Annual report pursuant to Section 13 and 15(d)

Real Estate and Lease Intangibles

v3.3.1.900
Real Estate and Lease Intangibles
12 Months Ended
Dec. 31, 2015
Property, Plant and Equipment [Abstract]  
Real Estate and Lease Intangibles

NOTE 3. REAL ESTATE AND LEASE INTANGIBLES

All of our properties are wholly-owned on a fee-simple basis. The following table provides certain summary information about our 43 farms as of December 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      $ 4,786,649       $ 4,677,258   

West Gonzales

   Oxnard, CA    9/15/1998    1    653    502      6/30/2020        12,198,297         23,796,549   

West Beach

   Watsonville, CA    1/3/2011    3    196    195      12/31/2023        9,299,418         4,556,294   

Dalton Lane

   Watsonville, CA    7/7/2011    1    72    70      10/31/2020        2,684,346         1,509,625   

Keysville Road

   Plant City, FL    10/26/2011    2    59    56      6/30/2020        1,240,565         897,600   

Colding Loop

   Wimauma, FL    8/9/2012    1    219    181      6/14/2018        3,957,326         2,640,000   

Trapnell Road

   Plant City, FL    9/12/2012    3    124    110      6/30/2017        3,943,865         2,522,250   

38th Avenue

   Covert, MI    4/5/2013    1    119    89      4/4/2020        1,274,852         720,943   

Sequoia Street

   Brooks, OR    5/31/2013    1    218    206      5/31/2028        3,109,843         1,666,610   

Natividad Road

   Salinas, CA    10/21/2013    1    166    166      10/31/2024        8,421,700         3,763,311   

20th Avenue

   South Haven, MI    11/5/2013    3    151    94      11/4/2018        1,890,436         1,075,232   

Broadway Road

   Moorpark, CA    12/16/2013    1    60    46      12/15/2023        2,880,849         1,612,848   

Oregon Trail

   Echo, OR    12/27/2013    1    1,895    1,640      12/31/2023        13,917,561         7,526,622   

East Shelton

   Willcox, AZ    12/27/2013    1    1,761    1,320      2/29/2024        7,875,996         3,602,026   

Collins Road

   Clatskanie, OR    5/30/2014    2    200    157      9/30/2024        2,423,608         1,451,563   

Spring Valley

   Watsonville, CA    6/13/2014    1    145    110      9/30/2022        5,777,020         3,171,933   

McIntosh Road

   Dover, FL    6/20/2014    2    94    78      6/30/2017 (2)      2,476,569         1,519,620   

Naumann Road

   Oxnard, CA    7/23/2014    1    68    66      7/31/2017        6,782,572         3,704,173   

Sycamore Road

   Arvin, CA    7/25/2014    1    326    322      10/31/2024        6,822,097         3,118,172   

Wauchula Road

   Duette, FL    9/29/2014    1    808    590      9/30/2024        13,771,697         7,742,812   

Santa Clara Avenue

   Oxnard, CA    10/29/2014    2    333    331      7/31/2017        24,242,056         13,440,396   

Dufau Road

   Oxnard, CA    11/4/2014    1    65    64      11/3/2017        6,061,157         3,675,000   

Espinosa Road

   Salinas, CA    1/5/2015    1    331    329      10/31/2016        16,541,996         10,178,000   

Parrish Road

   Duette, FL    3/10/2015    1    419    211      6/30/2025        4,283,210         2,374,680   

Immokalee Exchange

   Immokalee, FL    6/25/2015    2    2,678    1,644      6/30/2020        15,644,287         9,360,000   

Holt County

   Stuart, NE    8/20/2015    1    1,276    1,052      12/31/2018        5,478,661         3,301,000   

Rock County

   Bassett, NE    8/20/2015    1    1,283    1,049      12/31/2018        5,473,099         3,301,000   

Bear Mountain

   Arvin, CA    9/3/2015    3    854    841      1/9/2031        19,384,361         8,176,640   

Corbitt Road

   Immokalee, FL    11/2/2015    1    691    390      12/31/2021        3,820,031         3,760,000   

Reagan Road

   Willcox, AZ    12/22/2015    1    1,239    875      12/31/2025        5,732,435         3,891,000   
        

 

  

 

  

 

    

 

 

    

 

 

 
         43    16,810    13,022      $ 222,196,559       $ 142,733,157   
        

 

  

 

  

 

    

 

 

    

 

 

 

 

(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. Includes Total real estate, net and Lease intangibles, net; plus net above-market lease values included in Other assets; and less net below-market lease values, deferred revenue and unamortized tenant improvements included in Other liabilities, each as shown on the accompanying Consolidated Balance Sheet.
(2)  There are two leases in place on this property, one originally scheduled to expire on June 30, 2016, which lease was renewed subsequent to December 31, 2015 (see Note 10, “Subsequent Events”), and the other scheduled to expire on June 30, 2017.

