Real Estate and Intangible Assets (Tables)
|
6 Months Ended |
Jun. 30, 2017 |
|---|
| Summary Information of Farms |
The following table provides certain summary information about our 65 farms as of June 30, 2017 (dollars in thousands, except for footnotes):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location |
|
No. of Farms |
|
Total Acres |
|
Farm Acres |
|
Net Cost Basis(1)
|
|
Encumbrances(2)
|
California |
|
22 |
|
6,713 |
|
6,240 |
|
$ |
182,226 |
|
|
$ |
137,868 |
|
Florida |
|
16 |
|
9,315 |
|
7,664 |
|
107,960 |
|
|
64,800 |
|
Colorado |
|
9 |
|
30,170 |
|
23,257 |
|
42,140 |
|
|
25,227 |
|
Arizona(3)
|
|
6 |
|
6,280 |
|
5,228 |
|
40,748 |
|
|
23,314 |
|
Oregon |
|
4 |
|
2,313 |
|
2,003 |
|
19,568 |
|
|
12,927 |
|
Nebraska |
|
2 |
|
2,559 |
|
2,101 |
|
10,708 |
|
|
6,602 |
|
Michigan |
|
4 |
|
270 |
|
183 |
|
2,993 |
|
|
1,653 |
|
North Carolina |
|
2 |
|
310 |
|
295 |
|
2,317 |
|
|
1,301 |
|
|
|
65 |
|
57,930 |
|
46,971 |
|
$ |
408,660 |
|
|
$ |
273,692 |
|
|
|
(1) |
Consists of the initial acquisition price (including the costs allocated to both tangible and intangible assets acquired and liabilities assumed), plus subsequent improvements and other capitalized costs associated with the properties, and adjusted for accumulated depreciation and amortization. Includes Investments in real estate, net (excluding improvements paid for by the tenant) and Lease intangibles, net; plus net above-market lease values included in Other assets; and less net below-market lease values, deferred revenue and unamortized tenant improvements included in Other liabilities, each as shown on the accompanying Condensed Consolidated Balance Sheet. |
|
|
(2) |
Excludes approximately $1.7 million of deferred financing costs related to mortgage notes and bonds payable included in Mortgage notes and bonds payable, net on the accompanying Condensed Consolidated Balance Sheet.
|
|
|
(3) |
Includes two farms in which we own a leasehold interest via ground leases with the State of Arizona that expire in February 2022 and February 2025, respectively. In total, these two farms consist of 1,368 total acres and 1,221 farm acres and had a net cost basis of approximately $3.5 million as of June 30, 2017 (included in Lease intangibles, net on the accompanying Condensed Consolidated Balance Sheet).
|
|
| 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 June 30, 2017, and December 31, 2016 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017 |
|
December 31, 2016 |
Real estate: |
|
|
|
|
Land and land improvements |
|
$ |
332,035 |
|
|
$ |
265,985 |
|
Irrigation systems |
|
45,829 |
|
|
33,969 |
|
Buildings |
|
16,805 |
|
|
14,671 |
|
Horticulture |
|
18,870 |
|
|
17,759 |
|
Other improvements |
|
5,472 |
|
|
4,993 |
|
Real estate, at cost |
|
419,011 |
|
|
337,377 |
|
Accumulated depreciation |
|
(13,789 |
) |
|
(11,066 |
) |
Real estate, net |
|
$ |
405,222 |
|
|
$ |
326,311 |
|
|
| Carrying Value of Lease Intangibles and Accumulated Amortization for Each Intangible Asset or Liability Class |
The following table summarizes the carrying values of lease intangible assets and the related accumulated amortization as of June 30, 2017, and December 31, 2016 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017 |
|
December 31, 2016 |
Lease intangibles: |
|
|
|
|
Leasehold interest – land |
|
$ |
3,498 |
|
|
$ |
— |
|
In-place leases |
|
1,675 |
|
|
1,481 |
|
Leasing costs |
|
1,540 |
|
|
1,086 |
|
Tenant relationships |
|
668 |
|
|
706 |
|
Lease intangibles, at cost |
|
7,381 |
|
|
3,273 |
|
Accumulated amortization |
|
(1,476 |
) |
|
(1,273 |
) |
Lease intangibles, net |
|
$ |
5,905 |
|
|
$ |
2,000 |
|
Total amortization expense related to these lease intangible assets was approximately $210,000 and $348,000 for the three and six months ended June 30, 2017, respectively, and $198,000 and $375,000 for the three and six months ended June 30, 2016, respectively.
