Quarterly report pursuant to Section 13 or 15(d)

REAL ESTATE AND INTANGIBLE ASSETS (Tables)

v3.22.2.2
REAL ESTATE AND INTANGIBLE ASSETS (Tables)
9 Months Ended
Sep. 30, 2022
Real Estate [Abstract]  
Summary Information of Farms The following table provides certain summary information about the 169 farms we owned as of September 30, 2022 (dollars in thousands, except for footnotes):
Location No. of Farms Total
Acres
Farm Acres
Net Cost Basis(1)
Encumbrances(2)
California(3)(4)(5)
63 34,401 31,951 $ 866,226  $ 410,697 
Florida 26 22,606 17,639 223,659  110,249 
Washington 6 2,529 1,997 66,053  24,411 
Arizona(6)
6 6,320 5,333 56,077  15,999 
Colorado 12 32,773 25,577 46,650  28,527 
Nebraska 9 7,782 7,050 30,465  12,135 
Oregon(7)
6 898 736 29,372  11,845 
Michigan 23 1,892 1,245 24,067  14,204 
Texas 1 3,667 2,219 8,194  4,940 
Maryland 6 987 863 8,104  4,466 
South Carolina 3 597 447 3,655  2,193 
Georgia 2 230 175 2,776  1,689 
North Carolina 2 310 295 2,172  — 
New Jersey 3 116 101 2,138  1,273 
Delaware 1 180 140 1,308  717 
169 115,288 95,768 $ 1,370,916  $ 643,345 
(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 $3.6 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 September 30, 2022, this investment had a net carrying value of approximately $1.1 million and is included within Other assets, net on the accompanying Condensed Consolidated Balance Sheets.
(4)Includes five acres in which we own a leasehold interest via a ground sublease with a California municipality that expires in December 2041. The ground sublease had a net cost basis of approximately $734,000 as of September 30, 2022 (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. See “—Investments in Water Assets” below for additional information on this water.
(6)Includes two farms in which we own a leasehold interest via ground leases with the State of Arizona that expire in February 2025 and February 2032, respectively. In total, these two ground leases consist of 1,368 total acres and 1,221 farm acres and had an aggregate net cost basis of approximately $794,000 as of September 30, 2022 (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 September 30, 2022, 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.
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 September 30, 2022, and December 31, 2021 (dollars in thousands):
September 30, 2022 December 31, 2021
Real estate:
Land and land improvements $ 843,444  $ 812,830 
Permanent plantings 357,772  331,969 
Irrigation and drainage systems 164,626  153,688 
Farm-related facilities 47,470  46,804 
Other site improvements 14,170  12,509 
Real estate, at cost 1,427,482  1,357,800 
Accumulated depreciation (98,285) (74,002)
Total real estate, net $ 1,329,197  $ 1,283,798 
Schedule of 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 and the related accumulated amortization as of September 30, 2022, and December 31, 2021 (dollars in thousands):
September 30, 2022 December 31, 2021
Lease intangibles:
Leasehold interest – land $ 4,295  $ 4,295 
In-place lease values 2,763  2,174 
Leasing costs 3,095  1,808 
Other(1)
130  130 
Lease intangibles, at cost 10,283  8,407 
Accumulated amortization (4,332) (3,951)
Lease intangibles, net $ 5,951  $ 4,456 
(1)Other consists primarily of acquisition-related costs allocated to miscellaneous lease intangibles.
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 September 30, 2022, and December 31, 2021 (dollars in thousands):
  September 30, 2022 December 31, 2021
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)
$ 1,267  $ (351) $ 65  $ (12)
Below-market lease values and other deferred revenue(2)
(2,010) 473  (2,010) 340 
$ (743) $ 122  $ (1,945) $ 328 
(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.
(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.
Schedule of Asset Acquisitions
During the nine months ended September 30, 2022, we completed the following acquisitions, which are summarized in the table below (dollars in thousands, except for footnotes):
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)
Farm Road(3)
Charlotte, FL 5/20/2022 15 0 Adjacent parcel N/A None $ 54  $ 15  $ — 
County Road 35 Glenn, CA 6/16/2022 1,374 1 Olives for Olive Oil 14.5 years
1 (5 years)
24,500  55  1,714 
Reagan Road(4)
Cochise, AZ 7/13/2022 40 0 Corn 12.5 years None 120  17  39 
North Columbia River Road(5)(7)
Franklin & Grant, WA
7/21/2022 1,145 3 Wine Grapes 8.4 years None 30,320  146  2,296 
Prunedale Road(6)(7)
Umatilla, OR
7/21/2022 172 1 Wine Grapes 10.4 years None 7,008  35  286 
2,746 5 $ 62,002  $ 268  $ 4,335 
(1)Includes approximately $23,000 of external legal fees associated with negotiating and originating the leases associated with these acquisitions, which were expensed in the period incurred.
(2)Based on the minimum cash rental payments guaranteed under the respective leases, as required under GAAP, and excludes contingent rental payments, such as participation rents.
(3)Represents the acquisition of a parcel of land adjacent to an existing farm, providing additional road access to such farm. No new lease was executed related to this acquisition.
