Quarterly report pursuant to Section 13 or 15(d)

Real Estate and Intangible Assets (Tables)

v3.2.0.727
Real Estate and Intangible Assets (Tables)
6 Months Ended
Jun. 30, 2015
Summary Information of Farms

The following table provides certain summary information about our 36 farms as of June 30, 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    $ 4,806,449       $ 4,072,726   

West Gonzales

   Oxnard, CA    9/15/1998      1         653         502       6/30/2020      12,309,315         20,720,863   

West Beach

   Watsonville, CA    1/3/2011      3         196         195       12/31/2023      9,304,059         3,967,397   

Dalton Lane

   Watsonville, CA    7/7/2011      1         72         70       10/31/2020      2,690,463         1,314,507   

Keysville Road

   Plant City, FL    10/26/2011      2         59         56       6/30/2020      1,241,322         897,600   

Colding Loop

   Wimauma, FL    8/9/2012      1         219         181       6/14/2018      4,013,732         2,640,000   

Trapnell Road

   Plant City, FL    9/12/2012      3         124         110       6/30/2017      4,025,042         2,655,000   

38th Avenue

   Covert, MI    4/5/2013      1         119         89       4/4/2020      1,293,824         627,762   

Sequoia Street

   Brooks, OR    5/31/2013      1         218         206       5/31/2028      3,127,897         1,451,202   

Natividad Road

   Salinas, CA    10/21/2013      1         166         166       10/31/2024      8,189,239         3,276,906   

20th Avenue

   South Haven, MI    11/5/2013      3         151         94       11/4/2018      1,837,778         936,259   

Broadway Road

   Moorpark, CA    12/16/2013      1         60         60       12/15/2023      2,891,102         1,404,388   

Oregon Trail

   Echo, OR    12/27/2013      1         1,895         1,640       12/31/2023      13,955,285         6,553,812   

East Shelton

   Willcox, AZ    12/27/2013      1         1,761         1,320       2/29/2024      7,972,401         3,136,467   

Collins Road

   Clatskanie, OR    5/30/2014      2         200         157       9/30/2024      2,478,279         1,263,949   

Spring Valley

   Watsonville, CA    6/13/2014      1         145         110       9/30/2022      5,807,119         2,761,963   

McIntosh Road

   Dover, FL    6/20/2014      2         94         78       6/30/2017      2,553,622         1,599,600   

Naumann Road

   Oxnard, CA    7/23/2014      1         68         66       7/31/2017      6,821,216         3,225,412   

Sycamore Road

   Arvin, CA    7/25/2014      1         326         322       10/31/2024      6,387,629         2,715,151   

Wauchula Road

   Duette, FL    9/29/2014      1         808         590       9/30/2024      13,521,618         7,949,287   

Santa Clara Avenue

   Oxnard, CA    10/29/2014      2         333         331       7/31/2017      24,313,506         11,703,235   

Dufau Road

   Oxnard, CA    11/4/2014      1         65         64       11/3/2017      6,090,913         3,675,000   

Espinosa Road

   Salinas, CA    1/5/2015      1         331         329       10/31/2016      16,725,452         10,178,000   

Parrish Road

   Duette, FL    3/10/2015      1         419         211       6/30/2025      3,867,252         2,374,680   

Immokalee Exchange

   Immokalee, FL    6/25/2015      2         2,678         1,644       6/30/2020      15,762,300         9,360,000   
        

 

 

    

 

 

    

 

 

       

 

 

    

 

 

 
           36         11,467         8,829          $ 181,986,814       $ 110,461,166   
        

 

 

    

 

 

    

 

 

       

 

 

    

 

 

 

 

(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 June 30, 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 June 30, 2015, and December 31, 2014:

 

     June 30, 2015      December 31, 2014  

Real estate:

     

Land and land improvements

   $ 156,085,513       $ 122,999,316   

Irrigation systems

     16,439,003         12,365,514   

Buildings and improvements

     10,845,136         10,479,301   

Horticulture

     1,559,339         1,559,340   

Other site improvements

     1,044,261         968,007   
  

 

 

    

 

 

 

Real estate, at cost

     185,973,252         148,371,478   

Accumulated depreciation

     (5,482,928      (4,431,290
  

 

 

    

 

 

 

Real estate, net

   $ 180,490,324       $ 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 six months ended June 30, 2015 and 2014:

 

     Weighted-Average  
     Amortization Period (in Years)  

Intangible Assets

   2015      2014  

In-place leases

     4.1         4.7   

Leasing commissions

     6.1         7.8   

Tenant relationships

     9.5         7.3   

Above-market lease values

     —           3.0   

Below-market lease values

     —           2.3   
  

 

 

    

 

 

 

All intangible assets

     6.3         5.6   
  

 

 

    

 

 

 
Pro-Forma Condensed Consolidated Statements of Operations as Each Farm Acquired

The following table reflects pro-forma consolidated financial information as if each farm was acquired at the beginning of the previous fiscal year. In addition, pro-forma earnings have been adjusted to assume that acquisition-related costs related to these farms were incurred at the beginning of the previous fiscal year.

