Farmland Partners Inc. (NYSE:FPI) Q1 2019 Earnings Conference Call May 9, 2019 11:00 AM ET
Paul Pittman - Executive Chairman, President and Chief Executive Officer
Luca Fabbri - Chief Financial Officer and Treasurer
Conference Call Participants
Robert Stevenson - Janney Montgomery Scott
David Rodgers - Robert W. Baird
Paul Puryear - Raymond James
Craig Kucera - B.Riley FBR
Good morning, and welcome to the Farmland Partners First Quarter 2019 Earnings Conference Call. [Operator Instructions] Please note that today's event is being recorded. And with that, I would now like to turn the conference over to Paul Pittman, CEO and Chairman. Please go ahead.
Thank you. Good morning, and welcome to Farmland Partners first quarter 2019 earnings conference call and webcast. We appreciate you taking the time to join us for these calls.
With me this morning is Luca Fabbri, the Company's Chief Financial Officer. I will now turn over the call to Luca for some customary preliminary remarks.
Thank you Paul, and thank you all for listening to this webcast live or recorded. The press release announcing our first quarter earnings was distributed yesterday evening. A replay of this call will be available shortly after the conclusion of the call through May 23, 2019. The phone numbers to access the replay are provided in the earnings press release. For those who listen to the rebroadcast of this presentation, we remind you that the remarks made herein are as of today, May 9, 2019, and have not been updated subsequent to this initial earnings call.
During this call, we will make forward-looking statements, including statements related to the future performance of our portfolio, our identified and potential acquisitions and dispositions, the impact of acquisitions, dispositions and financing activities, as well as comments and our outlook for our business, rents and the broader agricultural markets. We also will discuss certain non-GAAP financial measures, including net operating income, FFO, adjusted FFO, EBITDAre and adjusted EBITDAre. Definitions of those non-GAAP measures, as well as reconciliations to the most comparable GAAP measures are included in the company's press release announcing first quarter earnings which is available on our website www.farmlandpartners.com and is furnished as an exhibit of our current report on Form 8-K dated May 8, 2019.
Listeners are cautioned that these statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond our control. These risks and uncertainties can cause actual result to differ materially from our current expectations, and we advise listeners to review the Risk Factors discussed in our press release yesterday after market closed and in documents we have filed with or furnished to the SEC.
I will now like to turn the call back to our Chairman and CEO, Paul Pittman. Paul?
Thank you, Luca. When we look at this quarter and the beginning of this year, a couple of key things stand out. Number one, we continue to sell farms at a substantial profit approximately 10% to 11% above what we paid for those farms, and buyback stock at a significant discount. We will continue this strategy as long as there is a substantial upside opportunity for our shareholders. Our margins in our operating business, this is the second point - we are squeezed due to interest rates primarily but also hurt by hurricane related repairs, legal expenses offset modestly by higher rents and overhead cost reductions.
The NAV of our portfolio on a per share basis is still $12 or better and is constantly rising due to the asset sales and associated stock buybacks. The fourth point is that a complete blow-up with China with regard to trade relationships for agricultural goods will be negative for the overall agricultural industry but it's a fact on land value and rents will probably be muted and somewhat temporary.
With that I am going to turn it back over to Luca to walk through some key operating and financial highlights.
Thank you, Paul. Before I jump into financial highlights, let me give you the usual reminder that the underlying business - we are fundamentally attached to agricultural is really works on manual cycle, and therefore we all knew that you should look at our results more on an annual basis rather than looking specifically individually interim reporting periods, specifically just as a quick reminder, our revenues due to that seasonality and due to the nature of some of our leases is heavily skewed with revenues in the fourth quarter while costs are fundamentally by and large spread evenly through the quarters.
And that of course affects significantly the bottom lines of our four months of individual reporting periods. So having said that, for the first quarter of 2019, we reported total operating revenues of $10.9 million, a 2.8% decrease over the first quarter of 2018. Operating income at $4.5 million, a 6.2% decrease over the same period in 2018 fundamentally for those - because of the stock just Paul mentioned as well as some of the asset sales that we have done. We are reporting a basic net loss took almost of $0.10 per share and AFFO per share of negative $0.03.
During the first quarter of 2019, we completed farm dispositions totaling approximately $4.7 million. Also on the stock buyback side, during the quarter, we had purchased 1.2 million shares of common stock at a weighted average price of $5.61 per share, as well as 16,800 shares of the Series B participating preferred at a weighted average price of $18.51. As a reminder, the nominal value of those shares is at this point $25.21.
