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)

9 Months Ended

Sep. 30, 2015

The following table provides certain summary information about our 41 farms as of September 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	$	4,796,549	$	4,929,782
West Gonzales	Oxnard, CA	9/15/1998	1		653		502	6/30/2020		12,253,806		25,081,321
West Beach	Watsonville, CA	1/3/2011	3		196		195	12/31/2023		9,309,576		4,802,288
Dalton Lane	Watsonville, CA	7/7/2011	1		72		70	10/31/2020		2,687,404		1,591,130
Keysville Road	Plant City, FL	10/26/2011	2		59		56	6/30/2020		1,240,944		897,600
Colding Loop	Wimauma, FL	8/9/2012	1		219		181	6/14/2018		3,985,529		2,640,000
Trapnell Road	Plant City, FL	9/12/2012	3		124		110	6/30/2017		3,984,454		2,522,250
38th Avenue	Covert, MI	4/5/2013	1		119		89	4/4/2020		1,284,338		759,866
Sequoia Street	Brooks, OR	5/31/2013	1		218		206	5/31/2028		3,118,870		1,756,590
Natividad Road	Salinas, CA	10/21/2013	1		166		166	10/31/2024		8,291,741		3,966,492
20th Avenue	South Haven, MI	11/5/2013	3		151		94	11/4/2018		1,909,662		1,133,283
Broadway Road	Moorpark, CA	12/16/2013	1		60		60	12/15/2023		2,868,979		1,699,925
Oregon Trail	Echo, OR	12/27/2013	1		1,895		1,640	12/31/2023		13,936,423		7,932,983
East Shelton	Willcox, AZ	12/27/2013	1		1,761		1,320	2/29/2024		7,924,620		3,796,499
Collins Road	Clatskanie, OR	5/30/2014	2		200		157	9/30/2024		2,450,944		1,529,932
Spring Valley	Watsonville, CA	6/13/2014	1		145		110	9/30/2022		5,792,070		3,343,186
McIntosh Road	Dover, FL	6/20/2014	2		94		78	6/30/2017⁽²⁾		2,489,125		1,519,620
Naumann Road	Oxnard, CA	7/23/2014	1		68		66	7/31/2017		6,801,894		3,904,161
Sycamore Road	Arvin, CA	7/25/2014	1		326		322	10/31/2024		6,650,335		3,286,522
Wauchula Road	Duette, FL	9/29/2014	1		808		590	9/30/2024		13,781,341		7,846,050
Santa Clara Avenue	Oxnard, CA	10/29/2014	2		333		331	7/31/2017		24,277,677		14,166,041
Dufau Road	Oxnard, CA	11/4/2014	1		65		64	11/3/2017		6,076,035		3,675,000
Espinosa Road	Salinas, CA	1/5/2015	1		331		329	10/31/2016		16,633,724		10,178,000
Parrish Road	Duette, FL	3/10/2015	1		419		211	6/30/2025		4,326,273		2,374,680
Immokalee Exchange	Immokalee, FL	6/25/2015	2		2,678		1,644	6/30/2020		15,703,523		9,360,000
Holt County	Stuart, NE	8/20/2015	1		1,276		1,052	12/31/2018		5,497,143		3,301,000
Rock County	Bassett, NE	8/20/2015	1		1,283		1,049	12/31/2018		5,495,291		3,301,000
Bear Mountain	Arvin, CA	9/3/2015	3		854		841	1/9/2031		19,031,194		8,790,193

			41		14,880		11,771		$	212,599,464	$	140,085,394

⁽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 September 30, 2015.

⁽²⁾	There are two leases in place on this property, one expiring on June 30, 2016, and the other expiring on June 30, 2017.

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, 2015, and December 31, 2014:


	September 30, 2015			December 31, 2014
Real estate:
Land and land improvements	$	184,176,187		$	122,999,316
Irrigation systems		19,468,718			12,365,514
Buildings and improvements		10,906,636			10,479,301
Horticulture		1,559,339			1,559,340
Other site improvements		1,172,746			968,007

Real estate, at cost		217,283,626			148,371,478
Accumulated depreciation		(6,078,467	)		(4,431,290	)

Real estate, net	$	211,205,159		$	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 nine months ended September 30, 2015 and 2014:


	Weighted-Average
	Amortization Period (in Years)
Intangible Assets	2015		2014
In-place leases		4.1		3.7
Leasing commissions		5.5		6.3
Tenant relationships		9.5		6.9
Above-market lease values		—		3.0
Below-market lease values		—		1.5

All intangible assets		6.2		4.2

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 on January 1 of the respective prior 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 Nine Months Ended September 30,
	2015			2014
	*(Unaudited)*			*(Unaudited)*
Operating Data:
Total operating revenue	$	10,080,652		$	9,906,857
Total operating expenses		(5,205,311	)		(5,606,338	)
Other expenses		(3,459,110	)		(2,738,257	)

Net income before income taxes		1,416,231			1,562,262
Provision for income taxes		—			(20,103	)

