Gladstone Land Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Real Estate and Intangible Assets (Tables)

Real Estate and Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2014

The following table provides certain summary information about our 26 farms as of June 30, 2014:


			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		307		237		12/31/2020	$	4,846,052	$	3,804,117
West Gonzales	Oxnard, CA	9/15/1998		1		653		502		6/30/2020		12,104,670		19,354,256
West Beach	Watsonville, CA	1/3/2011		3		196		195		12/31/2023		8,406,970		3,705,734
Dalton Lane	Watsonville, CA	7/7/2011		1		72		70		10/31/2015		2,712,226		1,227,811
Keysville Road	Plant City, FL	10/26/2011		2		59		50		7/1/2016		1,230,757		—
Colding Loop	Wimauma, FL	8/9/2012		1		219		181		6/14/2018		3,952,995		—
Trapnell Road	Plant City, FL	9/12/2012		3		124		110		6/30/2017		4,187,395		—
38th Avenue	Covert, MI	4/5/2013		1		119		89		4/4/2020		1,502,132		586,359
Sequoia Street	Brooks, OR	5/31/2013		1		218		206		5/31/2028		3,166,337		1,355,490
Natividad Road	Salinas, CA	10/21/2013		1		166		166		10/31/2024		7,436,725		3,060,783
20th Avenue	South Haven, MI	11/5/2013		3		151		94		11/4/2018		1,898,408		874,510
Broadway Road	Moorpark, CA	12/16/2013		1		60		60		12/15/2023		2,979,594		1,311,764
Oregon Trail	Echo, OR	12/27/2013		1		1,895		1,640		12/31/2023		14,030,734		6,121,567
East Shelton	Willcox, AZ	12/27/2013		1		1,761		1,320		2/29/2024		7,839,407		2,929,607
Collins Road	Clatskanie, OR	5/30/2014		2		200		157		9/30/2024		2,590,516		—
Spring Valley	Watsonville, CA	6/13/2014		1		145		110		9/30/2016		5,945,266		—
McIntosh Road	Dover, FL	6/20/2014		2		94		78		6/30/2017		2,618,537		—

				26		6,439		5,265			$	87,448,721	$	44,331,998

⁽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 June 30, 2014.

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, 2014, and December 31, 2013:


	June 30, 2014			December 31, 2013
Real estate:
Land and land improvements	$	72,814,550		$	63,944,307
Buildings and improvements		3,008,848			2,193,255
Coolers		5,098,330			5,293,796
Irrigation system		7,913,735			6,007,845
Horticulture		1,559,340			1,038,850

Real estate, gross		90,394,803			78,478,053
Accumulated depreciation		(3,587,682	)		(3,166,870	)

Real estate, net	$	86,807,121		$	75,311,183

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 during the six months ended June 30, 2014 and 2013:


Intangible Assets and Liabilities	2014		2013
In-place leases		4.7		—
Leasing commissions		7.8		12.7
Customer relationships		7.3		—
Above-market leases		3.0		—
Below-market leases		2.3		—

All intangible assets and liabilities		5.6		12.7

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 Six Months Ended June 30,
	2014			2013
	*(Unaudited)*			*(Unaudited)*
Operating Data:
Total operating revenue	$	3,317,410		$	2,277,080
Total operating expenses		(2,268,698	)		(1,299,947	)
Other expenses		(1,052,043	)		(563,454	)

Net income before income taxes		(3,331	)		413,680
Provision for income taxes		(13,246	)		(237,817	)

Net (loss) income	$	(16,577	)	$	175,863

Share and Per Share Data:
(Loss) earnings per share of common stock - basic and diluted	$	—		$	0.03

Weighted average common shares outstanding - basic and diluted		6,530,264			5,967,538

Carrying Value of Intangible Assets and Accumulated Amortization

The following table summarizes the carrying value of lease intangible assets and the accumulated amortization for each intangible asset class as of June 30, 2014, and December 31, 2013:


	June 30, 2014					December 31, 2013
	Lease Intangibles		Accumulated Amortization			Lease Intangibles		Accumulated Amortization
In-place leases	$	560,975	$	(280,852	)	$	397,728	$	(241,697	)
Leasing Costs		256,876		(51,144	)		146,558		(34,727	)
Customer relationships		212,166		(56,421	)		93,187		(49,985	)

