Prepared remarks
Greetings. Welcome to Gladstone Land Corporation's Second Quarter Earnings Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce Mr. David Gladstone, Chief Executive Officer and President. Thank you, sir. You may begin.
All right. Thank you. That was a very nice introduction, and this is David Gladstone, and welcome to the quarterly conference call for Gladstone Land, and thank you all for taking the time out of your day to listen to our presentation. Before I begin, we'll hear from Katharine Gorka, our Director of Investor Relations, and she handles the ESG stuff as well. Katharine, give us an introduction here.
Thank you, David, and good morning. Today's call may include forward-looking statements, which are based on management's estimates, assumptions and projections. There are no guarantees of future performance, and actual results may differ materially from those expressed or implied in these statements due to various uncertainties, including the risk factors set forth in our SEC filings, which you can find on the Investors page of our website, gladstoneland.com. We assume no obligation to update any of these statements unless required by law. Please visit our website for a copy of our Form 10-Q and earnings press release, both issued yesterday for more detailed information. You can also sign up for our e-mail notification service and find information on how to contact our Investor Relations department. We are also on X, @GladstoneComps as well as Facebook and LinkedIn. Keyword for both is The Gladstone Company.
Today, we'll discuss FFO, which is Funds From Operations, a non-GAAP accounting term defined as net income, excluding gains or losses from the sale of real estate and any impairment losses on property, plus depreciation and amortization of real estate assets. We may also discuss core FFO, which we generally define as FFO adjusted for certain non-recurring revenues and expenses and adjusted FFO, which further adjusts core FFO for certain noncash items, such as converting GAAP rents to normalized cash rents. We believe these metrics can be a better indication of our operating results and allow better comparability of our period-over-period performance. Now I'll turn it back to David Gladstone.
Well, thank you, Katharine. Let me just remind everybody with a brief overview of our Farmland holdings. We have about 103 acres on 150 different farms, and we have over 55,000 acre-feet of water now. That doesn't mean much to you, but it transfers into about 18 billion gallons that we own, and we have it stored in aquifers and different places. Our farms are in 15 different states and our water assets are all in California. Our farms are leased to over 80 different tenant farmers, who grow 60 different types of crops on our farms. Most of these are the kind of food that you can find in the produce section of your local grocery store, such as fruits and vegetables and also nuts. We continue to be cautious and have made no new investments because interest rates and the expenses of running these farms are so different now than they were when we first started. Our cost of capital remains very high and the cap rates on most of the row crops are still high.
If you buy one of these farms and then have to farm it, these are very difficult times for the farmers. We didn't complete any sales during the quarter, but we have one property, and that one property is in Florida. We have it classified on our financials as held for sale. This property consists of 2 farms in Florida that are currently under signed purchase agreement, and we expect the sale to close soon, and that would result in a nice gain for us. By the way, in Florida, many of the farms are being sold to be transferred into or reclassified into housing. We're not in the housing business, so we sell our farms when the housing folks show up and need more land. I want to touch on some modifications we made in our lease structure on certain of our farms. I know we've said this, but I want to make sure you understand it as it has a significant impact on our earnings pattern. I think we mentioned it in the prior call, market conditions around many of these permanent crops in the West, particularly those growing nuts and grapes, have seen crop prices that are different and they weren't very high, but this year has a little bit of a different landscape.
I'm hopeful we have a lot of almonds, for example, and the government publishes every year their estimates of how many almonds are going to be produced. The last five estimates over the last five years were inconclusive, but the government and their projections in the first two of the five years were better. Well, they didn't get exactly right, but we had more almonds than estimated by the government. Then the third year out, they were right on target, and then the last two, we just missed their estimates. I tell you, if the government is right this year, we make a lot of money. Anyway, we've decided to adjust the lease structure on 6 properties, and that's why these estimates are so crucial. We are working to minimize fixed costs while also allowing us to participate in the upside. We have moved from being a leaser to more of an operator or grower of sorts as we're taking some of our payment for the lease in part of the crop that is being grown.