 

     For the Six Months Ended June 30,  
     2015      2014  
     (Unaudited)      (Unaudited)  

Operating Data:

     

Total operating revenue

   $ 6,032,056       $ 5,868,815   

Total operating expenses

     (3,237,854      (3,627,657

Other expenses

     (1,927,153      (2,155,079
  

 

 

    

 

 

 

Net income before income taxes

     867,049         86,079   

Provision for income taxes

     —           (13,246
  

 

 

    

 

 

 

Net income

   $ 867,049       $ 72,833   
  

 

 

    

 

 

 

Share and Per-share Data:

     

Earnings per share of common stock - basic and diluted

   $ 0.10       $ 0.01   
  

 

 

    

 

 

 

Weighted average common shares outstanding - basic and diluted

     8,872,584         6,578,270   
  

 

 

    

 

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 June 30, 2015, and December 31, 2014:

 

     June 30, 2015      December 31, 2014  
     Lease
Intangibles
     Accumulated
Amortization
     Lease
Intangibles
     Accumulated
Amortization
 

In-place leases

   $ 1,399,490       $ (548,041    $ 869,207       $ (263,428

Leasing costs

     634,041         (145,105      357,210         (80,617

Tenant relationships

     898,128         (169,162      501,670         (66,467
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 2,931,659       $ (862,308    $ 1,728,087       $ (410,512
  

 

 

    

 

 

    

 

 

    

 

 

 
     Deferred
Rent Asset
(Liability)
     Accumulated
(Amortization)
Accretion
     Deferred
Rent Asset
(Liability)
     Accumulated
(Amortization)
Accretion
 

Above-market lease values(1)

   $ 65,203       $ (19,817    $ 65,203       $ (9,027

Below-market lease values(2)

     (371,707      269,927         (371,707      162,194   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ (306,504    $ 250,110       $ (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 Geographic Locations, by State, of Properties

The following table summarizes the geographic locations, by state, of our properties with leases in place as of June 30, 2015 and 2014:

 

     As of and For the Six Months Ended June 30, 2015     As of and For the Six Months Ended June 30, 2014  

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

     15         2,722         23.7   $ 3,712,894         68.7     9         1,599         24.8   $ 2,051,017         67.1

Florida

     12         4,401         38.4     820,834         15.2     8         496         7.7     240,304         7.9

Oregon

     4         2,313         20.2     583,763         10.8     4         2,313         35.9     492,121         16.1

Arizona

     1         1,761         15.4     161,935         3.0     1         1,761         27.4     145,328         4.7

Michigan

     4         270         2.3     123,357         2.3     4         270         4.2     128,157         4.2
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 
     36         11,467         100.0   $ 5,402,783         100.0     26         6,439         100.0   $ 3,056,927         100.0
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 
2015 New Real Estate Activity [Member]  
Summary Information of Farms

During the six months ended June 30, 2015, we acquired four new 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
    Annualized
Straight-line
Rent(1)
 

Espinosa Road(2)

  Salinas, CA   1/5/2015     331        1      Strawberries   1.8 years   None   $ 16,905,500      $ 87,512 (3 )    $ 778,342   

Parrish Road

  Duette, FL   3/10/2015     419        1      Strawberries   10.3 years   2 (5 years)     3,913,280        101,610 (3 )      251,832   

Immokalee Exchange

  Immokalee, FL   6/25/2015     2,678        2      Misc.Vegetables   5.0 years   2 (5 years)     15,757,700        148,960 (3 )      960,104   
     

 

 

   

 

 

         

 

 

   

 

 

   

 

 

 
        3,428        4            $ 36,576,480      $ 338,082      $ 1,990,278   
     

 

 

   

 

 

         

 

 

   

 

 

   

 

 

 

 

(1)  Annualized GAAP 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 $7,225 of direct leasing costs in connection with these acquisitions.
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, 2015, to be as follows:

 

Property Name

   Land and Land
Improvements
     Buildings and
Improvements
     Irrigation
System
     In-place
Leases
     Leasing
Costs
     Customer
Relationships
     Total
Purchase
Price
 

Espinosa Road

   $ 15,852,466       $ 84,478       $ 497,401       $ 246,472       $ 43,894       $ 180,789       $ 16,905,500   

Parrish Road

     2,403,064         42,619         1,299,851         54,405         77,449         35,892         3,913,280   

Immokalee Exhange

     14,410,840         273,107         515,879         229,406         148,691         179,777         15,757,700   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 32,666,370       $ 400,204       $ 2,313,131       $ 530,283       $ 270,034       $ 396,458       $ 36,576,480   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
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 and six months ended June 30, 2015:

 

          For the three months
ended June 30, 2015
    For the six months
ended June 30, 2015
 

Property Name

   Acquisition
Date
   Operating
Revenues
     Earnings(1)     Operating
Revenues
     Earnings(1)  

Espinosa Road

   1/5/2015    $ 194,585       $ 101,813      $ 380,802       $ 198,871   

Parrish Road

   3/10/2015      62,958         21,770        77,174         28,949   

Immokalee Exchange

   6/25/2015      —           (1,223     —           (1,223
     

 

 

    

 

 

   

 

 

    

 

 

 
      $ 257,543       $ 122,360      $ 457,976       $ 226,597   
     

 

 

    

 

 

   

 

 

    

 

 

 

 

(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.
2014 New Real Estate Activity [Member]  
Summary Information of Farms

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
Costs
    Customer
Relationships
    Above (Below)-
Market
Leases
    Total
Purchase
Price
 

Collins Road

  $ 1,252,387      $ 555,667      $ —        $ 126,719      $ 520,993      $ 45,086      $ 65,685      $ 24,796      $ —        $ 2,591,333   

Spring Valley

    5,576,138        5,781        200,855        —          —          83,487        17,498        66,217        (49,976     5,900,000   

McIntosh Road

    1,970,074        30,745        537,254        2,846        —          34,674        16,766        27,966        45,675        2,666,000   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
  $ 8,798,599      $ 592,193      $ 738,109      $ 129,565      $ 520,993      $ 163,247      $ 99,949      $ 118,979      $ (4,301   $ 11,157,333   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)  Horticulture acquired on Collins Road consists of various types of blueberry bushes.
Summary of Total Operating Revenues 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