Gladstone Land Corporation Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Real Estate and Intangible Assets (Tables)

Real Estate and Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2013

The following table provides certain summary information about our 21 farms as of December 31, 2013:


			Number						Lease
		Date	of		Total		Farmable		Expiration	Net Cost
Property Name	Location	Acquired	Farms		Acres		Acres		Date	Basis⁽¹⁾		Encumbrances
San Andreas	Watsonville, CA	6/16/1997		1		306		237	12/31/2014	$	4,864,968	$	100,000	⁽²⁾
West Gonzales	Oxnard, CA	9/15/1998		1		653		502	6/30/2020		12,420,452		27,900,311
West Beach	Watsonville, CA	1/3/2011		3		198		195	10/31/2014		8,351,475		5,206,014
Dalton Lane	Watsonville, CA	7/7/2011		1		72		70	10/31/2015		2,724,426		1,716,942
Keysville Road	Plant City, FL	10/26/2011		2		59		50	7/1/2016		1,230,758		917,338
Colding Loop	Wimauma, FL	8/9/2012		1		219		181	6/14/2018		4,006,721		2,176,837
Trapnell Road	Plant City, FL	9/12/2012		3		124		110	6/30/2017		4,171,499		2,414,143
38th Avenue	Covert, MI	4/5/2013		1		119		89	4/4/2020		1,352,635		821,680
Sequoia Street	Brooks, OR	5/31/2013		1		209		206	5/31/2028		3,184,260		1,900,900
Natividad Road	Salinas, CA	10/21/2013		1		166		166	10/31/2024		7,475,448		—
20th Avenue	South Haven, MI	11/5/2013		3		150		94	11/4/2018		2,012,711		—
Broadway Road	Moorpark, CA	12/16/2013		1		60		60	12/15/2023		3,020,230		—
Oregon Trail	Echo, OR	12/27/2013		1		1,895		1,640	12/31/2023		14,064,497		—
East Shelton	Willcox, AZ	12/27/2013		1		1,761		1,320	2/29/2024		6,742,167		—

				21		5,991		4,920		$	75,622,247	$	43,154,165

⁽¹⁾

Consists of the initial acquisition price (including the costs allocated to both tangible and intangible assets) plus subsequent improvements and other capitalized costs associated with the properties and adjusted for depreciation and amortization accumulated through December 31, 2013.

⁽²⁾

Represents borrowings outstanding on our line of credit as of December 31, 2013, under which San Andreas is pledgd as collateral.

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 December 31, 2013 and 2012:


	December 31, 2013			December 31, 2012
Real estate:
Land and land improvements	$	63,944,307		$	30,828,325
Buildings and improvements		2,193,255			1,311,027
Coolers		5,293,796			4,963,243
Irrigation system		6,007,845			2,576,373
Horticulture		1,038,850			—

Real estate, gross		78,478,053			39,678,968
Accumulated depreciation		(3,166,870	)		(2,535,084	)

Real estate, net	$	75,311,183		$	37,143,884

Pro-Forma Condensed Consolidated Statements of Operations as Properties Acquired

The table below reflects pro-forma financials for all farms acquired, regardless of whether they were treated as asset acquisitions or business combinations.


	For the Year Ended December 31,
	2013			2012
Operating Data:
Total operating revenue	$	5,811,314		$	5,701,778
Total operating expenses		(3,220,071	)		(2,245,982	)
Other expenses		(1,048,658	)		(1,167,813	)

Net income before income taxes		1,542,585			2,287,983
Provision for income taxes		(2,039,672	)		(828,066	)

Net (loss) income	$	(497,087	)	$	1,459,917

Share and Per Share Data:
(Loss) earnings per share of common stock - basic and diluted	$	(0.08	)	$	0.26

Weighted average common shares outstanding - basic and diluted		6,428,877			5,543,811

Weighted Average Amortization Period for Intangible Assets Acquired and Liabilities Assumed

The weighted-average amortization period, in years, for the intangible assets acquired and liabilities assumed during the years ended December 31, 2013 and 2012, is shown in the table below:


Intangible Assets and Liabilities	2013		2012
In-place leases		2.0		3.1
Leasing commissions		6.8		4.7
Customer relationships		—		5.8
Below-market leases		2.0		0.8

All intangible assets and liabilities		2.9		3.2

Carrying Value of Intangible Assets and Accumulated Amortization

The following table summarizes the carrying value of intangible assets and the accumulated amortization for each intangible asset class as of December 31, 2013, and December 31, 2012:


	December 31, 2013					December 31, 2012
	Lease		Accumulated			Lease		Accumulated
	Intangibles		Amortization			Intangibles		Amortization
In-place leases	$	397,728	$	(241,697	)	$	286,975	$	(186,843	)
Leasing commissions		146,558		(34,727	)		63,638		(17,627	)
Customer relationships		93,187		(49,985	)		93,187		(31,270	)

	$	637,473	$	(326,409	)	$	443,800	$	(235,740	)

Aggregate Amortization Expense

The aggregate amortization expense for each of the five succeeding fiscal years and thereafter is as follows:


		Estimated
Period		Amortization Expense
For the fiscal years ending December 31:	2014	$	113,398
	2015		100,497
	2016		34,525
	2017		23,446
	2018		9,898
	Thereafter		29,300

		$	311,064

Summarizes Lease Expirations by Year for Properties with Leases

The following table summarizes the lease expirations by year for our properties with leases in place as of December 31, 2013:


Year	Number of Expiring Leases		Expiring Leased Acreage		% of Total Acreage			Rental Revenue for the Year Ended December 31, 2013		% of Total Rental Revenue
2014⁽¹⁾		3		504		8.4	%	$	889,955		22.1	%
2015		1		72		1.2	%		142,500		3.5	%
2016		1		59		1.0	%		68,335		1.7	%
2017		1		124		2.1	%		241,811		6.0	%
2018		2		369		6.1	%		164,173		4.1	%
Thereafter		7		4,863		81.2	%		2,520,913		62.6	%

Totals		15		5,991		100.0	%	$	4,027,687		100.0	%

⁽¹⁾

Includes a surface area lease on a portion of one property leased to an oil company that is renewed on a year-to-year basis.

Future Operating Lease Payments from Tenants under Non-Cancelable Leases

Future operating lease payments from tenants under all non-cancelable leases, excluding tenant reimbursement of expenses, for each of the five succeeding fiscal years and thereafter as of December 31, 2013, are as follows:


		Tenant Lease
Period		Payments
For the fiscal years ending December 31:	2014	$	5,452,191
	2015		4,892,663
	2016		4,816,299
	2017		4,747,117
	2018		4,403,951
	Thereafter		14,321,082

		$	38,633,303

Summary of Geographic Locations of Properties

The following table summarizes the geographic locations of our properties with leases in place as of December 31, 2013 and 2012:


	As of and For the Year Ended December 31, 2013												As of and For the Year Ended December 31, 2012
	Number				% of					% of Total			Number				% of					% of Total
	of		Total		Total			Rental		Rental			of		Total		Total			Rental		Rental
State	Farms		Acres		Acres			Revenue		Revenue			Farms		Acres		Acres			Revenue		Revenue
California		8		1,455		24.3	%	$	3,362,020		83.5	%		6		1,229		75.4	%	$	3,183,739		93.9	%
Florida		6		402		6.7	%		454,135		11.3	%		6		402		24.6	%		206,855		6.1	%
Oregon		2		2,104		35.1	%		123,138		3.0	%		0		0		0.0	%		—		0.0	%
Michigan		4		269		4.5	%		84,679		2.1	%		0		0		0.0	%		—		0.0	%
Arizona		1		1,761		29.4	%		3,715		0.1	%		0		0		0.0	%		—		0.0	%

		21		5,991		100.0	%	$	4,027,687		100.0	%		12		1,631		100.0	%	$	3,390,594		100.0	%

2013 New Real Estate Activity [Member]

Summarized Information of Acquisition of Properties

During the year ended December 31, 2013, we acquired nine farms in seven separate transactions, which are summarized in the table below.


