Quarterly report pursuant to Section 13 or 15(d)

Real Estate and Intangible Assets (Tables)

v3.5.0.2
Real Estate and Intangible Assets (Tables)
6 Months Ended
Jun. 30, 2016
Summary Information of Farms
The following table provides certain summary information about our 47 farms as of June 30, 2016:
 
 
 
 
Date
 
Number
of
 
Total
 
Farm
 
Lease
Expiration
 
 
Net Cost
 
 
Property Name
 
Location
 
Acquired
 
Farms
 
Acres
 
Acres
 
Date
 
 
Basis(1)
 
Encumbrances(2)
San Andreas
 
Watsonville, CA
 
6/16/1997
 
1
 
307
 
238
 
12/31/2020
 
 
$
4,766,850

 
$
5,419,371

West Gonzales
 
Oxnard, CA
 
9/15/1998
 
1
 
653
 
502
 
6/30/2020
 
 
12,087,278

 
27,572,207

West Beach
 
Watsonville, CA
 
1/3/2011
 
3
 
196
 
195
 
12/31/2023
 
 
9,284,807

 
5,279,214

Dalton Lane
 
Watsonville, CA
 
7/7/2011
 
1
 
72
 
70
 
10/31/2020
 
 
2,678,229

 
1,749,149

Keysville Road
 
Plant City, FL
 
10/26/2011
 
2
 
61
 
56
 
6/30/2020
 
 
1,239,809

 
897,600

Colding Loop
 
Wimauma, FL
 
8/9/2012
 
1
 
219
 
181
 
6/14/2018
 
 
3,900,918

 
2,640,000

Trapnell Road
 
Plant City, FL
 
9/12/2012
 
3
 
124
 
110
 
6/30/2017
 
 
3,862,689

 
2,522,250

38th Avenue
 
Covert, MI
 
4/5/2013
 
1
 
119
 
89
 
4/4/2020
 
 
1,255,879

 
835,331

Sequoia Street
 
Brooks, OR
 
5/31/2013
 
1
 
218
 
206
 
5/31/2028
 
 
3,091,791

 
1,931,041

Natividad Road
 
Salinas, CA
 
10/21/2013
 
1
 
166
 
166
 
10/31/2024
 
 
8,952,970

 
4,360,413

20th Avenue
 
South Haven, MI
 
11/5/2013
 
3
 
151
 
94
 
11/4/2018
 
 
1,851,986

 
1,245,832

Broadway Road
 
Moorpark, CA
 
12/16/2013
 
1
 
60
 
46
 
12/15/2023
 
 
2,875,864

 
1,868,748

Oregon Trail
 
Echo, OR
 
12/27/2013
 
1
 
1,895
 
1,640
 
12/31/2023
 
 
13,879,837

 
8,720,826

East Shelton
 
Willcox, AZ
 
12/27/2013
 
1
 
1,761
 
1,320
 
2/29/2024
 
 
7,778,747

 
4,173,538

Collins Road
 
Clatskanie, OR
 
5/30/2014
 
2
 
200
 
157
 
9/30/2024
 
 
2,368,937

 
1,681,874

Spring Valley
 
Watsonville, CA
 
6/13/2014
 
1
 
145
 
110
 
9/30/2022
 
 
5,746,921

 
3,675,205

McIntosh Road
 
Dover, FL
 
6/20/2014
 
2
 
94
 
78
 
6/30/2017
(3) 
 
