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Real Estate and Lease Intangibles | 12 Months Ended
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Dec. 31, 2015
Property, Plant and Equipment [Abstract] |
Real Estate and Lease Intangibles | NOTE 3. REAL ESTATE AND LEASE INTANGIBLES All of our properties are wholly-owned on a fee-simple basis. The following table provides certain summary information about our 43 farms as of December 31, 2015:
Property Name |  | Location |  | Date Acquired |  | Number of Farms |  | Total Acres |  | Farm Acres |  | Lease Expiration Date |  |  | Net Cost Basis(1) |  |  | Encumbrances |
San Andreas |  | Watsonville, CA |  | 6/16/1997 |  | 1 |  | 307 |  | 238 |  |  | 12/31/2020 |  |  | $ | 4,786,649 |  |  | $ | 4,677,258 |
West Gonzales |  | Oxnard, CA |  | 9/15/1998 |  | 1 |  | 653 |  | 502 |  |  | 6/30/2020 |  |  |  | 12,198,297 |  |  |  | 23,796,549 |
West Beach |  | Watsonville, CA |  | 1/3/2011 |  | 3 |  | 196 |  | 195 |  |  | 12/31/2023 |  |  |  | 9,299,418 |  |  |  | 4,556,294 |
Dalton Lane |  | Watsonville, CA |  | 7/7/2011 |  | 1 |  | 72 |  | 70 |  |  | 10/31/2020 |  |  |  | 2,684,346 |  |  |  | 1,509,625 |
Keysville Road |  | Plant City, FL |  | 10/26/2011 |  | 2 |  | 59 |  | 56 |  |  | 6/30/2020 |  |  |  | 1,240,565 |  |  |  | 897,600 |
Colding Loop |  | Wimauma, FL |  | 8/9/2012 |  | 1 |  | 219 |  | 181 |  |  | 6/14/2018 |  |  |  | 3,957,326 |  |  |  | 2,640,000 |
Trapnell Road |  | Plant City, FL |  | 9/12/2012 |  | 3 |  | 124 |  | 110 |  |  | 6/30/2017 |  |  |  | 3,943,865 |  |  |  | 2,522,250 |
38th Avenue |  | Covert, MI |  | 4/5/2013 |  | 1 |  | 119 |  | 89 |  |  | 4/4/2020 |  |  |  | 1,274,852 |  |  |  | 720,943 |
Sequoia Street |  | Brooks, OR |  | 5/31/2013 |  | 1 |  | 218 |  | 206 |  |  | 5/31/2028 |  |  |  | 3,109,843 |  |  |  | 1,666,610 |
Natividad Road |  | Salinas, CA |  | 10/21/2013 |  | 1 |  | 166 |  | 166 |  |  | 10/31/2024 |  |  |  | 8,421,700 |  |  |  | 3,763,311 |
20th Avenue |  | South Haven, MI |  | 11/5/2013 |  | 3 |  | 151 |  | 94 |  |  | 11/4/2018 |  |  |  | 1,890,436 |  |  |  | 1,075,232 |
Broadway Road |  | Moorpark, CA |  | 12/16/2013 |  | 1 |  | 60 |  | 46 |  |  | 12/15/2023 |  |  |  | 2,880,849 |  |  |  | 1,612,848 |
Oregon Trail |  | Echo, OR |  | 12/27/2013 |  | 1 |  | 1,895 |  | 1,640 |  |  | 12/31/2023 |  |  |  | 13,917,561 |  |  |  | 7,526,622 |
East Shelton |  | Willcox, AZ |  | 12/27/2013 |  | 1 |  | 1,761 |  | 1,320 |  |  | 2/29/2024 |  |  |  | 7,875,996 |  |  |  | 3,602,026 |
Collins Road |  | Clatskanie, OR |  | 5/30/2014 |  | 2 |  | 200 |  | 157 |  |  | 9/30/2024 |  |  |  | 2,423,608 |  |  |  | 1,451,563 |
Spring Valley |  | Watsonville, CA |  | 6/13/2014 |  | 1 |  | 145 |  | 110 |  |  | 9/30/2022 |  |  |  | 5,777,020 |  |  |  | 3,171,933 |
McIntosh Road |  | Dover, FL |  | 6/20/2014 |  | 2 |  | 94 |  | 78 |  |  | 6/30/2017 | (2) |  |  | 2,476,569 |  |  |  | 1,519,620 |
Naumann Road |  | Oxnard, CA |  | 7/23/2014 |  | 1 |  | 68 |  | 66 |  |  | 7/31/2017 |  |  |  | 6,782,572 |  |  |  | 3,704,173 |
Sycamore Road |  | Arvin, CA |  | 7/25/2014 |  | 1 |  | 326 |  | 322 |  |  | 10/31/2024 |  |  |  | 6,822,097 |  |  |  | 3,118,172 |
Wauchula Road |  | Duette, FL |  | 9/29/2014 |  | 1 |  | 808 |  | 590 |  |  | 9/30/2024 |  |  |  | 13,771,697 |  |  |  | 7,742,812 |
