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)

3 Months Ended

Mar. 31, 2015

Summary Information of Thirty-Four Farms

The following table provides certain summary information about our 34 farms as of March 31, 2015:


Property Name	Location	Date Acquired		Number of Farms		Total Acres		Farm Acres		Lease Expiration Date		Net Cost Basis ⁽¹⁾		Encumbrances
San Andreas	Watsonville, CA		6/16/1997		1		307		238		12/31/2020	$	4,816,348	$	4,602,937
West Gonzales	Oxnard, CA		9/15/1998		1		653		502		6/30/2020		12,365,304		23,418,424
West Beach	Watsonville, CA		1/3/2011		3		196		195		12/31/2023		9,165,426		4,483,895
Dalton Lane	Watsonville, CA		7/7/2011		1		72		70		11/1/2015		2,693,926		1,485,638
Keysville Road	Plant City, FL		10/26/2011		2		59		56		6/30/2020		1,241,700		—
Colding Loop	Wimauma, FL		8/9/2012		1		219		181		6/14/2018		4,029,515		—
Trapnell Road	Plant City, FL		9/12/2012		3		124		110		6/30/2017		4,065,630		2,655,000
38th Avenue	Covert, MI		4/5/2013		1		119		89		4/4/2020		1,303,310		709,487
Sequoia Street	Brooks, OR		5/31/2013		1		218		206		5/31/2028		3,137,348		1,640,128
Natividad Road	Salinas, CA		10/21/2013		1		166		166		10/31/2024		7,402,759		3,703,512
20th Avenue	South Haven, MI		11/5/2013		3		151		94		11/4/2018		1,856,169		1,058,146
Broadway Road	Moorpark, CA		12/16/2013		1		60		60		12/15/2023		2,913,225		1,587,220
Oregon Trail	Echo, OR		12/27/2013		1		1,895		1,640		12/31/2023		13,974,147		7,407,024
East Shelton	Willcox, AZ		12/27/2013		1		1,761		1,320		2/29/2024		8,099,226		3,544,790
Collins Road	Clatskanie, OR		5/30/2014		2		200		157		9/30/2024		2,505,615		1,428,498
Spring Valley	Watsonville, CA		6/13/2014		1		145		110		9/30/2022		5,822,169		3,121,532
McIntosh Road	Dover, FL		6/20/2014		2		94		78		6/30/2017		2,572,587		1,599,600
Naumann Road	Oxnard, CA		7/23/2014		1		68		66		7/31/2017		6,840,538		3,645,314
Sycamore Road	Arvin, CA		7/25/2014		1		326		322		10/31/2024		6,413,843		3,068,624
Wauchula Road	Duette, FL		9/29/2014		1		808		590		9/30/2024		13,646,802		8,052,525
Santa Clara Avenue	Oxnard, CA		10/29/2014		2		333		331		7/31/2015		24,357,313		13,226,829
Dufau Road	Oxnard, CA		11/4/2014		1		65		64		11/3/2017		6,105,791		3,675,000
Espinosa Road	Salinas, CA		1/5/2015		1		331		329		10/31/2016		16,817,180		10,178,000
Parrish Road	Duette, FL		3/10/2015		1		419		211		6/30/2025		3,908,243		2,374,680

					34		8,789		7,185			$	166,054,114	$	106,666,803

⁽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 depreciation and amortization accumulated through March 31, 2015.

