Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended SEPTEMBER 30, 2017



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-35795

GLADSTONE LAND CORPORATION

(Exact Name of Registrant as Specified in its Charter)



MARYLAND		54-1892552
State or Other Jurisdiction of Incorporation or Organization		I.R.S. Employer Identification No.

1521 WESTBRANCH DRIVE, SUITE 100 MCLEAN, VIRGINIA		22102
Address of Principal Executive Offices		Zip Code

(703) 287-5800

Registrant’s Telephone Number, Including Area Code

Not Applicable

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer	¨		Accelerated filer	x

Non-accelerated filer	¨	(Do not check if a smaller reporting company)	Smaller reporting company	x

Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý.

The number of shares of the registrant’s Common Stock, $0.001 par value per share, outstanding as of November 6, 2017, was 13,637,938.

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GLADSTONE LAND CORPORATION

FORM 10-Q FOR THE QUARTER ENDED

SEPTEMBER 30, 2017

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		PAGE
PART I	FINANCIAL INFORMATION

ITEM 1.	Financial Statements (Unaudited):

	Condensed Consolidated Balance Sheets as of September 30, 2017, and December 31, 2016	3

	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2017 and 2016	4

	Condensed Consolidated Statements of Equity for the nine months ended September 30, 2017 and 2016	5

	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016	6

	Notes to Condensed Consolidated Financial Statements	7

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	47

ITEM 4.	Controls and Procedures	47

PART II	OTHER INFORMATION

ITEM 1.	Legal Proceedings	48

ITEM 1A.	Risk Factors	48

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	48

ITEM 3.	Defaults Upon Senior Securities	48

ITEM 4.	Mine Safety Disclosures	48

ITEM 5.	Other Information	48

ITEM 6.	Exhibits	49

SIGNATURES		50

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PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GLADSTONE LAND CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per-share data)

(Unaudited)



	September 30, 2017			December 31, 2016
ASSETS
Investments in real estate, net	$	444,390		$	326,311
Lease intangibles, net	5,796			2,000
Cash and cash equivalents	3,758			2,438
Deferred financing costs related to borrowings under line of credit, net	209			239
Other assets, net	2,407			2,997
TOTAL ASSETS	$	456,560		$	333,985

LIABILITIES AND EQUITY
LIABILITIES:
Borrowings under lines of credit	$	5,100		$	16,550
Mortgage notes and bonds payable, net	290,234			190,797
Series A cumulative term preferred stock, par value $0.001 per share; $25.00 per share liquidation preference; 2,000,000 shares authorized, 1,150,000 shares issued and outstanding as of September 30, 2017, and December 31, 2016, net	27,831			27,655
Accounts payable and accrued expenses	4,382			2,801
Due to related parties, net⁽¹⁾	984			751
Other liabilities, net	9,043			7,654
Total liabilities	337,574			246,208
Commitments and contingencies⁽²⁾
EQUITY:
Stockholders’ equity:
Common stock, $0.001 par value; 98,000,000 shares authorized, 13,485,025 shares issued and outstanding as of September 30, 2017; 18,000,000 shares authorized, 10,024,875 shares issued and outstanding as of December 31, 2016	13			10
Additional paid-in capital	126,848			90,082
Accumulated deficit	(17,801		)	(13,402		)
Total stockholders’ equity	109,060			76,690
Non-controlling interests in the Operating Partnership	9,926			11,087
Total equity	118,986			87,777
TOTAL LIABILITIES AND EQUITY	$	456,560		$	333,985


⁽¹⁾	Refer to Note 6, “Related-Party Transactions,” for additional information.


⁽²⁾	Refer to Note 8, “Commitments and Contingencies,” for additional information.

The accompanying notes are an integral part of these condensed consolidated financial statements.

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GLADSTONE LAND CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per-share data)

(Unaudited)



	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2017			2016			2017			2016
OPERATING REVENUES:
Rental revenue	$	6,561		$	4,467		$	18,302		$	12,388
Tenant recovery revenue	3			2			8			8
Total operating revenues	6,564			4,469			18,310			12,396
OPERATING EXPENSES:
Depreciation and amortization	2,051			1,432			5,123			3,744
Property operating expenses	257			161			747			545
Acquisition-related expenses	22			123			68			243
Management fee⁽¹⁾	523			385			1,446			1,158
Incentive fee⁽¹⁾	261			22			688			181
Administration fee⁽¹⁾	211			184			656			575
General and administrative expenses	374			356			1,208			1,150
Total operating expenses	3,699			2,663			9,936			7,596
Credits to fees from Adviser⁽¹⁾	(54		)	—			(54		)	—
Total operating expenses, net of credits to fees	3,645			2,663			9,882			7,596
OPERATING INCOME	2,919			1,806			8,428			4,800

OTHER INCOME (EXPENSE):
Other income	4			2			190			106
Interest expense	(2,634		)	(1,554		)	(6,984		)	(4,297		)
Distributions attributable to mandatorily-redeemable preferred stock	(458		)	(219		)	(1,375		)	(219		)
Loss on disposal of real estate asset	(78		)	—			(78		)	—
Total other expense	(3,166		)	(1,771		)	(8,247		)	(4,410		)
NET (LOSS) INCOME	(247		)	35			181			390
Plus (less) net loss (income) attributable to non-controlling interests	26			(3		)	(23		)	(16		)
NET (LOSS) INCOME ATTRIBUTABLE TO THE COMPANY	$	(221	)	$	32		$	158		$	374
(LOSS) EARNINGS PER COMMON SHARE:
Basic and diluted	$	(0.02	)	$	0.00		$	0.01		$	0.04
WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING:
Basic and diluted	12,271,925			10,018,331			11,512,968			10,001,466


⁽¹⁾	Refer to Note 6, “Related-Party Transactions,” for additional information.

The accompanying notes are an integral part of these condensed consolidated financial statements.

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GLADSTONE LAND CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(In thousands, except share data)

(Unaudited)



	Common Stock
	Number of Shares	Par Value		Additional Paid-in Capital			Accumulated Deficit			Non- Controlling Interests			Total Equity
Balance at December 31, 2015	9,992,941	$	10	$	86,892		$	(8,895	)	$	—		$	78,007
Net income	—	—		—			374			16			390
Proceeds from issuance of common stock, net	31,934	—		350			—			—			350
Distributions	—	—		—			(3,676		)	(234		)	(3,910		)
Issuance of OP Units as consideration in real estate acquisitions, net	—	—		—			—			11,708			11,708
Adjustment to non-controlling interests resulting from changes in ownership of the Operating Partnership	—	—		2,133			—			(2,133		)	—
Balance at September 30, 2016	10,024,875	$	10	$	89,375		$	(12,197	)	$	9,357		$	86,545

Balance at December 31, 2016	10,024,875	$	10	$	90,082		$	(13,402	)	$	11,087		$	87,777
Net income	—	—		—			158			23			181
Proceeds from issuance of common stock, net	3,410,150	3		38,420			—			—			38,423
Distributions	—	—		—			(4,557		)	(568		)	(5,125		)
Issuance of OP Units as consideration in real estate acquisitions, net	—	—		—			—			—			—
Redemption of OP Units	50,000	—		404			—			(2,674		)	(2,270		)
Adjustment to non-controlling interests resulting from changes in ownership of the Operating Partnership	—	—		(2,058		)	—			2,058			—
Balance at September 30, 2017	13,485,025	$	13	$	126,848		$	(17,801	)	$	9,926		$	118,986

The accompanying notes are an integral part of these condensed consolidated financial statements.

