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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
| | | | | |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2021
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 |
6.00% Series B Cumulative Redeemable Preferred Stock, $0.001 par value per share | | LANDO | | The Nasdaq Stock Market, LLC |
5.00% Series D Cumulative Redeemable Term Preferred Stock, $0.001 par value per share | | LANDM | | 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 ☒ 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 (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ 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 | ☐ |
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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of shares of the registrant’s Common Stock, $0.001 par value per share, outstanding as of May 11, 2021, was 29,357,403.
GLADSTONE LAND CORPORATION
FORM 10-Q FOR THE QUARTER ENDED
MARCH 31, 2021
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)
| | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 |
ASSETS | | | |
Investments in real estate, net | $ | 1,046,371 | | | $ | 1,046,203 | |
Lease intangibles, net | 4,390 | | | 3,732 | |
Cash and cash equivalents | 72,894 | | | 9,218 | |
Other assets, net | 10,811 | | | 8,136 | |
TOTAL ASSETS | $ | 1,134,466 | | | $ | 1,067,289 | |
| | | |
LIABILITIES AND EQUITY | | | |
LIABILITIES: | | | |
Borrowings under lines of credit | $ | 100 | | | $ | 100 | |
Notes and bonds payable, net | 628,912 | | | 623,961 | |
Series A cumulative term preferred stock, $0.001 par value, $25.00 per share liquidation preference; 850,000 shares authorized, 0 shares issued or outstanding as of March 31, 2021; 2,000,000 shares authorized, 1,150,000 shares issued and outstanding as of December 31, 2020, net | — | | | 28,594 | |
Series D cumulative term preferred stock, $0.001 par value, $25.00 per share liquidation preference; 3,600,000 shares authorized, 2,415,000 shares issued and outstanding as of March 31, 2021; 0 shares authorized, issued, or outstanding as of December 31, 2020, net | 58,372 | | | — | |
Accounts payable and accrued expenses | 8,573 | | | 9,081 | |
Due to related parties, net | 3,146 | | | 2,484 | |
Other liabilities, net | 17,696 | | | 19,279 | |
Total liabilities | 716,799 | | | 683,499 | |
Commitments and contingencies (Note 7) | | | |
EQUITY: | | | |
Stockholders’ equity: | | | |
Series B cumulative redeemable preferred stock, $0.001 par value, $25.00 per share liquidation preference; 6,456,065 shares authorized 5,956,065 shares issued and outstanding as of March 31, 2021, and December 31, 2020 | 6 | | | 6 | |
Series C cumulative redeemable preferred stock, $0.001 par value, $25.00 per share liquidation preference; 25,999,862 shares authorized, 1,624,113 shares issued and outstanding as of March 31, 2021; 25,999,862 shares authorized, 1,088,435 shares issued and outstanding as of December 31, 2020 | 2 | | | 1 | |
Common stock, $0.001 par value; 63,094,073 shares authorized, 27,531,951 shares issued and outstanding as of March 31, 2021; 65,544,073 shares authorized, 26,219,019 shares issued and outstanding as of December 31, 2020 | 27 | | | 26 | |
Additional paid-in capital | 476,996 | | | 440,470 | |
Accumulated other comprehensive loss | (133) | | | (1,500) | |
Distributions in excess of accumulated earnings | (61,066) | | | (55,213) | |
Total stockholders’ equity | 415,832 | | | 383,790 | |
Non-controlling interests in Operating Partnership | 1,835 | | | — | |
Total equity | 417,667 | | | 383,790 | |
| | | |
TOTAL LIABILITIES AND EQUITY | $ | 1,134,466 | | | $ | 1,067,289 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
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 March 31, | | |
| | | | | 2021 | | 2020 | | | | |
OPERATING REVENUES: | | | | | | | | | | | |
Lease revenue, net | | | | | $ | 16,034 | | | $ | 15,280 | | | | | |
| | | | | | | | | | | |
Total operating revenues | | | | | 16,034 | | | 15,280 | | | | | |