 

Real Estate

The following table sets forth the components of our investments in tangible real estate assets as of December 31, 2015 and 2014:

 

     December 31, 2015      December 31, 2014  

Real estate:

     

Land and land improvements

   $ 192,020,381       $ 122,999,316   

Irrigation systems

     21,849,508         12,365,514   

Buildings and improvements

     11,184,647         10,479,301   

Horticulture

     1,490,695         1,559,340   

Other site improvements

     1,872,606         968,007   
  

 

 

    

 

 

 

Real estate, at cost

     228,417,837         148,371,478   

Accumulated depreciation

     (6,634,412      (4,431,290
  

 

 

    

 

 

 

Real estate, net

   $ 221,783,425       $ 143,940,188   
  

 

 

    

 

 

 

New Real Estate Activity

Certain acquisitions during the years ended December 31, 2015 and 2014 were accounted for as business combinations in accordance with Accounting Standards Codification (“ASC”) 805, as there was a prior leasing history on the property. As such, the fair value of all assets acquired and liabilities assumed were determined in accordance with ASC 805, and all acquisition-related costs were expensed as incurred, other than those costs that directly related to reviewing or assigning leases we assumed upon acquisition, which were capitalized as part of leasing costs. For acquisitions accounted for as asset acquisitions under ASC 360, all acquisition-related costs were capitalized and included as part of the fair value allocation of the identifiable tangible assets acquired, other than those costs that directly related to originating new leases we executed upon acquisition, which were capitalized as part of leasing costs.

2015 New Real Estate Activity

During the year ended December 31, 2015, we acquired 11 new farms in 8 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

Cash  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        151,746 (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        27,589 (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        27,589 (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        119,128 (5)      828,608        21,138,196   

Corbitt Road

  Immokalee, FL   11/2/2015   691   1   Misc. Vegetables   6.1 years   1 (6 years)     3,760,000        74,857 (5)      226,938        3,760,000   

Reagan Road

  Willcox, AZ   12/22/2015   1,239   1   Corn   10.0 years   2 (5 years)     5,700,000        37,544 (5)      319,240        3,891,000   
     

 

         

 

 

   

 

 

   

 

 

   

 

 

 
      8,771   11         $ 75,966,980      $ 631,948      $ 3,944,694      $ 57,303,876   
     

 

         

 

 

   

 

 

   

 

 

   

 

 

 

 

(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.

 

We determined the fair value of assets acquired and liabilities assumed related to the properties acquired during the year ended December 31, 2015, to be as follows:

 

Property Name

   Land and Land
Improvements
     Buildings and
Improvements
     Irrigation
System
     In-place
Leases
     Leasing
Costs
     Tenant
Relationships
     Above-(Below)-
Market Leases &

(Deferred Revenue)
    Total
Purchase
Price
 

Espinosa Road

   $ 15,852,466       $ 84,478       $ 497,401       $ 246,472       $ 43,895       $ 180,788       $ —        $ 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

     4,862,314         72,232         540,589         —           28,865         —           —          5,504,000   

Bear Mountain

     18,428,247         —           494,253         —           —           —           —          18,922,500   

Corbitt Road

     3,186,765         254,963         470,875         —           —           —           (152,603     3,760,000   

Reagan Road

     4,207,040         18,366         1,474,594         —           —           —           —          5,700,000   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
   $ 68,041,105       $ 802,018       $ 6,023,326       $ 530,283       $ 326,394       $ 396,457       $ (152,603   $ 75,966,980   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

The allocation of the purchase price for the farms acquired during the year ended December 31, 2015, is preliminary and may change during the measurement period if we obtain new information regarding the assets acquired or liabilities assumed at the acquisition date.

