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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 
______________________________________________
FORM 10-Q
______________________________________________
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2016
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM                      TO                     
COMMISSION FILE NUMBER: 001-35795  
______________________________________________
GLADSTONE LAND CORPORATION
(Exact name of registrant as specified in its charter)
______________________________________________
MARYLAND
 
54-1892552
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
1521 WESTBRANCH DRIVE, SUITE 100
MCLEAN, VIRGINIA
 
22102
(Address of principal executive offices)
 
(Zip Code)
(703) 287-5800
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)  
______________________________________________
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  ý    NO  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES  ý    NO  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. 
(Check one):
 
 
  
 
 
 
Large accelerated filer
 
¨
  
Accelerated filer
 
¨
 
 
 
 
Non-accelerated filer
 
x  (Do not check if a smaller reporting company)
  
Smaller reporting company
 
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES  ¨    NO  ý.
The number of shares of the registrant’s Common Stock, $0.001 par value per share, outstanding as of November 11, 2016, was 10,024,875.


Table of Contents

GLADSTONE LAND CORPORATION
FORM 10-Q FOR THE QUARTER ENDED
SEPTEMBER 30, 2016
TABLE OF CONTENTS 
 
 
PAGE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Table of Contents

PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GLADSTONE LAND CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
 
 
September 30, 2016
 
December 31, 2015
ASSETS
 
 
 
Investments in real estate, net
$
309,237,004

 
$
221,783,425

Lease intangibles, net
2,115,085

 
1,763,541

Cash and cash equivalents
2,396,852

 
2,532,522

Deferred financing costs related to borrowings under line of credit, net
128,038

 
132,495

Other assets, net
2,429,753

 
2,472,042

TOTAL ASSETS
$
316,306,732

 
$
228,684,025

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
LIABILITIES:
 
 
 
Borrowings under line of credit
$
22,500,000

 
$
100,000

Mortgage notes and bonds payable, net
167,879,624

 
141,578,935

Series A cumulative term preferred stock, par value $0.001 per share; $25.00 per share liquidation preference; 2,000,000 shares authorized, 1,150,000 shares issued and outstanding as of September 30, 2016; zero shares authorized, issued or outstanding as of December 31, 2015, net(1)
27,601,050

 

Accounts payable and accrued expenses
2,222,547

 
3,495,339

Due to related parties, net(2)
636,541

 
565,593

Other liabilities, net
8,921,915

 
4,937,439

Total liabilities
229,761,677

 
150,677,306

Commitments and contingencies(3)

 

EQUITY:
 
 
 
Stockholders’ equity:
 
 
 
Common stock, $0.001 par value; 18,000,000 shares authorized, 10,024,875 shares issued and outstanding as of September 30, 2016; and 20,000,000 shares authorized, 9,992,941 shares issued and outstanding as of December 31, 2015
10,025

 
9,993

Additional paid-in capital
89,374,991

 
86,892,095

Accumulated deficit
(12,197,348
)
 
(8,895,369
)
Total stockholders’ equity
77,187,668

 
78,006,719

Non-controlling interests in operating partnership
9,357,387

 

Total equity
86,545,055

 
78,006,719

TOTAL LIABILITIES AND EQUITY
$
316,306,732

 
$
228,684,025


(1) 
Refer to Note 5, “Mandatorily-Redeemable Preferred Stock,” for additional information.
(2) 
Refer to Note 6, “Related-Party Transactions,” for additional information.
(3) 
Refer to Note 8, “Commitments and Contingencies,” for additional information.
The accompanying notes are an integral part of these condensed consolidated financial statements.

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Table of Contents

GLADSTONE LAND CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 
 
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
 
2016
 
2015
 
2016
 
2015
OPERATING REVENUES:
 
 
 
 
 
 
 
 
Rental revenue
 
$
4,467,217

 
$
3,080,240

 
$
12,388,303

 
$
8,483,023

Tenant recovery revenue
 
1,957

 
3,313

 
7,989

 
10,108

Total operating revenues
 
4,469,174

 
3,083,553

 
12,396,292

 
8,493,131

OPERATING EXPENSES:
 
 
 
 
 
 
 
 
Depreciation and amortization
 
1,431,846

 
809,445

 
3,743,529

 
2,312,880

Property operating expenses
 
160,913

 
191,739

 
499,694

 
553,909

Acquisition-related expenses
 
122,841

 
62,190

 
242,713

 
410,887

Management fee(1)
 
385,576

 
356,871

 
1,158,316

 
981,011

Incentive fee(1)
 
22,046

 

 
180,923

 

Administration fee(1)
 
183,605

 
180,722

 
574,842

 
489,510

General and administrative expenses
 
356,513

 
314,933

 
1,196,204

 
1,049,001

Operating expenses before credits from Adviser
 
2,663,340

 
1,915,900

 
7,596,221

 
5,797,198

Credits to fees from Adviser(1)
 

