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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, 2019
or
¨
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)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common stock, $0.001 par value per share
 
LAND
 
The Nasdaq Stock Market, LLC
6.375% Series A Cumulative Term Preferred Stock, $0.001 par value per share
 
LANDP
 
The Nasdaq Stock Market, LLC
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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit 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
¨
 
  
Smaller reporting company
 
 
 
 
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. ¨


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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 5, 2019, was 20,936,658.


Table of Contents

GLADSTONE LAND CORPORATION
FORM 10-Q FOR THE QUARTER ENDED
SEPTEMBER 30, 2019
TABLE OF CONTENTS 
 
 
PAGE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Table of Contents

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, 2019
 
December 31, 2018
ASSETS
 
 
 
Investments in real estate, net
$
740,608

 
$
538,953

Lease intangibles, net
5,257

 
5,686

Cash and cash equivalents
3,992

 
14,730

Other assets, net
7,170

 
5,750

TOTAL ASSETS
$
757,027

 
$
565,119

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
LIABILITIES:
 
 
 
Borrowings under lines of credit
$
4,100

 
$
100

Notes and bonds payable, net
448,004

 
335,788

Series A cumulative term preferred stock, $0.001 par value; $25.00 per share liquidation preference; 2,000,000 shares authorized, 1,150,000 shares issued and outstanding as of September 30, 2019, and December 31, 2018, net
28,301

 
28,124

Accounts payable and accrued expenses
7,015

 
9,152

Due to related parties, net
1,194

 
945

Other liabilities, net
15,123

 
9,957

Total liabilities
503,737

 
384,066

Commitments and contingencies (Note 7)

 

 
 
 
 
EQUITY:
 
 
 
Stockholders’ equity:
 
 
 
Series B cumulative redeemable preferred stock, $0.001 par value; $25.00 per share liquidation preference; 6,500,000 shares authorized; 3,465,527 shares issued and outstanding as of September 30, 2019; 1,144,393 shares issued and outstanding as of December 31, 2018
3

 
1

Common stock, $0.001 par value; 91,500,000 shares authorized; 20,888,075 shares issued and outstanding as of September 30, 2019; 17,891,340 shares issued and outstanding as of December 31, 2018
21

 
18

Additional paid-in capital
286,562

 
202,053

Accumulated other comprehensive loss
(347
)
 

Distributions in excess of accumulated earnings
(35,344
)
 
(25,826
)
Total stockholders’ equity
250,895

 
176,246

Non-controlling interests in Operating Partnership
2,395

 
4,807

Total equity
253,290

 
181,053

 
 
 
 
TOTAL LIABILITIES AND EQUITY
$
757,027

 
$
565,119

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

3

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GLADSTONE LAND CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(In thousands, except share and per-share data)
(Unaudited)
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
OPERATING REVENUES:
 
 
 
 
 
 
 
Lease revenues
$
11,012

 
$
8,015

 
$
27,203

 
$
21,344

Other operating revenues

 
2

 

 
7,313

Total operating revenues
11,012

 
8,017

 
27,203

 
28,657

OPERATING EXPENSES:
 
 
 
 
 
 
 
Depreciation and amortization
3,419

 
2,374

 
8,952

 
6,805

Property operating expenses
536

 
621

 
1,939

 
1,381

Base management fee
862

 
690

 
2,741

 
2,102

Capital gains fee

 
778

 

 
778

Administration fee
311

 
387

 
866

 
935

General and administrative expenses
447

 
443

 
1,465

 
1,350

Other operating expenses

 
175

 

 
7,673

Total operating expenses
5,575

 
5,468

 
15,963

 
21,024

Credits to fees from Adviser

 
(796
)
 
(1,542
)
 
(970
)
Total operating expenses, net of credits to fees
5,575

 
4,672

 
14,421

 
20,054

OTHER INCOME (EXPENSE):
 
 
 
 
 
 
 
Other income
62

 
1

 
937

 
324

Interest expense
(4,401
)
 
(3,082
)
 
(11,396
)
 
(8,728
)
Dividends declared on Series A cumulative term preferred stock
(458
)
 
(458
)
 
(1,375
)
 
(1,375
)
(Loss) gain on dispositions of real estate assets, net
(134
)
 
6,247

 
(154
)
 
6,247

Property and casualty recovery (loss), net
17

 

 
10

 
(129
)
Loss on write-down of crop inventory

 
(33
)
 

 
(1,093
)
Total other (expense) income, net
(4,914
)
 
2,675

 
(11,978
)
 
(4,754
)
NET INCOME
523

 
6,020

 
804

 
3,849

Net income attributable to non-controlling interests
(6
)
 
(337
)
 
(9
)
 
(206
)
NET INCOME ATTRIBUTABLE TO THE COMPANY
517

 
5,683

 
795

 
3,643

Dividends declared on Series B cumulative redeemable preferred stock
(1,161
)
 
(90
)
 
(2,655
)
 
(92
)
NET (LOSS) GAIN ATTRIBUTABLE TO COMMON STOCKHOLDERS
$
(644
)
 
$
5,593

 
$
(1,860
)
 
$
3,551

 
 
 
 
 
 
 
 
(LOSS) GAIN PER COMMON SHARE:
 
 
 
 
 
 
 
Basic and diluted
$
(0.03
)
 
$
0.35

 
$
(0.10
)
 
$
0.23

WEIGHTED-AVERAGE SHARES OF COMMON STOCK OUTSTANDING:
 
 
 
 
 
 
 
Basic and diluted
20,763,615

 
16,057,957

 
19,154,744

 
15,181,760

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




4

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GLADSTONE LAND CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (Continued)
(In thousands, except share and per-share data)
(Unaudited)
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
COMPREHENSIVE INCOME:
 
 
 
 
 
 
 
Net income attributable to the Company
$
517

 
$
5,683

 
$
795

 
$
3,643

Change in fair value related to interest rate hedging instruments
(347
)
 

