NOTE 3. REAL ESTATE AND LEASE INTANGIBLES

All of our properties are wholly-owned on a fee-simple basis. The following table provides certain summary information about our 43 farms as of December 31, 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			$	4,786,649			$	4,677,258
West Gonzales		Oxnard, CA		9/15/1998		1		653		502			6/30/2020				12,198,297				23,796,549
West Beach		Watsonville, CA		1/3/2011		3		196		195			12/31/2023				9,299,418				4,556,294
Dalton Lane		Watsonville, CA		7/7/2011		1		72		70			10/31/2020				2,684,346				1,509,625
Keysville Road		Plant City, FL		10/26/2011		2		59		56			6/30/2020				1,240,565				897,600
Colding Loop		Wimauma, FL		8/9/2012		1		219		181			6/14/2018				3,957,326				2,640,000
Trapnell Road		Plant City, FL		9/12/2012		3		124		110			6/30/2017				3,943,865				2,522,250
38th Avenue		Covert, MI		4/5/2013		1		119		89			4/4/2020				1,274,852				720,943
Sequoia Street		Brooks, OR		5/31/2013		1		218		206			5/31/2028				3,109,843				1,666,610
Natividad Road		Salinas, CA		10/21/2013		1		166		166			10/31/2024				8,421,700				3,763,311
20th Avenue		South Haven, MI		11/5/2013		3		151		94			11/4/2018				1,890,436				1,075,232
Broadway Road		Moorpark, CA		12/16/2013		1		60		46			12/15/2023				2,880,849				1,612,848
Oregon Trail		Echo, OR		12/27/2013		1		1,895		1,640			12/31/2023				13,917,561				7,526,622
East Shelton		Willcox, AZ		12/27/2013		1		1,761		1,320			2/29/2024				7,875,996				3,602,026
Collins Road		Clatskanie, OR		5/30/2014		2		200		157			9/30/2024				2,423,608				1,451,563
Spring Valley		Watsonville, CA		6/13/2014		1		145		110			9/30/2022				5,777,020				3,171,933
McIntosh Road		Dover, FL		6/20/2014		2		94		78			6/30/2017	(2)			2,476,569				1,519,620
Naumann Road		Oxnard, CA		7/23/2014		1		68		66			7/31/2017				6,782,572				3,704,173
Sycamore Road		Arvin, CA		7/25/2014		1		326		322			10/31/2024				6,822,097				3,118,172
Wauchula Road		Duette, FL		9/29/2014		1		808		590			9/30/2024				13,771,697				7,742,812
Santa Clara Avenue		Oxnard, CA		10/29/2014		2		333		331			7/31/2017				24,242,056				13,440,396
Dufau Road		Oxnard, CA		11/4/2014		1		65		64			11/3/2017				6,061,157				3,675,000
Espinosa Road		Salinas, CA		1/5/2015		1		331		329			10/31/2016				16,541,996				10,178,000
Parrish Road		Duette, FL		3/10/2015		1		419		211			6/30/2025				4,283,210				2,374,680
Immokalee Exchange		Immokalee, FL		6/25/2015		2		2,678		1,644			6/30/2020				15,644,287				9,360,000
Holt County		Stuart, NE		8/20/2015		1		1,276		1,052			12/31/2018				5,478,661				3,301,000
Rock County		Bassett, NE		8/20/2015		1		1,283		1,049			12/31/2018				5,473,099				3,301,000
Bear Mountain		Arvin, CA		9/3/2015		3		854		841			1/9/2031				19,384,361				8,176,640
Corbitt Road		Immokalee, FL		11/2/2015		1		691		390			12/31/2021				3,820,031				3,760,000
Reagan Road		Willcox, AZ		12/22/2015		1		1,239		875			12/31/2025				5,732,435				3,891,000
						43		16,810		13,022						$	222,196,559			$	142,733,157

 

(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. Includes Total real estate, net and Lease intangibles, net; plus net above-market lease values included in Other assets; and less net below-market lease values, deferred revenue and unamortized tenant improvements included in Other liabilities, each as shown on the accompanying Consolidated Balance Sheet.

(2)	There are two leases in place on this property, one originally scheduled to expire on June 30, 2016, which lease was renewed subsequent to December 31, 2015 (see Note 10, “Subsequent Events”), and the other scheduled to expire on June 30, 2017.

 

Real Estate

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

 

		December 31, 2015				December 31, 2014
Real estate:
Land and land improvements		$	192,020,381			$	122,999,316
Irrigation systems			21,849,508				12,365,514
Buildings and improvements			11,184,647				10,479,301
Horticulture			1,490,695				1,559,340
Other site improvements			1,872,606				968,007
Real estate, at cost			228,417,837				148,371,478
Accumulated depreciation			(6,634,412	)			(4,431,290	)
Real estate, net		$	221,783,425			$	143,940,188

New Real Estate Activity

Certain acquisitions during the years ended December 31, 2015 and 2014 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.