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GLADSTONE LAND CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



	For the Nine Months Ended September 30,
	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	181		$	390
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	5,123			3,744
Amortization of deferred financing costs	366			135
Amortization of deferred rent assets and liabilities, net	(189		)	(129		)
Allowance for doubtful accounts	—			72
Loss on disposal of real estate asset	78			—
Changes in operating assets and liabilities:
Other assets	492			(153		)
Accounts payable, accrued expenses, and due to related parties	541			(273		)
Other liabilities	1,079			4,126
Net cash provided by operating activities	7,671			7,912
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of new real estate	(120,985		)	(69,174		)
Capital expenditures on existing real estate	(3,438		)	(10,126		)
Proceeds from sale of real estate	—			156
Change in deposits on real estate acquisitions and investments, net	(865		)	(617		)
Net cash used in investing activities	(125,288		)	(79,761		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of equity	40,421			360
Offering costs	(1,962		)	(242		)
Payment for redemption of OP Units	(2,270		)	—
Borrowings from mortgage notes and bonds payable	104,590			28,953
Repayments on mortgage notes and bonds payable	(4,663		)	(2,606		)
Borrowings from lines of credit	52,500			44,700
Repayments on lines of credit	(63,950		)	(22,300		)
Proceeds from issuance of mandatorily-redeemable preferred stock	—			28,750
Payment of financing fees	(604		)	(1,292		)
Distributions paid on common stock	(4,557		)	(3,676		)
Distributions paid to non-controlling interests in Operating Partnership	(568		)	(234		)
Payment of contingent consideration	—			(700		)
Net cash provided by financing activities	118,937			71,713
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	1,320			(136		)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	2,438			2,533
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	3,758		$	2,397
NON-CASH INVESTING AND FINANCING INFORMATION:
Issuance of non-controlling interests in operating partnership in conjunction with acquisitions	$	—		$	11,763
Real estate additions included in Other assets	15			—
Real estate additions included in Accounts payable, accrued expenses, and due to related parties	1,140			390
Loss on disposal of real estate asset included in Accounts payable, accrued expenses, and due to related parties	23			—
Real estate additions included in Other liabilities	506			809
Common stock offering and OP Unit issuance costs included in Accounts payable, accrued expenses, and due to related parties	237			31
Financing fees included in Accounts payable, accrued expenses, and due to related parties	54			59

The accompanying notes are an integral part of these condensed consolidated financial statements.

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GLADSTONE LAND CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1. BUSINESS

Business

Gladstone Land Corporation (the "Company") is an agricultural real estate investment trust (“REIT”) that was re-incorporated in Maryland on March 24, 2011, having been previously re-incorporated in Delaware on May 25, 2004, and having been originally incorporated in California on June 14, 1997. We are primarily in the business of owning and leasing farmland, and we conduct substantially all of our operations through a subsidiary, Gladstone Land Limited Partnership (the “Operating Partnership”), a Delaware limited partnership. The Company owned 91.7% and 87.4% of the limited partnership interests in the Operating Partnership ("OP Units") as of September 30, 2017, and December 31, 2016, respectively (see Note 7, "Equity," for additional discussion regarding OP Units). In addition, we have elected for Gladstone Land Advisers, Inc. ("Land Advisers"), a Delaware corporation and a wholly-owned subsidiary of ours, to be taxed as a taxable REIT subsidiary ("TRS").

Subject to certain restrictions and limitations, and pursuant to contractual agreements, our business is managed by Gladstone Management Corporation (the “Adviser”), a Delaware corporation, and administrative services are provided to us by Gladstone Administration, LLC (the “Administrator”), a Delaware limited liability company. Our Adviser and Administrator are both affiliates of ours (see Note 6, "Related-Party Transactions," for additional discussion regarding our Adviser and Administrator).

All further references herein to “we,” “us,” “our,” and the “Company” refer, collectively, to Gladstone Land Corporation and its consolidated subsidiaries, except where indicated otherwise.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Interim Financial Information

Our interim financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q in accordance with Article 10 of Regulation S-X. Accordingly, certain disclosures accompanying annual financial statements prepared in accordance with GAAP are omitted. In the opinion of our management, all adjustments, consisting solely of normal recurring accruals, necessary for the fair statement of financial statements for the interim period have been included. The interim financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 21, 2017 (the “Form 10-K”). The results of operations for the three and nine months ended September 30, 2017, are not necessarily indicative of the results that may be expected for other interim periods or for the full fiscal year.

Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could materially differ from those estimates.

Reclassifications

Certain line items on the accompanying Condensed Consolidated Statement of Operations and Condensed Consolidated Statement of Cash Flows for the three and nine months ended September 30, 2016, have been reclassified to conform to the current period’s presentation. These reclassifications had no impact on previously-reported stockholders’ equity, net income or net change in cash and cash equivalents.

Non-controlling Interests

Non-controlling interests are interests in the Operating Partnership not owned by us. We evaluate whether non-controlling interests are subject to redemption features outside of our control. As of both September 30, 2017, and December 31, 2016, the non-controlling interests in the Operating Partnership are redeemable at the option of the holder for cash or, at our election, shares of our common stock and thus are reported in the equity section of the accompanying Condensed Consolidated Balance Sheet but separate from stockholders’ equity. The amounts reported for non-controlling interests on the accompanying Condensed Consolidated Statement of Operations represent the portion of income from the Operating Partnership not attributable to us. At the end of each reporting period, we determine the amount of equity (at book value) that is allocable to

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non-controlling interests based upon the respective ownership interests. To reflect the non-controlling interests' equity interest in the Company, an adjustment is made to non-controlling interests, with a corresponding adjustment to paid-in capital, as reflected on the accompanying Condensed Consolidated Statements of Equity.

Critical Accounting Policies

The preparation of financial statements in accordance with GAAP requires management to make judgments that are subjective in order to make certain estimates and assumptions, and our application of these accounting policies involves the exercise of judgment regarding the use of assumptions as to future uncertainties. A summary of our significant accounting policies is provided in Note 2 to our consolidated financial statements included in our Form 10-K. There were no material changes to our significant accounting policies during the nine months ended September 30, 2017.

Recently-Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2014-09, "Revenue from Contracts with Customers (Topic 606)" ("ASU 2014-09"), which was amended in each of March, April, May, and December of 2016. ASU 2014-09, as amended, supersedes or replaces nearly all GAAP revenue recognition guidance and establishes a new, control-based revenue recognition model, changes the basis for deciding when revenue is recognized over time or at a point in time and will expand disclosures about revenue. As deferred by the FASB in July 2015, ASU 2014-09, as amended, is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those years. We will adopt this guidance for our annual and interim periods beginning January 1, 2018, and expect to use the modified retrospective method, under which the cumulative effect of initially applying the guidance is recognized at the date of initial application. We do not expect ASU 2014-09 to have a material impact on our results of operations or financial condition, as the primary impact of this update is related to common area maintenance and other material tenant reimbursements, whereas the majority of our revenue is from rental income pursuant to net-lease agreements, with very little being attributed to tenant recoveries.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842): An Amendment of the FASB Accounting Standards Codification” (“ASU 2016-02”). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee, which classification determines whether lease expense is recognized based on an effective interest method or on a straight-line basis, respectively, over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months, regardless of the classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. ASU 2016-02 supersedes the previous leasing standard, Accounting Standards Codification ("ASC") 840, “Leases,” and is effective on January 1, 2019, with early adoption permitted. We expect our legal expenses (included in General and administrative expenses on our Condensed Consolidated Statements of Operations) to increase marginally, as the new standard requires us to expense indirect leasing costs that were previously capitalized; however, we do not expect ASU 2016-02 to materially impact our condensed consolidated financial statements, as we currently only have two operating ground lease arrangements with terms greater than one year for which we are the lessee.

In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments" ("ASU 2016-15"), which clarifies how entities should classify certain cash receipts and cash payments on the statement of cash flows, with the objective of reducing the existing diversity in practice related to certain cash flow issues. ASU 2016-15 is effective for annual periods beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted. We will adopt this guidance for our annual and interim periods beginning January 1, 2018. We do not expect the adoption of ASU 2016-15 to have a material impact on our condensed consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18, "Statement of Cash Flows (Topic 230): Restricted cash (a consensus of the FASB Emerging Issues Task Force)" ("ASU 2016-18"), which requires the statement of cash flows to explain the change during the period in the total of cash, cash equivalents, and amounts described as restricted cash or restricted cash equivalents. Under ASU 2016-18, amounts described as restricted cash and restricted cash equivalents will be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This guidance is effective for us beginning January 1, 2018, with early adoption permitted. We do not expect the adoption of ASU 2016-18 to have a material impact on our condensed consolidated financial statements.

In January 2017, the FASB issued ASU 2017-01, "Business Combinations (Topic 805): Clarifying the Definition of a Business" ("ASU 2017-01"), which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting, including acquisitions and disposals. ASU 2017-01 is effective for

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annual periods beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. We adopted ASU 2017-01, effective October 1, 2016, and, as a result of our early adoption, all of our farmland acquisitions since our adoption have been treated as asset acquisitions under ASC 360, which has resulted in a lower amount of acquisition-related costs being expensed on our condensed consolidated statements of operations, as the majority of those costs have been capitalized and included as part of the fair value allocation of the respective purchase prices. We anticipate that the majority of our future acquisitions will continue to be treated as asset acquisitions under ASC 360, resulting in similar treatment of acquisition-related costs.

