NOTE 3. REAL ESTATE AND INTANGIBLE ASSETS

All of our properties are wholly-owned on a fee-simple basis. The following table provides certain summary information about our 41 farms as of September 30, 2015:

 

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		$	4,796,549			$	4,929,782
West Gonzales		Oxnard, CA		9/15/1998		1			653				502			6/30/2020			12,253,806				25,081,321
West Beach		Watsonville, CA		1/3/2011		3			196				195			12/31/2023			9,309,576				4,802,288
Dalton Lane		Watsonville, CA		7/7/2011		1			72				70			10/31/2020			2,687,404				1,591,130
Keysville Road		Plant City, FL		10/26/2011		2			59				56			6/30/2020			1,240,944				897,600
Colding Loop		Wimauma, FL		8/9/2012		1			219				181			6/14/2018			3,985,529				2,640,000
Trapnell Road		Plant City, FL		9/12/2012		3			124				110			6/30/2017			3,984,454				2,522,250
38th Avenue		Covert, MI		4/5/2013		1			119				89			4/4/2020			1,284,338				759,866
Sequoia Street		Brooks, OR		5/31/2013		1			218				206			5/31/2028			3,118,870				1,756,590
Natividad Road		Salinas, CA		10/21/2013		1			166				166			10/31/2024			8,291,741				3,966,492
20th Avenue		South Haven, MI		11/5/2013		3			151				94			11/4/2018			1,909,662				1,133,283
Broadway Road		Moorpark, CA		12/16/2013		1			60				60			12/15/2023			2,868,979				1,699,925
Oregon Trail		Echo, OR		12/27/2013		1			1,895				1,640			12/31/2023			13,936,423				7,932,983
East Shelton		Willcox, AZ		12/27/2013		1			1,761				1,320			2/29/2024			7,924,620				3,796,499
Collins Road		Clatskanie, OR		5/30/2014		2			200				157			9/30/2024			2,450,944				1,529,932
Spring Valley		Watsonville, CA		6/13/2014		1			145				110			9/30/2022			5,792,070				3,343,186
McIntosh Road		Dover, FL		6/20/2014		2			94				78			6/30/2017 (2)			2,489,125				1,519,620
Naumann Road		Oxnard, CA		7/23/2014		1			68				66			7/31/2017			6,801,894				3,904,161
Sycamore Road		Arvin, CA		7/25/2014		1			326				322			10/31/2024			6,650,335				3,286,522
Wauchula Road		Duette, FL		9/29/2014		1			808				590			9/30/2024			13,781,341				7,846,050
Santa Clara Avenue		Oxnard, CA		10/29/2014		2			333				331			7/31/2017			24,277,677				14,166,041
Dufau Road		Oxnard, CA		11/4/2014		1			65				64			11/3/2017			6,076,035				3,675,000
Espinosa Road		Salinas, CA		1/5/2015		1			331				329			10/31/2016			16,633,724				10,178,000
Parrish Road		Duette, FL		3/10/2015		1			419				211			6/30/2025			4,326,273				2,374,680
Immokalee Exchange		Immokalee, FL		6/25/2015		2			2,678				1,644			6/30/2020			15,703,523				9,360,000
Holt County		Stuart, NE		8/20/2015		1			1,276				1,052			12/31/2018			5,497,143				3,301,000
Rock County		Bassett, NE		8/20/2015		1			1,283				1,049			12/31/2018			5,495,291				3,301,000
Bear Mountain		Arvin, CA		9/3/2015		3			854				841			1/9/2031			19,031,194				8,790,193
						41			14,880				11,771					$	212,599,464			$	140,085,394

 

(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 depreciation and amortization accumulated through September 30, 2015.

(2)	There are two leases in place on this property, one expiring on June 30, 2016, and the other expiring on June 30, 2017.

 

Real Estate

The following table sets forth the components of our investments in tangible real estate assets as of September 30, 2015, and December 31, 2014:

 

		September 30, 2015				December 31, 2014
Real estate:
Land and land improvements		$	184,176,187			$	122,999,316
Irrigation systems			19,468,718				12,365,514
Buildings and improvements			10,906,636				10,479,301
Horticulture			1,559,339				1,559,340
Other site improvements			1,172,746				968,007
Real estate, at cost			217,283,626				148,371,478
Accumulated depreciation			(6,078,467	)			(4,431,290	)
Real estate, net		$	211,205,159			$	143,940,188

Real estate depreciation expense on these tangible assets was $595,539 and $1,647,177 for the three and nine months ended September 30, 2015, respectively, and $331,430 and $887,939 for the three and nine months ended September 30, 2014, respectively.