Property	Property	Acquisition	Total		Number of		Primary	Lease	Renewal	Total Purchase		Acquisition		Annualized Straight- line
Name	Location	Date	Acreage		Farms		Crop(s)	Term	Options	Price		Expenses⁽¹⁾		Rent⁽²⁾
38th Avenue	Covert, MI	4/5/2013		119		1	Blueberries	7 years	1 (7 years)	$	1,341,000	$	40,133	$	87,286
Sequoia Street	Brooks, OR	5/31/2013		209		1	Blueberries	15 years	3 (5 years each)		3,100,000		106,797		193,617
Natividad Road⁽³⁾	Salinas, CA	10/21/2013		166		1	Strawberries & Raspberries	2 years	None		7,325,120		47,851		439,575
20th Avenue	South Haven, MI	11/5/2013		150		3	Blueberries	5 years	1 (5 years)		1,985,000		40,475		129,755
Broadway Road⁽⁴⁾	Moorpark, CA	12/16/2013		60		1	Lemons	10 years	1 (10 years)		3,000,000		23,912		171,958
Oregon Trail	Echo, OR	12/27/2013		1,895		1	Corn, Onions & Potatoes	10 years	3 (5 years each)		13,855,000		209,497		758,480
East Shelton	Willcox, AZ	12/27/2013		1,761		1	Corn & Dry edible beans	10 years	None		6,700,000		42,167		290,284

				4,360		9				$	37,306,120	$	510,832	$	2,070,955

⁽¹⁾

Unless otherwise noted, transaction accounted for as an asset acquisition under ASC 360 instead of a business combination under ASC 805; therefore, related costs associated with the acquisition were capitalized and included as part of the fair value allocation of the identifiable tangible assets acquired.

⁽²⁾

Annualized straight-line amount is based on the minimum rental payments required per the lease and includes the amortization of any above-market and below-market leases recorded.

⁽³⁾

This Transaction accounted for as a business combination under ASC 805; therefore, with the exception of costs directly incurred in connection with originating the follow-on lease, costs associated with the acquisition were expensed when incurred. $4,915 of costs were incurred in connection with originating the follow-on lease and were capitalized.

Fair Value of Acquired Assets and Liabilities Assumed Related to Properties Acquired

We determined the fair value of assets acquired and liabilities assumed related to the properties acquired during the year ended December 31, 2013, to be as follows:


	Land and Land				Irrigation		Site				In-place		Leasing		Below- Market			Total Purchase
Property Name	Improvements		Buildings		System		Improvements		Horticulture⁽¹⁾		Leases		Commissions⁽²⁾		Leases			Price
38th Avenue	$	647,430	$	42,720	$	240,105	$	—	$	447,035	$	—	$	3,842	$	—		$	1,381,132
Sequoia Street		2,493,809		279,372		424,081		—		—		—		9,535		—			3,206,797
Natividad Road⁽³⁾		7,186,774		19,199		144,915		—		—		110,753		29,941		(161,547	)		7,330,035
20th Avenue		811,673		281,160		441,415		—		488,604		—		2,623		—			2,025,475
Broadway Road		2,847,948		49,792		22,700		262		103,211		—		—		—			3,023,913
Oregon Trail		12,937,446		—		1,118,325		—		—		—		8,726		—			14,064,497
East Shelton		6,167,902		131,268		441,015		—		—		—		1,982		—			6,742,167

	$	33,092,982	$	803,511	$	2,832,556	$	262	$	1,038,850	$	110,753	$	56,649	$	(161,547	)	$	37,774,016

⁽¹⁾

Horticulture acquired on 38th Avenue and 20th Avenue consists of various types of high-bush variety blueberry bushes. Horticulture acquired on Broadway Road consits of an orchard of lemon trees.

⁽²⁾

With the exception of Natividad Road, none of the purchase price was allocated to any intangibles; leasing commissions above represent direct costs incurred in connection with originating new leases on the properties. On Natividad Road, $25,026 of the purchase price was allocated to leasing commissions, and an additional $4,915 of costs directly related to originating the follow-on lease was also capitalized.