NOTE 3. REAL ESTATE AND INTANGIBLE ASSETS

All of our farms are owned on a fee-simple basis, except where noted. The following table provides certain summary information about our 72 farms as of September 30, 2017 (dollars in thousands, except for footnotes):



Location	No. of Farms	Total Acres	Farm Acres	Net Cost Basis⁽¹⁾		Encumbrances⁽²⁾
California	27	7,921	7,156	$	202,181	$	145,819
Florida	17	11,225	9,027	117,549		76,072
Colorado	9	30,170	23,257	41,812		24,686
Arizona⁽³⁾	6	6,280	5,228	40,570		23,166
Oregon	4	2,313	2,003	19,755		12,528
Nebraska	2	2,559	2,101	10,667		6,602
Washington	1	746	417	9,525		5,460
Michigan	4	270	183	2,965		1,602
North Carolina	2	310	295	2,308		1,301
	72	61,794	49,667	$	447,332	$	297,236

⁽¹⁾

Consists of the initial acquisition price (including the costs allocated to both tangible and intangible assets acquired and liabilities assumed), plus subsequent improvements and other capitalized costs associated with the properties, and adjusted for accumulated depreciation and amortization. Includes Investments in real estate, net (excluding improvements paid for by the tenant) and Lease intangibles, net; plus net above-market lease values included in Other assets; and less net below-market lease values and deferred revenue included in Other liabilities, each as shown on the accompanying Condensed Consolidated Balance Sheet.


⁽²⁾	Excludes approximately $1.9 million of deferred financing costs related to mortgage notes and bonds payable included in Mortgage notes and bonds payable, net on the accompanying Condensed Consolidated Balance Sheet.

⁽³⁾

Includes two farms in which we own a leasehold interest via ground leases with the State of Arizona that expire in February 2022 and February 2025, respectively. In total, these two farms consist of 1,368 total acres and 1,221 farm acres and had a net cost basis of approximately $3.3 million as of September 30, 2017 (included in Lease intangibles, net on the accompanying Condensed Consolidated Balance Sheet).

Real Estate

The following table sets forth the components of our investments in tangible real estate assets as of September 30, 2017, and December 31, 2016 (dollars in thousands):



	September 30, 2017			December 31, 2016
Real estate:
Land and land improvements	$	356,015		$	265,985
Irrigation systems	48,750			33,969
Buildings	17,790			14,671
Horticulture	30,967			17,759
Other improvements	6,244			4,993
Real estate, at cost	459,766			337,377
Accumulated depreciation	(15,376		)	(11,066		)
Real estate, net	$	444,390		$	326,311

Real estate depreciation expense on these tangible assets was approximately $1.7 million and $4.4 million for the three and nine months ended September 30, 2017, respectively, and $1.2 million and $3.2 million for the three and nine months ended September 30, 2016, respectively.

Included in the figures above are amounts related to improvements on certain of our properties paid for by our tenants but owned by us, or tenant improvements. As of September 30, 2017, and December 31, 2016, we recorded tenant improvements, net of accumulated depreciation, of approximately $2.2 million and $1.8 million, respectively. We recorded both depreciation expense and additional rental revenue related to these tenant improvements of approximately $61,000 and $150,000 for the

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three and nine months ended September 30, 2017, respectively, and $31,000 and $98,000 for the three and nine months ended September 30, 2016, respectively.

Intangible Assets and Liabilities

The following table summarizes the carrying values of lease intangible assets and the related accumulated amortization as of September 30, 2017, and December 31, 2016 (dollars in thousands):



	September 30, 2017			December 31, 2016
Lease intangibles:
Leasehold interest – land	$	3,498		$	—
In-place leases	1,523			1,481
Leasing costs	1,511			1,086
Tenant relationships	439			706
Lease intangibles, at cost	6,971			3,273
Accumulated amortization	(1,175		)	(1,273		)
Lease intangibles, net	$	5,796		$	2,000

Total amortization expense related to these lease intangible assets was approximately $390,000 and $739,000 for the three and nine months ended September 30, 2017, respectively, and $207,000 and $582,000 for the three and nine months ended September 30, 2016, respectively.

The following table summarizes the carrying values of certain lease intangible assets or liabilities included in Other assets and Other liabilities, respectively, on the accompanying Condensed Consolidated Balance Sheets and the related accumulated amortization or accretion, respectively, as of September 30, 2017, and December 31, 2016 (dollars in thousands).



	September 30, 2017						December 31, 2016
Intangible Asset or Liability	Deferred Rent Asset (Liability)			Accumulated (Amortization) Accretion			Deferred Rent Asset (Liability)			Accumulated (Amortization) Accretion
Above-market lease values and lease incentives⁽¹⁾	$	46		$	(21	)	$	19		$	(14	)
Below-market lease values and deferred revenue⁽²⁾	(823		)	108			(785		)	61
	$	(777	)	$	87		$	(766	)	$	47


⁽¹⁾	Above-market lease values and lease incentives are included as part of Other assets in the accompanying Condensed Consolidated Balance Sheets, and the related amortization is recorded as a reduction of rental income.


⁽²⁾	Below-market lease values and deferred revenue are included as a part of Other liabilities in the accompanying Condensed Consolidated Balance Sheets, and the related accretion is recorded as an increase to rental income.

Total amortization related to above-market lease values and lease incentives was approximately $4,000 and $7,000 for the three and nine months ended September 30, 2017, respectively, and $2,000 and $5,000 for the three and nine months ended September 30, 2016, respectively. Total accretion related to below-market lease values and deferred revenue was approximately $17,000 and $47,000 for the three and nine months ended September 30, 2017, respectively, and $9,000 and $24,000 for the three and nine months ended September 30, 2016, respectively.

Acquisitions

Until our adoption of ASU 2017-01, which clarified the definition of a business, certain acquisitions during the prior-year period were accounted for as business combinations in accordance with ASC 805, as there was a prior leasing history on the property. As such, the fair value of all assets acquired and liabilities assumed were determined in accordance with ASC 805, and all acquisition-related costs were expensed as incurred, other than those costs directly related to reviewing or assigning leases that we assumed upon acquisition, which were capitalized as part of leasing costs. Upon our early adoption of ASU 2017-01, effective October 1, 2016, most acquisitions, including those with a prior leasing history, are now generally treated as an asset acquisition under ASC 360. For acquisitions accounted for as asset acquisitions under ASC 360, all acquisition-related costs were capitalized and included as part of the fair value allocation of the identifiable tangible and intangible assets acquired, other than those costs that directly related to originating new leases we executed upon acquisition, which were capitalized as part of leasing costs.

In addition, total consideration for acquisitions may include a combination of cash and equity securities, such as OP Units. When OP Units are issued in connection with acquisitions, we determine the fair value of the OP Units issued based on the number of units issued multiplied by the closing price of the Company’s common stock on the date of acquisition.

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2017 Acquisitions

During the nine months ended September 30, 2017, we acquired 14 new farms in seven separate transactions, which are summarized in the table below (dollars in thousands, except for footnotes).



Property Name	Property Location	Acquisition Date	Total Acreage	No. of Farms	Primary Crop(s)	Lease Term⁽¹⁾	Renewal Options	Total Purchase Price		Acquisition Costs⁽²⁾		Annualized Straight-line Rent⁽³⁾			New Long-term Debt
Citrus Boulevard	Martin, FL	1/12/2017	3,748	1	Organic Vegetables	7.0 years	3 (5 years)	$	54,000	$	80	$	2,926		$	32,400
Spot Road⁽⁴⁾	Yuma, AZ	6/1/2017	3,280	4	Melons and Alfalfa Hay	8.6 years	1 (10 years) & 1 (2 years)	27,500		88		1,673			15,300
Poplar Street	Bladen, NC	6/2/2017	310	2	Organic Blueberries	9.6 years	1 (5 years)	2,169		49		122		⁽⁵⁾	1,301
Phelps Avenue	Fresno, CA	7/17/2017	847	4	Pistachios and Almonds	10.3 years	1 (5 years)	13,603		43		681		⁽⁵⁾	8,162
Parrot Avenue⁽⁶⁾	Okeechobee, FL	8/9/2017	1,910	1	Misc. Vegetables	0.5 years	None	9,700		64		488			5,820
Cat Canyon Road⁽⁷⁾	Santa Barbara, CA	8/30/2017	361	1	Wine Grapes	9.8 years	2 (5 years)	5,375		67		322			3,225
Oasis Road	Walla Walla, WA	9/8/2017	746	1	Apples, Cherries, and Wine Grapes	6.3 years	None	9,500		45		480		⁽⁵⁾	5,460
			11,202	14				$	121,847	$	436	$	6,692		$	71,668


⁽¹⁾	Where more than one lease was assumed or executed, represents the weighted-average lease term on the property.