	$	1,030,017	$	(388,417	)	$	637,473	$	(326,409	)

Aggregate Amortization Expense

The aggregate amortization expense for the remainder of 2014 and each of the five succeeding fiscal years and thereafter is as follows:


Period		Estimated Amortization Expense
For the remaining six months ending December 31:	2014	$	113,054
For the fiscal years ending December 31:	2015		212,901
	2016		129,307
	2017		49,328
	2018		22,504
	2019		19,497
	Thereafter		95,009

		$	641,600

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 June 30, 2014:


Year	Number of Expiring Leases		Expiring Leased Acreage		% of Total Acreage			Rental Revenue for the Six Months Ended June 30, 2014		% of Total Rental Revenue
2014 ⁽¹⁾		1		0		0.0	%	$	15,320		0.5	%
2015		1		72		1.1	%		71,250		2.3	%
2016		2		204		3.2	%		47,713		1.6	%
2017		2		218		3.4	%		143,436		4.7	%
2018		2		370		5.7	%		127,578		4.2	%
2019		0		0		0.0	%		—		0.0	%
Thereafter		10		5,575		86.6	%		2,651,630		86.7	%

Totals		18		6,439		100.0	%	$	3,056,927		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 the remainder of 2014 and each of the five succeeding fiscal years and thereafter as of June 30, 2014, are as follows:


Period		Tenant Lease Payments
For the remaining six months ending December 31:	2014	$	3,224,774
For the fiscal years ending December 31:	2015		6,539,854
	2016		6,430,992
	2017		6,005,651
	2018		5,689,606
	2019		5,696,871
	Thereafter		13,471,123

		$	47,058,871

Summary of Geographic Locations of Properties

The following table summarizes the geographic locations of our properties with leases in place as of June 30, 2014 and 2013:


	As of and For the Six Months Ended June 30, 2014												As of and For the Six Months Ended June 30, 2013
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		9		1,599		24.8	%	$	2,051,017		67.1	%		6		1,228		62.4	%	$	1,591,082		85.3	%
Oregon		4		2,313		35.9	%		492,121		16.1	%		1		218		11.1	%		16,135		0.9	%
Florida		8		496		7.7	%		240,304		7.9	%		6		402		20.4	%		236,271		12.7	%
Arizona		1		1,761		27.4	%		145,328		4.7	%		0		0		0.0	%		—		0.0	%
Michigan		4		270		4.2	%		128,157		4.2	%		1		119		6.1	%		20,851		1.1	%

		26		6,439		100.0	%	$	3,056,927		100.0	%		14		1,967		100.0	%	$	1,864,339		100.0	%

2014 New Real Estate Activity [Member]

Summarized Information of Acquisition of Properties

During the six months ended June 30, 2014, we acquired five farms in three separate transactions, which are summarized in the table below.


Property Name	Property Location	Acquisition Date	Total Acreage		Number of Farms		Primary Crop(s)	Lease Term		Renewal Options	Total Purchase Price		Acquisition Costs⁽¹⁾		Annualized Straight- line Rent⁽²⁾
Collins Road	Clatskanie, OR	5/30/2014		200		2	Blueberries		10.3 years	3 (5 years each)	$	2,591,333	$	58,441	$	181,172
Spring Valley	Watsonville, CA	6/13/2014		145		1	Strawberries		2.3 years	None		5,900,000		48,915		270,901
McIntosh Road	Dover, FL	6/20/2014		94		2	Strawberries		3.0 years	None		2,666,000		61,190		136,908

				439		5					$	11,157,333	$	168,546	$	588,981

⁽¹⁾

Each of the properties acquired during the six months ended June 30, 2104, were accounted for as a business combination under ASC 805; therefore, the related costs associated with the acquisitions were expensed in the period incurred. However, $7,175 of these acquisition costs were direct costs incurred related to reviewing and assigning leases we assumed upon acquisition; therefore, we capitalized these costs as part of leasing costs. Further, $19,277 of the acquisition costs related to the closing of McIntosh Road was expensed prior to 2014.

⁽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.

