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INVESTMENTS IN WATER ASSETS | 6 Months Ended
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Jun. 30, 2025
Real Estate [Abstract] |
INVESTMENTS IN WATER ASSETS | REAL ESTATE AND INTANGIBLE ASSETS All of our properties are wholly-owned on a fee-simple basis, except where noted. The following table summarizes certain information about the 150 farms we owned as of June 30, 2025 (dollars in thousands, except for footnotes):
Location |  | No. of Farms |  | Total Acres |  | Farm Acres |  | Acre-feet of Water Assets |  | Net Cost Basis(1) |  | Encumbrances(2)
California(3)(4)(5) |  | 63 |  | 34,845 |  | 32,321 |  | 55,306 |  | $ | 825,470 |  |  | $ | 363,072 |
Florida(6) |  | 20 |  | 13,090 |  | 10,279 |  | 0 |  | 128,585 |  |  | 56,865 |
Washington |  | 6 |  | 2,520 |  | 2,004 |  | 0 |  | 54,566 |  |  | 14,843 |
Arizona(7) |  | 6 |  | 6,320 |  | 5,333 |  | 0 |  | 49,093 |  |  | 11,849 |
Colorado |  | 12 |  | 32,773 |  | 25,577 |  | 0 |  | 45,401 |  |  | 13,379 |
Oregon(8) |  | 6 |  | 898 |  | 736 |  | 0 |  | 29,271 |  |  | 10,647 |
Nebraska |  | 7 |  | 5,223 |  | 4,949 |  | 0 |  | 19,782 |  |  | 9,689 |
Michigan |  | 12 |  | 1,245 |  | 778 |  | 0 |  | 14,942 |  |  | 8,560 |
Texas |  | 1 |  | 3,667 |  | 2,219 |  | 0 |  | 8,971 |  |  | — |
Maryland |  | 6 |  | 987 |  | 863 |  | 0 |  | 7,916 |  |  | 4,153 |
South Carolina |  | 3 |  | 597 |  | 447 |  | 0 |  | 3,407 |  |  | 2,076 |
Georgia |  | 2 |  | 230 |  | 175 |  | 0 |  | 2,303 |  |  | 1,577 |
North Carolina |  | 2 |  | 310 |  | 295 |  | 0 |  | 2,055 |  |  | — |
New Jersey |  | 3 |  | 116 |  | 101 |  | 0 |  | 2,044 |  |  | 1,166 |
Delaware |  | 1 |  | 180 |  | 140 |  | 0 |  | 1,277 |  |  | 666 |
|  | 150 |  | 103,001 |  | 86,217 |  | 55,306 |  | $ | 1,195,083 |  |  | $ | 498,542 |
(1)Consists of the initial acquisition price (including the costs allocated to both tangible and intangible assets acquired and liabilities assumed), plus subsequent improvements and other capitalized costs associated with the properties, and adjusted for accumulated depreciation and amortization. Specifically, includes Total real estate, net and Lease intangibles, net; plus long-term water assets and related acquisition costs, net above-market lease values, net lease incentives, and net investments in special-purpose LLCs included in Other assets, net; and less net below-market lease values and other deferred revenue included in Other liabilities, net; each as shown on the accompanying Condensed Consolidated Balance Sheets. (2)Excludes approximately $2.2 million of debt issuance costs related to notes and bonds payable, included in Notes and bonds payable, net on the accompanying Condensed Consolidated Balance Sheets. (3)Includes ownership in a special-purpose LLC that owns a pipeline conveying water to certain of our properties. As of June 30, 2025, this investment had a net carrying value of approximately $839,000 and is included within Other assets, net on the accompanying Condensed Consolidated Balance Sheets. (4)Includes eight acres in which we own a leasehold interest via a ground lease with a private individual that expires in December 2040 and five acres in which we own a leasehold interest via a ground sublease with a California municipality that expires in December 2041. As of June 30, 2025, these two ground leases had a net cost basis of approximately $632,000 and are included in Lease intangibles, net on the accompanying Condensed Consolidated Balance Sheets. (5)Includes 48,309 acre-feet of water stored with Semitropic Water Storage District, located in Kern County, California, and 6,997 surplus water credits in certain of our accounts with Westlands Water District, located in Fresno County, California. See Note 4, “Investments in Water Assets,” for additional information. (6)Includes certain farms classified as held for sale; see “—Real Estate Held for Sale” below for additional information. (7)Includes two farms consisting of 1,368 total acres and 1,221 farm acres in which we own leasehold interests via two ground leases with the State of Arizona that expire in February 2032 and February 2035, respectively. As of June 30, 2025, the aggregate net cost basis of these ground leases was zero. (8)Includes ownership in a special-purpose LLC that owns certain irrigation infrastructure that provides water to two of our farms. As of June 30, 2025, this investment had a net carrying value of approximately $4.7 million and is included within Other assets, net on the accompanying Condensed Consolidated Balance Sheets. Real Estate The following table sets forth the components of our investments in tangible real estate assets as of June 30, 2025, and December 31, 2024 (dollars in thousands):