Net income	$	1,416,231		$	1,542,159

Share and Per-share Data:
Earnings per share of common stock – basic and diluted	$	0.15		$	0.23

Weighted average common shares outstanding – basic and diluted		9,196,650			6,603,545

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 September 30, 2015, and December 31, 2014:


	September 30, 2015						December 31, 2014
	Lease Intangibles			Accumulated Amortization			Lease Intangibles			Accumulated Amortization
In-place leases	$	1,385,378		$	(645,647	)	$	869,207		$	(263,428	)
Leasing costs		701,502			(179,153	)		357,210			(80,617	)
Tenant relationships		886,743			(217,259	)		501,670			(66,467	)

	$	2,973,623		$	(1,042,059	)	$	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		$	(51,587	)	$	65,203		$	(9,027	)
Below-market lease values ⁽²⁾		(371,707	)		322,518			(371,707	)		162,194

	$	(306,504	)	$	270,931		$	(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 September 30, 2015 and 2014:


	As of and For the Nine Months Ended September 30, 2015												As of and For the Nine Months Ended September 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		18		3,576		24.0	%	$	5,652,357		66.6	%		11		1,993		26.1	%	$	3,260,272		67.5	%
Florida		12		4,401		29.6	%		1,458,433		17.2	%		9		1,304		17.1	%		384,861		8.0	%
Oregon		4		2,313		15.6	%		876,244		10.3	%		4		2,313		30.3	%		775,438		16.1	%
Arizona		1		1,761		11.8	%		243,953		2.9	%		1		1,761		23.0	%		217,899		4.5	%
Michigan		4		270		1.8	%		185,036		2.2	%		4		270		3.5	%		189,563		3.9	%
Nebraska		2		2,559		17.2	%		67,000		0.8	%		—		—		—			—		—

		41		14,880		100.0	%	$	8,483,023		100.0	%		29		7,641		100.0	%	$	4,828,033		100.0	%

2015 New Real Estate Activity [Member]

Summary Information of Farms

During the nine months ended September 30, 2015, we acquired nine new farms in six 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⁾		Long-term Debt Issued
Espinosa Road⁽²⁾	Salinas, CA	1/5/2015		331		1	Strawberries	1.8 years	None	$	16,905,500	$	89,885	⁽³⁾	$	778,342	$	10,178,000
Parrish Road	Duette, FL	3/10/2015		419		1	Strawberries	10.3 years	2 (5 years)		3,913,280		103,610	⁽³⁾		251,832		2,374,680
Immokalee Exchange	Immokalee, FL	6/25/2015		2,678		2	Misc. Vegetables	5.0 years	2 (5 years)		15,757,700		151,386	⁽³⁾		960,104		9,360,000
Holt County	Stuart, NE	8/20/2015		1,276		1	Misc. Vegetables	3.4 years	None		5,504,000		23,789	⁽³⁾		289,815		3,301,000
Rock County	Bassett, NE	8/20/2015		1,283		1	Misc. Vegetables	3.4 years	None		5,504,000		23,789	⁽³⁾		289,815		3,301,000
Bear Mountain	Arvin, CA	9/3/2015		854		3	Almonds⁽⁴⁾	15.4 years	1 (10 years)		18,922,500		113,938	⁽⁵⁾		828,389		21,138,196

				6,841		9				$	66,506,980	$	506,397		$	3,398,297	$	49,652,876

⁽¹⁾

Annualized straight-line amount is based on the minimum cash rental payments guaranteed under the lease.

⁽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 $11,825 of direct leasing costs in connection with these acquisitions.

⁽⁴⁾

Property currently consists of open ground and old grape vineyards. However, we will be removing the existing vineyards and converting the property into an almond orchard, which development is expected to be completed by June 30, 2016.

⁽⁵⁾

Acquisition accounted for as an asset acquisition under ASC 360. As such, all acquisition-related costs were capitalized and allocated among the identifiable assets acquired.

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 nine months ended September 30, 2015, to be as follows:


Property Name	Land and Land Improvements		Buildings and Improvements		Irrigation System		In-place Leases		Leasing Costs		Tenant 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 Exchange		14,410,840		273,107		515,879		229,406		148,691		179,777		15,757,700
Holt County		4,690,369		56,253		729,884		—		27,494		—		5,504,000
Rock County		4,862,313		72,232		540,589		—		28,866		—		5,504,000
Bear Mountain		18,428,247		—		494,253		—		—		—		18,922,500

	$	60,647,299	$	528,689	$	4,077,857	$	530,283	$	326,394	$	396,458	$	66,506,980

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 nine months ended September 30, 2015:


		For the three months ended September 30, 2015				For the nine months ended September 30, 2015
Property Name	Acquisition Date	Operating Revenues		Earnings ⁽¹⁾		Operating Revenues		Earnings ⁽¹⁾
Espinosa Road	1/5/2015	$	194,586	$	81,522	$	575,387	$	280,393
Parrish Road	3/10/2015		62,958		8,978		140,133		37,927
Immokalee Exchange	6/25/2015		240,026		152,860		240,026		151,637
Holt County	8/20/2015		33,500		24,343		33,500		24,343
Rock County	8/20/2015		33,500		22,491		33,500		22,491
Bear Mountain	9/3/2015		64,430		59,023		64,430		59,023

