Quarterly report pursuant to Section 13 or 15(d)

Real Estate and Intangible Assets (Tables)

v3.20.2
Real Estate and Intangible Assets (Tables)
6 Months Ended
Jun. 30, 2020
Real Estate [Abstract]  
Summary Information of Farms The following table provides certain summary information about the 115 farms we owned as of June 30, 2020 (dollars in thousands, except for footnotes):
Location
 
No. of Farms
 
Total
Acres
 
Farm Acres
 
Net Cost Basis(1)
 
Encumbrances(2)
California(3)
 
43
 
15,420
 
14,203
 
$
436,744

 
$
268,244

Florida
 
23
 
20,770
 
16,256
 
210,474

 
131,359

Arizona(4)
 
6
 
6,280
 
5,228
 
58,498

 
22,087

Colorado
 
12
 
32,773
 
25,577
 
48,864

 
31,047

Nebraska
 
9
 
7,782
 
7,050
 
30,825

 
19,331

Michigan
 
15
 
962
 
682
 
12,262

 
7,573

Texas
 
1
 
3,667
 
2,219
 
8,363

 
5,173

Washington
 
1
 
746
 
417
 
8,031

 
4,957

Oregon
 
3
 
418
 
363
 
6,198

 
3,785

North Carolina
 
2
 
310
 
295
 
2,264

 
1,206

 
 
115
 
89,128
 
72,290
 
$
822,523

 
$
494,762

(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 Investments in real estate, net (excluding improvements paid for by the tenant) and Lease intangibles, net; plus net above-market lease values, lease incentives, and 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 Condensed Consolidated Balance Sheets.
(2) 
Excludes approximately $3.1 million of debt issuance costs related to notes and bonds payable, included in Notes and bonds payable, net on the accompanying Condensed Consolidated Balance Sheet.
(3) 
Includes ownership in a special-purpose LLC that owns a pipeline conveying water to one of our properties. As of June 30, 2020, this investment had a net carrying value of approximately $613,000 and is included within Other assets, net on the accompanying Condensed Consolidated Balance Sheet.
(4) 
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 $1.9 million as of June 30, 2020 (included in Lease intangibles, net on the accompanying Condensed 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 June 30, 2020, and December 31, 2019 (dollars in thousands):
 
June 30, 2020
 
December 31, 2019
Real estate:
 
 
 
Land and land improvements
$
609,792

 
$
583,247

Irrigation and drainage systems
115,293

 
108,222

Horticulture
108,779

 
107,941

Farm-related facilities
21,250

 
20,665

Other site improvements
7,215

 
7,180

Real estate, at gross cost
862,329

 
827,255

Accumulated depreciation
(41,566
)
 
(35,174
)
Real estate, net
$
820,763

 
$
792,081


Carrying Value of Lease Intangibles and Accumulated Amortization for Each Intangible Asset or Liability Class
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 Condensed Consolidated Balance Sheets and the related accumulated amortization or accretion, respectively, as of June 30, 2020, and December 31, 2019 (dollars in thousands):
 
 
June 30, 2020
 
December 31, 2019
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)
 
$
201

 
$
(103
)
 
$
111

 
$
(41
)
Below-market lease values and other deferred revenue(2)
 
(886
)
 
307

 
(886
)
 
257

 
 
$
(685
)
 
$
204

 
$
(775
)
 
$
216

(1) 
Net above-market lease values and lease incentives are included as part of Other assets, net on the accompanying Condensed Consolidated Balance Sheets, and the related amortization is recorded as a reduction of Lease revenue on the accompanying Condensed 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 Condensed Consolidated Balance Sheets, and the related accretion is recorded as an increase to Lease revenue on the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income.
The following table summarizes the carrying values of certain lease intangible assets and the related accumulated amortization as of June 30, 2020, and December 31, 2019 (dollars in thousands):
 
June 30, 2020
 
December 31, 2019
Lease intangibles:
 
 
 
Leasehold interest – land
$
3,498

 
$
3,498

In-place leases
2,007

 
2,293

Leasing costs
1,584

 
2,066

Tenant relationships
414

 
414

Lease intangibles, at cost
7,503

 
8,271

Accumulated amortization
(3,823
)
 
(3,444
)
Lease intangibles, net
$
3,680

 
$
4,827


Schedule of Asset Acquisitions, by Acquisition
During the six months ended June 30, 2020, we acquired four new farms, 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)
 