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 March 31, 2015, and December 31, 2014:


	March 31, 2015			December 31, 2014
Real estate:
Land and land improvements	$	141,476,576		$	122,999,316
Irrigation systems		15,300,699			12,365,514
Buildings and improvements		11,596,388			11,447,308
Horticulture		1,559,340			1,559,340

Real estate, gross		169,933,003			148,371,478
Accumulated depreciation		(4,943,804	)		(4,431,290	)

Real estate, net	$	164,989,199		$	143,940,188

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 the new properties acquired during the three months ended March 31, 2015:


	Amortization
Intangible Assets	Period (in Years)
In-place leases		1.5
Leasing commissions		4.0
Tenant relationships		2.3

All intangible assets		1.8

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 Three Months Ended March 31,
	2015			2014
	*(Unaudited)*			*(Unaudited)*
Operating Data:
Total operating revenue	$	2,682,835		$	1,753,180
Total operating expenses		(1,522,103	)		(1,419,129	)
Other expenses		(956,235	)		(523,968	)

Net income before income taxes		204,497			(189,917	)
Provision for income taxes		—			(6,623	)

Net income	$	204,497		$	(196,540	)

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

Weighted average common shares outstanding - basic and diluted		7,753,717			6,530,264

Carrying Value of Lease Intangibles and Accumulated Amortization for Each Intangible Asset or Liability Class

The following table summarizes the carrying value of lease intangibles and the accumulated amortization for each intangible asset or liability class as of March 31, 2015, and December 31, 2014:


	March 31, 2015					December 31, 2014
	Lease		Accumulated			Lease		Accumulated
	Intangibles		Amortization			Intangibles		Amortization
In-place leases	$	1,170,083	$	(448,741	)	$	869,207	$	(263,428	)
Leasing costs		480,790		(116,619	)		357,210		(80,617	)
Tenant relationships		718,351		(124,270	)		501,670		(66,467	)

	$	2,369,224	$	(689,630	)	$	1,728,087	$	(410,512	)


	Deferred			Accumulated			Deferred			Accumulated
	Rent Asset			(Amortization)			Rent Asset			(Amortization)
	(Liability)			Accretion			(Liability)			Accretion
Above-market lease values ⁽¹⁾	$	65,203		$	(14,422	)	$	65,203		$	(9,027	)
Below-market lease values ⁽²⁾		(371,707	)		217,337			(371,707	)		162,194

	$	(306,504	)	$	202,915		$	(306,504	)	$	153,167

⁽¹⁾

Above-market lease values are included as a 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 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.

Summary of Estimated Aggregate Amortization Expense and Estimated Net Impact on Rental Income

The estimated aggregate amortization expense to be recorded related to in-place leases, leasing costs and tenant relationships and the estimated net impact on rental income from the amortization of above- and below-market lease values for the remainder of 2015 and each of the five succeeding fiscal years and thereafter is as follows:


		Estimated		Estimated Net
		Amortization		Increase (Decrease)
Period		Expense		in Rental Revenue
For the remaining nine months ending December 31,	2015	$	615,234	$	107,289
For the fiscal years ending December 31:	2016		478,400		(17,004	)
	2017		188,494		(8,437	)
	2018		68,122		4,577
	2019		65,410		4,577
	2020		58,549		4,577
	Thereafter		205,385		8,010

		$	1,679,594	$	103,589

Summary of 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 March 31, 2015:


	Number of		Expiring		% of			Rental Revenue for the		% of Total
	Expiring		Leased		Total			Three Months Ended		Rental
Year	Leases		Acreage		Acreage			March 31, 2015		Revenue
2015 ⁽¹⁾		4		405		4.6	%	$	351,496		13.4	%
2016		1		331		3.8	%		186,216		7.1	%
2017		7		351		4.0	%		235,144		9.0	%
2018		3		370		4.2	%		92,121		3.5	%
2019		0		0		0.0	%		—		0.0	%
2020		4		1,138		12.9	%		743,216		28.3	%
Thereafter		11		6,194		70.5	%		1,014,134		38.7	%

Totals		30		8,789		100.0	%	$	2,622,327		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. The remaining three leases originally scheduled to expire in 2015 were renewed subsequent to March 31, 2015. See Note 9, “Subsequent Events,” for further discussion on these lease renewals.