New Real Estate Activity

2015 New Real Estate Activity

During the nine months ended September 30, 2015, we acquired nine new farms in six 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)				Long-term Debt Issued
Espinosa Road(2)		Salinas, CA		1/5/2015			331				1			Strawberries		1.8 years		None		$	16,905,500			$	89,885	(3)		$	778,342			$	10,178,000
Parrish Road		Duette, FL		3/10/2015			419				1			Strawberries		10.3 years		2 (5 years)			3,913,280				103,610	(3)			251,832				2,374,680
Immokalee Exchange		Immokalee, FL		6/25/2015			2,678				2			Misc. Vegetables		5.0 years		2 (5 years)			15,757,700				151,386	(3)			960,104				9,360,000
Holt County		Stuart, NE		8/20/2015			1,276				1			Misc. Vegetables		3.4 years		None			5,504,000				23,789	(3)			289,815				3,301,000
Rock County		Bassett, NE		8/20/2015			1,283				1			Misc. Vegetables		3.4 years		None			5,504,000				23,789	(3)			289,815				3,301,000
Bear Mountain		Arvin, CA		9/3/2015			854				3			Almonds(4)		15.4 years		1 (10 years)			18,922,500				113,938	(5)			828,389				21,138,196
							6,841				9									$	66,506,980			$	506,397			$	3,398,297			$	49,652,876

 

(1)	Annualized straight-line amount is based on the minimum cash rental payments guaranteed under the lease.

(2)	In connection with this acquisition, our Adviser earned a finder’s fee of $320,905, which fee was fully credited back to us by our Adviser during the three months ended March 31, 2015. See Note 4, “Related-Party Transactions” for further discussion on this fee.

(3)	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 $11,825 of direct leasing costs in connection with these acquisitions.

(4)	Property currently consists of open ground and old grape vineyards. However, we will be removing the existing vineyards and converting the property into an almond orchard, which development is expected to be completed by June 30, 2016.

(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.

As noted in the table above, certain acquisitions during the nine months ended September 30, 2015, were accounted for as business combinations in accordance with Accounting Standards Codification (“ASC”) 805, as there was a prior leasing history on the property. As such, the fair value of all assets acquired and liabilities assumed were determined in accordance with ASC 805, and all acquisition-related costs were expensed as incurred, other than those costs that directly related to reviewing or assigning leases we assumed upon acquisition, which were capitalized as part of leasing costs. For acquisitions accounted for as asset acquisitions under ASC 360, all acquisition-related costs were capitalized and included as part of the fair value allocation of the identifiable tangible assets acquired, other than those costs that directly related to originating new leases we executed upon acquisition, which were capitalized as part of leasing costs.

We determined the fair value of acquired assets and liabilities assumed related to the properties acquired during the nine months ended September 30, 2015, to be as follows:

 

Property Name		Land and Land Improvements				Buildings and Improvements				Irrigation System				In-place Leases				Leasing Costs				Tenant Relationships				Total Purchase Price
Espinosa Road		$	15,852,466			$	84,478			$	497,401			$	246,472			$	43,894			$	180,789			$	16,905,500
Parrish Road			2,403,064				42,619				1,299,851				54,405				77,449				35,892				3,913,280
Immokalee Exchange			14,410,840				273,107				515,879				229,406				148,691				179,777				15,757,700
Holt County			4,690,369				56,253				729,884				—				27,494				—				5,504,000
Rock County			4,862,313				72,232				540,589				—				28,866				—				5,504,000
Bear Mountain			18,428,247				—				494,253				—				—				—				18,922,500
		$	60,647,299			$	528,689			$	4,077,857			$	530,283			$	326,394			$	396,458			$	66,506,980

The allocation of the purchase price for the farms acquired during the nine months ended September 30, 2015, is preliminary and may change during the measurement period if we obtain new information regarding the assets acquired or liabilities assumed at the acquisition date.

