Real Estate and Intangible Assets (Tables)
|
3 Months Ended |
Mar. 31, 2020 |
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| Real Estate [Abstract] |
|
| Summary Information of Farms |
The following table provides certain summary information about the 113 farms we owned as of March 31, 2020 (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)
|
|
42 |
|
14,830 |
|
13,610 |
|
$ |
420,149 |
|
|
$ |
259,322 |
|
Florida |
|
23 |
|
20,770 |
|
16,256 |
|
210,535 |
|
|
132,492 |
|
Arizona(4)
|
|
6 |
|
6,280 |
|
5,228 |
|
56,987 |
|
|
22,087 |
|
Colorado |
|
12 |
|
32,773 |
|
25,577 |
|
49,141 |
|
|
26,687 |
|
Nebraska |
|
8 |
|
7,104 |
|
6,402 |
|
27,364 |
|
|
17,246 |
|
Michigan |
|
15 |
|
962 |
|
682 |
|
12,344 |
|
|
7,573 |
|
Texas |
|
1 |
|
3,667 |
|
2,219 |
|
8,317 |
|
|
5,227 |
|
Washington |
|
1 |
|
746 |
|
417 |
|
8,166 |
|
|
5,005 |
|
Oregon |
|
3 |
|
418 |
|
363 |
|
6,233 |
|
|
3,785 |
|
North Carolina |
|
2 |
|
310 |
|
295 |
|
2,274 |
|
|
1,238 |
|
|
|
113 |
|
87,860 |
|
71,049 |
|
$ |
801,510 |
|
|
$ |
480,662 |
|
|
|
(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. |
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(2) |
Excludes approximately $3.1 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.
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(3) |
Includes ownership in a special-purpose LLC that owns a pipeline conveying water to one of our properties. As of March 31, 2020, this investment had a net carrying value of approximately $621,000 and is included within Other assets, net on the accompanying Condensed Consolidated Balance Sheet.
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(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 $2.0 million as of March 31, 2020 (included in Lease intangibles, net on the accompanying Condensed Consolidated Balance Sheet).
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| Summary of Components of Investments in Real Estate |
The following table sets forth the components of our investments in tangible real estate assets as of March 31, 2020, and December 31, 2019 (dollars in thousands):
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March 31, 2020 |
|
December 31, 2019 |
Real estate: |
|
|
|
Land and land improvements |
$ |
590,137 |
|
|
$ |
583,247 |
|
Irrigation and drainage systems |
111,519 |
|
|
108,222 |
|
Horticulture |
108,102 |
|
|
107,941 |
|
Farm-related facilities |
20,665 |
|
|
20,665 |
|
Other site improvements |
7,180 |
|
|
7,180 |
|
Real estate, at gross cost |
837,603 |
|
|
827,255 |
|
Accumulated depreciation |
(38,147 |
) |
|
(35,174 |
) |
Real estate, net |
$ |
799,456 |
|
|
$ |
792,081 |
|
|
| Carrying Value of Lease Intangibles and Accumulated Amortization for Each Intangible Asset or Liability Class |
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, 2020, and December 31, 2019 (dollars in thousands):
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|
March 31, 2020 |
|
December 31, 2019 |
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)
|
|
$ |
201 |
|
|
$ |
(72 |
) |
|
$ |
111 |
|
|
$ |
(41 |
) |
Below-market lease values and other deferred revenues(2)
|
|
(886 |
) |
|
282 |
|
|
(886 |
) |
|
257 |
|
|
|
$ |
(685 |
) |
|
$ |
210 |
|
|
$ |
(775 |
) |
|
$ |
216 |
|
|
|
(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. |
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|
(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. |
The following table summarizes the carrying values of certain lease intangible assets and the related accumulated amortization as of March 31, 2020, and December 31, 2019 (dollars in thousands):
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|
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|
March 31, 2020 |
|
December 31, 2019 |
Lease intangibles: |
|
|
|
Leasehold interest – land |
$ |
3,498 |
|
|
$ |
3,498 |
|
In-place leases |
2,007 |
|
|
2,293 |
|
Leasing costs |
1,585 |
|
|
2,066 |
|
Tenant relationships |
414 |
|
|
414 |
|
Lease intangibles, at cost |
7,504 |
|
|
8,271 |
|
Accumulated amortization |
(3,503 |
) |
|
(3,444 |
) |
Lease intangibles, net |
$ |
4,001 |
|
|
$ |
4,827 |
|
|
| Schedule of Asset Acquisitions, by Acquisition |
During the three months ended March 31, 2019, we acquired one new farm, which is 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)
|
|
New
Long-term
Debt |
Somerset Road |
|
Lincoln, NE |
|
1/22/2019 |
|
695 |
|
1 |
|
Popcorn & edible beans |
|
4.9 years |
|
1 (5 years) |
|
$ |
2,400 |
|
|
$ |
33 |
|
|
$ |
126 |
|
|
$ |
1,440 |
|
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|
|
|
|
|
695 |
|
1 |
|
|
|
|
|
|
|
$ |
2,400 |
|
|
$ |
33 |
|
|
$ |
126 |
|
|
$ |
1,440 |
|
|
|
(1) |
Includes approximately $4,000 of external legal fees associated with negotiating and originating the lease associated with this acquisition, which cost was expensed in the period incurred.