In essence, we've accepted a percentage of the gross crop sales instead of a fixed rent payment. We did that because the last two to three years have been very difficult for farmers. We also decided to operate 2 properties ourselves with the help of third-party operators. That doesn't mean you're going to see me or any of the people out there on the farm harvesting or doing whatever. We really have, like many people who are in this business, hired third-party operators to run the farms. We'd like to transition all of these back to the more traditional structure, including fixed base rents. Our ability to do so will depend on several external factors such as crop production, pricing, interest rates, and input costs which have not gone down. They've generally increased. Water availability is key. On our farms, we purchased enough water and stored it so that we're good for many years out. One of the reasons we felt confident in choosing this route is that the particular farms we have, we have eight now that are in this situation.
These are farms that had really good crops in prior years. With the crop insurance coverage we've secured, you can buy crop guarantees on your historical yields. That means we can secure high levels of crop insurance. We have crop insurance on all eight of these farms. Should a hurricane come through and damage everything, we're still going to get paid what we would have gotten paid from those existing farms. We certainly hope that even though we're covered with crop insurance, we are still anticipating strong production from these farms. They've had strong performances in the past so that we don't need to rely on crop insurance, which could lead to significant profits. Regarding leasing activity, we still have many farms that are under leases, of course, and as a real estate investment trust, our leasing is aligned with that structure. During the quarter, we entered into 4 new standard lease agreements which are expected to result in an aggressive increase in our annual NOI of about $166,000 or about 9%.
That part of the business is still operating well, and we'll see how the crops we will own part of will look in the future. Looking ahead, we have 14 leases scheduled to expire through the rest of this year due to some of these leases containing no fixed base rent, including cash leases that we are working on. These leases account for negative $2.8 million of leasing revenue during the first half of 2024. Remember, we can't include these estimates even though we have insurance on them, so those are a negative drag until the crop comes in. We'll have more clarity on that in the third quarter. That's largely because the participation rents resulting from these leases won't be recognized until we get to the fourth quarter. That's the accounting standards. I don't know why we can't recognize some of it, but that’s the rules. And unless you have sold something and are trying to collect on it, you can't accrue any of it.
We're in discussions with both existing and prospective new tenants about the leasing of these farms, including potentially reverting some of these back to standard leases with fixed base rent. Or if the price is right, we may also look to sell a couple of these farms. As I mentioned, we have one that is set to sell in Florida because the housing boom there is significant.
Thank you, David. Yes, sure. Good morning, everybody. Just to talk a little bit about the 8 properties that are under modified lease agreements or are being directly operated by third parties. Three of these properties are wine grape vineyards, and with the economics of wine grapes as they are, we hope to recover most of our costs on these. If we break even, that will be a huge win. The remaining 5 properties consist of 2 pistachio orchards, 2 almond orchards, and a large property that has both. Based on planted acreage, about 60% of these 8 properties are in pistachios with about 35% of the acreage in almonds. Overwhelmingly, our focus is on these two nut crops. We're very pleased with the condition of the crops on all 8 properties. We expect above-average crop yields, and crop quality looks excellent. As David mentioned, we're fully insured on all of these properties. The nut properties have demonstrated very strong historical production.
They all look above average in terms of condition. We've been working with 5 different tenants or operators across the 8 assets, and all 5 growers are performing at a very high level for us, achieving an acceptable standard. All positive news there. Additionally, we saw an average wet winter this last season, and the growing season has been nearly perfect across the entire Western U.S. That is certainly a factor that we don't control, but we've been very fortunate. Generally speaking, we’ve seen the markets for many of our crops and commodities trend lower in the last few months. Trade negotiations and tariff talks play a major role in this, but traditional supply-demand dynamics are really the main drivers, particularly behind crops such as almonds and wine grapes, which are critical to us. These industries have seen orchards and vineyards being removed at historically large scale. We expect to see those markets turn sometime in the near future.