 

 

 
(320,905
)
Total operating expenses, net of credits to fees
 
2,663,340

 
1,915,900

 
7,596,221

 
5,476,293

OPERATING INCOME
 
1,805,834

 
1,167,653

 
4,800,071

 
3,016,838

OTHER INCOME (EXPENSE):
 
 
 
 
 
 
 
 
Other income
 
2,354

 
26,688

 
105,638

 
47,711

Interest expense
 
(1,554,668
)
 
(1,064,369
)
 
(4,296,336
)
 
(2,961,100
)
Distributions attributable to mandatorily-redeemable preferred stock
 
(218,919
)
 

 
(218,919
)
 

Property and casualty recovery, net
 

 
76,423

 

 
97,232

Total other expense
 
(1,771,233
)
 
(961,258
)
 
(4,409,617
)
 
(2,816,157
)
NET INCOME
 
34,601

 
206,395

 
390,454

 
200,681

Less net income attributable to non-controlling interests
 
(2,718
)
 

 
(16,342
)
 

NET INCOME ATTRIBUTABLE TO THE COMPANY
 
$
31,883

 
$
206,395

 
$
374,112

 
$
200,681

EARNINGS PER COMMON SHARE:
 
 
 
 
 
 
 
 
Basic and diluted
 
$

 
$
0.02

 
$
0.04

 
$
0.02

WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING:
 
 
 
 
 
 
 
 
Basic and diluted
 
10,018,331

 
9,060,314

 
10,001,466

 
8,422,748


(1) 
Refer to Note 6, “Related-Party Transactions,” for additional information.
The accompanying notes are an integral part of these condensed consolidated financial statements.


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Table of Contents

GLADSTONE LAND CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(UNAUDITED)
 
 
 
Common Stock
 
 
 
 
 
 
 
 
 
 
Number
of Shares
 
Par Value
 
Additional
Paid-in Capital
 
Accumulated
Deficit
 
Non-
Controlling
Interests
 
Total
Equity
Balance at December 31, 2014
 
7,753,717

 
$
7,754

 
$
65,366,309

 
$
(5,404,735
)
 
$

 
$
59,969,328

Net income
 

 

 

 
568,545

 

 
568,545

Proceeds from issuance of common stock, net
 
2,239,224

 
2,239

 
21,525,786

 

 

 
21,528,025

Distributions
 

 

 

 
(4,059,179
)
 

 
(4,059,179
)
Balance at December 31, 2015
 
9,992,941

 
$
9,993

 
$
86,892,095

 
$
(8,895,369
)
 
$

 
$
78,006,719

Net income
 

 

 

 
374,112

 
16,342

 
390,454

Proceeds from issuance of common stock
 
31,934

 
32

 
360,440

 

 

 
360,472

Offering costs
 

 

 
(10,372
)
 

 
(55,467
)
 
(65,839
)
Distributions
 

 

 

 
(3,676,091
)
 
(233,804
)
 
(3,909,895
)
Issuance of OP Units as consideration in real estate acquisitions, net
 

 

 

 

 
11,763,144

 
11,763,144

Adjustment to non-controlling interests resulting from changes in ownership of the Operating Partnership
 

 

 
2,132,828

 

 
(2,132,828
)
 

Balance at September 30, 2016
 
10,024,875

 
$
10,025

 
$
89,374,991

 
$
(12,197,348
)
 
$
9,357,387

 
$
86,545,055

The accompanying notes are an integral part of these condensed consolidated financial statements.


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GLADSTONE LAND CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) 
 
 
For the Nine Months Ended September 30,
 
 
2016
 
2015
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
Net income
 
$
390,454

 
$
200,681

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
3,743,529

 
2,312,880

Amortization of deferred financing costs
 
135,310

 
74,191

Amortization of deferred rent assets and liabilities, net
 
(128,825
)
 
(161,466
)
Property and casualty recovery, net
 

 
(97,232
)
Allowance for doubtful accounts
 
71,517

 

Changes in operating assets and liabilities:
 
 
 
 
Other assets
 
(152,562
)
 
284,864

Accounts payable, accrued expenses and due to related parties
 
(273,200
)
 
258,613

Other liabilities
 
3,425,657

 
1,430,977

Net cash provided by operating activities
 
7,211,880

 
4,303,508

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
Acquisition of new real estate
 
(69,174,387
)
 
(64,885,127
)
Capital expenditures on existing real estate
 
(10,125,475
)
 
(3,044,851
)
Proceeds from sale of real estate
 
155,799

 

Decrease in restricted cash
 

 
132,741

Deposits on future acquisitions
 
(100,000
)
 

