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, 2016

Property, Plant and Equipment [Line Items]

The following table provides certain summary information about our 58 farms as of December 31, 2016:



Property Name	Location	Date Acquired	No. of Farms	Total Acres	Farm Acres	Lease Expiration Date		Net Cost Basis⁽¹⁾		Encumbrances⁽²⁾
San Andreas	Watsonville, CA	6/16/1997	1	307	238	12/31/2020		$	4,747,051	$	6,917,247
West Gonzales	Oxnard, CA	9/15/1998	1	653	502	6/30/2020		12,030,677		26,956,919
West Beach	Watsonville, CA	1/3/2011	3	196	195	12/31/2023		9,270,197		6,032,246
Dalton Lane	Watsonville, CA	7/7/2011	1	72	70	10/31/2020		2,672,113		2,085,347
Keysville Road	Plant City, FL	10/26/2011	2	61	56	6/30/2020		1,239,052		897,600
Colding Loop	Wimauma, FL	8/9/2012	1	219	181	8/4/2017		3,837,942		2,640,000
Trapnell Road	Plant City, FL	9/12/2012	3	124	110	6/30/2017	⁽³⁾	3,808,117		2,389,500
38th Avenue	Covert, MI	4/5/2013	1	119	89	4/4/2020		1,236,907		543,207
Sequoia Street	Brooks, OR	5/31/2013	1	218	206	5/31/2028		3,073,737		1,705,915
Natividad Road	Salinas, CA	10/21/2013	1	166	166	10/31/2024		8,914,338		4,323,279
20th Avenue	South Haven, MI	11/5/2013	3	151	94	11/4/2018		1,813,535		914,501
Broadway Road	Moorpark, CA	12/16/2013	1	60	46	12/15/2023		2,870,878		1,698,795
Oregon Trail	Echo, OR	12/27/2013	1	1,895	1,640	12/31/2023		13,972,826		8,137,938
East Shelton	Willcox, AZ	12/27/2013	1	1,761	1,320	2/29/2024		7,681,498		4,236,814
Collins Road	Clatskanie, OR	5/30/2014	2	200	157	9/30/2024		2,314,502		1,556,381
Spring Valley	Watsonville, CA	6/13/2014	1	145	110	9/30/2022		5,716,822		3,522,201
McIntosh Road	Dover, FL	6/20/2014	2	94	78	6/30/2017	⁽⁴⁾	2,428,657		1,439,640
Naumann Road	Oxnard, CA	7/23/2014	1	68	66	7/31/2017		6,752,465		3,524,744
Sycamore Road	Arvin, CA	7/25/2014	1	326	322	10/31/2024		6,810,009		3,933,167
Wauchula Road	Duette, FL	9/29/2014	1	808	590	9/30/2024		13,318,605		7,329,863
Santa Clara Avenue	Oxnard, CA	10/29/2014	2	333	331	7/31/2017		24,099,573		13,732,770
Dufau Road	Oxnard, CA	11/4/2014	1	65	64	11/3/2017		6,001,644		3,675,000
Espinosa Road	Salinas, CA	1/5/2015	1	331	329	10/31/2020		16,062,427		10,178,000
Parrish Road	Duette, FL	3/10/2015	1	419	412	6/30/2025		4,094,292		2,374,680
Immokalee Exchange	Immokalee, FL	6/25/2015	2	2,678	1,644	6/30/2020		15,408,261		9,360,000
Holt County	Stuart, NE	8/20/2015	1	1,276	1,052	12/31/2018		5,404,736		3,301,000
Rock County	Bassett, NE	8/20/2015	1	1,283	1,049	12/31/2018		5,384,329		3,301,000
Bear Mountain	Arvin, CA	9/3/2015	3	854	841	1/9/2031		26,837,231		11,279,182
Corbitt Road	Immokalee, FL	11/2/2015	1	691	390	12/31/2021		3,733,152		2,165,760
Reagan Road	Willcox, AZ	12/22/2015	1	1,239	875	12/31/2025		5,717,113		3,210,000
Gunbarrel Road	Alamosa, CO	3/3/2016	3	6,191	4,730	2/28/2021	⁽⁵⁾	24,704,494		15,303,500
Calaveras Avenue	Coalinga, CA	4/5/2016	1	453	435	10/31/2025		15,187,423		9,161,418
Orange Avenue	Fort Pierce, FL	7/1/2016	1	401	400	6/30/2023		5,088,923		3,072,602
Lithia Road	Lithia, FL	8/11/2016	1	72	55	5/31/2021		1,694,521		1,020,000
Baca County	Edler, CO	9/1/2016	5	7,384	6,785	12/31/2020		6,381,955		3,051,727
Diego Ranch	Stanislaus, CA	9/14/2016	1	1,357	1,309	11/15/2019		13,999,584		7,273,282
Nevada Ranch	Merced, CA	9/14/2016	1	1,130	1,021	11/15/2019		13,234,157		6,713,799
Central Avenue	Kerman, CA	10/13/2016	1	197	195	10/31/2026		6,491,229		3,900,000
Horse Creek	Baca, CO	12/28/2016	1	16,595	11,742	12/31/2020		11,711,818		5,900,005
			58	50,592	39,895			$	325,746,790	$	208,759,029

⁽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 Investments in 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⁾	Excludes approximately $1.4 million of deferred financing costs related to mortgage notes and bonds payable included in Mortgage notes and bonds payable, net on the accompanying Consolidated Balance Sheet.