Santa Clara Avenue |  | Oxnard, CA |  | 10/29/2014 |  | 2 |  | 333 |  | 331 |  |  | 7/31/2017 |  |  |  | 24,242,056 |  |  |  | 13,440,396 |
Dufau Road |  | Oxnard, CA |  | 11/4/2014 |  | 1 |  | 65 |  | 64 |  |  | 11/3/2017 |  |  |  | 6,061,157 |  |  |  | 3,675,000 |
Espinosa Road |  | Salinas, CA |  | 1/5/2015 |  | 1 |  | 331 |  | 329 |  |  | 10/31/2016 |  |  |  | 16,541,996 |  |  |  | 10,178,000 |
Parrish Road |  | Duette, FL |  | 3/10/2015 |  | 1 |  | 419 |  | 211 |  |  | 6/30/2025 |  |  |  | 4,283,210 |  |  |  | 2,374,680 |
Immokalee Exchange |  | Immokalee, FL |  | 6/25/2015 |  | 2 |  | 2,678 |  | 1,644 |  |  | 6/30/2020 |  |  |  | 15,644,287 |  |  |  | 9,360,000 |
Holt County |  | Stuart, NE |  | 8/20/2015 |  | 1 |  | 1,276 |  | 1,052 |  |  | 12/31/2018 |  |  |  | 5,478,661 |  |  |  | 3,301,000 |
Rock County |  | Bassett, NE |  | 8/20/2015 |  | 1 |  | 1,283 |  | 1,049 |  |  | 12/31/2018 |  |  |  | 5,473,099 |  |  |  | 3,301,000 |
Bear Mountain |  | Arvin, CA |  | 9/3/2015 |  | 3 |  | 854 |  | 841 |  |  | 1/9/2031 |  |  |  | 19,384,361 |  |  |  | 8,176,640 |
Corbitt Road |  | Immokalee, FL |  | 11/2/2015 |  | 1 |  | 691 |  | 390 |  |  | 12/31/2021 |  |  |  | 3,820,031 |  |  |  | 3,760,000 |
Reagan Road |  | Willcox, AZ |  | 12/22/2015 |  | 1 |  | 1,239 |  | 875 |  |  | 12/31/2025 |  |  |  | 5,732,435 |  |  |  | 3,891,000 |
|  |  |  |  |  | 43 |  | 16,810 |  | 13,022 |  |  |  |  |  | $ | 222,196,559 |  |  | $ | 142,733,157 |
(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 Total real estate, net and Lease intangibles, net; plus net above-market lease values included in Other assets; and less net below-market lease values, deferred revenue and unamortized tenant improvements included in Other liabilities, each as shown on the accompanying Consolidated Balance Sheet.
(2) | There are two leases in place on this property, one originally scheduled to expire on June 30, 2016, which lease was renewed subsequent to December 31, 2015 (see Note 10, “Subsequent Events”), and the other scheduled to expire on June 30, 2017.
Real Estate The following table sets forth the components of our investments in tangible real estate assets as of December 31, 2015 and 2014:
|  | December 31, 2015 |  |  | December 31, 2014 |
Real estate: |  |  |  |  |  |  |  |
Land and land improvements |  | $ | 192,020,381 |  |  | $ | 122,999,316 |
Irrigation systems |  |  | 21,849,508 |  |  |  | 12,365,514 |
Buildings and improvements |  |  | 11,184,647 |  |  |  | 10,479,301 |
Horticulture |  |  | 1,490,695 |  |  |  | 1,559,340 |
Other site improvements |  |  | 1,872,606 |  |  |  | 968,007 |
Real estate, at cost |  |  | 228,417,837 |  |  |  | 148,371,478 |
Accumulated depreciation |  |  | (6,634,412 | ) |  |  | (4,431,290 | )
Real estate, net |  | $ | 221,783,425 |  |  | $ | 143,940,188 |
New Real Estate Activity Certain acquisitions during the years ended December 31, 2015 and 2014 were accounted for as business combinations in accordance with Accounting Standards Codification (“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 that directly related to reviewing or assigning leases 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. 2015 New Real Estate Activity During the year ended December 31, 2015, we acquired 11 new farms in 8 separate transactions, which are summarized in the table below.