Below is a summary of the total operating revenues and earnings recognized on the properties acquired during the three and nine months ended September 30, 2015:

 

				For the three months ended September 30, 2015								For the nine months ended September 30, 2015
Property Name		Acquisition Date		Operating Revenues				Earnings (1)				Operating Revenues				Earnings (1)
Espinosa Road		1/5/2015		$	194,586			$	81,522			$	575,387			$	280,393
Parrish Road		3/10/2015			62,958				8,978				140,133				37,927
Immokalee Exchange		6/25/2015			240,026				152,860				240,026				151,637
Holt County		8/20/2015			33,500				24,343				33,500				24,343
Rock County		8/20/2015			33,500				22,491				33,500				22,491
Bear Mountain		9/3/2015			64,430				59,023				64,430				59,023
				$	629,000			$	349,217			$	1,086,976			$	575,814

 

(1)	Earnings are calculated as net income less interest expense and any acquisition-related costs that are required to be expensed if the acquisition is treated as a business combination under ASC 805.

 

2014 New Real Estate Activity

During the nine months ended September 30, 2014, we acquired eight new farms in six 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)				Long-term Debt Issued
Collins Road		Clatskanie, OR		5/30/2014			200				2			Blueberries		10.3 years		3 (5 years each)		$	2,591,333			$	60,870	(4)		$	181,172			$	—
Spring Valley		Watsonville, CA		6/13/2014			145				1			Strawberries		2.3 years		None			5,900,000				50,896	(4)			270,901				2,204,660	(6)
McIntosh Road		Dover, FL		6/20/2014			94				2			Strawberries		3.0 years		1 (3 years) / None (2)			2,666,000				60,676	(4)			133,154				1,599,600	(7)
Naumann Road		Oxnard, CA		7/23/2014			68				1			Strawberries		3.0 years		1 (3 years)			6,888,500				91,103	(4)			329,668				2,574,595	(6)
Sycamore Road		Arvin, CA		7/25/2014			326				1			Vegetables		1.3 years (3)		None (3)			5,800,000				44,434	(4)			184,304	(3)			2,167,293	(6)
Wauchula Road		Duette, FL		9/29/2014			808				1			Strawberries		10.0 years		2 (5 years each)			13,765,000				123,500	(5)			888,439				8,259,000	(7)
							1,641				8									$	37,610,833			$	431,479			$	1,987,638			$	16,805,148

 

(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 separate tenants leasing each of the 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. We incurred $17,558 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 MetLife Credit Facility. Amount represents property’s proportionate share of the total borrowings outstanding under the MetLife Credit Facility in relation to all properties pledged as collateral under the facility.

(7)	Represents new debt issued from Farm Credit (as defined in Note 5, “Borrowings—Farm Credit Notes Payable”).

As noted in the table above, certain acquisitions during the nine months ended September 30, 2014, were accounted for as business combinations in accordance with ASC 805, as there was a prior leasing history on the property. As such, the fair value of all assets acquired and liabilities assumed were determined in accordance with ASC 805, and all acquisition-related costs were expensed as incurred, other than those costs that directly related to reviewing or assigning leases we assumed upon acquisition, which were capitalized as part of leasing costs. For acquisitions accounted for as asset acquisitions under ASC 360, all acquisition-related costs were capitalized and included as part of the fair value allocation of the identifiable tangible assets acquired, other than those costs that directly related to originating new leases we executed upon acquisition, which were capitalized as part of leasing costs.

We determined the fair value of acquired assets and liabilities assumed related to the properties acquired during the nine months ended September 30, 2014, to be as follows:

 

Property Name		Land and Land Improvements				Buildings and Improvements				Irrigation System				Site Improvements				Horticulture(1)				In-place Leases				Leasing Costs				Customer Relationships				Above (Below)- Market Leases				Total Acquisition Cost
Collins Road		$	1,252,387			$	555,667			$	—			$	126,719			$	520,993			$	45,086			$	65,685			$	24,796			$	—			$	2,591,333
Spring Valley			5,576,138				5,781				200,855				—				—				83,487				17,498				66,217				(49,976	)			5,900,000
McIntosh Road			1,970,074				30,745				537,254				2,846				—				34,674				16,766				27,966				45,675				2,666,000
Naumann Road			6,219,293				416,148				71,586				16,939				—				75,520				34,228				54,786				—				6,888,500
Sycamore Road			5,840,750				—				67,000				—				—				48,670				3,764				—				(160,184	)			5,800,000
Wauchula Road			8,388,424				1,775,661				3,489,046				111,869				—				—				—				—				—				13,765,000
		$	29,247,066			$	2,784,002			$	4,365,741			$	258,373			$	520,993			$	287,437			$	137,941			$	173,765			$	(164,485	)		$	37,610,833