2015 New Real Estate Activity

During the year ended December 31, 2015, 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 Cash  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				151,746	(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				27,589	(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				27,589	(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				119,128	(5)			828,608				21,138,196
Corbitt Road		Immokalee, FL		11/2/2015		691		1		Misc. Vegetables		6.1 years		1 (6 years)			3,760,000				74,857	(5)			226,938				3,760,000
Reagan Road		Willcox, AZ		12/22/2015		1,239		1		Corn		10.0 years		2 (5 years)			5,700,000				37,544	(5)			319,240				3,891,000
						8,771		11								$	75,966,980			$	631,948			$	3,944,694			$	57,303,876

 

(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.

 

We determined the fair value of assets acquired and liabilities assumed related to the properties acquired during the year ended December 31, 2015, to be as follows:

 

Property Name		Land and Land Improvements				Buildings and Improvements				Irrigation System				In-place Leases				Leasing Costs				Tenant Relationships				Above-(Below)- Market Leases & (Deferred Revenue)				Total Purchase Price
Espinosa Road		$	15,852,466			$	84,478			$	497,401			$	246,472			$	43,895			$	180,788			$	—			$	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			4,862,314				72,232				540,589				—				28,865				—				—				5,504,000
Bear Mountain			18,428,247				—				494,253				—				—				—				—				18,922,500
Corbitt Road			3,186,765				254,963				470,875				—				—				—				(152,603	)			3,760,000
Reagan Road			4,207,040				18,366				1,474,594				—				—				—				—				5,700,000
		$	68,041,105			$	802,018			$	6,023,326			$	530,283			$	326,394			$	396,457			$	(152,603	)		$	75,966,980

The allocation of the purchase price for the farms acquired during the year ended December 31, 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 year ended December 31, 2015:

 

Property Name		Acquisition Date				Operating Revenues				Earnings(1)
Espinosa Road			1/5/2015			$	769,972			$	383,201
Parrish Road			3/10/2015				203,341				57,613
Immokalee Exchange			6/25/2015				480,052				313,387
Holt County			8/20/2015				105,954				78,315
Rock County			8/20/2015				105,954				72,753
Bear Mountain			9/3/2015				271,599				249,958
Corbitt Road			11/2/2015				29,970				8,916
Reagan Road			12/22/2015				8,582				3,473
						$	1,975,424			$	1,167,616

 

(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 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)				Long-term Debt Issued
Collins Road		Clatskanie, OR		5/30/2014		200		2		Blueberries		10.3 years		3 (5 years)		$	2,591,333			$	60,329	(2)		$	181,172			$	—
Spring Valley		Watsonville, CA		6/13/2014		145		1		Strawberries		2.3 years		None			5,900,000				49,582	(2)			270,901				—
McIntosh Road		Dover, FL		6/20/2014		94		2		Strawberries		3.0 years		1 (3 years) / None(3)			2,666,000				60,939	(2)			133,154				1,599,600
Naumann Road		Oxnard, CA		7/23/2014		68		1		Strawberries		3.0 years		1 (3 years)			6,888,500				91,103	(2)			329,667				—
Sycamore Road		Arvin, CA		7/25/2014		326		1		Misc. Vegetables		1.3 years(4)		None(4)			5,800,000				44,434	(2)			184,304				—
Wauchula Road		Duette, FL		9/29/2014		808		1		Strawberries		10.0 years		2 (5 years)			13,765,000				132,555	(5)			888,439				8,259,000
Santa Clara Avenue		Oxnard, CA		10/29/2014		333		2		Strawberries		0.8 years		1 (2 years)			24,592,000				100,603	(2)			1,231,422				25,000,000
Dufau Road		Oxnard, CA		11/4/2014		65		1		Strawberries		3.0 years		1 (3 years)			6,125,600				66,474	(2)			304,607				3,675,000
						2,039		11								$	68,328,433			$	606,019			$	3,523,666			$	38,533,600

 

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

(2)	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 $21,408 of direct leasing costs in connection with these acquisitions.

(3)	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.

(4)

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.

(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.

