Gladstone Land Corporation Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Real Estate and Intangible Assets (Tables)

Real Estate and Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2023

Summary Information About Real Estate Properties

The following table provides certain summary information about the 169 farms we owned as of December 31, 2023 (dollars in thousands, except for footnotes):


Location	No. of Farms	Total Acres	Farm Acres	Acre-feet of Water Assets	Net Cost Basis(1)		Encumbrances(2)
California(3)(4)(5)	63	34,844	32,321	46,400	$	850,610	$	389,405
Florida(6)	26	22,468	17,639	—	221,185		95,012
Washington	6	2,520	2,004	—	59,763		20,133
Arizona(7)	6	6,320	5,333	—	52,119		12,303
Colorado	12	32,773	25,577	—	45,945		14,599
Nebraska	9	7,782	7,050	—	30,402		10,357
Oregon(8)	6	898	736	—	29,534		11,308
Michigan	23	1,892	1,245	—	23,048		13,868
Texas	1	3,667	2,219	—	8,101		—
Maryland	6	987	863	—	8,013		4,344
South Carolina	3	597	447	—	3,542		2,147
Georgia	2	230	175	—	2,317		1,645
North Carolina	2	310	295	—	2,117		—
New Jersey	3	116	101	—	2,100		1,221
Delaware	1	180	140	—	1,296		697
Totals	169	115,584	96,145	46,400	$	1,340,092	$	577,039

(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. Specifically, includes Total real estate, net (excluding improvements paid for by the tenant) and Lease intangibles, net; plus long-term water assets, net above-market lease values, net lease incentives, and net investments in special-purpose LLCs 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 Sheets.

(2)Excludes approximately $2.9 million of debt issuance costs related to notes and bonds payable, included in Notes and bonds payable, net on the accompanying Consolidated Balance Sheets.

(3)Includes ownership in a special-purpose LLC that owns a pipeline conveying water to certain of our properties. As of December 31, 2023, this investment had a net carrying value of approximately $1.0 million and is included within Other assets, net on the accompanying Consolidated Balance Sheet.

(4)Includes eight acres in which we own a leasehold interest via a ground lease with a private individual that expires in December 2040 and five acres in which we own a leasehold interest via a ground sublease with a California municipality that expires in December 2041. As of December 31, 2023, these two ground leases had a net cost basis of approximately $689,000 and are included in Lease intangibles, net on the accompanying Consolidated Balance Sheets.

(5)Includes 46.003 acre-feet of water stored with Semitropic Water Storage District, located in Kern County, California and 397 surplus water credits in our account with Westlands Water District, located in Fresno County, California. See “—Investments in Water Assets” below for additional information.

(6)Includes one property classified as held for sale; see “—Real Estate Held for Sale” below for additional information.

(7)Includes two farms consisting of 1,368 total acres and 1,221 farm acres in which we own leasehold interests via two ground leases with the State of Arizona that expire in February 2025 and February 2032, respectively. As of December 31, 2023, these ground leases had an aggregate net cost basis of approximately $376,000 and are included in Lease intangibles, net on the accompanying Consolidated Balance Sheets.

(8)Includes ownership in a special-purpose LLC that owns certain irrigation infrastructure that provides water to two of our farms. As of December 31, 2023, this investment had a net carrying value of approximately $4.8 million and is included within Other assets, net on the accompanying Consolidated Balance Sheets.

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, 2023 and 2022, excluding real estate held for sale (dollars in thousands):


	December 31, 2023		December 31, 2022
Real estate:
Land and land improvements	$	792,277	$	845,779
Permanent plantings	359,131		358,249
Irrigation and drainage systems	168,545		165,438
Farm-related facilities	50,517		48,690
Other site improvements	13,272		14,238
Real estate, at cost	1,383,742		1,432,394
Accumulated depreciation	(142,212)		(106,966)
Real estate, net	$	1,241,530	$	1,325,428

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 related accumulated amortization as of December 31, 2023 and 2022, excluding real estate held for sale (dollars in thousands):


	December 31, 2023		December 31, 2022
Lease intangibles:
Leasehold interest – land	$	4,295	$	4,295
In-place lease values	2,470		2,763
Leasing costs	3,017		3,088
Other(1)	141		133
Lease intangibles, at gross cost	9,923		10,279
Accumulated amortization	(5,141)		(4,577)
Lease intangibles, net	$	4,782	$	5,702

(1)Other consists primarily of acquisition-related costs allocated to miscellaneous lease intangibles.

The following table summarizes the carrying values of certain lease intangible assets or liabilities (excluding those related to real estate held for sale) 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, 2023 and 2022 (dollars in thousands):


	December 31, 2023				December 31, 2022
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)	$	5,342	$	(1,849)	$	4,702	$	(585)
Below-market lease values and other deferred revenue(2)	(1,944)		624		(2,010)		518
	$	3,398	$	(1,225)	$	2,692	$	(67)

(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 Lease revenue, net on the accompanying Consolidated Statements of Operations and Comprehensive Income.

(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 Lease revenue, net on the accompanying Consolidated Statements of Operations and Comprehensive Income.

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 lease revenue 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 (Decrease) to Lease Revenue
For the fiscal years ending December 31:	2024	$	711	$	(1,184)
	2025	610		(1,184)
	2026	486		(961)
	2027	556		(1,178)
	2028	556		(1,178)
	Thereafter	1,863		3,512
		$	4,782	$	(2,173)

Schedule of Asset Acquisitions

During the year ended December 31, 2022, we completed the following acquisitions, which are summarized in the table below (dollars in thousands, except for footnotes):


Property Name	Property Location	Acquisition Date	Total Acres	No. of Farms	Primary Crop(s) / Use	Lease Term	Renewal Options	Total Purchase Price		Acquisition Costs(1)		Annualized Straight-line Rent(2)
Farm Road(3)	Charlotte, FL	5/20/2022	15	0	Adjacent parcel	N/A	None	$	54	$	15	$	—
County Road 35	Glenn, CA	6/16/2022	1,374	1	Olives for Olive Oil	14.5 years	1 (5 years)	24,500		55		1,714
Reagan Road(4)	Cochise, AZ	7/13/2022	40	0	Corn	12.5 years	None	120		17		39
North Columbia River Road(5)(7)	Franklin & Grant, WA	7/21/2022	1,145	3	Wine Grapes	8.4 years	None	30,320		146		2,296
Prunedale Road(6)(7)	Umatilla, OR	7/21/2022	172	1	Wine Grapes	10.4 years	None	7,008		36		286
Phelps Avenue(8)	Fresno, CA	12/29/2022	443	0	Open ground and water credits	5.0 years	1 (5 years)	3,100		72		25
			3,189	5				$	65,102	$	341	$	4,360

(1)Includes approximately $27,000 of external legal fees associated with negotiating and originating the leases associated with these acquisitions, which were expensed in the period incurred.

(2)Unaudited; based on the minimum cash rental payments guaranteed under the respective leases, as required under GAAP, and excludes contingent rental payments, such as participation rents.

(3)Represents the acquisition of a parcel of land adjacent to an existing farm, providing additional road access to such farm. No new lease was executed related to this acquisition.

(4)Represents the acquisition of a parcel of farmable land adjacent to an existing farm. Subsequent to acquisition, we spent approximately $153,000 to install certain improvements on this property.

(5)Upon acquisition, we executed three new leases with the existing tenants on these farms. The lease terms above represent the weighted-average lease term and aggregate annualized straight-line rent of these three leases.

(6)In connection with the acquisition of this property, we also acquired an ownership interest in a related LLC, the sole purpose of which is to own and maintain an irrigation system providing water to this and other neighboring properties. Our acquired ownership, which equated to an 11.3% interest in the LLC, was valued at approximately $2.7 million at the time of acquisition and is included within Other assets, net on the accompanying Consolidated Balance Sheets. See “—Investments in Unconsolidated Entities” below for additional information on our aggregate ownership interest in this and other LLCs.

(7)These two properties were acquired as part of a single transaction. In connection with the acquisition of these vineyards, we committed to provide up to an aggregate amount of $2.2 million for certain irrigation and vineyard improvements on these farms, for which we will earn additional rent as the funds are disbursed by us.

(8)Represents the acquisition of three parcels of land adjacent to an existing farm that will initially be utilized for its water rights (including additional surface water rights and groundwater pumping rights) to be used on nearby farms. In addition, a portion of this acquisition was leased back to the seller.

Recognized Identified Assets and Liabilities Assumed Related to Properties Acquired

The allocation of the aggregate purchase price for the farms acquired during the year ended December 31, 2022 was as follows (dollars in thousands):


Assets (Liabilities) Acquired	2022 Acquisitions
Land and land improvements	$	30,353
Permanent plantings	24,706
Irrigation & drainage systems	3,102
Farm-related facilities	1,287


In-place lease values	909
Leasing costs	1,355
Above-market lease values(1)	641

Investment in LLC(1)	2,749

Total Purchase Price	$	65,102

(1)Included within Other assets, net on the accompanying Consolidated Balance Sheets.

Weighted Average Amortization Period for Intangible Assets Acquired and Liabilities Assumed

The following table shows the weighted-average amortization periods (in years) for the intangible assets acquired and liabilities assumed in connection with new real estate acquired during the year ended December 31, 2022:


						Weighted-Average Amortization Period (in Years)
Intangible Assets and Liabilities						2022
Leasehold interest – land						0.0
In-place lease values						10.9
Leasing costs						11.7
Above-market lease values and lease incentives						9.1
Below-market lease values and other deferred revenue						0.0
All intangible assets and liabilities						10.6

Future Operating Lease Payments from Tenants under Non-Cancelable Leases

The following tables summarize the future lease payments to be received under noncancellable leases as of December 31, 2023 (dollars in thousands):


Period		Tenant Lease Revenue
For the fiscal years ending December 31,	2024	$	77,576
	2025	70,372
	2026	63,954
	2027	60,099
	2028	51,482
	Thereafter	180,832
		$	504,315