 

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

 

Below is a summary of the total revenue and earnings recognized on the properties acquired during the three and nine months ended September 30, 2014:

 

								For the Three Months Ended								For the Nine Months Ended
								September 30, 2014								September 30, 2014
Property Name		Acquisition Date						Rental Revenue				Earnings (1)				Rental Revenue				Earnings (1)
Collins Road			5/30/2014					$	45,293			$	10,662			$	61,365			$	18,940
Spring Valley			6/13/2014						67,725				36,366				81,270				44,700
McIntosh Road			6/20/2014						20,549				(41,294	) (2)			24,733				(40,343	) (2)
Naumann Road			7/23/2014						62,920				44,514				62,920				44,514
Sycamore Road			7/25/2014						34,252				22,052				34,252				22,052
Wauchula Road			9/29/2014						4,868				4,868				4,868				4,868
								$	235,607			$	77,168			$	269,408			$	94,731

 

(1)	Earnings are calculated as net income less interest expense, 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.

(2)	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.

Acquired Intangibles and Liabilities

For acquisitions treated as business combinations, the purchase price was allocated to the identifiable intangible assets and liabilities in accordance with ASC 805. No purchase price was allocated to any intangible assets or liabilities related to acquisitions treated as asset acquisitions under ASC 360; however, the direct costs we incurred in connection with originating new leases were capitalized over the lives of the respective leases. 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 nine months ended September 30, 2015 and 2014:

 

		Weighted-Average
		Amortization Period (in Years)
Intangible Assets		2015				2014
In-place leases			4.1				3.7
Leasing commissions			5.5				6.3
Tenant relationships			9.5				6.9
Above-market lease values			—				3.0
Below-market lease values			—				1.5
All intangible assets			6.2				4.2

 

Pro-Forma Financials

We acquired nine farms during the nine months ended September 30, 2015, and 11 farms during the year ended December 31, 2014. The following table reflects pro-forma consolidated financial information as if each farm was acquired on January 1 of the respective prior fiscal year. In addition, pro-forma earnings have been adjusted to assume that acquisition-related costs related to these farms were incurred at the beginning of the previous fiscal year.

 

		For the Nine Months Ended September 30,
		2015				2014
		(Unaudited)				(Unaudited)
Operating Data:
Total operating revenue		$	10,080,652			$	9,906,857
Total operating expenses			(5,205,311	)			(5,606,338	)
Other expenses			(3,459,110	)			(2,738,257	)
Net income before income taxes			1,416,231				1,562,262
Provision for income taxes			—				(20,103	)
Net income		$	1,416,231			$	1,542,159
Share and Per-share Data:
Earnings per share of common stock – basic and diluted		$	0.15			$	0.23
Weighted average common shares outstanding – basic and diluted			9,196,650				6,603,545

The pro-forma consolidated results are prepared for informational purposes only. They are not necessarily indicative of what our consolidated financial condition or results of operations actually would have been assuming the acquisitions had occurred at the beginning of the respective previous periods, nor do they purport to represent our consolidated financial position or results of operations for future periods.

Significant Existing Real Estate Activity

On February 9, 2015, we terminated the lease with the tenant occupying Keysville Road and, on February 10, 2015, entered into a lease with a new tenant to occupy the property. The new lease is scheduled to expire on June 30, 2020, and provides for rent escalations over its life, with minimum, annualized straight-line rental income of $73,749, representing a 7.9% increase over that of the previous lease. In connection with the termination of the previous lease, during the three months ended March 31, 2015, we wrote off an aggregate amount of $32,497 related to deferred rent asset balances and rental income that had been recorded in prior periods.

On February 23, 2015, we renewed the lease with the tenant occupying Spring Valley, which lease was originally set to expire on September 30, 2016. The lease was renewed for an additional six years, through September 30, 2022, and provides for rent escalations over its life, with minimum annualized, straight-line rental income of $327,904, representing a 32.5% increase over that of the previous lease. The new lease also grants the tenant two options to extend the lease for an additional six years each.