⁽²⁾	Unless noted otherwise, acquisitions were accounted for as asset acquisitions under ASC 360.


⁽³⁾	Annualized straight-line amount is based on the minimum cash rental payments guaranteed under the lease, as required under GAAP.

⁽⁴⁾

Includes two farms (1,368 total acres) acquired through a leasehold interest, with the State of Arizona as the lessor. These state leases expire in February 2022 (485 total acres) and February 2025 (883 total acres). In addition, in connection with the acquisition of this property, we assumed four in-place leases with us as the lessor or sublessor. Three of these leases are agricultural leases, with one lease expiring on June 30, 2019, and two leases expiring on September 15, 2026. The fourth lease is a residential lease that expires on September 30, 2019. If either of the state leases is not renewed upon its expiration, the subleases on the respective acreage shall terminate automatically.


⁽⁵⁾	Leases also provide for a variable rent component based on the gross crop revenues earned on the property. The figures above represent only the minimum cash rents guaranteed under the respective leases.

⁽⁶⁾

In connection with the acquisition of this property, we executed a 6-year, follow-on lease with a new tenant that begins upon the expiration of the 7-month lease assumed at acquisition. The follow-on lease includes two, 6-year extension options and provides for minimum annualized straight-line rents of approximately $542,000. In addition, in connection with the execution of the follow-on lease, we committed to providing up to $1.0 million of capital for certain irrigation and property improvements. As stipulated in the follow-on lease, we will earn additional rent income on the total cost of the improvements as disbursements are made by us at a rate commensurate with the annual yield on the farmland (as determined by each year's minimum cash rent per the follow-on lease).


⁽⁷⁾	In connection with the acquisition of this property, we committed up to $4.0 million of capital to fund the development of additional vineyard acreage on the property. As stipulated in the lease agreement, we will earn additional rental income on the total cost of the project as the capital is disbursed by us at rates specified in the lease.

During the three and nine months ended September 30, 2017, in the aggregate, we recognized operating revenues of approximately $1.5 million and $3.0 million, respectively, and earnings of approximately $341,000 and $1.2 million, respectively, related to the above acquisitions.

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2016 Acquisitions

During the nine months ended September 30, 2016, we acquired 13 new farms in seven separate transactions, which are summarized in the table below (dollars in thousands, except for footnotes).



Property Name	Property Location	Acquisition Date	Total Acreage	No. of Farms	Primary Crop(s)	Lease Term	Renewal Options	Total Purchase Price		Acquisition Costs			Annualized Straight-line Rent⁽¹⁾			Net Long-term Debt Issued
Gunbarrel Road ⁽²⁾	Saguache, CO	3/3/2016	6,191	3	Organic Potatoes	5 years	1 (5 years)	$	25,736	$	119	⁽³⁾	$	1,591		$	15,531
Calaveras Avenue	Fresno, CA	4/5/2016	453	1	Pistachios	10 years	1 (5 years)	15,470		39		⁽⁴⁾	774		⁽⁵⁾	9,282
Orange Avenue	St. Lucie, FL	7/1/2016	401	1	Vegetables	7 years	2 (7 years)	5,100		38		⁽⁴⁾	291			3,120
Lithia Road	Hillsborough, FL	8/11/2016	72	1	Strawberries	5 years	None	1,700		38		⁽³⁾	97			1,020
Baca County⁽⁶⁾	Baca, CO	9/1/2016	7,384	5	Grass Hay and Alfalfa	4 years	1 (5 years)	6,323		73		⁽⁴⁾	384			—
Diego Ranch⁽⁷⁾	Stanislaus, CA	9/14/2016	1,357	1	Almonds	3 years	3 (5 years) & 1 (3 years)	13,997		64		⁽³⁾	621			—
Nevada Ranch	Merced, CA	9/14/2016	1,130	1	Almonds	3 years	3 (5 years) & 1 (3 years)	13,232		42		⁽³⁾	574			—
			16,988	13				$	81,558	$	413		$	4,332		$	28,953


⁽¹⁾	Annualized straight-line amount is based on the minimum cash rental payments guaranteed under the lease, as required under GAAP.


⁽²⁾	As partial consideration for the acquisition of this property, we issued 745,879 OP Units, constituting an aggregate fair value of approximately $6.5 million as of the acquisition date. We incurred $25,500 of legal costs in connection with the issuance of these OP Units.


⁽³⁾	Acquisition accounted for as a business combination under ASC 805. In aggregate, $9,520 of these costs were direct leasing costs incurred in connection with these acquisitions.


⁽⁴⁾	Acquisition accounted for as an asset acquisition under ASC 360.


⁽⁵⁾	Leases provide for a variable rent component based on the gross crop revenues earned on the property. The figures above represent only the minimum cash rents guaranteed under the respective leases.


⁽⁶⁾	As partial consideration for the acquisition of this property, we issued 125,677 OP Units, constituting an aggregate fair value of approximately $1.5 million as of the acquisition date. We incurred approximately $8,235 of legal costs in connection with the issuance of these OP Units.


⁽⁷⁾	As partial consideration for the acquisition of this property, we issued 343,750 OP Units, constituting an aggregate fair value of approximately $3.9 million as of the acquisition date. We incurred approximately $21,710 of legal costs in connection with the issuance of these OP Units.

During the three and nine months ended September 30, 2016, in the aggregate, we recognized operating revenues of approximately $770,000 and $1.5 million, respectively, and losses of of approximately $42,000 and $196,000, respectively, related to the above acquisitions (which loss figures include approximately $128,000 and $229,000, respectively, of non-recurring acquisition-related costs).

Purchase Price Allocations

The allocation of the aggregate purchase price for the farms acquired during each of the nine months ended September 30, 2017 and 2016 is as follows (dollars in thousands):



Acquisition Period	Land and Land Improvements		Buildings		Irrigation System		Other Improvements		Horticulture		Leasehold Interest – Land		In-place Leases	Leasing Costs		Net Below-Market Leases			Total Purchase Price
2017 Acquisitions	$	89,614	$	2,804	$	11,534	$	824	$	12,611	$	3,488	487	$	508	$	(23	)	$	121,847
2016 Acquisitions	59,038		3,691		4,952		2,079		11,431		—		501	448		(582		)	81,558

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Acquired Intangibles and Liabilities

The following table shows the weighted-average amortization period, in years, for the intangible assets acquired and liabilities assumed in connection with new real estate acquired during the nine months ended September 30, 2017 and 2016:



	Weighted-Average Amortization Period (in Years)
Intangible Assets and Liabilities	2017	2016
Leasehold interest – land	6.9	—
In-place leases	6.3	8.7
Leasing costs	8.8	10.6
Above-market lease values	2.1	—
Below-market lease values and deferred revenue	4.7	20.9
All intangible assets and liabilities	7.0	14.0

Pro-Forma Financials

During the nine months ended September 30, 2016, we acquired six farms that qualified as business combinations. No farms were acquired during the nine months ended September 30, 2017 that were treated as business combinations. The following table reflects pro-forma consolidated financial information as if each farm acquired during the nine months ended September 30, 2016, as part of a business combination was acquired on January 1, 2015. In addition, pro-forma earnings have been adjusted to assume that acquisition-related costs related to these farms were incurred at the beginning of the previous fiscal year (dollars in thousands, except share and per-share amounts).



	For the three months ended September 30, 2016		For the nine months ended September 30, 2016
	(Unaudited)		(Unaudited)
Operating Data:
Total operating revenue	$	4,718	$	13,286
Net income attributable to the company	$	212	$	594
Share and Per-share Data:
Earnings per share of common stock – basic and diluted	$	0.02	$	0.06
Weighted-average common shares outstanding – basic and diluted	10,018,331		10,001,466

The pro-forma consolidated results are prepared for informational purposes only. They are not necessarily indicative of what our consolidated financial condition or results of operations actually would have been assuming the acquisitions had occurred at the beginning of the previous fiscal year, nor do they purport to represent our consolidated financial position or results of operations for future periods.

