| Schedule of Operating Lease Obligations |
In connection with the execution of certain lease agreements, we have committed to provide capital improvements on certain of our farms, which are summarized in the table below (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Farm
Location
|
|
Farm
Gross
Acreage
|
|
Total
Commitment
|
|
Obligated
Completion
Date(1)
|
|
Amount Expended
or Accrued as of
September 30, 2019
|
Salinas, CA |
|
324 |
|
$ |
100 |
|
|
Q4 2019 |
|
$ |
— |
|
Ventura, CA |
|
413 |
|
1,000 |
|
|
Q1 2020 |
|
100 |
|
Santa Barbara, CA |
|
361 |
|
4,000 |
|
(2) |
Q1 2020 |
|
1,725 |
|
Madera, CA |
|
928 |
|
500 |
|
(2) |
Q2 2020 |
|
176 |
|
Columbia, OR |
|
200 |
|
1,800 |
|
(2) |
Q4 2020 |
|
1,023 |
|
Hillsborough, FL |
|
55 |
|
2,250 |
|
(2) |
Q2 2021 |
|
— |
|
Collier & Hendry, FL |
|
5,630 |
|
2,000 |
|
(2) |
Q2 2025 |
|
— |
|
|
|
(1) |
Our obligation to provide capital to fund these improvements does not extend beyond these respective dates. |
|
|
(2) |
Pursuant to contractual agreements, we will earn additional rent on the cost of these capital improvements as the funds are disbursed by us. |
|
| Schedule of Operating Ground Leases |
The following table summarizes certain leasing activity that occurred on our existing properties during the nine months ended September 30, 2019 (dollars in thousands, except footnotes):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PRIOR LEASES |
|
NEW LEASES |
Farm
Locations |
Number
of
Leases
|
Total
Farm
Acres
|
|
Total
Annualized
Straight-line
Rent(1)
|
# of Leases
with
Participation
Rents
|
Lease
Structures
(# of NNN
/ NN)(2)
|
|
Total
Annualized
Straight-line
Rent(1)
|
Wtd. Avg.
Term
(Years)
|
# of Leases
with
Participation
Rents |
Lease
Structures
(# of NNN
/ NN)(2)
|
AZ, CA,
FL, MI, NE |
16 |
7,364 |
|
$ |
3,527 |
|
1 |
10 / 6 |
|
$ |
3,804 |
|
4.0 |
3 |
10 / 6 |
|
|
(1) |
Annualized straight-line rent is based on the minimum cash rental payments guaranteed under the applicable leases (presented on an annualized basis), as required under GAAP, and excludes contingent rental payments, such as participation rents. |
|
|
(2) |
“NNN” refers to leases under triple-net lease arrangements, and “NN” refers to leases under partial-net lease arrangements. For a description of each of these types of lease arrangements, see “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview—Leases—General.”
|
As of September 30, 2019, we had recorded the following as a result of these operating ground leases (dollars in thousands, except for footnotes):
|
|
|
|
|
|
Operating lease right-of-use assets(1)
|
|
$ |
188 |
|
Operating lease liabilities(2)
|
|
$ |
171 |
|
|
|
|
Weighted-average remaining lease term (years) |
|
4.8 |
|
Weighted-average discount rate |
|
4.20 |
% |
|
|
(1) |
Operating lease right-of-use assets are shown net of accrued lease payments of approximately $17,000 and are included within Other assets, net on the accompanying Condensed Consolidated Balance Sheet.
|
|
|
(2) |
Included within Other liabilities, net on the accompanying Condensed Consolidated Balance Sheet. |
The following table sets forth the components of our lease revenues for the three and nine months ended September 30, 2019 and 2018 (dollars in thousands, except for footnotes):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, |
|
For the Nine Months Ended September 30, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Fixed lease payments(1)
|
|
$ |
10,131 |
|
|
$ |
7,124 |
|
|
$ |
26,236 |
|
|
$ |
20,427 |
|
Variable lease payments(2)
|
|
881 |
|
|
891 |
|
|
967 |
|
|
917 |
|
Lease revenues, net(3)
|
|
$ |
11,012 |
|
|
$ |
8,015 |
|
|
$ |
27,203 |
|
|
$ |
21,344 |
|
|
|
(1) |
Fixed lease payments include contractual rents under lease agreements with tenants recognized on a straight-line basis over the respective lease terms and includes the amortization of above-market lease values and lease incentives and the accretion of below-market lease values and other deferred revenue. |
|
|
(2) |
Variable lease payments include participation rents, which are generally based on a percentage of the gross crop revenues earned on the farm, and reimbursements of certain property operating expenses by tenants. Participation rents are generally recognized when all contingencies have been resolved and when actual results become known or estimable, enabling us to estimate and/or measure our share of such gross revenues. During the three and nine months ended September 30, 2019, we recorded participation rents of approximately $848,000 and $875,000, respectively, and reimbursements of certain property operating expenses by tenants of approximately $33,000 and $93,000, respectively. During the three and nine months ended September 30, 2018, we recorded participation rents of approximately $889,000 and $906,000, respectively, and reimbursements of certain property operating expenses by tenants of approximately $2,000 and $11,000, respectively.
|
|
|
(3) |
Reflected as a line item on our accompanying Condensed Consolidated Statements of Operations and Comprehensive Income. |
|
| Schedule of Future Lease Payments |
Future lease payments due under the remaining non-cancelable terms of these leases as of September 30, 2019, and December 31, 2018, are as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
Future Lease Payments(1)
|
Period |
|
September 30, 2019 |
|
December 31, 2018 |
2019 |
|
$ |
— |
|
|
$ |
47 |
|
2020 |
|
47 |
|
|
47 |
|
2021 |
|
47 |
|
|
47 |
|
2022 |
|
30 |
|
|
30 |
|
2023 |
|
30 |
|
|
30 |
|
Thereafter |
|
31 |
|
|
31 |
|
Total undiscounted lease payments |
|
185 |
|
|
232 |
|
Less: imputed interest |
|
(14 |
) |
|
— |
|
Present value of lease payments |
|
$ |
171 |
|
|
$ |
232 |
|
|
|
(1) |
Annual lease payments are set at the beginning of each year to then-current market rates (as determined by the State of Arizona). The amounts shown above represent estimated amounts based on the lease rates currently in place. |
|