Property Name |  | Property Location |  | Acquisition Date |  | Total Acreage |  | Number of Farms |  | Primary Crop(s) |  | Lease Term |  | Renewal Options |  | Total Purchase Price |  |  | Acquisition Costs |  |  | Annualized Straight-line Cash Rent(1) |  |  | 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 |  |  |  | 151,746 | (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(4) |  | 15.4 years |  | 1 (10 years) |  |  | 18,922,500 |  |  |  | 119,128 | (5) |  |  | 828,608 |  |  |  | 21,138,196 |
Corbitt Road |  | Immokalee, FL |  | 11/2/2015 |  | 691 |  | 1 |  | Misc. Vegetables |  | 6.1 years |  | 1 (6 years) |  |  | 3,760,000 |  |  |  | 74,857 | (5) |  |  | 226,938 |  |  |  | 3,760,000 |
Reagan Road |  | Willcox, AZ |  | 12/22/2015 |  | 1,239 |  | 1 |  | Corn |  | 10.0 years |  | 2 (5 years) |  |  | 5,700,000 |  |  |  | 37,544 | (5) |  |  | 319,240 |  |  |  | 3,891,000 |
|  |  |  |  |  | 8,771 |  | 11 |  |  |  |  |  |  |  | $ | 75,966,980 |  |  | $ | 631,948 |  |  | $ | 3,944,694 |  |  | $ | 57,303,876 |
(1) | Annualized straight-line amount is based on the minimum cash rental payments guaranteed under the lease.
(2) | In connection with this acquisition, our Adviser earned a finder’s fee of $320,905, which fee was fully credited back to us by our Adviser during the three months ended March 31, 2015. See Note 4, “Related- Party Transactions” for further discussion on this fee.
(3) | Acquisition accounted for as a business combination under ASC 805. As such, all acquisition-related costs were expensed as incurred, other than direct leasing costs, which were capitalized. In aggregate, we incurred $11,825 of direct leasing costs in connection with these acquisitions.
(4) | Property currently consists of open ground and old grape vineyards. However, we will be removing the existing vineyards and converting the property into an almond orchard, which development is expected to be completed by June 30, 2016.
(5) | Acquisition accounted for as an asset acquisition under ASC 360. As such, all acquisition-related costs were capitalized and allocated among the identifiable assets acquired.
We determined the fair value of assets acquired and liabilities assumed related to the properties acquired during the year ended December 31, 2015, to be as follows:
Property Name |  | Land and Land Improvements |  |  | Buildings and Improvements |  |  | Irrigation System |  |  | In-place Leases |  |  | Leasing Costs |  |  | Tenant Relationships |  |  | Above-(Below)- Market Leases & (Deferred Revenue) |  |  | Total Purchase Price |
Espinosa Road |  | $ | 15,852,466 |  |  | $ | 84,478 |  |  | $ | 497,401 |  |  | $ | 246,472 |  |  | $ | 43,895 |  |  | $ | 180,788 |  |  | $ | — |  |  | $ | 16,905,500 |
Parrish Road |  |  | 2,403,064 |  |  |  | 42,619 |  |  |  | 1,299,851 |  |  |  | 54,405 |  |  |  | 77,449 |  |  |  | 35,892 |  |  |  | — |  |  |  | 3,913,280 |
Immokalee Exchange |  |  | 14,410,840 |  |  |  | 273,107 |  |  |  | 515,879 |  |  |  | 229,406 |  |  |  | 148,691 |  |  |  | 179,777 |  |  |  | — |  |  |  | 15,757,700 |
Holt County |  |  | 4,690,369 |  |  |  | 56,253 |  |  |  | 729,884 |  |  |  | — |  |  |  | 27,494 |  |  |  | — |  |  |  | — |  |  |  | 5,504,000 |
Rock County |  |  | 4,862,314 |  |  |  | 72,232 |  |  |  | 540,589 |  |  |  | — |  |  |  | 28,865 |  |  |  | — |  |  |  | — |  |  |  | 5,504,000 |
Bear Mountain |  |  | 18,428,247 |  |  |  | — |  |  |  | 494,253 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 18,922,500 |
Corbitt Road |  |  | 3,186,765 |  |  |  | 254,963 |  |  |  | 470,875 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (152,603 | ) |  |  | 3,760,000 |
Reagan Road |  |  | 4,207,040 |  |  |  | 18,366 |  |  |  | 1,474,594 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 5,700,000 |
|  | $ | 68,041,105 |  |  | $ | 802,018 |  |  | $ | 6,023,326 |  |  | $ | 530,283 |  |  | $ | 326,394 |  |  | $ | 396,457 |  |  | $ | (152,603 | ) |  | $ | 75,966,980 |
The allocation of the purchase price for the farms acquired during the year ended December 31, 2015, 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 year ended December 31, 2015:
Property Name |  | Acquisition Date |  |  | Operating Revenues |  |  | Earnings(1) |
Espinosa Road |  |  | 1/5/2015 |  |  | $ | 769,972 |  |  | $ | 383,201 |
Parrish Road |  |  | 3/10/2015 |  |  |  | 203,341 |  |  |  | 57,613 |
Immokalee Exchange |  |  | 6/25/2015 |  |  |  | 480,052 |  |  |  | 313,387 |
Holt County |  |  | 8/20/2015 |  |  |  | 105,954 |  |  |  | 78,315 |
Rock County |  |  | 8/20/2015 |  |  |  | 105,954 |  |  |  | 72,753 |
Bear Mountain |  |  | 9/3/2015 |  |  |  | 271,599 |  |  |  | 249,958 |
Corbitt Road |  |  | 11/2/2015 |  |  |  | 29,970 |  |  |  | 8,916 |
Reagan Road |  |  | 12/22/2015 |  |  |  | 8,582 |  |  |  | 3,473 |
|  |  |  |  |  | $ | 1,975,424 |  |  | $ | 1,167,616 |
(1) | Earnings are calculated as net income less interest expense and any acquisition-related costs that are required to be expensed if the acquisition is treated as a business combination under ASC 805.