Lease
Term
 
Renewal
Options
 
Total
Purchase
Price
 
Acquisition
Costs
(1)
 
Annualized
Straight-line
Rent
(2)
 
New
Long-term
Debt
County Road 18
 
Phillips, CO
 
1/15/2020
 
1,325
 
2
 
Sugar beets, edible beans, potatoes, & corn
 
6.0 years
 
None
 
$
7,500

 
$
39

 
$
417

 
$
4,500

Lamar Valley
 
Chase, NE
 
5/7/2020
 
678
 
1
 
Potatoes, edible beans, & corn
 
6.7 years
 
2 (5 years)
 
3,500

 
47

 
204

 
2,100

Driver Road(3)
 
Kern, CA
 
6/5/2020
 
590
 
1
 
Pecans
 
4.7 years
 
2 (10 years)
 
14,169

 
53

 
784

 
8,500

 
 
 
 
 
 
2,593
 
4
 
 
 
 
 
 
 
$
25,169

 
$
139

 
$
1,405

 
$
15,100

(1) 
Includes approximately $18,000 of aggregate external legal fees associated with negotiating and originating the leases associated with these acquisitions, which costs were expensed in the period incurred.
(2) 
Annualized straight-line rent is based on the minimum cash rental payments guaranteed under the applicable leases, as required under GAAP, and excludes contingent rental payments, such as participation rents.
(3) 
The lease provides for an initial term of 14.7 years and includes six tenant termination options throughout the initial term. The lease term stated above represents the term through the first available termination option, and the annualized straight-line rent amount represents the rent guaranteed through the noncancelable term of the lease.
During the six months ended June 30, 2019, 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
Acres
 
No. of
Farms
 
Primary
Crop(s)
 
Lease
Term
 
Renewal
Options
 
Total
Purchase
Price
 
Acquisition
Costs
(1)
 
Annualized
Straight-line
Rent
(2)
 
New
Long-term
Debt
Somerset Road
 
Lincoln, NE
 
1/22/2019
 
695
 
1
 
Popcorn & edible beans
 
4.9 years
 
1 (5 years)
 
$
2,400

 
$
33

 
$
126

 
$
1,440

Greenhills Boulevard(3)
 
Madera, CA
 
4/9/2019
 
928
 
1
 
Pistachios
 
10.6 years
 
2 (5 years)
 
28,550

 
141

 
1,721

 
17,130

Van Buren Trail
 
Van Buren, MI
 
5/29/2019
 
159
 
2
 
Blueberries & cranberries
 
10.6 years
 
2 (5 years)
 
2,682

 
26

 
206

 
1,609

Blue Star Highway
 
Allegran & Van Buren, MI
 
6/4/2019
 
357
 
8
 
Blueberries
 
10.6 years
 
2 (5 years)
 
5,100

 
30

 
390

 
3,060

Yolo County Line Road
 
Yolo, CA
 
6/13/2019
 
542
 
1
 
Olives for olive oil
 
14.6 years
 
1 (5 years)
 
9,190

 
68

 
624

 
5,514

 
 
 
 
 
 
2,681
 
13
 
 
 
 
 
 
 
$
47,922

 
$
298

 
$
3,067

 
$
28,753

(1) 
Includes approximately $18,000 of external legal fees associated with negotiating and originating the lease associated with this acquisition, which cost was expensed in the period incurred.
(2) 
Annualized straight-line rent is based on the minimum cash rental payments guaranteed under the applicable leases, as required under GAAP, and excludes contingent rental payments, such as participation rents.
(3) 
Lease provides for a participation rent component based on the gross crop revenues earned on the farm. The rent figure above represents only the minimum cash guaranteed under the lease.
Recognized Identified Assets Acquired and Liabilities Assumed In Asset Acquisitions
The allocation of the aggregate purchase price for the farms acquired during each of the six months ended June 30, 2020 and 2019 is as follows (dollars in thousands):
Acquisition Period
 
Land and Land
Improvements
 
Irrigation &
Drainage Systems
 
Horticulture
 
Farm-related
Facilities
 
Total Purchase
Price
2020 Acquisitions
 
$
22,630

 
$
2,119

 
$
369

 
$
51

 
$
25,169

2019 Acquisitions
 
18,209

 
4,022

 
23,989

 
1,702

 
47,922


Summary of Leasing Activity
The following table summarizes certain leasing activity that occurred on our existing properties during the six months ended June 30, 2020 (dollars in thousands):
 
