Real Estate and Intangible Assets (Tables)
|
12 Months Ended |
Dec. 31, 2018 |
|---|
| Property, Plant and Equipment [Line Items] |
|
| Summary Information About Real Estate Properties |
The following table provides certain summary information about the 85 farms we owned as of December 31, 2018 (dollars in thousands, except for footnotes):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Location |
|
No. of Farms |
|
Total Acres |
|
Farm Acres |
|
Net Cost Basis(1)
|
|
Encumbrances(2)
|
California |
|
33 |
|
10,147 |
|
9,336 |
|
$ |
249,984 |
|
|
$ |
168,158 |
|
Florida |
|
22 |
|
17,184 |
|
12,981 |
|
154,749 |
|
|
97,262 |
|
Arizona(3)
|
|
6 |
|
6,280 |
|
5,228 |
|
53,849 |
|
|
22,359 |
|
Colorado |
|
10 |
|
31,448 |
|
24,513 |
|
42,098 |
|
|
25,468 |
|
Nebraska |
|
2 |
|
2,559 |
|
2,101 |
|
10,464 |
|
|
7,050 |
|
Washington |
|
1 |
|
746 |
|
417 |
|
8,845 |
|
|
5,236 |
|
Texas |
|
1 |
|
3,667 |
|
2,219 |
|
8,418 |
|
|
5,280 |
|
Oregon |
|
3 |
|
418 |
|
363 |
|
5,946 |
|
|
3,375 |
|
Michigan |
|
5 |
|
446 |
|
291 |
|
4,980 |
|
|
2,768 |
|
North Carolina |
|
2 |
|
310 |
|
295 |
|
2,323 |
|
|
1,270 |
|
|
|
85 |
|
73,205 |
|
57,744 |
|
$ |
541,656 |
|
|
$ |
338,226 |
|
|
|
(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 (excluding improvements paid for by the tenant) and Lease intangibles, net; plus net above-market lease values and lease incentives included in Other assets, net; and less net below-market lease values and other deferred revenue included in Other liabilities, net; each as shown on the accompanying Consolidated Balance Sheet. |
|
|
(2) |
Excludes approximately $2.3 million of debt issuance costs related to notes and bonds payable, included in Notes and bonds payable, net on the accompanying Consolidated Balance Sheet.
|
|
|
(3) |
Includes two farms in which we own a leasehold interest via ground leases with the State of Arizona that expire in February 2022 and February 2025, respectively. In total, these two farms consist of 1,368 total acres and 1,221 farm acres and had an aggregate net cost basis of approximately $2.7 million as of December 31, 2018 (included in Lease intangibles, net on the accompanying Consolidated Balance Sheet).
|
|
| 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 December 31, 2018 and 2017 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018 |
|
December 31, 2017 |
Real estate: |
|
|
|
|
Land and land improvements |
|
$ |
417,310 |
|
|
$ |
356,316 |
|
Irrigation systems |
|
71,583 |
|
|
50,282 |
|
Horticulture |
|
48,894 |
|
|
34,803 |
|
Farm-related facilities |
|
18,510 |
|
|
18,191 |
|
Other site improvements |
|
6,707 |
|
|
6,551 |
|
Real estate, at gross cost |
|
563,004 |
|
|
466,143 |
|
Accumulated depreciation |
|
(24,051 |
) |
|
(16,657 |
) |
Real estate, net |
|
$ |
538,953 |
|
|
$ |
449,486 |
|
|
| Carrying Value of Lease Intangibles and Accumulated Amortization for Each Intangible Asset or Liability Class |
The following table summarizes the carrying value of certain lease intangible assets and the accumulated amortization as of December 31, 2018 and 2017 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018 |
|
December 31, 2017 |
Lease intangibles: |
|
|
|
|
Leasehold interest – land |
|
$ |
3,498 |
|
|
$ |
3,498 |
|
In-place leases |
|
2,046 |
|
|
1,451 |
|
Leasing costs |
|
1,963 |
|
|
1,490 |
|
Tenant relationships |
|
414 |
|
|
439 |
|
Lease intangibles, at gross cost |
|
7,921 |
|
|
6,878 |
|
Accumulated amortization |
|
(2,235 |
) |
|
(1,386 |
) |
Lease intangibles, net |
|
$ |
5,686 |
|
|
$ |
5,492 |
|
The following table summarizes the carrying values of certain lease intangible assets or liabilities included in Other assets, net or Other liabilities, net, respectively, on the accompanying Consolidated Balance Sheets and the related accumulated amortization or accretion, respectively, as of December 31, 2018, and December 31, 2017 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018 |
