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

Quarterly report pursuant to Section 13 or 15(d)

Real Estate and Intangible Assets (Tables)

Real Estate and Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2020

The following table provides certain summary information about the 115 farms we owned as of June 30, 2020 (dollars in thousands, except for footnotes):



Location	No. of Farms	Total Acres	Farm Acres	Net Cost Basis⁽¹⁾		Encumbrances⁽²⁾
California⁽³⁾	43	15,420	14,203	$	436,744	$	268,244
Florida	23	20,770	16,256	210,474		131,359
Arizona⁽⁴⁾	6	6,280	5,228	58,498		22,087
Colorado	12	32,773	25,577	48,864		31,047
Nebraska	9	7,782	7,050	30,825		19,331
Michigan	15	962	682	12,262		7,573
Texas	1	3,667	2,219	8,363		5,173
Washington	1	746	417	8,031		4,957
Oregon	3	418	363	6,198		3,785
North Carolina	2	310	295	2,264		1,206
	115	89,128	72,290	$	822,523	$	494,762

⁽¹⁾

Consists of the initial acquisition price (including the costs allocated to both tangible and intangible assets acquired and liabilities assumed), plus subsequent improvements and other capitalized costs associated with the properties, and adjusted for accumulated depreciation and amortization. Specifically, includes Investments in real estate, net (excluding improvements paid for by the tenant) and Lease intangibles, net; plus net above-market lease values, lease incentives, and investments in special-purpose LLCs included in Other assets, net; and less net below-market lease values and other deferred revenue included in Other liabilities, net; each as shown on the accompanying Condensed Consolidated Balance Sheets.


⁽²⁾	Excludes approximately $3.1 million of debt issuance costs related to notes and bonds payable, included in Notes and bonds payable, net on the accompanying Condensed Consolidated Balance Sheet.


⁽³⁾	Includes ownership in a special-purpose LLC that owns a pipeline conveying water to one of our properties. As of June 30, 2020, this investment had a net carrying value of approximately $613,000 and is included within Other assets, net on the accompanying Condensed Consolidated Balance Sheet.

⁽⁴⁾

Includes two farms in which we own a leasehold interest via ground leases with the State of Arizona that expire in February 2022 and February 2025, respectively. In total, these two farms consist of 1,368 total acres and 1,221 farm acres and had an aggregate net cost basis of approximately $1.9 million as of June 30, 2020 (included in Lease intangibles, net on the accompanying Condensed Consolidated Balance Sheet).

Summary of Components of Investments in Real Estate

The following table sets forth the components of our investments in tangible real estate assets as of June 30, 2020, and December 31, 2019 (dollars in thousands):



	June 30, 2020			December 31, 2019
Real estate:
Land and land improvements	$	609,792		$	583,247
Irrigation and drainage systems	115,293			108,222
Horticulture	108,779			107,941
Farm-related facilities	21,250			20,665
Other site improvements	7,215			7,180
Real estate, at gross cost	862,329			827,255
Accumulated depreciation	(41,566		)	(35,174		)
Real estate, net	$	820,763		$	792,081

Carrying Value of Lease Intangibles and Accumulated Amortization for Each Intangible Asset or Liability Class

The following table summarizes the carrying values of certain lease intangible assets or liabilities included in Other assets, net or Other liabilities, net, respectively, on the accompanying Condensed Consolidated Balance Sheets and the related accumulated amortization or accretion, respectively, as of June 30, 2020, and December 31, 2019 (dollars in thousands):



	June 30, 2020						December 31, 2019
Intangible Asset or Liability	Deferred Rent Asset (Liability)			Accumulated (Amortization) Accretion			Deferred Rent Asset (Liability)			Accumulated (Amortization) Accretion
Above-market lease values and lease incentives⁽¹⁾	$	201		$	(103	)	$	111		$	(41	)
Below-market lease values and other deferred revenue⁽²⁾	(886		)	307			(886		)	257
	$	(685	)	$	204		$	(775	)	$	216


⁽¹⁾	Net above-market lease values and lease incentives are included as part of Other assets, net on the accompanying Condensed Consolidated Balance Sheets, and the related amortization is recorded as a reduction of Lease revenue on the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income.

