Gladstone Land Corporation Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Real Estate and Lease Intangibles (Tables)

Real Estate and Lease Intangibles (Tables)

12 Months Ended

Dec. 31, 2014

The following table provides certain summary information about our 32 farms as of December 31, 2014:


Property Name	Location	Date Acquired	Number of Farms		Total Acres		Farm Acres		Lease Expiration Date	Net Cost Basis⁽¹⁾		Encumbrances
San Andreas	Watsonville, CA	6/16/1997		1		307		238	12/31/2020	$	4,826,248	$	4,220,586
West Gonzales	Oxnard, CA	9/15/1998		1		653		502	6/30/2020		12,406,298		21,473,134
West Beach	Watsonville, CA	1/3/2011		3		196		195	12/31/2023		8,979,337		4,111,433
Dalton Lane	Watsonville, CA	7/7/2011		1		72		70	11/1/2015		2,700,026		1,362,231
Keysville Road	Plant City, FL	10/26/2011		2		59		50	7/1/2016		1,232,260		—
Colding Loop	Wimauma, FL	8/9/2012		1		219		181	6/14/2018		3,925,704		—
Trapnell Road	Plant City, FL	9/12/2012		3		124		110	6/30/2017		4,106,218		2,655,000
38th Avenue	Covert, MI	4/5/2013		1		119		89	4/4/2020		1,449,670		650,552
Sequoia Street	Brooks, OR	5/31/2013		1		218		206	5/31/2028		3,521,564		1,503,888
Natividad Road	Salinas, CA	10/21/2013		1		166		166	10/31/2024		7,398,003		3,395,874
20th Avenue	South Haven, MI	11/5/2013		3		151		94	11/4/2018		1,884,981		970,250
Broadway Road	Moorpark, CA	12/16/2013		1		60		60	12/15/2023		2,935,348		1,455,375
Oregon Trail	Echo, OR	12/27/2013		1		1,895		1,640	12/31/2023		13,993,009		6,791,748
East Shelton	Willcox, AZ	12/27/2013		1		1,761		1,320	2/29/2024		7,760,059		3,250,336
Collins Road	Clatskanie, OR	5/30/2014		2		200		157	9/30/2024		2,532,950		—
Spring Valley	Watsonville, CA	6/13/2014		1		145		110	9/30/2016		5,882,738		2,862,237
McIntosh Road	Dover, FL	6/20/2014		2		94		78	6/30/2017		2,553,874		1,599,600
Naumann Road	Oxnard, CA	7/23/2014		1		68		64	7/31/2017		6,859,860		3,342,510
Sycamore Road	Arvin, CA	7/25/2014		1		326		322	10/31/2024		5,939,523		2,813,724
Wauchula Road	Duette, FL	9/29/2014		1		808		590	9/30/2024		13,772,371		8,155,762
Santa Clara Avenue	Oxnard, CA	10/29/2014		2		333		331	7/31/2015		24,497,797		12,128,121
Dufau Road	Oxnard, CA	11/4/2014		1		65		64	11/3/2017		6,099,925		3,675,000

				32		8,039		6,637		$	145,257,763	$	86,417,361

⁽¹⁾

Consists of the initial acquisition price (including the costs allocated to both tangible and intangible assets, excluding those allocated to above- and below-market lease values), plus subsequent improvements and other capitalized costs associated with the properties, and adjusted for depreciation and amortization accumulated through December 31, 2014.

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 December 31, 2014 and 2013:


	2014			2013
Real estate:
Land and land improvements	$	122,999,316		$	63,944,307
Irrigation system		12,365,514			6,007,845
Buildings and improvements		11,447,308			7,487,051
Horticulture		1,559,340			1,038,850

Real estate, gross		148,371,478			78,478,053
Accumulated depreciation		(4,431,290	)		(3,166,870	)

Real estate, net	$	143,940,188		$	75,311,183

Weighted Average Amortization Period for Intangible Assets Acquired and Liabilities Assumed

The following table shows the weighted-average amortization period, in years, for the intangible assets acquired and liabilities assumed in connection with the new properties acquired during the years ended December 31, 2014 and 2013:


Intangible Assets and Liabilities	2014		2013
In-place leases		2.2		2.0
Leasing commissions		5.1		7.0
Tenant relationships		4.7		—
Above-market lease values		3.0		—
Below-market lease values		1.5		2.0

All intangible assets and liabilities		3.3		2.9

Pro-Forma Condensed Consolidated Statements of Operations as Properties Acquired

The table below reflects pro-forma financials for all farms acquired, regardless of whether they were treated as asset acquisitions or business combinations.