On April 8, 2015, the tenant occupying Santa Clara exercised its option to extend the two existing leases, which were originally set to expire on July 31, 2015. The leases were each extended for an additional two years, through July 31, 2017, and provide for aggregate annualized, straight-line rental income of $1,302,783, representing a 5.8% increase over that of the previous leases.

On April 13, 2015, we renewed the lease with the tenant occupying Dalton Lane, which was originally set to expire on October 31, 2015. The lease was renewed for an additional five years, through October 31, 2020, and provides for rent escalations over its life, with annualized, straight-line rental income of $163,989, representing a 16.8% increase over that of the previous lease. The new lease also grants the tenant one option to extend the lease for an additional five years.

On September 10, 2015, we terminated the lease with the tenant occupying one of the McIntosh Road farms and entered into a lease agreement with a new tenant to occupy the property. The new lease is scheduled to expire on June 30, 2016, and provides for minimum rental payments of $43,200 over its term. In connection with the termination of the previous lease, during the three months ended September 30, 2015, we wrote off an aggregate amount of $27,274 related to unamortized above-market lease value and deferred rent asset balances.

 

Involuntary Conversions and Property and Casualty Recovery

In April 2014, two separate fires occurred on two of our properties, partially damaging a structure on each property. One occurred on 20^th Avenue, destroying the majority of a residential house, and the other occurred on West Gonzales, damaging a portion of a cooling facility. During the year ended December 31, 2014, we wrote down the carrying values of these properties by an aggregate amount of $232,737, and, in accordance with ASC 605, “Revenue Recognition – Gains and Losses,” we also recorded a corresponding property and casualty loss. We recovered $495,700 of insurance proceeds during the year ended December 31, 2014, and, in accordance with ASC 450, “Contingencies,” we recorded these amounts as an offset to the property and casualty loss recorded earlier in the year, resulting in a net recovery.

Repairs have been completed on each of these properties. During the three months ended March 31, 2015, we expended $35,648 in repairs and upgrades to the cooler as a result of the fire on West Gonzales, of which $25,682 was capitalized as a real estate addition and $9,966 was recorded in repairs and maintenance expense, included in Property operating expense on the accompanying Condensed Consolidated Statements of Operations. Repairs on 20^th Avenue were completed during the three months ended September 30, 2015, at no cost to us.

During the nine months ended September 30, 2015, we received an additional $97,232 of insurance proceeds related to the fire on West Gonzales, including $76,423 received during the three months ended September 30, 2015, and such recovery is included in Property and casualty recovery, net on the accompanying Condensed Consolidated Statements of Operations. No further recoveries are expected for either of these fires.

Intangible Assets and Liabilities

The following table summarizes the carrying value of lease intangibles and the accumulated amortization for each intangible asset or liability class as of September 30, 2015, and December 31, 2014:

 

		September 30, 2015								December 31, 2014
		Lease Intangibles				Accumulated Amortization				Lease Intangibles				Accumulated Amortization
In-place leases		$	1,385,378			$	(645,647	)		$	869,207			$	(263,428	)
Leasing costs			701,502				(179,153	)			357,210				(80,617	)
Tenant relationships			886,743				(217,259	)			501,670				(66,467	)
		$	2,973,623			$	(1,042,059	)		$	1,728,087			$	(410,512	)
		Deferred Rent Asset (Liability)				Accumulated (Amortization) Accretion				Deferred Rent Asset (Liability)				Accumulated (Amortization) Accretion
Above-market lease values (1)		$	65,203			$	(51,587	)		$	65,203			$	(9,027	)
Below-market lease values (2)			(371,707	)			322,518				(371,707	)			162,194
		$	(306,504	)		$	270,931			$	(306,504	)		$	153,167

 

(1)	Above-market lease values are included as a part of Other assets in the accompanying Condensed Consolidated Balance Sheets, and the related amortization is recorded as a reduction of rental income.

(2)	Below-market lease values are included as a part of Other liabilities in the accompanying Condensed Consolidated Balance Sheets, and the related accretion is recorded as an increase to rental income.