Subsequent to the quarter end, we have also repurchased an additional approximate 0.5 million shares of common stock at a weighted average price of $6.58 bringing the total stock repurchases for common and preferred B in the year-to-date at just about $10 million. As of today's date, we have 33,752,428 shares of common stock outstanding on a fully diluted basis, which includes the units in our operating partnership.
With that I am concluding my remarks on our operating performance for the first quarter of 2019. Thank you for your time this morning and your interest in Farmland Partners.
Operator, we would like to begin the question-and-answer session.
Today's first question will be from Rob Stevenson with Janney. Please go ahead.
Hi. Good morning, guys. Paul, what are the types of crops and locations of the farms that you sold thus far in 2019? And anything in particular from a rhyme or reason in terms of selling certain assets, selling certain markets should we expect over the remainder of 2019?
All of the asset sales that we make are based frankly on local market conditions, all of these little submarkets around the United States rate at a different pace, and so we are largely selling properties where we think good returns can be achieved and/or long-term outlook for the region based on the - the way the portfolio is currently structured is that we would like to lighten up on that region. I mean we don't just sort of sell anything that somebody wants. We only sell those things where good prices are attained and we would like to lighten exposure.
Other than what we disclosed, we don't disclose actual prices or transactions individually at least to the extent we can avoid it, because we get - we are respectful of the transaction we've done in the counterparty on the other side and I just think it's inappropriate to give too much detail. These asset sales we've made - though were both in the Midwest region; I will give you that much additional information and/or likely, we are very exposed in the Midwest in terms of our total exposure. So, there will be some trimming there in the rest of the year though; it would also be some anticipated sales in regions away from the Midwest because as we grant - the Midwest to us is still an incredibly strong and important market. It's a very easy market to manage, so, you expect some sales to come in other regions as well and continue the approximate portfolio balance we currently have.
One important addition to that, I would say, is you may have noticed that we are - by the effect of the sales we are gradually increasing the percentage of our revenues coming from the specialty crop side of our portfolio. That's likely to continue. We never quite got as fully weighted the specialty crops when we were growing the portfolio as we wanted. So, the asset sales will tend to be away from the California Central Valley - intend to be in other locations. I hope that helps, Robert.
Yes, and then when you're doing these sales, how are you thinking about leverage? I mean is - are you maintaining - are you essentially leverage - it's going to be leveraged neutral relative to your current leverage or are you looking to pay down more debt and de-lever as part of these transactions? Are you trying to buy back more stock, and so, essentially leverage ratios increase slightly as a result of this? How are you guys in the board thinking about that?
I mean broadly speaking I think you should think of them as leverage neutral. Whenever we sell a farm the very first funds flow out of the closing is to reduce whatever debt is on that farm; usually give-or-take a little bit it's about 50% of the price we paid when we acquired the farm. So you're going always take that debt off the balance sheet at the time you close the transaction. The decision on whether to buy back common or preferred or reduce debt further is always going to be case-by-case based on the relative value of those different instruments at the time we spend the money. Certainly, at current stock price you have got a tendency to deploy that capital to acquire additional stock, and that's what we've been doing. But round numbers that'll - that will ever so slightly push your - your total leverage up but - but from time to time will make an additional debt reduction that kind of pulls that back in line. So it ought to stay roughly leverage neutral.
Okay, and then last one for me, what percentage of your asset have some sort that you've acquired have some sort of tax protection on them?
Okay. Thank you.
Let me just add to that. The only tax reduction that the company had ever given was in the original IPO transaction. I received tax reduction in my - in my immediate family on the assets we contributed that set up the REIT. But, if you all recall late last year right - literally right around the turn of the year, I converted 100% of my OP interest in the common shares. One of the reasons I did that was it would move the tax protection overhang from the company on any given asset. So there's none left today at all.
Next question will be from Dave Rodgers with Baird. Please go ahead.
Yes, good morning, Paul. I guess just wanted to follow up on what you're seeing out and - you haven't really been - acquisition market you've done some, I assume that you are still paying some attention there? I guess a couple of questions around that one is, are you seeing good - a good volume out there for specialty crops and for permanent crops that would be higher yielding for you guys? And, I guess, the question then would be why not maybe accelerate some of these asset sales, maybe go a little bit even faster in that direction which would enhance your yield here in the near term and really kind of support the stock and cash flow and debt reduction in the near term?