The following table summarizes the carrying values of certain lease intangible assets or liabilities included in Other assets and Other liabilities, respectively, on the accompanying Condensed Consolidated Balance Sheets and the related accumulated amortization or accretion, respectively, as of June 30, 2017, and December 31, 2016 (dollars in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017 |
|
December 31, 2016 |
Intangible Asset or Liability |
|
Deferred
Rent Asset
(Liability)
|
|
Accumulated
(Amortization)
Accretion
|
|
Deferred
Rent Asset
(Liability)
|
|
Accumulated
(Amortization)
Accretion
|
Above-market lease values(1)
|
|
$ |
35 |
|
|
$ |
(18 |
) |
|
$ |
19 |
|
|
$ |
(14 |
) |
Below-market lease values and deferred revenue(2)
|
|
(800 |
) |
|
91 |
|
|
(785 |
) |
|
61 |
|
|
|
$ |
(765 |
) |
|
$ |
73 |
|
|
$ |
(766 |
) |
|
$ |
47 |
|
|
|
(1) |
Above-market lease values are included as part of Other assets in the accompanying Condensed Consolidated Balance Sheets, and the related amortization is recorded as a reduction of rental income. |
|
|
(2) |
Below-market lease values and deferred revenue are included as a part of Other liabilities in the accompanying Condensed Consolidated Balance Sheets, and the related accretion is recorded as an increase to rental income. |
|
| Weighted Average Amortization Period for Intangible Assets Acquired and Liabilities Assumed |
The following table shows the weighted-average amortization period, in years, for the intangible assets acquired and liabilities assumed in connection with new real estate acquired during the six months ended June 30, 2017 and 2016:
|
|
|
|
|
|
|
|
Weighted-Average
Amortization Period
(in Years)
|
Intangible Assets and Liabilities |
|
2017 |
|
2016 |
Leasehold interest – land |
|
6.9 |
|
0.0 |
In-place leases |
|
9.1 |
|
5.1 |
Leasing costs |
|
9.2 |
|
5.1 |
Above-market lease values |
|
2.1 |
|
0.0 |
Below-market lease values and deferred revenue |
|
2.3 |
|
0.0 |
All intangible assets and liabilities |
7.3 |
|
5.1 |
|
| Pro-Forma Condensed Consolidated Statements of Operations as Properties Acquired |
The following table reflects pro-forma consolidated financial information as if each farm acquired during the six months ended June 30, 2016, as part of a business combination was acquired on January 1, 2015. In addition, pro-forma earnings have been adjusted to assume that acquisition-related costs related to these farms were incurred at the beginning of the previous fiscal year (dollars in thousands, except share and per-share amounts).