2,453,449

 
1,519,620

Naumann Road
 
Oxnard, CA
 
7/23/2014
 
1
 
68
 
66
 
7/31/2017
 
 
6,793,670

 
4,291,892

Sycamore Road
 
Arvin, CA
 
7/25/2014
 
1
 
326
 
322
 
10/31/2024
 
 
6,848,715

 
3,612,914

Wauchula Road
 
Duette, FL
 
9/29/2014
 
1
 
808
 
590
 
9/30/2024
 
 
13,581,735

 
7,536,338

Santa Clara Avenue
 
Oxnard, CA
 
10/29/2014
 
2
 
333
 
331
 
7/31/2017
 
 
24,170,815

 
15,572,904

Dufau Road
 
Oxnard, CA
 
11/4/2014
 
1
 
65
 
64
 
11/3/2017
 
 
6,031,400

 
3,675,000

Espinosa Road
 
Salinas, CA
 
1/5/2015
 
1
 
331
 
329
 
10/31/2016
 
 
16,358,539

 
10,178,000

Parrish Road
 
Duette, FL
 
3/10/2015
 
1
 
419
 
412
 
6/30/2025
 
 
4,188,751

 
2,374,680

Immokalee Exchange
 
Immokalee, FL
 
6/25/2015
 
2
 
2,678
 
1,644
 
6/30/2020
 
 
15,526,274

 
9,360,000

Holt County
 
Stuart, NE
 
8/20/2015
 
1
 
1,276
 
1,052
 
12/31/2018
 
 
5,441,699

 
3,301,000

Rock County
 
Bassett, NE
 
8/20/2015
 
1
 
1,283
 
1,049
 
12/31/2018
 
 
5,428,714

 
3,301,000

Bear Mountain
 
Arvin, CA
 
9/3/2015
 
3
 
854
 
841
 
1/9/2031
 
 
26,094,518

 
9,979,735

Corbitt Road
 
Immokalee, FL
 
11/2/2015
 
1
 
691
 
390
 
12/31/2021
 
 
3,777,909

 
3,714,880

Reagan Road
 
Willcox, AZ
 
12/22/2015
 
1
 
1,239
 
875
 
12/31/2025
 
 
5,678,064

 
3,723,000

Gunbarrel Road
 
Alamosa, CO
 
3/3/2016
 
3
 
6,191
 
4,730
 
2/28/2021
 
 
25,326,491

 
15,531,000

Calaveras Avenue
 
Coalinga, CA
 
4/5/2016
 
1
 
453
 
442
 
10/31/2025
 
 
15,401,510

 
9,282,000

 
 
 
 
 
 
47
 
23,456
 
18,395
 
 
 
 
$
268,725,765

 
$
181,526,562


(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 Investments in 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 Condensed Consolidated Balance Sheet.
(2) 
Excludes approximately $1.1 million of deferred financing costs related to mortgage notes and bonds payable included in Mortgage notes and bonds payable, net on the accompanying Condensed Consolidated Balance Sheet.
(3) 
There are two leases in place on this property, one expiring on June 30, 2017, and the other expiring on June 30, 2019.
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, 2016, and December 31, 2015:
 
 
June 30, 2016
 
December 31, 2015
Real estate:
 
 
 
 
Land and land improvements
 
$
213,659,402

 
$
192,020,381

Irrigation systems
 
30,615,816

 
21,849,508

Buildings
 
14,623,118

 
11,184,647

Horticulture
 
13,679,327

 
1,490,695

Other improvements
 
4,575,516

 
1,872,606

Real estate, at cost
 
277,153,179

 
228,417,837

Accumulated depreciation
 
(8,571,234
)
 
(6,634,412
)
Real estate, net
 
$
268,581,945

 
$
221,783,425

Carrying Value of Lease Intangibles and Accumulated Amortization for Each Intangible Asset or Liability Class
The following table summarizes the carrying values of lease intangible assets and the related accumulated amortization as of June 30, 2016, and December 31, 2015:
 
 
June 30, 2016
 
December 31, 2015
Lease intangibles:
 
 
 
 
In-place leases
 
$
1,607,932

 
$
1,225,955

Leasing costs
 
939,676

 
677,112

Tenant relationships
 
886,743

 
886,743

Lease intangibles, at cost
 
3,434,351

 
2,789,810

Accumulated amortization
 
(1,401,130
)
 
(1,026,269
)
Lease intangibles, net
 
$
2,033,221

 
$
1,763,541

Total amortization expense related to these lease intangible assets was $198,135 and $374,861 for the three and six months ended June 30, 2016, respectively, and $172,678 and $451,796 for the three and six months ended June 30, 2015, respectively.

The following table summarizes the carrying values of certain lease intangible assets or liabilities included in Other assets and Other liabilities, respectively, on the accompanying Condensed Consolidated Balance Sheets and the related accumulated amortization or accretion, respectively, as of June 30, 2016, and December 31, 2015.
 
