Gladstone Land Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

REAL ESTATE AND INTANGIBLE ASSETS (Tables)

REAL ESTATE AND INTANGIBLE ASSETS (Tables)

9 Months Ended

Sep. 30, 2021

The following table provides certain summary information about the 158 farms we owned as of September 30, 2021 (dollars in thousands, except for footnotes):


Location	No. of Farms	Total Acres	Farm Acres	Net Cost Basis(1)		Encumbrances(2)
California(3)(4)(5)	60	28,882	26,758	$	724,248	$	402,262
Florida	25	21,387	16,805	213,932		128,343
Arizona(6)	6	6,280	5,228	55,678		19,308
Colorado	12	32,773	25,577	47,543		29,618
Washington	3	1,384	1,001	38,030		25,325
Nebraska	9	7,782	7,050	30,479		12,210
Michigan	23	1,892	1,245	24,723		14,923
Oregon	4	561	471	18,293		3,781
Texas	1	3,667	2,219	8,269		5,059
Maryland	6	987	863	7,992		4,584
South Carolina	3	597	447	3,745		2,237
North Carolina	2	310	295	2,214		1,172
New Jersey	3	116	101	2,196		—
Delaware	1	180	140	1,279		735
	158	106,798	88,200	$	1,178,621	$	649,557

(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. Specifically, includes Total real estate, net (excluding improvements paid for by the tenant), Lease intangibles, net, and Long-term water assets; plus net above-market lease values, lease incentives, and investments in special-purpose LLCs included in Other assets, net; and less net below-market lease values and other deferred revenue included in Other liabilities, net; each as shown on the accompanying Condensed Consolidated Balance Sheets.

(2)Excludes approximately $3.5 million of debt issuance costs related to notes and bonds payable, which is included in Notes and bonds payable, net on the accompanying Condensed Consolidated Balance Sheet.

(3)Includes ownership in a special-purpose LLC that owns a pipeline conveying water to certain of our properties. As of September 30, 2021, this investment had a net carrying value of approximately $1.1 million and is included within Other assets, net on the accompanying Condensed Consolidated Balance Sheet.

(4)Includes one farm in which we own a leasehold interest via a ground sublease with a California municipality that expires in December 2041. The ground sublease consists of approximately five acres and had a net cost basis of approximately $772,000 as of September 30, 2021 (included in Lease intangibles, net on the accompanying Condensed Consolidated Balance Sheet).

(5)Includes 25,330 acre-feet of water stored with Semitropic Water Storage District, located in Kern County, California. See “—Investments in Water Assets” below for additional information on this water.

(6)Includes two farms in which we own a leasehold interest via ground leases with the State of Arizona that expire in February 2022 and February 2025, respectively. In total, these two ground leases consist of 1,368 total acres and 1,221 farm acres and had an aggregate net cost basis of approximately $1.2 million as of September 30, 2021 (included in Lease intangibles, net on the accompanying Condensed Consolidated Balance Sheet).

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 September 30, 2021, and December 31, 2020 (dollars in thousands):


	September 30, 2021		December 31, 2020
Real estate:
Land and land improvements	$	769,384	$	713,333
Permanent Plantings	250,099		202,420
Irrigation and drainage systems	147,210		141,408
Farm-related facilities	45,493		28,146
Other site improvements	11,749		10,132
Real estate, at cost	1,223,935		1,095,439
Accumulated depreciation	(67,007)		(49,236)
Total real estate, net	$	1,156,928	$	1,046,203

Carrying Value of Lease Intangibles and Accumulated Amortization for Each Intangible Asset or Liability Class

The following table summarizes the carrying values of certain lease intangible assets and the related accumulated amortization as of September 30, 2021, and December 31, 2020 (dollars in thousands):


	September 30, 2021		December 31, 2020
Lease intangibles:
Leasehold interest – land	$	4,292	$	3,498
In-place leases	2,190		1,968
Leasing costs	1,822		1,640
Tenant relationships	127		127
Lease intangibles, at cost	8,431		7,233
Accumulated amortization	(3,689)		(3,501)
Lease intangibles, net	$	4,742	$	3,732

The following table summarizes the carrying values of certain lease intangible assets or liabilities included in Other assets, net or Other liabilities, net, respectively, on the accompanying Condensed Consolidated Balance Sheets and the related accumulated amortization or accretion, respectively, as of September 30, 2021, and December 31, 2020 (dollars in thousands):


	September 30, 2021				December 31, 2020
Intangible Asset or Liability	Deferred Rent Asset (Liability)		Accumulated (Amortization) Accretion		Deferred Rent Asset (Liability)		Accumulated (Amortization) Accretion
Above-market lease values and lease incentives(1)	$	65	$	(11)	$	308	$	(154)
Below-market lease values and other deferred revenue(2)	(2,220)		488		(908)		336
	$	(2,155)	$	477	$	(600)	$	182

(1)Net above-market lease values and lease incentives are included as part of Other assets, net on the accompanying Condensed Consolidated Balance Sheets, and the related amortization is recorded as a reduction of Lease revenue on the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income.

