NOTE 8. COMMITMENTS AND CONTINGENCIES

In connection with the execution of a new lease on Colding Loop in May 2013, we were required to install new wells and irrigation equipment on 121 of the 181 total farmable acres on the property. The installation of the new wells and irrigation equipment on these acres is substantially complete, and, as of December 31, 2013, we have expended or accrued approximately $616,000 related to the installation. In addition, if the tenant notifies us of their intention to fully utilize the remaining 60 acres of the property, we will be required to install new irrigation equipment to cover the additional 60 acres, which is estimated to cost approximately $83,000.

Coinciding with the extension of the lease on West Beach, we entered into an agreement with the tenants on the farm to provide oversight on certain capital improvements that will serve to protect the property against future flooding. The cost of these improvements, which we expect to be between $200,000 and $250,000, will be borne by us and will take place over the next year. In addition, under the terms of the agreement with our tenants, we are required to pay them $46,000 for their oversight role, to be paid in two equal installments over the course of the next year. These capital improvements are currently underway, and, as of December 31, 2013, we have expended or accrued approximately $23,000 related to these improvements.

In connection with the extension of the commercial lease on Trapnell Road, we agreed to incur the costs, up to a maximum of $450,000, of expanding and upgrading the cooling facility on the property. As of December 31, 2013, we have expended or accrued approximately $352,000 related to these improvements. This work was completed in January 2014, and the total cost to us of the improvements was $450,000. See Note 10, “Subsequent Events,” for further discussion on this completion.