⁽³⁾

Acquisition accounted for as a business combination under ASC 805.

Summary of Total Revenue and Earnings Recognized on Properties Acquired

Below is a summary of the total revenue and earnings recognized on the properties acquired during the year ended December 31, 2013:


		For the Year Ended
		December 31, 2013
Property	Acquisition	Rental
Name	Date	Revenue		Earnings⁽¹⁾
38th Avenue	4/5/2013	$	64,494	$	35,996
Sequoia Street	5/31/2013		112,944		83,262
Natividad Road	10/21/2013		86,510		63,133
20th Avenue	11/5/2013		20,184		6,919
Broadway Road	12/16/2013		7,396		3,713
Oregon Trail	12/27/2013		10,195		10,154
East Shelton	12/27/2013		3,715		3,283

		$	305,438	$	206,460

⁽¹⁾

Earnings are calculated as net income less interest expense (if debt was issued to acquire the property), income taxes and any acquisition-related costs that are required to be expensed if the acquisition is treated as a business combination under ASC 805.

2012 New Real Estate Activity [Member]

Summarized Information of Acquisition of Properties

During the year ended December 31, 2012, we acquired four farms in two separate transactions, which are summarized in the table below:


Property	Property		Acquisition	Total		Number of		Primary	Lease	Renewal	Total Purchase		Acquisition		Annualized Straight- line
Name	Location		Date	Acreage		Farms		Crop	Term	Options	Price		Expenses⁽¹⁾		Rent⁽²⁾		Debt Issued
Colding Loop⁽³⁾		Wimauma, FL	8/9/2012		219		1	Strawberries	1 year	None	$	3,400,836	$	31,879	$	141,274	$	3,507,000
Trapnell Road		Plant City, FL	9/12/2012		124		3	Strawberries	5 years	1 (5 years)		4,000,000		82,412		241,630		4,000,000

					343		4				$	7,400,836	$	114,291	$	382,904	$	7,507,000

⁽¹⁾

Both transactions accounted for as business combinations under ASC 805; therefore, costs associated with the acquisition were expensed when incurred.

⁽²⁾

Annualized straight-line amount is based on the minimum rental payments required per the lease and includes the amortization of any above-market and below-market leases recorded.

⁽³⁾

The original lease that was assumed upon acquisition of Colding Loop expired on June 14, 2013; thus, the rental income reflected in the table above is the straight-line rent recognized over remaining ten-month term of the lease, which translated to $166,205 on an annual basis. On May 28, 2013, we executed a new, five-year lease on Colding Loop, commencing June 15, 2013. The new lease has one five-year renewal option and provides for minimum annualized straight-line rent of $125,400.

Fair Value of Acquired Assets and Liabilities Assumed Related to Properties Acquired

In accordance with ASC 805, we determined the fair value of acquired assets and liabilities assumed related to the properties acquired during the year ended December 31, 2012, as follows:


													Below-			Total
Property					Irrigation		Lease		Leasing		Customer		Market			Purchase
Name	Land		Cooler		System		In-place		Commissions		Relationships		Leases			Price
Colding Loop	$	2,513,696	$	—	$	909,490	$	43,989	$	1,676	$	30,793	$	(98,808	)	$	3,400,836
Trapnell Road		2,198,728		686,578		970,761		60,627		45,543		37,763		—			4,000,000

	$	4,712,424	$	686,578	$	1,880,251	$	104,616	$	47,219	$	68,556	$	(98,808	)	$	7,400,836

Summary of Total Revenue and Earnings Recognized on Properties Acquired

Below is a summary of the total revenue and earnings recognized on the properties acquired during the year ended December 31, 2012:


		For the Year Ended
		December 31, 2012
Property	Acquisition	Rental
Name	Date	Revenue		Earnings⁽¹⁾
Colding Loop	8/9/2012	$	65,558	$	11,567
Trapnell Road	9/12/2012		72,961		30,686

		$	138,519	$	42,253

⁽¹⁾