land-20230630

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 June 30, 2023


☐			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

6.00% Series C Cumulative Redeemable Preferred Stock, $0.01 par value per share

LANDP

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.

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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 August 4, 2023, was 35,838,442.

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GLADSTONE LAND CORPORATION

FORM 10-Q FOR THE QUARTER ENDED

JUNE 30, 2023

TABLE OF CONTENTS


		PAGE
PART I	FINANCIAL INFORMATION

ITEM 1.	Financial Statements (Unaudited):

	Condensed Consolidated Balance Sheets as of June 30, 2023, and December 31, 2022	3

	Condensed Consolidated Statements of Operations and Comprehensive Income for the three and six months ended June 30, 2023 and 2022	4

	Condensed Consolidated Statements of Equity for the three and six months ended June 30, 2023 and 2022	5

	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022	7

	Notes to Condensed Consolidated Financial Statements	8

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	47

ITEM 4.	Controls and Procedures	47

PART II	OTHER INFORMATION

ITEM 1.	Legal Proceedings	49

ITEM 1A.	Risk Factors	49

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	49

ITEM 3.	Defaults Upon Senior Securities	49

ITEM 4.	Mine Safety Disclosures	49

ITEM 5.	Other Information	50

ITEM 6.	Exhibits	51

SIGNATURES		53

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PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

GLADSTONE LAND CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

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

(Unaudited)


	June 30, 2023		December 31, 2022
ASSETS
Real estate, at cost	$	1,433,714	$	1,432,394
Less: accumulated depreciation	(124,300)		(106,966)
Total real estate, net	1,309,414		1,325,428
Lease intangibles, net	5,262		5,702
Cash and cash equivalents	48,208		61,141


Other assets, net	65,848		64,980
TOTAL ASSETS	$	1,428,732	$	1,457,251

LIABILITIES AND EQUITY
LIABILITIES:
Borrowings under lines of credit	$	100	$	100
Notes and bonds payable, net	593,656		626,400
Series D cumulative term preferred stock, net, $0.001 par value, $25.00 per share liquidation preference; 3,600,000 shares authorized, 2,415,000 shares issued and outstanding as of June 30, 2023, and December 31, 2022	59,313		59,107
Accounts payable and accrued expenses	14,096		16,266
Due to related parties, net	3,095		4,370
Other liabilities, net	23,538		19,646
Total liabilities	693,798		725,889
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 June 30, 2023, and December 31, 2022	6		6
Series C cumulative redeemable preferred stock, $0.001 par value, $25.00 per share liquidation preference; 25,902,437 shares authorized, 10,156,509 shares issued and outstanding as of June 30, 2023; 25,951,347 shares authorized, 10,191,353 shares issued and outstanding as of December 31, 2022	10		10
Series E cumulative redeemable preferred stock, $0.001 par value, $25.00 per share liquidation preference; 16,000,000 shares authorized, 135,409 shares issued and outstanding as of June 30, 2023; 16,000,000 shares authorized, 0 shares issued and outstanding as of December 31, 2022	0		—
Common stock, $0.001 par value; 48,041,498 shares authorized, 35,780,082 shares issued and outstanding as of June 30, 2023; 47,992,588 shares authorized, 35,050,397 shares issued and outstanding as of December 31, 2022	36		35
Additional paid-in capital	852,967		836,674
Distributions in excess of accumulated earnings	(126,799)		(114,370)
Accumulated other comprehensive income	8,714		9,007
Total stockholders’ equity	734,934		731,362
Non-controlling interests in Operating Partnership	—		—
Total equity	734,934		731,362
TOTAL LIABILITIES AND EQUITY	$	1,428,732	$	1,457,251

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

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GLADSTONE LAND CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

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

(Unaudited)


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2023		2022		2023		2022
OPERATING REVENUES:
Lease revenue, net	$	21,210	$	20,293	$	42,412	$	40,236

Total operating revenues	21,210		20,293		42,412		40,236
OPERATING EXPENSES:
Depreciation and amortization	9,044		8,392		18,163		16,738
Property operating expenses	887		695		2,015		1,398
Base management fee	2,148		2,043		4,296		4,079
Incentive fee	—		—		—		1,131

Administration fee	514		463		1,090		926
General and administrative expenses	790		567		1,577		1,253