 
(347
)
 

COMPREHENSIVE INCOME ATTRIBUTABLE TO THE COMPANY
$
170

 
$
5,683

 
$
448

 
$
3,643


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

5

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GLADSTONE LAND CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(In thousands, except share data)
(Unaudited)
 
Three months ended September 30, 2019
 
Series B Preferred Stock
 
Common Stock
 
Additional
Paid-in 
Capital
 
Accumulated
Comprehensive
Income
 
Distributions
in Excess of
Accumulated
Earnings
 
Total
Stockholders’
Equity
 
Non-
Controlling
Interests
 
Total
Equity
 
Number
of Shares
 
Par
Value
 
Number
of Shares
 
Par
Value
 
 
 
 
 
Balance at June 30, 2019
2,636,068

 
$
3

 
20,532,770

 
$
21

 
$
263,249

 
$

 
$
(31,919
)
 
231,354

 
$

 
$
231,354

Issuance of Series B Preferred Stock, net
831,579

 
0

 

 

 
18,517

 

 

 
18,517

 

 
18,517

Redemptions of Series B Preferred Stock
(2,120
)
 
0

 

 

 
(48
)
 

 

 
(48
)
 

 
(48
)
Issuance of OP Units as consideration in real estate acquisitions, net

 

 

 

 

 

 

 

 
3,276

 
3,276

Issuance of common stock, net

 

 
355,305

 
0

 
3,996

 

 

 
3,996

 

 
3,996

Accumulated Other Comprehensive Income

 

 

 

 

 
(347
)
 

 
(347
)
 

 
(347
)
Net income

 

 

 

 

 

 
517

 
517

 
6

 
523

Dividends—Series B Preferred Stock

 

 

 

 

 

 
(1,161
)
 
(1,161
)
 

 
(1,161
)
Distributions—OP Units and common stock

 

 

 

 

 

 
(2,781
)
 
(2,781
)
 
(39
)
 
(2,820
)
Adjustment to non-controlling interests resulting from changes in ownership of the Operating Partnership

 

 

 

 
848

 

 

 
848

 
(848
)
 

Balance at September 30, 2019
3,465,527

 
$
3

 
20,888,075

 
$
21

 
$
286,562

 
$
(347
)
 
$
(35,344
)
 
$
250,895

 
$
2,395

 
$
253,290

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine months ended September 30, 2019
 
Series B Preferred Stock
 
Common Stock
 
Additional
Paid-in 
Capital
 
Accumulated
Comprehensive
Income
 
Distributions
in Excess of
Accumulated
Earnings
 
Total
Stockholders’
Equity
 
Non-
Controlling
Interests
 
Total
Equity
 
Number
of Shares
 
Par
Value
 
Number
of Shares
 
Par
Value
 
 
 
 
 
Balance at December 31, 2018
1,144,393

 
$
1

 
17,891,340

 
$
18

 
$
202,053

 
$

 
$
(25,826
)
 
$
176,246

 
$
4,807

 
$
181,053

Issuance of Series B Preferred Stock, net
2,330,654

 
2

 

 

 
51,975

 

 

 
51,977

 

 
51,977

Redemptions of Series B Preferred Stock
(9,520
)
 
0

 

 

 
(214
)
 

 

 
(214
)
 

 
(214
)
Issuance of OP Units as consideration in real estate acquisitions, net

 

 

 

 

 

 

 

 
3,276

 
3,276

Redemption of OP Units

 

 
570,879

 
1

 
4,714

 

 

 
4,715

 
(4,715
)
 

Issuance of common stock, net

 

 
2,425,856

 
2

 
27,143

 

 

 
27,145

 

 
27,145

Accumulated Other Comprehensive Income

 

 

 

 

 
(347
)
 

 
(347
)
 

 
(347
)
Net income

 

 

 

 

 

 
795

 
795

 
9

 
804

Dividends—Series B Preferred Stock

 

 

 

 

 

 
(2,655
)
 
(2,655
)
 

 
(2,655
)
Distributions—OP Units and common stock

 

 

 

 

 

 
(7,658
)
 
(7,658
)
 
(91
)
 
(7,749
)
Adjustment to non-controlling interests resulting from changes in ownership of the Operating Partnership

 

 

 

 
891

 

 

 
891

 
(891
)
 

Balance at September 30, 2019
3,465,527

 
$
3

 
20,888,075

 
$
21

 
$
286,562

 
$
(347
)
 
$
(35,344
)
 
$
250,895

 
$
2,395

 
$
253,290

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

6

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GLADSTONE LAND CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Continued)
(In thousands, except share data)
(Unaudited)
 
Three months ended September 30, 2018
 
Series B Preferred Stock
 
Common Stock
 
Additional
Paid-in 
Capital
 
Distributions
in Excess of
Accumulated
Earnings
 
Total
Stockholders’
Equity
 
Non-
Controlling
Interests
 
Total
Equity
 
Number
of Shares
 
Par
Value
 
Number
of Shares
 
Par
Value
 
 
 
 
 
Balance at June 30, 2018
20,280

 
$
0

 
16,023,872

 
$
16

 
$
155,106

 
$
(25,763
)
 
$
129,359

 
$
5,792

 
$
135,151

Issuance of Series B Preferred Stock, net
372,768

 
0

 

 

 
8,344

 

 
8,344

 

 
8,344

Redemption of OP Units

 

 
46,544

 
0

 
432

 

 
432

 
(434
)
 
(2
)
Issuance of common stock, net

 

 
200

 
0

 
4

 

 
4

 

 
4

Net income

 

 

 

 

 
5,683

 
5,683

 
337

 
6,020

Dividends—Series B Preferred Stock

 

 

 

 

 
(90
)
 
(90
)
 

 
(90
)
Distributions—OP Units and common stock

 

 

 

 

 
(2,135
)
 