Well, for a variety of reasons that - we're not likely to aggressively accelerate the asset sales, but I'll come back to that in a minute. The - in terms of what we're seeing in the marketplace though, values for assets are staying quite strong, I mean, as you can see that in the asset sales that we are making, and the reason for that is that the asset is fundamentally very, very scarce particularly in the higher quality end of the asset range and most of what we own is very high-quality for the region that we're invested in. So, you just - you just - there's not a huge opportunity to deploy capital in a discounted way by any means nor is there a huge buying opportunity anywhere even at frankly fair price. Their volumes are quite light and volumes and specialty crops on the West Coast, for example, are probably kind of normal by historical levels.
Asset movement in the Midwest is below historical average; that's frankly to be expected. The current pricing today is not drawing an additional amount of volume into the market because it's just not high enough to motivate a sell - a potential seller. The only assets you are seeing move generally come out of a debt or a divorce or some specific farmer related distress. That's typical of when the market prices are weak your volumes will reduce; When market prices tend to be slightly strong, volumes increase and that's the factor we watch.
So, in terms of accelerating a strategy, we are not driven and never have been purely by cash flow; it's not the way right way in my opinion to invest in farmland. Farmland has two elements to return; cash flow is one. Asset appreciation is another. The long-term investors in the asset class care about both. If you are - but every investor is of course different. If you are little more motivated by current yield you will tend to have a specialty crop bent to your investment thesis. If you are more motivated by, you know, long-term appreciation, safety and ease of management, you will tend to have a corn belt bent to your - to your investment thesis. We are frankly somewhere in between with the asset sales we made we're probably approaching 70:30 specialty - specialties 30 row crops 70. It used to be more like 75:25, but in broad, strokes will stay close to that - that ratio as we continue to make asset sales.
It'll probably creep a little more toward specialty crop over time, but not dramatically so, because it's just - it's just not asset class where I think you get rewarded for chasing whatever feels good right now, because about the time you have shifted your portfolio to that position you will find out that what was hot is no longer hot and you wish you had more exposure to a different kind of crop.
So, we are going to stay balanced and cautious and - look, as the largest shareholder in the company, this strategy is working. The true value of my shares and every shareholder shares are rapidly increasing because we are selling properties at significant gains and buying stock back that are in my opinion 40% or 50% discount. We will further - I know it doesn't feel good when you look at the stock price on a daily basis, but in terms of true value creation that's a very disciplined approach and we are going to stick to it.
And so with respect to G&A, Paul, you guys have done a great job of kind of bringing that number down, are you kind of near the bottom on that level as we said in the first quarter, I think it was like a $1.3 million and then as you look out and kind of in the future re-growing the portfolio, are you scalable at this level or does that have to scale them back up?
No, we're absolutely scalable. This is a - we were very rapidly growing portfolio; We hopefully will get back the growth when appropriate stock prices reached again, but, we can - we can grow probably not - I mean I can't probably - can't double every year like we were for a while because of the staffing level, but we could probably grow 20% or 30% a year at this staffing level, and would certainly do so. You know from the standpoint of overhead reduction, the fact that we have become - we've really slowed our growth rate has allowed us great opportunity inside the company to catch up on sorts of the internal infrastructure building process that all companies ought to go through, and so, we've done some of that and it allows us to run our portfolios somewhat more efficiently.
We are - ought - one of the things, for example, when we consider selling farms that we focus on is it in a slightly geographically cumbersome location from the standpoint of management, do we have - the long ways from wherever the human being that actually runs that farm lives or offices, and compare that to how much we have in that region. So, we are doing things that actually make this portfolio a little bit easier to manage as we go through this sale process.
Next question will be from Paul Puryear with Raymond James. Please go ahead.
Thanks. Good morning. Paul, if you could comment on sort of how your revenue line looks on a same-store basis, if you netted out acquisitions and dispositions over the past year, how would the top-line look? Do you have a sense for that?
Yes, yes. We certainly have a sense for that and, so a significant - if you look at top-line for the quarter and obviously Luca's comments are important in the context that, that quarterly numbers because of gas straight lining and other things are skewed a little bit, but, if you looked in our supplemental at the P&L, and if you looked at year-over-year quarter comparisons what you will see there is most of the reduction in revenue is largely due to a tenant reimbursement issue, and that's not that we're getting less reimbursements; It actually had to do with the fact that that because of the AFCO acquisition we had - still had supplemental property tax bills coming through the P&L in the first quarter of last year, and those supplemental tax bills are reimbursed by the tenants and those reimbursements are technically revenue in our P&L.
