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

Real Estate and Intangible Assets

9 Months Ended

Sep. 30, 2016

All of our properties are wholly owned on a fee-simple basis. The following table provides certain summary information about our 56 farms as of September 30, 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		$	4,756,950	$	7,702,672
West Gonzales	Oxnard, CA	9/15/1998	1	653	502	6/30/2020		12,066,248		30,017,766
West Beach	Watsonville, CA	1/3/2011	3	196	195	12/31/2023		9,277,502		6,717,183
Dalton Lane	Watsonville, CA	7/7/2011	1	72	70	10/31/2020		2,675,171		1,590,375
Keysville Road	Plant City, FL	10/26/2011	2	61	56	6/30/2020		1,239,430		897,600
Colding Loop	Wimauma, FL	8/9/2012	1	219	181	8/4/2017		3,865,019		2,640,000
Trapnell Road	Plant City, FL	9/12/2012	3	124	110	6/30/2017	⁽³⁾	3,837,986		2,389,500
38th Avenue	Covert, MI	4/5/2013	1	119	89	4/4/2020		1,246,393		759,506
Sequoia Street	Brooks, OR	5/31/2013	1	218	206	5/31/2028		3,082,764		1,755,757
Natividad Road	Salinas, CA	10/21/2013	1	166	166	10/31/2024		8,923,059		3,964,611
20th Avenue	South Haven, MI	11/5/2013	3	151	94	11/4/2018		1,832,760		1,132,746
Broadway Road	Moorpark, CA	12/16/2013	1	60	46	12/15/2023		2,873,371		1,699,119
Oregon Trail	Echo, OR	12/27/2013	1	1,895	1,640	12/31/2023		13,993,354		7,929,221
East Shelton	Willcox, AZ	12/27/2013	1	1,761	1,320	2/29/2024		7,730,123		4,717,887
Collins Road	Clatskanie, OR	5/30/2014	2	200	157	9/30/2024		2,341,601		1,529,207
Spring Valley	Watsonville, CA	6/13/2014	1	145	110	9/30/2022		5,731,872		3,922,133
McIntosh Road	Dover, FL	6/20/2014	2	94	78	6/30/2017	⁽⁴⁾	2,441,053		1,439,640
Naumann Road	Oxnard, CA	7/23/2014	1	68	66	7/31/2017		6,773,068		3,902,310
Sycamore Road	Arvin, CA	7/25/2014	1	326	322	10/31/2024		6,829,362		4,379,762
Wauchula Road	Duette, FL	9/29/2014	1	808	590	9/30/2024		13,450,170		7,433,100
Santa Clara Avenue	Oxnard, CA	10/29/2014	2	333	331	7/31/2017		24,135,194		14,159,324
Dufau Road	Oxnard, CA	11/4/2014	1	65	64	11/3/2017		6,016,522		3,675,000
Espinosa Road	Salinas, CA	1/5/2015	1	331	329	10/31/2020		16,111,013		10,178,000
Parrish Road	Duette, FL	3/10/2015	1	419	412	6/30/2025		4,141,521		2,374,680
Immokalee Exchange	Immokalee, FL	6/25/2015	2	2,678	1,644	6/30/2020		15,467,267		9,360,000
Holt County	Stuart, NE	8/20/2015	1	1,276	1,052	12/31/2018		5,423,218		3,301,000
Rock County	Bassett, NE	8/20/2015	1	1,283	1,049	12/31/2018		5,406,522		3,301,000
Bear Mountain	Arvin, CA	9/3/2015	3	854	841	1/9/2031		26,828,964		12,559,887
Corbitt Road	Immokalee, FL	11/2/2015	1	691	390	12/31/2021		3,755,637		3,714,880
Reagan Road	Willcox, AZ	12/22/2015	1	1,239	875	12/31/2025		5,750,597		3,639,000
Gunbarrel Road	Alamosa, CO	3/3/2016	3	6,191	4,730	2/28/2021		25,015,493		15,303,500
Calaveras Avenue	Coalinga, CA	4/5/2016	1	453	435	10/31/2025		15,290,013		9,282,000
Orange Avenue	Fort Pierce, FL	7/1/2016	1	401	400	6/30/2023		5,113,269		3,091,761
Lithia Road	Lithia, FL	8/11/2016	1	72	55	5/31/2021		1,700,469		1,020,000
Baca County	Edler, CO	9/1/2016	5	7,384	6,785	12/31/2020		6,385,779		—		⁽⁵⁾
Diego Ranch	Stanislaus, CA	9/14/2016	1	1,357	1,309	11/15/2019		13,997,610		—		⁽⁵⁾
Nevada Ranch	Merced, CA	9/14/2016	1	1,130	1,021	11/15/2019		13,231,638		—		⁽⁵⁾
			56	33,800	27,958			$	308,737,982	$	191,480,127

