Participation Rent Revenue

In Q2 2024, Q1 2024, and Q4 2023, participation rents were discussed in terms of lower fixed base rents, delayed revenue recognition due to crop data timing, and lease restructurings on nut and permanent crop farms ( " " " " " " " ).

Q3 2024 emphasized stronger pistachio production driving participation rents, with revenue recognition now largely backloaded into late 2025 and 2026, and a clear focus on shifting lease structures towards participation-based models ( " " " ).

Transition toward participation-based leases with a longer-term arrangement and greater reliance on crop production performance, reflecting a shift from short-term fixed revenues to backloaded, upside-driven revenue amid ongoing pricing uncertainty.

Tenant Issues and Farm Vacancies

Across Q1 2024, Q2 2024, and Q4 2023, tenant issues—such as nonaccrual tenants and multiple vacancies—were a recurring negative factor, with significant NOI impacts and discussions about tenants on nonaccrual status affecting several farms ( " " " " " ).

Q3 2024 noted issues with two tenants covering five farms, causing a moderate NOI decrease, while also detailing initiatives such as selling problematic blueberry farms to reduce ongoing NOI pressures and expecting fewer vacancies moving forward ( " " " ).

Persistent challenges with tenant performance and vacancies, though there is gradual improvement as asset dispositions help mitigate the negative impact on NOI, suggesting incremental progress in managing tenant-related risks.

Crop Production and Pricing Trends

Prior periods (Q1 2024, Q2 2024, Q4 2023) highlighted depressed prices and reduced demand for nuts like almonds and pistachios, weather impacts, and lease adjustments to manage volatility; optimism was mixed with recovery signs in certain markets ( " " " " " " " ).

Q3 2024 focused on stabilization signals with stronger pistachio output driving participation rents, despite ongoing depressed pricing and operational challenges, supported by subtle signs of recovery and improved production trends ( " " " " ).

Gradual recovery amid persistent challenges: While crop prices remain under pressure, improved production—especially in pistachios—is beginning to offset lower prices, indicating a cautious shift toward stabilization and future recovery.

Water Resource Management

In Q1, Q2, and Q4 2023, detailed initiatives such as groundwater recharge facilities, water banking, and strategic water asset acquisitions were key discussion points, emphasizing water credits, below-market acquisitions, and long-term water supply securing ( " " " " " " ).

Q3 2024 provided a briefer update, reiterating that water assets (nearly 18 billion gallons) are concentrated in California and emphasizing the importance of dual water sources without delving into new detailed initiatives ( " " ).

Consistent strategic importance with an established operational framework; current commentary is more succinct, suggesting that water resource management remains a mature and integral part of the strategy with less need for elaboration.

Asset Transactions

Previous calls (Q1, Q2, and Q4 2023) frequently addressed farm sales and dispositions—including the sale of a high‐value Florida farm and challenges with Michigan assets—as well as a cautious approach to new acquisitions driven by high capital costs and market conditions ( " " " " " " ).

In Q3 2024, the focus was on the sale of Michigan blueberry farms that had been dragging NOI, alongside a continued cautious approach toward new acquisitions due to the current financing environment ( " " " ).

Ongoing portfolio optimization: Consistent asset disposals are used to relieve NOI pressure, while the cautious acquisition strategy persists due to high financing costs, reflecting a stable yet careful outlook on asset transactions.

Debt Management and Refinancing Risks

In Q1, Q2, and Q4 2023, the company consistently discussed managing debt maturities with a focus on fixed-rate borrowings, refinancing strategy, and robust liquidity, ensuring minimal impact from rising interest rates ( " " " " " ).

Q3 2024 reported $39 million in near-term maturities with the fixed-rate structure intact and minimal refinancing risk, reinforcing the overall stability of debt management ( " ).

Stable and consistent approach: Fixed-rate debt and prudent refinancing strategies continue to keep interest rate exposure low, maintaining strong liquidity and stable financial management across periods.

Asset Valuation Declines and NOI Pressure

Past periods (Q1, Q2, and Q4 2023) noted revaluations primarily affecting permanent crop farms with declines ranging from modest (1%) to more significant, alongside NOI pressures from tenant issues and lease adjustments, partially offset by leasing activity and participation rent dynamics ( " " " " ).

Q3 2024 revealed a notable $23 million decline in permanent crop valuations and a $638,000 drop in NOI due to tenant issues and lease amendments, although partially counterbalanced by increased participation rents from strong pistachio outputs ( " " " ).

Persistent pressure on valuations and NOI: Permanent crop values continue to face downward pressure while operating challenges persist, although improvements in participation rents provide some mitigation, indicating a cautious but consistent trend.

Shifting Market Sentiments on Revenue Drivers and Crop Demand

Previous calls (Q1, Q2, and Q4 2023) described fluctuating demand and depressed crop prices for nuts alongside lease adjustments to manage these challenges, with mixed sentiment as market recovery signs emerged sporadically ( " " " " " " ).

Q3 2024 focused on the evolving revenue mix—shifting from fixed rents toward participation-based earnings—with clear concerns over depressed nut prices but signs of potential recovery, especially in almonds and pistachios, and a continued emphasis on long‑term healthy crop demand ( " " " ).

Shift toward flexible, production‐tied revenue models: As market sentiment evolves due to ongoing crop price volatility, the focus is on achieving long-term upside through participation rents, reflecting an adaptation to market conditions with gradual optimism for recovery.