So, it looked like you had a couple of hundred thousand drop in revenue and the truth is you really didn't; it's largely coming if not entirely coming from that, just accounting fact of how tax reimbursement works. It's not that we get less reimbursement than we used to get it - just that they are you know in terms of how the contracting with our tenants work. So we are getting just less dollars because there is no supplemental bill anymore. The - in terms of the portfolio on a sort of a same-store basis, so a significant percentage of our portfolio, and I don't have an exact number for you, Paul, but probably approaching a third to half because we started a few years ago, embedding in almost all leases a modest annual cost-of-living adjustment.
That - so we've got that in a lot of leases today. That's usually 1% or 2% increase per annum, embedded in the lease. So you've got that going for you gradually pushing rents up, most of the rent renewals we did this year led to significant increases in rent, when I say significant that's 3%, 4%, 5% increase when you roll this forward but recognize we only renew approximately at third of our leases usually a little bit less than a third in any given year. So that doesn't have its super powerful effect. When you - and then we like any company, we would have a couple of troubled properties where we probably went backwards and rent at least on a handful of properties.
So when you net all that together portfolio-wide, you probably have something in the neighborhood of 1%, maybe 1.5% increase in our rental stream. That is, we feel pretty good about that from the standpoint of how we manage our business and it's somewhat difficult Ag economy. On the other hand, it's a way behind the expected trend line, long-term trend line would be about 3% per year, appreciation in rents and we're getting 1% to 1.5% at this point in time.
So we hope that recovers the historical norm we frankly think it will. The real question is when. Hope that it helps Paul.
Yes, that's very helpful. And if you - any commentary by region would be helpful.
Yes. So by region - the two regions. And I'm going to call out the couple of reasons where things are more difficult than other regions. So the two regions in the Ag economy that are struggling the most are the Northern Plains, I think the Dakota as maybe Minnesota places like that. And that is a region that had in the last half a decade or so become very focused on soybean exports to China and obviously that's been hurt quite a bit, it's a difficult region from the standpoint of river transportation. So it's always got a very negative basis compared to Chicago Board of Trade meeting at discounts to Chicago border trade because of transportation costs.
We luckily we own one farm in that entire region and at farms doing okay. It's in the southern edge of that region. It's in South Dakota, it's can get out to the markets, the other way, but we're just not very weighted in that region because several of those states handle anti-corporate Farmland law. So we never built much of the portfolio there. Great, great region. From a long-term perspective, mostly had more exposure, but we frankly don't for the reason I just explained.
The other region that's struggled is the High Plains so think Western Kansas, Western Nebraska, Eastern Colorado very similar in the sense that the transportation costs are high from those regions. So basis levels are bad so farmers. That's the other region where you're challenged in your rent roll process, but we're probably holding our ground region-wide in those areas.
We have quite a bit of crop shared in the West in the High Plains region, which tends to very rapidly reflect rent increases and decreases. So between last year and this year, not a huge change between the last. This year-end three or four years ago, quite a bit of change, but we've already taken that pain in crop share environment, it shows up almost all of the year, frankly within the year.
You see the change in rental income. As far as the rest of the country goes pretty good, pretty good situation the core of the Midwest, meaning, Illinois, which is the largest state in terms of value in our portfolio. Frankly, given the farm economy incredibly strong generally getting rent increases across the portfolio and rental rules occur in the Midwest.
I am not surprised by that. That is the, as I always say that's the Park Avenue of US agriculture real estate, very competitive tenant base, very high efficiencies in terms of that farm region. The cost per unit of production of corn and soybeans in that region is very, very low. Frankly even by worldwide standards, and that reflects itself in a very vibrant and strong localized economy, certainly not as strong as it was five years ago, but really not big challenges and so that's kind of what we're seeing regionally.
And then I know you didn't comment on the lawsuit in your remarks, but can you tell us anything about the lawsuit?
Yes. So we have filed most in the dismissed the class-action lawsuit, that is where shareholders, assuming the shareholders. That is where unscrupulous lawyers find a shareholder, did a - basically a screen scrape of the Rota Fortunae article and sued us on that basis, and we filed a motion to dismiss for that. Hopefully that motion to dismiss will be granted since those claims are merit less. We'll just grind it out. We're not going to give up and - on that and Rota Fortunae will be brought to the dock at some point, not likely to back off on that.
