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Business and Organization

Gladstone Land Corporation (the “Company”) is an agricultural real estate investment trust (“REIT”) that was re-incorporated in Maryland on March 24, 2011, having been originally incorporated in California on June 14, 1997. Upon the pricing of our initial public offering on January 29, 2013, our shares of common stock began trading on the Nasdaq Stock Market, LLC (“Nasdaq”), under the symbol “LAND.” We are primarily in the business of owning and leasing farmland, and we conduct substantially all of our operations through a subsidiary, Gladstone Land Limited Partnership (the “Operating Partnership”), a Delaware limited partnership. As we currently control the sole general partner of the Operating Partnership and own, directly or indirectly, a majority of the common units of limited partnership interest in the Operating Partnership (“OP Units”), the financial position and results of operations of the Operating Partnership are consolidated within our financial statements. As of June 30, 2020, and December 31, 2019, the Company owned approximately 99.3% and 98.6%, respectively, of the outstanding OP Units (see Note 8, “Equity,” for additional discussion regarding OP Units).

Gladstone Land Advisers, Inc. (“Land Advisers”), a Delaware corporation and a subsidiary of ours, was created to collect certain non-qualifying income related to our real estate portfolio and to perform certain small-scale farming business operations. We have elected for Land Advisers to be treated as a taxable REIT subsidiary (“TRS”) of ours. Since we currently own 100% of the voting securities of Land Advisers, its financial position and results of operations are consolidated within our financial statements.

Subject to certain restrictions and limitations, and pursuant to contractual agreements, our business is managed by Gladstone Management Corporation (the “Adviser”), a Delaware corporation, and administrative services are provided to us by Gladstone Administration, LLC (the “Administrator”), a Delaware limited liability company. Our Adviser and Administrator are both affiliates of ours (see Note 6, “Related-Party Transactions,” for additional discussion regarding our Adviser and Administrator).

All further references herein to “we,” “us,” “our,” and the “Company” refer, collectively, to Gladstone Land Corporation and its consolidated subsidiaries, except where indicated otherwise.

Interim Financial Information

Our interim financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q in accordance with Article 10 of Regulation S-X. Accordingly, certain disclosures accompanying annual financial statements prepared in accordance with GAAP are omitted. In the opinion of our management, all adjustments (consisting solely of normal recurring accruals) necessary for the fair statement of financial statements for the interim period have been included. The interim financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 19, 2020 (the “Form 10-K”). The results of operations for the three and six months ended June 30, 2020, are not necessarily indicative of the results that may be expected for other interim periods or for the full fiscal year.

Use of Estimates

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, including the impact of extraordinary events, such as the novel coronavirus (“COVID-19”) pandemic, the results of which form the basis for making certain judgments. Actual results may materially differ from these estimates.

Impairment of Real Estate Assets

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We account for the impairment of our tangible and identifiable intangible real estate assets in accordance with Accounting Standards Codification (“ASC”) 360, “Property, Plant, and Equipment” (“ASC 360”), which requires us to periodically review the carrying value of each property to determine whether indicators of impairment exist. If circumstances support the possibility of impairment, we prepare a projection of the total undiscounted future cash flows of the specific property (without interest charges), including proceeds from disposition, and compare them to the net book value of the property to determine whether the carrying value of the property is recoverable. If the carrying amount is more than the aggregate undiscounted future cash flows, we would recognize an impairment loss to the extent the carrying value exceeds the estimated fair value of the property.

We evaluate our entire portfolio each quarter for any impairment indicators and perform an impairment analysis on those select properties that have an indication of impairment. As of June 30, 2020, and December 31, 2019, we concluded that none of our properties were impaired. There have been no impairments recognized on our real estate assets since our inception.

Income Taxes

We have operated and intend to continue to operate in a manner that will allow us to qualify as a REIT under the Sections 856-860 of the Internal Revenue Code of 1986, as amended (the “Code”). As a REIT, we generally are not subject to federal corporate income taxes on amounts that we distribute to our stockholders (except income from any foreclosure property), provided that, on an annual basis, we distribute at least 90% of our REIT taxable income (excluding net capital gains) to our stockholders and meet certain other conditions. As such, in general, as long as we qualify as a REIT, no provision for federal income taxes will be necessary, except for taxes on undistributed REIT taxable income and taxes on the income generated by a TRS (such as Land Advisers), if any. For the tax year ended December 31, 2019 and for the six months ended June 30, 2020, we did not have any undistributed REIT taxable income, nor was there any taxable income or loss from Land Advisers. Should we have any taxable income or loss in the future, we will account for any income taxes in accordance with the provisions of ASC 740, “Income Taxes,” using the asset and liability method.

Reclassifications

Certain information on the accompanying Condensed Consolidated Balance Sheet as of December 31, 2019, has been reclassified to conform to the current period’s presentation. These reclassifications had no impact on previously-reported stockholders’ equity, net income, or net change in cash and cash equivalents.

Recently-Issued Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 requires more timely recognition of credit losses on loans and other financial instruments that are not accounted for at fair market value through net income. The standard also requires that financial assets measured at amortized cost be presented at the net amount anticipated to be collected via an allowance for credit losses that is deducted from the amortized cost basis. Pursuant to ASU 2016-13, we are required to measure all expected credit losses based upon historical experience, current conditions, and reasonable (and supportable) forecasts that affect the collectability of the financial asset. We adopted ASU 2016-13 beginning with the three months ended March 31, 2020, which has not had a material impact on our consolidated financial statements.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848)” (“ASU 2020-04”). The main provisions of this update provide optional expedients and exceptions for contracts, hedging relationships, and other transactions that reference the London Inter-bank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. ASU 2020-04 is effective for all entities as of March 12, 2020. We adopted ASU 2020-04 beginning with the three months ended March 31, 2020, which has not resulted in a material impact to our consolidated financial statements, as ASU 2020-04 allows for prospective application of any changes in the effective interest rate for LIBOR-based debt and also provides for practical expedients that will allow us to continue to treat our derivative instruments designed as cash flow hedges consistent to how they are accounted for now.

In April 2020, the FASB issued a staff question-and-answer document, “Topic 842 and Topic 840: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic” (the “COVID-19 Q&A”), to address certain frequently-asked questions pertaining to lease concessions arising from the effects of the COVID-19 pandemic. Existing lease guidance requires entities to determine if a lease concession was a result of a new arrangement reached with the tenant (which would be addressed under the lease modification accounting framework) or if a lease concession was under the enforceable rights and obligations within the existing lease agreement (which would not fall under the lease modification accounting framework). The COVID-19 Q&A clarifies that entities may elect to not evaluate whether lease-related relief granted in light of the effects of COVID-19 is a lease modification, provided that the concession does not result in a substantial increase in rights of the lessor

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or obligations of the lessee. This election is available for concessions that result in the total payments required by the modified contract being substantially the same as or less than the total payments required by the original contract. In July 2020, we granted rent deferrals to two tenants who owed aggregate rents of approximately $343,000, which was originally scheduled to be paid on July 1, 2020. The agreements with these tenants provide for extensions of up to 123 days, extending the new due dates for these rental payments to be on or before November 1, 2020. We anticipate electing to not evaluate these lease amendments under the lease modification accounting framework.

All of our properties are wholly-owned on a fee-simple basis, except where noted. 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).

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

Real estate depreciation expense on these tangible assets was approximately $3.5 million and $7.0 million for the three and six months ended June 30, 2020, respectively, and approximately $2.6 million and $4.9 million for the three and six months ended June 30, 2019, respectively.

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Included in the figures above are amounts related to improvements made on certain of our properties paid for by our tenants but owned by us, or tenant improvements. As of June 30, 2020, and December 31, 2019, we recorded tenant improvements, net of accumulated depreciation, of approximately $2.1 million and $2.2 million, respectively. We recorded both depreciation expense and additional lease revenue related to these tenant improvements of approximately $76,000 and $152,000 for the three and six months ended June 30, 2020, respectively, and approximately $72,000 and $146,000 for the three and six months ended June 30, 2019, respectively.

Intangible Assets and Liabilities

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

Total amortization expense related to these lease intangible assets, including amounts charged to amortization expense due to early lease terminations, was approximately $321,000 and $1.1 million for the three and six months ended June 30, 2020, respectively, and approximately $326,000 and $650,000 for the three and six months ended June 30 2019, respectively. See below, under “Significant Existing Real Estate Activity—Leasing Activity—Lease Termination” for further discussion of this lease termination.

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.

Total amortization related to above-market lease values and lease incentives was approximately $31,000 and $62,000 for the three and six months ended June 30, 2020, respectively, and approximately $33,000 and $66,000 for the three and six months ended June 30, 2019, respectively. Total accretion related to below-market lease values and other deferred revenue was approximately $25,000 and $50,000 for the three and six months ended June 30, 2020, respectively, and approximately $39,000 and $77,000 for the three and six months ended June 30, 2019, respectively.

Acquisitions

2020 Acquisitions

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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 three and six months ended June 30, 2020, we recognized lease revenue of approximately $191,000 and $280,000, respectively, and net income of approximately $125,000 and $196,000, respectively, related to the above acquisition.