(2)Net below-market lease values and other deferred revenue are included as a part of Other liabilities, net on the accompanying Condensed Consolidated Balance Sheets, and the related accretion is recorded as an increase to Lease revenue on the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income.

Schedule of Asset Acquisitions

During the nine months ended September 30, 2021, we acquired 21 new farms, which are summarized in the table below (dollars in thousands, except for footnotes):


Property Name	Property Location	Acquisition Date	Total Acres	No. of Farms	Primary Crop(s) / Use	Lease Term	Renewal Options	Total Purchase Price		Acquisition Costs(1)		Annualized Straight-line Rent(2)
Palmer Mill Road	Dorchester, MD	3/3/2021	228	2	Sod	10.0 years	2 (5 years)	$	1,600	$	56	$	89
Eight Mile Road – Port Facility	San Joaquin, CA	3/11/2021	5	1	Cooling facility and storage	9.8 years	3 (5 years)	3,977		50		189
South Avenue	Tehama, CA	4/5/2021	2,285	1	Olives for olive oil	14.7 years	1 (5 years)	37,800		149		2,555
Richards Avenue	Atlantic, NJ	6/3/2021	116	3	Blueberries	14.9 years	2 (5 years)	2,150		63		129
Lerdo Highway (Phase I)(3)(4)	Kern, CA	6/4/2021	639	1	Conventional & organic almonds and banked water	10.4 years	3 (10 years)	26,492		111		974
Almena Drive	Van Buren & Eaton, MI	6/9/2021	930	8	Blueberries	14.7 years	2 (5 years)	13,300		49		785
Maricopa Highway	Kern, CA	8/11/2021	277	1	Organic blueberries	14.9 years	3 (5 years)	30,000		63		2,262
Wallace Road	Yamhill, OR	8/11/2021	143	1	Organic blueberries	10.1 years	3 (5 years)	12,320		39		768
West Orange	St. Lucie, FL	8/18/2021	617	2	Lemons and oranges	12.0 years	None	5,241		180		367
Lerdo Highway (Phase II)(3)(5)	Kern, CA	8/20/2021	479	1	Conventional & organic almonds and banked water	10.2 years	3 (10 years)	14,772		53		735
			5,719	21				$	147,652	$	813	$	8,853

(1)Includes approximately $50,000 of external legal fees associated with negotiating and originating the leases associated with these acquisitions, which were expensed in the period incurred.

(2)Based on the minimum cash rental payments guaranteed under the respective leases, as required under GAAP, and excludes contingent rental payments, such as participation rents.

(3)Lease provides for an annual participation rent component based on the gross crop revenues earned on the farm. The rent figure above represents only the minimum cash guaranteed under the lease.

(4)As part of the acquisition of this property, we acquired a contract to purchase 20,330 acre-feet of water stored with Semitropic Water Storage District, located in Kern County, California, at a fixed price. We executed this contract on June 25, 2021, at an additional cost of approximately $1.2 million, which is included in the total purchase price for this property in the table above. Rent is not currently being earned on the value attributable to the water. See “—Investments in Water Assets” below for additional information on this water.

(5)As part of the acquisition of this property, we acquired a contract to purchase 5,000 acre-feet of water stored with Semitropic Water Storage District, located in Kern County, California, at a fixed price. We executed this contract on August 23, 2021, at an additional cost of approximately $306,000, which is included in the total purchase price for this property in the table above. Rent is not currently being earned on the value attributable to the water. See “—Investments in Water Assets” below for additional information on this water.

During the nine months ended September 30, 2020, we acquired 12 new farms, which are summarized in the table below (dollars in thousands, except for footnotes):


Property Name	Property Location	Acquisition Date	Total Acres	No. of Farms	Primary Crop(s)	Lease Term	Renewal Options	Total Purchase Price		Acquisition Costs(1)		Annualized Straight-line Rent(2)
County Road 18	Phillips, CO	1/15/2020	1,325	2	Sugar beets, edible beans, potatoes, & corn	6.0 years	None	$	7,500	$	39	$	417
Lamar Valley	Chase, NE	5/7/2020	678	1	Potatoes, edible beans, & corn	6.7 years	2 (5 years)	3,500		43		204
Driver Road(3)	Kern, CA	6/5/2020	590	1	Pecans	4.7 years	2 (10 years)	14,169		52		784
Mt. Hermon	Wicomico & Caroline, MD, and Sussex, DE	8/31/2020	939	5	Sod & vegetables	10.0 years	2 (5 years)	7,346		226		432
Firestone Avenue(4)(5)(6)	Fresno, CA	9/3/2020	2,534	3	Pistachios and misc. organic & conventional vegetables	1.2 years	2 (5 years)	31,833		131		1,734
			6,066	12				$	64,348	$	491	$	3,571

(1)Includes approximately $38,000 of aggregate external legal fees associated with negotiating and originating the leases associated with these acquisitions, which were expensed in the period incurred.