| June 30, 2025 |  | December 31, 2024
Real estate: |  |  |
Land and land improvements | $ | 728,749 |  |  | $ | 743,141 |
Permanent plantings | 349,858 |  |  | 349,761 |
Irrigation and drainage systems | 170,218 |  |  | 169,098 |
Farm-related facilities | 49,048 |  |  | 49,063 |
Other site improvements | 14,776 |  |  | 13,569 |
Real estate, at cost | 1,312,649 |  |  | 1,324,632 |
Accumulated depreciation | (183,200) |  |  | (167,782) |
Total real estate, net | $ | 1,129,449 |  |  | $ | 1,156,850 |
Real estate depreciation expense on these tangible assets was approximately $8.3 million and $16.5 million for the three and six months ended June 30, 2025, respectively, and approximately $8.5 million and $17.1 million for the three and six months ended June 30, 2024, respectively. Intangible Assets and Liabilities The following table summarizes the carrying values of certain lease intangible assets and the related accumulated amortization as of June 30, 2025, and December 31, 2024 (dollars in thousands):
| June 30, 2025 |  | December 31, 2024
Lease intangibles: |  |  |
Leasehold interest – land | $ | 797 |  |  | $ | 3,372 |
In-place lease values | 1,744 |  |  | 1,798 |
Leasing costs | 2,199 |  |  | 2,280 |
Other(1) | 117 |  |  | 117 |
Lease intangibles, at cost | 4,857 |  |  | 7,567 |
Accumulated amortization | (1,523) |  |  | (3,979) |
Lease intangibles, net | $ | 3,334 |  |  | $ | 3,588 |
(1)Other includes tenant relationships and acquisition-related costs allocated to miscellaneous lease intangibles. Total amortization expense related to these lease intangible assets was approximate ly $106,000 and $254,000 for the three and six months ended June 30, 2025, respectively, and approximately $289,000 and $521,000 for the three and six months ended June 30, 2024, respectively. The following table summarizes the carrying values of certain lease intangible assets or liabilities (excluding those related to real estate held for sale) included in Other assets, net or Other liabilities, net, respectively, on the accompanying Condensed Consolidated Balance Sheets and the related accumulated amortization or accretion, respectively, as of June 30, 2025, and December 31, 2024 (dollars in thousands):
|  | June 30, 2025 |  | December 31, 2024
Intangible Asset or Liability |  | Deferred Rent Asset (Liability) |  | Accumulated (Amortization) Accretion |  | Deferred Rent Asset (Liability) |  | Accumulated (Amortization) Accretion
Above-market lease values(1) |  | $ | 695 |  |  | $ | (236) |  |  | $ | 695 |  |  | $ | (198) |
Below-market lease values(2) |  | (1,371) |  |  | 629 |  |  | (1,371) |  |  | 561 |
Lease incentives and other deferred revenue, net(3) |  | 13,512 |  |  | (8,156) |  |  | 14,192 |  |  | (3,691) |
|  | $ | 12,836 |  |  | $ | (7,763) |  |  | $ | 13,516 |  |  | $ | (3,328) |
(1)Included as part of Other assets, net on the accompanying Condensed Consolidated Balance Sheets, and the related amortization is recorded as a reduction of Lease revenue, net on the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income. (2)Included as a part of Other liabilities, net on the accompanying Condensed Consolidated Balance Sheets, and the related accretion is recorded as an increase to Lease revenue, net on the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income. (3)Lease incentives are included as part of Other assets, net on the accompanying Condensed Consolidated Balance Sheets, and the related amortization is recorded as a reduction of Lease revenue, net on the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income. Other deferred revenue primarily is primarily attributable to tenant-funded improvements and is included as a part of Other liabilities, net on the accompanying Condensed Consolidated Balance Sheets, and the related accretion is recorded as an increase to Lease revenue, net on the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income. Total amortization related to above-market lease values was approximately $19,000 and $38,000 for the three and six months ended June 30, 2025, respectively, and approximately $19,000 and $38,000 for the three and six months ended June 30, 2024, respectively. Total accretion related to below-market lease values was approximately $34,000 and $68,000 for the three and six months ended June 30, 2025, respectively, and approximately $149,000 and $189,000 for the three and six months