OPERATING EXPENSES: | | | | | | | | | | | |
Depreciation and amortization | | | | | 6,051 | | | 4,257 | | | | | |
Property operating expenses | | | | | 429 | | | 521 | | | | | |
Base management fee | | | | | 1,369 | | | 1,034 | | | | | |
Incentive fee | | | | | 1,162 | | | 1,334 | | | | | |
| | | | | | | | | | | |
Administration fee | | | | | 357 | | | 384 | | | | | |
General and administrative expenses | | | | | 539 | | | 553 | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Total operating expenses | | | | | 9,907 | | | 8,083 | | | | | |
OTHER INCOME (EXPENSE): | | | | | | | | | | | |
Other income | | | | | 2,235 | | | 1,324 | | | | | |
Interest expense | | | | | (6,193) | | | (4,963) | | | | | |
Dividends declared on Series A and Series D cumulative term preferred stock | | | | | (804) | | | (458) | | | | | |
Loss on dispositions of real estate assets, net | | | | | (798) | | | (99) | | | | | |
Property and casualty recovery, net | | | | | — | | | 66 | | | | | |
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(Loss) income from investments in unconsolidated entities | | | | | (13) | | | 34 | | | | | |
Total other expense, net | | | | | (5,573) | | | (4,096) | | | | | |
NET INCOME | | | | | 554 | | | 3,101 | | | | | |
Net income attributable to non-controlling interests | | | | | (1) | | | (42) | | | | | |
NET INCOME ATTRIBUTABLE TO THE COMPANY | | | | | 553 | | | 3,059 | | | | | |
Dividends declared on Series B and Series C cumulative redeemable preferred stock | | | | | (2,764) | | | (2,125) | | | | | |
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NET (LOSS) INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS | | | | | $ | (2,211) | | | $ | 934 | | | | | |
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(LOSS) INCOME PER COMMON SHARE: | | | | | | | | | | | |
Basic and diluted | | | | | $ | (0.08) | | | $ | 0.04 | | | | | |
WEIGHTED-AVERAGE SHARES OF COMMON STOCK OUTSTANDING: | | | | | | | | | | | |
Basic and diluted | | | | | 26,874,630 | | | 21,262,080 | | | | | |
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COMPREHENSIVE INCOME: | | | | | | | | | | | |
Net income attributable to the Company | | | | | $ | 553 | | | $ | 3,059 | | | | | |
Change in fair value related to interest rate hedging instruments | | | | | 1,367 | | | (1,257) | | | | | |
COMPREHENSIVE INCOME ATTRIBUTABLE TO THE COMPANY | | | | | $ | 1,920 | | | $ | 1,802 | | | | | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
GLADSTONE LAND CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(In thousands, except share data)
(Unaudited)
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| Three months ended March 31, 2021 |
| Series B Preferred Stock | | Series C Preferred Stock | | Common Stock | | Additional Paid-in Capital | | Accumulated Other Comprehensive Loss | | Distributions in Excess of Accumulated Earnings | | Total Stockholders’ Equity | | Non- Controlling Interests | | Total Equity |
| Number of Shares | | Par Value | | Number of Shares | | Par Value | | Number of Shares | | Par Value | | | | | |
Balance at December 31, 2020 | 5,956,065 | | $ | 6 | | | 1,088,435 | | $ | 1 | | | 26,219,019 | | $ | 26 | | | $ | 440,470 | | | $ | (1,500) | | | $ | (55,213) | | | $ | 383,790 | | | $ | — | | | $ | 383,790 | |
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Issuance of preferred C stock, net | — | | — | | | 535,678 | | 1 | | — | | — | | | 12,170 | | | — | | | — | | | 12,171 | | | — | | | 12,171 | |
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Issuance of OP Units as consideration in real estate acquisitions, net | — | | — | | | — | | — | | | — | | — | | | — | | | — | | | — | | | — | | | 3,970 | | | 3,970 | |
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Issuance of common stock, net | — | | — | | | — | | — | | | 1,312,932 | | 1 | | | 22,229 | | | — | | | — | | | 22,230 | | | — | | | 22,230 | |
Net income | — | | — | | | — | | — | | | — | | — | | | — | | | — | | | 553 | | | 553 | | | 1 | | | 554 | |