⁽²⁾

Net below-market lease values and other deferred revenue are included as a part of Other liabilities, net on the accompanying Condensed Consolidated Balance Sheets, and the related accretion is recorded as an increase to Lease revenue on the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income.

The following table summarizes the carrying values of certain lease intangible assets and the related accumulated amortization as of June 30, 2020, and December 31, 2019 (dollars in thousands):



	June 30, 2020			December 31, 2019
Lease intangibles:
Leasehold interest – land	$	3,498		$	3,498
In-place leases	2,007			2,293
Leasing costs	1,584			2,066
Tenant relationships	414			414
Lease intangibles, at cost	7,503			8,271
Accumulated amortization	(3,823		)	(3,444		)
Lease intangibles, net	$	3,680		$	4,827

Schedule of Asset Acquisitions, by Acquisition

During the six months ended June 30, 2020, we acquired four new farms, which are summarized in the table below (dollars in thousands, except for footnotes):



Property Name	Property Location	Acquisition Date	Total Acres	No. of Farms	Primary Crop(s)	Lease Term	Renewal Options	Total Purchase Price		Acquisition Costs⁽¹⁾		Annualized Straight-line Rent⁽²⁾		New Long-term Debt
County Road 18	Phillips, CO	1/15/2020	1,325	2	Sugar beets, edible beans, potatoes, & corn	6.0 years	None	$	7,500	$	39	$	417	$	4,500
Lamar Valley	Chase, NE	5/7/2020	678	1	Potatoes, edible beans, & corn	6.7 years	2 (5 years)	3,500		47		204		2,100
Driver Road⁽³⁾	Kern, CA	6/5/2020	590	1	Pecans	4.7 years	2 (10 years)	14,169		53		784		8,500
			2,593	4				$	25,169	$	139	$	1,405	$	15,100


⁽¹⁾	Includes approximately $18,000 of aggregate external legal fees associated with negotiating and originating the leases associated with these acquisitions, which costs were expensed in the period incurred.


⁽²⁾	Annualized straight-line rent is based on the minimum cash rental payments guaranteed under the applicable leases, as required under GAAP, and excludes contingent rental payments, such as participation rents.

⁽³⁾

The lease provides for an initial term of 14.7 years and includes six tenant termination options throughout the initial term. The lease term stated above represents the term through the first available termination option, and the annualized straight-line rent amount represents the rent guaranteed through the noncancelable term of the lease.

During the six months ended June 30, 2019, we acquired 13 new farms, which are summarized in the table below (dollars in thousands, except for footnotes):



Property Name	Property Location	Acquisition Date	Total Acres	No. of Farms	Primary Crop(s)	Lease Term	Renewal Options	Total Purchase Price		Acquisition Costs⁽¹⁾		Annualized Straight-line Rent⁽²⁾		New Long-term Debt
Somerset Road	Lincoln, NE	1/22/2019	695	1	Popcorn & edible beans	4.9 years	1 (5 years)	$	2,400	$	33	$	126	$	1,440
Greenhills Boulevard⁽³⁾	Madera, CA	4/9/2019	928	1	Pistachios	10.6 years	2 (5 years)	28,550		141		1,721		17,130
Van Buren Trail	Van Buren, MI	5/29/2019	159	2	Blueberries & cranberries	10.6 years	2 (5 years)	2,682		26		206		1,609
Blue Star Highway	Allegran & Van Buren, MI	6/4/2019	357	8	Blueberries	10.6 years	2 (5 years)	5,100		30		390		3,060
Yolo County Line Road	Yolo, CA	6/13/2019	542	1	Olives for olive oil	14.6 years	1 (5 years)	9,190		68		624		5,514
			2,681	13				$	47,922	$	298	$	3,067	$	28,753


⁽¹⁾	Includes approximately $18,000 of external legal fees associated with negotiating and originating the lease associated with this acquisition, which cost was expensed in the period incurred.


⁽²⁾	Annualized straight-line rent is based on the minimum cash rental payments guaranteed under the applicable leases, as required under GAAP, and excludes contingent rental payments, such as participation rents.

⁽³⁾

Lease provides for a participation rent component based on the gross crop revenues earned on the farm. The rent figure above represents only the minimum cash guaranteed under the lease.