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

 

Property Name

   Acquisition
Date
     Operating
Revenues
     Earnings(1)  

Espinosa Road

     1/5/2015       $ 769,972       $ 383,201   

Parrish Road

     3/10/2015         203,341         57,613   

Immokalee Exchange

     6/25/2015         480,052         313,387   

Holt County

     8/20/2015         105,954         78,315   

Rock County

     8/20/2015         105,954         72,753   

Bear Mountain

     9/3/2015         271,599         249,958   

Corbitt Road

     11/2/2015         29,970         8,916   

Reagan Road

     12/22/2015         8,582         3,473   
     

 

 

    

 

 

 
      $ 1,975,424       $ 1,167,616   
     

 

 

    

 

 

 

 

(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

During the year ended December 31, 2014, we acquired 11 new farms in 8 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)   $ 2,591,333      $ 60,329 (2)    $ 181,172      $ —     

Spring Valley

  Watsonville, CA   6/13/2014   145   1   Strawberries   2.3 years   None     5,900,000        49,582 (2)      270,901        —     

McIntosh Road

  Dover, FL   6/20/2014   94   2   Strawberries   3.0 years   1 (3 years) / None(3)     2,666,000        60,939 (2)      133,154        1,599,600   

Naumann Road

  Oxnard, CA   7/23/2014   68   1   Strawberries   3.0 years   1 (3 years)     6,888,500        91,103 (2)      329,667        —     

Sycamore Road

  Arvin, CA   7/25/2014   326   1   Misc. Vegetables   1.3 years(4)   None(4)     5,800,000        44,434 (2)      184,304        —     

Wauchula Road

  Duette, FL   9/29/2014   808   1   Strawberries   10.0 years   2 (5 years)     13,765,000        132,555 (5)      888,439        8,259,000   

Santa Clara Avenue

  Oxnard, CA   10/29/2014   333   2   Strawberries   0.8 years   1 (2 years)     24,592,000        100,603 (2)      1,231,422        25,000,000   

Dufau Road

  Oxnard, CA   11/4/2014   65   1   Strawberries   3.0 years   1 (3 years)     6,125,600        66,474 (2)      304,607        3,675,000   
     

 

 

 

       

 

 

   

 

 

   

 

 

   

 

 

 
      2,039   11         $ 68,328,433      $ 606,019      $ 3,523,666      $ 38,533,600   
     

 

 

 

       

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)  Annualized straight-line amount is based on the minimum cash rental payments guaranteed under the lease.
(2)  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 $21,408 of direct leasing costs in connection with these acquisitions.
(3)  This property has a separate tenant leasing each of the property’s two farms. One lease provides for one 3-year renewal option, while the other does not include a renewal option.
(4)  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.
(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.

We determined the fair value of assets acquired and liabilities assumed related to the properties acquired during the year ended December 31, 2014, to be as follows:

 

Property Name

   Land and Land
Improvements
     Buildings and
Improvements
     Irrigation
System
     Horticulture(1)      In-place
Leases
     Leasing
Costs
     Tenant
Relationships
     Above-(Below)-
Market Leases
    Total
Purchase
Price
 

Collins Road

   $ 1,252,388       $ 682,385       $ —         $ 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         33,592         537,254         —           34,674         16,766         27,966         45,674        2,666,000   

Naumann Road

     6,219,293         433,087         71,586         —           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         1,887,530         3,489,046         —           —           —           —           —          13,765,000   

Santa Clara Avenue

     23,672,902         163,140         187,314         —           310,119         29,153         229,372         —          24,592,000   

Dufau Road

     5,859,721         3,021         88,827         —           71,654         30,128         52,720         19,529        6,125,600   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 
   $ 58,779,690       $ 3,208,536       $ 4,641,882       $ 520,993       $ 669,210       $ 197,222       $ 455,857       $ (144,957   $ 68,328,433   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

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

 

Below is a summary of the total operating revenues and earnings recognized on the properties acquired during the year ended December 31, 2014:

 

Property Name

   Acquisition
Date
     Operating
Revenues
     Earnings (1)  

Collins Road

     5/30/2014       $ 106,658       $ 33,303   

Spring Valley

     6/13/2014         148,996         81,073   

McIntosh Road

     6/20/2014         58,021         (22,902 )(2) 

Naumann Road

     7/23/2014         145,337         104,726   

Sycamore Road

     7/25/2014         80,328         39,574   

Wauchula Road

     9/29/2014         226,978         101,794   

Santa Clara Avenue

     10/29/2014         212,078         73,833   

Dufau Road

     11/4/2014         48,229         32,807   
     

 

 

    

 

 

 
      $ 1,026,625       $ 444,208   
     

 

 

    

 

 

 

 

(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.
(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.