	For the Years Ended December 31,
	2014			2013
	*(Unaudited)*			*(Unaudited)*
Operating Data:
Total operating revenue	$	8,547,496		$	9,113,902
Total operating expenses		(6,287,653	)		(5,183,279	)
Other expenses		(2,902,815	)		(2,760,914	)

Net income before income taxes		(642,972	)		1,169,708
Provision for income taxes		(26,502	)		(1,519,730	)

Net income	$	(669,474	)	$	(350,022	)

Share and Per-share Data:
Earnings per share of common stock - basic and diluted	$	(0.09	)	$	(0.05	)

Weighted average common shares outstanding - basic and diluted		7,563,060			7,443,197

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

The following table summarizes the carrying value of lease intangibles and the accumulated amortization for each intangible asset or liability class as of December 31, 2014 and 2013:


	2014						2013
	Lease Intangibles			Accumulated Amortization			Lease Intangibles			Accumulated Amortization
In-place leases	$	869,207		$	(263,428	)	$	397,728		$	(241,697	)
Leasing costs		357,210			(80,617	)		146,558			(34,727	)
Tenant relationships		501,670			(66,467	)		93,187			(49,985	)

	$	1,728,087		$	(410,512	)	$	637,473		$	(326,409	)


	Deferred Rent Asset (Liability)			Accumulated (Amortization) Accretion			Deferred Rent Liability			Accumulated Accretion
Above-market lease values	$	65,203		$	(9,027	)	$	—		$	—
Below-market lease values		(371,707	)		162,194			(260,356	)		114,469

	$	(306,504	)	$	153,167		$	(260,356	)	$	114,469

Summary of Estimated Aggregate Amortization Expense and Estimated Net Impact on Rental Income

The estimated aggregate amortization expense to be recorded related to in-place leases, leasing costs and tenant relationships and the estimated net impact on rental income from the amortization of above- and below-market lease values for each of the five succeeding fiscal years and thereafter is as follows:


Period	Estimated Amortization Expense		Estimated Net Increase (Decrease) in Rental Revenue
For the fiscal years ending December 31: 2015	$	676,448	$	171,636
2016		289,465		(5,284	)
2017		161,781		(13,015	)
2018		41,254		—
2019		38,542		—
Thereafter		110,085		—

	$	1,317,575	$	153,337

Summarizes Lease Expirations by Year for Properties with Leases

The following table summarizes the lease expirations by year for our properties with leases in place as of December 31, 2014:


Year	Number of Expiring Leases		Expiring Leased Acreage		% of Total Acreage			Rental Revenue for the Year Ended December 31, 2014		% of Total Rental Revenue
2015⁽¹⁾		4		405		5.0	%	$	386,642		5.4	%
2016		2		204		2.5	%		217,331		3.0	%
2017		7		351		4.4	%		424,737		5.9	%
2018		3		370		4.6	%		364,803		5.1	%
2019		0		0		0.0	%		—		0.0	%
Thereafter		12		6,709		83.5	%		5,776,805		80.6	%

Totals		28		8,039		100.0	%	$	7,170,318		100.0	%

⁽¹⁾	Includes a surface area lease on a portion of one property leased to an oil company that is renewed on a year-to-year basis.

Future Operating Lease Payments from Tenants under Non-Cancelable Leases

Future operating lease payments from tenants under all non-cancelable leases, excluding tenant reimbursement of expenses, for each of the five succeeding fiscal years and thereafter as of December 31, 2014, are as follows:


Period	Tenant Lease Payments
For the fiscal years ending December 31: 2015	$	7,735,500
2016		8,205,815
2017		7,494,621
2018		6,882,291
2019		6,919,095
Thereafter		19,581,336

	$	56,818,658

Summary of Geographic Locations of Properties

The following table summarizes the geographic locations of our properties with leases in place as of December 31, 2014 and 2013:


	As of and For the Year Ended December 31, 2014												As of and For the Year Ended December 31, 2013
State	Number of Farms		Total Acres		% of Total Acres			Rental Revenue		% of Total Rental Revenue			Number of Farms		Total Acres		% of Total Acres			Rental Revenue		% of Total Rental Revenue
California		14		2,391		29.7	%	$	4,778,579		66.6	%		8		1,454		24.2	%	$	3,362,020		83.5	%
Oregon		4		2,313		28.8	%		1,080,105		15.1	%		2		2,113		35.2	%		123,138		3.0	%
Florida		9		1,304		16.2	%		759,398		10.6	%		6		402		6.7	%		454,135		11.3	%
Arizona		1		1,761		21.9	%		299,785		4.2	%		1		1,761		29.4	%		3,715		0.1	%
Michigan		4		270		3.4	%		252,451		3.5	%		4		270		4.5	%		84,679		2.1	%