Dividends—Series B Preferred Stock and Series C Preferred Stock | — | | — | | | — | | — | | | — | | — | | | — | | | — | | | (2,764) | | | (2,764) | | | — | | | (2,764) | |
Distributions—OP Units and common stock | — | | — | | | — | | — | | | — | | — | | | — | | | — | | | (3,642) | | | (3,642) | | | (9) | | | (3,651) | |
Comprehensive income attributable to the Company | — | | — | | | — | | — | | | — | | — | | | — | | | 1,367 | | | — | | | 1,367 | | | — | | | 1,367 | |
Adjustment to non-controlling interests resulting from changes in ownership of the Operating Partnership | — | | — | | | — | | — | | | — | | — | | | 2,127 | | | — | | | — | | | 2,127 | | | (2,127) | | | — | |
Balance at March 31, 2021 | 5,956,065 | | $ | 6 | | | 1,624,113 | | $ | 2 | | | 27,531,951 | | $ | 27 | | | $ | 476,996 | | | $ | (133) | | | $ | (61,066) | | | $ | 415,832 | | | $ | 1,835 | | | $ | 417,667 | |
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| Three months ended March 31, 2020 |
| Series B Preferred Stock | | Series C Preferred Stock | | Common Stock | | Additional Paid-in Capital | | Accumulated Other Comprehensive Loss | | Distributions in Excess of Accumulated Earnings | | Total Stockholders’ Equity | | Non- Controlling Interests | | Total Equity |
| Number of Shares | | Par Value | | Number of Shares | | Par Value | | Number of Shares | | Par Value | | | | | | |
Balance at December 31, 2019 | 4,755,869 | | $ | 5 | | | — | | — | | | 20,936,658 | | $ | 21 | | | $ | 315,770 | | | $ | (390) | | | $ | (38,785) | | | $ | 276,621 | | | $ | 2,349 | | | $ | 278,970 | |
Issuance of Series B Preferred Stock, net | 1,229,531 | | 1 | | | — | | — | | | — | | — | | | 27,115 | | | — | | | — | | | 27,116 | | | — | | | 27,116 | |
Redemptions of Series B Preferred Stock | (7,753) | | 0 | | | — | | — | | | — | | — | | | (185) | | | — | | | — | | | (185) | | | — | | | (185) | |
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Issuance of common stock, net | — | | — | | | — | | — | | | 409,800 | | 0 | | 5,324 | | | — | | | — | | | 5,324 | | | — | | | 5,324 | |
Net income | — | | — | | | — | | — | | | — | | — | | | — | | | — | | | 3,059 | | | 3,059 | | | 42 | | | 3,101 | |
Dividends—Series B Preferred Stock and Series C Preferred Stock | — | | — | | | — | | — | | | — | | — | | | — | | | — | | | (2,125) | | | (2,125) | | | — | | | (2,125) | |
Distributions—OP Units and common stock | — | | — | | | — | | — | | | — | | — | | | — | | | — | | | (2,850) | | | (2,850) | | | (39) | | | (2,889) | |
Comprehensive loss attributable to the Company | | | | | | | | | | | | | | | (1,257) | | | — | | | (1,257) | | | — | | | (1,257) | |
Adjustment to non-controlling interests resulting from changes in ownership of the Operating Partnership | — | | — | | | — | | — | | | — | | — | | | (4) | | | — | | | — | | | (4) | | | 4 | | | — | |
Balance at March 31, 2020 | 5,977,647 | | $ | 6 | | | — | | $ | — | | | 21,346,458 | | $ | 21 | | | $ | 348,020 | | | $ | (1,647) | | | $ | (40,701) | | | $ | 305,699 | | | $ | 2,356 | | | $ | 308,055 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
GLADSTONE LAND CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
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| For the Three Months Ended March 31, |
| 2021 | | 2020 |
CASH FLOWS FROM OPERATING ACTIVITIES: | | | |
Net income | $ | 554 | | | $ | 3,101 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Depreciation and amortization | 6,051 | | | 4,257 | |
Amortization of debt issuance costs | 388 | | | 179 | |
Amortization of deferred rent assets and liabilities, net | (179) | | | (69) | |
Amortization of right-of-use assets from operating leases and operating lease liabilities, net | (33) | | | — | |
Loss (income) from investments in unconsolidated entities | 13 | | | (34) | |
Bad debt expense | — | | | 12 | |
Loss on dispositions of real estate assets, net | 798 | | | 99 | |
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Changes in operating assets and liabilities: | | | |