Deposits applied against real estate investments
 
(716,725
)
 
(1,000,000
)
Deposits refunded
 
200,000

 
100,000

Insurance proceeds received capitalized as real estate additions
 

 
97,232

Net cash used in investing activities
 
(79,760,788
)
 
(68,600,005
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
Proceeds from issuance of equity
 
360,472

 
14,895,206

Offering costs
 
(241,845
)
 
(1,027,986
)
Borrowings from mortgage notes payable
 
28,953,000

 
53,190,476

Repayments on mortgage note payable
 
(2,606,030
)
 
(522,443
)
Net borrowings from (repayments on) line of credit
 
22,400,000

 
1,000,000

Proceeds from issuance of mandatorily-redeemable preferred stock
 
28,750,000

 

Payment of financing fees
 
(1,292,464
)
 
(222,560
)
Distributions paid on common and preferred stock
 
(3,676,091
)
 
(2,934,088
)
Distributions paid to non-controlling interests in operating partnership
 
(233,804
)
 

Net cash provided by financing activities
 
72,413,238

 
64,378,605

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
 
(135,670
)
 
82,108

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
 
2,532,522

 
2,619,342

CASH AND CASH EQUIVALENTS AT END OF PERIOD
 
$
2,396,852

 
$
2,701,450

NON-CASH INVESTING AND FINANCING INFORMATION:
 
 
 
 
Issuance of non-controlling interests in operating partnership in conjunction with acquisitions
 
$
11,763,144

 
$

Real estate additions included in Accounts payable, accrued expenses and due to related parties
 
389,542

 
642,934

Real estate additions included in Other liabilities
 
809,188

 
700,000

Real estate additions removed from Other liabilities
 
700,000

 

Common stock offering and OP Unit issuance costs included in Accounts payable, accrued expenses and due to related parties
 
31,224

 
179,575

Financing fees included in Accounts payable, accrued expenses and due to related parties
 
58,740

 
30,756

The accompanying notes are an integral part of these condensed consolidated financial statements.

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GLADSTONE LAND CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BUSINESS
Business
Gladstone Land Corporation is a real estate investment trust (“REIT”) that was re-incorporated in Maryland on March 24, 2011, having been previously re-incorporated in Delaware on May 25, 2004, and having been originally incorporated in California on June 14, 1997. We are primarily in the business of owning and leasing farmland, and we conduct substantially all of our operations through a subsidiary, Gladstone Land Limited Partnership (the “Operating Partnership”), a Delaware limited partnership. The Company owned 89.2% and 100.0% of the limited partnership interests in the Operating Partnership ("OP Units") as of September 30, 2016, and December 31, 2015, respectively (see Note 7, "Equity," for additional discussion regarding OP Units).
Subject to certain restrictions and limitations, and pursuant to contractual agreements, our business is managed by Gladstone Management Corporation (the “Adviser”), a Delaware corporation, and administrative services are provided to us by Gladstone Administration, LLC (the “Administrator”), a Delaware limited liability company. Our Adviser and Administrator are both affiliates of ours.
All further references herein to “we,” “us,” “our” and the “Company” refer, collectively, to Gladstone Land Corporation and its consolidated subsidiaries, except where indicated otherwise.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Information
Our interim financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q in accordance with Article 10 of Regulation S-X. Accordingly, certain disclosures accompanying annual financial statements prepared in accordance with GAAP are omitted. In the opinion of our management, all adjustments, consisting solely of normal recurring accruals, necessary for the fair presentation of financial statements for the interim period have been included. The interim financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2015, as filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 23, 2016 (the “Form 10-K”). The results of operations for the three and nine months ended September 30, 2016, are not necessarily indicative of the results that may be expected for other interim periods or for the full fiscal year.
Use of Estimates
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could materially differ from those estimates.
Reclassifications
Certain line items on the Condensed Consolidated Balance Sheet as of December 31, 2015, and the Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2015, have been reclassified to conform to the current period’s presentation. These reclassifications had no impact on previously-reported stockholders’ equity or net income.
Non-controlling Interests
Non-controlling interests are interests in the Operating Partnership not owned by us. We evaluate whether non-controlling interests are subject to redemption features outside of our control. As of September 30, 2016, the non-controlling interests in the Operating Partnership are redeemable for cash or, at our option, shares of our common stock and thus are reported in the equity section of the Condensed Consolidated Balance Sheet but separate from stockholders’ equity. The amount reported for non-controlling interests on the Condensed Statement of Operations represents the portion of income from the Operating Partnership not attributable to us.