Recognized Identified Assets Acquired and Liabilities Assumed In Asset Acquisitions

The allocation of the aggregate purchase price for the farms acquired during each of the six months ended June 30, 2020 and 2019 is as follows (dollars in thousands):



Acquisition Period	Land and Land Improvements		Irrigation & Drainage Systems		Horticulture		Farm-related Facilities		Total Purchase Price
2020 Acquisitions	$	22,630	$	2,119	$	369	$	51	$	25,169
2019 Acquisitions	18,209		4,022		23,989		1,702		47,922

Summary of Leasing Activity

The following table summarizes certain leasing activity that occurred on our existing properties during the six months ended June 30, 2020 (dollars in thousands):

PRIOR LEASES

NEW LEASES⁽¹⁾⁽²⁾

Farm
Locations

Number

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

6,525

4,661

6 / 2 / 2

4,758

6.2

6 / 3 / 0


⁽¹⁾	In connection with certain of these leases, we committed to provide capital for certain improvements on these farms. See Note 7, “Commitments and Contingencies—Operating Obligations,” for additional information on these commitments.


⁽²⁾	Two of the prior leases encompassing four of our farms were renewed under a single lease encompassing the same four farms.


⁽³⁾	Annualized straight-line rent is based on the minimum cash rental payments guaranteed under the leases (presented on an annualized basis), as required under GAAP, and excludes contingent rental payments, such as participation rents.

⁽⁴⁾

“NNN” refers to leases under triple-net lease arrangements, “NN” refers to leases under partial-net lease arrangements, and “N” refers to leases under single-net lease arrangements. For a description of each of these types of lease arrangements, see “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview—Leases—General.”

The following table summarizes the leasing activity that occurred on our existing properties subsequent to June 30, 2020, through the date of this filing (dollars in thousands):

PRIOR LEASES

NEW LEASES

Farm
Locations

Number

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⁾

114

2 / 0 / 0

125

2.0

2 / 0 / 0


⁽¹⁾	Annualized straight-line rent is based on the minimum cash rental payments guaranteed under the leases (presented on an annualized basis), as required under GAAP, and excludes contingent rental payments, such as participation rents.

⁽²⁾

“NNN” refers to leases under triple-net lease arrangements, “NN” refers to leases under partial-net lease arrangements, and “N” refers to leases under single-net lease arrangements. For a description of each of these types of lease arrangements, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview—Leases—General.”

Summary of Geographic Locations of Properties

The following table summarizes the geographic locations (by state) of our farms owned and with leases in place as of the six months ended June 30, 2020 and 2019 (dollars in thousands):



	As of and For the six months ended June 30, 2020						As of and For the six months ended June 30, 2019
State	Number of Farms	Total Acres	% of Total Acres	Lease Revenue		% of Total Lease Revenue	Number of Farms	Total Acres	% of Total Acres	Lease Revenue		% of Total Lease Revenue
California⁽¹⁾	43	15,420	17.3%	$	13,815	49.5%	35	11,617	15.3%	$	7,906	48.8%
Florida	23	20,770	23.3%	6,669		23.9%	22	17,184	22.6%	4,689		29.0%
Arizona	6	6,280	7.1%	3,805		13.6%	6	6,280	8.3%	1,077		6.7%
Colorado	12	32,773	36.8%	1,662		6.0%	10	31,448	41.4%	1,411		8.7%
Nebraska	9	7,782	8.7%	762		2.7%	3	3,254	4.3%	162		1.0%
Michigan	15	962	1.1%	384		1.4%	15	962	1.3%	89		0.5%
Oregon	3	418	0.5%	263		0.9%	3	418	0.6%	257		1.6%
Washington	1	746	0.8%	245		0.9%	1	746	1.0%	245		1.5%
Texas	1	3,667	4.1%	225		0.8%	1	3,667	4.8%	263		1.6%
North Carolina	2	310	0.3%	88		0.3%	2	310	0.4%	93		0.6%
TOTALS	115	89,128	100.0%	$	27,918	100.0%	98	75,886	100.0%	$	16,192	100.0%

⁽¹⁾

According to the California Chapter of the American Society of Farm Managers and Rural Appraisers, there are eight distinct growing regions within California; our farms are spread across six of these growing regions.