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended June 30, 2016 |
|
For the six months ended June 30, 2016 |
|
|
(Unaudited) |
|
(Unaudited) |
Operating Data: |
|
|
|
|
Total operating revenue |
|
$ |
4,244 |
|
|
$ |
7,927 |
|
Net income attributable to the company |
|
$ |
93 |
|
|
$ |
101 |
|
Share and Per-share Data: |
|
|
|
|
Earnings per share of common stock – basic and diluted |
|
$ |
0.01 |
|
|
$ |
0.01 |
|
Weighted-average common shares outstanding – basic and diluted |
|
9,992,941 |
|
|
9,992,941 |
|
|
| Summary of Geographic Locations of Properties |
The following table summarizes the geographic locations, by state, of our properties with leases in place as of June 30, 2017 and 2016 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and For the Six Months Ended June 30, 2017 |
|
As of and For the Six Months Ended June 30, 2016 |
State |
|
Number
of
Farms
|
|
Total
Acres
|
|
% of
Total
Acres
|
|
Rental
Revenue
|
|
% of Total
Rental
Revenue
|
|
Number
of
Farms |
|
Total
Acres |
|
% of
Total
Acres |
|
Rental
Revenue |
|
% of Total
Rental
Revenue |
California |
|
22 |
|
6,713 |
|
11.6% |
|
$ |
5,728 |
|
|
48.8% |
|
19 |
|
4,029 |
|
17.2% |
|
$ |
4,502 |
|
|
56.8% |
Florida |
|
16 |
|
9,315 |
|
16.1% |
|
3,143 |
|
|
26.8% |
|
13 |
|
5,094 |
|
21.7% |
|
1,539 |
|
|
19.4% |
Colorado |
|
9 |
|
30,170 |
|
52.1% |
|
1,345 |
|
|
11.4% |
|
3 |
|
6,191 |
|
26.4% |
|
522 |
|
|
6.6% |
Oregon |
|
4 |
|
2,313 |
|
4.0% |
|
589 |
|
|
5.0% |
|
4 |
|
2,313 |
|
9.9% |
|
585 |
|
|
7.4% |
Arizona |
|
6 |
|
6,280 |
|
10.8% |
|
512 |
|
|
4.3% |
|
2 |
|
3,000 |
|
12.8% |
|
358 |
|
|
4.5% |
Nebraska |
|
2 |
|
2,559 |
|
4.4% |
|
290 |
|
|
2.5% |
|
2 |
|
2,559 |
|
10.9% |
|
290 |
|
|
3.7% |
Michigan |
|
4 |
|
270 |
|
0.5% |
|
125 |
|
|
1.1% |
|
4 |
|
270 |
|
1.1% |
|
125 |
|
|
1.6% |
North Carolina |
|
2 |
|
310 |
|
0.5% |
|
10 |
|
|
0.1% |
|
— |
|
— |
|
—% |
|
— |
|
|
—% |
TOTALS |
|
65 |
|
57,930 |
|
100.0% |
|
$ |
11,742 |
|
|
100.0% |
|
47 |
|
23,456 |
|
100.0% |
|
$ |
7,921 |
|
|
100.0% |
|
| 2016 New Real Estate Activity |
|
| Summary Information of Farms |
During the six months ended June 30, 2016, we acquired four new farms in two separate transactions, which are summarized in the table below (dollars in thousands, except for footnotes).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
Name |
|
Property
Location |
|
Acquisition
Date |
|
Total
Acreage |
|
No. of
Farms |
|
Primary
Crop(s) |
|
Lease
Term |
|
Renewal
Options |
|
Total
Purchase
Price |
|
Acquisition
Costs |
|
Annualized
Straight-line
Rent(1)
|
|
Net
Long-term
Debt Issued |
Gunbarrel Road (2)
|
|
Saguache, CO |
|
3/3/2016 |
|
6,191 |
|
3 |
|
Organic Potatoes |
|
5 years |
|
1 (5 years) |
|
$ |
25,736 |
|
|
$ |
119 |
|
(3) |
$ |
1,591 |
|
|
$ |
15,531 |
|
Calaveras Avenue |
|
Fresno, CA |
|
4/5/2016 |
|
453 |
|
1 |
|
Pistachios |
|
10 years |
|
1 (5 years) |
|
15,470 |
|
|
39 |
|
(4) |
774 |
|
(5) |
9,282 |
|
|
|
|
|
|
|
6,644 |
|
4 |
|
|
|
|
|
|
|
$ |
41,206 |
|
|
$ |
158 |
|
|
$ |
2,365 |
|
|
$ |
24,813 |
|
|
|
(1) |
Annualized straight-line amount is based on the minimum cash rental payments guaranteed under the lease, as required under GAAP. |
|
|
(2) |
As partial consideration for the acquisition of this property, we issued 745,879 OP Units, constituting an aggregate fair value of approximately $6.5 million as of the acquisition date. We incurred $25,500 of legal costs in connection with the issuance of these OP Units.
|
|
|
(3) |
Acquisition accounted for as a business combination under ASC 805. In aggregate, $4,670 of these costs were direct leasing costs incurred in connection with these acquisitions.