ended June 30, 2024, respectively. Total net amortization related to lease incentives and other deferred revenue, net was approximately $2.9 million and $6.1 million for the three and six months ended June 30, 2025, respectively, and approximately $143,000 and $656,000 for the three and six months ended June 30, 2024, respectively. Acquisitions We did not acquire any new farms during either of the three or six months ended June 30, 2025 or 2024. Property Sales 2025 Property Sales In January 2025, we completed the sale of five farms in Florida totaling 5,630 gross acres for an aggregate sales price of approximately $52.5 million. Including closing costs, we recognized a net gain on the sale of approximately $14.1 million. In February 2025, we completed the sale of two farms in Nebraska totaling 2,559 gross acres for an aggregate sales price of $12.0 million. Including closing costs, we recognized an aggregate net gain on these sales of approximately $1.6 million. 2024 Property Sales In January 2024, we completed the sale of a 3,748-acre farm in Florida for approximately $65.7 million. Including closing costs, we recognized a net gain on the sale of approximately $10.4 million. Real Estate Held for Sale As of June 30, 2025, we had one property (consisting of two farms) located in Florida that was classified as held for sale. As of June 30, 2025, this property had a net cost basis of approximately $14.5 million. As of December 31, 2024, we had three properties (consisting of seven farms) that were classified as held for sale. As of December 31, 2024, one property (consisting of five farms), located in Florida, had a net cost basis of approximately $36.3 million, and two properties (consisting of two farms), located in Nebraska, had an aggregate net cost basis of approximately $10.0 million. Each of these sales was completed during the three months ended March 31, 2025, as noted above. Investments in Unconsolidated Entities In connection with the acquisition of certain farmland located in Fresno County, California, we also acquired an ownership in a related limited liability company (the “Fresno LLC”), the sole purpose of which is to own and maintain a pipeline conveying water to our and other neighboring properties. In addition, in connection with the acquisition of certain farmland located in Umatilla County, Oregon, we also acquired an ownership in a related limited liability company (the “Umatilla LLC”), the sole purpose of which is to own and maintain an irrigation system providing water to our and other neighboring properties. As of June 30, 2025, our aggregate ownership interest in the Fresno LLC and the Umatilla LLC was 50.0% and 20.5%, respectively. As our investments in the Fresno LLC and Umatilla LLC are both deemed to constitute “significant influence,” we have accounted for these investments under the equity method. We recorded an aggregate loss of approximately $51,000 and $186,000 during the three and six months ended June 30, 2025, respectively, and approximately $85,000 and $171,000 during the three and six months ended June 30, 2024, respectively (included in Loss from investments in unconsolidated entities on our Condensed Consolidated Statements of Operations and Comprehensive Income), which represents our pro-rata share of the aggregate loss recognized by the Fresno LLC and Umatilla LLC. As of June 30, 2025, and December 31, 2024, our combined ownership interest in the Fresno LLC and the Umatilla LLC had an aggregate carrying value of approximately $5.6 million and $5.7 million, respectively, and is included within Other assets, net on the accompanying Condensed Consolidated Balance Sheets. Portfolio Concentrations Credit Risk As of June 30, 2025, our farms were leased to various different, unrelated third-party tenants, with certain tenants leasing more than one farm. One unrelated third-party tenant (“Tenant A”) leases six of our farms under leases expiring in 2030 or later. During the six months ended June 30, 2025, aggregate lease revenue attributable to Tenant A accounted for approximately $3.7 million, or 12.9% of the total lease revenue recorded during the six months ended June 30, 2025. If Tenant A fails to make rental payments or elects to terminate its leases prior to their expirations (and we cannot re-lease the farms on satisfactory terms), there could be a material adverse effect on our financial performance. No other individual tenant represented greater than 10% of the total lease revenue recorded during the six months ended June 30, 2025. Geographic Risk Farms located