Other assets, net | (924) | | | (1,857) | |
Accounts payable and accrued expenses and Due to related parties, net | 1,099 | | | (1,243) | |
Other liabilities, net | (1,111) | | | (949) | |
Net cash provided by operating activities | 6,656 | | | 3,496 | |
CASH FLOWS FROM INVESTING ACTIVITIES: | | | |
Acquisition of new real estate assets | (1,579) | | | (7,436) | |
Capital expenditures on existing real estate assets | (3,027) | | | (2,682) | |
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Deposits on prospective real estate acquisitions and investments | (800) | | | (50) | |
Net cash used in investing activities | (5,406) | | | (10,168) | |
CASH FLOWS FROM FINANCING ACTIVITIES: | | | |
Proceeds from issuance of preferred and common equity | 35,868 | | | 35,589 | |
Offering costs | (1,447) | | | (2,523) | |
Redemptions of cumulative redeemable preferred stock (Series B and Series C) | — | | | (185) | |
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Proceeds from issuance of mandatorily-redeemable preferred stock (Series D) | 60,375 | | | — | |
Redemption of mandatorily-redeemable preferred stock (Series A) | (28,750) | | | — | |
Borrowings from notes and bonds payable | 9,903 | | | — | |
Repayments of notes and bonds payable | (4,973) | | | (4,388) | |
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Payments of financing fees | (2,223) | | | (263) | |
Dividends paid on cumulative redeemable preferred stock (Series B and Series C) | (2,676) | | | (2,125) | |
Distributions paid on non-controlling common interests in Operating Partnership | (9) | | | (39) | |
Distributions paid on common stock | (3,642) | | | (2,850) | |
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Net cash provided by financing activities | 62,426 | | | 23,216 | |
NET INCREASE IN CASH AND CASH EQUIVALENTS | 63,676 | | | 16,544 | |
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | 9,218 | | | 13,688 | |
CASH AND CASH EQUIVALENTS AT END OF PERIOD | $ | 72,894 | | | $ | 30,232 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
GLADSTONE LAND CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In thousands)
(Unaudited)
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| For the Three Months Ended March 31, |
| 2021 | | 2020 |
NON-CASH OPERATING, INVESTING, AND FINANCING INFORMATION: | | | |
Issuance of non-controlling interests in Operating Partnership in conjunction with acquisitions, net | $ | 3,970 | | | $ | — | |
Operating lease right-of-use assets included in Other assets, net | 683 | | | 168 | |
Operating lease liabilities included in Other liabilities, net | 644 | | | 127 | |
Real estate additions included in Accounts payable and accrued expenses and Due to related parties, net | 692 | | | 2,699 | |
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Stock offering and OP Unit issuance costs included in Accounts payable and accrued expenses and Due to related parties, net | — | | | 28 | |
Financing fees included in Accounts payable and accrued expenses and Due to related parties, net | 165 | | | 77 | |
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Lender holdback on loan issuance | — | | | 498 | |
Unrealized loss related to interest rate hedging instrument | (133) | | | (1,647) | |
Dividends paid on Series C Preferred Stock via additional share issuances | 21 | | | — | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
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. 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, a majority of the common 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 March 31, 2021 and December 31, 2020, the Company owned approximately 99.3% and 100.0%, 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 taxed 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. For the three months ended March 31, 2021, and for the tax year ended December 31, 2020, there was no taxable income or loss from Land Advisers, nor did we have any undistributed REIT taxable income.