		32		8,039		100.0	%	$	7,170,318		100.0	%		21		6,000		100.0	%	$	4,027,687		100.0	%

Schedule of Purchase Agreements

As of December 31, 2014, we were entered into the following purchase agreements:

Date Entered Into

Gross
Acres

State

Primary
Crop(s)

Purchase
Price

9/29/2014

Strawberries

3,800,000

⁽¹⁾

12/17/2015

331

Strawberries

16,964,021

⁽²⁾

394

20,764,021

⁽¹⁾	Agreement was terminated on January 20, 2015, and the related deposit of $100,000, which deposit is included in Other Assets on our Consolidated Balance Sheet as of December 31, 2014, was returned to us.

⁽²⁾	Acquisition was completed on January 5, 2015. See Note 10, “Subsequent Events,” for further discussion on the acquisition of this property.

2014 New Real Estate Activity [Member]

Summary Information of Thirty-Two Farms

During the year ended December 31, 2014, we acquired 11 new farms in 8 separate transactions, which are summarized in the table below.


Property Name	Property Location	Acquisition Date		Total Acreage		Number of Farms		Primary Crop(s)	Lease Term	Renewal Options	Total Purchase Price		Acquisition Costs			Annualized Straight- line Rent⁽¹⁾		Debt Issued / Encumbrances
Collins Road	Clatskanie, OR		5/30/2014		200		2	Blueberries	10.3 years	3 (5 years each)	$	2,591,333	$	60,869	⁽⁴⁾	$	181,172	$	—
Spring Valley	Watsonville, CA		6/13/2014		145		1	Strawberries, Misc. Vegetables and Lilies	2.3 years	None		5,900,000		49,582	⁽⁴⁾		270,901		2,862,237	⁽⁶⁾
McIntosh Road	Dover, FL		6/20/2014		94		2	Strawberries	3.0 years	1 (3 years) /None⁽²⁾		2,666,000		60,939	⁽⁴⁾		133,154		1,599,600	⁽⁷⁾
Naumann Road	Oxnard, CA		7/23/2014		68		1	Strawberries and Raspberries	3.0 years	1 (3 years)		6,888,500		91,103	⁽⁴⁾		329,667		3,342,510	⁽⁶⁾
Sycamore Road	Arvin, CA		7/25/2014		326		1	Misc. Vegetables and Grain	1.3 years	None⁽³⁾		5,800,000		44,434	⁽⁴⁾		184,304		2,813,724	⁽⁶⁾
Wauchula Road	Duette, FL		9/29/2014		808		1	Strawberries, Misc. Vegetables, and Melons	10.0 years	2 (5 years each)		13,765,000		132,555	⁽⁵⁾		888,439		8,259,000	⁽⁷⁾
Santa Clara Avenue	Oxnard, CA		10/29/2014		333		2	Strawberries and Misc. Vegetables	0.8 years	1 (2 years)		24,592,000		100,603	⁽⁴⁾		1,231,422		12,128,121	⁽⁶⁾
Dufau Road	Oxnard, CA		11/4/2014		65		1	Strawberries and Misc. Vegetables	3.0 years	1 (3 years)		6,125,600		61,474	⁽⁴⁾		304,607		3,675,000	⁽⁷⁾

					2,039		11				$	68,328,433	$	601,559		$	3,523,666	$	34,680,192

⁽¹⁾	Annualized straight-line amount is based on the minimum rental payments required per the lease and includes the amortization of any above-market and below-market lease values recorded.

⁽²⁾	This property has a separate tenant leasing each of the property’s two farms. One lease provides for one 3-year renewal option, while the other does not include a renewal option.

⁽³⁾

Upon acquisition of this property, we assumed the in-place lease, which expires October 31, 2015. In addition, we executed a 9-year, follow-on lease with a new tenant that commences November 1, 2015. Under the terms of the follow-on lease, the tenant has one 3-year renewal option, and annualized, straight-line rents will be $311,760.

⁽⁴⁾	Acquisition accounted for as a business combination under ASC 805. As such, all acquisition-related costs were expensed as incurred, other than direct leasing costs, which were capitalized. In aggregate, we incurred $21,409 of direct leasing costs in connection with these acquisitions.

⁽⁵⁾	Acquisition accounted for as an asset acquisition under ASC 360. As such, all acquisition-related costs were capitalized and allocated among the identifiable assets acquired.