2019 Acquisitions

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.

During the three and six months ended June 30, 2019, we recognized operating revenues of approximately $503,000 and $527,000, respectively, and net income of approximately $218,000 and $220,000, respectively, related to the above acquisitions.

Purchase Price Allocations

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

Significant Existing Real Estate Activity

Property Add-on

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In connection with the acquisition of a 366-acre vineyard located in Napa, California (“Withers Road”), on August 28, 2019, we committed to provide up to approximately $4.0 million as additional compensation, contingent upon the County of Napa approving the planting of additional vineyards on up to 47 acres of the property by February 25, 2020 (the “Permit Deadline”). In addition, if approval was obtained, we also committed to contribute up to $40,000 per approved acre for the development of such vineyards. While approval of the additional plantings was not received from the County of Napa by the Permit Deadline, in March 2020, we executed an agreement with the tenant on Withers Road to extend the Permit Deadline until August 24, 2020.

In April 2020, we received notification from the County of Napa informing us that it had approved of additional vineyard plantings on 38.7 acres of the property. As such, in May 2020, we paid additional compensation related to this acquisition of approximately $3.2 million. As a result, and pursuant to a lease amendment, we will earn additional straight-line rental income of approximately $335,000 per year throughout the remaining term of the lease, which expires on December 31, 2029. We will also earn additional rent on any of the aforementioned development costs as they are incurred by us.

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.”

Lease Termination

On February 10, 2020, we reached an agreement with a tenant occupying four of our farms in Arizona to terminate the existing leases encompassing those four farms effective February 10, 2020. As part of the termination agreement, the outgoing tenant made a one-time termination payment to us of approximately $3.0 million, which we recognized as additional lease revenue during the six months ended June 30, 2020. The prior leases were scheduled to expire on September 15, 2026 (with two of the farms subject to the renewal of certain state leases currently scheduled to expire on February 14, 2022, and February 14, 2025). In connection with the early termination of these leases, during the six months ended June 30, 2020, we recognized approximately $89,000 of prepaid rent as additional lease revenue and wrote off an aggregate net deferred rent balance of approximately $254,000 against lease revenue. In addition, approximately $470,000 of unamortized lease intangible assets related to the terminated leases were written off and charged to amortization expense during the six months ended June 30, 2020. Upon termination of these leases, we entered into a new, seven-year lease with a new tenant effective immediately. These leases are included in the Leasing Activity table above.

Investments in Unconsolidated Entities

In connection with the acquisition of 2,110 gross acres of farmland located in Fresno County, California (“Sutter Avenue”), which occurred in two phases during the year ended December 31, 2019, we also acquired an ownership in a related LLC, the sole purpose of which is to own and maintain a pipeline conveying water to this and other neighboring properties. On August 16, 2019, we acquired an 11.75% ownership interest in the LLC that was valued at approximately $280,000 at the time of acquisition. On November 1, 2019, we acquired an additional 13.25% interest in the LLC that was valued at approximately $307,000 at the time of acquisition. As our investment in the LLC is deemed to constitute “significant influence,” we have accounted for this investment under the equity method.

During the three and six months ended June 30, 2020, we recorded (loss) income of approximately $(8,000) and $26,000, respectively (included on our Condensed Consolidated Statements of Operations and Comprehensive Income as Income from investments in unconsolidated entities), which represents our pro-rata share of the (loss) income recognized by the LLC. Prior to fiscal year 2020, we had not recorded any material income or loss related to our ownership interest in the LLC. Our combined ownership interest in the LLC, which had an aggregate carrying value of approximately $613,000 and $587,000, as

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of June 30, 2020, and December 31, 2019, respectively, is included within Other assets, net on the accompanying Condensed Consolidated Balance Sheets.

Portfolio Diversification and Concentrations

Diversification

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.

Concentrations

Credit Risk

As of June 30, 2020, our farms were leased to 72 different, unrelated third-party tenants, with certain tenants leasing more than one farm. Due primarily to an early lease termination payment of approximately $3.0 million received from an outgoing tenant (“Tenant A”) during the six months ended June 30, 2020 (see “—Lease Termination” above), aggregate lease revenue attributable to Tenant A accounted for approximately $3.0 million, or 10.1%, of the total lease revenue recorded during the six months ended June 30, 2020. As of June 30, 2020, we are no longer a party to any contractual agreements with Tenant A. No other individual tenant represented greater than 10.0% of the total lease revenue recorded during the six months ended June 30, 2020.

Geographic Risk

Farms located in California, Florida, and Arizona accounted for approximately $13.8 million (49.5%), $6.7 million (23.9%) and $3.8 million (13.6%), respectively, of the total lease revenue recorded during the six months ended June 30, 2020. Though we seek to continue to further diversify geographically, as may be desirable or feasible, should an unexpected natural disaster occur where our properties are located, there could be a material adverse effect on our financial performance and ability to continue operations. No other single state accounted for more than 10.0% of our total lease revenue recorded during the six months ended June 30, 2020.

Our borrowings as of June 30, 2020, and December 31, 2019, are summarized below (dollars in thousands):

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	Carrying Value as of								As of June 30, 2020
	June 30, 2020				December 31, 2019				Stated Interest Rates(1) (Range; Wtd. Avg)		Maturity Dates (Range; Wtd. Avg)
Notes and bonds payable:
Fixed-rate notes payable	$	404,531			$	394,569			3.00%–5.70%; 4.04%		2/14/2022–11/1/2045; August 2032
Fixed-rate bonds payable	90,131				90,380				2.61%–4.57%; 3.44%		12/11/2020–9/13/2028; May 2023
Total notes and bonds payable	494,662				484,949
Debt issuance costs – notes and bonds payable	(3,124		)		(3,120		)		N/A		N/A
Notes and bonds payable, net	$	491,538			$	481,829
Variable-rate revolving lines of credit	$	100			$	100			3.39%		4/5/2024
Total borrowings, net	$	491,638			$	481,929

 

(1)	Where applicable, stated interest rates are before interest patronage (as described below).

As of June 30, 2020, the above borrowings were collateralized by certain of our farms with an aggregate net book value of approximately $821.3 million. The weighted-average interest rate charged on the above borrowings (excluding the impact of debt issuance costs and before any interest patronage, or refunded interest) was 3.98% for each of the three and six months ended June 30, 2020, respectively, as compared to 3.93% for each of the three and six months ended June 30, 2019. In addition, 2019 interest patronage from our Farm Credit Notes Payable (as defined below), which we recorded during the three months ended March 31, 2020, resulted in a 20.4% reduction (approximately 98 basis points) to the stated interest rates on such borrowings. We are unable to estimate the amount of interest patronage to be received, if any, related to interest accrued during 2020 on our Farm Credit Notes Payable.

As of June 30, 2020, we were in compliance with all covenants applicable to the above borrowings.

New MetLife Facility

As of December 31, 2019, our facility with Metropolitan Life Insurance Company (“MetLife”) consisted of a total of $200.0 million of term notes (the “Prior MetLife Term Notes”) and $75.0 million of revolving equity lines of credit (the “MetLife Lines of Credit,” and together with the Prior MetLife Term Notes, the “Prior MetLife Facility”). The draw period for the Prior MetLife Term Notes expired on December 31, 2019, with approximately $21.5 million being left undrawn, and MetLife had no obligation to disburse the remaining funds under those notes.

On February 20, 2020, we entered into an agreement with MetLife to remove the MetLife Lines of Credit from the Prior MetLife Facility and create a new credit facility consisting of a new $75.0 million long-term note payable (the “New MetLife Term Note”) and the MetLife Lines of Credit (collectively, the “New MetLife Facility”).

The following table summarizes the pertinent terms of the New MetLife Facility as of June 30, 2020 (dollars in thousands, except for footnotes):

Issuance		Aggregate Commitment				Maturity Dates		Principal Outstanding				Interest Rate Terms		Undrawn Commitment
New MetLife Term Note		$	75,000		(1)	1/5/2030		$	—			N/A	(2)	75,000		(3)
MetLife Lines of Credit		75,000				4/5/2024		100				3-month LIBOR + 2.00%	(4)	74,900		(3)
Total principal outstanding								$	100

 

(1)	If the aggregate commitment under the New MetLife Term Note is not fully utilized by December 31, 2022, MetLife has the option to be relieved of its obligation to disburse the additional funds under the New MetLife Term Note.

(2)	Interest rates on any disbursements under the New MetLife Term Note will be based on prevailing market rates at the time of such disbursements. In addition, through December 31, 2022, the New MetLife Term Note is also subject to an unused fee ranging from 0.10% to 0.20% on undrawn amounts (based on the balance drawn under the New MetLife Term Note).

(3)	Based on the properties that were pledged as collateral under the New MetLife Facility, as of June 30, 2020, the maximum additional amount we could draw under the facility was approximately $24.2 million.

(4)	The interest rate on the MetLife Lines of Credit is subject to a minimum annualized rate of 2.50%, plus an unused fee ranging from 0.10% to 0.20% on undrawn amounts (based on the balance drawn under each line of credit).

