Cap rates are estimated to be in the high 8% range, with some competition pushing them toward 9%.
The company is cautious about high-growth markets and prefers industrial properties in growth corridors.
Recent sales indicate cap rates that support capital recycling from office to industrial, with no expectation of cap rates reaching into the 9% range this year.
Adjusted Funds From Operations (AFFO) was negative $3.4 million or $0.10 per share, down from a positive $3.7 million or $0.10 per share in Q2 2024.
Core operating expenses decreased by about $200,000, with lower G&A costs partially offset by higher property operating expenses related to water rights protection and vacant farms.
Dividends declared per common share remained steady at $0.14.
Fixed base cash rents declined by approximately $6.8 million year-over-year due to lease modifications, vacancies, and farm sales.
Gladstone Land reported a net loss of $7.9 million and a net loss to common shareholders of $13.9 million or $0.38 per share for Q2 2025.
Interest expense decreased due to loan repayments over the past year.
Liquidity remains strong with over $150 million in available capital and nearly $170 million in unpledged properties for additional collateral.
Impact of Software Asset Divestments on Capital and Business Focus
Divestitures are expected to be accretive, allowing greater capital allocation to high-growth, profitable segments.
Proceeds from sales will be used in line with the company's capital framework, with potential return to shareholders if no immediate growth opportunities are identified.
The sale of software assets significantly reduces revenue contribution from 8% to a smaller proportion, enabling a sharper strategic focus on financial services.
Impact of Market Conditions on Revenue and Pricing Strategies
Clients are delaying discretionary investments due to economic uncertainty, tariffs, geopolitical unrest, and government funding cuts.
Revenue from nonrecurring project-based services is down low single digits year-over-year, with increased client pushback on rate increases, averaging about 4%, below expectations.
Market conditions have led to a headwind of approximately $75 million for the full year due to lower-than-expected rate increases.
Management has accelerated revenue and cost control initiatives, including targeted client outreach and workforce optimization, to mitigate these pressures.