Acquired Intangibles and Liabilities

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 years ended December 31, 2015 and 2014:

 

Intangible Assets and Liabilities

   2015      2014  

In-place leases

     4.1         2.2   

Leasing costs

     5.5         5.0   

Tenant relationships

     9.5         4.7   

Above-market lease values

     —           3.0   

Below-market lease and sale inducement values

     6.2         1.5   
  

 

 

    

 

 

 

All intangible assets and liabilities

     6.2         3.2   
  

 

 

    

 

 

 

 

Pro-Forma Information

We acquired 11 farms during each of the years ended December 31, 2015 and 2014. 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 Years Ended December 31,  
     2015      2014  
     (Unaudited)      (Unaudited)  

Operating Data:

     

Total operating revenue

   $ 13,993,765       $ 13,831,669   

Total operating expenses

     (7,282,204      (7,767,114

Other expenses

     (4,861,169      (4,695,902
  

 

 

    

 

 

 

Net income before income taxes

     1,850,392         1,368,653   

Provision for income taxes

     —           (26,502
  

 

 

    

 

 

 

Net income

   $ 1,850,392       $ 1,342,151   
  

 

 

    

 

 

 

Share and Per-share Data:

     

Earnings per share of common stock – basic and diluted

   $ 0.20       $ 0.18   
  

 

 

    

 

 

 

Weighted-average common shares outstanding – basic and diluted

     9,216,469         7,608,416   
  

 

 

    

 

 

 

The pro-forma consolidated results are prepared for informational purposes only. They are not necessarily indicative of what our consolidated financial condition or results of operations actually would have been assuming the acquisitions had occurred at the beginning of the respective previous periods, nor do they purport to represent our consolidated financial position or results of operations for future periods.

Significant Existing Real Estate Activity

On February 9, 2015, we terminated the lease with the tenant occupying Keysville Road and, on February 10, 2015, entered into a lease with a new tenant to occupy the property. The new lease is scheduled to expire on June 30, 2020, and provides for rent escalations over its life, with minimum, annualized straight-line rental income of $73,749, representing a 7.9% increase over that of the previous lease. In connection with the termination of the previous lease, during the three months ended March 31, 2015, we wrote off an aggregate amount of $40,022 related to deferred rent asset balances and rental income, including $32,497 that had been recorded in prior periods.

On February 23, 2015, we renewed the lease with the tenant occupying Spring Valley, which lease was originally set to expire on September 30, 2016. The lease was renewed for an additional six years, through September 30, 2022, and provides for rent escalations over its life, with minimum annualized, straight-line rental income of $327,904, representing a 32.5% increase over that of the previous lease. The new lease also grants the tenant two options to extend the lease for an additional six years each.

On April 8, 2015, the tenant occupying Santa Clara exercised its option to extend the two existing leases, which were originally set to expire on July 31, 2015. The leases were each extended for an additional two years, through July 31, 2017, and provide for aggregate annualized, straight-line rental income of $1,302,783, representing a 5.8% increase over that of the previous leases.

On April 13, 2015, we renewed the lease with the tenant occupying Dalton Lane, which was originally set to expire on October 31, 2015. The lease was renewed for an additional five years, through October 31, 2020, and provides for rent escalations over its life, with annualized, straight-line rental income of $163,989, representing a 16.8% increase over that of the previous lease. The new lease also grants the tenant one option to extend the lease for an additional five years.

On September 10, 2015, we terminated the lease with the tenant occupying one of the McIntosh Road farms and immediately entered into a new lease agreement with a different tenant to occupy the property. The new lease is scheduled to expire on June 30, 2016, and provides for minimum rental payments of $43,200 over its term. In connection with the termination of the previous lease, during the three months ended September 30, 2015, we wrote off an aggregate amount of $27,274 related to unamortized above-market lease value and deferred rent asset balances. In addition, we expensed $20,255 of unamortized intangible assets related to the old lease.