|
December 31, 2017 |
Intangible Asset or Liability |
Deferred
Rent Asset
(Liability)
|
|
Accumulated
(Amortization)
Accretion
|
|
Deferred
Rent Asset
(Liability)
|
|
Accumulated
(Amortization)
Accretion
|
Above-market lease values and lease incentives(1)
|
$ |
126 |
|
|
$ |
(18 |
) |
|
$ |
26 |
|
|
$ |
(5 |
) |
Below-market lease values and other deferred revenues(2)
|
(917 |
) |
|
202 |
|
|
(823 |
) |
|
125 |
|
|
$ |
(791 |
) |
|
$ |
184 |
|
|
$ |
(797 |
) |
|
$ |
120 |
|
|
|
(1) |
Net above-market lease values and lease incentives are included as part of Other assets, net on the accompanying Consolidated Balance Sheets, and the related amortization is recorded as a reduction of rental income on the accompanying Consolidated Statements of Operations. |
|
|
(2) |
Net below-market lease values and other deferred revenue are included as a part of Other liabilities, net on the accompanying Consolidated Balance Sheets, and the related accretion is recorded as an increase to rental income on the accompanying Consolidated Statements of Operations |
|
| 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 lease values, leasing costs, and tenant relationships and the estimated net impact on rental income from the amortization of above-market lease values and lease incentives or accretion of above-market lease values and other deferred revenues for each of the five succeeding fiscal years and thereafter is as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
Period |
|
Estimated
Amortization
Expense
|
|
Estimated Net
Increase to
Rental Income
|
For the fiscal years ending December 31: |
2019 |
|
$ |
959 |
|
|
$ |
113 |
|
|
2020 |
|
754 |
|
|
27 |
|
|
2021 |
|
549 |
|
|
32 |
|
|
2022 |
|
341 |
|
|
33 |
|
|
2023 |
|
299 |
|
|
30 |
|
|
Thereafter |
|
2,784 |
|
|
372 |
|
|
|
|
$ |
5,686 |
|
|
$ |
607 |
|
|
| Fair Value of Acquired Assets and Liabilities Assumed Related to Properties Acquired |
The allocation of the aggregate purchase price for the farms acquired during each of the years ended December 31, 2018 and 2017 is as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition Period |
|
Land and
Land
Improvements
|
|
Irrigation
Systems |
|
Horticulture |
|
Farm-related
Facilities
|
|
Other
Improvements |
|
Leasehold
Interest –
Land
|
|
In-place
Leases
|
|
Leasing
Costs
|
|
Net Below-Market Leases |
|
Total
Purchase
Price
|
2018 Acquisitions |
|
$ |
72,508 |
|
|
$ |
4,313 |
|
|
$ |
13,288 |
|
|
$ |
123 |
|
|
$ |
— |
|
|
$ |
— |
|
|
763 |
|
|
$ |
526 |
|
|
$ |
(95 |
) |
|
$ |
91,426 |
|
2017 Acquisitions |
|
92,516 |
|
|
11,844 |
|
|
16,213 |
|
|
2,805 |
|
|
835 |
|
|
3,488 |
|
|
486 |
|
|
508 |
|
|
(23 |
) |
|
128,672 |
|
|
| Weighted Average Amortization Period for Intangible Assets Acquired and Liabilities Assumed |
he 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 during the years ended December 31, 2018 and 2017:
|
|
|
|
|
|
|
|
Weighted-Average
Amortization Period (in Years)
|
Intangible Assets and Liabilities |
|
2018 |
|
2017 |
Leasehold interest – land |
|
0.0 |
|
6.9 |
In-place leases |
|
5.9 |
|
6.3 |
Leasing costs |
|
6.9 |
|
8.8 |
Above-market lease values and lease incentives |
|
0.0 |
|
5.4 |
Below-market lease values and other deferred revenues |
|
1.1 |
|
4.7 |
All intangible assets and liabilities |
|
6.0 |
|
7.0 |
|
| Operating Leases of Lessor, Leasing Activity |
The following table summarizes the leasing activity that occurred on our existing properties during the year ended December 31, 2018 (dollars in thousands, except footnotes):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRIOR LEASES(1)
|
|
NEW LEASES(2)
|
Farm
Locations |
Number
of
Leases
|
Total
Farm
Acres
|
|
Total
Annualized
Straight-line
Rent(3)
|
# of Leases
with
Participation
Rents
|
Lease
Structures
(# of NNN
/ NN)
|
|
Total
Annualized
Straight-line
Rent(3)
|
Wtd. Avg.
Term
(Years)
|
# of Leases
with
Participation
Rents |
Lease
Structures
(# of NNN
/ NN) |
AZ, CA,
FL, & MI |
9 |
3,659 |
|
$ |
1,742 |
|
1 |
4 / 5 |
|
$ |
2,001 |
|
5.3 |
4 |
7 / 2 |
|
|
(1) |
Includes the farm previously leased to Land Advisers, during which time no rental income was recognized. |
|
|
(2) |
In connection with certain of these leases, we committed to provide aggregate capital of up to $600,000 for certain irrigation and other improvements on these farms, all of which was expended or accrued for as of December 31, 2018.
|
|
|
(3) |
Annualized straight-line rent is based on the minimum cash rental payments guaranteed under the leases (presented on an annualized basis), as required under GAAP, and excludes contingent rental payments, such as participation rents. |
The following table summarizes the leasing activity that occurred on our existing properties subsequent to December 31, 2018 (dollars in thousands, except footnotes):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRIOR LEASES(1)
|
|
NEW LEASES(2)
|
Farm
Locations |
Number
of
Leases
|
Total
Farm
Acres
|
|
Total
Annualized
Straight-line
Rent(3)
|
# of Leases
with
Participation
Rents
|
Lease
Structures
(# of NNN
/ NN)
|
|
Total
Annualized
Straight-line
Rent(3)
|
Wtd. Avg.
Term
(Years)
|
# of Leases
with
Participation
Rents |
Lease
Structures
(# of NNN
/ NN) |
AZ, CA, FL,
MI, & NE |
8 |
3,707 |
|
$ |
1,025 |
|
1 |
6 / 2 |
|
$ |
856 |
|
1.4 |
3 |
5 / 3 |
|
|
(1) |
Includes a farm that was previously vacant. |
|
|
(2) |
In connection with certain of these leases, we committed to provide aggregate capital of up to $420,000 for certain improvements on these farms.
|
|
|
(3) |
Annualized straight-line rent is based on the minimum cash rental payments guaranteed under the leases (presented on an annualized basis), as required under GAAP, and excludes contingent rental payments, such as participation rents. |
|
| Future Operating Lease Payments from Tenants under Non-Cancelable Leases |
uture operating rental payments owed from tenants under all non-cancelable leases (excluding contingent rental payments, such as participation rents, and tenant reimbursement of certain expenses) for each of the five succeeding fiscal years and thereafter as of December 31, 2018, are as follows (dollars in thousands):
|
|
|
|
|
|
|
|
Period |
|
Tenant Rental
Payments
|
For the fiscal years ending December 31: |
|
2019 |
|
$ |
30,290 |
|
|
|
2020 |
|
26,917 |
|
|
|
2021 |
|
20,980 |
|
|
|
2022 |
|
19,775 |
|
|
|
2023 |
|
19,413 |
|
|
|
Thereafter |
|
59,934 |
|
|
|
|
|
$ |
177,309 |
|
|
| Summary of Geographic Locations of Properties |
he following table summarizes the geographic locations (by state) of our farms owned and with leases in place as of December 31, 2018 and 2017 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and For the Year Ended December 31, 2018 |
|
As of and For the Year Ended December 31, 2017 |
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(1)
|
|
33 |
|
10,147 |
|
13.8% |
|
$ |
13,637 |
|
|
46.5% |
|
28 |
|
8,080 |
|
12.8% |
|
$ |
12,006 |
|
|
47.8% |
Florida |
|
22 |
|
17,184 |
|
23.5% |
|
8,132 |
|
|
27.7% |
|
16 |
|
11,006 |
|
17.5% |
|
6,585 |
|
|
26.2% |
Colorado |
|
10 |
|
31,448 |
|
42.9% |
|
2,743 |
|
|
9.4% |
|
10 |
|
31,450 |
|
49.9% |
|
2,704 |
|
|
10.8% |
Arizona |
|
6 |
|
6,280 |
|
8.6% |
|
2,041 |
|
|
7.0% |
|
6 |
|
6,280 |
|
10.0% |
|
1,572 |
|
|
6.3% |
Oregon |
|
3 |
|
418 |
|
0.6% |
|
893 |
|
|
3.0% |
|
4 |
|
2,313 |
|
3.7% |
|
1,189 |
|
|
4.7% |
Washington |
|
1 |
|
746 |
|
1.1% |
|
718 |
|
|
2.4% |
|
1 |
|
746 |
|
1.1% |
|
152 |
|
|
0.6% |
Nebraska |
|
2 |
|
2,559 |
|
3.5% |
|
580 |
|
|
2.0% |
|
2 |
|
2,559 |
|
4.1% |
|
580 |
|
|
2.3% |
Michigan |
|
5 |
|
446 |
|
0.6% |
|
370 |
|
|
1.3% |
|
4 |
|
270 |
|
0.4% |
|
249 |
|
|
1.0% |
North Carolina |
|
2 |
|
310 |
|
0.4% |
|
148 |
|
|
0.5% |
|
2 |
|
310 |
|
0.5% |
|
74 |
|
|
0.3% |
Texas |
|
1 |
|
3,667 |
|
5.0% |
|
60 |
|
|
0.2% |
|
— |
|
— |
|
—% |
|
— |
|
|
—% |
|
|
85 |
|
73,205 |
|
100.0% |
|
$ |
29,322 |
|
|
100.0% |
|
73 |
|
63,014 |
|
100.0% |
|
$ |
25,111 |
|
|
100.0% |
|
|
(1) |
According to the California Chapter of the American Society of Farm Managers and Rural Appraisers, there are eight distinct growing regions within California; our farms are spread across four of these growing regions.
|
|
| 2018 New Real Estate Activity |
|
| Property, Plant and Equipment [Line Items] |
|
| Summary Information About Real Estate Properties |
During the year ended December 31, 2018, we acquired 13 new farms, which are summarized in the table below (dollars in thousands, except for footnotes).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
Name |
|
Property
Location |
|
Acquisition
Date |
|
Total
Acreage |
|
No. of
Farms |
|
Primary
Crop(s) |
|
Lease
Term |
|
Renewal
Options |
|
Total
Purchase
Price |
|
Acquisition
Costs |
|
Annualized
Straight-line
Rent(1)
|
|
New
Long-term
Debt |
Taft Highway(2)
|
|
Kern, CA |
|
1/31/2018 |
|
161 |
|
1 |
|
Potatoes and Melons |
|
N/A |
|
N/A |
|
$ |
2,945 |
|
|
$ |
32 |
|
|
$ |
— |
|
|
$ |
1,473 |
|
Cemetery Road |
|
Van Buren, MI |
|
3/13/2018 |
|
176 |
|
1 |
|
Blueberries |
|
9.6 years |
|
None |
|
2,100 |
|
|
39 |
|
|
150 |
|
|
1,260 |
|
Owl Hammock(3)
|
|
Collier & Hendry, FL |
|
7/12/2018 |
|
5,630 |
|
5 |
|
Vegetables and Melons |
|
7.0 years |
|
2 (5 years) |
|
37,350 |
|
|
196 |
|
|
2,148 |
|
|
22,410 |
|
Plantation Road |
|
Jackson, FL |
|
9/6/2018 |
|
574 |
|
1 |
|
Peanuts and Melons |
|
2.3 years |
|
None |
|
2,600 |
|
|
35 |
|
|
142 |
|
|
1,560 |
|
Flint Avenue |
|
Kings, CA |
|
9/13/2018 |
|
194 |
|
2 |
|
Cherries |
|
15.3 years |
|
1 (5 years) |
|
6,850 |
|
|
51 |
|
|
523 |
|
|
4,110 |
|
Sunnyside Avenue |
|
Madera, CA |
|
11/1/2018 |
|
951 |
|
1 |
|
Figs and Pistachios |
|
8.0 years |
|
2 (5 years) |
|
23,000 |
|
|
41 |
|
|
1,237 |
|
(4) |
13,800 |
|
Bunker Hill(5)
|
|
Hartley, TX |
|
11/20/2018 |
|
3,667 |
|
1 |
|
Chip Potatoes |
|
1.1 years |
|
None |
|
8,400 |
|
|
32 |
|
|
356 |
|
|
5,280 |
|
Olsen Road(6)
|
|
Merced, CA |
|
12/6/2018 |
|
761 |
|
1 |
|
Almonds |
|
0.9 years |
|
3 (5 years) & 1 (3 years) |
|
8,181 |
|
|
40 |
|
|
25 |
|
(4) |
— |
|
|
|
|
|
|
|
12,114 |
|
13 |
|
|
|
|
|
|
|
$ |
91,426 |
|
|
$ |
466 |
|
|
$ |
4,581 |
|
|
$ |
49,893 |
|
|
|
(1) |
Annualized straight-line rent is based on the minimum cash rental payments guaranteed under the lease, as required under GAAP, and excludes contingent rental payments, such as participation rents. |
|
|
(2) |
Farm was purchased with no lease in place at the time of acquisition. See Note 11, “Subsequent Events—Leasing Activity” for discussion on the lease executed on this farm subsequent to December 31, 2018.
|
|
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(3) |
In connection with the acquisition of this property, we committed to provide up to $2.0 million of capital for certain irrigation and property improvements. As stipulated in the lease, we will earn additional rental income on the total cost of the improvements as disbursements are made by us at a rate commensurate with the annual yield on the farmland (as determined by each year's minimum cash rent per the lease).
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(4) |
These leases provide for a participation rent component based on the gross crop revenues earned on the respective farms. The rent figures above represent only the minimum cash guaranteed under the respective leases. |
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(5) |
Purchase price is net of a $100,000 credit provided to us by the seller.
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(6) |
Lease provided for an initial rent payment of approximately $471,000 to be paid upon commencement of the lease, with all subsequent annual rent payments to be participation rents based on the gross revenues earned on the farm. In accordance with GAAP, the initial rent payment (which represents the only cash rental payment guaranteed under the lease) is being recognized over the full term of the lease, including all tenant renewal options (which management believes to represent the minimum lease term, as defined by GAAP).
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| 2017 New Real Estate Activity |
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| Property, Plant and Equipment [Line Items] |
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| Summary Information About Real Estate Properties |
During the year ended December 31, 2017, we acquired 16 new farms, which are summarized in the table below (dollars in thousands, except for footnotes).
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Property Name |
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Property
Location
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Acquisition
Date
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Total
Acreage
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No. of
Farms |
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Primary
Crop(s)
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Lease
Term(1)
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Renewal
Options
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Total
Purchase
Price
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Acquisition
Costs
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Annualized
Straight-line
Rent(2)
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New
Long-term
Debt
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Citrus Boulevard |
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Martin, FL |
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1/12/2017 |
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3,748 |
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1 |
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Organic Vegetables |
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7.0 years |
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3 (5 years) |
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$ |
54,000 |
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$ |
80 |
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$ |
2,926 |
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$ |
32,400 |
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Spot Road(3)
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Yuma, AZ |
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6/1/2017 |
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3,280 |
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4 |
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Melons and Alfalfa Hay |
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8.6 years |
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1 (10 years) & 1 (2 years) |
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27,500 |
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88 |
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1,673 |
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15,300 |
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Poplar Street |
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Bladen, NC |
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6/2/2017 |
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310 |
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2 |
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Organic Blueberries |
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9.6 years |
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1 (5 years) |
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2,169 |
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49 |
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122 |
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(4) |
1,301 |
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Phelps Avenue |
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Fresno, CA |
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7/17/2017 |
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847 |
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4 |
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Pistachios and Almonds |
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10.3 years |
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1 (5 years) |
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13,603 |
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43 |
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681 |
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(4) |
8,162 |
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Parrot Avenue(5)
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Okeechobee, FL |
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8/9/2017 |
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1,910 |
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1 |
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Misc. Vegetables |
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0.5 years |
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None |
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9,700 |
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67 |
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488 |
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(5) |
5,820 |
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Cat Canyon Road(6)
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Santa Barbara, CA |
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8/30/2017 |
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361 |
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1 |
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Wine Grapes |
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9.8 years |
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2 (5 years) |
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5,375 |
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112 |
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322 |
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3,225 |
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Oasis Road |
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Walla Walla, WA |
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9/8/2017 |
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746 |
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1 |
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Apples, Cherries, and Wine Grapes |
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6.3 years |
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None |
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9,500 |
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45 |
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480 |
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(4) |
5,460 |
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JJ Road |
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Baca, CO |
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10/2/2017 |
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1,280 |
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1 |
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Grass Hay |
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4.3 years |
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1 (5 years) |
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900 |
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26 |
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52 |
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540 |
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Jayne Avenue |
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Fresno, CA |
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12/15/2017 |
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159 |
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1 |
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Organic Almonds |
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19.9 years |
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2 (5 years) |
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5,925 |
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44 |
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364 |
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(4) |
3,555 |
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12,641 |
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16 |
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$ |
128,672 |
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$ |
554 |
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$ |
7,108 |
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$ |
75,763 |
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