⁽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 (excluding improvements paid for by the tenant) 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 Condensed Consolidated Balance Sheet.


⁽²⁾	Excludes approximately $1.1 million of deferred financing costs related to mortgage notes and bonds payable included in Mortgage notes and bonds payable, net on the accompanying Condensed 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⁾	Pledged as collateral under the MetLife Facility subsequent to September 30, 2016. See Note 10, "Subsequent Events," for further discussion.

Real Estate

The following table sets forth the components of our investments in tangible real estate assets as of September 30, 2016, and December 31, 2015:



	September 30, 2016			December 31, 2015
Real estate:
Land and land improvements	$	251,906,593		$	192,020,381
Irrigation systems	33,355,718			21,849,508
Buildings	14,670,759			11,184,647
Horticulture	14,281,209			1,490,695
Other improvements	4,804,376			1,872,606
Real estate, at cost	319,018,655			228,417,837
Accumulated depreciation	(9,781,651		)	(6,634,412		)
Real estate, net	$	309,237,004		$	221,783,425

Real estate depreciation expense on these tangible assets was $1,224,612 and $3,161,434 for the three and nine months ended September 30, 2016, respectively, and $595,539 and $1,647,177 for the three and nine months ended September 30, 2015, respectively.

Included in the figures above are amounts related to improvements on certain of our properties paid for by our tenants but owned by us, or tenant improvements. As of September 30, 2016, and December 31, 2015, we recorded tenant improvements, net of accumulated depreciation, of $1,882,114 and $1,302,009, respectively. We recorded both depreciation expense and additional rental revenue related to these tenant improvements of $30,753 and $98,225 during the three and nine months ended September 30, 2016, respectively, and $14,780 and $27,502 for the three and nine months ended September 30, 2015, respectively.

Intangible Assets and Liabilities

The following table summarizes the carrying values of lease intangible assets and the related accumulated amortization as of September 30, 2016, and December 31, 2015:



	September 30, 2016			December 31, 2015
Lease intangibles:
In-place leases	$	1,727,483		$	1,225,955
Leasing costs	1,086,846			677,112
Tenant relationships	886,743			886,743
Lease intangibles, at cost	3,701,072			2,789,810
Accumulated amortization	(1,585,987		)	(1,026,269		)
Lease intangibles, net	$	2,115,085		$	1,763,541

Total amortization expense related to these lease intangible assets was $207,234 and $582,095 for the three and nine months ended September 30, 2016, respectively, and $193,621 and $645,448 for the three and nine months ended September 30, 2015, respectively.

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 Condensed Consolidated Balance Sheets and the related accumulated amortization or accretion, respectively, as of September 30, 2016, and December 31, 2015.



	September 30, 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		$	(12,422	)	$	19,528		$	(7,540	)
Below-market lease values and deferred revenue⁽²⁾	(785,917		)	46,818			(202,579		)	23,205
	$	(766,389	)	$	34,396		$	(183,051	)	$	15,665


⁽¹⁾	Above-market lease values are included as part of Other assets in the accompanying Condensed 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 Condensed Consolidated Balance Sheets, and the related accretion is recorded as an increase to rental income.