On October 5, 2015, we executed a lease amendment with the tenant on East Shelton to provide for additional annual rent in connection with the completion of certain irrigation upgrades we performed on the property. The amendment also adjusted the rent due for the next two years as stipulated in the lease as the first minimum rent reset period. The portion of the amendment related to the recovery of capital expenditures resulted in additional annualized, straight-line rents of $16,268 throughout the entire lease term, while the portion of the amendment related to the market rent reset period will result in an additional $78,780 of annualized, straight-line rental income for the two-year period ending on February 28, 2018, at which time the next market reset period will begin.

On November 6, 2015, we executed an agreement for a perpetual right-of-way easement that will allow for the installation of a natural gas pipeline underneath approximately 2.6 nonfarmable acres on Collins Road. In return, we received $17,021 of gross consideration, $14,483 of which was recognized as a capital gain during the year ended December 31, 2015, in accordance with GAAP.

For further leasing activity on our existing properties, see Note 9, “Subsequent Events.”

Involuntary Conversions and Property and Casualty Recovery

In April 2014, two separate fires occurred on two of our properties, partially damaging a structure on each property. One occurred on 20th Avenue, destroying the majority of a residential house, and the other occurred on West Gonzales, damaging a portion of a cooling facility. During the year ended December 31, 2014, we wrote down the carrying values of these properties by an aggregate amount of $232,737, and, in accordance with ASC 605, “Revenue Recognition – Gains and Losses,” we also recorded a corresponding property and casualty loss. We recovered $495,700 of insurance proceeds during the year ended December 31, 2014, and, in accordance with ASC 450, “Contingencies,” we recorded these amounts as an offset to the property and casualty loss recorded earlier in the year, resulting in a net recovery. During the year ended December 31, 2015, we recovered an additional $97,232 of insurance proceeds, and such recovery is included in Property and casualty recovery, net on the accompanying Consolidated Statements of Operations.

Repairs have been completed on each of these properties. During the year ended December 31, 2015, we expended $35,648 in repairs and upgrades to the cooler as a result of the fire on West Gonzales, of which $25,682 was capitalized as a real estate addition, and $9,966 was recorded in repairs and maintenance expense, included in Property operating expense on the accompanying Condensed Consolidated Statements of Operations. Repairs on 20th Avenue were also completed during the year ended December 31, 2015, at no cost to us. During the year ended December 31, 2014, we expended $496,784 in repairs and upgrades to the cooler, of which $407,096 was capitalized as a real estate addition and $89,688 was recorded in repairs and maintenance expense.

Each of these insurance claims has been closed, and no further recoveries are expected for either of these fires.

 

Intangible Assets and Liabilities

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

 

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

In-place leases

   $ 1,225,955       $ (573,149    $ 869,207       $ (263,428

Leasing costs

     677,112         (183,851      357,210         (80,617

Tenant relationships

     886,743         (269,269      501,670         (66,467
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 2,789,810       $ (1,026,269    $ 1,728,087       $ (410,512
  

 

 

    

 

 

    

 

 

    

 

 

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

Above-market lease values(1)

   $ 19,528       $ (7,540    $ 65,203       $ (9,027

Below-market lease values and deferred revenue(2)

     (202,579      23,205         (371,707      162,194   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ (183,051    $ 15,665       $ (306,504    $ 153,167   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1)  Above-market lease values are included as a part of Other assets in the accompanying Consolidated Balance Sheets, and the related amortization is recorded as a reduction of rental income.
(2)  Below-market lease values and deferred revenue are included as a part of Other liabilities in the accompanying Consolidated Balance Sheets, and the related accretion is recorded as an increase to 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 or accretion of above- and below-market lease values and deferred revenue for each of the five succeeding fiscal years and thereafter is as follows:

 

Period

        Estimated
Amortization
Expense
     Estimated Net
Increase to
Rental Income
 

For the fiscal years ending December 31:

   2016    $ 624,604       $ 29,324   
   2017      348,854         22,814   
   2018      246,624         23,845   
   2019      207,158         29,323   
   2020      117,966         29,324   
   Thereafter      218,335         32,756   
     

 

 

    

 

 

 
      $ 1,763,541       $ 167,386   
     

 

 

    

 

 

 

 

Lease Expirations

The following table summarizes the future lease expirations by year for our properties as of December 31, 2015:

 