We continue to have a modest spend level. It's frankly slowed down some, because you're just waiting for the courts to do their job and grind through the process but that's nothing new which is why we didn't mention it but no change in core short strategy.
Thanks. And then one last one for us, given all the noise and everything that's happened with the trade negotiation, I just wonder if you're aware, you have any sense for any change with respect to Ag as to how the administration is thinking.
The answer is I certainly don't have any deep knowledge of what's really going on in the White House and amongst the negotiating team. But here is my perspective. My guess is, and this is largely based on press reports that we had some very good things in that deal for agriculture. We, the United States thought we had some good things with regard to the technology transfer and fact issues. And the Chinese negotiating team for reasons that probably makes complete sense from their side of the table backed off on those tech transfer related commitments and the Trump administration grew up its hands in frustration and threatened to blow the whole thing out, not my place to say whether that's in good or bad for the nation as a whole.
Probably not great for agriculture, although farmers generally pretty patriotic group of people and there's probably ways to benefit to - to help farmers if they are the ones taking the brunt of the trade war like they did in the past. So I think either that I don't want to sugar coat. I mean a complete roughly 40% -50% of US agriculture production is exported in some form or fashion. China is the biggest worldwide buyer. Blowing up the Chinese trading relationship is by no means a good thing for production agriculture, counterbalancing that though is that it's a hungry, hungry world and most of the crops are being consumed.
So our view is that the trade dispute will have, if it falls apart here is going to have a relatively negative short-term impact on farm operators. Some of which can be helped out through money transfers from the government to make up for that. For the farmers themselves, as far as the long-term impact on land values in rent we think it will be modest. And relatively short-lived. It might take the top end out of the growth rates on both rents and land values, but it's the reason why that we invest in this asset class and that I've spent a large portion of my life investing in the asset class, is that underlying food demand and the fundamental scarcity of the Farmland are more or less set in stone. And they don't change very much. And that'll pull everything through in our opinion.
Next question will be from Craig Kucera with B Riley, FBR. Please go ahead.
Hi, good morning. I noted that you closed on $11 million of assets subsequent to quarter-end, but do you have a sense for the total dollar value of the assets that you're currently marketing for sale today?
Well, I mean, everything in our portfolio is for sale at the right price. I mean that site be billion one would be for sale, but the key is always the right price. This is every single market is an individual market, your best buy or on any given asset is within a 40 to 50-mile radius of that asset. All across the country Institutional buyers are a tiny, tiny piece of this market. They are active from time to time and we certainly have relationships with them, with the other institutional buyers and are happy to sell to them, but that's not what drives this market.
So you don't go out and kind of just put a bunch of call up a real estate broker and put a bunch of stuff on the market, that's not how this market works. What you do is you know basically who your neighbors are on every asset and you know whose trying to expand and who's not and you are selectively marketing to those people at all points in time. So I think we've sold today in our supplemental. Luca, do you have it handy what we assets with-- the total volume of assets we sold?
The total starting the second quarter of 2018 is about $37 million.
Yes. So we made about $37 million of assets, my guess is we'll - so that's running at round numbers little better than $10 million a quarter on average. My guess is we'll maintain that case, if not accelerated a little bit. As long as the stock price stays low, I don't like selling these assets. These are great assets. And I don't like so, I mean I'm a growth guy, not a sales guy, but the very best the investment we can make as a company today is to continue to shrink our outstanding share capital.
It is just so simple, but it's frankly one of the beauties of the capital market, people who don't believe me are more than welcome to sell stock back to the company at $6.50 or something like that. And we, as we're standing there buying it think it's worth $12. And I keep telling people that. And I say it over and over and again and it's a free country, it's free market, let them sell and those people that agree with our view are making money every time. We are - if you did the mathematical impact of the - if you really think the stocks worth $12 and we bought it back on average it's around $6, and so a lot of money, lot of value was generated $5 a share on every one of those shares we bought back so far.
Okay. And I just want to circle back to the G&A. And it sounded based on your commentary in the Q and A that the spent on the shareholder suits in Rota Fortunae may be slowing down. Should we - I think last quarter you said you thought it might have a $0.02 to $0.04 impact. Is that still valid or is it potentially lighter?
I think I continue to run with that number for now. I mean I would say the only thing less predictable than the tweets coming out of the White House is litigation strategy and process. So I don't know for sure what will happen here. I'd run the same number for a while.