Farm Credit Notes Payable

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From time to time since September 2014, we, through certain subsidiaries of our Operating Partnership, have entered into various loan agreements (collectively, the “Farm Credit Notes Payable”) with 10 different Farm Credit associations (collectively, “Farm Credit”). During the six months ended June 30, 2020, we entered into the following loan agreements with Farm Credit (dollars in thousands):

Issuer

Date of Issuance

Amount

Maturity Date

Principal Amortization

Interest Rate Terms(1)

Premier Farm Credit, FLCA

5/14/2020

$

4,500

1/1/2045

24.6 years

4.00%, fixed through December 31, 2029 (variable thereafter)

Farm Credit West, FLCA

6/24/2020

600

5/1/2044

24.2 years

3.00%, fixed through July 31, 2026 (variable thereafter)

Farm Credit West, FLCA

6/24/2020

600

5/1/2044

24.2 years

3.00%, fixed through August 31, 2026 (variable thereafter)

Farm Credit West, FLCA

6/25/2020

8,500

11/1/2045

25.0 years

3.75%, fixed through June 30, 2030 (variable thereafter)

(1)	Stated rate is before interest patronage, as described below.

Interest patronage, or refunded interest, on our borrowings from Farm Credit is generally recorded upon receipt and is included within Other income on our Condensed Consolidated Statements of Operations and Comprehensive Income. Receipt of interest patronage typically occurs in the first half of the calendar year following the calendar year in which the respective interest expense is accrued. During the three months ended March 31, 2020, we recorded interest patronage of approximately $1.3 million related to interest accrued on the Farm Credit Notes Payable during the year ended December 31, 2019, which resulted in a 20.4% reduction (approximately 98 basis points) to the stated interest rates on such borrowings.

Conterra Note Payable

During the six months ended June 30, 2020, we entered into a loan agreement with Conterra Agricultural Capital, LLC (“Conterra”), the terms of which are summarized in the following table (dollars in thousands):

Date of Issuance		Amount				Maturity Date		Principal Amortization		Interest Rate Terms
6/8/2020		$	2,100			7/1/2027		30.0 years		3.40%, fixed throughout term

Farmer Mac Facility

On December 5, 2014, we, through certain subsidiaries of our Operating Partnership, entered into a bond purchase agreement (the “Bond Purchase Agreement”) with Federal Agricultural Mortgage Corporation (“Farmer Mac”) and Farmer Mac Mortgage Securities Corporation (the “Bond Purchaser”), for a secured note purchase facility. As subsequently amended, the Bond Purchase Agreement provided for bond issuances up to an aggregate amount of $125.0 million (the “Farmer Mac Facility”) through December 11, 2018, after which date the Bond Purchaser had the option to continue buying new bonds issued under the Farmer Mac Facility.

During the six months ended June 30, 2020, we amended and restated one bond for $8.1 million that was previously issued under the Farmer Mac Facility and was originally scheduled to mature on January 10, 2020. The pertinent terms of the amended and restated bond are summarized in the table below (dollars in thousands):

Date of Issuance		Amount				Maturity Date		Principal Amortization		Interest Rate Terms
1/10/2020		$	8,100			1/12/2024		None (interest only)		2.66%, fixed throughout term

No prepayment penalty was incurred in connection with this amendment, and all other material items of the amended and restated bond remained unchanged.

Debt Service – Aggregate Maturities

Scheduled principal payments of our aggregate notes and bonds payable as of June 30, 2020, for the succeeding years are as follows (dollars in thousands):

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Period			Scheduled Principal Payments
For the remaining six months ending December 31:	2020		$	19,361
For the fiscal years ending December 31:	2021		18,833
	2022		41,707
	2023		35,974
	2024		35,260
	2025		32,256
	Thereafter		311,271
			$	494,662

Fair Value

ASC 820 provides a definition of fair value that focuses on the exchange (exit) price of an asset or liability in the principal, or most advantageous, market and prioritizes the use of market-based inputs to the valuation. ASC 820-10, “Fair Value Measurements and Disclosures,” establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

•	Level 1 — inputs that are based upon quoted prices (unadjusted) for identical assets or liabilities in active markets;

•	Level 2 — inputs are based upon quoted prices for similar assets or liabilities in active or inactive markets or model-based valuation techniques, for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

•	Level 3 — inputs are generally unobservable and significant to the fair value measurement. These unobservable inputs are generally supported by little or no market activity and are based upon management’s estimates of assumptions that market participants would use in pricing the asset or liability.

As of June 30, 2020, the aggregate fair value of our long-term notes and bonds payable was approximately $496.5 million, as compared to an aggregate carrying value (excluding unamortized related debt issuance costs) of approximately $494.7 million. The fair value of our long-term notes and bonds payable is valued using Level 3 inputs under the hierarchy established by ASC 820-10 and is calculated based on a discounted cash flow analysis, using discount rates based on management’s estimates of market interest rates on long-term debt with comparable terms. Further, due to the revolving nature and variable interest rates applicable to the MetLife Lines of Credit, their aggregate fair value as of June 30, 2020, is deemed to approximate their aggregate carrying value of $100,000.

Interest Rate Swap Agreement

In order to hedge our exposure to variable interest rates, we have entered into various interest rate swap agreements in connection with certain of our mortgage financings. In accordance with these swap agreements, we will pay our counterparty a fixed interest rate on a quarterly basis and receive payments from our counterparty equal to the respective stipulated floating rates. We have adopted the fair value measurement provision for these financial instruments, and the aggregate fair value of our interest rate swap agreements is recorded in Other assets, net or Other liabilities, net, as appropriate, on our accompanying Condensed Consolidated Balance Sheets. Generally, in the absence of observable market data, we will estimate the fair value of our interest rate swaps using estimates of certain data points, including estimated remaining life, counterparty credit risk, current market yield, and interest rate spreads of similar securities as of the measurement date. As of June 30, 2020, our interest rate swaps were valued using Level 2 inputs.

In addition, we have designated our interest rate swaps as cash flow hedges, and we record changes in the fair values of the interest rate swap agreements to accumulated other comprehensive income on the Condensed Consolidated Balance Sheets. We record changes in fair value on a quarterly basis, using current market valuations at quarter end. The following table summarizes our interest rate swap as of June 30, 2020, and December 31, 2019 (dollars in thousands):

June 30, 2020												December 31, 2019
Aggregate Notional Amount				Aggregate Fair Value Asset				Aggregate Fair Value Liability				Aggregate Notional Amount				Aggregate Fair Value Asset				Aggregate Fair Value Liability
$	14,077			$	—			$	1,816			$	14,298			$	—			$	390

The following table presents the amount of loss recognized in comprehensive income within our condensed consolidated financial statements for the three and six months ended June 30, 2020 (dollars in thousands):

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	Three Months Ended June 30, 2020				Six Months Ended June 30, 2020
Derivative in cash flow hedging relationship:
Interest rate swaps	$	169			$	1,426
Total	$	169			$	1,426

We were not party to any interest rate swap agreements during the three or six months ended June 30, 2019.

The following table summarizes certain information regarding our derivative instruments as of June 30, 2020, and December 31, 2019 (dollars in thousands):

				Derivative Liability Fair Value
Derivative Type		Balance Sheet Location		June 30, 2020				December 31, 2019
Derivatives Designated as Hedging Instruments:
Interest rate swaps		Other liabilities, net		$	1,816			$	390
Total				$	1,816			$	390

In August 2016, we completed a public offering of 6.375% Series A Cumulative Term Preferred Stock, par value $0.001 per share (the “Series A Term Preferred Stock”), at a public offering price of $25.00 per share. As a result of this offering (including the underwriters’ exercise of their option to purchase additional shares to cover over-allotments), we issued a total of 1,150,000 shares of the Series A Term Preferred Stock for gross proceeds of approximately $28.8 million and net proceeds, after deducting underwriting discounts and offering expenses borne by us, of approximately $27.6 million. The Series A Term Preferred Stock is traded under the ticker symbol “LANDP” on Nasdaq.

Generally, we were not permitted to redeem shares of the Series A Term Preferred Stock prior to September 30, 2018, except in limited circumstances to preserve our qualification as a REIT. Since September 30, 2018, we have been permitted to redeem the shares at a redemption price of $25.00 per share, plus any accumulated and unpaid dividends up to, but excluding, the date of redemption. The shares of the Series A Term Preferred Stock have a mandatory redemption date of September 30, 2021, and are not convertible into our common stock or any other securities. As of June 30, 2020, no shares of Series A Term Preferred Stock have been redeemed.

We incurred approximately $1.2 million in total offering costs related to this issuance, which have been recorded net of the Series A Term Preferred Stock as presented on the accompanying Condensed Consolidated Balance Sheets and are being amortized over the mandatory redemption period as a component of interest expense on the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income. The Series A Term Preferred Stock is recorded as a liability on our accompanying Condensed Consolidated Balance Sheets in accordance with ASC 480, “Distinguishing Liabilities from Equity,” which states that mandatorily-redeemable financial instruments should be classified as liabilities. In addition, the related dividend payments are treated similarly to interest expense on the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income.