Total operating expenses	13,383		12,160		27,141		25,525



OTHER INCOME (EXPENSE):
Other income	364		63		2,984		2,829
Interest expense	(5,942)		(6,523)		(11,979)		(12,971)
Dividends declared on cumulative term preferred stock	(755)		(755)		(1,509)		(1,509)
Gain (loss) on dispositions of real estate assets, net	6,394		(305)		5,914		(1,280)
Property and casualty (loss) recovery, net	—		—		(1,016)		49

Loss from investments in unconsolidated entities	(33)		—		(60)		(29)
Total other income (expense), net	28		(7,520)		(5,666)		(12,911)
NET INCOME	7,855		613		9,605		1,800
Net loss (income) attributable to non-controlling interests	—		3		—		(6)
NET INCOME ATTRIBUTABLE TO THE COMPANY	7,855		616		9,605		1,794
Dividends declared on cumulative redeemable preferred stock	(6,084)		(4,486)		(12,152)		(8,398)
Loss on extinguishment of cumulative redeemable preferred stock	(44)		(3)		(46)		(6)
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	1,727	$	(3,873)	$	(2,593)	$	(6,610)

INCOME (LOSS) PER COMMON SHARE:
Basic and diluted	$	0.05	$	(0.11)	$	(0.07)	$	(0.19)
WEIGHTED-AVERAGE SHARES OF COMMON STOCK OUTSTANDING:
Basic and diluted	35,722,836		34,520,068		35,635,601		34,403,184

NET INCOME	$	7,855	$	613	$	9,605	$	1,800
Change in fair value related to interest rate hedging instruments	1,355		2,562		(293)		7,292
COMPREHENSIVE INCOME	9,210		3,175		9,312		9,092
Net loss (income) attributable to non-controlling interests	—		3		—		(6)

COMPREHENSIVE INCOME ATTRIBUTABLE TO THE COMPANY	$	9,210	$	3,178	$	9,312	$	9,086

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

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GLADSTONE LAND CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(In thousands, except share data)

(Unaudited)





















	Three Months Ended June 30, 2023
	Series B Preferred Stock			Series C Preferred Stock			Series E Preferred Stock			Common Stock			Additional Paid-in Capital		Distributions in Excess of Accumulated Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity		Non- Controlling Interests		Total Equity
	No. of Shares	Par Value		No. of Shares	Par Value		No. of Shares	Par Value		No. of Shares	Par Value
Balance at March 31, 2023	5,956,065	$	6	10,195,602	$	10	60,200	$	—	35,713,982	$	36	$	851,063	$	(123,594)	$	7,359	$	734,880	$	—	$	734,880



Redemptions of Series C Preferred Stock	—	—		(39,093)	—		—	—		—	—		(907)		(44)		—		(951)		—		(951)


Issuance of Series E Preferred Stock, net	—	—		—	—		75,209	—		—	—		1,679		—		—		1,679		—		1,679
Issuance of common stock, net	—	—		—	—		—	—		66,100	—		1,132		—		—		1,132		—		1,132
Net income	—	—		—	—		—	—		—	—		—		7,855		—		7,855		—		7,855
Dividends—cumulative redeemable preferred stock	—	—		—	—		—	—		—	—		—		(6,084)		—		(6,084)		—		(6,084)
Distributions—OP Units and common stock	—	—		—	—		—	—		—	—		—		(4,932)		—		(4,932)		—		(4,932)
Comprehensive income attributable to the Company	—	—		—	—		—	—		—	—		—		—		1,355		1,355		—		1,355

Balance at June 30, 2023	5,956,065	$	6	10,156,509	$	10	135,409	$	—	35,780,082	$	36	$	852,967	$	(126,799)	$	8,714	$	734,934	$	—	$	734,934





















	Six Months Ended June 30, 2023
	Series B Preferred Stock			Series C Preferred Stock			Series E Preferred Stock			Common Stock			Additional Paid-in Capital		Distributions in Excess of Accumulated Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity		Non- Controlling Interests		Total Equity
	No. of Shares	Par Value		No. of Shares	Par Value		No. of Shares	Par Value		No. of Shares	Par Value
Balance at December 31, 2022	5,956,065	$	6	10,191,353	$	10	—	$	—	35,050,397	$	35	$	836,674	$	(114,370)	$	9,007	$	731,362	$	—	$	731,362


Issuance of Series C Preferred Stock, net	—	—		14,069	—		—	—		—	—		318		—		—		318		—		318
Redemptions of Series C Preferred Stock	—	—		(48,913)	—		—	—		—	—		(1,130)		(46)		—		(1,176)		—		(1,176)