Significant Existing Real Estate Activity

Lease Extensions and Renewals

During the nine months ended September 30, 2017, we executed ten separate leases on nine different farms in California and Florida that had leases expiring in either 2017 or 2018. In total, these leases were renewed for additional terms ranging between one and five years and for total annualized rents of approximately $2.2 million, representing a decrease of approximately $167,000 (approximately 7.0%) from that of the prior leases. These renewals were executed without incurring any downtime on the respective farms, and no leasing commissions or tenant improvements were incurred in connection with these renewals.

Project Completion

In connection with the lease we executed upon our acquisition of an 854-acre farm in California in September 2015, we agreed to fund the development of the property into an almond orchard. The development included the removal of 274 acres of old grape vineyards, the installation of a new irrigation system, including the drilling of four new wells, and the planting of over 800 acres of new almond trees. As of September 30, 2017, the development project had been completed at a total cost of approximately $8.4 million, and, as a result, we expect to receive approximately $5.2 million of additional rent throughout the term of the lease, which expires January 9, 2031.

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Portfolio Diversification and Concentrations

Diversification

The following table summarizes the geographic locations, by state, of our properties with leases in place as of September 30, 2017 and 2016 (dollars in thousands):



	As of and For the Nine Months Ended September 30, 2017						As of and For the Nine Months Ended September 30, 2016
State	Number of Farms	Total Acres	% of Total Acres	Rental Revenue		% of Total Rental Revenue	Number of Farms	Total Acres	% of Total Acres	Rental Revenue		% of Total Rental Revenue
California	27	7,921	12.8%	$	8,749	47.8%	21	6,516	19.3%	$	6,986	56.4%
Florida	17	11,225	18.2%	4,839		26.5%	15	5,567	16.5%	2,408		19.4%
Colorado	9	30,170	48.8%	2,018		11.0%	8	13,575	40.1%	951		7.7%
Arizona	6	6,280	10.2%	1,114		6.1%	2	3,000	8.9%	544		4.4%
Oregon	4	2,313	3.7%	887		4.8%	4	2,313	6.8%	877		7.1%
Nebraska	2	2,559	4.2%	435		2.4%	2	2,559	7.6%	435		3.5%
Michigan	4	270	0.4%	187		1.0%	4	270	0.8%	187		1.5%
North Carolina	2	310	0.5%	42		0.2%	—	—	—%	—		—%
Washington	1	746	1.2%	31		0.2%	—	—	—%	—		—%
TOTALS	72	61,794	100.0%	$	18,302	100.0%	56	33,800	100.0%	$	12,388	100.0%

Concentrations

Credit Risk

As of September 30, 2017, our farms were leased to 49 different, third-party tenants, with certain tenants leasing more than one farm. One unrelated tenant ("Tenant A") leases five of our farms, and aggregate rental revenue attributable to Tenant A accounted for approximately $3.2 million, or 17.7% of the rental revenue recorded during the nine months ended September 30, 2017. In addition, Dole Food Company (“Dole”) leases two of our farms, and aggregate rental revenue attributable to Dole accounted for approximately $2.2 million, or 12.2% of the rental revenue recorded during the nine months ended September 30, 2017. If either Tenant A or Dole fail to make rental payments or elect to terminate their respective leases, and the properties cannot be re-leased on satisfactory terms, there could be a material adverse effect on our financial performance and ability to continue operations. No other individual tenant represented greater than 10.0% of the total rental revenue recorded during the nine months ended September 30, 2017.

Geographic Risk

As of September 30, 2017, 27 of the 72 farms we owned were located in California, 17 farms were located in Florida and 9 farms were located in Colorado. Further, our California, Florida, and Colorado farms accounted for approximately $8.7 million (47.8%), $4.8 million (26.5%), and $2.0 million (11.0%), respectively, of the rental revenue recorded during the nine months ended September 30, 2017. Our 27 California farms are spread across four of the many different growing regions within the state. Though we seek to continue to further diversify geographically, as may be desirable or feasible, should an unexpected natural disaster occur where our properties are located, there could be a material adverse effect on our financial performance and ability to continue operations. No other single state accounted for more than 10.0% of the total rental revenue recorded during the nine months ended September 30, 2017.

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NOTE 4. BORROWINGS

Our borrowings as of September 30, 2017, and December 31, 2016 are summarized below (dollars in thousands):



	Carrying Value as of						As of September 30, 2017
	September 30, 2017			December 31, 2016			Stated Interest Rates⁽¹⁾ (Range; Wtd Avg)	Maturity Dates (Range; Wtd Avg)
Mortgage notes and bonds payable:
Fixed-rate mortgage notes payable	$	207,618		$	142,861		2.90%–4.47%; 3.59%	6/1/2020–11/1/2041; April 2029
Fixed-rate bonds payable	84,518			49,348			2.38%–4.05%; 3.13%	7/30/2018–8/30/2024; June 2021
Total mortgage notes and bonds payable	292,136			192,209
Deferred financing costs – mortgage notes and bonds payable	(1,902		)	(1,412		)	N/A	N/A
Mortgage notes and bonds payable, net	$	290,234		$	190,797

Variable-rate revolving lines of credit	$	5,100		$	16,550		3.55%	4/5/2024

Total borrowings, net	$	295,334		$	207,347


⁽¹⁾	Where applicable, stated interest rates are before interest patronage (as described below).

The weighted-average interest rate charged on the above borrowings, excluding the impact of deferred financing costs and before any interest patronage, or refunded interest, was 3.44% and 3.33% for the three and nine months ended September 30, 2017, respectively, and 3.29% and 3.27% for the three and nine months ended September 30, 2016, respectively. In addition, 2016 interest patronage from our Farm Credit Notes Payable (as defined below), which we received and recorded during the six months ended June 30, 2017, resulted in a 17.2% reduction (approximately 61 basis points) to the stated interest rates on such borrowings.

MetLife Borrowings

MetLife Facility

On May 9, 2014, we closed on a credit facility (the "MetLife Facility") with Metropolitan Life Insurance Company (“MetLife”) that originally consisted of a $100.0 million long-term note payable (the “2015 MetLife Term Note”) and a $25.0 million revolving equity line of credit (the “2015 MetLife Line of Credit”). As amended on October 5, 2016, the overall size of the MetLife Facility was increased from $125.0 million to $200.0 million (the "2016 Amendment"). Pursuant to the 2016 Amendment, the MetLife Facility now consists of the 2015 MetLife Term Note, the 2015 MetLife Line of Credit, a $50.0 million long-term note payable (the "2016 MetLife Term Note" and, together with the 2015 MetLife Term Note, the "MetLife Term Notes"), the terms of which are pari passu with those of the 2015 MetLife Term Note, and a second $25.0 million revolving equity line of credit (the "2016 MetLife Line of Credit" and, together with the 2015 MetLife Line of Credit, the "MetLife Lines of Credit"), the terms of which are pari passu to those of the 2015 MetLife Line of Credit.

On September 19, 2017, we drew approximately $27.5 million on the MetLife Term Notes, which was used to repay a portion of the balance outstanding under the MetLife Lines of Credit. The interest rate on the new disbursement was 3.85% per annum (which rate is fixed through January 4, 2027) and was blended with the existing interest rate on the previously-outstanding balance under the MetLife Term Notes.

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The following table summarizes the pertinent terms of the MetLife Facility as of September 30, 2017 (dollars in thousands, except for footnotes):

Issuance

Aggregate

Commitment

Maturity

Dates

Principal

Outstanding

Interest Rate Terms

Undrawn

Commitment

MetLife Term Notes

150,000

⁽¹⁾

1/5/2029

131,210

3.30%, fixed through 1/4/2027

⁽²⁾

13,530

^(3),(4)

MetLife Lines of Credit

50,000

4/5/2024

5,100

3-month LIBOR + 2.25%

⁽⁵⁾

44,900

⁽³⁾

Total principal outstanding

136,310


⁽¹⁾	If the aggregate commitment under the MetLife Facility is not fully utilized by December 31, 2018, MetLife has the option to be relieved of its obligation to disburse the additional funds under the MetLife Term Notes.


⁽²⁾	Represents the blended interest rate on the MetLife Term Notes as of September 30, 2017. Interest rates for subsequent disbursements will be based on then-prevailing market rates. The interest rate on all then-outstanding disbursements will be subject to adjustment on January 5, 2027. Through December 31, 2018, the MetLife Term Notes are also subject to an unused fee of 0.20% on undrawn amounts.


