Commitments and Contingencies
|12 Months Ended|
Dec. 31, 2020
|Commitments and Contingencies Disclosure [Abstract]|
|Commitments and Contingencies||COMMITMENTS AND CONTINGENCIES
In connection with the execution of certain lease agreements, we have committed to provide capital improvements on certain of our farms, which are summarized in the table below (dollars in thousands):
(1)Our obligation to provide capital to fund these improvements does not extend beyond these respective dates.
(2)Pursuant to contractual agreements, we will earn additional rent on the cost of these capital improvements as the funds are disbursed by us.
Ground Lease Obligations
In connection with two farms acquired on June 1, 2017, through a leasehold interest, we assumed two ground lease arrangements under which we are the lessee (with the State of Arizona as the lessor). These two operating ground leases expire in February 2022 and February 2025, and neither lease contains any extension, renewal, or termination options. Upon our adoption of ASU 2016-02, “Leases (Topic 842): An Amendment of the FASB Accounting Standards Codification,” on January 1, 2019, we recognized an operating lease right-of-use asset of approximately $218,000 and an operating lease liability of approximately $213,000 as a result of these ground leases. These values were determined by discounting the respective future minimum lease payments using a discount rate equivalent to treasury rates with similar terms plus a spread ranging from 2.47% to 2.53%.
As of December 31, 2020 and 2019, we recorded the following as a result of these operating ground leases (dollars in thousands, except for footnotes):
(1)Operating lease right-of-use assets are shown net of accrued lease payments of approximately $6,000 as of each December 31, 2020 and 2019 and are included within Other assets, net on the accompanying Consolidated Balance Sheets.
(2)Included within Other liabilities, net on the accompanying Consolidated Balance Sheets.
As a result of these ground leases, we recorded lease expense (included within Property operating expenses on the accompanying Consolidated Statement of Operations and Comprehensive Income) of approximately $59,000 and $50,000 during the years ended December 31, 2020 and 2019, respectively. Future lease payments due under the remaining non-cancelable terms of these leases as of December 31, 2020 and 2019, are as follows (dollars in thousands):
(1)Annual lease payments are set at the beginning of each year to then-current market rates (as determined by the State of Arizona). The amounts shown above represent estimated amounts based on the lease rates currently in place.
In the ordinary course of business, we may be involved in legal proceedings from time to time. We are not currently subject to any material known or threatened litigation.
The entire disclosure for commitments and contingencies.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef