Gladstone Land Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Real Estate and Intangible Assets (Tables)

Real Estate and Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2019

The following table provides certain summary information about the 86 farms we owned as of March 31, 2019 (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	$	249,319	$	166,109
Florida	22	17,184	12,981	154,297		96,772
Arizona⁽³⁾	6	6,280	5,228	55,340		22,008
Colorado	10	31,448	24,513	41,790		25,046
Nebraska	3	3,254	2,701	12,847		8,490
Washington	1	746	417	8,709		5,190
Texas	1	3,667	2,219	8,393		5,280
Oregon	3	418	363	6,003		3,312
Michigan	5	446	291	4,990		2,740
North Carolina	2	310	295	2,313		1,270
	86	73,900	58,344	$	544,001	$	336,217

⁽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 Condensed Consolidated Balance Sheets.


⁽²⁾	Excludes approximately $2.3 million of debt issuance costs related to mortgage notes and bonds payable, included in Mortgage notes and bonds payable, net on the accompanying Condensed 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 $2.5 million as of March 31, 2019 (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 March 31, 2019, and December 31, 2018 (dollars in thousands):



	March 31, 2019			December 31, 2018
Real estate:
Land and land improvements	$	419,602		$	417,310
Irrigation and drainage systems	73,864			71,583
Horticulture	49,057			48,894
Farm-related facilities	18,534			18,510
Other site improvements	6,717			6,707
Real estate, at gross cost	567,774			563,004
Accumulated depreciation	(26,323		)	(24,051		)
Real estate, net	$	541,451		$	538,953

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 and the related accumulated amortization as of March 31, 2019, and December 31, 2018 (dollars in thousands):



	March 31, 2019			December 31, 2018
Lease intangibles:
Leasehold interest – land	$	3,498		$	3,498
In-place leases	2,046			2,046
Leasing costs	1,965			1,963
Tenant relationships	414			414
Lease intangibles, at cost	7,923			7,921
Accumulated amortization	(2,559		)	(2,235		)
Lease intangibles, net	$	5,364		$	5,686

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 March 31, 2019, and December 31, 2018 (dollars in thousands):



	March 31, 2019						December 31, 2018
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⁾	$	216		$	(51	)	$	126		$	(18	)
Below-market lease values and other deferred revenue⁽²⁾	(917		)	240			(917		)	202
	$	(701	)	$	189		$	(791	)	$	184


⁽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.


⁽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.

Schedule of Asset Acquisitions, by Acquisition

During the three months ended March 31, 2019, we acquired one new farm, which is summarized in the table below (dollars in thousands):



Property Name	Property Location	Acquisition Date	Total Acreage	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 and edible beans	4.9 years	1 (5 years)	$	2,400	$	31	$	126	$	1,440
			695	1				$	2,400	$	31	$	126	$	1,440


⁽¹⁾	Includes approximately $4,000 of aggregate external legal fees associated with negotiating and originating the lease associated with this acquisition, which costs were expensed in the period incurred.


⁽²⁾	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.

During the three months ended March 31, 2018, we acquired two 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
			337	2				$	5,045	$	71	$	150	$	2,733


⁽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.

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 three months ended March 31, 2019 and 2018 is as follows (dollars in thousands):



Acquisition Period	Land and Land Improvements		Irrigation & Drainage Systems		Horticulture		Farm-related Facilities		In-place Leases		Leasing Costs		Total Purchase Price
2019 Acquisitions	$	2,090	$	310	$	—	$	—	$	—	$	—	$	2,400
2018 Acquisitions	3,256		582		961		123		76		47		5,045

Summary of Leasing Activity

The following table summarizes certain leasing activity that occurred on our existing properties during the three months ended March 31, 2019 (dollars in thousands, except footnotes):

PRIOR LEASES⁽¹⁾

NEW LEASES⁽²⁾

Farm
Locations

Number

Leases

Total

Farm

Acres

Total

Annualized

Straight-line

Rent⁽³⁾

# of Leases

with

Participation

Rents

Lease

Structures

(# of NNN

/ NN)⁽⁴⁾

Total
Annualized
Straight-line
Rent⁽³⁾

Wtd. Avg.

Term
(Years)

# of Leases
with
Participation
Rents

Lease
Structures
(# of NNN
/ NN)⁽⁴⁾

AZ, CA, FL,
MI, & NE

4,375

2,143

8 / 4

2,127

3.2

8 / 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.


⁽⁴⁾	“NNN” refers to leases under triple-net lease arrangements, and “NN” refers to leases under partial-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.”

As of March 31, 2019, we had recorded the following as a result of these operating ground leases (dollars in thousands, except for footnotes):



Operating lease right-of-use assets⁽¹⁾	$	208
Operating lease liabilities⁽²⁾	167

Weighted-average remaining lease term (years)	5.3
Weighted-average discount rate	4.20		%


⁽¹⁾	Operating lease right-of-use assets are shown net of accrued lease payments of approximately $41,000 and are included within Other assets, net on the accompanying Condensed Consolidated Balance Sheet.


⁽²⁾	Included within Other liabilities, net on the accompanying Condensed Consolidated Balance Sheet.

Future Lease Payments to be Received

The following table summarizes the future lease payments to be received under non-cancelable leases as of March 31, 2019, and December 31, 2018 (dollars in thousands):



	Future Lease Payments⁽¹⁾
Period	March 31, 2019		December 31, 2018
2019	$	20,546	$	30,290
2020	28,179		26,917
2021	21,131		20,980
2022	20,285		19,775
2023	19,718		19,413
Thereafter	62,793		59,934
	$	172,652	$	177,309


⁽¹⁾	Excludes variable rent payments, such as potential rent increases that are based on CPI or future contingent rents based on a percentage of the gross revenues earned on the respective farms.

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 and for the three months ended March 31, 2019 and 2018 (dollars in thousands):



	As of and For the Three Months Ended March 31, 2019						As of and For the Three Months Ended March 31, 2018
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⁾	33	10,147	13.7%	$	3,734	47.7%	29	8,241	13.0%	$	3,030	45.3%
Florida	22	17,184	23.2%	2,339		29.9%	16	11,006	17.4%	1,754		26.2%
Colorado	10	31,448	42.6%	696		8.9%	10	31,450	49.6%	686		10.3%
Arizona	6	6,280	8.5%	539		6.9%	6	6,280	9.9%	532		7.9%
Texas	1	3,667	5.0%	131		1.7%	—	—	—%	—		—%
Oregon	3	418	0.6%	128		1.6%	4	2,313	3.7%	307		4.6%
Washington	1	746	1.0%	122		1.5%	1	746	1.2%	121		1.8%
North Carolina	2	310	0.4%	60		0.8%	2	310	0.5%	49		0.7%
Nebraska	3	3,254	4.4%	60		0.8%	2	2,559	4.0%	145		2.2%
Michigan	5	446	0.6%	21		0.2%	5	446	0.7%	70		1.0%
TOTALS	86	73,900	100.0%	$	7,830	100.0%	75	63,351	100.0%	$	6,694	100.0%


⁽¹⁾