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, 2020, as filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 24, 2021 (the “Form 10-K”). The results of operations for the three months ended March 31, 2021, 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. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, including the impact of extraordinary events, such as the novel coronavirus (“COVID-19”) pandemic, the results of which form the basis for making certain judgments. Actual results may materially differ from these estimates.
Recently-Issued Accounting Pronouncements
In April 2020, the FASB issued a staff question-and-answer document, “Topic 842 and Topic 840: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic” (the “COVID-19 Q&A”), to address certain frequently-asked questions pertaining to lease concessions arising from the effects of the COVID-19 pandemic. Existing lease guidance requires entities to determine if a lease concession is a result of a new arrangement reached with the tenant (which would be addressed under the lease modification accounting framework) or if a lease concession is under the enforceable rights and obligations within the existing lease agreement (which would not fall under the lease modification accounting framework). The COVID-19 Q&A clarifies that entities may elect to not evaluate whether lease-related relief granted in light of the effects of COVID-19 is a lease modification, provided that the concession does not result in a substantial increase in rights of the lessor or obligations of the lessee. This election is available for concessions that result in the total payments required by the modified contract being substantially the same as or less than the total payments required by the original contract.
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 140 farms we owned as of March 31, 2021 (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)(4) | | 56 | | 25,202 | | 23,531 | | $ | 622,177 | | | $ | 383,829 | |
Florida | | 23 | | 20,770 | | 16,256 | | 209,525 | | | 129,527 | |
Arizona(5) | | 6 | | 6,280 | | 5,228 | | 57,368 | | | 19,575 | |
Colorado | | 12 | | 32,773 | | 25,577 | | 48,023 | | | 30,147 | |
Washington | | 3 | | 1,384 | | 1,001 | | 39,006 | | | 25,425 | |
Nebraska | | 9 | | 7,782 | | 7,050 | | 30,601 | | | 19,296 | |
Michigan | | 15 | | 962 | | 682 | | 11,832 | | | 7,011 | |
Texas | | 1 | | 3,667 | | 2,219 | | 8,306 | | | 5,117 | |
Maryland | | 6 | | 987 | | 863 | | 7,939 | | | 4,644 | |
Oregon | | 3 | | 418 | | 363 | | 6,091 | | | 3,839 | |
South Carolina | | 3 | | 597 | | 447 | | 3,790 | | | 2,259 | |
North Carolina | | 2 | | 310 | | 295 | | 2,235 | | | 1,206 | |
Delaware | | 1 | | 180 | | 140 | | 1,272 | | | 744 | |
| | 140 | | 101,312 | | 83,652 | | $ | 1,048,165 | | | $ | 632,619 | |
(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 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 $3.6 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 certain of our properties. As of March 31, 2021, this investment had a net carrying value of approximately $1.1 million and is included within Other assets, net on the accompanying Condensed Consolidated Balance Sheet.
(4)Includes one farm in which we own a leasehold interest via a ground sublease with a California municipality that expires in December 2041. The farm subject to this sublease consists of approximately five acres and had an aggregate net cost basis of approximately $784,000 as of March 31, 2021 (included in Lease intangibles, net on the accompanying Condensed Consolidated Balance Sheet).
(5)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 March 31, 2021 (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 March 31, 2021, and December 31, 2020 (dollars in thousands):
| | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 |
Real estate: | | | |
Land and land improvements | $ | 714,676 | | | $ | 713,333 | |
Permanent Plantings | 202,443 | | | 202,420 | |
Irrigation and drainage systems | 140,855 | | | 141,408 | |
Farm-related facilities | 32,812 | | | 28,146 | |
Other site improvements | 10,285 | | | 10,132 | |
Real estate, at gross cost | 1,101,071 | | | 1,095,439 | |
Accumulated depreciation | (54,700) | | | (49,236) | |
Real estate, net | $ | 1,046,371 | | | $ | 1,046,203 | |
Real estate depreciation expense on these tangible assets was approximately $5.7 million and $3.4 million for the three months ended March 31, 2021 and 2020, 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 both March 31, 2021, and December 31, 2020, we recorded tenant improvements, net of accumulated depreciation, of approximately $2.0 million. We recorded both depreciation expense and additional lease revenue related to these tenant improvements of approximately $98,000 and $75,000 for the three months ended March 31, 2021 and 2020, respectively.