Total amortization related to above-market lease values and deferred revenue was $1,627 and $4,882 for the three and nine months ended September 30, 2016, respectively, and $4,496 and $15,286 for the three and nine months ended September 30, 2015, respectively. Total accretion related to below-market lease values and deferred revenue was $8,951 and $23,613 for the three and nine months ended September 30, 2016, respectively, and $52,591 and $160,324 for the three and nine months ended September 30, 2015, respectively.

New Real Estate Activity

Certain acquisitions during the periods presented were accounted for as business combinations in accordance with 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 directly related to reviewing or assigning leases that 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.

In addition, total consideration for acquisitions may include a combination of cash and equity securities, such as OP Units. When OP Units are issued in connection with acquisitions, we determine the fair value of the OP Units issued based on the number of units issued multiplied by the closing price of the Company’s common stock on the date of acquisition.

2016 New Real Estate Activity

During the nine months ended September 30, 2016, we acquired 13 new farms in seven 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
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		72,340		⁽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		63,114		⁽³⁾	621,115			—
Nevada Ranch	Merced, CA	9/14/2016	1,130	1	Almonds	3 years	3 (5 years) & 1 (3 years)	13,231,832		40,833		⁽³⁾	574,274			—
			16,988	13				$	81,557,106	$	409,784		$	4,331,713		$	28,953,000


⁽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 OP Units, constituting an aggregate fair value of approximately $1.5 million as of the acquisition date. We incurred approximately $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 approximately $21,732 of legal costs in connection with the issuance of these OP Units.

The preliminary allocation of the purchase price for the farms acquired during the nine months ended September 30, 2016, are as follows:



Property Name	Land and Land Improvements		Buildings		Irrigation Systems		Other Improvements		Horticulture		In-place Leases		Leasing Costs		Above (Below)- Market Lease			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	14,136,135		—		45,535		—		—		58,535		73,337		(316,936		)	13,996,606
Nevada Ranch	12,863,790		—		505,196		—		—		53,276		66,895		(257,325		)	13,231,832
	$	59,079,293	$	3,690,290	$	4,953,388	$	2,079,102	$	11,430,452	$	501,527	$	406,390	$	(583,336	)	$	81,557,106

The allocation of the purchase price for the property acquired during the nine months ended September 30, 2016, 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 three and nine months ended September 30, 2016:



		For the three months ended September 30, 2016					For the nine months ended September 30, 2016
Property Name	Acquisition Date	Operating Revenues		Earnings⁽¹⁾			Operating Revenues		Earnings⁽¹⁾
Gunbarrel Road	3/3/2016	$	397,654	$	(28,515	)	$	919,306	$	(180,491	)
Calaveras Avenue	4/5/2016	193,375		(8,478		)	377,240		(11,321		)
Orange Avenue	7/1/2016	72,793		15,884			72,793		15,884
Lithia Road	8/11/2016	13,601		(28,607		)	13,601		(28,607		)
Baca County	9/1/2016	31,978		30,799			31,978		30,799
Diego Ranch	9/14/2016	31,056		(10,070		)	31,056		(10,070		)
Nevada Ranch	9/14/2016	28,714		(12,921		)	28,714		(12,921		)
		$	769,171	$	(41,908	)	$	1,474,688	$	(196,727	)


⁽¹⁾	In aggregate, includes $128,161 and $229,476 of non-recurring acquisition-related costs during the three and nine months ended September 30, 2016, respectively.

2015 New Real Estate Activity

During the nine months ended September 30, 2015, we acquired nine new farms in six 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⁾	1,115,992		21,138,196
			6,841	9				$	66,506,980	$	518,986		$	3,685,900	$	49,652,876


⁽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 the Adviser fully credited back to us during the nine months ended September 30, 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, $11,825 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.