⁽⁶⁾	Acquisition funded through a draw on our New MetLife Credit Facility. Amount represents property’s proportionate share of the total borrowings outstanding under the New MetLife Credit Facility as of December 31, 2014, in relation to all properties pledged as collateral under the facility.

⁽⁷⁾	Represents new debt issued under various facilities; see Note 5, “Borrowings.”

Fair Value of Acquired Assets and Liabilities Assumed Related to Properties Acquired

We determined the fair value of acquired assets and liabilities assumed related to the properties acquired during the year ended December 31, 2014, to be as follows:


Property Name	Land and Land Improvements		Buildings and Improvements		Irrigation System		Horticulture⁽¹⁾		In-place Leases		Leasing Costs(2)		Customer Relationships		Above- (Below)- Market Leases			Total Acquisition Cost
Collins Road	$	1,252,388	$	682,385	$	—	$	520,993	$	45,086	$	71,085	$	24,796	$	—		$	2,596,733
Spring Valley		5,576,138		5,781		200,855		—		83,487		17,998		66,217		(49,976	)		5,900,500
McIntosh Road		1,970,074		33,592		537,254		—		34,674		18,041		27,966		45,674			2,667,275
Naumann Road		6,219,293		433,087		71,586		—		75,520		41,012		54,786		—			6,895,284
Sycamore Road		5,840,750		—		67,000		—		48,670		7,364		—		(160,184	)		5,803,600
Wauchula Road		8,466,185		1,904,941		3,521,229		—		—		5,200		—		—			13,897,555
Santa Clara Avenue		23,672,902		163,140		187,314		—		310,119		30,353		229,372		—			24,593,200
Dufau Road		5,859,721		3,021		88,827		—		71,654		32,778		52,720		19,529			6,128,250

	$	58,857,451	$	3,225,947	$	4,674,065	$	520,993	$	669,210	$	223,831	$	455,857	$	(144,957	)	$	68,482,397

⁽¹⁾	Horticulture acquired on Collins Road consists of various types of blueberry bushes.

⁽²⁾

Leasing commissions represent the allocable portion of the purchase price, as well as direct costs that were incurred related to reviewing and assigning leases we assumed upon acquisition. Direct leasing costs incurred in connection with properties acquired during the year ended December 31, 2014, that were accounted for as business combinations under ASC 805 totaled $21,409.

Summary of Total Operating Revenues and Earnings Recognized on Properties Acquired

Below is a summary of the total operating revenues and earnings recognized on the properties acquired during the year December 31, 2014:


Property Name	Acquisition Date	Operating Revenues⁽¹⁾		Earnings⁽²⁾
Collins Road	5/30/2014	$	106,658	$	33,303
Spring Valley	6/13/2014		148,996		81,073
McIntosh Road	6/20/2014		58,021		(22,902	)⁽³⁾
Naumann Road	7/23/2014		145,337		104,726
Sycamore Road	7/25/2014		80,328		39,574
Wauchula Road	9/29/2014		226,978		101,794
Santa Clara Avenue	10/29/2014		212,078		73,833
Dufau Road	11/4/2014		48,229		32,807

		$	1,026,625	$	444,208

⁽¹⁾	Includes the amortization of any above—and below—market lease values recorded.

⁽²⁾	Earnings are calculated as net income less interest expense (if debt was issued to acquire the property), income taxes and any acquisition—related costs that are required to be expensed if the acquisition is treated as a business combination under ASC 805.

⁽³⁾	Includes $43,328 of lease intangibles that were written off during the three months ended September 30, 2014, related to the termination of a lease in September 2014 that we had assumed upon acquisition. The property was immediately re—leased to a new tenant at similar rental rates.

2013 New Real Estate Activity [Member]

Fair Value of Acquired Assets and Liabilities Assumed Related to Properties Acquired

We determined the fair value of acquired assets and liabilities assumed related to the properties acquired during the year ended December 31, 2013, to be as follows:


Property Name	Land and Land Improvements		Buildings and Irrigation Improvements		System		Horticulture⁽¹⁾		In-place Leasing		Leases Costs⁽²⁾		Below- Market Leases			Total Acquisition Cost
38th Avenue	$	646,522	$	42,660	$	239,768$		446,408	$	—	$	3,842	$	—		$	1,379,200
Sequoia Street		2,494,911		279,496		424,268		—		—		9,535		—			3,208,210
Natividad Road		7,186,774		19,199		144,915		—		110,753		29,941		(161,547	)		7,330,035
20th Avenue		805,677		281,160		441,415		488,604		—		2,623		—			2,019,479
Broadway Road		2,851,353		50,114		22,727		103,334		—		—		—			3,027,528
Oregon Trail		12,941,092		—		1,118,640		—		—		8,726		—			14,068,458
East Shelton		6,175,702		131,434		441,573		—		—		1,982		—			6,750,691

	$	33,102,031	$	804,063	$	2,833,306	$	1,038,346	$	110,753	$	56,649	$	(161,547	)	$	37,783,601

⁽¹⁾	Horticulture acquired on 38th Avenue and 20th Avenue consists of various types of high-bush variety blueberry bushes. Horticulture acquired on Broadway Road consits of an orchard of lemon trees.