Total amortization expense related to these lease intangible assets was $193,651 and $645,448 for the three and nine months ended September 30, 2015, respectively, and $72,493 and $134,502 for the three and nine months ended September 30, 2014, respectively. In addition, during the three months ended September 30, 2015, we wrote off $34,155 of intangible assets due to the termination of a lease that was assumed in connection with a farm acquired in June 2014, of which $20,255 was immediately charged to amortization expense. During the three months ended September 30, 2014, we wrote off $46,526 of intangible assets due to the termination of a lease that was assumed in connection with a farm acquired in June 2014, of which $43,328 was immediately charged to amortization expense.

Total amortization related to above-market lease values was $4,496 and $15,286, for the three and nine months ended September 30, 2015, respectively, and $3,768 and $4,228 for the three and nine months ended September 30, 2014, respectively. In addition, in connection with a lease terminated during the three months ended September 30, 2015, we wrote off the remaining unamortized above-market lease value of $27,274 and recorded it as a decrease to rental income. Total accretion related to below-market lease values was $52,591 and $160,324 for the three and nine months ended September 30, 2015, respectively, and $48,781 and $89,655 for the three and nine months ended September 30, 2014, respectively.

Portfolio Diversification and Concentrations

Diversification

The following table summarizes the geographic locations, by state, of our properties with leases in place as of September 30, 2015 and 2014:

 

		As of and For the Nine Months Ended September 30, 2015																				As of and For the Nine Months Ended September 30, 2014
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			18				3,576				24.0	%		$	5,652,357				66.6	%			11				1,993				26.1	%		$	3,260,272				67.5	%
Florida			12				4,401				29.6	%			1,458,433				17.2	%			9				1,304				17.1	%			384,861				8.0	%
Oregon			4				2,313				15.6	%			876,244				10.3	%			4				2,313				30.3	%			775,438				16.1	%
Arizona			1				1,761				11.8	%			243,953				2.9	%			1				1,761				23.0	%			217,899				4.5	%
Michigan			4				270				1.8	%			185,036				2.2	%			4				270				3.5	%			189,563				3.9	%
Nebraska			2				2,559				17.2	%			67,000				0.8	%			—				—				—				—				—
			41				14,880				100.0	%		$	8,483,023				100.0	%			29				7,641				100.0	%		$	4,828,033				100.0	%

Concentrations

Credit Risk

Our farms are leased to 31 different, third-party tenants. Two of our farms are leased to the same tenant, Dole Food Company (“Dole”). Aggregate rental income attributable to Dole accounted for approximately $2.2 million, or 26.1%, of the rental revenue recorded during the nine months ended September 30, 2015. In addition, a separate tenant accounted for approximately 11.2% of the total rental revenue recorded during the nine months ended September 30, 2015. If either tenant fails to make rental payments or elects to terminate their lease, and the land cannot be re-leased on satisfactory terms, there would likely be a material adverse effect on our financial performance and ability to continue operations. No other individual tenant represented greater than 10.0% of the total rental revenue recorded during the nine months ended September 30, 2015.

Geographic Risk

18 of our 41 farms owned as of September 30, 2015, are located in California, and 12 farms are located in Florida. As of September 30, 2015, our farmland in California accounted for 3,576 acres, or 24.0% of the total acreage we owned. Furthermore, these farms accounted for approximately $5.7 million, or 66.6%, of the rental revenue recorded during the nine months ended September 30, 2015. However, these farms are spread across three of the many different growing regions within California. As of September 30, 2015, our farmland in Florida accounted for 4,401 acres, or 29.6% of the total acreage we owned, and these farms accounted for approximately $1.5 million, or 17.2%, of the rental revenue recorded during the nine months ended September 30, 2015. In addition, our farms in Oregon accounted for approximately 10.3% of the rental revenue recorded during the nine months ended September 30, 2015. 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 the total rental revenue recorded during the nine months ended September 30, 2015.

 

Active Purchase and Sale Agreements

As of September 30, 2015, we have entered into three separate agreements to purchase an aggregate 1,688 acres of cropland in Florida and Georgia for an aggregate purchase price of approximately $7.7 million. 692 acres, accounting for approximately $3.8 million of the aggregate purchase price, closed subsequent to September 30, 2015. See Note 9, “Subsequent Events” for further detail on this transaction. The remaining prospective purchases are expected to close during the three months ending December 31, 2015, subject to customary conditions and termination rights for these types of transactions, including a due diligence inspection period. There can be no assurance that these prospective acquisitions will be consummated by that time, on the terms currently anticipated, or at all.