|
|
|
(4) |
Acquisition accounted for as an asset acquisition under ASC 360. |
|
|
(5) |
This lease provides for a variable rent component based on the gross crop revenues earned on the property. The figure above represents only the minimum cash rents guaranteed under the lease. |
|
| Fair Value of Assets Acquired and Liabilities Assumed Related to Property Acquired |
The allocation of the purchase price for the farms acquired during the six months ended June 30, 2016, were as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property Name |
|
Land and Land
Improvements
|
|
Buildings and
Improvements
|
|
Irrigation
System
|
|
Other
Improvements
|
|
Horticulture |
|
In-place
Leases
|
|
Leasing
Costs
|
|
Total Purchase Price |
Gunbarrel Road |
|
$ |
16,756 |
|
|
$ |
3,438 |
|
|
$ |
2,831 |
|
|
$ |
2,079 |
|
|
$ |
— |
|
|
$ |
382 |
|
|
$ |
250 |
|
|
$ |
25,736 |
|
Calaveras Avenue |
|
3,615 |
|
|
— |
|
|
424 |
|
|
— |
|
|
11,431 |
|
|
— |
|
|
— |
|
|
15,470 |
|
|
|
$ |
20,371 |
|
|
$ |
3,438 |
|
|
$ |
3,255 |
|
|
$ |
2,079 |
|
|
$ |
11,431 |
|
|
$ |
382 |
|
|
$ |
250 |
|
|
$ |
41,206 |
|
|
| Summary of Total Operating Revenues and Earnings Recognized on Properties Acquired |
Below is a summary of the total operating revenues and loss recognized on the properties acquired during the three and six months ended June 30, 2016 (dollars in thousands, except for footnotes):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended June 30, 2016 |
|
For the six months ended June 30, 2016 |
Property Name |
|
Acquisition
Date
|
|
Operating Revenues |
|
Loss(1)
|
|
Operating Revenues |
|
Loss(1)
|
Gunbarrel Road |
|
3/3/2016 |
|
$ |
398 |
|
|
$ |
(51 |
) |
|
$ |
522 |
|
|
$ |
(152 |
) |
Calaveras Avenue |
|
4/5/2016 |
|
184 |
|
|
(3 |
) |
|
184 |
|
|
(3 |
) |
|
|
|
|
$ |
582 |
|
|
$ |
(54 |
) |
|
$ |
706 |
|
|
$ |
(155 |
) |
|
|
(1) |
Includes approximately $5,000 and $89,000 of non-recurring acquisition-related costs during the three and six months ended June 30, 2016, respectively.
|
|
| 2017 New Real Estate Activity |
|
| Summary Information of Farms |
During the six months ended June 30, 2017, we acquired seven new farms in three separate transactions, which are summarized in the table below (dollars in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
Name
|
|
Property
Location
|
|
Acquisition
Date
|
|
Total
Acreage
|
|
No. of
Farms
|
|
Primary
Crop(s)
|
|
Lease
Term(1)
|
|
Renewal
Options
|
|
Total
Purchase
Price
|
|
Acquisition
Costs(2)
|
|
Annualized
Straight-line
Rent(3)
|
|
New
Long-term
Debt
|
Citrus Boulevard |
|
Martin, FL |
|
1/12/2017 |
|
3,748 |
|
1 |
|
Organic Vegetables |
|
7 years |
|
3 (5 years) |
|
$ |
54,000 |
|
|
$ |
80 |
|
|
$ |
2,926 |
|
|
$ |
32,400 |
|
Spot Road(4)
|
|
Yuma, AZ |
|
6/1/2017 |
|
3,280 |
|
4 |
|
Melons and Alfalfa Hay |
|
8.2 years |
|
1 (10 years) & 1 (2 years) |
|
27,500 |
|
|
88 |
|
|
1,673 |
|
|
15,300 |
|
Poplar Street |
|
Bladen, NC |
|
6/2/2017 |
|
310 |
|
2 |
|
Organic Blueberries |
|
9.6 years |
|
1 (5 years) |
|
2,169 |
|
|
49 |
|
|
122 |
|
(5) |
1,301 |
|
|
|
|
|
|
|
7,338 |
|
7 |
|
|
|
|
|
|
|
$ |
83,669 |
|
|
$ |
217 |
|
|
$ |
4,721 |
|
|
$ |
49,001 |
|
|
|
(1) |
Where more than one lease was assumed or executed, represents the weighted-average lease term on the property.