(2,135
)
 
(92
)
 
(2,227
)
Adjustment to non-controlling interests resulting from changes in ownership of the Operating Partnership

 

 

 

 
57

 

 
57

 
(57
)
 

Balance at September 30, 2018
393,048

 
$

 
16,070,616

 
$
16

 
$
163,943

 
$
(22,305
)
 
$
141,654

 
$
5,546

 
$
147,200


 
Nine months ended September 30, 2018
 
Series B Preferred Stock
 
Common Stock
 
Additional
Paid-in 
Capital
 
Distributions
in Excess of
Accumulated
Earnings
 
Total
Stockholders’
Equity
 
Non-
Controlling
Interests
 
Total
Equity
 
Number
of Shares
 
Par
Value
 
Number
of Shares
 
Par
Value
 
 
 
 
 
Balance at December 31, 2017

 
$

 
13,791,574

 
$
14

 
$
129,705

 
$
(19,802
)
 
$
109,917

 
$
8,034

 
$
117,951

Issuance of Series B Preferred Stock, net
393,048

 
0

 

 

 
8,799

 

 
8,799

 

 
8,799

Redemption of OP Units

 

 
297,811

 
0

 
2,460

 

 
2,460

 
(2,983
)
 
(523
)
Issuance of common stock, net

 

 
1,981,231

 
2

 
23,605

 

 
23,607

 

 
23,607

Net income

 

 

 

 

 
3,643

 
3,643

 
206

 
3,849

Dividends—Series B Preferred Stock

 

 

 

 

 
(92
)
 
(92
)
 

 
(92
)
Distributions—OP Units and common stock

 

 

 

 

 
(6,054
)
 
(6,054
)
 
(337
)
 
(6,391
)
Adjustment to non-controlling interests resulting from changes in ownership of the Operating Partnership

 

 

 

 
(626
)
 

 
(626
)
 
626

 

Balance at September 30, 2018
393,048

 
$

 
16,070,616

 
$
16

 
$
163,943

 
$
(22,305
)
 
$
141,654

 
$
5,546

 
$
147,200

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

7

Table of Contents

GLADSTONE LAND CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
 
For the Nine Months Ended September 30,
 
 
2019
 
2018
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
Net income
 
$
804

 
$
3,849

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
8,952

 
6,805

Amortization of debt issuance costs
 
461

 
434

Amortization of deferred rent assets and liabilities, net
 
(244
)
 
(272
)
Bad debt expense
 
24

 
108

Loss (gain) on dispositions of real estate assets, net
 
154

 
(6,247
)
Property and casualty (recovery) loss, net
 
(10
)
 
129

Loss on write-down of crop inventory
 

 
1,093

Changes in operating assets and liabilities:
 
 
 
 
Crop inventory and other assets, net
 
281

 
(1,274
)
Accounts payable and accrued expenses and Due to related parties, net
 
(1,586
)
 
(677
)
Other liabilities, net
 
5,066

 
4,096

Net cash provided by operating activities
 
13,902

 
8,044

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
Acquisition of new real estate assets
 
(200,676
)
 
(31,467
)
Capital expenditures on existing real estate assets
 
(8,974
)
 
(17,157
)
Proceeds from dispositions of real estate assets
 

 
132

Change in deposits on real estate acquisitions and investments, net
 
(300
)
 
(100
)
Net cash used in investing activities
 
(209,950
)
 
(48,592
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
Proceeds from issuance of preferred and common equity
 
86,070

 
34,397

Offering costs
 
(6,551
)
 
(1,894
)
Payments for redemptions of OP Units
 

 
(523
)
Redemption of Series B Preferred Stock
 
(213
)
 

Borrowings from mortgage notes and bonds payable
 
120,399

 
48,218

Repayments of mortgage notes and bonds payable
 
(7,686
)
 
(22,800
)
Borrowings from lines of credit
 
22,900

 
14,100

Repayments of lines of credit
 
(18,900
)
 
(24,000
)
Payments of financing fees
 
(738
)
 
(525
)
Dividends paid on Series B cumulative redeemable preferred stock
 
(2,222
)
 
(43
)
Distributions paid on common stock
 
(7,658
)
 
(6,054
)
Distributions paid to non-controlling interests in Operating Partnership
 
(91
)
 
(337
)
Net cash provided by financing activities
 
185,310

 
40,539

NET DECREASE IN CASH AND CASH EQUIVALENTS
 
(10,738
)
 
(9
)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
 
14,730

 
2,938

CASH AND CASH EQUIVALENTS AT END OF PERIOD
 
$
3,992

 
$
2,929



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

8

Table of Contents

GLADSTONE LAND CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In thousands)
(Unaudited)

 
 
For the Nine Months Ended September 30,
 
 
2019
 
2018
NON-CASH OPERATING, INVESTING, AND FINANCING INFORMATION:
 
 
 
 
Issuance of non-controlling interests in Operating Partnership in conjunction with acquisitions
 
$
3,290

 
$

Operating lease right-of-use assets included in Other assets, net
 
188

 

Operating lease liabilities included in Other liabilities, net
 
171

 

Real estate additions included in Accounts payable and accrued expenses and Due to related parties, net
 
1,397

 
2,656

Loss on dispositions of real estate assets, net included in Accounts payable and accrued expenses and Due to related parties, net
 
119

 
87

Real estate additions included in Other liabilities, net
 

 
136

Stock offering and OP Unit issuance costs included in Accounts payable and accrued expenses and Due to related parties, net
 
35

 
100

Financing fees included in Accounts payable and accrued expenses and Due to related parties, net
 
14

 

Escrow proceeds from asset sale used for acquisition of new real estate assets
 
 
 
20,500

Lender holdback on loan issuance
 
498

 

Unrealized loss related to interest rate hedging instrument
 
(347
)
 
 


