Company: LANDO
Filing Date: 2025-02-19
Form Type: 10-K
Source: 0001495240-25-000005
Chunk: 85

Company: GLADSTONE LAND Corp
Filing Date: 2025-02-19
Form: 10-K
Item: Item 7
Chunk 85
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 effective interest rate (after interest patronage, as described below) of 3.35% over that term.

Business Environment

Impact of Inflation and Interest Rates

According to the U.S. Bureau of Labor Statistics, the consumer price index (“CPI”) grew at an annual rate of 2.9% through December 31, 2024, as overall inflation continued to decline from its peak in the summer of 2022, when it reached the highest level in over 40 years.  Food price increases have also slowed but have generally kept pace with inflation until recently, as the overall food segment rose at an annual rate of 2.5% through December 31, 2024.  However, despite the recent slowdown, prices remain elevated, with overall food prices increasing by 16.2% over the past three years, outpacing overall CPI of 13.2% over the same period.  While farm operators have faced rising input costs, we believe these increases will be somewhat offset if food prices continue to match or exceed the inflation rate.

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Table of Content

After keeping rates steady since July 2023, the Federal Reserve began cutting interest rates for the first time in four years in September 2024, lowering its benchmark funds rate by 100 basis points in the fourth quarter of 2024.  However, U.S. Treasury yields surged following the September 2024 meeting, driven by stronger-than-expected macroeconomic data, persistent inflation, and a reduction in projected interest rate cuts for 2025 by 50%.  While there is general optimism about the economy’s trajectory, geopolitical concerns, such as tariffs and the potential for a trade war with key U.S. trading partners, add uncertainty.  As a result, the benchmark 10-year U.S. Treasury yield has remained volatile, most recently settling around 4.5%.  This has kept interest rates elevated, limiting our ability to finance new acquisitions under favorable terms.

Over 99.9% of our borrowings are currently at fixed rates, and on a weighted-average basis, these rates are fixed at an effective interest rate of 3.35% for another 3.6 years.  As such, with respect to our current borrowings, we have experienced minimal impact from the recent increases in interest rates, and we believe we are well-protected against the potential of continued high interest rates or any further interest rate increases.

California Water Outlook

The 2024-2025 water year has been