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, 2015

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.

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, 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

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, 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 Condensed Consolidated Statements of Operations as Properties Acquired


	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

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, 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.

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 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

Summary of Future Lease Expirations by Year for Properties

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 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, 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

Summary of Geographic Locations of Properties

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	%

2015 New Real Estate Activity [Member]

Summary Information of Farms

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.

Fair Value of Acquired Assets and Liabilities Assumed Related to Properties 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

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 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 [Member]

Summary Information of 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⁾		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.

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

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 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.