⁽²⁾

Summary of Total Operating Revenues and Earnings Recognized on Properties Acquired

Below is a summary of the total operating revenues and earnings recognized on the properties acquired during the year December 31, 2013:


Property Name	Acquisition Date	Revenues Operating⁽¹⁾		Earnings⁽²⁾
38th Avenue	4/5/2013	$	64,494	$	35,996
Sequoia Street	5/31/2013		112,944		83,262
Natividad Road	10/21/2013		86,510		63,133
20th Avenue	11/5/2013		20,184		6,919
Broadway Road	12/16/2013		7,396		3,713
Oregon Trail	12/27/2013		10,195		10,154
East Shelton	12/27/2013		3,715		3,283

		$	305,438	$	206,460

⁽¹⁾	Includes the amortization of any below-market lease values recorded.

⁽²⁾	Earnings are calculated as net income less interest expense (if debt was issued to acquire the property), income taxes and any acquisition-related costs that are required to be expensed if the acquisition is treated as a business combination under ASC 805.

Summarized Information of Acquisition of Properties

During the year ended December 31, 2013, we acquired nine new farms in seven separate transactions, which are summarized in the table below.


Property Name	Property Location	Acquisition Date		Total Acreage		Number of Farms		Primary Crop(s)	Lease Term	Renewal Options	Total Purchase Price		Acquisition Costs			Annualized Straight- line Rent⁽¹⁾
38th Avenue	Covert, MI		4/5/2013		119		1	Blueberries	7 years	1 (7 years)	$	1,341,000	$	38,200	⁽⁴⁾	$	87,286
Sequoia Street	Brooks, OR		5/31/2013		218		1	Blueberries	15 years	3 (5 years each)		3,100,000		108,211	⁽⁴⁾		193,617
Natividad Road	Salinas, CA		10/21/2013		166		1	Strawberries & Raspberries	2 years⁽³⁾	None⁽³⁾		7,325,120		47,850	⁽⁵⁾		439,575
20th Avenue	South Haven, MI		11/5/2013		151		3	Blueberries	5 years	1 (5 years)		1,985,000		34,479	⁽⁴⁾		129,755
Broadway Road	Moorpark, CA		12/16/2013		60		1	Lemons⁽²⁾	10 years	1 (10 years)		3,000,000		27,528	⁽⁴⁾		171,958
Oregon Trail	Echo, OR		12/27/2013		1,895		1	Corn, Onions & Potatoes	10 years	3 (5 years each)		13,855,000		213,458	⁽⁴⁾		758,480
East Shelton	Willcox, AZ		12/27/2013		1,761		1	Corn & Dry edible beans	10 years	None		6,700,000		50,691	⁽⁴⁾		290,284

					4,370		9				$	37,306,120	$	520,417		$	2,070,955

⁽¹⁾	Annualized straight-line amount is based on the minimum rental payments required per the lease and includes the amortization of any above-market and below-market lease values recorded.

⁽²⁾	Beginning in 2015, this property will be farmed for blueberries and avocados.

⁽³⁾

Upon acquisition of the property, we assumed a lease with two years remaining on it. T his lease originally provided for one, three-year extension option; however, the right to this option was waived by the tenant. In connection with assuming this lease, we recorded a below-market lease liability of $161,547. In addition, the Company executed a nine-year, follow-on lease with a separate tenant to commence at the expiration of the assumed lease. T he follow-on lease includes one, five-year renewal option and provides for prescribed rent escalations over the term of the lease, with annualized, straight-line rents of $413,476.

⁽⁴⁾	Acquisition accounted for as an asset acquisition under ASC 360. As such, all acquisition-related costs were capitalized and allocated among the identifiable assets acquired.

⁽⁵⁾	Acquisition accounted for as a business combination under ASC 805. As such, all acquisition-related costs were expensed as incurred, other than direct leasing costs, which were capitalized. We incurred $4,915 of direct leasing costs in connection with this acquisition.