⁽³⁾	There are three agricultural leases and one commercial lease on this property. Each of the agricultural leases expires on June 30, 2017, and the commercial lease expires on June 30, 2018.


⁽⁴⁾	There are two leases in place on this property, one expiring on June 30, 2017, and the other expiring on June 30, 2019.


⁽⁵⁾	The lease agreement on this property includes two terms. The rental period for the land expires on February 28, 2021, and the rental period for the facilities expires on June 30, 2021.

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, 2016 and 2015:



	December 31, 2016			December 31, 2015
Real estate:
Land and land improvements	$	265,984,509		$	192,020,381
Irrigation systems	33,968,693			21,849,508
Buildings and improvements	14,670,759			11,184,647
Horticulture	17,759,193			1,490,695
Other site improvements	4,993,440			1,872,606
Real estate, at cost	337,376,594			228,417,837
Accumulated depreciation	(11,065,973		)	(6,634,412		)
Real estate, net	$	326,310,621		$	221,783,425

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, 2016 and 2015:



	December 31, 2016			December 31, 2015
Lease intangibles:
In-place leases	$	1,480,842		$	1,225,955
Leasing costs	1,086,582			677,112
Tenant relationships	705,955			886,743
Lease intangibles, at cost	3,273,379			2,789,810
Accumulated amortization	(1,273,606		)	(1,026,269		)
Lease intangibles, net	$	1,999,773		$	1,763,541

The following table summarizes the carrying values of certain lease intangible assets or liabilities included in Other assets and Other liabilities, respectively, on the accompanying Consolidated Balance Sheets and the related accumulated amortization or accretion, respectively, as of December 31, 2016, and 2015.



	December 31, 2016						December 31, 2015
Intangible Asset or Liability	Deferred Rent Asset (Liability)			Accumulated (Amortization) Accretion			Deferred Rent Asset (Liability)			Accumulated (Amortization) Accretion
Above-market lease values⁽¹⁾	$	19,528		$	(14,050	)	$	19,528		$	(7,540	)
Below-market lease values and deferred revenue⁽²⁾	(785,045		)	61,389			(202,579		)	23,205
	$	(765,517	)	$	47,339		$	(183,051	)	$	15,665


⁽¹⁾	Above-market lease values are included as 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:	2017	$	492,153	$	58,294
	2018	392,191		52,815
	2019	354,790		58,294
	2020	265,599		58,294
	2021	100,113		57,193
	Thereafter	394,927		433,288
		$	1,999,773	$	718,178

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, 2016 and 2015:



	Weighted-Average Amortization Period (in Years)
Intangible Assets and Liabilities	2016	2015
In-place leases	8.7	4.1
Leasing costs	11.6	5.5
Tenant relationships	0.0	9.5
Below-market lease and sale inducement values	20.9	6.2
All intangible assets and liabilities	14.2	6.2

Pro-Forma Condensed Consolidated Statements of Operations as Properties Acquired



	For the Years Ended December 31,
	2016		2015
	(Unaudited)		(Unaudited)
Operating Data:
Total operating revenue	$	18,205,615	$	13,552,489
Net income (loss) attributable to the company	900,749		(418,776		)
Share and Per-share Data:
Earnings (loss) per share of common stock – basic and diluted	$	0.09	$	(0.05	)
Weighted-average common shares outstanding – basic and diluted	10,007,350		8,639,397

Summary of Future Lease Expirations by Year for Properties

The following unaudited table summarizes the future lease expirations by year for our properties as of December 31, 2016:



Year	Number of Expiring Leases			Expiring Leased Acreage	% of Total Acreage		Rental Revenue for the Year Ended December 31, 2016		% of Total Rental Revenue
2017		11	⁽¹⁾	866	1.7	%	$	2,296,025	13.3	%
2018		4		2,710	5.4	%	825,485		4.8	%
2019		3		2,524	5.0	%	419,740		2.4	%
2020		9		28,200	55.7	%	5,247,810		30.3	%
2021		4		6,954	13.7	%	1,606,592		9.3	%
2022		1		145	0.3	%	315,896		1.8	%
Thereafter		15		9,193	18.2	%	6,593,921		38.1	%
Totals		47		50,592	100.0	%	$	17,305,469	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 $32,109 of rental revenue during the year ended December 31, 2016