We determined the fair value of assets acquired 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				Tenant Relationships				Above-(Below)- Market Leases				Total Purchase Price
Collins Road		$	1,252,388			$	682,385			$	—			$	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				33,592				537,254				—				34,674				16,766				27,966				45,674				2,666,000
Naumann Road			6,219,293				433,087				71,586				—				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				1,887,530				3,489,046				—				—				—				—				—				13,765,000
Santa Clara Avenue			23,672,902				163,140				187,314				—				310,119				29,153				229,372				—				24,592,000
Dufau Road			5,859,721				3,021				88,827				—				71,654				30,128				52,720				19,529				6,125,600
		$	58,779,690			$	3,208,536			$	4,641,882			$	520,993			$	669,210			$	197,222			$	455,857			$	(144,957	)		$	68,328,433

 

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

 

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

 

Property Name		Acquisition Date				Operating Revenues				Earnings (1)
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	)(2)
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)	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.

(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

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, 2015 and 2014:

 

Intangible Assets and Liabilities		2015				2014
In-place leases			4.1				2.2
Leasing costs			5.5				5.0
Tenant relationships			9.5				4.7
Above-market lease values			—				3.0
Below-market lease and sale inducement values			6.2				1.5
All intangible assets and liabilities			6.2				3.2

 

Pro-Forma Information

We acquired 11 farms during each of the years ended December 31, 2015 and 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 Years Ended December 31,
		2015				2014
		(Unaudited)				(Unaudited)
Operating Data:
Total operating revenue		$	13,993,765			$	13,831,669
Total operating expenses			(7,282,204	)			(7,767,114	)
Other expenses			(4,861,169	)			(4,695,902	)
Net income before income taxes			1,850,392				1,368,653
Provision for income taxes			—				(26,502	)
Net income		$	1,850,392			$	1,342,151
Share and Per-share Data:
Earnings per share of common stock – basic and diluted		$	0.20			$	0.18
Weighted-average common shares outstanding – basic and diluted			9,216,469				7,608,416

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 $40,022 related to deferred rent asset balances and rental income, including $32,497 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 immediately entered into a new lease agreement with a different 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. In addition, we expensed $20,255 of unamortized intangible assets related to the old lease.

On October 5, 2015, we executed a lease amendment with the tenant on East Shelton to provide for additional annual rent in connection with the completion of certain irrigation upgrades we performed on the property. The amendment also adjusted the rent due for the next two years as stipulated in the lease as the first minimum rent reset period. The portion of the amendment related to the recovery of capital expenditures resulted in additional annualized, straight-line rents of $16,268 throughout the entire lease term, while the portion of the amendment related to the market rent reset period will result in an additional $78,780 of annualized, straight-line rental income for the two-year period ending on February 28, 2018, at which time the next market reset period will begin.

On November 6, 2015, we executed an agreement for a perpetual right-of-way easement that will allow for the installation of a natural gas pipeline underneath approximately 2.6 nonfarmable acres on Collins Road. In return, we received $17,021 of gross consideration, $14,483 of which was recognized as a capital gain during the year ended December 31, 2015, in accordance with GAAP.

For further leasing activity on our existing properties, see Note 9, “Subsequent Events.”

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. During the year ended December 31, 2015, we recovered an additional $97,232 of insurance proceeds, and such recovery is included in Property and casualty recovery, net on the accompanying Consolidated Statements of Operations.

Repairs have been completed on each of these properties. During the year ended December 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 also completed during the year ended December 31, 2015, at no cost to us. During the year ended December 31, 2014, we expended $496,784 in repairs and upgrades to the cooler, of which $407,096 was capitalized as a real estate addition and $89,688 was recorded in repairs and maintenance expense.

Each of these insurance claims has been closed, and 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 December 31, 2015 and 2014:

 

		December 31, 2015								December 31, 2014
		Lease Intangibles				Accumulated Amortization				Lease Intangibles				Accumulated Amortization
In-place leases		$	1,225,955			$	(573,149	)		$	869,207			$	(263,428	)
Leasing costs			677,112				(183,851	)			357,210				(80,617	)
Tenant relationships			886,743				(269,269	)			501,670				(66,467	)
		$	2,789,810			$	(1,026,269	)		$	1,728,087			$	(410,512	)
		Deferred Rent Asset (Liability)				Accumulated (Amortization) Accretion				Deferred Rent Asset (Liability)				Accumulated (Amortization) Accretion
Above-market lease values(1)		$	19,528			$	(7,540	)		$	65,203			$	(9,027	)
Below-market lease values and deferred revenue(2)			(202,579	)			23,205				(371,707	)			162,194
		$	(183,051	)		$	15,665			$	(306,504	)		$	153,167

 

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

(2)	Below-market lease values and deferred revenue are included as a part of Other liabilities in the accompanying Consolidated Balance Sheets, and the related accretion is recorded as an increase to 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 or accretion of above- and below-market lease values and deferred revenue for each of the five succeeding fiscal years and thereafter is as follows:

 

Period				Estimated Amortization Expense				Estimated Net Increase to Rental Income
For the fiscal years ending December 31:		2016		$	624,604			$	29,324
		2017			348,854				22,814
		2018			246,624				23,845
		2019			207,158				29,323
		2020			117,966				29,324
		Thereafter			218,335				32,756
				$	1,763,541			$	167,386

 

Lease Expirations

The following table summarizes the future lease expirations by year for our properties as of December 31, 2015:

 

Year		Number of Expiring Leases				Expiring Leased Acreage				% of Total Acreage				Rental Revenue for the Year Ended December 31, 2015				% of Total Rental Revenue
2016(1)			4				368				2.2	%		$	816,811				6.9	%
2017			8				647				3.9	%			2,160,141				18.2	%
2018			5				2,929				17.4	%			581,084				4.9	%
2019			0				0				0.0	%			—				0.0	%
2020			6				3,888				23.1	%			3,763,641				31.6	%
2021			2				691				4.1	%			29,970				0.2	%
Thereafter			13				8,287				49.3	%			4,536,444				38.2	%
Totals			38				16,810				100.0	%		$	11,888,091				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, for which we recorded $32,064 of rental revenue during the year ended December 31, 2015, and a residential lease on one of our properties that is not expected to be renewed upon its expiration in 2016 and for which no rental revenue was recorded during the year ended December 31, 2015. In addition, one of the agricultural leases originally set to expire in 2016 was renewed subsequent to December 31, 2015. See Note 10, “Subsequent Events,” for further discussion on this lease renewal.

Future Lease Payments

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, 2015, are as follows:

 

				Tenant Lease
Period				Payments
For the fiscal years ending December 31:		2016		$	12,876,180
		2017			10,895,846
		2018			10,860,980
		2019			10,310,834
		2020			8,303,119
		Thereafter			25,233,615
				$	78,480,574

In accordance with the lease terms, substantially all operating expenses are required to be paid by the tenant; however, we would be required to pay real estate property taxes on the respective parcels of land in the event the tenants fail to pay them.

 

Portfolio Diversification and Concentrations

Diversification

The following table summarizes the geographic locations, by state, of our properties with leases in place as of December 31, 2015 and 2014:

 

		As of and For the Year Ended December 31, 2015																				As of and For the Year Ended December 31, 2014
		Number								% of								% of Total				Number								% of								% of Total
		of				Total				Total				Rental				Rental				of				Total				Total				Rental				Rental
State		Farms				Acres				Acres				Revenue				Revenue				Farms				Acres				Acres				Revenue				Revenue
California			18				3,576				21.3	%		$	7,754,945				65.2	%			14				2,391				29.7	%		$	4,778,579				66.6	%
Florida			13				5,092				30.3	%			2,166,660				18.2	%			9				1,304				16.2	%			759,398				10.6	%
Oregon			4				2,313				13.8	%			1,168,725				9.8	%			4				2,313				28.8	%			1,080,105				15.1	%
Arizona			2				3,000				17.8	%			338,446				2.9	%			1				1,761				21.9	%			299,785				4.2	%
Michigan			4				270				1.6	%			247,407				2.1	%			4				270				3.4	%			252,451				3.5	%
Nebraska			2				2,559				15.2	%			211,908				1.8	%			—				—				—				—				—
			43				16,810				100.0	%		$	11,888,091				100.0	%			32				8,039				100.0	%		$	7,170,318				100.0	%

Concentrations

Credit Risk

Our farms are leased to 33 different, third-party tenants, with certain tenants leasing more than one farm. Dole Food Company (“Dole”) leases two of our farms, and aggregate rental revenue attributable to Dole accounted for approximately $2.9 million, or 24.8% of the total rental revenue recorded during the year ended December 31, 2015. In addition, a separate tenant accounted for approximately $1.3 million, or 10.7% of the total rental revenue recorded during the year ended December 31, 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 year ended December 31, 2015.

Geographic Risk

18 of our 43 farms owned as of December 31, 2015, are located in California, and 13 farms are located in Florida. As of December 31, 2015, our farmland in California accounted for 3,576 acres, or 21.3% of the total acreage we owned. Furthermore, these farms accounted for approximately $7.8 million, or 65.2%, of the total rental revenue recorded during the year ended December 31, 2015. However, these farms are spread across three of the many different growing regions within California. As of December 31, 2015, our farmland in Florida accounted for 5,092 acres, or 30.3% of the total acreage we owned, and these farms accounted for approximately $2.2 million, or 18.2%, of the total rental revenue recorded during the year ended December 31, 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 year ended December 31, 2015.