Okay. And one more from me, with all the weather events last fall. Is it still too early to assess damage until we get into this next harvest season in the fall or at any update on there?
No. We know where the harm was. The only remain - probably - the most significant remaining harm where we I mean, we talked about in the past, but we haven't seen it really flow through the P&L is the avocado property suffered a substantial amount of heat, excess heat last year, and therefore will have had a somewhat lower yield potential this year. That's one farm out of the 120 or 125 farms that we own.
Not a company-wide big negative event, but that's the one that we don't think we'll have quite as good a result this year as we would have otherwise had. Everything else, what kind of back in action. I think we mentioned, we had, and we lost almost every.
I think we lost every single pivot on the pretty substantial farm in the Florida, Panhandle and a little bit of that farm I think is over the - over into Georgia. Those pivots have now been replaced, insurance covered most of it. Farmers back in action planting not, not really a long-term impact.
I mean that's why we had insurance. The pre-corn property was that when we talked about, we lost a lot of the pre-corn, which hurt the crop share on the farm. Last year, but we didn't lose very many trees in the grand scheme of things, I mean you hate to see any big old tree with lot of corns on it fall over, but in the property-wide basis, not a not a big asset quality diminution. It was really the loss of the nuts themselves and this is a new, this is a new season.
So last year's hurricane is the relevant. The bigger thing going on and it's at least temporarily completely lost in the commodities markets due to the trade dispute. But there is a real set of challenges in terms of getting this crop of corn, soybean into the ground, there is also some real challenges on the wheat crop in terms of the quality of the V wheat crop and the planting pace of the spring wheat crop due to that the sort of excessively cold spring temperatures and excess moisture in the plains in the Midwest. That - those two problems exacerbated each other, because if it wet and high it dries out. If it's wet and cold then it just doesn't seem to dry out and let the farmers get back the planting.
On the planting progress report that came out from the USDA on Monday, we are around half of historical average levels. This will end up having an impact on yield per acre that's probably going to be substantial. There is probably another 7 to 10 days, most people say that if you get a corn is a nationwide average, so it's different in every state, but roughly you need to have 80% or 85% of the corn crop planted by May 20th or you will start to experience meaningful yield loss.
I don't think there's any way you have this 80% or 85% of the crop planted by that date. And so you're going to start to have a significant yield loss. From an industry profitability perspective, I'm not sure that's a bad thing. You're going to see price recovery in the commodities particularly corn, if they don't get the crop on the ground and that on balance for the farmers.
They may be better off with less total volume at a higher price. Then they are in the alternative, but like I said, that news - it was not for the Trump tweets rollout regarding the trade war last Sunday that would be the news that would have been traded this week. Because it's - you guys, I'm sure none of you read the Ag press as religiously as I do. But that's the big story and it's out there, but it's completely smothered by the trade war dispute right now.
Next question will be from Ryan Watson with Farmland. Please go ahead.
Most of my questions have already been answered, but Paul in the past you've spoken about picking dividend cut decisions very seriously. The value creation right now buybacks at least 3x which you're getting from a dividend. Given that there AFFO was negative, and the risks you mentioned in your opening remarks. So you guys considered eliminating the dividend and accelerating the buybacks? That's all from me.
Yes, we certainly considered it, this is obviously a decision for the board, not just for me, but we definitely considered it, when we cut the dividend we considered cutting it completely. One thing I want to correct, we're not running a negative AFFO on an annual basis, so maybe on a quarterly basis, but that quarterly accounting does not fit very well with an annual revenue cycle industry. Luca alluded this to his comments. We take the expenses of our business through the P&L, more or less in equal amounts each quarter.
You only take the revenue in the fourth quarter. So we're not negative AFFO. But on an annual basis, at this dividend level. But here's the consideration. And we're not; it's not likely that we will change this dividend in the foreseeable future. And the reason is, look, every investor and I appreciate what you're saying, Ryan. Every investor has a different opinion on that. And so we struck at some people who want that dividend and believe it's important that it continues, and I get kind of phone calls and investor comments along those lines.
They're disappointed we cut it as much as we did. And then some investors, take the position that I think you're kind of taking that says just buyback stock and go back to paying a dividend after you get all the stock bought back as inexpensively as you can.
We probably struck roughly the right balance because I would say that I get about an equal number of complaints from each side. So that's kind of where we are. And at least for the foreseeable future, it would be high, early and the Board could always change it. But my judgment is that we will stay exactly where we are, probably for the remainder of this year.