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, 2016, are as follows:



		Tenant Lease
Period		Payments
For the fiscal years ending December 31:	2017	$	16,356,193
	2018	17,404,173
	2019	16,911,432
	2020	14,679,754
	2021	9,067,911
	Thereafter	46,168,102
		$	120,587,565

Summary of Geographic Locations of Properties

The following unaudited table summarizes the geographic locations, by state, of our properties with leases in place as of December 31, 2016 and 2015:



	As of and For the Year Ended December 31, 2016								As of and For the Year Ended December 31, 2015
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	22	6,713	13.3	%	$	9,829,177	56.8	%	18	3,576	21.3	%	$	7,754,945	65.2	%
Florida	15	5,567	11.0	%	3,293,475		19.0	%	13	5,092	30.3	%	2,166,660		18.2	%
Colorado	9	30,170	59.6	%	1,452,581		8.4	%	—	—	—	%	—		—	%
Oregon	4	2,313	4.6	%	1,171,887		6.8	%	4	2,313	13.8	%	1,168,725		9.8	%
Arizona	2	3,000	5.9	%	729,232		4.2	%	2	3,000	17.8	%	338,446		2.9	%
Nebraska	2	2,559	5.1	%	579,630		3.4	%	2	2,559	15.2	%	211,908		1.8	%
Michigan	4	270	0.5	%	249,487		1.4	%	4	270	1.6	%	247,407		2.1	%
	58	50,592	100.0	%	$	17,305,469	100.0	%	43	16,810	100.0	%	$	11,888,091	100.0	%

2016 New Real Estate Activity

Property, Plant and Equipment [Line Items]

Summary Information of Farms

During the year ended December 31, 2016, we acquired 15 new farms in nine separate transactions, which are summarized in the table below.



Property Name	Property Location	Acquisition Date	Total Acreage	No. of Farms	Primary Crop(s)	Lease Term	Renewal Options	Total Purchase Price		Acquisition Costs			Annualized Straight-line Rent⁽¹⁾			New Long-term Debt Issued
Gunbarrel Road⁽²⁾	Alamosa, CO	3/3/2016	6,191	3	Organic Potatoes	5 years	1 (5 years)	$	25,735,815	$	119,085	⁽³⁾	$	1,590,614		$	15,531,000
Calaveras Avenue	Coalinga, CA	4/5/2016	453	1	Pistachios	10 years	1 (5 years)	15,470,000		38,501		⁽⁴⁾	773,500		⁽⁵⁾	9,282,000
Orange Avenue	Fort Pierce, FL	7/1/2016	401	1	Vegetables	7 years	2 (7 years)	5,100,000		37,615		⁽⁴⁾	291,173			3,120,000
Lithia Road	Plant City, FL	8/11/2016	72	1	Strawberries	5 years	None	1,700,000		38,296		⁽³⁾	97,303			1,020,000
Baca County⁽⁶⁾	Edler, CO	9/1/2016	7,384	5	Grass Hay and Alfalfa	4 years	1 (5 years)	6,322,853		72,558		⁽⁴⁾	383,734			—
Diego Ranch⁽⁷⁾	Stanislaus, CA	9/14/2016	1,357	1	Almonds	3 years	3 (5 years) & 1 (3 years)	13,996,606		63,909		⁽³⁾	621,092			—
Nevada Ranch	Merced, CA	9/14/2016	1,130	1	Almonds	3 years	3 (5 years) & 1 (3 years)	13,231,832		41,650		⁽³⁾	574,256			—
Central Avenue	Kerman, CA	10/13/2016	197	1	Almonds	10 years	2 (5 years)	6,500,000		29,284		⁽⁴⁾	325,032			3,900,000
Horse Creek⁽⁸⁾	Baca, CO	12/28/2016	16,595	1	Grass Hay and Alfalfa	4 years	1 (5 years)	11,664,849		54,644		⁽⁴⁾	716,967			—
			33,780	15				$	99,721,955	$	495,542		$	5,373,671		$	32,853,000


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


⁽²⁾	As partial consideration for the acquisition of this property, we issued 745,879 OP Units, constituting an aggregate fair value of approximately $6.5 million as of the acquisition date. We incurred $25,500 of legal costs in connection with the issuance of these OP Units.


⁽³⁾	Acquisition accounted for as a business combination under ASC 805. In aggregate, $9,520 of these costs related to direct leasing costs incurred in connection with these acquisitions.


⁽⁴⁾	Acquisition accounted for as an asset acquisition under ASC 360.


⁽⁵⁾	Lease provides for a variable rent component based on the gross crop revenues earned on the property. The figure above represents only the minimum cash rents guaranteed under the lease.