⁽³⁾	Based on the properties that were pledged as collateral under the MetLife Facility, as of September 30, 2017, the maximum additional amount we could draw under the facility was approximately $12.9 million.


⁽⁴⁾	Net of amortizing principal payments of approximately $5.3 million.


⁽⁵⁾	The interest rate on the MetLife Lines of Credit is subject to a minimum annualized rate of 2.50%, plus an unused fee of 0.20% on undrawn amounts. The interest rate spread will be subject to adjustment on October 5, 2019. As of September 30, 2017, the interest rate on the MetLife Lines of Credit was 3.55%.

Individual MetLife Notes

In May 2017, we also entered into two new loan agreements with MetLife (collectively, the "Individual MetLife Notes"), the terms of which are summarized in the aggregate in the table below (dollars in thousands):



Date of Issuance	Amount		Maturity Date	Principal Amortization	Interest Rate Terms
5/31/2017	$15,300	⁽¹⁾	2/14/2022 & 2/14/2025	28.6 years	3.55% & 3.85%, fixed throughout their respective terms


⁽¹⁾	Proceeds from these notes were used for the acquisition of a new property.

As of September 30, 2017, we were in compliance with all covenants applicable to the MetLife Borrowings.

Farm Credit Notes Payable

From time to time since September 2014, we, through certain subsidiaries of our Operating Partnership, have entered into various loan agreements with certain Farm Credit associations, including Farm Credit of Central Florida, FLCA ("Farm Credit CFL"), Farm Credit West, FLCA ("Farm Credit West"), Cape Fear Farm Credit, ACA ("CF Farm Credit"), Farm Credit of Florida, ACA ("Farm Credit FL"), and Northwest Farm Credit Services, FLCA ("NW Farm Credit," and, collectively, with the other Farm Credit associations, "Farm Credit"). During the nine months ended September 30, 2017, we entered into the following loan agreements with Farm Credit (dollars in thousands):

Issuer

Date of Issuance

Amount⁽¹⁾

Maturity Date

Principal Amortization

Interest Rate Terms⁽²⁾

Farm Credit CFL⁽³⁾

7/13/2017

5,472

8/1/2022

28.4 years

4.47%, fixed throughout term

Farm Credit West

7/17/2017

8,162

5/1/2037

20.0 years

4.31%, fixed through 7/31/2024, variable thereafter

CF Farm Credit

6/14/2017

1,301

7/1/2022

40.2 years

4.41%, fixed throughout its term

Farm Credit FL

8/9/2017

5,820

3/1/2037

19.5 years

4.70%, fixed through 2/29/2024, variable thereafter

NW Farm Credit

9/8/2017

5,460

9/1/2024

39.6 years

4.41%, fixed throughout its term


⁽¹⁾	Proceeds from these notes were used to fund new acquisitions, to repay existing indebtedness, and for other general corporate purposes.


⁽²⁾	Stated rate is before interest patronage, as discussed below.

⁽³⁾

During the three months ended September 30, 2017, we amended four existing loan agreements with Farm Credit CFL to increase the loan amounts and adjust the principal amortization and interest rate terms as shown in the table above. The amount presented in the table above represents the total additional funds advanced under the four loans. The new terms of each of these four loans are pari passu with one another.

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The following table summarizes, in the aggregate, the pertinent terms of the loans outstanding from Farm Credit (collectively, the "Farm Credit Notes Payable") as of September 30, 2017 (dollars in thousands, except for footnotes):



Issuer	# of Loans Outstanding	Dates of Issuance	Maturity Dates	Principal Outstanding		Stated Interest Rate⁽¹⁾
Farm Credit CFL	8	9/19/2014 – 7/13/2017	6/1/2020 – 10/1/2040	$	27,472	4.15%	⁽²⁾
Farm Credit West	3	4/4/2016 – 7/17/2017	5/1/2037 – 11/1/2041	21,054		3.91%	⁽³⁾
CF Farm Credit	1	6/14/2017	7/1/2022	1,301		4.41%	⁽⁴⁾
Farm Credit FL	1	8/9/2017	3/1/2037	5,820		4.70%	⁽⁴⁾
NW Farm Credit	1	9/8/2017	9/1/2024	5,460		4.41%	⁽⁴⁾
Total	14			$	61,107


⁽¹⁾	Represents the weighted-average, blended rate (before interest patronage, as discussed below) on the respective borrowings as of September 30, 2017.


⁽²⁾	In April 2017, we received interest patronage of approximately $124,000 related to interest accrued on loans from Farm Credit CFL during the year ended December 31, 2016, which resulted in a 15.8% reduction (approximately 55 basis points) to the stated interest rates on such borrowings. In March 2016, we received interest patronage related to loans from Farm Credit CFL of approximately $94,000.


⁽³⁾	In February 2017, we received interest patronage of approximately $59,000 related to interest accrued on loans from Farm Credit West during the year ended December 31, 2016, which resulted in a 21.3% reduction (approximately 76 basis points) to the stated interest rates on such borrowings. We did not receive any patronage related to loans from Farm Credit West during the prior year.


⁽⁴⁾	To date, no interest patronage has been received or recorded associated with these loans, as they were not outstanding during 2016.

Interest patronage, or refunded interest, on our borrowings from Farm Credit associations is recorded upon receipt and is included in Other income on our Condensed Consolidated Statements of Operations. Receipt of interest patronage typically occurs in the first half of the calendar year following the year in which the respective interest payments are made.

As of September 30, 2017, we were in compliance with all covenants applicable to the Farm Credit Notes Payable.

Farmer Mac Facility

On December 5, 2014, we, through certain subsidiaries of our Operating Partnership, entered into a bond purchase agreement (the “Bond Purchase Agreement”) with Federal Agricultural Mortgage Corporation (“Farmer Mac”) and Farmer Mac Mortgage Securities Corporation (the “Bond Purchaser”), for a secured note purchase facility that provides for bond issuances up to an aggregate principal amount of $75.0 million (the “Farmer Mac Facility”). On June 16, 2016, we amended the Farmer Mac Facility to increase the maximum borrowing capacity from $75.0 million to $125.0 million and extend the term of the Bond Purchase Agreement by two years, to December 11, 2018.

During the nine months ended September 30, 2017, we issued five bonds for gross proceeds of approximately $35.6 million, the terms of which are summarized, in the aggregate, in the table below (dollars in thousands):



Date of Issuance	Gross Proceeds⁽¹⁾			Maturity Dates	Principal Amortization	Interest Rate Terms
1/12/2017-8/30/2017	$	35,625	⁽¹⁾	1/10/2020 – 8/30/2024	None	2.80% – 4.05%, fixed throughout their respective terms


⁽¹⁾	Proceeds from these bonds were used for the acquisitions of new properties.

The following table summarizes, in the aggregate, the terms of the 14 bonds outstanding under the Farmer Mac Facility as of September 30, 2017 (dollars in thousands):



Dates of Issuance	Initial Commitment			Maturity Dates	Principal Outstanding		Stated Interest Rate⁽¹⁾	Undrawn Commitment
12/11/2014–8/30/2017	$	125,000	⁽²⁾	7/30/2018–8/30/2024	$	84,519	3.13%	$	39,118	⁽³⁾


⁽¹⁾	Represents the weighted-average interest rate as of September 30, 2017.


⁽²⁾	If the balance of the Farmer Mac Facility is not fully utilized by December 11, 2018, Farmer Mac has the option to be relieved of its obligations to purchase additional bonds under the facility.


⁽³⁾	As of September 30, 2017, there was no additional availability to draw under the Farmer Mac Facility, as no additional properties had been pledged as collateral.

As of September 30, 2017, we were in compliance with all covenants under the Farmer Mac Facility.

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Debt Service – Aggregate Maturities

Scheduled principal payments of our aggregate mortgage notes and bonds payable as of September 30, 2017, for the succeeding years are as follows (dollars in thousands):



Period		Scheduled Principal Payments
For the remaining three months ending December 31:	2017	$	601
For the fiscal years ending December 31:	2018	23,433
	2019	11,060
	2020	26,484
	2021	7,242
	2022	36,089
	Thereafter	187,227
		$	292,136

Fair Value

ASC 820 provides a definition of fair value that focuses on the exchange (exit) price of an asset or liability in the principal, or most advantageous, market and prioritizes the use of market-based inputs to the valuation. ASC 820-10, "Fair Value Measurements and Disclosures," establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:


•	Level 1 — inputs that are based upon quoted prices (unadjusted) for identical assets or liabilities in active markets;


•	Level 2 — inputs are based upon quoted prices for similar assets or liabilities in active or inactive markets or model-based valuation techniques, for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and


•	Level 3 — inputs are generally unobservable and significant to the fair value measurement. These unobservable inputs are generally supported by little or no market activity and are based upon management's estimates of assumptions that market participants would use in pricing the asset or liability.