As of June 30, 2020, the fair value of our Series A Term Preferred Stock was approximately $30.2 million, as compared to the carrying value (exclusive of unamortized offering costs) of approximately $28.8 million. The fair value of our Series A Term Preferred Stock is valued using Level 1 inputs under the hierarchy established by ASC 820-10, “Fair Value Measurements and Disclosures,” and is calculated based on the closing per-share price as of June 30, 2020, of $26.27.

For information on the dividends declared by our Board of Directors and paid by us on the Series A Term Preferred Stock during the six months ended June 30, 2020 and 2019, see Note 8, “Equity—Distributions.”

Our Adviser and Administrator

We are externally managed pursuant to contractual arrangements with our Adviser and our Administrator, which collectively employ all of our personnel and pay their salaries, benefits, and general expenses directly. Both our Adviser and Administrator are affiliates of ours, as their parent company is owned and controlled by David Gladstone, our chairman, chief executive officer, and president. In addition, two of our executive officers, Mr. Gladstone and Terry Brubaker (our vice chairman and chief operating officer), serve as directors and executive officers of each of our Adviser and Administrator, and Michael

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LiCalsi, our general counsel and secretary (who also serves as our Administrator’s president, general counsel, and secretary), is also executive vice president of administration of our Adviser.

We have entered into an investment advisory agreement with our Adviser and an administration agreement with our Administrator (the “Administration Agreement”). The advisory agreement with our Adviser that was in effect through March 31, 2017, and the Administration Agreement each became effective February 1, 2013. The advisory agreement with our Adviser that was in effect through June 30, 2019 (the “Prior Advisory Agreement”), was amended and restated on July 9, 2019 (as amended, the “2019 Advisory Agreement”), and again amended and restated on January 14, 2020 (as amended, the “2020 Advisory Agreement,” and, together with the Prior Advisory Agreement and the 2019 Advisory Agreement, the “Advisory Agreements”). The Administration Agreement and each of the Advisory Agreements were approved unanimously by our board of directors, including our independent directors.

A summary of the 2019 Advisory Agreement is provided in Note 6 to our consolidated financial statements included in our Form 10-K. A summary of the compensation terms for each of the Prior Advisory Agreement, the 2020 Advisory Agreement, and the Administration Agreement is below.

Advisory Agreements

Pursuant to each of the Prior Advisory Agreement (which was in effect from April 1, 2017, through June 30, 2019), the 2019 Advisory Agreement (which was in effect from July 1, 2019, through December 31, 2019), and the 2020 Advisory Agreement (which has been in effect since January 1, 2020), our Adviser is compensated in the form of a base management fee and, each as applicable, an incentive fee, a capital gains fee, and a termination fee. Our Adviser does not charge acquisition or disposition fees when we acquire or dispose of properties, as is common in other externally-managed REITs. The 2019 Advisory Agreement modified the calculation of the base management and incentive fees to exclude preferred equity from such calculations, while the capital gains and termination fees remained unchanged. The 2020 Advisory Agreement revised and replaced the previous calculation of the base management fee, which was previously based on equity, with a calculation based on gross real estate assets (in each case, as further described below), while all other fees remained unchanged. Each of the base management, incentive, capital gains, and termination fees is described below.

Base Management Fee

Pursuant to the Prior Advisory Agreement, a base management fee was paid quarterly and was calculated as 2.0% per annum (0.50% per quarter) of the calendar quarter’s total adjusted equity, which was defined as total equity plus total mezzanine equity, if any (each as reported on our balance sheet), adjusted to exclude unrealized gains and losses and certain other one-time events and non-cash items (“Total Adjusted Equity”).

Under the 2020 Advisory Agreement, a base management fee is paid quarterly and is calculated at an annual rate of 0.50% (0.125% per quarter) of the prior calendar quarter’s “Gross Tangible Real Estate,” defined as the gross cost of tangible real estate owned by us (including land and land improvements, irrigation and drainage systems, horticulture, farm-related facilities, and other tangible site improvements), prior to any accumulated depreciation, and as shown on our balance sheet or the notes thereto for the applicable quarter.

During the three and six months ended June 30, 2019, our Adviser granted us certain non-contractual, unconditional, and irrevocable waivers, which were applied as credits against the base management fee for the period, as detailed in the table below under “—Related-Party Fees.” We did not have any such waivers for the three and six months ended June 30, 2020.

Incentive Fee

Pursuant to the Prior Advisory Agreement, an incentive fee was calculated and payable quarterly in arrears if the Pre-Incentive Fee FFO for a particular quarter exceeded a hurdle rate of 1.75% (7.0% annualized) of the prior calendar quarter’s Total Adjusted Equity.

Under the 2020 Advisory Agreement, an incentive fee is calculated and payable quarterly in arrears if the Pre-Incentive Fee FFO for a particular quarter exceeds a hurdle rate of 1.75% (7.0% annualized) of the prior calendar quarter’s “Total Adjusted Common Equity,” defined as common stockholders’ equity plus non-controlling common interests in the Operating Partnership, if any (each as reported on our balance sheet), adjusted to exclude unrealized gains and losses and certain other one-time events and non-cash items.

For purposes of the calculation of the Incentive Fee, Pre-Incentive Fee FFO was defined in each of the Advisory Agreements as FFO (also as defined in each of the Advisory Agreements) accrued by the Company during the current calendar quarter (prior to any incentive fee calculation for the current calendar quarter), less any dividends paid on preferred stock securities that were not treated as a liability for GAAP purposes. Our Adviser would receive: (i) no Incentive Fee in any calendar quarter in which the Pre-Incentive Fee FFO did not exceed the hurdle rate; (ii) 100% of the Pre-Incentive Fee FFO with respect to that portion of such Pre-Incentive Fee FFO, if any, that exceeded the hurdle rate but was less than 2.1875% in any calendar quarter

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(8.75% annualized); and (iii) 20% of the amount of the Pre-Incentive Fee FFO, if any, that exceeds 2.1875% in any calendar quarter (8.75% annualized).

Capital Gains Fee

Pursuant to each of the Advisory Agreements, a capital gains-based incentive fee will be calculated and payable in arrears at the end of each fiscal year (or upon termination of the Advisory Agreement). The capital gains fee shall equal: (i) 15% of the cumulative aggregate realized capital gains minus the cumulative aggregate realized capital losses, minus (ii) any aggregate capital gains fees paid in prior periods. For purposes of this calculation, realized capital gains and losses will be calculated as (x) the sales price of the property, minus (y) any costs to sell the property and the then-current gross value of the property (which includes the property’s original acquisition price plus any subsequent, non-reimbursed capital improvements). At the end of each fiscal year, if this figure is negative, no capital gains fee shall be paid.

Termination Fee

Pursuant to each of the Advisory Agreements, in the event of our termination of the agreement with our Adviser for any reason (with 120 days’ prior written notice and the vote of at least two-thirds of our independent directors), a termination fee would be payable to the Adviser equal to three times the sum of the average annual base management fee and incentive fee earned by the Adviser during the 24-month period prior to such termination.

Administration Agreement

Pursuant to the Administration Agreement, we pay for our allocable portion of the Administrator’s expenses incurred while performing its obligations to us, including, but not limited to, rent and the salaries and benefits expenses of our Administrator’s employees, including our chief financial officer, treasurer, chief compliance officer, general counsel and secretary (who also serves as our Administrator’s president, general counsel, and secretary), and their respective staffs.

As approved by our Board of Directors, effective July 1, 2014, our allocable portion of the Administrator’s expenses is generally derived by multiplying our Administrator’s total expenses by the approximate percentage of time the Administrator’s employees perform services for us in relation to their time spent performing services for all companies serviced by our Administrator under similar contractual agreements.

Gladstone Securities

On April 11, 2017, we entered into an agreement with Gladstone Securities, LLC (“Gladstone Securities”), for it to act as our non-exclusive agent to assist us with arranging financing for our properties (the “Financing Arrangement Agreement”). Gladstone Securities is a privately-held broker-dealer and a member of the Financial Industry Regulatory Authority and the Securities Investor Protection Corporation. Gladstone Securities is an affiliate of ours, as its parent company is owned and controlled by Mr. Gladstone, who also serves on the board of managers of Gladstone Securities.

Financing Arrangement Agreement

We pay Gladstone Securities a financing fee in connection with the services provided to us for securing financing on our properties. Depending on the size of the financing obtained, the maximum amount of the financing fee, which is payable upon closing of the respective financing, ranges from 0.5% to 1.0% of the amount of financing obtained. The amount of the financing fee may be reduced or eliminated as determined by us and Gladstone Securities after taking into consideration various factors, including, but not limited to, the involvement of any unrelated third-party brokers and general market conditions.

We paid total financing fees to Gladstone Securities of approximately $28,000 during each of the three and six months ended June 30, 2020, and approximately $26,000 and $28,000 during the three and six months ended June 30, 2019, respectively. Through June 30, 2020, the total amount of financing fees paid to Gladstone Securities represented approximately 0.12% of the total financings secured since the Financing Arrangement Agreement has been in place.