The allocation of the purchase price for the farms acquired during the the nine months ended September 30, 2015, were as follows:



Property Name	Land and Land Improvements		Buildings and Improvements		Irrigation System		In-place Leases		Leasing Costs		Tenant Relationships		Total Purchase Price
Espinosa Road	$	15,852,466	$	84,478	$	497,401	$	246,472	$	43,894	$	180,789	$	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	4,862,313		72,232		540,589		—		28,866		—		5,504,000
Bear Mountain	18,428,247		—		494,253		—		—		—		18,922,500
	$	60,647,299	$	528,689	$	4,077,857	$	530,283	$	326,394	$	396,458	$	66,506,980

Below is a summary of the total operating revenues and earnings recognized on the properties acquired during the three and nine months ended September 30, 2015:



		For the three months ended September 30, 2015					For the nine months ended September 30, 2015
Property Name	Acquisition Date	Operating Revenues		Earnings⁽¹⁾			Operating Revenues		Earnings⁽¹⁾
Espinosa Road	1/5/2015	$	194,586	$	(2,922	)	$	575,387	$	(53,281	)
Parrish Road	3/10/2015	62,958		(10,175		)	140,133		(106,362		)
Immokalee Exchange	6/25/2015	240,026		94,302			240,026		(60,045		)
Holt County	8/20/2015	33,500		(6,075		)	33,500		(6,075		)
Rock County	8/20/2015	33,500		(7,927		)	33,500		(7,927		)
Bear Mountain	9/3/2015	64,430		59,023			64,430		59,023
		$	629,000	$	126,226		$	1,086,976	$	(174,667	)


⁽¹⁾	In aggregate, includes $75,293 and $413,374 of non-recurring acquisition-related costs during the three and nine months ended September 30, 2015, respectively.

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 new real estate acquired as part of business combinations during the nine months ended September 30, 2016 and 2015:



	Weighted-Average Amortization Period (in Years)
Intangible Assets and Liabilities	2016	2015
In-place leases	8.7	4.1
Leasing costs	10.6	5.5
Tenant relationships	—	9.5
Below-market lease values and deferred revenue	20.9	—
All intangible assets and liabilities	14.0	6.2

Pro-Forma Financials

During each of the nine months ended September 30, 2016 and 2015, we acquired six farms in transactions that qualified as business combinations. The following table reflects pro-forma consolidated financial information as if each farm acquired as part of a business combination 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 Three Months Ended September 30,					For the Nine Months Ended September 30,
	2016		2015			2016		2015
	(Unaudited)		(Unaudited)			(Unaudited)		(Unaudited)
Operating Data:
Total operating revenue	$	4,718,052	$	3,460,986		$	13,285,819	$	8,864,148
Net income attributable to the company	$	211,822	$	(176,949	)	$	593,599	$	914,580
Share and Per-share Data:
Earnings per share of common stock – basic and diluted	$	0.02	$	(0.02	)	$	0.06	$	0.10
Weighted-average common shares outstanding – basic and diluted	10,018,331		9,060,314			10,001,466		9,060,314

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 1, 2016, we completed certain irrigation improvements on Sycamore Road to increase overall water availability at a total cost of $993,319. As stipulated in the lease agreement with our tenant, we will earn additional rent on the total cost commensurate with the annual yield on the farmland, which will result in additional straight-line rental income of $53,550 per year throughout the remaining lease term.

On February 8, 2016, we renewed the lease with the tenant occupying one of our McIntosh Road farms, which was set to expire on June 30, 2016. The lease was renewed for an additional three years, through June 30, 2019, with annualized, straight-line rental income of $63,000, representing a 17.9% increase over that of the previous lease.

On April 5, 2016, we reimbursed the tenant occupying Wauchula Road for $569,607 of costs incurred to construct certain irrigation improvements on the farm. As stipulated in the lease, as of April 1, 2016, we began earning an additional $92,634 of annualized, straight-line rental income on this farm throughout the remaining lease term.

On April 5, 2016, we reimbursed the tenant occupying Parrish Road for $500,000 of our portion of the costs incurred to construct certain irrigation improvements on the farm. As stipulated in the lease, as of April 1, 2016, we began earning an additional $139,073 of annualized, straight-line rental income on this farm throughout the remaining lease term. In addition, in connection with our acquisition of Parrish Road in March 2015, we committed to providing $745,000 as additional compensation and reimbursements of certain costs, contingent upon the approval by a local water management district of increases in certain water permits on the property. These water permits were approved on June 28, 2016, and we remitted $745,000 to the tenant, who was also the seller of the property, on June 30, 2016.