 
June 30, 2016
 
December 31, 2015
 
 
Deferred
Rent Asset
 
Accumulated
(Amortization)
 
Deferred
Rent Asset
 
Accumulated
(Amortization)
Intangible Asset or Liability
 
(Liability)
 
Accretion
 
(Liability)
 
Accretion
Above-market lease values(1)
 
$
19,528

 
$
(10,795
)
 
$
19,528

 
$
(7,540
)
Below-market lease values and deferred revenue(2)
 
(202,579
)
 
37,867

 
(202,579
)
 
23,205

 
 
$
(183,051
)
 
$
27,072

 
$
(183,051
)
 
$
15,665


(1) 
Above-market lease values are included as 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 and deferred revenue 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.
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 new real estate acquired as part of business combinations during the six months ended June 30, 2016 and 2015:
 
 
Weighted-Average
Amortization Period (in Years)
Intangible Assets and Liabilities
 
2016
 
2015
In-place leases
 
5.1

 
4.1
Leasing costs
 
5.1

 
6.1
Tenant relationships
 

 
9.5
All intangible assets and liabilities
5.1

 
6.3
Pro-Forma Condensed Consolidated Statements of Operations as Properties Acquired
 
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
 
2016
 
2015
 
2016
 
2015
 
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
Operating Data:
 
 
 
 
 
 
 
 
Total operating revenue
 
$
4,244,441

 
$
2,834,979

 
$
7,927,117

 
$
5,629,607

Net income attributable to the company
 
$
92,512

 
$
(293,259
)
 
$
101,372

 
$
517,789

Share and Per-share Data:
 
 
 
 
 
 
 
 
Earnings per share of common stock – basic and diluted
 
$
0.01

 
$
(0.03
)
 
$
0.01

 
$
0.06

Weighted-average common shares outstanding – basic and diluted
 
9,992,941

 
9,060,314

 
9,992,941

 
9,060,314

Summary of Geographic Locations of Properties
The following table summarizes the geographic locations, by state, of our properties with leases in place as of June 30, 2016 and 2015:
 
 
As of and For the Six Months Ended June 30, 2016
 
As of and For the Six Months Ended June 30, 2015
 
 
Number
of
 
Total
 
% of
Total
 
Rental
 
% of Total
Rental
 
Number
of
 
Total
 
% of
Total
 
Rental
 
% of Total
Rental
State
 
Farms
 
Acres
 
Acres
 
Revenue
 
Revenue
 
Farms
 
Acres
 
Acres
 
Revenue
 
Revenue
California
 
19
 
4,029

 
17.2
%
 
$
4,502,644

 
56.8
%
 
15
 
2,722

 
23.7
%
 
$
3,712,894

 
68.7
%
Florida
 
13
 
5,094

 
21.7
%
 
1,539,217

 
19.4
%
 
12
 
4,401

 
38.4
%
 
820,834

 
15.2
%
Oregon
 
4
 
2,313

 
9.9
%
 
584,962

 
7.4
%
 
4
 
2,313

 
20.2
%
 
583,763

 
10.8
%
Colorado
 
3
 
6,191

 
26.4
%
 
521,653

 
6.6
%
 
 

 
%
 

 
%
Arizona
 
2
 
3,000

 
12.8
%
 
358,051

 
4.5
%
 
1
 
1,761

 
15.4
%
 
161,935

 
3.0
%
Nebraska
 
2
 
2,559

 
10.9
%
 
289,815

 
3.7
%
 
 

 
%
 

 
%
Michigan
 
4
 
270

 
1.1
%
 
124,743

 
1.6
%
 
4
 
270

 
2.3
%
 
123,357

 
2.3
%
 
 
47
 
23,456

 
100.0
%
 
$
7,921,085

 
100.0
%
 
36
 
11,467

 
100.0
%
 
$
5,402,783

 
100.0
%
2016 New Real Estate Activity [Member]  
Summary Information of Farms
During the six months ended June 30, 2016, we acquired four new farms in two separate transactions, which are summarized in the table below.
 