Issuance of Series E Preferred Stock, net	—	—		—	—		135,409	—		—	—		3,028		—		—		3,028		—		3,028
Issuance of common stock, net	—	—		—	—		—	—		729,685	1		14,077		—		—		14,078		—		14,078
Net income	—	—		—	—		—	—		—	—		—		9,605		—		9,605		—		9,605
Dividends—cumulative redeemable preferred stock	—	—		—	—		—	—		—	—		—		(12,152)		—		(12,152)		—		(12,152)
Distributions—OP Units and common stock	—	—		—	—		—	—		—	—		—		(9,836)		—		(9,836)		—		(9,836)
Comprehensive loss attributable to the Company	—	—		—	—		—	—		—	—		—		—		(293)		(293)		—		(293)

Balance at June 30, 2023	5,956,065	$	6	10,156,509	$	10	135,409	$	—	35,780,082	$	36	$	852,967	$	(126,799)	$	8,714	$	734,934	$	—	$	734,934

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

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GLADSTONE LAND CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Continued)

(In thousands, except share data)

(Unaudited)





















	Three Months Ended June 30, 2022
	Series B Preferred Stock			Series C Preferred Stock			Series E Preferred Stock			Common Stock			Additional Paid-in Capital		Distributions in Excess of Accumulated Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity		Non- Controlling Interests		Total Equity
	No. of Shares	Par Value		No. of Shares	Par Value		No. of Shares	Par Value		No. of Shares	Par Value
Balance at March 31, 2022	5,956,065	$	6	5,045,023	$	5	—	$	—	34,520,068	$	35	$	713,805	$	(87,868)	$	3,694	$	629,677	$	2,248	$	631,925


Issuance of Series C Preferred Stock, net	—	—		1,487,032	2		—	—		—	—		33,739		—		—		33,741		—		33,741
Redemptions of Series C Preferred Stock	—	—		(2,160)	—		—	—		—	—		(49)		(3)		—		(52)		—		(52)

Redemptions of OP Units	—	—		—	—		—	—		—	—		(3,700)		—		—		(3,700)		(3,970)		(7,670)


Net income	—	—		—	—		—	—		—	—		—		616		—		616		(3)		613
Dividends—cumulative redeemable preferred stock	—	—		—	—		—	—		—	—		—		(4,486)		—		(4,486)		—		(4,486)
Distributions—OP Units and common stock	—	—		—	—		—	—		—	—		—		(4,701)		—		(4,701)		—		(4,701)
Comprehensive income attributable to the Company	—	—		—	—		—	—		—	—		—		—		2,562		2,562		—		2,562
Adjustment to non-controlling interests resulting from changes in ownership of the Operating Partnership	—	—		—	—		—	—		—	—		(1,725)		—		—		(1,725)		1,725		—
Balance at June 30, 2022	5,956,065	$	6	6,529,895	$	7	—	$	—	34,520,068	$	35	$	742,070	$	(96,442)	$	6,256	$	651,932	$	—	$	651,932





















	Six Months Ended June 30, 2022
	Series B Preferred Stock			Series C Preferred Stock			Series E Preferred Stock			Common Stock			Additional Paid-in Capital		Distributions in Excess of Accumulated Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity		Non- Controlling Interests		Total Equity
	No. of Shares	Par Value		No. of Shares	Par Value		No. of Shares	Par Value		No. of Shares	Par Value
Balance at December 31, 2021	5,956,065	$	6	3,493,333	$	3	—	$	—	34,210,013	$	34	$	668,275	$	(80,467)	$	(1,036)	$	586,815	$	2,251	$	589,066


Issuance of Series C Preferred Stock, net	—	—		3,041,202	4		—	—		—	—		69,019		—		—		69,023		—		69,023
Redemptions of Series C Preferred Stock	—	—		(4,640)	—		—	—		—	—		(105)		(6)		—		(111)		—		(111)

Redemptions of OP Units	—	—		—	—		—	—			—		(3,700)		—		—		(3,700)		(3,970)		(7,670)

Issuance of common stock, net	—	—		—	—		—	—		310,055	1		10,321		—		—		10,322		—		10,322
Net income	—	—		—	—		—	—		—	—		—		1,794		—		1,794		6		1,800
Dividends—cumulative redeemable preferred stock	—	—		—	—		—	—		—	—		—		(8,398)		—		(8,398)		—		(8,398)
Distributions—OP Units and common stock	—	—		—	—		—	—		—	—		—		(9,365)		—		(9,365)		(27)		(9,392)
Comprehensive income attributable to the Company	—	—		—	—		—	—		—	—		—		—		7,292		7,292		—		7,292
Adjustment to non-controlling interests resulting from changes in ownership of the Operating Partnership	—	—		—	—		—	—		—	—		(1,740)		—		—		(1,740)		1,740		—
Balance at June 30, 2022	5,956,065	$	6	6,529,895	$	7	—	$	—	34,520,068	$	35	$	742,070	$	(96,442)	$	6,256	$	651,932	$	—	$	651,932