Series B Dealer-Manager Agreement

On January 10, 2018, we entered into a dealer-manager agreement, which was amended and restated on May 31, 2018 (the “Series B Dealer-Manager Agreement”), with Gladstone Securities, whereby Gladstone Securities served as our exclusive dealer-manager in connection with the offering of our Series B Preferred Stock (as defined in Note 8, “Equity—Series B Preferred Stock”). Pursuant to the Series B Dealer-Manager Agreement, Gladstone Securities provided certain sales, promotional, and marketing services to us in connection with the offering of the Series B Preferred Stock, and we generally paid Gladstone Securities: (i) selling commissions of up to 7.0% of the gross proceeds from sales of Series B Preferred Stock in the offering (the “Series B Selling Commissions”), and (ii) a dealer-manager fee of 3.0% of the gross proceeds from sales of

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Series B Preferred Stock in the offering (the “Series B Dealer-Manager Fee”).  Gladstone Securities was permitted, in its sole discretion, to remit all or a portion of the Series B Selling Commissions and also to reallow all or a portion of the Series B Dealer-Manager Fees to participating broker-dealers and wholesalers in support of the offering. The terms of the Series B Dealer-Manager Agreement were approved by our board of directors, including all of its independent directors.

In connection with the sales of the Series B Preferred Stock, we paid total Series B Selling Commissions and Series B Dealer-Manager Fees to Gladstone Securities of approximately $0 and $2.5 million during the three and six months ended June 30, 2020, respectively, and approximately $1.7 million and $3.3 million during the three and six months ended June 30, 2019, respectively. The majority of these amounts were then remitted by Gladstone Securities to unrelated third-parties involved in the offering, including participating broker-dealers and wholesalers. Series B Selling Commissions and Series B Dealer-Manager Fees paid to Gladstone Securities are netted against the gross proceeds received from sales of the Series B Preferred Stock and are included within Additional paid-in capital on the accompanying Condensed Consolidated Balance Sheets. The offering of our Series B Preferred Stock was completed on March 5, 2020.

Series C Dealer-Manager Agreement

On February 20, 2020, we entered into a dealer-manager agreement (the “Series C Dealer-Manager Agreement”), with Gladstone Securities, whereby Gladstone Securities will serve as our exclusive dealer-manager in connection with the offering of our Series C Preferred Stock (as defined in Note 8, “Equity—Equity Issuances—Series C Preferred Stock”). Pursuant to the Series C Dealer-Manager Agreement, Gladstone Securities provides certain sales, promotional, and marketing services to us in connection with the offering of the Series C Preferred Stock, and we pay Gladstone Securities (i) selling commissions of up to 6.0% of the gross proceeds from sales of Series C Preferred Stock (the “Series C Selling Commissions”) in the Primary Series C Offering (as defined in Note 8, “Equity—Equity Issuances—Series C Preferred Stock”), and (ii) a dealer-manager fee of 3.0% of the gross proceeds from sales of Series C Preferred Stock in the Primary Series C Offering (the “Series C Dealer-Manager Fee”).  No Series C Selling Commissions or Series C Dealer-Manager Fee shall be paid with respect to shares of the Series C Preferred Stock sold pursuant to our dividend reinvestment plan (the “DRIP”) for the Series C Preferred Stock. Gladstone Securities may, in its sole discretion, reallow a portion of the Series C Dealer-Manager Fee to participating broker-dealers in support of the Primary Series C Offering. The terms of the Series C Dealer-Manager Agreement were approved by our board of directors, including all of our independent directors.

During both the three and six months ended June 30, 2020, we paid approximately $286,000 of Series C Selling Commissions and Series C Dealer-Manager Fees to Gladstone Securities in connection with sales of the Series C Preferred Stock. The majority of these amounts were then remitted by Gladstone Securities to unrelated third-parties involved in the offering, including participating broker-dealers and wholesalers. Series C Selling Commissions and Series C Dealer-Manager Fees paid to Gladstone Securities are netted against the gross proceeds received from sales of the Series C Preferred Stock and are included within Additional paid-in capital on the accompanying Condensed Consolidated Balance Sheets.

Related-Party Fees

The following table summarizes related-party fees paid or accrued for and reflected in our accompanying condensed consolidated financial statements (dollars in thousands):

	For the Three Months Ended June 30,								For the Six Months Ended June 30,
	2020				2019				2020				2019
Base management fee(1)(2)	$	1,047			$	974			$	2,081			$	1,879
Incentive fee(1)(2)	—				—				1,334				—
Credits from non-contractual, unconditional, and irrevocable waiver granted by Adviser’s board of directors(2)	—				(974		)		—				(1,543		)
Total fees to our Adviser, net	$	1,047			$	—			$	3,415			$	336
Administration fee(1)(2)	$	357			$	250			$	740			$	556
Selling Commissions and Dealer-Manager Fees(1)(3)	$	286			$	1,659			$	2,770			$	3,313
Financing fees(1)(4)	28				26				28				28
Total fees to Gladstone Securities	$	314			$	1,685			$	2,798			$	3,341

(1)	Pursuant to the agreements with the respective related-party entities, as discussed above.

(2)	Reflected as a line item on our accompanying Condensed Consolidated Statements of Operations and Comprehensive Income.

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(3)	Included within Additional paid-in capital on the accompanying Condensed Consolidated Balance Sheets. Includes selling commissions and dealer-manager fees related to both the Series B Preferred Stock and the Series C Preferred Stock.

(4)	Included within Notes and bonds payable, net on the Condensed Consolidated Balance Sheets and amortized into Interest expense on the Condensed Consolidated Statements of Operations and Comprehensive Income.

Related-Party Fees Due

Amounts due to related parties on our accompanying Condensed Consolidated Balance Sheets as of June 30, 2020, and December 31, 2019, were as follows (dollars in thousands):

	June 30, 2020				December 31, 2019
Base management fee	$	1,047			$	881
Incentive fee	—				847
Other(1)	3				25
Total due to Adviser	1,050				1,753
Administration fee	357				341
Cumulative accrued but unpaid portion of prior Administration Fees(2)	246				75
Total due to Administrator	603				416
Total due to related parties(3)	$	1,653			$	2,169

(1)	Other amounts due to or from our Adviser primarily relate to miscellaneous general and administrative expenses either paid by our Adviser on our behalf or by us on our Adviser’s behalf.

(2)	Represents the cumulative accrued but unpaid portion of prior Administration fees that are scheduled to be paid during the three months ending September 30, 2020, which is the quarter following our Administrator’s fiscal year end.

(3)	Reflected as a line item on our accompanying Condensed Consolidated Balance Sheet.

Operating Obligations

In connection with the execution of certain lease agreements, we have committed to provide capital improvements on certain of our farms, which are summarized in the table below (dollars in thousands):

Farm Location		Farm Acreage		Total Commitment				Obligated Completion Date(1)		Amount Expended or Accrued as of June 30, 2020
Hillsborough, FL		55		$	2,250		(2)	Q2 2021		$	515
Cochise, AZ		1,320		1,820			(2)(3)	Q4 2021		1,482
Cochise, AZ		875		1,360			(2)(4)	Q4 2021		982
Van Buren, MI		89		150				Q4 2021		126
Napa, CA		269		1,548			(2)	Q3 2023		—
Columbia, OR		157		1,800			(2)	Q3 2024		1,146
Collier & Hendry, FL		3,612		2,000			(2)	Q2 2025		—
Salinas, CA		304		1,248				Q4 2025		548

(1)	Our obligation to provide capital to fund these improvements does not extend beyond these respective dates.

(2)	Pursuant to contractual agreements, we will earn additional rent on the cost of these capital improvements as the funds are disbursed by us.

(3)	Pursuant to the agreement, we will only earn additional rent if the total amount of capital improvements exceeds $1.3 million.

(4)	Pursuant to the agreement, we will only earn additional rent if the total amount of capital improvements exceeds $860,000.

Litigation

In the ordinary course of business, we may be involved in legal proceedings from time to time. We are not currently subject to any material known or threatened litigation.

Amendment to Articles of Incorporation

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On February 20, 2020, we filed with the Maryland Department of Assessments and Taxation an Articles Supplementary (i) setting forth the rights, preferences, and terms of the Series C Preferred Stock and (ii) reclassifying and designating 26,000,000 shares of our authorized and unissued shares of common stock as shares of Series C Preferred Stock.  The reclassification decreased the number of shares classified as common stock from approximately 91.5 million shares immediately prior to the reclassification to 65.5 million shares immediately after the reclassification.