(4)Represents the acquisition of a parcel of farmable land adjacent to an existing farm. Subsequent to acquisition, we spent approximately $153,000 to install certain improvements on this property.
(5)Upon acquisition, we executed three new leases with the existing tenants on these farms. The lease terms above represent the weighted-average lease term and aggregate annualized straight-line rent of these three leases.
(6)In connection with the acquisition of this property, we also acquired an ownership interest in a related LLC, the sole purpose of which is to own and maintain an irrigation system providing water to this and other neighboring properties. Our acquired ownership, which equated to an 11.3% interest in the LLC, was valued at approximately $2.7 million at the time of acquisition and is included within Other assets, net on the accompanying Consolidated Balance Sheets. See “—Investments in Unconsolidated Entities” below for additional information on our aggregate ownership interest in this and other LLCs.
(7)These two properties were acquired as part of a single transaction. In connection with the acquisition of these vineyards, we committed to provide up to an aggregate amount of $2.2 million for certain irrigation and vineyard improvements on these farms, for which we will earn additional rent as the funds are disbursed by us.
During the nine months ended September 30, 2021, we completed the following acquisitions, which are summarized in the table below (dollars in thousands, except for footnotes):
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)
Palmer Mill Road Dorchester, MD 3/3/2021 228 2 Sod 10.0 years
2 (5 years)
$ 1,600  $ 56  $ 89 
Eight Mile Road – Port Facility San Joaquin, CA 3/11/2021 5 1 Cooling facility and storage 9.8 years
3 (5 years)
3,977  50  189 
South Avenue Tehama, CA 4/5/2021 2,285 1 Olives for olive oil 14.7 years
1 (5 years)
37,800  149  2,555 
Richards Avenue Atlantic, NJ 6/3/2021 116 3 Blueberries 14.9 years
2 (5 years)
2,150  63  129 
Lerdo Highway (Phase I)(3)(4)
Kern, CA 6/4/2021 639 1 Conventional & organic almonds and banked water 10.4 years
3 (10 years)
26,492  111  974 
Almena Drive Van Buren
& Eaton, MI
6/9/2021 930 8 Blueberries 14.7 years
2 (5 years)
13,300  51  785 
Maricopa Highway Kern, CA 8/11/2021 277 1  Organic blueberries 14.9 years
3 (5 years)
30,000  63  2,262 
Wallace Road Yamhill, OR 8/11/2021 143 1 Organic blueberries 10.1 years
3 (5 years)
12,320  39  768 
West Orange St. Lucie, FL 8/18/2021 617 2 Lemons and oranges 12.0 years None 5,241  184  367 
Lerdo Highway (Phase II)(3)(5)
Kern, CA 8/20/2021 479 1 Conventional & organic almonds and banked water 10.2 years
3 (10 years)
14,772  53  735 
5,719 21 $ 147,652  $ 819  $ 8,853 
(1)Includes approximately $52,000 of external legal fees associated with negotiating and originating the leases associated with these acquisitions, which were expensed in the period incurred.
(2)Based on the minimum cash rental payments guaranteed under the respective leases, as required under GAAP, and excludes contingent rental payments, such as participation rents.
(3)Lease provides for an annual participation rent component based on the gross crop revenues earned on the farm. The rent figure above represents only the minimum cash guaranteed under the lease.
(4)As part of the acquisition of this property, we acquired a contract to purchase 20,330 acre-feet of water stored with Semitropic Water Storage District, located in Kern County, California, at a fixed price. We executed this contract on June 25, 2021, at an additional cost of approximately $1.2 million, which is included in the total purchase price for this property in the table above. Rent is not currently being earned on the value attributable to the water. See “—Investments in Water Assets” below for additional information on this water.
(5)As part of the acquisition of this property, we acquired a contract to purchase 5,000 acre-feet of water stored with Semitropic Water Storage District, located in Kern County, California, at a fixed price. We executed this contract on August 23, 2021, at an additional cost of approximately $306,000, which is included in the total purchase price for this property in the table above. Rent is not currently being earned on the value attributable to the water. See “—Investments in Water Assets” below for additional information on this water.
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed In Asset Acquisitions
The allocation of the aggregate purchase price for the farms acquired during the nine months ended September 30, 2022, and 2021 respectively, is as follows (dollars in thousands):
Assets (Liabilities) Acquired 2022 Acquisitions 2021 Acquisitions
Land and land improvements $ 28,139  $ 55,318 
Permanent plantings 24,706  47,502 
Irrigation & drainage systems 2,973  6,492 
Farm-related facilities 530  17,067 
Other site improvements —  984 
Leasehold interest—land —  787 
In-place lease values 909  687 
Leasing costs 1,355  509 
Above-market lease values(1)
641  — 
Below-market lease values(2)
—  (1,321)
Investment in LLC(1)
2,749  — 
Water purchase contracts(1)(3)
—  18,075 
Total Purchase Price $ 62,002  $ 146,100 
(1)Included within Other assets, net on the accompanying Condensed Consolidated Balance Sheets.
(2)Included within Other liabilities, net on the accompanying Condensed Consolidated Balance Sheets.
(3)Represents only the value attributable to the water purchase contract acquired as part of the acquisition of Lerdo Highway and excludes approximately $1.6 million paid to execute the contract subsequent to acquisition.