 
 
 
PRIOR LEASES
 
NEW LEASES(1)(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 / N)(4)
 
Total
Annualized
Straight-line
Rent
(3)
Wtd. Avg.
Term
(Years)
# of Leases
with
Participation
Rents
Lease
Structures
(# of NNN
/ NN / N)
(4)
AZ, CA, & NE
10
6,525
 
$
4,661

3
6 / 2 / 2
 
$
4,758

6.2
4
6 / 3 / 0
(1) 
In connection with certain of these leases, we committed to provide capital for certain improvements on these farms. See Note 7, “Commitments and Contingencies—Operating Obligations,” for additional information on these commitments.
(2) 
Two of the prior leases encompassing four of our farms were renewed under a single lease encompassing the same four 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.
(4) 
“NNN” refers to leases under triple-net lease arrangements, “NN” refers to leases under partial-net lease arrangements, and “N” refers to leases under single-net lease arrangements. For a description of each of these types of lease arrangements, see “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview—Leases—General.”
The following table summarizes the leasing activity that occurred on our existing properties subsequent to June 30, 2020, through the date of this filing (dollars in thousands):
 
 
 
 
PRIOR LEASES
 
NEW LEASES
Farm
Locations
Number
of
Leases
Total
Farm
Acres
 
Total
Annualized
Straight-line
Rent(1)
# of Leases
with
Participation
Rents
Lease
Structures
(# of NNN
/ NN / N)(2)
 
Total
Annualized
Straight-line
Rent
(1)
Wtd. Avg.
Term
(Years)
# of Leases
with
Participation
Rents
Lease
Structures
(# of NNN
/ NN / N)
(2)
FL
2
78
 
$
114

0
2 / 0 / 0
 
$
125

2.0
0
2 / 0 / 0
(1) 
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.
(2) 
“NNN” refers to leases under triple-net lease arrangements, “NN” refers to leases under partial-net lease arrangements, and “N” refers to leases under single-net lease arrangements. For a description of each of these types of lease arrangements, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview—Leases—General.”
Summary of Geographic Locations of Properties
The following table summarizes the geographic locations (by state) of our farms owned and with leases in place as of the six months ended June 30, 2020 and 2019 (dollars in thousands):
 
 
As of and For the six months ended June 30, 2020
 
As of and For the six months ended June 30, 2019
State
 
Number
of
Farms
 
Total
Acres
 
% of
Total
Acres
 
Lease
Revenue
 
% of Total
Lease
Revenue
 
Number
of
Farms
 
Total
Acres
 
% of
Total
Acres
 
Lease
Revenue
 
% of Total
Lease
Revenue
California(1)
 
43
 
15,420
 
17.3%
 
$
13,815

 
49.5%
 
35
 
11,617
 
15.3%
 
$
7,906

 
48.8%
Florida
 
23
 
20,770
 
23.3%
 
6,669

 
23.9%
 
22
 
17,184
 
22.6%
 
4,689

 
29.0%
Arizona
 
6
 
6,280
 
7.1%
 
3,805

 
13.6%
 
6
 
6,280
 
8.3%
 
1,077

 
6.7%
Colorado
 
12
 
32,773
 
36.8%
 
1,662

 
6.0%
 
10
 
31,448
 
41.4%
 
1,411

 
8.7%
Nebraska
 
9
 
7,782
 
8.7%
 
762

 
2.7%
 
3
 
3,254
 
4.3%
 
162

 
1.0%
Michigan
 
15
 
962
 
1.1%
 
384

 
1.4%
 
15
 
962
 
1.3%
 
89

 
0.5%
Oregon
 
3
 
418
 
0.5%
 
263

 
0.9%
 
3
 
418
 
0.6%
 
257

 
1.6%
Washington
 
1
 
746
 
0.8%
 
245

 
0.9%
 
1
 
746
 
1.0%
 
245

 
1.5%
Texas
 
1
 
3,667
 
4.1%
 
225

 
0.8%
 
1
 
3,667
 
4.8%
 
263

 
1.6%
North Carolina
 
2
 
310
 
0.3%
 
88

 
0.3%
 
2
 
310
 
0.4%
 
93

 
0.6%
TOTALS
 
115
 
89,128
 
100.0%
 
$
27,918

 
100.0%
 
98
 
75,886
 
100.0%
 
$
16,192

 
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 six of these growing regions.