2014 New Real Estate Activity During the year ended December 31, 2014, we acquired 11 new farms in 8 separate transactions, which are summarized in the table below.
Property Name |  | Property Location |  | Acquisition Date |  | Total Acreage |  | Number of Farms |  | Primary Crop(s) |  | Lease Term |  | Renewal Options |  | Total Purchase Price |  |  | Acquisition Costs |  |  | Annualized Straight- line Rent(1) |  |  | Long-term Debt Issued |
Collins Road |  | Clatskanie, OR |  | 5/30/2014 |  | 200 |  | 2 |  | Blueberries |  | 10.3 years |  | 3 (5 years) |  | $ | 2,591,333 |  |  | $ | 60,329 | (2) |  | $ | 181,172 |  |  | $ | — |
Spring Valley |  | Watsonville, CA |  | 6/13/2014 |  | 145 |  | 1 |  | Strawberries |  | 2.3 years |  | None |  |  | 5,900,000 |  |  |  | 49,582 | (2) |  |  | 270,901 |  |  |  | — |
McIntosh Road |  | Dover, FL |  | 6/20/2014 |  | 94 |  | 2 |  | Strawberries |  | 3.0 years |  | 1 (3 years) / None(3) |  |  | 2,666,000 |  |  |  | 60,939 | (2) |  |  | 133,154 |  |  |  | 1,599,600 |
Naumann Road |  | Oxnard, CA |  | 7/23/2014 |  | 68 |  | 1 |  | Strawberries |  | 3.0 years |  | 1 (3 years) |  |  | 6,888,500 |  |  |  | 91,103 | (2) |  |  | 329,667 |  |  |  | — |
Sycamore Road |  | Arvin, CA |  | 7/25/2014 |  | 326 |  | 1 |  | Misc. Vegetables |  | 1.3 years(4) |  | None(4) |  |  | 5,800,000 |  |  |  | 44,434 | (2) |  |  | 184,304 |  |  |  | — |
Wauchula Road |  | Duette, FL |  | 9/29/2014 |  | 808 |  | 1 |  | Strawberries |  | 10.0 years |  | 2 (5 years) |  |  | 13,765,000 |  |  |  | 132,555 | (5) |  |  | 888,439 |  |  |  | 8,259,000 |
Santa Clara Avenue |  | Oxnard, CA |  | 10/29/2014 |  | 333 |  | 2 |  | Strawberries |  | 0.8 years |  | 1 (2 years) |  |  | 24,592,000 |  |  |  | 100,603 | (2) |  |  | 1,231,422 |  |  |  | 25,000,000 |
Dufau Road |  | Oxnard, CA |  | 11/4/2014 |  | 65 |  | 1 |  | Strawberries |  | 3.0 years |  | 1 (3 years) |  |  | 6,125,600 |  |  |  | 66,474 | (2) |  |  | 304,607 |  |  |  | 3,675,000 |
|  |  |  |  |  | 2,039 |  | 11 |  |  |  |  |  |  |  | $ | 68,328,433 |  |  | $ | 606,019 |  |  | $ | 3,523,666 |  |  | $ | 38,533,600 |
(1) | Annualized straight-line amount is based on the minimum cash rental payments guaranteed under the lease.
(2) | Acquisition accounted for as a business combination under ASC 805. As such, all acquisition-related costs were expensed as incurred, other than direct leasing costs, which were capitalized. In aggregate, we incurred $21,408 of direct leasing costs in connection with these acquisitions.
(3) | This property has a separate tenant leasing each of the property’s two farms. One lease provides for one 3-year renewal option, while the other does not include a renewal option.
(4) | Upon acquisition of this property, we assumed the in-place lease, which expires October 31, 2015. In addition, we executed a 9-year, follow-on lease with a new tenant that commences November 1, 2015. Under the terms of the follow-on lease, the tenant has one 3-year renewal option, and annualized, straight-line rents will be $311,760.
(5) | Acquisition accounted for as an asset acquisition under ASC 360. As such, all acquisition-related costs were capitalized and allocated among the identifiable assets acquired.
