once you get just a little bit larger in terms of asset size, I'm hopeful that we'll get listed on the RMZ index that is for real estate investment companies and that will bring in additional institution ownership that will increase the daily liquidity or a stock. But folks, Gladstone Land wouldn't be anything without the good people that we have. We have great operators, great buyers. We're managing that, we keep up with everything. Buying and leasing a farmland is a complex business and I think we're doing a good job.

So, if you like, what you're hearing please buy some stock, keep eating fresh fruits and vegetables and nuts and now I'm going to stop and the operator will come on, we'll be able to answer some of your pressing questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from Craig Kucera with B Riley FBR.

David J. Gladstone -- Chairman, Chief Executive Officer and President

Craig, we can't hear you.

Craig Kucera -- B Riley FBR -- Analyst

[Speech Overlap]. Sorry about that. I am here, Hi. Well, I just wanted to ask, you mentioned that you're seeing more opportunities than you were earlier this year, do you have any sense of what you would attribute that to was..?

David J. Gladstone -- Chairman, Chief Executive Officer and President

Yeah, the farmers are busy as can be and so as a result I don't get out of the farm as long as they're farming. So they're out there in the farm backing up the truck and getting as much stuff in the truck and take it to town as they possibly can. They are very, very busy right now. So that's been a problem and then the local governments and their reaction to the coronavirus should we say the Chinese virus has been extreme in terms of shutting down things. So there has been problems in getting people to do what you need to do to get something purchased. The lawyers are all there. We can get the lawyers to work, but some of the government workers and some of the others that are in our need to to find out things just aren't in the shop, so it takes a little time to get that done. So, I think we are now getting to the point where some of the things that we started, even last year are coming through and I think this will be a good quarter, maybe not as good as we had hoped, but by the time year income so we should have done a pretty good job of buying this year.

Michael LiCalsi -- General Counsel and Secretary

You have another question, Craig?

Craig Kucera -- B Riley FBR -- Analyst

Yes, yes, I do actually. I was going to ask it sounds like there's a lot of sort of the procedural and institutional channel it was just related to Covid. Has that impacted pricing at all or is that remain fairly steady?

David J. Gladstone -- Chairman, Chief Executive Officer and President

Although it's fairly steady, grocery store prices are up about 10% especially and may be more in the produce section. I don't know [Indecipherable]. We get some information from the Department of Agriculture, but it's spotty. They do a good job of bringing together the prices that are going from field to the buyer, but we don't know how much the stores are marking up the product and sometimes marking it down in order to flow it through they have, but there is a lot of strawberries and blueberries in the marketplace today and sometimes they use the strawberry as a marketing mechanism to get the buyer to come into the store because the buyer of strawberries tends to buy four times more produce than anybody else. So when you look in the newspaper, you'll see the discounting on strawberries in order to make somebody come in and buy strawberries, but at the same time buy all the other things that they buy in the fresh fruit section.

Craig Kucera -- B Riley FBR -- Analyst

Got it. So, I feel like earlier this year you felt that even though there was an initial spike in sort of pricing that it wasn't going to last sounds like things are may be up 10% based on your commentary, does that lead you to be a little bit more confident about be seeing some rising percentage rent in the back half of this year?

David J. Gladstone -- Chairman, Chief Executive Officer and President

I hope so. I love percentage rents. It's the easy way for us to participate in the farming operation rather than owning the farm. I think it's just a good way to get another bite at the apple, no pun intended.

Craig Kucera -- B Riley FBR -- Analyst

Got it. So just based on the commentary you had on some of the opportunities you're looking at, I think you mentioned you had four farms that we're a little closer to maybe closing at about $70 million and another four for $80 million, would you handicap what you think you're going to close by year-end of that $150 million?

David J. Gladstone -- Chairman, Chief Executive Officer and President

Oh, you're doing your projections again, aren't you? I think we will close the four farms with $70 million, how much we get with the $80 million I don't know. And we may have we've got a couple of people that say they now want to close before year-end and we only have anything from them other than a good discussion going.

Craig Kucera -- B Riley FBR -- Analyst

Got it.

David J. Gladstone -- Chairman, Chief Executive Officer and President

Craig, [Speech Overlap] no way of handicapping that you just never know.

Craig Kucera -- B Riley FBR -- Analyst

That's fair. And you mentioned using both the units. I know you don't have a tremendous amount of OP Units outstanding. But are any of the potential acquisitions you're looking at our OP Units coming up in the discussion?

David J. Gladstone -- Chairman, Chief Executive Officer and President

There are always in the discussion and we push it pretty hard, but I don't know. It's hard to sell OP Units to somebody for their farm because many of the people are want to buy another farm and you can't use the OP Units for that. So they're usually like any business that's dependent on real estate, they need the cash to buy the next whatever next farm next warehouse whatever they're buying.

Craig Kucera -- B Riley FBR -- Analyst

Well that makes sense. And you mentioned capex. Can you remind us of what you expect your capex budget will be for the rest of the year?