Year

   Number of
Expiring
Leases
     Expiring
Leased
Acreage
     % of
Total
Acreage
    Rental Revenue
for the Year Ended
December 31, 2015
     % of Total
Rental
Revenue
 

2016(1)

     4         368         2.2   $ 816,811         6.9

2017

     8         647         3.9     2,160,141         18.2

2018

     5         2,929         17.4     581,084         4.9

2019

     0         0         0.0     —           0.0

2020

     6         3,888         23.1     3,763,641         31.6

2021

     2         691         4.1     29,970         0.2

Thereafter

     13         8,287         49.3     4,536,444         38.2
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Totals

     38         16,810         100.0   $ 11,888,091         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, for which we recorded $32,064 of rental revenue during the year ended December 31, 2015, and a residential lease on one of our properties that is not expected to be renewed upon its expiration in 2016 and for which no rental revenue was recorded during the year ended December 31, 2015. In addition, one of the agricultural leases originally set to expire in 2016 was renewed subsequent to December 31, 2015. See Note 10, “Subsequent Events,” for further discussion on this lease renewal.

Future Lease Payments

Future operating lease payments from tenants under all non-cancelable leases, excluding tenant reimbursement of expenses, for each of the five succeeding fiscal years and thereafter as of December 31, 2015, are as follows:

 

          Tenant Lease  

Period

        Payments  

For the fiscal years ending December 31:

   2016    $ 12,876,180   
   2017      10,895,846   
   2018      10,860,980   
   2019      10,310,834   
   2020      8,303,119   
   Thereafter      25,233,615   
     

 

 

 
      $ 78,480,574   
     

 

 

 

In accordance with the lease terms, substantially all operating expenses are required to be paid by the tenant; however, we would be required to pay real estate property taxes on the respective parcels of land in the event the tenants fail to pay them.

 

Portfolio Diversification and Concentrations

Diversification

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

 

     As of and For the Year Ended December 31, 2015     As of and For the Year Ended December 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

     18         3,576         21.3   $ 7,754,945         65.2     14         2,391         29.7   $ 4,778,579         66.6

Florida

     13         5,092         30.3     2,166,660         18.2     9         1,304         16.2     759,398         10.6

Oregon

     4         2,313         13.8     1,168,725         9.8     4         2,313         28.8     1,080,105         15.1

Arizona

     2         3,000         17.8     338,446         2.9     1         1,761         21.9     299,785         4.2

Michigan

     4         270         1.6     247,407         2.1     4         270         3.4     252,451         3.5

Nebraska

     2         2,559         15.2     211,908         1.8     —           —           —          —           —     
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 
     43         16,810         100.0   $ 11,888,091         100.0     32         8,039         100.0   $ 7,170,318         100.0
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 

Concentrations

Credit Risk

Our farms are leased to 33 different, third-party tenants, with certain tenants leasing more than one farm. Dole Food Company (“Dole”) leases two of our farms, and aggregate rental revenue attributable to Dole accounted for approximately $2.9 million, or 24.8% of the total rental revenue recorded during the year ended December 31, 2015. In addition, a separate tenant accounted for approximately $1.3 million, or 10.7% of the total rental revenue recorded during the year ended December 31, 2015. If either tenant fails to make rental payments or elects to terminate their lease, and the land cannot be re-leased on satisfactory terms, there would likely be a material adverse effect on our financial performance and ability to continue operations. No other individual tenant represented greater than 10.0% of the total rental revenue recorded during the year ended December 31, 2015.

Geographic Risk

18 of our 43 farms owned as of December 31, 2015, are located in California, and 13 farms are located in Florida. As of December 31, 2015, our farmland in California accounted for 3,576 acres, or 21.3% of the total acreage we owned. Furthermore, these farms accounted for approximately $7.8 million, or 65.2%, of the total rental revenue recorded during the year ended December 31, 2015. However, these farms are spread across three of the many different growing regions within California. As of December 31, 2015, our farmland in Florida accounted for 5,092 acres, or 30.3% of the total acreage we owned, and these farms accounted for approximately $2.2 million, or 18.2%, of the total rental revenue recorded during the year ended December 31, 2015. Though we seek to continue to further diversify geographically, as may be desirable or feasible, should an unexpected natural disaster occur where our properties are located, there could be a material adverse effect on our financial performance and ability to continue operations. No other single state accounted for more than 10.0% of the total rental revenue recorded during the year ended December 31, 2015.