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

We determined the fair value of acquired assets and liabilities assumed related to the properties acquired during the six months ended June 30, 2014, to be as follows:


Property Name	Land and Land Improvements		Buildings		Irrigation System		Site Improvements		Horticulture⁽¹⁾		In-place Leases		Leasing Commissions⁽²⁾		Customer Relationships		Above (Below)- Market Leases			Total Acquisition Cost
Collins Road	$	1,252,387	$	555,667	$	—	$	126,719	$	520,993	$	45,086	$	71,085	$	24,796	$	—		$	2,596,733
Spring Valley		5,576,138		5,781		200,855		—		—		83,487		17,998		66,217		(49,976	)		5,900,500
McIntosh Road		1,970,074		30,745		537,254		2,846		—		34,674		18,041		27,966		45,675			2,667,275

	$	8,798,599	$	592,193	$	738,109	$	129,565	$	520,993	$	163,247	$	107,124	$	118,979	$	(4,301	)	$	11,164,508

⁽¹⁾

Horticulture acquired on Collins Road consists of various types of blueberry bushes.

⁽²⁾

Leasing commissions represent the allocable portion of the purchase price, as well as direct costs that were incurred related to reviewing and assigning leases we assumed upon acquisition. Direct leasing costs incurred in connection with the properties acquired during the six months ended June 30, 2014, totaled $7,175.

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 three and six months ended June 30, 2014:


			For the Three and Six Months
			Ended June 30, 2014
Property Name	Acquisition Date		Rental Revenue		Earnings ⁽¹⁾
Collins Road		5/30/2014	$	16,072	$	8,278
Spring Valley		6/13/2014		13,545		8,335
McIntosh Road		6/20/2014		4,183		951

			$	33,800	$	17,564

⁽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.

2013 New Real Estate Activity [Member]

Summarized Information of Acquisition of Properties

During the six months ended June 30, 2013, we acquired two farms in two separate transactions, which are summarized in the table below.


Property Name	Property Location		Acquisition Date		Total Acreage		Number of Farms		Crop Grown	Lease Term	Renewal Options	Total Purchase Price		Acquisition Costs⁽¹⁾		Annualized Straight- line Rent⁽²⁾
38th Avenue		Covert, MI		4/5/2013		119		1	Blueberries	7.0 years	1 (7 years)	$	1,341,000	$	38,200	$	87,286
Sequoia Street		Brooks, OR		5/31/2013		218		1	Blueberries	15.0 years	3 (5 years each)		3,100,000		108,210		193,617

						337		2				$	4,441,000	$	146,410	$	280,903

⁽¹⁾

Each of the properties acquired during the six months ended June 30, 2013, were accounted for as an asset acquisition under ASC 360; therefore, the related costs associated with the acquisitions were capitalized and included as part of the fair value allocation of the tangible assets acquired. In addition, $13,377 of these costs were capitalized as direct leasing costs we incurred as part of these acquisitions.

⁽²⁾

Annualized straight-line amount is based on the minimum rental payments required per the lease.

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

We determined the fair value of acquired assets and liabilities assumed related to the properties acquired during the six months ended June 30, 2013, to be as follows:


Property Name	Land		Building		Drain System		Horticulture⁽¹⁾		Leasing Commissions ⁽²⁾		Total Acquisition Cost
38th Avenue	$	647,431	$	42,720	$	240,105	$	447,035	$	3,842	$	1,381,133
Sequoia Street		2,494,911		279,496		424,268		—		9,535		3,208,210

	$	3,142,342	$	322,216	$	664,373	$	447,035	$	13,377	$	4,589,343

⁽¹⁾

Horticulture acquired on the 38th Avenue property consists of various types of high-bush variety blueberry bushes.

⁽²⁾

None of the purchase price was allocated to any intangibles; however, we incurred $13,377 of direct leasing costs in connection with the properties acquired during the six months ended June 30, 2013.

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 six months ended June 30, 2013:


			For the Three and Six Months Ended June 30, 2013
Property Location	Acquisition Date		Rental Revenue		Earnings ⁽¹⁾
38th Avenue		4/5/2013	$	20,851	$	11,297
Sequoia Street		5/31/2013		16,135		12,058

			$	36,986	$	23,355

⁽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.