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

9

Table of Contents

GLADSTONE LAND CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BUSINESS AND ORGANIZATION
Business and Organization
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 originally incorporated in California on June 14, 1997. Upon the pricing of our initial public offering on January 29, 2013, our shares of common stock began trading on the Nasdaq Stock Market, LLC (“Nasdaq”), under the symbol “LAND.” 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. As we currently control the sole general partner of the Operating Partnership and own, directly or indirectly, all of the units of limited partnership interest in the Operating Partnership (“OP Units”), the financial position and results of operations of the Operating Partnership are consolidated within our financial statements. As of September 30, 2019, and December 31, 2018, the Company owned approximately 98.6% and 96.9%, respectively, of the outstanding OP Units (see Note 8, “Equity,” for additional discussion regarding OP Units).
Gladstone Land Advisers, Inc. (“Land Advisers”), a Delaware corporation and a subsidiary of ours, was created to collect any non-qualifying income related to our real estate portfolio and to perform certain small-scale farming business operations. We have elected for Land Advisers to be treated as a taxable REIT subsidiary (“TRS”) of ours. Since we currently own 100% of the voting securities of Land Advisers, its financial position and results of operations are consolidated within our financial statements.
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, 2018, as filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 26, 2019 (the “Form 10-K”). The results of operations for the three and nine months ended September 30, 2019, 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.
Impairment of Real Estate Assets
We account for the impairment of our tangible and identifiable intangible real estate assets in accordance with Accounting Standards Codification (“ASC”) 360, “Property, Plant, and Equipment” (“ASC 360”), which requires us to periodically review the carrying value of each property to determine whether indicators of impairment exist. If circumstances support the

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possibility of impairment, we prepare a projection of the total undiscounted future cash flows of the specific property (without interest charges), including proceeds from disposition, and compare them to the net book value of the property to determine whether the carrying value of the property is recoverable. If the carrying amount is more than the aggregate undiscounted future cash flows, we would recognize an impairment loss to the extent the carrying value exceeds the estimated fair value of the property.
We evaluate our entire portfolio each quarter for any impairment indicators and perform an impairment analysis on those select properties that have an indication of impairment. As of September 30, 2019, and December 31, 2018, we concluded that none of our properties were impaired. There have been no impairments recognized on our real estate assets since our inception.
Crop Inventory and Crop Sales
Crop Inventory
From October 17, 2017, through July 31, 2018, Land Advisers operated a 169-acre farm located in Ventura County, California, under a short-term lease (see Note 6, “Related-Party Transactions—TRS Lease Assumption” for further discussion on this lease assignment). Costs incurred by Land Advisers in operating the farm generally consisted of growing costs (including the costs of land preparation, plants, fertilizers and pesticides, and labor costs), harvesting and selling costs (including labor costs for harvesting, packaging and cooling costs, and sales commissions), and certain overhead costs (including management/oversight costs). Due to certain market conditions during the nine months ended September 30, 2018 (primarily the existence of bumper crops in all of the strawberry-growing regions within California), we were unable to sell all of the crops and therefore assessed the market value of such unsold crops to be zero. Accordingly, we wrote down the cost of crop inventory to its estimated net realizable value of zero and recorded a loss during the three and nine months ended September 30, 2018, of approximately $33,000 and $1.1 million, respectively, included within Loss on write-down of crop inventory on the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income.
Crop Sales
Revenue from the sale of harvested crops was recognized when the harvested crops had been delivered to the facility and title had transferred and were recorded using the market price on the date of delivery. Accumulated costs were charged to cost of products sold (based on percentage of gross revenue from sales) as the related crops were harvested and sold.
Revenue from the sale of harvested crops and accumulated costs allocated to the crops sold during the three and nine months ended September 30, 2018, are shown in the following table (dollars in thousands, except for footnotes):
 
 
Three Months Ended September 30, 2018
 
Nine Months Ended September 30, 2018
Sales revenue(1)
 
$
2

 
$
7,308

Cost of sales(2)
 
(175
)
 
(7,673
)
(1) 
Included within Other operating revenues on the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income.
(2) 
Included within Other operating expenses on the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income. Excludes rent expense owed to the Company and interest expense owed on a loan from the Company to Land Advisers, both of which expenses were eliminated in consolidation. Also excludes the allocation of a fee earned by our Adviser from Land Advisers of approximately $15,000 and $176,000 during the three and nine months ended September 30, 2018, respectively, which is included within Management Fee on the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income (see Note 6, “Related-Party Transactions—TRS Fee Arrangements—TRS Expense Sharing Agreement” for further discussion on this fee).
The lease to Land Advisers expired on July 31, 2018, after which we leased the farm to a new, unrelated third-party tenant under a 10-year lease that commenced on August 1, 2018.
Income Taxes
We have operated and intend to continue to operate in a manner that will allow us to qualify as a REIT under the Sections 856-860 of the Internal Revenue Code of 1986, as amended (the “Code”). As a REIT, we generally are not subject to federal corporate income taxes on amounts that we distribute to our stockholders (except income from any foreclosure property), provided that, on an annual basis, we distribute at least 90% of our REIT taxable income (excluding net capital gains) to our stockholders and meet certain other conditions. As such, in general, as long as we qualify as a REIT, no provision for federal income taxes will be necessary, except for taxes on undistributed REIT taxable income and taxes on the income generated by a TRS (such as Land Advisers), if any. From October 17, 2017, through July 31, 2018, Land Advisers, which is subject to federal and state income taxes, assumed the operations on one of our farms in California (see Note 6, “Related-Party Transactions—