We determined the fair value of assets acquired and liabilities assumed related to the properties acquired during the year ended December 31, 2014, to be as follows:
Property Name |  | Land and Land Improvements |  |  | Buildings and Improvements |  |  | Irrigation System |  |  | Horticulture(1) |  |  | In-place Leases |  |  | Leasing Costs |  |  | Tenant Relationships |  |  | Above-(Below)- Market Leases |  |  | Total Purchase Price |
Collins Road |  | $ | 1,252,388 |  |  | $ | 682,385 |  |  | $ | — |  |  | $ | 520,993 |  |  | $ | 45,086 |  |  | $ | 65,685 |  |  | $ | 24,796 |  |  | $ | — |  |  | $ | 2,591,333 |
Spring Valley |  |  | 5,576,138 |  |  |  | 5,781 |  |  |  | 200,855 |  |  |  | — |  |  |  | 83,487 |  |  |  | 17,498 |  |  |  | 66,217 |  |  |  | (49,976 | ) |  |  | 5,900,000 |
McIntosh Road |  |  | 1,970,074 |  |  |  | 33,592 |  |  |  | 537,254 |  |  |  | — |  |  |  | 34,674 |  |  |  | 16,766 |  |  |  | 27,966 |  |  |  | 45,674 |  |  |  | 2,666,000 |
Naumann Road |  |  | 6,219,293 |  |  |  | 433,087 |  |  |  | 71,586 |  |  |  | — |  |  |  | 75,520 |  |  |  | 34,228 |  |  |  | 54,786 |  |  |  | — |  |  |  | 6,888,500 |
Sycamore Road |  |  | 5,840,750 |  |  |  | — |  |  |  | 67,000 |  |  |  | — |  |  |  | 48,670 |  |  |  | 3,764 |  |  |  | — |  |  |  | (160,184 | ) |  |  | 5,800,000 |
Wauchula Road |  |  | 8,388,424 |  |  |  | 1,887,530 |  |  |  | 3,489,046 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 13,765,000 |
Santa Clara Avenue |  |  | 23,672,902 |  |  |  | 163,140 |  |  |  | 187,314 |  |  |  | — |  |  |  | 310,119 |  |  |  | 29,153 |  |  |  | 229,372 |  |  |  | — |  |  |  | 24,592,000 |
Dufau Road |  |  | 5,859,721 |  |  |  | 3,021 |  |  |  | 88,827 |  |  |  | — |  |  |  | 71,654 |  |  |  | 30,128 |  |  |  | 52,720 |  |  |  | 19,529 |  |  |  | 6,125,600 |
|  | $ | 58,779,690 |  |  | $ | 3,208,536 |  |  | $ | 4,641,882 |  |  | $ | 520,993 |  |  | $ | 669,210 |  |  | $ | 197,222 |  |  | $ | 455,857 |  |  | $ | (144,957 | ) |  | $ | 68,328,433 |
(1) | Horticulture acquired on Collins Road consists of various types of blueberry bushes.
Below is a summary of the total operating revenues and earnings recognized on the properties acquired during the year ended December 31, 2014:
Property Name |  | Acquisition Date |  |  | Operating Revenues |  |  | Earnings (1) |
Collins Road |  |  | 5/30/2014 |  |  | $ | 106,658 |  |  | $ | 33,303 |
Spring Valley |  |  | 6/13/2014 |  |  |  | 148,996 |  |  |  | 81,073 |
McIntosh Road |  |  | 6/20/2014 |  |  |  | 58,021 |  |  |  | (22,902 | )(2)
Naumann Road |  |  | 7/23/2014 |  |  |  | 145,337 |  |  |  | 104,726 |
Sycamore Road |  |  | 7/25/2014 |  |  |  | 80,328 |  |  |  | 39,574 |
Wauchula Road |  |  | 9/29/2014 |  |  |  | 226,978 |  |  |  | 101,794 |
Santa Clara Avenue |  |  | 10/29/2014 |  |  |  | 212,078 |  |  |  | 73,833 |
Dufau Road |  |  | 11/4/2014 |  |  |  | 48,229 |  |  |  | 32,807 |
|  |  |  |  |  | $ | 1,026,625 |  |  | $ | 444,208 |
(1) | Earnings are calculated as net income less interest expense and any acquisition-related costs that are required to be expensed if the acquisition is treated as a business combination under ASC 805.
(2) | Includes $43,328 of lease intangibles that were written off during the three months ended September 30, 2014, related to the termination of a lease in September 2014 that we had assumed upon acquisition.