Over the past year, we've seen almond markets definitely turn a corner, trending upward. David referenced the USDA's almond objective forecast released in July. The number they put out was significant, higher than anyone expected, and nobody really believes it, but it caused about a 20% drop in almond prices about a month ago. It wiped out all pricing gains from the last year and returned prices to a year-ago level. However, in the last couple of weeks, we've noticed pricing really coming back. It's increased by about 5% to 8% as of last week, and this past week, just as of this week, prices are up another $0.03 to $0.04 per pound. We definitely have good momentum in the almond market, and we expect that trend to continue. Harvest just started; we're shaking trees in all our almond orchards as of now. Over the next few weeks, we will begin to see how the industry actuals compare to the objective estimates.
All eyes are on that because it will support more price gains if we are below the USDA projections. In terms of coffee shop chatter today, it seems that the crop is coming in light. That's actually probably good news for us as it could strengthen the market. The wine grape market remains mired in low points, and it has been slow this summer to secure contracts but in the last 10 days, we've had numerous inquiries for contracts on some of our crops and the pricing is significantly better than a year ago. There are a couple of positive signals there. Pistachios are really possibly the best market out there right now. Although tariffs and trade discussions have created some uncertainty, we see very strong demand, even a little bit unexpectedly. In fact, the 2024 crop has sold out early. As we sit here today, a month away from the 2025 crop harvest, there's very little movement as the product is scarce.
We're expecting the 2025 U.S. pistachio crop to be the largest on record, but we have good strong demand and stable pricing. Our guaranteed base price was announced a few weeks ago, and it's the same as last year, which is exactly what we had budgeted for. One of the unknowns has now been clarified: we know what our base pricing is for our pistachio crops, which is reassuring. While profitability is not nearly as strong as during the boom periods of five or ten years ago in pistachios, the market fundamentals remain very strong. Generally, we are seeing increased bearing acreage leading to annual growth in pistachio production, but this increase is balanced by trade uncertainty, especially related to China. We also see stable increases in consumption in the EU, particularly driven by the Dubai chocolate phenomenon. There are many positives to balance out the negatives. I'll conclude with some comments on water.
We've previously reported how the Western U.S. has been in a normal to wet cycle over the past few years, including this most recent year. This has created numerous water-buying opportunities at prices that fit into our crop budgets. We have been very aggressive and focused on improving our delivery and storage infrastructure across our portfolio. Coupled with the availability of inexpensive water, we've significantly enhanced the water security of our farms. We continue to expand our 55,000 acre-feet of water. Our farms have enough water reserves that if it didn’t rain for ten years, we could still irrigate them for about a decade. We're spending time figuring out how to synergize our properties to share water and enhance overall portfolio security. We will continue to explore long-term and short-term water purchases while improving infrastructure. We’re working toward ensuring a secure portfolio in this regard. That's it for me. I'll turn it over to our CFO, Lewis Parrish.
All right. Thank you, Bill, and good morning, everyone. I'll start with a quick update on our recent financing activity. During the quarter, we refinanced a $10 million maturing loan with MetLife, and after the quarter ended, we repaid a $10 million maturing bond in anticipation of selling the underlying property later this month. We did not issue any new equity during the quarter. Turning to our operating results. For the second quarter, we recorded a net loss of about $7.9 million and a net loss to common shareholders of $13.9 million or $0.38 per share. Adjusted FFO was negative $3.4 million or $0.10 per share compared to a positive $3.7 million or $0.10 per share in the same quarter last year. The dividends declared per common share were $0.14 in both quarters. The year-over-year decline in AFFO was driven by recent changes to lease structures on certain farms and ongoing tenancy issues that resulted in farm vacancies leading to reduced revenues and higher costs, along with lost revenue from farms sold over the past year.
Fixed base cash rents were down by about $6.8 million from the prior year quarter due to the reasons just mentioned, mainly the vacancies we continue to navigate and the structural changes made to certain leases, where we reduced or eliminated fixed base cash rents or, in some cases, provided cash lease incentives to certain tenants in exchange for significantly increasing the crop share components. As others have mentioned, particularly the results from these crop share components won’t be known until the harvest is complete, and the crops are sold. Year-over-year participation rents were also down, largely due to the accelerated recognition of certain revenue in 2024. Last year, we received some information earlier than usual, which allowed us to record certain revenue amounts in the first half of the year. So far, this year’s participation rents have mostly come from cash collections on wine grape sales.
