As mentioned over the weekend I was planning to do some rearranging of CLO preferreds and baby bonds in our portfolios this week and I got a decent start on it yesterday.
I sold the entire Sound Point Meridian 8% baby bonds (SPMA) position. Also I sold the entire position in the Eagle Point Institutional 8.125% Term Preferred (EIIA). I also sold the Oxford Lane Capital 6.25% baby bond (OXLCP). So nothing left of these issues. I may have taken a tiny capital loss on these–but tiny and the dividends/interest received far outweighed a few pennies of capital losses.
I bought more of the Eagle Point Income 7.75% baby bonds (EICB) at $24.89 to add to what I already owned.
Also I took the opportunity to once again add to the Gladstone Land 5% term preferred (LANDM) at $24.65 which has a mandatory redemption in January, 2026 so the yield to maturity is around 6.90%.
I am not implying that anything I sold is bad, or that they are in ‘trouble’–this is simply a rebalance to a more conservative positioning–for a conservative like me risk now more equals the reward.
I will get these posted to the my ‘laundry list of holdings‘ sometime today.
I stayed from my IG Bond portfolio today. I used cash on hand to purchase a several issues. Bought a little Gold (IAU), a little Bitcoin (FBTC), a REIT (LANDO) and being the chicken that I am, I ventured into PFFA, not wanting to pick individual preferred stocks. Reading JD’s comment, I’m questioning the LANDO purchase. It’s only 1/2 of 1% of my portfolio so not a big deal. I also started positions in HYBD, ARCC, JEPI, JEPQ, UTF, DNP, BIZD, CHSCL and what I’m calling a full position WFC-L. This cash was sitting in FIDO sweep account. I could have purchased some long dated IG paper (30 years) to get over 6% but looking for yield without being in 30 year paper. Call me crazy!
Should add that I did purchase a bond today also, though not IG…but close. Macy’s 4/2029 yielding a little over 7%. Didn’t have to take on duration to get that 7% plus yield and I figure Macy’s has at least 4 years left in it.
I’m $145 in the red with 105 shares of LANDP, a 6% perpetual held in a Roth IRA. I’m a little wary of their future and wondering if I should sell and invest in something a little safer, maybe EICB or EICC. Any thoughts? Thanks.
Farm land: My experience has been it gets harder to find farmers for land every year. Not sure how that works out. More tree farms replacing former plowed land in my area. And of course houses, and a few solar installations. Overall a lot less folks farming and less land being worked.
Doug, on a recent drive thru mid-south Michigan, came across several 1000 + acre farms that had installed massive swaths of solar panels.
Probably not news to the Arizona / Nevada / Call area’s , yet had not seen before in midwest.
Doug, on a recent drive thru mid-south Michigan, came across several 1000 + acre farms that had installed massive swaths of solar panels.
Probably not news to the Arizona / Nevada / Call area’s , yet had not seen before in mid west.
Selling at a small loss to what you paid way back when in order to buy something else that also is lower. That’s not a losing trade as far as I’m concerned. Some good swaps happen on the way down when it’s more volatile.
I agree martin – just wanted to put out the facts–honestly taking small losses doesn’t bother me at all to get situated where I want to be.
SPMC earnings tomorrow before the open……I own both the common (1st time owning a CLO common) and SPMA…….We will see how this new issue reports compared to their peers
Thanks Eyeman let us know
Not sure if this has been discussed around here, but LAND has not been doing well. Quite a few of their farms are vacant or not paying rent, and they are doing deals with farmers to operate the farms but instead of paying normal rent LAND is accepting a lot of “participation rent” late in the year. They are also selling vacant farms. So AFFO is down quite substantially YoY. Worth reviewing last few earnings reports and conference call.
I will also note that historically LAND used to show an NAV calculation in every earnings release, which was useful to get their version of market value of the farms. Historically the EV through the preferred was around 70% of their professed market value, which seemed like a reasonable margin of safety for farmland. But, LAND recently stopped providing this information on NAV, so that makes me a bit wary, especially in conjunction with their bad results recently.
On the last conference call, there was some discussion about the upcoming maturity of the 5% term preferred, and management noted they were well aware of that and considering their options. The CFO noted that if they do not redeem on the due date, the coupon goes to 8%, and he suggested just letting that happen wouldn’t be a bad way to deal with that maturity because their cost of capital is high now, and they would pay something like that anyway to do a new issue in order to pay off that security. So that’s kind of how I’m thinking of that security — not likely to be redeemed, but instead likely to become an 8% coupon.