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TRS Lease Assumption”). There was no taxable income or loss from Land Advisers for the tax year ended December 31, 2018, nor was there any for the nine months ended September 30, 2019.
Should we have any taxable income or loss in the future, we will account for any income taxes in accordance with the provisions of ASC 740, “Income Taxes,” using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized based on differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases (including for operating loss, capital loss, and tax credit carryforwards) and are calculated using the enacted tax rates and laws expected to be in effect when such amounts are realized or settled. In addition, we will establish valuation allowances for tax benefits when we believe it is more-likely-than-not (defined as a likelihood of more than 50%) that such assets will not be realized.
Reclassifications
On the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended September 30, 2019, operating rental revenue has been reclassified to be displayed in accordance with ASU 2016-02 (as defined below), which was adopted on January 1, 2019, and acquisition-related expenses have been reclassified to be included within general and administrative expenses. These reclassifications had no impact on previously-reported net income (loss), equity, or net change in cash and cash equivalents.
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. We adopted ASU 2014-09 on January 1, 2018, using the modified retrospective method, under which the cumulative effect of initially applying the guidance was recognized at the date of initial application. Our adoption of ASU 2014-09 did not 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. The impact of ASU 2014-09 did not take effect until the new leasing standard (ASU 2016-02, as defined below) became effective on January 1, 2019.
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842): An Amendment of the FASB Accounting Standards Codification” (“ASU 2016-02”), which supersedes the previous leasing standard, ASC 840, “Leases.” 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 similarly to operating leases under the previous leasing standard. The new standard requires lessors to account for leases using an approach that is substantially equivalent to that under the previous standard for sales-type leases, direct financing leases, and operating leases. We adopted ASU 2016-02 on January 1, 2019, using the modified retrospective method, under which we recorded the cumulative effect of applying the new guidance as of the adoption date. We also elected the package of practical expedients permitted under the transition guidance (which included that: (i) an entity need not reassess whether any expired or existing contracts are or contain leases, (ii) an entity need not reassess the lease classification for any expired or existing leases, and (iii) an entity need not reassess initial direct costs for any existing leases), the land easement practical expedient to carry forward existing accounting treatment on existing land easements, and the lease and non-lease component combined practical expedient. In addition, we elected the short-term lease exception, which allows us to account for leases with a term of 12 months or less similar to existing operating leases. We currently have two operating ground lease arrangements with terms greater than one year for which we are the lessee. See Note 7, “Commitments and Contingencies—Ground Lease Obligations,” for further discussion on the impact of our adoption of ASU 2016-02 and the assumptions used in determine the related right-of-use asset and lease liability.
NOTE 3. REAL ESTATE AND INTANGIBLE ASSETS
All of our properties are wholly-owned on a fee-simple basis, except where noted. The following table provides certain summary information about the 97 farms we owned as of September 30, 2019 (dollars in thousands, except for footnotes):

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Location
 
No. of Farms
 
Total Acres
 
Farm Acres
 
Net Cost Basis(1)
 
Encumbrances(2)
California(3)
 
41
 
13,731
 
12,570
 
$
383,358

 
$
243,763

Florida
 
23
 
20,770
 
16,256
 
211,703

 
133,742

Arizona(4)
 
6
 
6,280
 
5,228
 
56,488

 
21,773

Colorado
 
10
 
31,448
 
24,513
 
41,317

 
24,810

Nebraska
 
3
 
3,254
 
2,701
 
12,758

 
8,476

Michigan
 
7
 
962
 
682
 
12,570

 
7,421

Washington
 
1
 
746
 
417
 
8,438

 
5,099

Texas
 
1
 
3,667
 
2,219
 
8,333

 
5,280

Oregon
 
3
 
418
 
363
 
6,150

 
3,337

North Carolina
 
2
 
310
 
295
 
2,294

 
1,238

 
 
97
 
81,586
 
65,244
 
$
743,409

 
$
454,939

(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. Specifically, includes Investments in real estate, net (excluding improvements paid for by the tenant) and Lease intangibles, net; plus net above-market lease values, lease incentives, and net investments in special-purpose LLCs included in Other assets, net; and less net below-market lease values and other deferred revenue included in Other liabilities, net; each as shown on the accompanying Condensed Consolidated Balance Sheets.
(2) 
Excludes approximately $2.8 million of debt issuance costs related to notes and bonds payable, included in Notes and bonds payable, net on the accompanying Condensed Consolidated Balance Sheet.
(3) 
Includes ownership in a special-purpose LLC that owns a pipeline conveying water to one of our properties. As of September 30, 2019, this investment was valued at approximately $280,000 and is included within Other assets, net on the accompanying Condensed Consolidated Balance Sheet.
(4) 
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 an aggregate net cost basis of approximately $2.3 million as of September 30, 2019 (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, 2019, and December 31, 2018 (dollars in thousands):
 
September 30, 2019
 
December 31, 2018
Real estate:
 
 
 
Land and land improvements
$
556,557

 
$
417,310

Irrigation and drainage systems
96,913

 
71,583

Horticulture
91,289

 
48,894

Farm-related facilities
20,579

 
18,510

Other site improvements
7,097

 
6,707

Real estate, at gross cost
772,435

 
563,004

Accumulated depreciation
(31,827
)
 
(24,051
)
Real estate, net
$
740,608

 
$
538,953

Real estate depreciation expense on these tangible assets was approximately $3.0 million and $7.8 million for the three and nine months ended September 30, 2019, respectively, and $2.1 million and $6.0 million for the three and nine months ended September 30, 2018, respectively.
Included in the figures above are amounts related to improvements made on certain of our properties paid for by our tenants but owned by us, or tenant improvements. As of September 30, 2019, and December 31, 2018, we recorded tenant improvements, net of accumulated depreciation, of approximately $2.2 million and $2.4 million, respectively. We recorded both depreciation expense and additional lease revenue related to these tenant improvements of approximately $72,000 and $218,000 for the three and nine months ended September 30, 2019, respectively, and approximately $77,000 and $228,000 for the three and nine months ended September 30, 2018, respectively.
Intangible Assets and Liabilities
The following table summarizes the carrying values of certain lease intangible assets and the related accumulated amortization as of September 30, 2019, and December 31, 2018 (dollars in thousands):