I will note that we continue to expect higher participation rent levels in the second half of 2025 as a result of lease modifications we made on certain permanent crop farms. We discussed this in previous calls, but these lease changes are expected to reduce fixed base rents by about $17 million for fiscal year 2025 compared to 2024. This figure includes both the base rents recognized last year under prior leases and the cash allowances provided to certain tenants for the 2025 crop year. It’s being shown as a reduction in fixed base rents at a rate of roughly $4 million to $5 million per quarter in 2025, which is in line with the first half of the year. Subsequently, most of the resulting crop share proceeds from these leases are expected to be recognized as participation rent in the fourth quarter of 2025, with most of the remaining smaller portion being recognized in the second half of 2026.
In essence, we're shifting this revenue from fixed base rents to participation rents over the next couple of years, and as a result, earnings this year will be more heavily weighted towards the fourth quarter with lighter earnings during the first half of the year. On the expense side, excluding reimbursable items and certain non-recurring or non-cash charges, our core operating expenses decreased by about $200,000 this quarter. The capital gain fee that was triggered in Q1 by property sales was reversed in Q2 due to additional losses incurred on certain asset dispositions. Excluding this reversal, total related party fees fell by about $67,000, driven by a lower base management fee due to recent farm sales. Our remaining cash operating expenses decreased by about $135,000, with lower G&A costs partially offset by higher property operating expenses. The increase in property operating expenses was largely driven by additional costs incurred to protect water rights on certain farms in California, as well as higher variable expenses related to farms that were vacant, directly operated, or on non-accrual status, particularly increased property taxes which were previously the responsibility of the former tenants.
The decrease in G&A expense was mainly due to lower shareholder-related costs and reduced professional fees. Finally, other expenses decreased mainly due to lower interest expense driven by loan repayments made over the past year. Turning to liquidity. We currently have over $150 million of available capital, and we also have nearly $170 million of unpledged properties that we could use as additional collateral if needed. Over 99% of our borrowings are at fixed rates with a weighted average rate of 3.39% locked in for another 3.3 years. This has protected us from the impacts of rising interest rates over the past few years. Looking ahead, we have about $17 million of scheduled principal amortization payments due over the next 12 months, which is less than 4% of our total debt. We also have about $11 million in loans with fixed rate terms expiring in the next year, although the loans themselves are not maturing.
Finally, regarding our common distribution. In July, we declared a monthly dividend of $0.0467 per share for the third quarter of 2025. At our current stock price of $9.14, this represents a 6.1% annualized yield, which is well above the sector average. We're maintaining the dividend at its current level for now, and we'll reassess it in the coming months as we gain more clarity on the 2025 harvest results. With that, I'll turn it back over to David.
Okay. Thank you, Lewis. I think everybody is getting the gist here. We have changed when we can recognize income, and we won't recognize much in the second quarter. Hopefully, in the third and fourth quarters, certainly the fourth quarter as we sell a lot of our crops, we'll be back in the game of substantial profits. One thing you may not know, I didn't realize it was happening until I got a call from Lewis and our legal team. There was a group out there trading on the market with dollar sign LAND. These players were having a lot of fun trading with each other on the price, knocking about one point off the price of our stock. It was not good for us, and it takes a long time to recover from these irregular stocks and have them be regularly traded again. Going back to the acquisition outlook, we continue to stay active in the market, and we are observing many changes in what farmers can sell their properties for.
I think we'll be able to sell more properties over time. Again, we are moving in the direction we have to based on how we're operating the company now. With cost of capital remaining high, I am genuinely concerned that the marketplace will undergo significant changes. Overall demand for prime farmland growing berries and vegetables remains stable across all the areas where our properties are, especially along the coast of California. As mentioned earlier, prices for certain permanent crops have been depressed. When we refer to permanent crops, we are particularly discussing the nut business and many trees currently under cultivation. The only positive aspect regarding all of those trees is they are harvested mechanically. We are not significantly hindered by fluctuations in labor costs for harvest. However, we must acknowledge that we are increasingly concerned about our ability to recognize any projected income.