Amendment to Operating Partnership Agreement

In connection with the authorization of the Series C Preferred Stock, the Operating Partnership adopted the Fourth Amendment to its First Amended and Restated Agreement of Limited Partnership, including Exhibit SC thereto (collectively, the “Amendment”), as amended from time to time, establishing the rights, privileges, and preferences of 6.00% Series C Cumulative Redeemable Preferred Units, a newly-designated class of limited partnership interests (the “Series C Preferred OP Units”). The Amendment provides for the Operating Partnership’s establishment and issuance of an equal number of Series C Preferred OP Units as are issued shares of Series C Preferred Stock by the Company in connection with the Series C Offering upon the Company’s contributions to the Operating Partnership of the net proceeds of the Series C Offering. Generally, the Series C Preferred OP Units provided for under the Amendment have preferences, distribution rights and other provisions substantially equivalent to those of the Series C Preferred Stock.

Non-Controlling Interests in Operating Partnership

We consolidate our Operating Partnership, which is a majority-owned partnership.  As of June 30, 2020, and December 31, 2019, we owned approximately 99.3% and 98.6%, respectively, of the outstanding OP Units. As of June 30, 2020, and December 31, 2019, there were 144,151 and 288,303 OP Units held by non-controlling OP Unitholders.

On or after 12 months after becoming a holder of OP Units, each limited partner, other than the Company, has the right, subject to the terms and conditions set forth in the partnership agreement of the Operating Partnership, to require the Operating Partnership to redeem all or a portion of such units in exchange for cash or, at the Company’s option, shares of our common stock on a one-for-one basis. The cash redemption per OP Unit would be based on the market price of our common stock at the time of redemption. A limited partner will not be entitled to exercise redemption rights if the delivery of common stock to the redeeming limited partner would breach restrictions on the ownership of common stock imposed under our charter and other limitations thereof.

We did not issue any new OP Units to non-controlling OP Unitholders during the three or six months ended June 30, 2020 or 2019.

Information related to OP Units tendered for redemption during the three and six months ended June 30, 2020 and 2019 is provided in the table below:

Period		OP Units Tendered for Redemption		Shares of Common Stock Issued
2020:
Three months ended June 30, 2020		144,152		144,152
Six months ended June 30, 2020		144,152		144,152
2019:
Three months ended June 30, 2019		0		0
Six months ended June 30, 2019		570,879		570,879

Regardless of the rights described above, the Operating Partnership will not have an obligation to issue cash to a unitholder upon a redemption request if the Company elects to redeem the OP Units for shares of its common stock. When a non-controlling unitholder redeems OP Units and the Company elects to satisfy that redemption through the issuance of common stock, non-controlling interest in the Operating Partnership is reduced, and stockholders’ equity is increased.

The Operating Partnership is required to make distributions on each OP Unit in the same amount as those paid on each share of the Company’s common stock, with the distributions on the OP Units held by the Company being utilized to make distributions to the Company’s common stockholders.

Registration Statement

On March 30, 2017, we filed a universal registration statement on Form S-3 (File No. 333-217042) with the SEC (the “2017 Registration Statement”) to replace our previous registration statement. The 2017 Registration Statement, which was declared

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effective by the SEC on April 12, 2017, permitted us to issue up to an aggregate of $300.0 million in securities, consisting of common stock, preferred stock, warrants, debt securities, depository shares, subscription rights, and units, including through separate, concurrent offerings of two or more of such securities. Under the 2017 Registration Statement, we issued a total of 9,495,834 shares of common stock (excluding 1,215,565 shares of common stock issued in exchange for certain OP Units that were tendered for redemption) for gross proceeds of approximately $117.4 million and 6,000,000 shares of Series B Preferred Stock for gross proceeds of approximately $147.5 million.

On March 6, 2020, we filed a universal registration statement on Form S-3 (File No. 333-236943) with the SEC (the “2020 Registration Statement”) to replace the 2017 Registration Statement. The 2020 Registration Statement, which was declared effective by the SEC on April 1, 2020, permits us to issue up to an aggregate of $1.0 billion in securities, consisting of common stock, preferred stock, warrants, debt securities, depository shares, subscription rights, and units, including through separate, concurrent offerings of two or more of such securities. Through June 30, 2020, we had issued a total of 44,129 shares of common stock (excluding 144,152 shares of common stock issued in exchange for certain OP Units that were tendered for redemption) for gross proceeds of approximately $714,000 and 130,702 shares of Series C Preferred Stock for gross proceeds of approximately $3.3 million under the 2020 Registration Statement.

In conjunction with the filing of the 2020 Registration Statement, we wrote off approximately $29,000 of unallocated costs associated with the initial filing of the 2017 Registration Statement. These costs were written off to professional fees, which is included within General and administrative expenses on our accompanying Condensed Consolidated Statements of Operations and Comprehensive Income, during the six months ended June 30, 2020.

Equity Issuances

Series B Preferred Stock

On May 31, 2018, we filed a prospectus supplement with the SEC for a continuous public offering of up to 6,000,000 shares (the “Series B Offering”) of our 6.00% Series B Cumulative Redeemable Preferred Stock (the “Series B Preferred Stock”) at an offering price of $25.00 per share. The Series B Preferred Stock was offered on a continuous, “reasonable best efforts” basis by Gladstone Securities, the dealer-manager for the Series B Offering. See Note 6, “Related-Party Transactions—Gladstone Securities—Series B Dealer-Manager Agreement,” for a discussion of the fees and commissions to be paid to Gladstone Securities in connection with the Series B Offering.

The following table provides information on sales of the Series B Preferred Stock that occurred during the three and six months ended June 30, 2020 and 2019 (dollars in thousands, except per-share amounts):

Period		Number of Shares Sold		Weighted-average Offering Price per Share			Gross Proceeds			Net Proceeds(1)
2020(2):
Six months ended June 30, 2020		1,229,531		24.52			30,148			27,664
2019:
Three months ended June 30, 2019		751,159		24.71			18,560			16,901
Six months ended June 30, 2019		1,499,075		24.71			37,042			33,729

(1)	Net of Series B Selling Commissions and Series B Dealer-Manager Fees borne by us.

(2)	The Series B Offering was completed during the three months ended March 31, 2020.

The following table provides information on redemptions of the Series B Preferred Stock that occurred during the three and six months ended June 30, 2020 and 2019 (dollars in thousands, except per-share amounts):

Period		Number of Shares Redeemed		Weighted-average Redemption Price per Share				Cash Redemption Paid
2020:
Three months ended June 30, 2020		5,165		$	23.86			$	123
Six months ended June 30, 2020		12,918		23.89				309
2019:
Three months ended June 30, 2019		6,800		22.50				153
Six months ended June 30, 2019		7,400		22.50				166

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The Series B Offering was completed on March 5, 2020 (the “Series B Termination Date”), with the full 6,000,000 allotted shares being sold, and, exclusive of redemptions, resulted in total gross proceeds of approximately $147.5 million and net proceeds, after deducting Series B Selling Commissions, Series B Dealer-Manager Fees, and offering expenses payable by us, of approximately $133.4 million. Excluding Series B Selling Commissions and Series B Dealer-Manager Fees, we incurred approximately $1.6 million of total costs related to the Series B Offering, which were initially recorded as deferred offering costs (included within Other assets, net on the accompanying Condensed Consolidated Balance Sheets) and were applied against the gross proceeds received from the offering through additional paid-in capital as shares of the Series B Preferred Stock were sold.

There is currently no public market for shares of the Series B Preferred Stock; however, we intend to apply to list the Series B Preferred Stock on Nasdaq or another national securities exchange within one calendar year after the Series B Termination Date, though there can be no assurance that a listing will be achieved in such timeframe, or at all.

Series C Preferred Stock

On February 20, 2020, we filed a prospectus supplement with the SEC for a continuous public offering of up to 400,000 shares of our newly-designated 6.00% Series C Cumulative Redeemable Preferred Stock, par value $0.001 per share (the “Series C Preferred Stock”), on a “reasonable best efforts” basis through Gladstone Securities at an offering price of $25.00 per share, and up to 120,000 shares of our Series C Preferred Stock pursuant to the DRIP at a price of $22.75 per share. No shares of the Series C Preferred Stock were sold pursuant to the prospectus supplement dated February 20, 2020.

On April 3, 2020, we filed a new prospectus supplement with the SEC for a continuous offering of up to 26,000,000 shares of the Series C Preferred Stock, which superseded and replaced the prospectus supplement dated February 20, 2020, for a continuous public offering (the “Series C Offering”) of up to 26,000,000 shares of the Series C Preferred Stock. The Series C Offering permits us to sell up to 20,000,000 shares (the “Primary Series C Offering”) of our Series C Preferred Stock on a “reasonable best efforts” basis through Gladstone Securities at an offering price of $25.00 per share and up to 6,000,000 shares of our Series C Preferred Stock pursuant to the DRIP at a price of $22.75 per share. See Note 6, “Related-Party Transactions—Gladstone Securities—Series C Dealer-Manager Agreement,” for a discussion of the commissions and fees to be paid to Gladstone Securities in connection with the Series C Offering.

The following table provides information on equity sales that have occurred during the three and six months ended June 30, 2020 (dollars in thousands, except per-share amounts):

Period		Number of Shares Sold		Weighted Average Offering Price Per Share				Gross Proceeds				Net Proceeds(1)
Three and Six months ended June 30, 2020(2)		130,702		$	24.94			$	3,260			$	2,973

(1)	Net of Series C Selling Commissions and Series C Dealer-Manager Fees.