⁽⁶⁾	As partial consideration for the acquisition of this property, we issued 125,677 Units, constituting an aggregate fair value of approximately $1.5 million as of the acquisition date. We incurred $8,235 of legal costs in connection with the issuance of these OP Units.


⁽⁷⁾	As partial consideration for the acquisition of this property, we issued 343,750 OP Units, constituting an aggregate fair value of approximately $3.9 million as of the acquisition date. We incurred $21,710 of legal costs in connection with the issuance of these OP Units.


⁽⁸⁾	As partial consideration for the acquisition of this property, we issued 233,952 OP Units, constituting an aggregate fair value of approximately $2.6 million as of the acquisition date. We incurred $7,675 of legal costs in connection with the issuance of these OP Units.

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

The preliminary allocation of the purchase price for the farms acquired during the year ended December 31, 2016, are as follows:



Property Name	Land and Land Improvements		Buildings		Irrigation Systems		Other Improvements		Horticulture		In-place Leases		Leasing Costs		Above (Below)- Market Leases			Total Purchase Price
Gunbarrel Road	$	16,755,814	$	3,438,291	$	2,830,738	$	2,079,102	$	—	$	381,977	$	249,893	$	—		$	25,735,815
Calaveras Avenue	3,615,436		—		424,112		—		11,430,452		—		—		—			15,470,000
Orange Avenue	4,135,741		29,777		934,482		—		—		—		—		—			5,100,000
Lithia Road	1,461,090		10,656		213,325		—		—		7,739		16,265		(9,075		)	1,700,000
Baca County	6,111,287		211,566		—		—		—		—		—		—			6,322,853
Diego Ranch	14,114,337		—		45,465		—		—		58,445		94,806		(316,447		)	13,996,606
Nevada Ranch	12,844,650		—		504,445		—		—		53,197		86,483		(256,943		)	13,231,832
Central Avenue	2,924,232		—		138,237		—		3,437,531		—		—		—			6,500,000
Horse Creek	11,388,317		—		108,027		168,505		—		—		—		—			11,664,849
	$	73,350,904	$	3,690,290	$	5,198,831	$	2,247,607	$	14,867,983	$	501,358	$	447,447	$	(582,465	)	$	99,721,955

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, 2016:



		For the year ended December 31, 2016
Property Name	Acquisition Date	Operating Revenues		Earnings⁽¹⁾
Gunbarrel Road	3/3/2016	$	1,316,960	$	(210,622	)
Calaveras Avenue	4/5/2016	570,615		(6,745		)
Orange Avenue	7/1/2016	145,587		31,442
Lithia Road	8/11/2016	37,927		(16,741		)
Baca County	9/1/2016	127,911		122,687
Diego Ranch	9/14/2016	186,328		141,404
Nevada Ranch	9/14/2016	172,277		128,093
Central Avenue	10/13/2016	70,773		(927		)
Horse Creek	12/28/2016	7,709		7,709
		$	2,636,087	$	196,300


⁽¹⁾	In aggregate, includes $206,210 of non-recurring acquisition-related costs during the year ended December 31, 2016.

2015 New Real Estate Activity

Property, Plant and Equipment [Line Items]

Summary Information of Farms

During the year ended December 31, 2015, we acquired 11 new farms in eight separate transactions, which are summarized in the table below.



Property Name	Property Location	Acquisition Date	Total Acreage	No. of Farms	Primary Crop(s)	Lease Term	Renewal Options	Total Purchase Price		Acquisition Costs			Annualized Straight-line Rent⁽¹⁾		Net 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		152,571		⁽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	15.4 years	1 (10 years)	18,922,500		117,742		⁽⁴⁾	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		77,259		⁽⁴⁾	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		44,871		⁽⁴⁾	319,240		3,891,000
			8,771	11				$	75,966,980	$	641,116		$	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 was fully credited back to us by our Adviser during the three months ended March 31, 2015. See Note 6, “Related- Party Transactions” for further discussion on this fee.


⁽³⁾	Acquisition accounted for as a business combination under ASC 805. In aggregate, we incurred $11,825 of direct leasing costs in connection with these acquisitions.


⁽⁴⁾	Acquisition accounted for as an asset acquisition under ASC 360.

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	$	(33,169	)
Parrish Road	3/10/2015	203,341		(105,830		)
Immokalee Exchange	6/25/2015	480,052		40,504
Holt County	8/20/2015	105,954		24,716
Rock County	8/20/2015	105,954		19,153
Bear Mountain	9/3/2015	271,599		249,958
Corbitt Road	11/2/2015	29,970		(13,434		)
Reagan Road	12/22/2015	8,582		507
		$	1,975,424	$	182,405


⁽¹⁾	In aggregate, includes $388,594 of non-recurring acquisition-related costs during the year ended December 31, 2015.