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

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GLADSTONE LAND CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	For the Six Months Ended June 30,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	9,605	$	1,800
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	18,163		16,738
Amortization of debt issuance costs	519		548
Amortization of deferred rent assets and liabilities, net	(13)		(93)
Amortization of right-of-use assets from operating leases and operating lease liabilities, net	46		46
Loss from investments in unconsolidated entities	60		29
Bad debt expense	63		67

(Gain) loss on dispositions of real estate assets, net	(5,914)		1,280

Property and casualty loss (recovery), net	1,016		(49)
Changes in operating assets and liabilities:

Other assets, net	(1,263)		(2,516)
Accounts payable and accrued expenses and Due to related parties, net	(3,628)		1,366
Other liabilities, net	3,923		139
Net cash provided by operating activities	22,577		19,355
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of new real estate assets	—		(24,320)
Capital expenditures on existing real estate assets	(5,691)		(10,118)

Proceeds from dispositions of real estate assets	9,037		—
Deposits on prospective real estate acquisitions and investments	(245)		(709)

Net cash provided by (used in) investing activities	3,101		(35,147)
CASH FLOWS FROM FINANCING ACTIVITIES:


Borrowings from notes and bonds payable	—		9,932
Repayments of notes and bonds payable	(32,987)		(15,925)
Payments of financing fees	(3)		(743)


Proceeds from issuance of preferred and common equity	17,709		85,356
Offering costs	(496)		(6,191)
Redemptions of cumulative redeemable preferred stock	(1,176)		(111)
Payments for redemptions of OP Units	—		(7,670)
Dividends paid on cumulative redeemable preferred stock	(11,822)		(7,728)
Distributions paid on non-controlling common interests in Operating Partnership	—		(27)
Distributions paid on common stock	(9,836)		(9,365)

Net cash (used in) provided by financing activities	(38,611)		47,528
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(12,933)		31,736
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	61,141		16,708
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	48,208	$	48,444

NON-CASH INVESTING AND FINANCING INFORMATION:



Real estate additions included in Accounts payable and accrued expenses and Due to related parties, net	$	2,510	$	4,182


Tenant-funded improvements included within Real estate, at cost	25		284
Stock offering and OP Unit issuance costs included in Accounts payable and accrued expenses and Due to related parties, net	155		10
Financing fees included in Accounts payable and accrued expenses and Due to related parties, net	5		13


Unrealized gain related to interest rate hedging instruments	8,714		6,256
Dividends paid on Series C Preferred Stock via additional share issuances	320		170

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

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GLADSTONE LAND CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1. BUSINESS AND ORGANIZATION

Business and Organization

Gladstone Land Corporation (“we,” “us,” or 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 June 30, 2023, and December 31, 2022, the Company owned 100.0% 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 six months ended June 30, 2023, and for the tax year ended December 31, 2022, 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. 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, 2022, as filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 21, 2023 (the “Form 10-K”). The results of operations for the three and six months ended June 30, 2023, 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, the results of which form the basis for making certain judgments. Actual results may materially differ from these estimates.

Recently-Issued Accounting Pronouncements

As of June 30, 2023, there were no recently-issued accounting pronouncements that had a material impact on our condensed consolidated financial statements.

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 169 farms we owned as of June 30, 2023 (dollars in thousands, except for footnotes):


Location	No. of Farms	Total Acres	Farm Acres	Acre-feet of Water	Net Cost Basis(1)		Encumbrances(2)
California(3)(4)(5)	63	34,844	32,321	45,016	$	859,556	$	398,110
Florida	26	22,468	17,639	0	220,401		98,369
Washington	6	2,529	1,997	0	62,738		20,597
Arizona(6)	6	6,320	5,333	0	53,230		12,545
Colorado	12	32,773	25,577	0	46,181		14,921
Nebraska	9	7,782	7,050	0	30,578		11,880
Oregon(7)	6	898	736	0	29,921		11,506
Michigan	23	1,892	1,245	0	23,515		14,037
Texas	1	3,667	2,219	0	8,138		4,814
Maryland	6	987	863	0	8,084		4,406
South Carolina	3	597	447	0	3,587		2,170
Georgia	2	230	175	0	2,676		1,667
North Carolina	2	310	295	0	2,138		—
New Jersey	3	116	101	0	2,105		1,238
Delaware	1	180	140	0	1,308		707
	169	115,593	96,138	45,016	$	1,354,156	$	596,967

(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 Total real estate, net (excluding improvements paid for by the tenant) and Lease intangibles, net; plus long-term water assets, 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 $3.2 million of debt issuance costs related to notes and bonds payable, included in Notes and bonds payable, net on the accompanying Condensed Consolidated Balance Sheets.