(2)	The Series C Offering commenced during the three months ended June 30, 2020.

As of June 30, 2020, excluding Series C Selling Commissions and Series C Dealer-Manager Fees, we have incurred approximately $302,000 of costs related to the Series C Offering, which are initially recorded as deferred offering costs (included within Other assets, net on the accompanying Condensed Consolidated Balance Sheets) and are applied against gross proceeds received from the offering through additional paid-in capital as shares of the Series C Preferred Stock are sold. See Note 11, “Subsequent Events—Equity Activity—Series C Preferred Stock,” for sales of Series C Preferred Stock completed subsequent to June 30, 2020.

The Series C Offering will terminate on the date (the “Series C Termination Date”) that is the earlier of either June 1, 2025 (unless terminated earlier or extended by our Board of Directors), or the date on which all 20,000,000 shares in the Primary Series C Offering are sold. There is currently no public market for shares of the Series C Preferred Stock; however, we intend to apply to list the Series C Preferred Stock on Nasdaq or another national securities exchange within one calendar year after the Series C Termination Date, though there can be no assurance that a listing will be achieved in such timeframe, or at all.

Common Stock

At-the-Market Program

On August 7, 2015, we entered into equity distribution agreements (commonly referred to as “at-the-market agreements”), as amended from time to time, with Cantor Fitzgerald & Co., Ladenburg Thalmann & Co., Inc., and Virtu Americas, LLC (each a “Sales Agent”), under which we were permitted to issue and sell, from time to time and through the Sales Agents, shares of our common stock having an aggregate offering price of up to $30.0 million (the “Prior ATM Program”). On May 12, 2020, we terminated the Prior ATM Program and entered into new equity distribution agreements with Virtu Americas, LLC, and Ladenburg & Co., Inc., under which we may issue and sell, from time to time and through the current Sales Agents, shares of

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our common stock having an aggregate offering price of up to $100.0 million (the “Current ATM Program,” and collectively with the Prior ATM Program, the “ATM Programs”).

The following table provides information on shares of common stock sold by the Sales Agents under the ATM Programs during the three and six months ended June 30, 2020 and 2019 (dollars in thousands, except per-share amounts):

Period		Number of Shares Sold		Weighted-average Offering Price Per Share				Gross Proceeds				Net Proceeds(1)
2020:
Three months ended June 30, 2020		44,129		$	16.19			$	714			$	707
Six months ended June 30, 2020		453,929		13.56				6,155				6,094
2019:
Three months ended June 30, 2019		70,551		12.65				893				879
Six months ended June 30, 2019		70,551		12.65				893				879

(1)	Net of underwriting commissions and discounts.

Distributions

The per-share distributions to preferred and common stockholders declared by our Board of Directors and paid by us (except as noted) during the three and six months ended June 30, 2020 and 2019 are reflected in the table below.

		For the Three Months Ended June 30,								For the Six Months Ended June 30,
Issuance		2020				2019				2020				2019
Series A Term Preferred Stock(1)		$	0.3984375			$	0.3984375			$	0.7968750			$	0.7968750
Series B Preferred Stock(2)		0.375				0.375				0.750				0.750
Series C Preferred Stock(2)		0.375				—				0.375				—
Common Stock(3)		0.13410				0.13350				0.26805				0.26685

(1)	Treated similar to interest expense on the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income.

(2)	Of the aggregate dividends declared on the Series B Preferred Stock and Series C Preferred Stock by our Board of Directors on April 14, 2020, and April 9, 2019, approximately $763,000 and $333,000, respectively, was paid (as scheduled) by us on July 3, 2020, and July 5, 2019, respectively.

(3)	The same amounts were paid as distributions on each OP Unit held by non-controlling OP Unitholders.

The following table sets forth the components of our lease revenues for the three and six months ended June 30, 2020 and 2019 (dollars in thousands, except for footnotes):

	For the Three Months Ended June 30,								For the Six Months Ended June 30,
	2020				2019				2020				2019
Fixed lease payments(1)	$	12,350			$	8,332			$	24,612			$	16,105
Variable lease payments(2)	288				30				3,306				87
Lease revenues, net(3)	$	12,638			$	8,362			$	27,918			$	16,192

(1)	Fixed lease payments include contractual rents under lease agreements with tenants recognized on a straight-line basis over the respective lease terms and includes the amortization of above-market lease values and lease incentives and the accretion of below-market lease values and other deferred revenue.

(2)

Variable lease payments include participation rents, which are generally based on a percentage of the gross crop revenues earned on the farm, and reimbursements of certain property operating expenses by tenants. Participation rents are generally recognized when all contingencies have been resolved and when actual results become known or estimable, enabling us to estimate and/or measure our share of such gross revenues. During the three and six months ended June 30, 2020, we recorded participation rents of approximately $44,000 and $74,000, respectively, and reimbursements of certain property operating expenses by tenants of approximately $244,000 and $422,000, respectively. During the three and six months ended June 30, 2019, we recorded participation rents of approximately $0 and $27,000, respectively, and reimbursements of certain property operating expenses by tenants of approximately $30,000 and $60,000, respectively. In addition, during the six months ended June 30, 2020, we received a lease termination payment of approximately $3.0 million.

(3)	Reflected as a line item on our accompanying Condensed Consolidated Statements of Operations and Comprehensive Income.

The following table sets forth the computation of basic and diluted net loss per common share for the three and six months ended June 30, 2020 and 2019, computed using the weighted average number of shares outstanding during the respective

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periods. Net loss figures are presented net of non-controlling interests in the earnings per share calculations. The non-controlling limited partners’ outstanding OP Units (which may be redeemed for shares of common stock) have been excluded from the diluted per-share calculation, as there would be no effect on the amounts since the non-controlling OP Unitholders’ share of earnings would also be added back to net loss.

	Three months ended June 30,								Six months ended June 30,
	2020				2019				2020				2019
	(Dollars in thousands, except per-share amounts)								(Dollars in thousands, except per-share amounts)
Net loss attributable to common stockholders	$	(2,078	)		$	(720	)		$	(1,144	)		$	(1,215	)
Weighted average shares of common stock outstanding – basic and diluted	21,418,455				18,641,738				21,340,268				18,336,975
Loss per common share – basic and diluted	$	(0.10	)		$	(0.04	)		$	(0.05	)		$	(0.07	)

Portfolio Activity

Leasing Activity

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.”

Equity Activity

Equity Issuances

The following table provides information on equity sales that have occurred subsequent to June 30, 2020 (dollars in thousands, except per-share amounts):

Type of Issuance		Number of Shares Sold		Weighted Average Offering Price Per Share				Gross Proceeds				Net Proceeds(1)
Series C Preferred Stock		147,682		$	24.92			$	3,680			$	3,360
Common Stock – ATM Program		343,925		16.23				5,583				5,527

(1)	Net of Series C Selling Commissions and Series C Dealer-Manager Fees or underwriting commissions and discounts (in each case, as applicable).

Equity Redemptions

Subsequent to June 30, 2020, 1,297 shares of the Series B Preferred Stock were tendered for redemption at a cash redemption price of $22.50 per share. As a result, we paid a total redemption cost of approximately $29,000 to redeem and retire these shares. In addition, subsequent to June 30, 2020, 144,151 OP Units held by non-controlling OP Unitholders were tendered for redemption, and we issued 144,151 shares of common stock in exchange for such OP Units.

Distributions

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On July 14, 2020, our Board of Directors authorized and we declared the following monthly cash distributions to holders of our preferred and common stock:

Issuance		Record Date		Payment Date		Distribution per Share
Series A Term Preferred Stock:		July 24, 2020		July 31, 2020		$	0.1328125
		August 24, 2020		August 31, 2020		0.1328125
		September 23, 2020		September 30, 2020		0.1328125
Total Series A Term Preferred Stock Distributions:						$	0.3984375
Series B Preferred Stock:		July 29, 2020		August 5, 2020		$	0.125
		August 26, 2020		September 4, 2020		0.125
		September 30, 2020		October 7, 2020		0.125
Total Series B Preferred Stock Distributions:						$	0.375
Series C Preferred Stock:		July 29, 2020		August 5, 2020		$	0.125
		August 26, 2020		September 4, 2020		0.125
		September 30, 2020		October 7, 2020		0.125
Total Series C Preferred Stock Distributions:						$	0.375
Common Stock:		July 24, 2020		July 31, 2020		$	0.0448
		August 24, 2020		August 31, 2020		0.0448
		September 23, 2020		September 30, 2020		0.0448
Total Common Stock Distributions:						$	0.1344

The same amounts paid to common stockholders will be paid as distributions on each OP Unit held by non-controlling OP Unitholders as of the above record dates.