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 2015 and each of the five succeeding fiscal years and thereafter as of March 31, 2015, are as follows:


		Tenant Lease
Period		Payments
For the remaining nine months ending December 31,	2015	$	5,977,677
For the fiscal years ending December 31:	2016		9,188,301
	2017		8,122,043
	2018		7,525,864
	2019		7,579,161
	2020		6,322,196
	Thereafter		15,653,602

		$	60,368,844

Summary of Geographic Locations, by State, of Properties

The following table summarizes the geographic locations, by state, of our properties with leases in place as of March 31, 2015 and 2014:


	As of and For the Three Months Ended March 31, 2015												As of and For the Three Months Ended March 31, 2014
	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		15		2,722		31.0	%	$	1,839,707		70.2	%		8		1,454		24.2	%	$	1,013,612		67.8	%
Oregon		4		2,313		26.3	%		291,537		11.1	%		2		2,113		35.2	%		238,025		15.9	%
Florida		10		1,723		19.6	%		349,488		13.3	%		6		402		6.7	%		116,982		7.8	%
Arizona		1		1,761		20.0	%		79,916		3.0	%		1		1,761		29.4	%		72,757		4.9	%
Michigan		4		270		3.1	%		61,679		2.4	%		4		270		4.5	%		54,260		3.6	%

		34		8,789		100.0	%	$	2,622,327		100.0	%		21		6,000		100.0	%	$	1,495,636		100.0	%

2015 New Real Estate Activity [Member]

Summary Information of Thirty-Four Farms

During the three months ended March 31, 2015, we acquired two new farms in two 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			Annualized Straight- line Rent⁽¹⁾
Espinosa Road⁽²⁾	Salinas, CA	1/5/2015		331		1	Strawberries	1.8 years	None	$	16,905,500		$	85,805	⁽³⁾	$	778,342
Parrish Road	Duette, FL	3/10/2015		419		1	Strawberries	10.3 years	2 (5 years)		3,913,280	⁽⁴⁾		99,990	⁽³⁾		251,832

				750		2				$	20,818,780		$	185,795		$	1,030,174

⁽¹⁾

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 lease values recorded.

⁽²⁾

In connection with this acquisition, our Adviser earned a finder’s fee of $320,905, which fee was fully credited back to us by our Adviser during the three months ended March 31, 2015. See Note 4, “Related-Party Transactions” for further discussion on this fee.

⁽³⁾

Acquisition accounted for as a business combination under ASC 805. As such, all acquisition-related costs were expensed as incurred, other than direct leasing costs, which were capitalized. In aggregate, we incurred $2,625 of direct leasing costs in connection with these acquisitions.

⁽⁴⁾

Excludes $700,000 of contingent consideration owed in connection with this acquisition. See Note 7, “Commitments and Contingencies”, for further discussion on this contingency.

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 three months ended March 31, 2015, to be as follows:


													Total
	Land and Land		Buildings and		Irrigation		In-place		Leasing		Customer		Acquisition
Property Name	Improvements		Improvements		System		Leases		Costs ⁽¹⁾		Relationships		Cost
Espinosa Road	$	15,852,466	$	84,478	$	497,401	$	246,472	$	44,519	$	180,789	$	16,906,125
Parrish Road		2,403,064		42,619		1,299,851		54,405		79,449		35,892		3,915,280

	$	18,255,530	$	127,097	$	1,797,252	$	300,877	$	123,968	$	216,681	$	20,821,405

⁽¹⁾

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 properties acquired during the three months ended March 31, 2015, that were accounted for as business combinations under ASC 805 totaled $2,625.

Summary of Total Operating Revenues and Earnings Recognized on Properties Acquired

Below is a summary of the total operating revenues and earnings recognized on the properties acquired during the three months ended March 31, 2015:


	Acquisition		Operating
Property Name	Date		Revenues		Earnings⁽¹⁾
Espinosa Road		1/5/2015	$	186,216	$	97,058
Parrish Road		3/10/2015		14,216		7,179

			$	200,432	$	104,237

⁽¹⁾

Earnings are calculated as net income less interest expense and any acquisition-related costs that are required to be expensed if the acquisition is treated as a business combination under ASC 805.