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September 30, 2019
 
December 31, 2018
Lease intangibles:
 
 
 
 
Leasehold interest – land
 
$
3,498

 
$
3,498

In-place leases
 
2,601

 
2,046

Leasing costs
 
2,073

 
1,963

Tenant relationships
 
414

 
414

Lease intangibles, at cost
 
8,586

 
7,921

Accumulated amortization
 
(3,329
)
 
(2,235
)
Lease intangibles, net
 
$
5,257

 
$
5,686

Total amortization expense related to these lease intangible assets was approximately $460,000 and $1.1 million for the three and nine months ended September 30, 2019, respectively, and approximately $289,000 and $835,000 for the three and nine months ended September 30, 2018, respectively.
The following table summarizes the carrying values of certain lease intangible assets or liabilities included in Other assets, net or Other liabilities, net, respectively, on the accompanying Condensed Consolidated Balance Sheets and the related accumulated amortization or accretion, respectively, as of September 30, 2019, and December 31, 2018 (dollars in thousands):
 
 
September 30, 2019
 
December 31, 2018
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)
 
$
216

 
$
(115
)
 
$
126

 
$
(18
)
Below-market lease values and other deferred revenue(2)
 
(1,002
)
 
325

 
(917
)
 
202

 
 
$
(786
)
 
$
210

 
$
(791
)
 
$
184

(1) 
Net above-market lease values and lease incentives are included as part of Other assets, net on the accompanying Condensed Consolidated Balance Sheets, and the related amortization is recorded as a reduction of Lease revenue on the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income.
(2) 
Net below-market lease values and other deferred revenue are included as a part of Other liabilities, net on the accompanying Condensed Consolidated Balance Sheets, and the related accretion is recorded as an increase to Lease revenue on the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income.
Total amortization related to above-market lease values and lease incentives was approximately $31,000 and $97,000 for the three and nine months ended September 30, 2019, respectively, and approximately $2,000 and $5,000 for the three and nine months ended September 30, 2018, respectively. Total accretion related to below-market lease values and other deferred revenue was approximately $46,000 and $123,000 for the three and nine months ended September 30, 2019, respectively, and approximately $17,000 and $50,000 for the three and nine months ended September 30, 2018, respectively.
Acquisitions
Upon our adoption of ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business,” on October 1, 2016, most acquisitions, including those with a prior leasing history, are generally treated as an asset acquisition under ASC 360. For acquisitions accounted for as asset acquisitions under ASC 360, all acquisition-related costs, other than those costs that directly related to either originating new leases we execute upon acquisition or reviewing in-place leases we assumed upon acquisition, are capitalized and included as part of the fair value allocation of the identifiable tangible and intangible assets acquired or liabilities assumed. Upon our adoption of ASU 2016-02 on January 1, 2019, costs that directly related to either negotiating and originating new leases or reviewing assumed leases (generally, external legal costs) are expensed as incurred, whereas these costs were generally capitalized as part of leasing costs under the previous leasing standard. 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. Unless otherwise noted, all properties acquired during 2019 and 2018 were accounted for as asset acquisitions under ASC 360.
2019 Acquisitions

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During the nine months ended September 30, 2019, we acquired 12 new farms, which are summarized in the table below (dollars in thousands):
Property
Name
 
Property
Location
 
Acquisition
Date
 
Total
Acreage
 
No. of
Farms
 
Primary
Crop(s) / Use
 
Lease
Term
 
Renewal
Options
 
Total
Purchase
Price
 
Acquisition
Costs
(1)
 
Annualized
Straight-line
Rent
(2)
 
New
Long-term
Debt
Somerset Road
 
Lincoln, NE
 
1/22/2019
 
695
 
1
 
Popcorn &
edible beans
 
4.9 years
 
1
(5 years)
 
$
2,400

 
$
28

 
$
126

 
$
1,440

Greenhills Boulevard(3)
 
Madera, CA
 
4/9/2019
 
928
 
1
 
Pistachios
 
10.6 years
 
2
(5 years)
 
28,550

 
143

 
1,721

 
17,130

Van Buren Trail
 
Van Buren, MI
 
5/29/2019
 
159
 
1
 
Blueberries
& cranberries
 
10.6 years
 
2
(5 years)
 
2,682

 
28

 
206

 
1,609

Blue Star Highway
 
Allegran &
Van Buren, MI
 
6/4/2019
 
357
 
1
 
Blueberries
 
10.6 years
 
2
(5 years)
 
5,100

 
31

 
390

 
3,060

Yolo County Line Road
 
Yolo, CA
 
6/13/2019
 
542
 
1
 
Olives for
olive oil
 
14.6 years
 
1
(5 years)
 
9,190

 
66

 
624

 
5,514

San Juan Grade Road(4)
 
Monterey, CA
 
7/11/2019
 
324
 
1
 
Strawberries
& vegetables
 
0.3 years
 
None
 
9,000

 
60

 
632

 
5,400

West Citrus Boulevard(5)
 
Martin, FL
 
7/22/2019
 
3,586
 
1
 
Water
retention
 
8.4 years
 
2
(10 years)
 
57,790

 
503

 
3,696

 
37,700

Sutter Avenue I(3)(6)
 
Fresno, CA
 
8/16/2019
 
1,011
 
1
 
Pistachios
 
8.2 years
 
2
(5 years)
 
33,000

 
139

 
2,106

 
16,500

Las Posas Road(7)
 
Ventura, CA
 
8/28/2019
 
413
 
3
 
Sod & vegetables
 
3.3 years
 
1
(2 years)
 
21,320

 
67

 
1,283

 
12,792

Withers Road(8)
 
Napa, CA
 
8/29/2019
 
366
 
1
 
Wine grapes
 
10.3 years
 
2
(10 years)
 
32,000

 
77

 
2,256

 
19,254

 
 