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 the new properties acquired during the years ended December 31, 2015 and 2014:
Intangible Assets and Liabilities |  | 2015 |  |  | 2014 |
In-place leases |  |  | 4.1 |  |  |  | 2.2 |
Leasing costs |  |  | 5.5 |  |  |  | 5.0 |
Tenant relationships |  |  | 9.5 |  |  |  | 4.7 |
Above-market lease values |  |  | — |  |  |  | 3.0 |
Below-market lease and sale inducement values |  |  | 6.2 |  |  |  | 1.5 |
All intangible assets and liabilities |  |  | 6.2 |  |  |  | 3.2 |
Pro-Forma Information We acquired 11 farms during each of the years ended December 31, 2015 and 2014. The following table reflects pro-forma consolidated financial information as if each farm 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 Years Ended December 31, |
|  | 2015 |  |  | 2014 |
|  | (Unaudited) |  |  | (Unaudited) |
Operating Data: |  |  |  |  |  |  |  |
Total operating revenue |  | $ | 13,993,765 |  |  | $ | 13,831,669 |
Total operating expenses |  |  | (7,282,204 | ) |  |  | (7,767,114 | )
Other expenses |  |  | (4,861,169 | ) |  |  | (4,695,902 | )
Net income before income taxes |  |  | 1,850,392 |  |  |  | 1,368,653 |
Provision for income taxes |  |  | — |  |  |  | (26,502 | )
Net income |  | $ | 1,850,392 |  |  | $ | 1,342,151 |
Share and Per-share Data: |  |  |  |  |  |  |  |
Earnings per share of common stock – basic and diluted |  | $ | 0.20 |  |  | $ | 0.18 |
Weighted-average common shares outstanding – basic and diluted |  |  | 9,216,469 |  |  |  | 7,608,416 |
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 9, 2015, we terminated the lease with the tenant occupying Keysville Road and, on February 10, 2015, entered into a lease with a new tenant to occupy the property. The new lease is scheduled to expire on June 30, 2020, and provides for rent escalations over its life, with minimum, annualized straight-line rental income of $73,749, representing a 7.9% increase over that of the previous lease. In connection with the termination of the previous lease, during the three months ended March 31, 2015, we wrote off an aggregate amount of $40,022 related to deferred rent asset balances and rental income, including $32,497 that had been recorded in prior periods. On February 23, 2015, we renewed the lease with the tenant occupying Spring Valley, which lease was originally set to expire on September 30, 2016. The lease was renewed for an additional six years, through September 30, 2022, and provides for rent escalations over its life, with minimum annualized, straight-line rental income of $327,904, representing a 32.5% increase over that of the previous lease. The new lease also grants the tenant two options to extend the lease for an additional six years each. On April 8, 2015, the tenant occupying Santa Clara exercised its option to extend the two existing leases, which were originally set to expire on July 31, 2015. The leases were each extended for an additional two years, through July 31, 2017, and provide for aggregate annualized, straight-line rental income of $1,302,783, representing a 5.8% increase over that of the previous leases. On April 13, 2015, we renewed the lease with the tenant occupying Dalton Lane, which was originally set to expire on October 31, 2015. The lease was renewed for an additional five years, through October 31, 2020, and provides for rent escalations over its life, with annualized, straight-line rental income of $163,989, representing a 16.8% increase over that of the previous lease. The new lease also grants the tenant one option to extend the lease for an additional five years. On September 10, 2015, we terminated the lease with the tenant occupying one of the McIntosh Road farms and immediately entered into a new lease agreement with a different tenant to occupy the property. The new lease is scheduled to expire on June 30, 2016, and provides for minimum rental payments of $43,200 over its term. In connection with the termination of the previous lease, during the three months ended September 30, 2015, we wrote off an aggregate amount of $27,274 related to unamortized above-market lease value and deferred rent asset balances. In addition, we expensed $20,255 of unamortized intangible assets related to the old lease. On October 5, 2015, we executed a lease amendment with the tenant on East Shelton to provide for additional annual rent in connection with the completion of certain irrigation upgrades we performed on the property. The amendment also adjusted the rent due for the next two years as stipulated in the lease as the first minimum rent reset period. The portion of the amendment related to the recovery of capital expenditures resulted in additional annualized, straight-line rents of $16,268 throughout the entire lease term, while the portion of the amendment related to the market rent reset period will result in an additional $78,780 of annualized, straight-line rental income for the two-year period ending on February 28, 2018, at which time the next market reset period will begin. On November 6, 2015, we executed an agreement for a perpetual right-of-way easement that will allow for the installation of a natural gas pipeline underneath approximately 2.6 nonfarmable acres on Collins Road. In return, we received $17,021 of gross consideration, $14,483 of which was recognized as a capital gain during the year ended December 31, 2015, in accordance with GAAP. For further leasing activity on our existing properties, see Note 9, “Subsequent Events.” Involuntary Conversions and Property and Casualty Recovery In April 2014, two separate fires occurred on two of our properties, partially damaging a structure on each property. One occurred on 20th Avenue, destroying the majority of a residential house, and the other occurred on