in California and Florida accounted for approximately $17.1 million (58.8%) and $4.7 million (16.2%), respectively, of the total lease revenue recorded during the six months ended June 30, 2025. We seek to continue to further diversify geographically, as may be desirable or feasible. If an unexpected natural disaster (such as an earthquake, wildfire, flood, or hurricane) occurs or climate change impacts the regions where our properties are located, there could be a material adverse effect on our financial performance and ability to continue our operations. To date, none of our farms have been materially impacted by natural disasters, including the January 2025 wildfires that occurred in southern California. See “—Southeastern U.S. Hurricanes” below for a discussion on damage caused on certain of our farms by the hurricanes that occurred in the Southeastern U.S. in September and October 2024. Besides California and Florida, no other single state accounted for more than 10.0% of the total lease revenue recorded during the six months ended June 30, 2025. Southeastern U.S. Hurricanes In September and October 2024, Hurricanes Helene and Milton caused widespread destruction across many states in the Southeastern U.S., including areas where several of our farms are located. As a result of Hurricane Helene in September 2024, one of our farms in Georgia suffered damage to certain permanent plantings on the farm. At the time, we estimated the carrying value of such plantings to be approximately $275,000, and during the three months ended September 30, 2024, we wrote down the carrying value of these plantings and also recorded a corresponding property and casualty loss. During the three months ended March 31, 2025, after further inspection of the property, it was determined that the damage was not as extensive as originally estimated, and we recorded an adjustment to our original estimate, which is included within Property and casualty (loss) recovery, net on our Condensed Consolidated Statements of Operations and Comprehensive Income. Certain of our other farms in the region suffered minor damage as a result of Hurricanes Helene and Milton, but none of our other farms were materially impacted. Impairment We evaluate our entire portfolio each quarter for any impairment indicators and perform an impairment analysis on those select properties that have an indication of impairment. If this analysis indicates that the carrying value may not be recoverable, an impairment loss is recorded in earnings equal to the amount by which the carrying value exceeds the fair value of the asset. As of June 30, 2025, and December 31, 2024, we concluded that none of our properties were impaired. INVESTMENTS IN WATER ASSETS Semitropic Water Storage District Banked Water In connection with the acquisition of certain farmland located in Kern County, California, in 2021, we also acquired three contracts providing the right to purchase an aggregate of 45,000 acre-feet of banked water held by Semitropic Water Storage District (“SWSD”), a water storage district located in Kern County, California, at a fixed price. At the time of acquisition, we allocated approximately $31.3 million of aggregate value to these contracts. Subsequently in 2021, we executed all three contracts and purchased the full 45,000 acre-feet of banked water for an additional aggregate cost of approximately $2.8 million. In addition, since the initial acquisition, additional contracts to purchase banked water held by SWSD were conveyed to us by one of our tenants as partial consideration for rent payments owed. The following table summarizes the total acre-feet of banked water obtained through exercising these contracts as of June 30, 2025 (dollars in thousands):
Period Acquired |  | Acre-feet of Banked Water Available to Purchase per Contract |  | Acre-feet of Banked Water Purchased(1) |  | Value Attributed to Contract(2) |  | Cost to Exercise Contract |  | Total Carrying Value of Banked Water Purchased
Three months ended December 31, 2023 |  | 1,003 |  | 1,003 |  | $ | 401 |  |  | $ | 62 |  |  | $ | 463 |
Three months ended March 31, 2024 |  | 2,306 |  | 2,306 |  | 923 |  |  | 141 |  |  | 1,064 |
Total |  | 3,309 |  | 3,309 |  | $ | 1,324 |  |  | $ | 203 |  |  | $ | 1,527 |