		$	629,000	$	349,217	$	1,086,976	$	575,814

⁽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 nine months ended September 30, 2014, we acquired eight new farms in six 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⁾			Long-term Debt Issued
Collins Road	Clatskanie, OR	5/30/2014		200		2	Blueberries	10.3 years	3 (5 years each)	$	2,591,333	$	60,870	⁽⁴⁾	$	181,172		$	—
Spring Valley	Watsonville, CA	6/13/2014		145		1	Strawberries	2.3 years	None		5,900,000		50,896	⁽⁴⁾		270,901			2,204,660	⁽⁶⁾
McIntosh Road	Dover, FL	6/20/2014		94		2	Strawberries	3.0 years	1 (3 years) / None ⁽²⁾		2,666,000		60,676	⁽⁴⁾		133,154			1,599,600	⁽⁷⁾
Naumann Road	Oxnard, CA	7/23/2014		68		1	Strawberries	3.0 years	1 (3 years)		6,888,500		91,103	⁽⁴⁾		329,668			2,574,595	⁽⁶⁾
Sycamore Road	Arvin, CA	7/25/2014		326		1	Vegetables	1.3 years ⁽³⁾	None ⁽³⁾		5,800,000		44,434	⁽⁴⁾		184,304	⁽³⁾		2,167,293	⁽⁶⁾
Wauchula Road	Duette, FL	9/29/2014		808		1	Strawberries	10.0 years	2 (5 years each)		13,765,000		123,500	⁽⁵⁾		888,439			8,259,000	⁽⁷⁾

				1,641		8				$	37,610,833	$	431,479		$	1,987,638		$	16,805,148

⁽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⁾

This property has separate tenants leasing each of the two farms. One lease provides for one 3-year renewal option, while the other does not include a renewal option.

⁽³⁾

Upon acquisition of this property, we assumed the in-place lease, which expires October 31, 2015. In addition, we executed a 9-year, follow-on lease with a new tenant that commences November 1, 2015. Under the terms of the follow-on lease, the tenant has one 3-year renewal option, and annualized, straight-line rents will be $311,760.

⁽⁴⁾

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. We incurred $17,558 of direct leasing costs in connection with these acquisitions.

⁽⁵⁾

Acquisition accounted for as an asset acquisition under ASC 360. As such, all acquisition-related costs were capitalized and allocated among the identifiable assets acquired.

⁽⁶⁾

Acquisition funded through a draw on our MetLife Credit Facility. Amount represents property’s proportionate share of the total borrowings outstanding under the MetLife Credit Facility in relation to all properties pledged as collateral under the facility.

⁽⁷⁾

Represents new debt issued from Farm Credit (as defined in Note 5, “Borrowings—Farm Credit Notes Payable”).

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 nine months ended September 30, 2014, to be as follows:


Property Name	Land and Land Improvements		Buildings and Improvements		Irrigation System		Site Improvements		Horticulture⁽¹⁾		In-place Leases		Leasing Costs		Customer Relationships		Above (Below)- Market Leases			Total Acquisition Cost
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
Naumann Road		6,219,293		416,148		71,586		16,939		—		75,520		34,228		54,786		—			6,888,500
Sycamore Road		5,840,750		—		67,000		—		—		48,670		3,764		—		(160,184	)		5,800,000
Wauchula Road		8,388,424		1,775,661		3,489,046		111,869		—		—		—		—		—			13,765,000

	$	29,247,066	$	2,784,002	$	4,365,741	$	258,373	$	520,993	$	287,437	$	137,941	$	173,765	$	(164,485	)	$	37,610,833

⁽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 nine months ended September 30, 2014:


			For the Three Months Ended					For the Nine Months Ended
			September 30, 2014					September 30, 2014
Property Name	Acquisition Date		Rental Revenue		Earnings ⁽¹⁾			Rental Revenue		Earnings ⁽¹⁾
Collins Road		5/30/2014	$	45,293	$	10,662		$	61,365	$	18,940
Spring Valley		6/13/2014		67,725		36,366			81,270		44,700
McIntosh Road		6/20/2014		20,549		(41,294	)⁽²⁾		24,733		(40,343	)⁽²⁾
Naumann Road		7/23/2014		62,920		44,514			62,920		44,514
Sycamore Road		7/25/2014		34,252		22,052			34,252		22,052
Wauchula Road		9/29/2014		4,868		4,868			4,868		4,868

			$	235,607	$	77,168		$	269,408	$	94,731

⁽¹⁾	Earnings are calculated as net income less interest expense, 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.

⁽²⁾	Includes $43,328 of lease intangibles that were written off during the three months ended September 30, 2014, related to the termination of a lease in September 2014 that we had assumed upon acquisition.