West Gonzales, damaging a portion of a cooling facility. During the year ended December 31, 2014, we wrote down the carrying values of these properties by an aggregate amount of $232,737, and, in accordance with ASC 605, “Revenue Recognition – Gains and Losses,” we also recorded a corresponding property and casualty loss. We recovered $495,700 of insurance proceeds during the year ended December 31, 2014, and, in accordance with ASC 450, “Contingencies,” we recorded these amounts as an offset to the property and casualty loss recorded earlier in the year, resulting in a net recovery. During the year ended December 31, 2015, we recovered an additional $97,232 of insurance proceeds, and such recovery is included in Property and casualty recovery, net on the accompanying Consolidated Statements of Operations. Repairs have been completed on each of these properties. During the year ended December 31, 2015, we expended $35,648 in repairs and upgrades to the cooler as a result of the fire on West Gonzales, of which $25,682 was capitalized as a real estate addition, and $9,966 was recorded in repairs and maintenance expense, included in Property operating expense on the accompanying Condensed Consolidated Statements of Operations. Repairs on 20th Avenue were also completed during the year ended December 31, 2015, at no cost to us. During the year ended December 31, 2014, we expended $496,784 in repairs and upgrades to the cooler, of which $407,096 was capitalized as a real estate addition and $89,688 was recorded in repairs and maintenance expense. Each of these insurance claims has been closed, and no further recoveries are expected for either of these fires. Intangible Assets and Liabilities The following table summarizes the carrying value of lease intangibles and the accumulated amortization for each intangible asset or liability class as of December 31, 2015 and 2014:
|  | December 31, 2015 |  |  | December 31, 2014 |
|  | Lease Intangibles |  |  | Accumulated Amortization |  |  | Lease Intangibles |  |  | Accumulated Amortization |
In-place leases |  | $ | 1,225,955 |  |  | $ | (573,149 | ) |  | $ | 869,207 |  |  | $ | (263,428 | )
Leasing costs |  |  | 677,112 |  |  |  | (183,851 | ) |  |  | 357,210 |  |  |  | (80,617 | )
Tenant relationships |  |  | 886,743 |  |  |  | (269,269 | ) |  |  | 501,670 |  |  |  | (66,467 | )
|  | $ | 2,789,810 |  |  | $ | (1,026,269 | ) |  | $ | 1,728,087 |  |  | $ | (410,512 | )
|  | Deferred Rent Asset (Liability) |  |  | Accumulated (Amortization) Accretion |  |  | Deferred Rent Asset (Liability) |  |  | Accumulated (Amortization) Accretion |
Above-market lease values(1) |  | $ | 19,528 |  |  | $ | (7,540 | ) |  | $ | 65,203 |  |  | $ | (9,027 | )
Below-market lease values and deferred revenue(2) |  |  | (202,579 | ) |  |  | 23,205 |  |  |  | (371,707 | ) |  |  | 162,194 |
|  | $ | (183,051 | ) |  | $ | 15,665 |  |  | $ | (306,504 | ) |  | $ | 153,167 |
(1) | Above-market lease values are included as a part of Other assets in the accompanying Consolidated Balance Sheets, and the related amortization is recorded as a reduction of rental income.
(2) | Below-market lease values and deferred revenue are included as a part of Other liabilities in the accompanying Consolidated Balance Sheets, and the related accretion is recorded as an increase to rental income.
The estimated aggregate amortization expense to be recorded related to in-place leases, leasing costs and tenant relationships and the estimated net impact on rental income from the amortization or accretion of above- and below-market lease values and deferred revenue for each of the five succeeding fiscal years and thereafter is as follows:
Period |  |  |  | Estimated Amortization Expense |  |  | Estimated Net Increase to Rental Income |
For the fiscal years ending December 31: |  | 2016 |  | $ | 624,604 |  |  | $ | 29,324 |
|  | 2017 |  |  | 348,854 |  |  |  | 22,814 |
|  | 2018 |  |  | 246,624 |  |  |  | 23,845 |
|  | 2019 |  |  | 207,158 |  |  |  | 29,323 |
|  | 2020 |  |  | 117,966 |  |  |  | 29,324 |
|  | Thereafter |  |  | 218,335 |  |  |  | 32,756 |
|  |  |  | $ | 1,763,541 |  |  | $ | 167,386 |
Lease Expirations The following table summarizes the future lease expirations by year for our properties as of December 31, 2015:
Year |  | Number of Expiring Leases |  |  | Expiring Leased Acreage |  |  | % of Total Acreage |  |  | Rental Revenue for the Year Ended December 31, 2015 |  |  | % of Total Rental Revenue |
2016(1) |  |  | 4 |  |  |  | 368 |  |  |  | 2.2 | % |  | $ | 816,811 |  |  |  | 6.9 | %
2017 |  |  | 8 |  |  |  | 647 |  |  |  | 3.9 | % |  |  | 2,160,141 |  |  |  | 18.2 | %
2018 |  |  | 5 |  |  |  | 2,929 |  |  |  | 17.4 | % |  |  | 581,084 |  |  |  | 4.9 | %
2019 |  |  | 0 |  |  |  | 0 |  |  |  | 0.0 | % |  |  | — |  |  |  | 0.0 | %
2020 |  |  | 6 |  |  |  | 3,888 |  |  |  | 23.1 | % |  |  | 3,763,641 |  |  |  | 31.6 | %
2021 |  |  | 2 |  |  |  | 691 |  |  |  | 4.1 | % |  |  | 29,970 |  |  |  | 0.2 | %
Thereafter |  |  | 13 |  |  |  | 8,287 |  |  |  | 49.3 | % |  |  | 4,536,444 |  |  |  | 38.2 | %
Totals |  |  | 38 |  |  |  | 16,810 |  |  |  | 100.0 | % |  | $ | 11,888,091 |  |  |  | 100.0 | %
(1) | Includes a surface area lease on a portion of one property leased to an oil company that is renewed on a year-to-year basis, for which we recorded $32,064 of rental revenue during the year ended December 31, 2015, and a residential lease on one of our properties that is not expected to be renewed upon its expiration in 2016 and for which no rental revenue was recorded during the year ended December 31, 2015. In addition, one of the agricultural leases originally set to expire in 2016 was renewed subsequent to December 31, 2015. See Note 10, “Subsequent Events,” for further discussion on this lease renewal.