So given the operating issues with vacant / non-paying farms, elimination of transparency on farm values, and the likelihood that the 5% preferred does not get redeemed in 2026…. I have sold all of my 5% LAND preferred. It could all work out fine, but its no longer the no-brainer safe return I once thought.
Great post JD. Makes me want to look at this thing myself. (I did a few years ago, and vaguely liked it then, but not enough to buy what seemed like not enough yield at the time.)
I have made an observation and mentioned that companies that are established have a handicap when recessions or a depression comes around compared to a company that starts during the low point of the economy. Since COVID and the GFC there have been companies that have started up and don’t have a long term track record.
I don’t see anything wrong with SPMA , for one thing the parent company which I don’t think is publicly traded is going to do everything it can to be successful. Just I have a feeling being new and not well known the price has been stagnant. Because of this I could see in a market panic the price dropping.
If I sold it because I was wanting to be more cautious I still would be watching for a better entry point if it drops.
From LAND CC:
John Massocca
So, maybe with that kind of cash balance in mind, how are you thinking about, I mean, relatively limited debt maturities for the remainder of 2025. But you do have that term preferred out there at the beginning of ‘26. How are you thinking about financing that? I mean, is that something you could take out with additional asset sales? Would you potentially use some of the — maybe kind of runway you have in terms of taking on more leverage to take that down? Just kind of curious your thoughts about that particular instrument.
David Gladstone
Well, we planned it out and we are going to make the payment. Not worried about that. But the question is always how you do it. And if we use our cash, we lose some liquidity. We’ve got these banks that want to lend us money, but their prices are still high. So, we’re kind of sitting between those two decisions and trying to figure out which is the best way to go. We’ll go through it.
We’ve got plenty of room to do it. It just means that we’re pushing out the answer to the question of these eight farms for another year or two years. I don’t want to do that. I’d rather get back to leasing farms and letting the farmer make the big dollars rather than us putting up some money and making the big dollars.
I don’t like the growing side of the business. I do love the leasing side of the business. So, we’re just going to keep doing that and hopefully things will work out. Right now, it looks extremely good. Projections for the farms are following exactly what we thought. We’re still in good shape. So, we’ll let you know if anything happens. But I hate to see the people out there selling their shares because I think we’re going to do well for the year.
Lewis Parrish
John, regarding your question about the Series D term preferred stock, $60 million and change coming due in January of 2026. We’re talking through a few options. It’s likely, not guaranteed, but it’s likely we’ll have a couple more farm sales. So, that’s more cash on the balance sheet that could be used towards it depending on what interest rates are closer to that time. We could go that route.
We have been talking with banks to refinance that. But as David said, the price for that is high. Honestly, it’s not too much cheaper than the option that would result if we just let it sit out there. The coupon would go from 5% to 8%, not something we want to do, but the current refinancing cost is not a whole lot cheaper than that. Of course, you have a lot of upfront commissions and costs involved in that transaction as well.
So, we have a few different options that we’re looking at, but it’s too early to make a decision on which route we want to go, but it is in the forefront of our minds.
Good info BTW, JD…. here’s the color on the 8 parcels
Gaurav Mehta
Okay, and so in terms of the total participation rents that you guys expect in ‘25, so that’s $17 million plus some additional number as well based on last year’s run rate?
Lewis Parrish
Yes, so as David said, the eight properties that are kind of in this bucket of having a lease incentive or being direct operated, we do expect to make all of that $17 million back and insurance should cover that number plus a little bit of a profit. Of course, we’re hoping not to have to use it and to be able to show a higher profit, but the split of the revenues coming will be between Q4 ’25 and Q4 ’26. If we had a guess, maybe we’ll get between 60% to 70% of that this year and then the remaining amount will be in ’26, second half of ’26.
Gaurav Mehta
And so in addition to 17, I think last year you had $9.4 million of participation rent, so it’s going to be last year’s run rate plus additional 17, right?
Lewis Parrish
Not exactly. Because some of those, some of that participation rent came from farms that are now in this adjusted lease structure, if you will. So that $9.4 million would probably be a little bit lower this year and then add the $17 million plus any profit we’re able to generate on these farms for the current year.
Gaurav Mehta
Okay. And then lastly, the $2.4 million termination fee, can you provide some color on that farm?
Lewis Parrish
Yeah, so those were just three almond farms that one tenant leased and those three farms are vacant now. We got a termination fee for letting them out of certain lease obligations and one-time event. Of course, we won’t get that again, but we are working through a variety of options on those three farms to get income coming in on those farms again.
Thanks 2WR
So perhaps we should consider a farm lease? I’ve always wanted a place in the country to get away to/ start my own Republic of Nevada govmint . My dogs would like a place too.
Thanks JD for your input.