 
 
 
 
 
 
 
Number
 
 
 
 
 
 
 
Total
 
 
 
Annualized
 
New
Property
 
Property
 
Acquisition
 
Total
 
of
 
Primary
 
Lease
 
Renewal
 
Purchase
 
Acquisition
 
Straight-line
 
Long-term
Name
 
Location
 
Date
 
Acreage
 
Farms
 
Crop(s)
 
Term
 
Options
 
Price
 
Costs
 
Rent(1)
 
Debt Issued
Gunbarrel Road (2)
 
Alamosa, CO
 
3/3/2016
 
6,191
 
3
 
Organic Potatoes
 
5 years
 
1 (5 years)
 
$
25,735,815

 
$
93,585

(3) 
$
1,590,614

 
$
15,531,000

Calaveras Avenue
 
Coalinga, CA
 
4/5/2016
 
453
 
1
 
Pistachios
 
10 years
 
1 (5 years)
 
15,470,000

 
38,501

(4) 
773,500

(5) 
9,282,000

 
 
 
 
 
 
6,644
 
4
 
 
 
 
 
 
 
$
41,205,815

 
$
132,086

 
$
2,364,114

 
$
24,813,000


(1) 
Annualized straight-line amount is based on the minimum cash rental payments guaranteed under the lease, as required under GAAP.
(2) 
As partial consideration for the acquisition of this property, we issued 745,879 OP Units, constituting an aggregate fair value of approximately $6.5 million as of the acquisition date.
(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 $4,670 of direct leasing costs in connection with this acquisition.
(4) 
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.
(5) 
This lease provides for a variable rent component based on the gross crop revenues earned on the property. The figure above represents only the minimum cash rents guaranteed under the lease.
Fair Value of Assets Acquired and Liabilities Assumed Related to Property Acquired
We determined the fair value of assets acquired and liabilities assumed related to the property acquired during the six months ended June 30, 2016, to be as follows:
 
 
Land and Land
 
 
 
Irrigation
 
Other
 
 
 
In-place
 
Leasing
 
Total
Purchase
Property Name
 
Improvements
 
Buildings
 
Systems
 
Improvements
 
Horticulture
 
Leases
 
Costs
 
Price
Gunbarrel Road
 
$
16,755,814

 
$
3,438,291

 
$
2,830,738

 
$
2,079,102

 
$

 
$
381,977

 
$
249,893

 
$
25,735,815

Calaveras Avenue
 
3,615,436

 

 
424,112

 

 
11,430,452

 

 

 
15,470,000

 
 
$
20,371,250

 
$
3,438,291

 
$
3,254,850

 
$
2,079,102

 
$
11,430,452

 
$
381,977

 
$
249,893

 
$
41,205,815

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 property acquired during the three and six months ended June 30, 2016:
 
 
 
 
For the three months ended June 30, 2016
 
For the six months ended June 30, 2016
 
 
Acquisition
 
Operating
 
 
 
Operating
 
 
Property Name
 
Date
 
Revenues
 
Earnings(1)
 
Revenues
 
Earnings(1)
Gunbarrel Road
 
3/3/2016
 
$
397,654

 
$
72,522

 
$
521,653

 
$
93,597

Calaveras Avenue
 
4/5/2016
 
183,865

 
76,565

 
183,865

 
76,565

 
 
 
 
$
581,519

 
$
149,087

 
$
705,518

 
$
170,162


(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.
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
 
Property
 
Acquisition
 
Total
 
Number
of
 
Primary
 
Lease
 
Renewal
 
Total
Purchase
 
Acquisition
 
 
Annualized
Straight-line
 
Long-term
Name
 
Location
 
Date
 
Acreage
 
Farms
 
Crop(s)
 
Term
 
Options
 
Price
 
Costs
 
 
Rent(1)
 
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

 
152,571

(3) 
 
960,104

 
9,360,000

 
 
 
 
 
 
3,428
 
4
 
 
 
 
 
 
 
$
36,576,480

 
$
346,066

 
 
$
1,990,278

 
$
21,912,680


(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 the Adviser fully credited back to us during the six months ended June 30, 2015. See Note 5, “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 Assets Acquired and Liabilities Assumed Related to Property Acquired
We determined the fair value of assets acquired and liabilities assumed related to the properties acquired during the six months ended June 30, 2015, to be as follows:
 
 
Land and Land
 
Buildings and
 
Irrigation
 
In-place
 
Leasing
 
Tenant
 
Total
Purchase
Property Name
 
Improvements
 
Improvements
 
System
 
Leases
 
Costs
 
Relationships
 
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

 
 
$
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
 
 
Acquisition
 
Operating
 
 
 
Operating
 
 
Property Name
 
Date
 
Revenues
 
Earnings(1)
 
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.