As of September 30, 2017, the aggregate fair value of our long-term, fixed-rate mortgage notes and bonds payable was approximately $286.3 million, as compared to an aggregate carrying value (excluding unamortized related debt issuance costs) of $292.1 million. The fair value of our long-term, fixed-rate mortgage notes and bonds payable is valued using Level 3 inputs under the hierarchy established by ASC 820-10 and is calculated based on a discounted cash flow analysis, using discount rates based on management’s estimates of market interest rates on long-term debt with comparable terms. Further, due to the revolving nature of the MetLife Lines of Credit and the lack of changes in market credit spreads, their aggregate fair value as of September 30, 2017, is deemed to approximate their aggregate carrying value of $5.1 million.

NOTE 5. MANDATORILY-REDEEMABLE PREFERRED STOCK

On August 17, 2016, we completed a public offering of 1,000,000 shares of 6.375% Series A Cumulative Term Preferred Stock, par value $0.001 per share (the "Term Preferred Stock"), at a public offering price of $25.00 per share. Simultaneous with the closing of the offering and on the same terms and conditions, the underwriters exercised in full their option to purchase an additional 150,000 shares of the Term Preferred Stock to cover over-allotments. As a result of this offering, we issued a total of 1,150,000 shares of the Term Preferred Stock for gross proceeds of approximately $28.8 million and net proceeds, after deducting underwriting discounts and offering expenses borne by us, of approximately $27.6 million. These proceeds were used to repay existing indebtedness, to fund new property acquisitions and for other general corporate purposes. The Term Preferred Stock is traded under the ticker symbol, "LANDP," on the NASDAQ Global Market. The Term Preferred Stock is not convertible into our common stock or any other securities.

Generally, we may not redeem shares of the Term Preferred Stock prior to September 30, 2018, except in limited circumstances to preserve our qualification as a REIT. On or after September 30, 2018, we may redeem the shares at a redemption price of $25.00 per share, plus any accumulated and unpaid dividends up to, but excluding, the date of redemption. The shares of the Term Preferred Stock have a mandatory redemption date of September 30, 2021. We incurred approximately $1.2 million in total offering costs related to this issuance, which have been recorded net of the Term Preferred Stock as presented on the accompanying Condensed Consolidated Balance Sheet, and we will amortize these costs over the mandatory redemption period, which ends on September 30, 2021.

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The Term Preferred Stock is recorded as a liability on our accompanying Condensed Consolidated Balance Sheet in accordance with ASC 480, "Distinguishing Liabilities from Equity," which states that mandatorily redeemable financial instruments should be classified as liabilities. In addition, the related dividend payments are treated similar to interest expense in the accompanying Condensed Consolidated Statement of Operations.

As of September 30, 2017, the fair value of our Term Preferred Stock was approximately $29.8 million, as compared to the carrying value, exclusive of offering costs, of $28.8 million. The fair value of our Term Preferred Stock is valued using Level 1 inputs under the hierarchy established by ASC 820-10, "Fair Value Measurements and Disclosures," and is calculated based on the closing per-share price as of September 30, 2017, of $25.93.

The dividends to preferred stockholders declared by our Board of Directors and paid by us during the nine months ended September 30, 2017 and 2016 are reflected in the table below.



Fiscal Year	Declaration Date	Record Date	Payment Date	Dividend per Preferred Share
2017	January 10, 2017	January 20, 2017	January 31, 2017	$	0.1328125
	January 10, 2017	February 16, 2017	February 28, 2017	0.1328125
	January 10, 2017	March 22, 2017	March 31, 2017	0.1328125
	April 11, 2017	April 21, 2017	April 28, 2017	0.1328125
	April 11, 2017	May 19, 2017	May 31, 2017	0.1328125
	April 11, 2017	June 21, 2017	June 30, 2017	0.1328125
	July 11, 2017	July 21, 2017	July 31, 2017	0.1328125
	July 11, 2017	August 21, 2017	August 31, 2017	0.1328125
	July 11, 2017	September 20, 2017	September 29, 2017	0.1328125
	Nine months ended September 30, 2017			$	1.1953125

2016	September 12, 2016	September 21, 2016	September 30, 2016	$	0.190364583	⁽¹⁾
	Nine months ended September 30, 2016			$	0.190364583


⁽¹⁾	Represents the cumulative dividend from (but excluding) the date of original issuance through the month ended September 30, 2016.

NOTE 6. RELATED-PARTY TRANSACTIONS

We are externally managed pursuant to contractual arrangements with our Adviser and our Administrator, which collectively employ all of our personnel and pay their salaries, benefits and general expenses directly. Both our Adviser and Administrator are affiliates of ours, as their parent company is owned and controlled by David Gladstone, our chairman and chief executive officer. In addition, two of our executive officers, Mr. Gladstone and Terry Brubaker (our vice chairman and chief operating officer), serve as directors and executive officers of each of our Adviser and Administrator, and Michael LiCalsi, our general counsel and secretary, serves as our Administrator’s president.

The advisory agreement with our Adviser that was in effect through March 31, 2017 (the “Advisory Agreement”), and the current administration agreement with our Administrator (the “Administration Agreement”) each became effective February 1, 2013. A summary of each of these agreements is provided in Note 6 to our consolidated financial statements included in our Form 10-K.

On April 11, 2017, we entered into a Second Amended and Restated Investment Advisory Agreement (the "Amended Advisory Agreement") with our Adviser that became effective beginning with the three months ended June 30, 2017. Our entrance into the Amended Advisory Agreement was approved unanimously by our board of directors, including, specifically, our independent directors.

In addition, on April 11, 2017, we entered into an agreement with Gladstone Securities, LLC, ("Gladstone Securities"), effective beginning with the three months ended June 30, 2017, for it to act as our non-exclusive agent to assist us with arranging financing for our properties (the "Financing Arrangement Agreement"). Gladstone Securities is a privately-held broker-dealer registered with the Financial Industry Regulatory Authority and insured by the Securities Investor Protection Corporation. Gladstone Securities is an affiliate of ours, as its parent company is owned and controlled by David Gladstone, our chairman and chief executive officer. Mr. Gladstone also serves on the board of managers of Gladstone Securities.

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A summary of the compensation terms for each of the Amended Advisory Agreement and the Financing Arrangement Agreement is below.

In addition, subsequent to September 30, 2017, the existing lease on one of our farms was assigned by the tenant to our TRS. See Note 10, "Subsequent Events," for further discussion on this transaction.

Amended Advisory Agreement

Pursuant to the Amended Advisory Agreement, effective beginning with the three months ended June 30, 2017, our Adviser is compensated in the form of a base management fee and, each as applicable, an incentive fee, a capital gains fee and a termination fee. Each of these fees is described below.

Base Management Fee

A base management fee will be paid quarterly and will be calculated as 2.0% per annum (0.50% per quarter) of the prior calendar quarter's total adjusted equity, which is defined as total equity plus total mezzanine equity, if any, each as reported on our balance sheet, adjusted to exclude unrealized gains and losses and certain other one-time events and non-cash items ("Total Adjusted Equity").

Incentive Fee

An incentive fee will be calculated and payable quarterly in arrears if the Pre-Incentive Fee FFO for a particular quarter exceeds a hurdle rate of 1.75% (7.0% annualized) of the prior calendar quarter's Total Adjusted Equity. For purposes of this calculation, Pre-Incentive Fee FFO is defined in the Amended Advisory Agreement as FFO (also as defined in the Amended Advisory Agreement) accrued by the Company during the current calendar quarter (prior to any incentive fee calculation for the current calendar quarter), less any dividends paid on preferred stock securities that are not treated as a liability for GAAP purposes. Our Adviser will receive: (i) no Incentive Fee in any calendar quarter in which the Pre-Incentive Fee FFO does not exceed the hurdle rate; (ii) 100% of the Pre-Incentive Fee FFO with respect to that portion of such Pre-Incentive Fee FFO, if any, that exceeds the hurdle rate but is less than 2.1875% in any calendar quarter (8.75% annualized); and (iii) 20% of the amount of the Pre-Incentive Fee FFO, if any, that exceeds 2.1875% in any calendar quarter (8.75% annualized).