(3)Includes ownership in a special-purpose LLC that owns a pipeline conveying water to certain of our properties. As of June 30, 2023, this investment had a net carrying value of approximately $1.0 million and is included within Other assets, net on the accompanying Condensed Consolidated Balance Sheets.

(4)Includes eight acres in which we own a leasehold interest via a ground lease with a private individual that expires in December 2040 and five acres in which we own a leasehold interest via a ground sublease with a California municipality that expires in December 2041. As of June 30, 2023, these two ground leases had a net cost basis of approximately $709,000 and are included in Lease intangibles, net on the accompanying Condensed Consolidated Balance Sheets.

(5)Includes 45,000 acre-feet of water stored with Semitropic Water Storage District, located in Kern County, California, and 16 acre-feet of groundwater pumping credits with Westlands Water District, located in Fresno County, California. See “—Investments in Water Assets” below for additional information.

(6)Includes two farms consisting of 1,368 total acres and 1,221 farm acres in which we own leasehold interests via two ground leases with the State of Arizona that expire in February 2025 and February 2032, respectively. As of June 30, 2023, these ground leases had an aggregate net cost basis of approximately $543,000 and are included in Lease intangibles, net on the accompanying Condensed Consolidated Balance Sheets.

(7)Includes ownership in a special-purpose LLC that owns certain irrigation infrastructure that provides water to two of our farms. As of June 30, 2023, this investment had a net carrying value of approximately $4.8 million and is included within Other assets, net on the accompanying Condensed Consolidated Balance Sheets.

Real Estate

The following table sets forth the components of our investments in tangible real estate assets as of June 30, 2023, and December 31, 2022 (dollars in thousands):


	June 30, 2023		December 31, 2022
Real estate:
Land and land improvements	$	843,210	$	845,779
Permanent plantings	359,273		358,249
Irrigation and drainage systems	168,520		165,438
Farm-related facilities	49,407		48,690
Other site improvements	13,304		14,238
Real estate, at cost	1,433,714		1,432,394
Accumulated depreciation	(124,300)		(106,966)
Total real estate, net	$	1,309,414	$	1,325,428

Real estate depreciation expense on these tangible assets was approximately $8.8 million and $17.7 million for the three and six months ended June 30, 2023, respectively, and approximately $8.1 million and $16.2 million for the three and six months ended June 30, 2022, 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-funded improvements. As of June 30, 2023, and December 31, 2022, we recorded tenant-funded improvements, net of accumulated depreciation, of approximately $2.7 million and $3.0 million, respectively. We recorded additional lease revenue related to these tenant-funded improvements of approximately $136,000 and $284,000 during the three and six months ended June 30, 2023, respectively, and approximately $103,000 and $207,000 during the three and six months ended June 30, 2022, respectively.

Intangible Assets and Liabilities

The following table summarizes the carrying values of certain lease intangible assets and the related accumulated amortization as of June 30, 2023, and December 31, 2022 (dollars in thousands):


	June 30, 2023		December 31, 2022
Lease intangibles:
Leasehold interest – land	$	4,295	$	4,295
In-place lease values	2,763		2,763
Leasing costs	3,136		3,088
Other(1)	141		133
Lease intangibles, at cost	10,335		10,279
Accumulated amortization	(5,073)		(4,577)
Lease intangibles, net	$	5,262	$	5,702

(1)Other includes tenant relationships and acquisition-related costs allocated to miscellaneous lease intangibles.

Total amortization expense related to these lease intangible assets was approximately $256,000 and $508,000 for the three and six months ended June 30, 2023, respectively, and approximately $245,000 and $511,000 for the three and six months ended June 30, 2022, 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 June 30, 2023, and December 31, 2022 (dollars in thousands):


	June 30, 2023				December 31, 2022
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)	$	4,691	$	(933)	$	4,702	$	(585)
Below-market lease values and other deferred revenue(2)	(2,010)