Intangible Assets and Liabilities
The following table summarizes the carrying values of certain lease intangible assets and the related accumulated amortization as of March 31, 2021, and December 31, 2020 (dollars in thousands):
| | | | | | | | | | | |
| March 31, 2021 | | December 31, 2020 |
Lease intangibles: | | | |
Leasehold interest – land | $ | 4,285 | | | $ | 3,498 | |
In-place leases | 1,824 | | | 1,968 | |
Leasing costs | 1,616 | | | 1,640 | |
Tenant relationships | 127 | | | 127 | |
Lease intangibles, at cost | 7,852 | | | 7,233 | |
Accumulated amortization | (3,462) | | | (3,501) | |
Lease intangibles, net | $ | 4,390 | | | $ | 3,732 | |
Total amortization expense related to these lease intangible assets was approximately $383,000 and $826,000 for the three months ended March 31, 2021 and 2020, 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 March 31, 2021, and December 31, 2020 (dollars in thousands):
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| | March 31, 2021 | | December 31, 2020 |
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) | | $ | 255 | | | $ | (110) | | | $ | 308 | | | $ | (154) | |
Below-market lease values and other deferred revenue(2) | | (2,229) | | | 372 | | | (908) | | | 336 | |
| | $ | (1,974) | | | $ | 262 | | | $ | (600) | | | $ | 182 | |
(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 $(44,000) and $31,000 for the three months ended March 31, 2021 and 2020, respectively. Total accretion related to below-market lease values and other deferred revenue was approximately $36,000 and $25,000 for the three months ended March 31, 2021 and 2020, respectively.
Acquisitions
2021 Acquisitions
During the three months ended March 31, 2021, we acquired three 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 Acres | | No. of Farms | | Primary Crop(s) / Use | | Lease Term | | Renewal Options | | Total Purchase Price | | Acquisition Costs(1) | | Annualized Straight-line Rent(2) |
Palmer Mill Road | | Dorchester, MD | | 3/3/2021 | | 228 | | 2 | | Sod | | 10.0 years | | 2 (5 years) | | $ | 1,600 | | | $ | 48 | | | $ | 89 | |
Eight Mile Road - Port Facility | | San Joaquin, CA | | 3/11/2021 | | 5 | | 1 | | Cooling Facility & Storage | | 9.8 years | | 3 (5 years) | | 3,977 | | | 30 | | | 189 | |
| | | | | | 233 | | 3 | | | | | | | | $ | 5,577 | | | $ | 78 | | | $ | 278 | |
(1)Includes approximately $4,000 of external legal fees associated with negotiating and originating the leases associated with these acquisitions, which costs were expensed in the period incurred.
(2)Based on the minimum cash rental payments guaranteed under the respective leases, as required under GAAP, and excludes contingent rental payments, such as participation rents.
During the three months ended March 31, 2021, in the aggregate, we recognized operating revenues of approximately $25,000 and a net loss of approximately $4,000 related to the above acquisitions.
2020 Acquisitions
During the three months ended March 31, 2020, we acquired two 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 Acres | | No. of Farms | | Primary Crop(s) | | Lease Term | | Renewal Options | | Total Purchase Price | | Acquisition Costs(1) | | Annualized Straight-line Rent(2) |
County Road 18 | | Phillips, CO | | 1/15/2020 | | 1,325 | | 2 | | Sugar beets, edible beans, potatoes, & corn | | 6.0 years | | None | | $ | 7,500 | | | $ | 39 | | | $ | 417 | |
| | | | | | 1,325 | | 2 | | | | | | | | $ | 7,500 | | | $ | 39 | | | $ | 417 | |
(1)Includes approximately $4,000 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)Unaudited; 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.