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(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. |
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)
|
|
New
Long-term
Debt |
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 |
|
|
$ |
— |
|
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|
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|
1,325 |
|
2 |
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|
$ |
7,500 |
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|
$ |
39 |
|
|
$ |
417 |
|
|
$ |
— |
|
|
|
(1) |
Includes approximately $4,000 of external legal fees associated with negotiating and originating the lease associated with this acquisition, which cost was expensed in the period incurred.
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|
(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. |
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| Recognized Identified Assets Acquired and Liabilities Assumed In Asset Acquisitions |
The allocation of the aggregate purchase price for the farms acquired during each of the three months ended March 31, 2020 and 2019 is as follows (dollars in thousands):
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|
Acquisition Period |
|
Land and Land
Improvements
|
|
Irrigation &
Drainage Systems
|
|
Total Purchase
Price
|
2020 Acquisitions |
|
$ |
6,843 |
|
|
$ |
657 |
|
|
$ |
7,500 |
|
2019 Acquisitions |
|
2,090 |
|
|
310 |
|
|
2,400 |
|
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| Summary of Leasing Activity |
The following table summarizes certain leasing activity that occurred on our existing properties during the three months ended March 31, 2020 (dollars in thousands):
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PRIOR LEASES |
|
NEW LEASES(1)
|
Farm
Locations |
Number
of
Leases
|
Total
Farm
Acres
|
|
Total
Annualized
Straight-line
Rent(2)
|
# of Leases
with
Participation
Rents
|
Lease
Structures
(# of NNN
/ NN / N)(3)
|
|
Total
Annualized
Straight-line
Rent(2)
|
Wtd. Avg.
Term
(Years)
|
# of Leases
with
Participation
Rents |
Lease
Structures
(# of NNN
/ NN / N)(3)
|
AZ, CA, & NE |
9 |
6,287 |
|
$ |
4,057 |
|
3 |
5 / 2 / 2 |
|
$ |
3,992 |
|
5.9 |
4 |
5 / 4 / 0 |
|
|
(1) |
In connection with certain of these leases, we committed to provide capital for certain improvements on these farms. See Note 7, “Commitments and Contingencies—Operating Obligations,” for additional information on these commitments.
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(2) |
Annualized straight-line rent is based on the minimum cash rental payments guaranteed under the leases (presented on an annualized basis), as required under GAAP, and excludes contingent rental payments, such as participation rents. |
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(3) |
“NNN” refers to leases under triple-net lease arrangements, “NN” refers to leases under partial-net lease arrangements, and “N” refers to leases under single-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.”
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The following table summarizes the leasing activity that occurred on our existing properties subsequent to March 31, 2020, through the date of this filing (dollars in thousands):
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|
PRIOR LEASES |
|
NEW LEASES(1)
|
Farm
Locations |
Number
of
Leases
|
Total
Farm
Acres
|
|
Total
Annualized
Straight-line
Rent(2)
|
# of Leases
with
Participation
Rents
|
Lease
Structures
(# of NNN
/ NN / N)(3)
|
|
Total
Annualized
Straight-line
Rent(2)
|
Wtd. Avg.