Right now, we are all sitting by, trying to determine when we will be able to finalize real transactions. As Bill mentioned, they are now beginning to sell and deliver some of the nut crops. I don’t want to sell any right now, as Bill wants to wait and see what the crops truly look like. We all expect inflation, particularly in the food sector to persist over time. We anticipate an increase in the value of the underlying farmland as crops gain value, meaning as long as farmers are profitable, they will continue farming. I believe this will be especially true for healthier foods such as the fresh fruits and vegetables we grow, as well as the nut crops. The trend of more people shifting towards healthier foods is apparent, and particularly the new initiatives will encourage this. I think that it's beneficial for us because more people are choosing healthy foods like nuts and berries. We have the largest farm dedicated to cabbages. So, as a result, that segment is still profitable. Now, we will take questions instead of me continuing to ramble on, or we can get someone else to come on board and ask some meaningful questions.
Questions and answers
Our first question is from Gaurav Mehta with Alliance Global Partners.
I wanted to follow up on your comments related to participation rents. The $17 million that you guys talked about, how much of that are you expecting in Q4 of '25? How much are you projecting for next year?
The $17 million is difficult to determine right now because we don't know what the total number will be. If we have a poor harvest, then the participation rent coming from those leases could be less than that amount. If we have a great harvest and pricing, then it could be higher. We're projecting probably about 60% to 65% this year and the rest would be a little bit throughout next year, but most of it would probably occur in Q4 of next year.
The way these leases are structured, do they automatically convert to fixed rents, or will they need to be renewed at the participation rents?
They never automatically convert to fixed rent, so we will need to negotiate that again when the time comes, usually before the end of the calendar year.
Yes. These leases end later this year. We'll be renegotiating them. If we can come to terms on a standard lease, that’s fantastic. If not, then we may have to maintain the structure for another year.
Then maybe switching to the balance sheet. Can you talk about your expectations for the Series D that's up for redemption in January of '26?
Yes. We're still keeping our options open. We're in touch with underwriters. We're discussing internally about cash availability through the line of credit. Our options include paying it off potentially with proceeds from property sales, the line of credit at about 1.7% lower than the Series D rate when it rises. Alternatively, we could let it sit out there, which would increase from 5% to 8%. Current market rates for refinancing suggest this could still be a more favorable option when considering refinancing rates along with additional upfront costs and commissions. Right now, we’re assessing things, looking at cash availability, line of credit usage, and determining what makes sense come January—whether to pay it off or let it sit for a while, possibly selling properties to cover the costs.
Gaurav, what’s really encouraging right now is the possibility of making significant profits from selling these products. For instance, we could potentially gain around $8 million from selling one of our nut crops. We've been observing other businesses for an extended period, and unfortunately, the cost of capital along with all the changes in the farming sector have resulted in considerable losses for many of our excellent tenants. One individual, I recall, made substantial profits in past years but has since lost about $8 million due to these changes. We want all crops to perform well and for everyone involved to turn a profit. One thing to note is that when a large crop comes in, prices generally decrease. Sellers who are first to the market can earn more than those who wait. Currently, we believe the initial influx of buyers indicates individuals in need who are not adequately stocked.
If you’re in the candy industry and rely heavily on nuts, you might be facing some challenges. It will be quite intriguing to see how this unfolds, and I suspect prices may escalate quickly over the coming year. From my perspective, we could witness an influx of growers entering the nut market as it becomes more lucrative. The nut segment has presented challenges for us. We encountered difficulty during a less favorable time, but it’s improving, and it will be advantageous if previous buyers become more proactive about acquiring nuts internationally. It’s vital to keep in mind that many companies are dependent on China to purchase large quantities of nuts. I was surprised to discover that a significant amount of our almond crops are sold to Spain and various Middle Eastern countries. In contrast, we don’t typically have much exposure internationally in terms of strawberries, which are typically grown and consumed domestically.