Next question will be from Jason Allen, a Private Investor. Please go ahead.
Good morning. And you've spent a number of questions talking about the capital structure going forward and debt levels. What are your thoughts on the Series B Preferred and what your plans are going forward because optically it seems like an expensive piece of capital given that you're no longer in a growth mode? And I have a follow-up after that.
Yes, I mean it's a lot cheaper than equity. Even today and so we likely to leave that preferred out there till the time for the ratchet up in the coupon occurs, no, we announced it's actually a good security and a good price when we sold. And we used it to acquire OLM assets largely which have a return well in excess of the cost of that security.
So it's, it's a good piece of paper, it may optically looks high but it's actually in the real world compared to comparative alternatives and you'd have to replace that instrument largely with equity not straight debt. We actually think is actually well priced and good security for us --SO no, no likelihood that we do anything drastic on that security in the near term.
Thank you. And a follow-up on kind of your thoughts on debt going forward as far as fixed versus floating and kind of the average duration of your debt profile with given, given you have really long-lived assets, what are your thoughts on that profile now and going forward.
Yes, well, what we will probably maintain a balance to fix to floating somewhere more to the one we have. Hindsight's always 2020. We would have been better off leaving it all floating. We fix things under pressure from bankers, shareholders and others. And our own fears, we decided to fix some things and every single vein we fix would be cheaper now then if we left floating.
So you never get that perfectly right. The yield curve has been such that you were, you've been rewarded through. And I mean beyond I'm 57 years old, so not just the recent era but you've been rewarded to stay floating on the shorter end of the curve in most environments for the most of my adult life. And so I think we'll continue to maintain that bias. But you don't want to be 100% floating, because if you get it wrong. It's just too painful. So - I think our approximate balance of fixed to floating as where we'll --where will stay.
Thank you. Take kind of hedging --that's little bit.
Yes. We are hedging a bit. That's why we got some fixed on the balance sheet. The lenders are always pushing you to move to fixed. But, John, they are always pushes you to buy higher priced tractor. So it's not surprising, that's their point of view.
Next question will be from Kurt Albertson with Aspen Square Holdings. Please go ahead.
Thank you, operator. Paul, I just had a question regarding, if you could provide some color on the results of the shareholder vote for the nominees for the Board of Directors and there will be any changes going forward on the board? Thank you.
Yes, I think we - I don't want to do anything beyond what we've already publicly disclosed because that's always such a unilateral proxy process is highly regulated. Every member of the Board was received enough votes to be re-elected. The appointment of the auditor was approved. I think that - I don't know Luca or Erika if you are listening please help, but I think it might have been one of the resolution I can't remember what it was.
Oh. I was just kind of curious specifically; it looks like Mr. Bartels only receive 5.4 million shares voting for his nomination versus 8.5.
Yes. So, thank you for that because it was in the public domain. I'm happy to talk about it or I just didn't want to go over the line. So it sounds like it is in the public domain and Luca and I are in the same room today. Cut me off for some reason it's not okay to delay or -
No. You can go ahead.
Yes. So, Mr. Bartels is the Chairman of our Governance Committee, he did receive - all of the governance committee members received a materially lower vote tally than the non-members of governance. They are myself and Chris Downey, who do not serve on that committee got in the 90 percentile range on votes. The members of the governance committee got in the 60s and that Mr. Bartels I think got in the 40s of the approval level. So in terms of Mr. Bartels, I think he was nominally hit worse because he is the Chairman of that committee than anybody else.
I think that's a little bit frankly unfair to him as an individual because he is doing in good faith, what he and the board believes is correct for the company. I think that ISS had withhold on our governance committee in their recommendations to institutional investors. They don't like - I think they don't like the gender diversity of our Board and they do not like the - one of the ways - one of our bylaws works. The company from our perspective is committed to having a high quality board and diversity where possible. But diversity by itself is not the leading goal of our board.
It's knowledge of the industry and agriculture is a leading goal of the Board. We have made some proposals to add diverse members to the Board and not been able to accomplish that because the pool of really qualified candidates is somewhat limited. And so they've chosen not to join our Board.
So we're not going to go just sort of solve that problem, the ticker box. So we're just going to continue to focus on it and do the right thing over time. As far as the bylaw issue, we actually disagree with ISS on that. We just - we don't think it's right for long-term shareholder value. We think for example what the company is going through today. It would be a perfect example of why that's not the right strategy.