Term
(Years)
|
# of Leases
with
Participation
Rents |
Lease
Structures
(# of NNN
/ NN / N)(3)
|
CA |
2 |
542 |
|
$ |
1,211 |
|
0 |
2 / 0 / 0 |
|
$ |
1,458 |
|
6.9 |
0 |
2 / 0 / 0 |
|
|
(1) |
In connection with certain of these leases, we committed to provide capital for certain improvements on these farms. See Note 7, “Commitments and Contingencies,” for additional information on these commitments.
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|
|
(2) |
Annualized straight-line rent is based on the minimum cash rental payments guaranteed under the leases (presented on an annualized basis), as required under GAAP, and excludes contingent rental payments, such as participation rents. |
|
|
(3) |
“NNN” refers to leases under triple-net lease arrangements, “NN” refers to leases under partial-net lease arrangements, and “N” refers to leases under single-net lease arrangements. For a description of each of these types of lease arrangements, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview—Leases—General.”
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| Future Lease Payments to be Received |
The following table summarizes the future lease payments to be received under non-cancelable leases as of March 31, 2020, and December 31, 2019 (dollars in thousands):
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Future Lease Payments(1)
|
Period |
|
March 31, 2020 |
|
December 31, 2019 |
For the remaining nine months ending December 31: |
2020 |
|
$ |
33,713 |
|
|
$ |
46,483 |
|
For the fiscal years ending December 31: |
2021 |
|
41,004 |
|
|
40,799 |
|
|
2022 |
|
40,007 |
|
|
38,793 |
|
|
2023 |
|
40,291 |
|
|
39,351 |
|
|
2024 |
|
34,426 |
|
|
34,080 |
|
|
Thereafter |
|
124,482 |
|
|
125,137 |
|
|
|
|
$ |
313,923 |
|
|
$ |
324,643 |
|
|
|
(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. |
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| Summary of Geographic Locations of Properties |
The following table summarizes the geographic locations (by state) of our farms owned and with leases in place as of the three months ended March 31, 2020 and 2019 (dollars in thousands):
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As of and For the three months ended March 31, 2020 |
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As of and For the three months ended March 31, 2019 |
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)
|
|
42 |
|
14,830 |
|
16.9% |
|
$ |
6,816 |
|
|
44.6% |
|
33 |
|
10,147 |
|
13.7% |
|
$ |
3,734 |
|
|
47.7% |
Florida |
|
23 |
|
20,770 |
|
23.6% |
|
3,335 |
|
|
21.8% |
|
22 |
|
17,184 |
|
23.2% |
|
2,339 |
|
|
29.9% |
Arizona |
|
6 |
|
6,280 |
|
7.1% |
|
3,331 |
|
|
21.8% |
|
6 |
|
6,280 |
|
8.5% |
|
539 |
|
|
6.9% |
Colorado |
|
12 |
|
32,773 |
|
37.3% |
|
823 |
|
|
5.4% |
|
10 |
|
31,448 |
|
42.6% |
|
696 |
|
|
8.9% |
Nebraska |
|
8 |
|
7,104 |
|
8.1% |
|
385 |
|
|
2.5% |
|
3 |
|
3,254 |
|
4.4% |
|
60 |
|
|
0.8% |
Michigan |
|
15 |
|
962 |
|
1.1% |
|
170 |
|
|
1.1% |
|
5 |
|
446 |
|
0.6% |
|
21 |
|
|
0.2% |
Oregon |
|
3 |
|
418 |
|
0.5% |
|
130 |
|
|
0.9% |
|
3 |
|
418 |
|
0.6% |
|
128 |
|
|
1.6% |
Washington |
|
1 |
|
746 |
|
0.8% |
|
123 |
|
|
0.8% |
|
1 |
|
746 |
|
1.0% |
|
122 |
|
|
1.5% |
Texas |
|
1 |
|
3,667 |
|
4.2% |
|
112 |
|
|
0.7% |
|
1 |
|
3,667 |
|
5.0% |
|
131 |
|
|
1.7% |
North Carolina |
|
2 |
|
310 |
|
0.4% |
|
55 |
|
|
0.4% |
|
2 |
|
310 |
|
0.4% |
|
60 |
|
|
0.8% |
TOTALS |
|
113 |
|
87,860 |
|
100.0% |
|
$ |
15,280 |
|
|
100.0% |
|
86 |
|
73,900 |
|
100.0% |
|
$ |
7,830 |
|
|
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.
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|