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Critical Accounting Policies
The preparation of financial statements in accordance with GAAP requires management to make judgments that are subjective in nature in order to make certain estimates and assumptions, and the application of these accounting policies involves the exercise of judgment regarding the use of assumptions as to future uncertainties. A summary of our significant accounting policies is provided in Note 2 to our consolidated financial statements included in our Form 10-K. There were no material changes to our significant accounting policies during the nine months ended September 30, 2016.
Recently-Issued Accounting Pronouncements
In April 2015, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2015-03, “Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs” (“ASU 2015-03”), which simplifies the presentation of debt issuance costs. ASU 2015-03 requires the presentation of debt issuance costs on the balance sheet as a deduction from the carrying amount of the related debt liability instead of a deferred financing cost. ASU 2015-03 is effective for annual periods beginning after December 15, 2015, and we adopted this provision during the three months ended March 31, 2016. As of both September 30, 2016, and December 31, 2015, we had unamortized deferred financing costs related to mortgage notes and bonds payable of approximately $1.1 million, which costs have been reclassified from Deferred financing costs, net, as reported on the Consolidated Balance Sheet as of December 31, 2015, in the Form 10-K, to Mortgage notes and bonds payable, net on the accompanying Condensed Consolidated Balance Sheets. All periods presented have been retroactively adjusted.
The following table summarizes the retrospective adjustment and the overall impact on the previously-reported consolidated financial statements:
 
 
As of December 31, 2015
 
 
As Previously
Reported
 
Retrospective
Application
Deferred financing costs related to mortgage notes and bonds payable(1)
 
$
1,054,222

 
$

Mortgage notes and bonds payable, net
 
142,633,157

 
141,578,935


(1) 
Included as part of Deferred financing costs, net, as reported on the Consolidated Balance Sheet in the Form 10-K.
In August 2015, the FASB issued ASU No. 2015-15, “Interest—Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements” (“ASU 2015-15”), which codifies an SEC staff announcement that entities are permitted to defer and present debt issuance costs related to line of credit arrangements as assets. ASU 2015-15 was effective immediately. As of each September 30, 2016, and December 31, 2015, we had unamortized deferred financing costs of approximately $0.1 million related to our line of credit, and we will continue to present debt issuance costs related to line of credit arrangements as an asset on the accompanying Condensed Consolidated Balance Sheets.
On January 1, 2016, we adopted accounting guidance under Accounting Standards Codification (“ASC”) Topic 810, “Consolidations: Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities,” (“ASC 810”), which modifies the analysis we must perform to determine whether we should consolidate certain types of legal entities. The guidance does not amend the existing disclosure requirements for variable interest entities (“VIEs”) or voting interest model entities, but it modifies the requirements to qualify as a voting interest model entity. Under the revised guidance, our Operating Partnership will qualify as a VIE; however, as we already consolidate the Operating Partnership in our balance sheets, the identification of our Operating Partnership as a VIE has no impact on our consolidated financial statements. There were no other legal entities qualifying under the scope of the revised guidance that were consolidated as a result of the adoption of this guidance. In addition, there were no other voting interest model entities under prior existing guidance determined to be VIEs under the revised guidance.
In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842): An Amendment of the FASB Accounting Standards Codification” (“ASU 2016-02”). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the leases is effectively a financed purchase by the lessee, which classification determines whether lease expense is recognized based on an effective interest method or on a straight-line basis, respectively, over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months, regardless of the classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. ASU 2016-02 supersedes the previous leasing standard, ASC 840, “Leases,” and is effective on January 1, 2019, with

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early adoption permitted. We are currently evaluating the overall impact of ASU 2016-02. We expect our legal expenses to increase marginally, as the new standard requires us to expense indirect leasing costs that were previously capitalized; however, we do not expect ASU 2016-02 to materially impact our consolidated financial statements, as we do not currently have any lease arrangements for which we are the lessee.
In August 2016, the FASB issued ASU 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the FASB Emerging Issues Task Force)" ("ASU 2016-15"), which is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. ASU 2016-15 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those fiscal years, with early adoption permitted. We are currently assessing the impact of ASU 2016-15 and do not anticipate a material impact on our financial position, results of operations or cash flows.
In October 2016, the FASB issued ASU 2016-17, "Consolidation (Topic 810): Interests Held through Related Parties That Are under Common Control" ("ASU 2016-17"), which amends the consolidation guidance in ASU 2015-02 regarding the treatment of indirect interests held through related parties that are under common control. ASU 2016-17 is effective for annual reporting periods beginning after December 15, 2016, and interim periods within those years, with early adoption permitted. We are currently assessing the impact of ASU 2016-17 and do not anticipate a material impact on our financial position, results of operations or cash flows.

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NOTE 3. REAL ESTATE AND INTANGIBLE ASSETS
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.

10

Table of Contents

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.

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Table of Contents

(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.

12

Table of Contents

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.

13

Table of Contents

(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


14

Table of Contents

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

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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<