Future Lease Payments Future operating lease payments from tenants under all non-cancelable leases, excluding tenant reimbursement of expenses, for each of the five succeeding fiscal years and thereafter as of December 31, 2015, are as follows:
|  |  |  | Tenant Lease |
Period |  |  |  | Payments |
For the fiscal years ending December 31: |  | 2016 |  | $ | 12,876,180 |
|  | 2017 |  |  | 10,895,846 |
|  | 2018 |  |  | 10,860,980 |
|  | 2019 |  |  | 10,310,834 |
|  | 2020 |  |  | 8,303,119 |
|  | Thereafter |  |  | 25,233,615 |
|  |  |  | $ | 78,480,574 |
In accordance with the lease terms, substantially all operating expenses are required to be paid by the tenant; however, we would be required to pay real estate property taxes on the respective parcels of land in the event the tenants fail to pay them. Portfolio Diversification and Concentrations Diversification The following table summarizes the geographic locations, by state, of our properties with leases in place as of December 31, 2015 and 2014:
|  | As of and For the Year Ended December 31, 2015 |  |  | As of and For the Year Ended December 31, 2014 |
|  | 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 |  |  | 18 |  |  |  | 3,576 |  |  |  | 21.3 | % |  | $ | 7,754,945 |  |  |  | 65.2 | % |  |  | 14 |  |  |  | 2,391 |  |  |  | 29.7 | % |  | $ | 4,778,579 |  |  |  | 66.6 | %
Florida |  |  | 13 |  |  |  | 5,092 |  |  |  | 30.3 | % |  |  | 2,166,660 |  |  |  | 18.2 | % |  |  | 9 |  |  |  | 1,304 |  |  |  | 16.2 | % |  |  | 759,398 |  |  |  | 10.6 | %
Oregon |  |  | 4 |  |  |  | 2,313 |  |  |  | 13.8 | % |  |  | 1,168,725 |  |  |  | 9.8 | % |  |  | 4 |  |  |  | 2,313 |  |  |  | 28.8 | % |  |  | 1,080,105 |  |  |  | 15.1 | %
Arizona |  |  | 2 |  |  |  | 3,000 |  |  |  | 17.8 | % |  |  | 338,446 |  |  |  | 2.9 | % |  |  | 1 |  |  |  | 1,761 |  |  |  | 21.9 | % |  |  | 299,785 |  |  |  | 4.2 | %
Michigan |  |  | 4 |  |  |  | 270 |  |  |  | 1.6 | % |  |  | 247,407 |  |  |  | 2.1 | % |  |  | 4 |  |  |  | 270 |  |  |  | 3.4 | % |  |  | 252,451 |  |  |  | 3.5 | %
Nebraska |  |  | 2 |  |  |  | 2,559 |  |  |  | 15.2 | % |  |  | 211,908 |  |  |  | 1.8 | % |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
|  |  | 43 |  |  |  | 16,810 |  |  |  | 100.0 | % |  | $ | 11,888,091 |  |  |  | 100.0 | % |  |  | 32 |  |  |  | 8,039 |  |  |  | 100.0 | % |  | $ | 7,170,318 |  |  |  | 100.0 | %
Concentrations Credit Risk Our farms are leased to 33 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 $2.9 million, or 24.8% of the total rental revenue recorded during the year ended December 31, 2015. In addition, a separate tenant accounted for approximately $1.3 million, or 10.7% of the total rental revenue recorded during the year ended December 31, 2015. If either tenant fails to make rental payments or elects to terminate their lease, and the land cannot be re-leased on satisfactory terms, there would likely 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 year ended December 31, 2015. Geographic Risk 18 of our 43 farms owned as of December 31, 2015, are located in California, and 13 farms are located in Florida. As of December 31, 2015, our farmland in California accounted for 3,576 acres, or 21.3% of the total acreage we owned. Furthermore, these farms accounted for approximately $7.8 million, or 65.2%, of the total rental revenue recorded during the year ended December 31, 2015. However, these farms are spread across three of the many different growing regions within California. As of December 31, 2015, our farmland in Florida accounted for 5,092 acres, or 30.3% of the total acreage we owned, and these farms accounted for approximately $2.2 million, or 18.2%, of the total rental revenue recorded during the year ended December 31, 2015. 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 year ended December 31, 2015.

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