David J. Gladstone -- Chairman, Chief Executive Officer and President

Lewis, what you got.

Lewis Parrish -- Chief Financial Officer and Assistant Treasurer

So most of the we don't, we don't we are not disclosing that capex cap for the rest of the year, but most of the projects that we have been doing so far for the first half of the year are nearing completion. So, we do think you'll see depressed amounts through the third and fourth quarters versus what they were in the first half of the year.

Craig Kucera -- B Riley FBR -- Analyst

Got it. And one more from me, I know, earlier this summer, you were looking at the walnut that business. Have you come to a conclusion on whether or not that's a business that fits for Gladstone Land?

David J. Gladstone -- Chairman, Chief Executive Officer and President

Well, we have some, but not a lot. It's a little worrisome on the walnut side, it's a good product, but I don't know we've go back and forth on those and if you sell me a farm cheap enough we will-we will be in the business, but not going to pay off. Walnuts are a little hard to forecast right now.

Craig Kucera -- B Riley FBR -- Analyst

All right, sounds good. That's it from me. Thanks guys.

David J. Gladstone -- Chairman, Chief Executive Officer and President

Okay, next question.

Operator

Our next question comes from James Villard with Ladenburg Thalmann.

James Villard -- Ladenburg Thalmann -- Analyst

Good morning, guys.

David J. Gladstone -- Chairman, Chief Executive Officer and President

Good morning.

Lewis Parrish -- Chief Financial Officer and Assistant Treasurer

Good morning.

James Villard -- Ladenburg Thalmann -- Analyst

As we move into Q3, has the transit transaction trouble you guys with you've mentioned about local government has that improved in Q2 and we see..

Lewis Parrish -- Chief Financial Officer and Assistant Treasurer

It's better now. Yeah ahead.

David J. Gladstone -- Chairman, Chief Executive Officer and President

Finish James.

James Villard -- Ladenburg Thalmann -- Analyst

Yeah. And as you move in the back half of 2020 do you expect there'd be some pent-up acquisitions?

David J. Gladstone -- Chairman, Chief Executive Officer and President

I wish I knew, I think people are thinking about it. I think at Covid-19 push somebody over the some people over the edge and they now want to sell a farm and get some liquidity and just rent rather than have a lot of capital tied up in land, they don't know what tomorrow will bring in terms of this China virus that we are fighting. I just don't know. You know it's really hard in this business because there is unlike if you're in the real estate business line wholesale, there is no way. This is all done retail. Our people are out actually talking to the pharma that owns it rather than talking to the broker who is talking at many of the real estate companies as you probably know are all based on brokers in the field and there're list of the products, you get 10 bids, ours are knocking on doors and talking to people and somebody heard from Joe below that Joe is selling his land and renting it back and they want to know how we do that. So, there is a lot of a lot of shoe leather put into getting these things done and a lot of discussions in educating people because it's not well known how this works in the farming business.

James Villard -- Ladenburg Thalmann -- Analyst

Yeah. I understand that. Just one more question from me, are you all I guess when you look at when you're dealing with these farmers who are looking for a little liquidity, are you competing with Federal rateprograms that are just coming online. I guess in the wake of this this Chinese virus?

David J. Gladstone -- Chairman, Chief Executive Officer and President

I don't know. Do we have any competition with any of the farming products, I don't think so. And they really have a chance to borrow money from the farm credit in those kind of people or insure some of their products. It's not a very well organized. There are parts of Department of Agriculture that are extremely well organized. The disposition of farms and financing our farms unless you look at the farm credit people or Farmer Mac are not as well organized as other, other products out there. I mean if you got a warehouse or there are lot of buyers that will buy warehouses today. So, I think we are in the early stages of it being organized and if we can just capture part of the $1.7 billion that we see out there we'll be very happy

James Villard -- Ladenburg Thalmann -- Analyst

That's all for me. Thanks for the color.

David J. Gladstone -- Chairman, Chief Executive Officer and President

Next question?

Operator

[Operator Instructions]. And I'm not showing any further questions at this time.

David J. Gladstone -- Chairman, Chief Executive Officer and President

Okay, we're all just one question was asked of us why aren't we issuing more common stock and it's cheap compared to where it was and quite frankly I think it's still undervalued. We should be a $20 stock given the given the asset value and strength of our assets that we're holding and given the consistency of getting paid over and over, no matter what. I mean this is the worst recession I've ever been through and these farmers continue to sell and it is only only one phrase to to set that your mind as people got to eat. So as a result, as long as the products keep coming and they do, their farms are not going to stop producing. It's great place for us to be. So that's the end until next time. So, we will see you next quarter. And thank you very much for calling in.

Operator

[Operator Closing Remarks]

Duration: 40 minutes

Call participants:

David J. Gladstone -- Chairman, Chief Executive Officer and President

Michael LiCalsi -- General Counsel and Secretary

Lewis Parrish -- Chief Financial Officer and Assistant Treasurer

Craig Kucera -- B Riley FBR -- Analyst

James Villard -- Ladenburg Thalmann -- Analyst

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