Therefore, it’s crucial to maintain clarity on these differing market dynamics. Ultimately, I still prefer the traditional leasing aspect of the business we’ve engaged in from the beginning, and I look forward to a return to that area as market profitability improves.
Yes. Maybe lastly, you talked about some positive trends in almonds and pistachios. I was wondering if there's any other crop type within your portfolio that's not seeing positive trends and is still experiencing price softness?
I think that is indeed the case. Lewis, is there anything to add?
Bill, do you want to provide some insights on that?
The question was whether there are other crop types showing weakness or softness in the market, correct?
Yes. Lewis, you mentioned positive trends in almonds and pistachios. I was wondering if there's anything else in your portfolio that is not showing positive trends.
Not really. You experience ups and downs in some of the annual row crops, but those fluctuations are typically driven by weather events, whether it’s freezes, excess rain, or heat spells. Our leases on annual row crops aren’t tied to specific crops. We just don’t experience anything like that. The markets that are significant to us are the permanent crops, as even within standard leases, a component of those leases includes crop share, which has a bigger impact.
Our next question is from Steven Dumanski with Janney Montgomery Scott.
As discussed earlier in the call, with potential acquirers currently limited by their cost of capital, is it possible to project when you'll see more disposition opportunities? Also, can you share any feedback you have received from potential buyers?
Well, certainly, there are buyers out there, but they are all looking for very discounted prices for farms. They are coming in attempting to acquire properties, which is excellent, but it’s not a strategy we will use to sell our own properties. If the situation in Florida continues as someone mentioned—a rapid increase in population—there seems to be about 10,000 new families moving to Florida every week. The housing marketplace is thriving, and we have people contacting us regarding purchasing our properties for much higher prices, but that is further down the line. I don’t wish to lock up our farms in that. As long as they are generating solid rental income, I prefer to remain in that segment of the business. We are keeping a watchful eye on the market. I would say we are likely one of thousands of farmers tuned into radio broadcasts discussing farming prices daily. Bill is as close as anyone to the situation; he is in California and closely monitors the farms we have there. He is our resident expert on prices, and we heed his insights when preparing to sell. We still have some properties in the Midwest that we acquired along the way, and those will be put up for sale. We plan to sell them while continuing to focus on our core business, which encompasses the East and the leasing segment, along with the eight farms we are genuinely managing.
Lastly, can you please elaborate on the decrease quarter-over-quarter regarding the acre-feet of water you own? I'd like to know if the variance was due to a remeasurement or another factor.
No, that was just a 44-acre-foot decrease quarter-over-quarter. That was simply because we utilized a small amount. We now record water credit recognition in the quarter following usage. This reflects the water usage from the first quarter of the year but only needed due to a tenant transition on one property. We had to irrigate the trees while working on transitioning the wells from different accounts and a power company.
We have a question from John Massocca with B. Riley Securities.
I'd like to stick with the theme of water. What are you seeing right now concerning the impact of Sigma on some of your properties? Has that largely played out? Or do you think there are specific assets that may not have the necessary bank water that are still at risk? Have all the regulatory changes and water needs been determined? Where are we in that process?
No, there are still changes coming from Sigma. As of now, we seem to be ahead of the curve, but you never know what the government will decide. There have been lawsuits filed by groups of farmers. In fact, I believe we are participants in one of those lawsuits. If the government becomes somewhat biased and starts favoring certain groups, it complicates decision-making. Presently, we are in decent shape. We are not in perfect condition, but I don’t anticipate any major issues regarding water this year. This has been a good year for us. Most farms could endure two or three more years without any significant issues. However, water prices might hurt some farmers if we experience a dry period, but that’s not a concern for us at the moment. You're correct to highlight the importance of the water aspect of business. It is vital, particularly for crops that require a heavy water supply, such as strawberries and various vegetables.
However, we predominantly conduct our major water-intensive growing on the East Coast, especially in Florida, where water is readily available. Overall, the water situation is good for us this year, and we have managed to secure a significant supply. Thanks to our team, we've been able to purchase water at a reasonable price and store it in aquifers. We've become large holders of water in those aquifers, particularly during the rainy season, and we're still actively expanding that 55,000 acre-feet. Our assets in aquifers are abundant. Bill, do you want to add anything regarding the water situation?