What the issue is this can a group of shareholders move to change the bylaws or is that a Board act? Our view is that it should remain continue to be a Board Act and the reason I say that is that you would have some shareholders today that would be happy, for example. They bought the stock at five and I'd be happy to sell the company at 750 a share.
Those shareholders who have bought stock up and down the price structure ever since the IPO would probably disagree with that point of view. And we just actually think for shareholder value reasons that's more carefully - and that's more properly done by the Board considering the best interest of all shareholders. And trying to balance that when necessarily being able to be forced to buy some given smaller group of shareholders, who may have - well heartfelt but frankly divergent interests than other shareholders.
So that's just kind of our opinion on that. It happens to be different than ISS and they recommended withhold and I think the brunt of that recommendation fell on the Chairman of the Governance Committee. Long winded answer but I hope it helps.
Yes, well, I appreciate the color on that in the very in-depth explanation, but why even hold a shareholder vote if more shareholders are going to vote do not have a nominee on the board. Yet the Board is going to say we don't care what the shareholders say because it was one opinion. It just doesn't even seem like it's a valid shareholder vote, and then also with Mr. Bartels, couple of times a year, the shareholders are pleasantly reading Form 4 where every share he issued he pretty much disposes of. Does he actually meet that threshold? It looked like there was a change something like three times the cash portion, I mean he only owns like 2,400 shares. Is he even eligible based on that metric?
Yes, it's - well he is eligible because we've --what I think you're referring to is, we have a certain amount of ownership that Directors and Senior Officers are supposed to work to over a period of years. So I don't think you've got it absolute issue with regard to the level of ownership because the timeframe by which you have to get there hasn't been met. Look, I don't like to selling stock. I don't like directors selling stock.
I wish they didn't, but each director has their own kind of financial concerns and the like in their own --of their portfolio, and it happens from time to time. I think the key is to look in particular at me as the Chairman and CEO. I am highly acquisitive and will continue to be of our shares at these prices. I've been highly acquisitive at almost all prices because I don't think our stock is traded at its private market value of the underlying assets in quite some time.
I continue to believe that we'll continue to buy it. But I hear you, Kurt, it is - there is a process, there is set way that voting process works and he receive the necessary number of votes to stay on the board.
Okay, thank you for the color on that, pretty disappointing and with ISS having an issue with some corporate governance issues, clearly indicated by the vote for that committee. Do you feel that has any impact on why potential shareholders are not investing with Farmland Partners, manage perpetually trading at $0.55 to $0.60 on the dollar. As an investor, what am I missing there? What's called the smart money isn't, why are people not buying the stock and I guess that's my last question. Thank you.
I think the smart money is buying the stock. So that's kind of my opinion, and look I firmly believe that the board and directors in particular have a duty to shareholders to do what they believe is right, not to do what ISS recommend. ISS does not take the legal liability for running the company in the appropriate way. The directors do. I think it would be horrible results for corporate governance nationwide if ISS recommendations were 100% supported. Because what you would have done as you would have turned over the governments of the company to a group of people who are, I think frankly well-intentioned and put out a point of view that they truly believe is in the best interests of at least their constituency.
But may not be actually the right answer for every single company. And so I just don't agree that you should do whatever ISS says. I think the appropriate thing for a board and it's what our Board did is to seriously consider the ISS recommendation on a given issue. Because they're smart thoughtful people, but to ultimately take the decision that makes the most sense for your particular company, in particular, when you go to hard asset businesses where you really can't determine the private market valuation of the underlying assets, ending up with anything that could lead you to a discounted disposition based on short-term motion of the company losing for shareholders all of that private market value that's embedded in the assets you hold.
That's just a mistake and that in our view, and that's why our Board continues to maintain the position they do on that corporate governance issue.
Also just to add one more note on the bylaws issue, we are actually in the same boat as the overwhelming majority of the REIT industry. It's our view is shared by virtually all publicly traded REITs.
And it comes through the hard asset point that I'm making. This is what REIT industry tends to disagree on that issue. Because it is relatively easy for the Board to understand the private market value of the assets.
At this time, this will conclude today's question-and-answer session. I'd like to turn the call back over to Paul Pittman for any closing remarks.
Thank you very much, operator. For all of you on the conference call. We do appreciate your interest in the company. And we'll look forward to updating you again next quarter as the markets continue to unfold. Thank you.
The conference has now concluded. We want to thank everyone for attending today's presentation. At this time you may now disconnect.