COVID-19

In July 2020, we granted extensions of up to 123 days to two tenants who owed semi-annual rental payments totaling approximately $343,000. These payments were originally scheduled to be paid on July 1, 2020, and the rent deferrals we granted to these tenants extend the new due dates to be on or before November 1, 2020, with all other terms of the existing lease agreements remaining unchanged. Additional time was granted to these tenants due to delays in payments owed to them from their respective processors, which were primarily caused by the strict government-mandated lockdowns in the state of Michigan in response to COVID-19. In addition, we are currently awaiting payment from one other tenant who owed an annual rental payment of approximately $53,000 in July 2020. The delay in this payment is primarily due to a delay in our farmer’s receipt of certain insurance payouts, which are expected to be settled during August 2020, at which time we expect to collect the rent owed to us. Based on the payment histories and current operational statuses of each of the respective tenants, we currently anticipate being able to collect these amounts in full within the aforementioned timeframes. We have not received any other requests from tenants seeking relief as a result of COVID-19, and all other tenants are current in their rental payments to us; however, no assurances can be made that we will not receive additional rent deferral or modification requests in the future.

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(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.

(1)	Certain lease agreements encompass multiple farms.

(2)	Includes two leases that were renewed for an additional two years subsequent to June 30, 2020 (see “Recent Developments—Portfolio Activity—Existing Properties—Leasing Activity” below for a summary of this and other recent leasing activities).

(3)

Consists of ancillary leases (e.g., oil, gas, and mineral leases, telecommunications leases, etc.) with varying expirations on certain of our farms. In addition, includes a net amount of approximately $2.8 million of lease revenue recorded as a result of an early lease termination on one of our properties (see below, under “Recent Developments—Portfolio Activity—Existing Properties—Leasing Activity—Lease Termination” for additional information).

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(1)	Includes approximately $14,000 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.

(1)	Annualized straight-line rent is based on the minimum cash rental payments guaranteed under the applicable 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, in each case, as described above under “Leases—General.”

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(1)

On borrowings from the various Farm Credit associations, we receive interest patronage, or refunded interest, which is typically received in the calendar year following the year in which the related interest expense was accrued. The expected effective interest rates reflected in the table above are the interest rates net of expected interest patronage, which is based on either historical patronage actually received (for pre-existing lenders whom we have received interest patronage from) or indications from the respective lenders of estimated patronage to be paid (for new lenders). See Note 4, “Borrowings,” in the accompanying notes to our condensed consolidated financial statements for additional information on interest patronage received in current and prior years.

(1)	Net of selling commissions and dealer-manager fees borne by us. Aggregate selling commissions and dealer-manager fees paid to Gladstone Securities as a result of these sales was approximately $606,000 (of which approximately $584,000 was remitted by Gladstone Securities to unrelated third-parties involved in the offering, such as participating broker-dealers and wholesalers).

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(1)	Net of underwriter commissions and discounts.

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(1)	Actual figures calculated pursuant to the agreements with our Adviser in place during the respective periods.

(2)	Calculated as if the 2020 Advisory Agreement had been in place as of January 1, 2017.

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•	With regard to the comparison between the three months ended June 30, 2020 versus 2019:

◦	Same-property basis represents farms owned as of March 31, 2019, and were not vacant at any point during either period presented;

◦	Properties acquired or disposed of are farms that were either acquired or disposed of at any point subsequent to March 31, 2019. From April 1, 2019, through June 30, 2020, we acquired 29 new farms and did not have any farm dispositions; and

◦	Vacant or self-operated properties represent farms that were either vacant (either wholly or partially) at any point during either period presented or operated by a wholly-owned subsidiary of ours. We did not have any vacant farms during either of the three months ended June 30, 2020 or 2019.

•	With regard to the comparison between the six months ended June 30, 2020 versus 2019:

◦	Same-property basis represents farms owned as of December 31, 2019, and were not vacant at any point during either period presented;

◦	Properties acquired or disposed of are farms that were either acquired or disposed of at any point subsequent to December 31, 2018. From January 1, 2019, through June 30, 2020, we acquired 30 new farms and did not have any farm dispositions; and

◦	Vacant or self-operated properties represent farms that were either vacant (either wholly or partially) at any point during either period presented or operated by a wholly-owned subsidiary of ours. We had two farms that were vacant for a portion of the six months ended June 30, 2019.

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(1)	Tenant reimbursements generally represent tenant-reimbursed property operating expenses on certain of our farms, including property taxes, insurance premiums, and other property-related expenses. Corresponding amounts were also recorded as property operating expenses during the respective periods.

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(1)	Represents certain operating expenses (property taxes, insurance premiums, and other property-related expenses) paid by us that, per the respective leases, are required to be reimbursed to us by the tenant. Corresponding amounts were also recorded as lease revenues during the respective periods.

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(1)	Reflected as a line item on our accompanying Consolidated Statements of Operations and Comprehensive Income.

(2)	Represent non-contractual, unconditional, and irrevocable waivers granted to us by our Adviser.

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(1)	Net of selling commissions and dealer-manager fees or underwriting discounts (in each case, as applicable).

(2)	Excludes share redemptions during the applicable time period.

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•

Acquisition- and disposition-related expenses. Acquisition- and disposition-related expenses (including due diligence costs on acquisitions not consummated and certain auditing and accounting fees incurred that were directly related to completed acquisitions or dispositions) are incurred for investment purposes and do not correlate with the ongoing operations of our existing portfolio. Further, certain auditing and accounting fees incurred vary depending on the number and complexity of acquisitions or dispositions completed during the period. Due to the inconsistency in which these costs are incurred and how they have historically been treated for accounting purposes, we believe the exclusion of these expenses improves comparability of our operating results on a period-to-period basis.

•

Rent adjustments. This adjustment removes the effects of straight-lining rental income, as well as the amortization related to above-market lease values and lease incentives and accretion related to below-market lease values, other deferred revenue, and tenant improvements, resulting in rental income reflected on a modified accrual cash basis. In addition to these adjustments, we also modify the calculation of cash rents within our definition of AFFO to provide greater consistency and comparability due to the period-to-period volatility in which cash rents are received. To coincide with our tenants’ harvest seasons, our leases typically provide for cash rents to be paid at various points throughout the lease year, usually annually or semi-annually. As a result, cash rents received during a particular period may not necessarily be comparable to other periods or represent the cash rents indicative of a given lease year. Therefore, we further adjust AFFO to normalize the cash rent received pertaining to a lease year over that respective lease year on a straight-line basis, resulting in cash rent being recognized ratably over the period in which the cash rent is earned.

•	Amortization of debt issuance costs. The amortization of costs incurred to obtain financing is excluded from AFFO, as it is a non-cash expense item that is not directly related to the operating performance of our properties.

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(1)	Represents our pro-rata share of depreciation expense recorded in unconsolidated entities during the period.

(2)	Consists primarily of net property and casualty recoveries recorded and the cost of related repairs expensed during each period as a result of the damage to certain irrigation improvements and, for the three and six months ended June 30, 2020, only, our pro-rata share of (loss) income recorded from investments in unconsolidated entities during the period.

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For properties acquired within 12 months prior to the date of valuation, the purchase price of the property will generally be used as the current fair value unless overriding factors apply. In situations where OP Units are issued as partial or whole consideration in connection with the acquisition of a property, the fair value of the property will generally be the lower of: (i) the agreed-upon purchase price between the seller and the buyer (as shown in the purchase and sale agreement or contribution agreement and using the agreed-upon pricing of the OP Units, if applicable), or (ii) the value as determined by an independent, third-party appraiser.

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For real estate we acquired more than one year prior to the date of valuation, we determine the fair value either by relying on estimates provided by independent, third-party appraisers or through an internal valuation process. In addition, if significant capital improvements take place on a property, we will typically have those properties reappraised upon completion of the project by an independent, third-party appraiser. In any case, we intend to have each property valued by an independent, third-party appraiser via a full appraisal at least once every three years, with interim values generally being determined by either: (i) a restricted appraisal (a “desk appraisal”) performed by an independent, third-party appraiser, or (ii) our internal valuation process.

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(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 paid for by us that were associated with the properties, and adjusted for accumulated depreciation and amortization.

(2)	Appraisals performed between September 2019 and June 2020.

(1)	Includes a $3.2 million add-on to our Withers Road property.

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(1)	Per Net Cost Basis as presented in the table above.

(2)	Per Current Fair Value as presented in the table above.

(3)	Includes the principal balances outstanding of all long-term borrowings (consisting of notes and bonds payable) and the Series A Term Preferred Stock.

(4)	Long-term notes and bonds payable were valued using a discounted cash flow model. The Series A Term Preferred Stock was valued based on its closing stock price as of June 30, 2020.

(5)	Valued at the securities’ respective liquidation values, as discussed above.

(6)	Includes 21,534,739 shares of common stock and 144,151 OP Units held by non-controlling OP Unitholders.

(1)

The net change in unrealized fair value of our farmland portfolio consists of three components: (i) a decrease of $0.03 per share due to the net depreciation in value of the farms that were valued during the three months ended June 30, 2020, (ii) an increase of $0.18 per share due to the aggregate depreciation and amortization expense recorded during the three months ended June 30, 2020, and (iii) a decrease of $0.19 per share due to capital improvements made on certain farms that have not yet been considered in the determination of the respective farms’ estimated fair values.

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