On July 5, 2016, we received payment of approximately $164,000 (including $4,000 of accrued interest) from the California Department of Transportation ("CalTrans") in connection with the settlement of the eminent domain lawsuit for 4.5 acres of nonfarmable land on Espinosa Road. The portion of this payment allocated to our cost basis of the 4.5 nonfarmable acres was approximately $156,000, which was previously included in Investments in real estate, net on our Condensed Consolidated Balance Sheet.

On July 15, 2016, we terminated the lease with the tenant occupying Colding Loop prior to its expiration, and, on August 5, 2016, we entered into a new lease with a new tenant to occupy the property. The new lease is scheduled to expire on August 4, 2017, and provides for minimum rental payments of $72,400 over its term. In connection with the early termination of the previous lease, we wrote off $20,697 and $84,600 of deferred rent asset balances to bad debt expense during the three and nine months ended September 30, 2016, respectively. In addition, during the three months ended September 30, 2016, we expensed $8,635 of unamortized leasing costs associated with the previous lease.

On August 25, 2016, we renewed the lease with the tenant occupying Espinosa Road, which was originally set to expire on October 31, 2016. The lease was renewed for an additional four years, through October 31, 2020, with annualized, straight-line rental income of $997,017, representing a 28.1% increase over that of the previous lease. In connection with the renewal, we also assumed the responsibility for the property taxes on Espinosa Road, which were the tenant's responsibility under the old lease. Property taxes on Espinosa Road are approximately $144,000 for the property tax assessment year ending June 30, 2017.

Portfolio Diversification and Concentrations

Diversification

The following table summarizes the geographic locations, by state, of our properties with leases in place as of September 30, 2016 and 2015:



	As of and For the Nine Months Ended September 30, 2016								As of and For the Nine Months Ended September 30, 2015
	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	21	6,516	19.3	%	$	6,986,099	56.4	%	18	3,576	24.0	%	$	5,652,357	66.6	%
Florida	15	5,567	16.5	%	2,407,893		19.4	%	12	4,401	29.6	%	1,458,433		17.2	%
Colorado	8	13,575	40.1	%	951,285		7.7	%	—	—	—		—		—	%
Oregon	4	2,313	6.8	%	877,547		7.1	%	4	2,313	15.6	%	876,244		10.3	%
Arizona	2	3,000	8.9	%	543,642		4.4	%	1	1,761	11.8	%	243,953		2.9	%
Nebraska	2	2,559	7.6	%	434,722		3.5	%	2	2,559	17.2	%	67,000		0.8	%
Michigan	4	270	0.8	%	187,115		1.5	%	4	270	1.8	%	185,036		2.2	%
	56	33,800	100.0	%	$	12,388,303	100.0	%	41	14,880	100.0	%	$	8,483,023	100.0	%

Concentrations

Credit Risk

As of September 30, 2016, our farms were leased to 39 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 $2.2 million, or 17.8% of the rental revenue recorded during the nine months ended September 30, 2016. If Dole fails to make rental payments or elects to terminate its leases, and the properties cannot be re-leased on satisfactory terms, there could 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 nine months ended September 30, 2016.

Geographic Risk

21 of our 56 farms owned as of September 30, 2016, are located in California, and 15 farms are located in Florida. As of September 30, 2016, our farmland in California accounted for 6,516 acres, or 19.3% of the total acreage we owned. Furthermore, these farms accounted for approximately $7.0 million, or 56.4% of the rental revenue recorded during the nine months ended September 30, 2016. However, these farms are spread across three of the many different growing regions within California. As of September 30, 2016, our farmland in Florida accounted for 5,567 acres, or 16.5% of the total acreage we owned, and these farms accounted for approximately $2.4 million, or 19.4%, of the rental revenue recorded during the nine months ended September 30, 2016. 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 nine months ended September 30, 2016.