Capital Gains Fee

A capital gains-based incentive fee will be calculated and payable in arrears at the end of each fiscal year (or upon termination of the Amended Advisory Agreement). The capital gains fee shall equal: (i) 15% of the cumulative aggregate realized capital gains minus the cumulative aggregate realized capital losses, minus (ii) any aggregate capital gains fees paid in prior periods. For purposes of this calculation, realized capital gains and losses will be calculated as (x) the sales price of the property minus (y) any costs to sell the property and the then-current gross value of the property (which includes the property's original acquisition price plus any subsequent, non-reimbursed capital improvements). At the end of each fiscal year, if this figure is negative, no capital gains fee shall be paid.

Termination Fee

In the event of our termination of the Amended Advisory Agreement for any reason (with 120 days’ prior written notice and the vote of at least two-thirds of our independent directors), a termination fee would be payable to the Adviser equal to three times the sum of the average annual base management fee and incentive fee earned by the Adviser during the 24-month period prior to such termination.

Financing Arrangement Agreement

In connection with the Financing Arrangement Agreement, Gladstone Securities may, from time to time, solicit the interest of various agricultural or commercial real estate lenders and/or recommend to us third-party lenders offering credit products or packages that are responsive to our needs. We will pay Gladstone Securities a financing fee in connection with the services it provides to us for securing financing on our properties. Depending on the size of the financing obtained, the maximum amount of the financing fee, which will be payable upon closing of the respective financing, will range from 0.5% to 1.0% of the amount of financing obtained. The amount of the financing fee may be reduced or eliminated as determined by us and Gladstone Securities after taking into consideration various factors, including, but not limited to, the involvement of any third-party brokers and general market conditions. During each of the three and nine months ended September 30, 2017, the total amount of financing fees paid to Gladstone Securities represented approximately 0.1% of the total financings secured since the Financing Arrangement Agreement has been in place.

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Related-Party Fees

The following table summarizes certain related-party fees paid or accrued for and reflected in our accompanying Condensed Consolidated Statements of Operations (dollars in thousands):



	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2017			2016		2017			2016
Management fee⁽¹⁾⁽²⁾	$	523		$	385	$	1,446		$	1,158
Incentive fee⁽¹⁾⁽²⁾	261			22		688			181
Credits from voluntary, irrevocable waiver granted by Adviser’s board of directors⁽²⁾⁽³⁾	(54		)	—		(54		)	—
Net fees due to our Adviser	$	730		$	407	$	2,080		$	1,339
Administration fee⁽¹⁾⁽²⁾	$	211		$	184	$	656		$	575
Financing Fees to Gladstone Securities⁽⁴⁾	$	28		$	—	$	30		$	—


⁽¹⁾	Pursuant to the Advisory and Administration Agreements, respectively.


⁽²⁾	Reflected as a line item on our accompanying Condensed Consolidated Statements of Operations.


⁽³⁾	The credit received from our Advisor for the three and nine months ended September 30, 2017, was granted as a voluntary, irrevocable waiver to be applied against the incentive fee payable to the Advisor.


⁽⁴⁾	Included in Mortgage notes and bonds payable, net on the Condensed Consolidated Balance Sheets and amortized into Interest expense on the Condensed Consolidated Statements of Operations.

Related-Party Fees Due

Amounts due to related parties on our accompanying Condensed Consolidated Balance Sheets as of September 30, 2017, and December 31, 2016, were as follows (dollars in thousands):



	September 30, 2017			December 31, 2016
Management fee due to Adviser	$	523		$	384
Incentive fee due to Adviser	261			169
Credits to fees due to Adviser⁽¹⁾	(54		)	—
Other due to Adviser⁽²⁾	43			2
Total due to Adviser	773			555
Administration fee due to Administrator	211			202
Other due from Administrator⁽²⁾	—			(6		)
Total due to Administrator	211			196
Total due to related parties⁽³⁾	$	984		$	751


⁽¹⁾	The credit received from our Advisor for the three and nine months ended September 30, 2017, was granted as a voluntary, irrevocable waiver to be applied against the incentive fee payable to our Advisor.


⁽²⁾	Other fees due to or from related parties primarily relate to miscellaneous general and administrative expenses paid by our Adviser or Administrator on our behalf or by us on our Adviser's or Administrator's behalf.


⁽³⁾	Reflected as a line item on our accompanying Condensed Consolidated Balance Sheets.

NOTE 7. EQUITY

Amendment to Articles of Incorporation

On July 12, 2017, we filed an Articles of Amendment with the State Department of Assessments and Taxation for Maryland to increase the number of shares of capital stock that we have authority to issue from 20,000,000 shares to 100,000,000 shares, with the additional 80,000,000 shares of stock being initially classified as common stock, $0.001 par value per share.

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Stockholders’ Equity

As of September 30, 2017, there were 98,000,000 shares of common stock, par value $0.001 per share, authorized, with 13,485,025 shares issued and outstanding. As of December 31, 2016, there were 18,000,000 shares of common stock, par value $0.001 per share, authorized, with 10,024,875 shares issued and outstanding.

Non-Controlling Interests in Operating Partnership

We consolidate our Operating Partnership, which is a majority-owned partnership. As of September 30, 2017, and December 31, 2016, we owned approximately 91.7% and 87.4%, respectively, of the outstanding OP Units.

On or after 12 months after becoming a holder of OP Units, each limited partner, other than the Company, has the right, subject to the terms and conditions set forth in the partnership agreement of the Operating Partnership, to require the Operating Partnership to redeem all or a portion of such units in exchange for cash or, at the Company’s option, shares of our common stock on a one-for-one basis. The cash redemption per OP Unit would be based on the market price of our common stock at the time of redemption. A limited partner will not be entitled to exercise redemption rights if the delivery of common stock to the redeeming limited partner would breach restrictions on the ownership of common stock imposed under our charter and other limitations thereof.

On September 20, 2017, 221,875 OP Units were tendered for redemption, and on September 29, 2017, we issued 50,000 shares of common stock in exchange for 50,000 OP Units, and we satisfied the redemption of 171,875 OP Units with a cash payment of approximately $2.3 million (approximately $13.21 per OP Unit).

Regardless of the rights described above, the Operating Partnership will not have an obligation to issue cash to a unitholder upon a redemption request if the Company elects to redeem the OP Units for shares of its common stock. When a non-Company unitholder redeems an OP Unit, non-controlling interest in the Operating Partnership is reduced, and stockholders’ equity is increased.

The Operating Partnership is required to make distributions on each OP Unit in the same amount as those paid on each share of the Company’s common stock, with the distributions on the OP Units held by the Company being utilized to make distributions to the Company’s common stockholders.

As of September 30, 2017, and December 31, 2016, there were 1,227,383 and 1,449,258 OP Units held by non-controlling limited partners outstanding, respectively, of which 993,431 and zero OP Units, respectively, were eligible to be tendered for redemption. Subsequent to September 30, 2017, 121,875 additional OP Units were tendered for redemption; see Note 10, "Subsequent Events," for further discussion on the redemption of these OP Units.

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Distributions

The distributions to common stockholders declared by our Board of Directors and paid by us during the nine months ended September 30, 2017 and 2016 are reflected in the table below.



Fiscal Year	Declaration Date	Record Date	Payment Date	Distributions per Common Share
2017	January 10, 2017	January 20, 2017	January 31, 2017	$	0.04300
	January 10, 2017	February 16, 2017	February 28, 2017	0.04300
	January 10, 2017	March 22, 2017	March 31, 2017	0.04300
	April 11, 2017	April 21, 2017	April 28, 2017	0.04350
	April 11, 2017	May 19, 2017	May 31, 2017	0.04350
	April 11, 2017	June 21, 2017	June 30, 2017	0.04350
	July 11, 2017	July 21, 2017	July 31, 2017	0.04400
	July 11, 2017	August 21, 2017	August 31, 2017	0.04400
	July 11, 2017	September 20, 2017	September 29, 2017	0.04400
		Nine Months Ended September 30, 2017		$	0.39150

2016	January 12, 2016	January 22, 2016	February 2, 2016	$	0.04000
	January 12, 2016	February 18, 2016	February 29, 2016	0.04000
	January 12, 2016	March 21, 2016	March 31, 2016	0.04000
	April 12, 2016	April 22, 2016	May 2, 2016	0.04125
	April 12, 2016	May 19, 2016	May 31, 2016	0.04125
	April 12, 2016	June 17, 2016