That’s a great question regarding Sigma. Our approach from the beginning was to acknowledge that we didn’t know what the restrictions would look like and recognized it would change over time. We focused on how not to follow any single acre. Instead, we concentrated on figuring out how each farm is affected by Sigma while ensuring we can secure supplemental water supplies. This long-term perspective informed our investment in delivery infrastructure and identifying groundwater basins for water storage. We’ve been fortunate in having several wet winters, which has made it possible to access plentiful water at advantageous prices. That proactive strategy has placed us in a strong position. I would assert that among all the land portfolios in California owned by various firms, the water security of our collection is among the best. We will continue to pursue this approach as circumstances evolve. We have been involved in two water adjudications, and there may be one or two more that impact us. However, our focus has been on supplementing any possible restrictions rather than fighting over initial allocations. By assuming we have this allocation, we are returning to projects that help replace some of the lost supply.
I want to add, John, that for the past three years, we've had average wet years in California, allowing for great buying opportunities for water at good prices. These opportunities are available to all farmers, but many lack the infrastructure we've developed for groundwater recharge facilities or water banks. While everyone has access to buy water, few others have the storage capacity like we do. We've had neighboring landowners even approach us expressing interest in storing their water with us in exchange for cash payments or leaving some behind, which provides us with a minor revenue stream. But importantly, the real advantage is that the water we store will significantly benefit us the next time there's drought. We're not wishing for a drought, but we expect to significantly reap the rewards of our stored water when that happens. Right now, our investments in water assets total approximately $35 million, averaging around $600 per acre-foot, which is advantageous compared to the last drought ending prices at about triple that amount.
We recognize that droughts are an inevitable part of agriculture. While we cannot predict when one will occur, we know that they will arrive, and it will be severe. Thus, we are well-prepared for that eventuality.
Building on the conversation about operated properties, is there a level you assume would serve as a floor based on the crop insurance you have in place today for the effect on probably Q4 revenues?
I’d say the overall investment between these eight properties is about $25 million in total for growing the crops, including that $17 million from those six properties we altered the leases on. Additionally, we have the two properties that we directly operate with support from third-party operators. The total investment in these eight properties is significant, and the crop insurance would cover our costs entirely, possibly yielding a modest profit. Regarding our prior conversation, the estimates fall roughly into that same timeframe of about 60% to 65% this year, with the remainder into next year. This is a worst-case scenario meaning that we cannot harvest or sell crops, but we anticipate a better outcome than this scenario.
I’d add that the nuance around crop insurance suggests that the better the property performs, the better the insurance conditions. Ironically, while we have strong crop insurance on the best properties, these are also the ones that are less likely to experience loss because they perform better. Our good crop insurance is a signal that these assets surpass the industry average.
Lastly, on the balance sheet side, considering you have more of an operational component, how comfortable are you with your current cash balance? What is the minimum level you would want to maintain, bearing in mind that you have a substantial cash on hand which can be used to pay down debt maturing? Should we expect the cash level to stay close to today’s metrics, or would you continue to utilize it for future debt repayments as they mature?
Currently, the cash level is evaluated in terms of overall liquidity. As of June 30th, we had approximately $30 million in cash on the balance sheet, alongside nearly $87 million available in two lines of credit. This totals to about $150 million in immediate funds. If we had to operate all eight properties again, we would estimate about $25 million for that alone. We have $17 million in principal payments due. We want to maintain at least $50 million in available funds over the next 12 months at all times, and we have that covered. Additionally, we also have $170 million in unpledged properties that would provide another $100 million in borrowing capacity if interest rates become appealing or if other situations requiring funding arise.
There are no further questions at this time.
Well, that's unfortunate. We enjoy responding to your questions. We hope you all will bring some thought-provoking questions for us next time, and we expect to have much more insight regarding these farms in the next session. That concludes our discussion today, and we thank you all for participating. See you next quarter.
Thank you. That will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.