During the three months ended March 31, 2020, we recognized operating revenues of approximately $88,000 and net income of approximately $70,000 related to the above acquisition.
Purchase Price Allocations
The allocation of the aggregate purchase price for the farms acquired during each of the three months ended March 31, 2021 and 2020 is as follows (dollars in thousands):
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Assets (Liabilities) Acquired | | 2021 Acquisitions | | 2020 Acquisitions |
Land and Land Improvements | | $ | 1,341 | | | $ | 6,843 | |
Irrigation & Drainage Systems | | 209 | | | 657 | |
| | | | |
Farm-related Facilities | | 4,218 | | | — | |
Other Site Improvements | | 88 | | | — | |
Leasehold Interest—Land | | 787 | | | |
In-Place Leases | | 110 | | | — | |
Leasing Costs | | 145 | | | — | |
| | | | |
Below-market Lease Values(1) | | (1,321) | | | — | |
| | | | |
Total Purchase Price | | $ | 5,577 | | | $ | 7,500 | |
(1)Included within Other liabilities, net on the accompanying Condensed Consolidated Balance Sheets.
Investments in Unconsolidated Entities
In connection with the acquisition of certain farmland located in Fresno County, California, we also acquired an ownership in a related LLC, the sole purpose of which is to own and maintain a pipeline conveying water to our and other neighboring
properties. As of March 31, 2021, our aggregate ownership interest in the LLC was 50.0%. As our investment in the LLC is deemed to constitute “significant influence,” we have accounted for this investment under the equity method.
During the three months ended March 31, 2021 and 2020, we recorded (loss) income of approximately $(13,000) and $34,000, respectively (included on our Condensed Consolidated Statements of Operations and Comprehensive Income as (Loss) income from investments in unconsolidated entities), which represents our pro-rata share of the (loss) income recognized by the LLC. Our combined ownership interest in the LLC, which had an aggregate carrying value of approximately $1.1 million and $1.2 million, as of March 31, 2021, and December 31, 2020, respectively, is included within Other assets, net on the accompanying Condensed Consolidated Balance Sheets.
Portfolio Concentrations
Credit Risk
As of March 31, 2021, our farms were leased to various different, unrelated third-party tenants, with certain tenants leasing more than one farm. No individual tenant represented greater than 10.0% of the total lease revenue recorded during the three months ended March 31, 2021.
Geographic Risk
Farms located in California and Florida accounted for approximately $9.9 million (61.9%) and $3.4 million (20.9%), respectively, of the total lease revenue recorded during the three months ended March 31, 2021. Though we seek to continue to further diversify geographically, as may be desirable or feasible, should an unexpected natural disaster (such as an earthquake, wildfire, or flood) occur or climactic change impact the regions 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 our total lease revenue recorded during the three months ended March 31, 2021.
Impairment
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 March 31, 2021, and December 31, 2020, we concluded that none of our properties were impaired. There have been no impairments recognized on our real estate assets since our inception.
NOTE 4. BORROWINGS
Our borrowings as of March 31, 2021, and December 31, 2020, are summarized below (dollars in thousands):
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| Carrying Value as of | | As of March 31, 2021 |
| March 31, 2021 | | December 31, 2020 | | Stated Interest Rates(1) (Range; Wtd. Avg) | | Maturity Dates (Range; Wtd. Avg) |
Notes and bonds payable: | | | | | | | |
Fixed-rate notes payable | $ | 536,015 | | | $ | 492,182 | | | 2.45%–5.70%; 3.72% | | 2/14/2022–11/1/2045; December 2031 |
Variable-rate notes payable(2) | 4,410 | | | 45,525 | | | 2.11%–2.11%; 2.11% | | 12/1/2022–12/1/2030; October 2029 |
Fixed-rate bonds payable | 92,094 | | | 89,883 | | | 2.13%–4.57%; 3.49% | | 8/17/2021–10/31/2028; July 2024 |
Total notes and bonds payable | 632,519 | | | 627,590 | | | | | |
Debt issuance costs – notes and bonds payable | ( |