(1)All contracts to purchase additional banked water were exercised in the same quarter in which the respective contract was conveyed to us. (2)Represents noncash income received during the respective periods. The straight-line impact of these receipts is included within Lease revenue, net on the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income. All banked water acquired was recognized at cost, including the subsequent cost to execute the contracts and any administrative fees necessary to transfer the water to our banked water account. As of June 30, 2025, the 48,309 acre-feet of banked water held by SWSD was recognized as a long-term water asset and had an aggregate carrying value of approximately $35.5 million. Westlands Water District Groundwater Credits In addition, from May 2023 through March 2024, we elected to participate in a groundwater recharge program established by Westlands Water District (“WWD”), a water district located in Fresno County, California. Under the program, WWD paid for surplus surface water to be delivered to individual landowners’ properties with district-approved groundwater recharge facilities, also known as “water banks.” The landowner was allowed to keep 50% of the net amount of groundwater credits generated under the program (after allowing for certain leave-behind and evaporative losses), and the remaining 50% was used to recharge the aquifer and retained by WWD. Delivery of water under this program was subject to surplus water availability at WWD’s discretion. WWD terminated the program for the 2024 water year effective March 5, 2024. As a result of the program, we recognized 2,660 acre-feet of water credits, which represents 50% of the total net water credits generated and confirmed by WWD under the program. As of June 30, 2025, these water credits were recognized as a long-term water asset and had an aggregate carrying value of approximately $753,000. In addition, as a result of being granted these water credits in exchange for transferring and storing this surplus water on behalf of WWD, we recognized approximately $27,000 and $453,000 of non-cash revenue during the three and six months ended June 30, 2024, respectively, which represents the estimated fair value of the water credits obtained during the periods. Other Groundwater Credits Since 2023, we have also entered into various other agreements with certain third parties (including local water districts and private individuals) to either buy water directly, buy a portion of other water districts’ surface water allocations in future years in which allocations are granted, or to store surface water on others’ behalf in one of our groundwater recharge facilities in exchange for a portion of the net groundwater credits produced and recognized by the respective water district. Through June 30, 2025, we have obtained 4,337 acre-feet of water credits as a result of these agreements, which were recognized as a long-term water asset with an aggregate carrying value of approximately $853,000. Total Long-term Water Assets As of June 30, 2025, we owned a total of 55,306 acre-feet of long-term water assets, and our investments in these assets had an aggregate carrying value of approximately $37.1 million and are included within Investments in water assets on our Condensed Consolidated Balance Sheets. In addition, we have invested approximately $1.4 million to construct groundwater recharge facilities on two of our farms, which is included within Real estate, at cost on our Condensed Consolidated Balance Sheets. Through June 30, 2025, we have also invested an additional $4.0 million in the aggregate in connection with certain agreements that are expected to result in additional groundwater credits in the future; however, the amount and timing of these credits, if any, is currently unknown and is dependent upon and subject to the recognition of such credits by the respective water districts, in their sole discretion. Such costs are held in a deferred asset account (also included within Investments in water assets on our Condensed Consolidated Balance Sheets) until the related net water credits become estimable and are recognized by the respective water district, at which time the costs would be considered a long-term water asset within Investments in water assets. Impairment We evaluate our entire portfolio each quarter for any impairment indicators and perform an impairment analysis on those select water assets that have an indication of impairment. If this analysis indicates that the carrying value may not be recoverable, an impairment loss is recorded in earnings equal to the amount by which the carrying value exceeds the fair value of the asset. As of June 30, 2025, and December 31, 2024, we concluded that none of our water assets were impaired.

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