|
|
|
(2) |
Unless noted otherwise, acquisitions were accounted for as asset acquisitions under ASC 360. |
|
|
(3) |
Annualized straight-line amount is based on the minimum cash rental payments guaranteed under the lease, as required under GAAP. |
|
|
(4) |
Includes two farms (1,368 total acres) acquired through a leasehold interest, with the State of Arizona as the lessor. These state leases expire in February 2022 (485 total acres) and February 2025 (883 total acres). In addition, in connection with the acquisition of this property, we assumed four in-place leases with us as the lessor or sublessor. Three of these leases are agricultural leases, with one lease expiring on June 30, 2019, and two leases expiring on September 15, 2026. The fourth lease is a residential lease that expires on September 30, 2019. If either of the state leases is not renewed upon its expiration, the subleases on the respective acreage shall terminate automatically.
|
|
|
(5) |
This lease provides for a variable rent component based on the gross crop revenues earned on the property. The figure above represents only the minimum cash rents guaranteed under the lease. |
|
| Fair Value of Assets Acquired and Liabilities Assumed Related to Property Acquired |
The allocation of the purchase price for the farm acquired during the six months ended June 30, 2017, is as follows (dollars in thousands, except for footnotes):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property Name |
|
Land and Land Improvements |
|
Buildings |
|
Irrigation Systems |
|
Other Improvements |
|
Horticulture |
|
Leasehold Interest – Land |
|
In-place Leases |
|
Leasing Cost |
|
Total Purchase Price |
Citrus Boulevard |
|
$ |
52,375 |
|
|
$ |
178 |
|
|
$ |
1,447 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
54,000 |
|
Spot Road(1)
|
|
12,354 |
|
|
1,897 |
|
|
8,584 |
|
|
455 |
|
|
— |
|
|
3,488 |
|
|
254 |
|
|
468 |
|
|
27,500 |
|
Poplar Street |
|
1,110 |
|
|
48 |
|
|
305 |
|
|
— |
|
|
706 |
|
|
— |
|
|
— |
|
|
— |
|
|
2,169 |
|
|
|
$ |
65,839 |
|
|
$ |
2,123 |
|
|
$ |
10,336 |
|
|
$ |
455 |
|
|
$ |
706 |
|
|
$ |
3,488 |
|
|
$ |
254 |
|
|
$ |
468 |
|
|
$ |
83,669 |
|
|
|
(1) |
In connection with the acquisition of this property, we recorded an above-market lease value of approximately $15,000 related to one agricultural lease assumed and a below-market lease value of approximately $15,000 related to the residential lease assumed.
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|
| Summary of Total Operating Revenues and Earnings Recognized on Properties Acquired |
Below is a summary of the total operating revenues and earnings (loss) recognized on the property acquired during the three and six months ended June 30, 2017 (dollars in thousands):
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For the three months ended June 30, 2017 |
|
For the six months ended June 30, 2017 |
Property Name |
|
Acquisition Date |
|
Operating
Revenues
|
|
Earnings (Loss) |
|
Operating
Revenues
|
|
Earnings (Loss) |
Citrus Boulevard |
|
1/12/2017 |
|
$ |
732 |
|
|
$ |
430 |
|
|
$ |
1,377 |
|
|
$ |
810 |
|
Spot Road |
|
6/1/2017 |
|
141 |
|
|
(5 |
) |
|
141 |
|
|
(5 |
) |
Poplar Street |
|
6/2/2017 |
|
10 |
|
|
4 |
|
|
10 |
|
|
4 |
|
|
|
|
|
$ |
883 |
|
|
$ |
429 |
|
|
$ |
1,528 |
|
|
$ |
809 |
|
|