(2)Based on the minimum cash rental payments guaranteed under the applicable leases, as required under GAAP, and excludes contingent rental payments, such as participation rents.

(3)The lease provides for an initial term of 14.7 years and includes six tenant termination options throughout the initial term. The lease term stated above represents the term through the first available termination option, and the annualized straight-line rent amount represents the rent guaranteed through the noncancellable term of the lease.

(4)Lease provides for a participation rent component based on the gross crop revenues earned on the farm. The rent figure above represents only the minimum cash guaranteed under the lease.

(5)Lease provides for an initial term of 8.2 years but also includes an annual tenant termination option, effective as of the end of the then-current lease year (as defined within the lease). The lease term stated above represents the term through the first available termination option, and the annualized straight-line rent amount represents the rent guaranteed through the noncancellable term of the lease.

(6)In connection with the acquisition of this property, we also acquired an ownership interest in a related LLC, the sole purpose of which is to own and maintain a pipeline conveying water to this and other neighboring properties. Our acquired ownership, which equated to a 12.5% interest in the LLC, was valued at approximately $280,000 at the time of acquisition and is included within Other assets, net on the accompanying Condensed Consolidated Balance Sheets. See “Investments in Unconsolidated Entities” below for further information on our aggregate ownership interest in this LLC.

Subsequent to September 30, 2021, we acquired two new farms, which are summarized in the table below (dollars in thousands, except for footnotes):


Property Name	Property Location	Acquisition Date	Total Acres	No. of Farms	Primary Crop(s) / Use	Lease Term	Renewal Options	Total Purchase Price		Acquisition Costs(1)		Annualized Straight-line Rent(2)
Lerdo Highway (Phase III)(3)(4)	Kern, CA	10/8/2021	1,284	1	Conventional & organic almonds, conventional & organic pistachios, and banked water	10.1 years	3 (10 years)	$	42,959	$	77	$	1,981
Raymond Road(4)	Madera, CA	10/21/2021	219	1	Almonds	10.0 years	1 (5 years)	3,300		50		183
			1,503	2				$	46,259	$	127	$	2,164

(1)Acquisitions will be accounted for as asset acquisitions in accordance with ASC 360. The figures above represent only costs paid or accrued for as of the date of this filing.

(2)Annualized straight-line rent is based on the minimum cash rental payments guaranteed under the applicable leases, as required under GAAP, and excludes contingent rental payments, such as participation rents.

(3)As part of the acquisition of this property, we acquired a contract to purchase 19,670 acre-feet of water stored with SWSD, located in Kern County, California, at a fixed price. We executed this contract on October 11, 2021, at an additional cost of approximately $1.2 million, which is included in the total purchase price for this property in the table above. Rent is not currently being earned on the value attributable to the water.

(4)Lease provides for an annual participation rent component based on the gross crop revenues earned on the farm. The rent figure above represents only the minimum cash guaranteed under the lease.

Recognized Identified Assets Acquired and Liabilities Assumed In Asset Acquisitions

The allocation of the aggregate purchase price for the farms acquired during each of the nine months ended September 30, 2021 and 2020 is as follows (dollars in thousands):


Assets (Liabilities) Acquired	2021 Acquisitions		2020 Acquisitions
Land and land improvements	$	55,318	$	44,154
Permanent plantings	47,502		12,245
Irrigation & drainage systems	6,492		7,250
Farm-related facilities	17,067		189
Other site improvements	984		—
Leasehold interest—land	787		—
In-place lease values	687		101
Leasing costs	509		133
Above-market lease values(2)	—		54
Below-market lease values(1)	(1,321)		(58)
Investment in LLC(2)	—		280
Water purchase contracts(2)(3)	18,075		—
Total Purchase Price	$	146,100	$	64,348

(1)Included within Other liabilities, net on the accompanying Condensed Consolidated Balance Sheets.

(2)Included within Other assets, net on the accompanying Condensed Consolidated Balance Sheets.

(3)Represents only the value attributable to the water purchase contracts acquired as part of the acquisition of Lerdo Highway and excludes approximately $1.6 million paid to execute the contracts subsequent to acquisition.