 
 
 
 
8,381
 
12
 
 
 
 
 
 
 
$
201,032

 
$
1,142

 
$
13,040

 
$
120,399

(1) 
Includes approximately $63,000 of aggregate external legal fees associated with negotiating and originating the leases associated with these acquisitions, which costs were expensed in the period incurred.
(2) 
Annualized straight-line rent is based on the minimum cash rental payments guaranteed under the applicable leases, as required under GAAP, and excludes contingent rental payments, such as participation rents.
(3) 
Leases provide for a participation rent component based on the gross crop revenues earned on the respective farms. The rent figures above represent only the minimum cash guaranteed under the respective leases.
(4) 
In connection with the acquisition of this property, we executed a 6-year, follow-on lease with a new tenant that will commence upon the expiration of the 4-month lease executed on the date of acquisition. The follow-on lease includes one, 4-year extension option and provides for minimum annualized straight-line rents of approximately $606,000. In connection with the follow-on lease, we committed to provide up to $100,000 for certain irrigation improvements on the property.
(5) 
As partial consideration for the acquisition of this property, we issued 288,303 OP Units, constituting an aggregate fair value of approximately $3.3 million as of the acquisition date.
(6) 
In connection with the acquisition of this property, we also acquired an ownership in a related LLC, the sole purpose of which is to own and maintain a pipeline conveying water to this and other neighboring properties. Our acquired ownership equated to an 11.75% interest in the LLC and was valued at approximately $280,000 at the time of acquisition and is included within Other assets, net on the accompanying Condensed Consolidated Balance Sheets. As our investment in the LLC is deemed to constitute “significant influence,” we have accounted for this investment under the equity method. From the commencement of our ownership in the LLC through September 30, 2019, there was no material income or loss recognized by the LLC; thus, no net income or loss was recorded by us during the three months ended September 30, 2019.
(7) 
In connection with this acquisition, we executed two separate lease agreements with two different, unrelated third-party tenants. The lease term of 3.3 years represents the weighted-average term of the two leases. In addition, pursuant to one of these lease agreements, we committed to provide up to $1.0 million for certain irrigation improvements on the property.
(8) 
In connection with the acquisition of this property, we committed to provide up to approximately $4.0 million as additional compensation, contingent upon the County of Napa approving the planting of additional vineyards on up to 47 acres of the property by February 25, 2020. We are currently unable to estimate when this approval will be obtained, if at all. If approval is obtained, we have also committed to contribute up to $40,000 per approved acre for the development of such vineyards. As provided for in the lease, we will earn additional rent on all of the aforementioned costs, if any, incurred by us.
During the three and nine months ended September 30, 2019, we recognized operating revenues of approximately $2.2 million and $2.8 million, respectively, and net income of approximately $574,000 and $793,000, respectively, related to the above acquisitions.
2018 Acquisitions
During the nine months ended September 30, 2018, we acquired ten new farms, which are summarized in the table below (dollars in thousands, except for footnotes):

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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)
 
New
Long-term
Debt
Taft Highway(2)
 
Kern, CA
 
1/31/2018
 
161
 
1
 
Potatoes and Melons
 
N/A
 
N/A
 
$
2,945

 
$
32

 
$

 
$
1,473

Cemetery Road
 
Van Buren, MI
 
3/13/2018
 
176
 
1
 
Blueberries
 
9.6 years
 
None
 
2,100

 
39

 
150

 
1,260

Owl Hammock(3)
 
Collier & Hendry, FL
 
7/12/2018
 
5,630
 
5
 
Vegetables and Melons
 
7.0 years
 
2 (5 years)
 
37,350

 
196

 
2,148

 
22,410

Plantation Road
 
Jackson, FL
 
9/6/2018
 
574
 
1
 
Peanuts and Melons
 
2.3 years
 
None
 
2,600

 
35

 
142

 
1,560

Flint Avenue
 
Kings, CA
 
9/13/2018
 
194
 
2
 
Cherries
 
15.3 years
 
1 (5 years)
 
6,850

 
58

 
523

 
4,110

 
 
 
 
 
 
6,735
 
10
 
 
 
 
 
 
 
$
51,845

 
$
360

 
$
2,963

 
$
30,813

(1) 
Annualized straight-line rent is based on the minimum cash rental payments guaranteed under the applicable lease, as required under GAAP, and excludes contingent rental payments, such as participation rents.
(2) 
Farm was purchased with no lease in place at the time of acquisition.
(3) 
In connection with the acquisition of this property, we committed to provide up to $2.0 million of capital for certain irrigation and property improvements. As stipulated in the lease, we will earn additional rental 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).
During the three and nine months ended September 30, 2018, in the aggregate, we recognized operating revenues of approximately $554,000 and $603,000, respectively, and net income of approximately $168,000 and $140,000, respectively, related to the above acquisitions.
Purchase Price Allocations
The allocation of the aggregate purchase price for the farms acquired during each of the nine months ended September 30, 2019 and 2018 is as follows (dollars in thousands):
Acquisition Period
 
Land and Land
Improvements
 
Irrigation &
Drainage
Systems
 
Horticulture
 
Farm-
related
Facilities
 
Other Site Improvements
 
In-
place
Leases
 
Leasing
Costs
 
Below Market Leases(1)
 
Investment in LLC(2)
 
Total
Purchase
Price
2019 Acquisitions
 
$
138,245

 
$
17,804

 
$
41,739

 
$
2,014

 
$
358

 
$
560

 
$
118

 
$
(85
)
 
$
280

 
$
201,032

2018 Acquisitions
 
44,749

 
1,548

 
4,288

 
123

 

 
626

 
511

 

 

 
51,845

(1) 
Included within Other liabilities, net on the accompanying Condensed Consolidated Balance Sheets.
(2) 
Included within Other assets, net on the accompanying Condensed Consolidated Balance Sheets.
Acquired Intangibles and Liabilities
The following table shows the weighted-average amortization periods (in years) for the intangible assets acquired and liabilities assumed in connection with new real estate acquired during the nine months ended September 30, 2019 and 2018:
 
 
Weighted-Average Amortization
Period (in Years)
Intangible Assets and Liabilities
 
2019
 
2018
In-place leases
 
1.9
 
7.0
Leasing costs
 
3.0
 
7.1
All intangible assets and liabilities
2.1
 
7.1
Significant Existing Real Estate Activity
Leasing Activity
The following table summarizes certain leasing activity that occurred on our existing properties during the nine months ended September 30, 2019 (dollars in thousands, except footnotes):
 
 
 
 
PRIOR LEASES
 
NEW LEASES
Farm
Locations
Number
of
Leases
Total
Farm
Acres
 
Total
Annualized
Straight-line
Rent(1)
# of Leases
with
Participation
Rents
Lease
Structures
(# of NNN
/ NN)(2)
 
Total
Annualized
Straight-line
Rent
(1)
Wtd. Avg.
Term
(Years)
# of Leases
with
Participation
Rents
Lease
Structures
(# of NNN
/ NN)
(2)
AZ, CA,
FL, MI, NE
16
7,364
 
$
3,527

1
10 / 6
 
$
3,804

4.0
3
10 / 6

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(1) 
Annualized straight-line rent is based on the minimum cash rental payments guaranteed under the applicable leases (presented on an annualized basis), as required under GAAP, and excludes contingent rental payments, such as participation rents.
(2) 
“NNN” refers to leases under triple-net lease arrangements, and “NN” refers to leases under partial-net lease arrangements. For a description of each of these types of lease arrangements, see “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview—Leases—General.”
See Note 11, “Subsequent Events—Leasing Activity” for additional leasing activity that occurred subsequent to September 30, 2019.
Project Completion
During the year ended December 31, 2018, we replaced 23 irrigation pivots on one of our properties in Colorado at a total cost of approximately $1.4 million. Pursuant to a lease amendment executed during the nine months ended September 30, 2019, in connection with this project, we will earn additional straight-line rental income of approximately $117,000 per year throughout the remaining term of the lease, which expires on February 28, 2021.
Future Minimum Lease Payments
We account for all of our leasing arrangements in which we are the lessor as operating leases. The majority of our leases are subject to fixed rental increases, and a small subset of our lease portfolio includes lease payments based on an index, such as the consumer price index (“CPI”). In addition, several of our leases contain participation rent components based on the gross revenues earned on the respective farms. Most of our leases also include tenant renewal options; however, these renewal options are generally based on then-current market rates and are therefore typically excluded from the determination of the minimum lease term. Our leases do not generally include tenant termination options.
The following table summarizes the future lease payments to be received under non-cancelable leases as of September 30, 2019, and December 31, 2018 (dollars in thousands):
 
 
Future Lease Payments(1)
Period
 
September 30, 2019
 
December 31, 2018
2019
 
$
7,338

 
$
30,290

2020
 
40,972

 
26,917

2021
 
33,045

 
20,980

2022
 
31,602

 
19,775

2023
 
31,903

 
19,413

Thereafter
 
123,243

 
59,934

 
 
$
268,103

 
$
177,309

(1) 
Excludes variable rent payments, such as potential rent increases that are based on CPI or future contingent rents based on a percentage of the gross revenues earned on the respective farms.
Portfolio Diversification and Concentrations
Diversification
The following table summarizes the geographic locations (by state) of our farms owned and with leases in place as of and for the nine months ended September 30, 2019 and 2018 (dollars in thousands):

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As of and For the nine months ended September 30, 2019
 
As of and For the nine months ended September 30, 2018
State
 
Number
of
Farms
 
Total
Acres
 
% of
Total
Acres
 
Lease
Revenue
 
% of Total
Lease
Revenue
 
Number
of
Farms
 
Total
Acres
 
% of
Total
Acres
 
Lease
Revenue
 
% of Total
Lease
Revenue
California(1)
 
41
 
13,731
 
16.8%
 
$
13,872

 
51.0%
 
31
 
8,435
 
12.4%
 
$
9,887

 
46.3%
Florida
 
23
 
20,770
 
25.5%
 
7,785

 
28.6%
 
22
 
17,184
 
25.3%
 
5,790

 
27.1%
Colorado
 
10
 
31,448
 
38.5%
 
2,126

 
7.8%
 
10
 
31,448
 
46.4%
 
2,057

 
9.7%
Arizona
 
6
 
6,280
 
7.7%
 
1,609

 
5.9%
 
6
 
6,280
 
9.3%
 
1,429

 
6.7%
Michigan
 
7
 
962
 
1.2%
 
394

 
1.4%
 
5
 
446
 
0.7%
 
270

 
1.3%
Texas
 
1
 
3,667
 
4.5%
 
386

 
1.4%
 
 
 
—%
 

 
—%
Washington
 
1
 
746
 
0.9%
 
383

 
1.4%
 
1
 
746
 
1.1%
 
596

 
2.8%
Oregon
 
3
 
418
 
0.5%
 
264

 
1.0%
 
3
 
418
 
0.6%
 
765

 
3.6%
North Carolina
 
2
 
310
 
0.4%
 
259

 
1.0%
 
2
 
310
 
0.4%
 
115

 
0.5%
Nebraska
 
3
 
3,254
 
4.0%
 
125

 
0.5%
 
2
 
2,559
 
3.8%
 
435

 
2.0%
TOTALS
 
97
 
81,586
 
100.0%
 
$
27,203

 
100.0%
 
82
 
67,826
 
100.0%
 
$
21,344

 
100.0%
(1) 
According to the California Chapter of the American Society of Farm Managers and Rural Appraisers, there are eight distinct growing regions within California; our farms are spread across six of these growing regions.
Concentrations
Credit Risk