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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
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)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common stock, $0.001 par value per share
 
LAND
 
The Nasdaq Stock Market, LLC
6.375% Series A Cumulative Term Preferred Stock, $0.001 par value per share
 
LANDP
 
The Nasdaq Stock Market, LLC
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      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).     Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
  
Accelerated filer
Non-accelerated filer
 
  
Smaller reporting company
 
 
 
 
Emerging growth company



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes      No  
The number of shares of the registrant’s Common Stock, $0.001 par value per share, outstanding as of August 4, 2020, was 22,022,815.



GLADSTONE LAND CORPORATION
FORM 10-Q FOR THE QUARTER ENDED
JUNE 30, 2020
TABLE OF CONTENTS 
 
 
PAGE
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GLADSTONE LAND CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per-share data)
(Unaudited)
 
 
June 30, 2020
 
December 31, 2019
ASSETS
 
 
 
Investments in real estate, net
$
820,763

 
$
792,081

Lease intangibles, net
3,680

 
4,827

Cash and cash equivalents
24,779

 
13,688

Other assets, net
7,467

 
6,191

TOTAL ASSETS
$
856,689

 
$
816,787

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
LIABILITIES:
 
 
 
Borrowings under lines of credit
$
100

 
$
100

Notes and bonds payable, net
491,538

 
481,829

Series A cumulative term preferred stock, $0.001 par value, $25.00 per share liquidation preference; 2,000,000 shares authorized, 1,150,000 shares issued and outstanding as of June 30, 2020, and December 31, 2019, net
28,476

 
28,359

Accounts payable and accrued expenses
12,443

 
10,132

Due to related parties, net
1,653

 
2,169

Other liabilities, net
16,096

 
15,228

Total liabilities
550,306

 
537,817

Commitments and contingencies (Note 7)

 

 
 
 
 
EQUITY:
 
 
 
Stockholders’ equity:
 
 
 
Series B cumulative redeemable preferred stock, $0.001 par value, $25.00 per share liquidation preference; 6,472,482 shares authorized 5,972,482 shares issued and outstanding as of June 30, 2020; 6,485,400 shares authorized, 4,755,869 shares issued and outstanding as of December 31, 2019
6

 
5

Series C cumulative redeemable preferred stock, $0.001 par value, $25.00 per share liquidation preference; 26,000,000 shares authorized, 130,702 shares issued and outstanding as of June 30, 2020; no shares authorized, issued, or outstanding as of December 31, 2019

 

Common stock, $0.001 par value; 65,527,518 shares authorized 21,534,739 shares issued and outstanding as of June 30, 2020; 91,514,600 shares authorized, 20,936,658 shares issued and outstanding as of December 31, 2019
22

 
21

Additional paid-in capital
352,677

 
315,770

Accumulated other comprehensive loss
(1,816
)
 
(390
)
Distributions in excess of accumulated earnings
(45,653
)
 
(38,785
)
Total stockholders’ equity
305,236

 
276,621

Non-controlling interests in Operating Partnership
1,147

 
2,349

Total equity
306,383

 
278,970

 
 
 
 
TOTAL LIABILITIES AND EQUITY
$
856,689

 
$
816,787


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

3


GLADSTONE LAND CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(In thousands, except share and per-share data)
(Unaudited)
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2020
 
2019
 
2020
 
2019
OPERATING REVENUES:
 
 
 
 
 
 
 
Lease revenue, net
$
12,638

 
$
8,362

 
$
27,918

 
$
16,192

Total operating revenues
12,638

 
8,362

 
27,918

 
16,192

OPERATING EXPENSES:
 
 
 
 
 
 
 
Depreciation and amortization
3,843

 
2,936

 
8,100

 
5,533

Property operating expenses
717

 
586

 
1,238

 
1,403

Base management fee
1,047

 
974

 
2,081

 
1,879

Incentive fee

 

 
1,334

 

Administration fee
357

 
250

 
740

 
556

General and administrative expenses
490

 
469

 
1,044

 
1,018

Total operating expenses
6,454

 
5,215

 
14,537

 
10,389

Credits to fees from Adviser

 
(974
)
 

 
(1,543
)
Total operating expenses, net of credits to fees
6,454

 
4,241

 
14,537

 
8,846

OTHER INCOME (EXPENSE):
 
 
 
 
 
 
 
Other income
21

 
48

 
1,345

 
874

Interest expense
(4,990
)
 
(3,543
)
 
(9,953
)
 
(6,996
)
Dividends declared on Series A cumulative term preferred stock
(458
)
 
(458
)
 
(916
)
 
(916
)
(Loss) gain on dispositions of real estate assets, net
(567
)
 
13

 
(666
)
 
(19
)
Property and casualty (loss) recovery

 
(7
)
 
66

 
(7
)
(Loss) income from investments in unconsolidated entities
(8
)
 

 
26

 

Total other expense, net
(6,002
)
 
(3,947
)
 
(10,098
)
 
(7,064
)
NET INCOME
182

 
174

 
3,283

 
282

Net loss (income) attributable to non-controlling interests
2

 
(1
)
 
(39
)
 
(3
)
NET INCOME ATTRIBUTABLE TO THE COMPANY
184

 
173

 
3,244

 
279

Dividends declared on Series B cumulative redeemable preferred stock
(2,241
)
 
(893
)
 
(4,367
)
 
(1,494
)
Dividends declared on Series C cumulative redeemable preferred stock
(21
)
 

 
(21
)
 

NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS
$
(2,078
)
 
$
(720
)
 
$
(1,144
)
 
$
(1,215
)
 
 
 
 
 
 
 
 
LOSS PER COMMON SHARE:
 
 
 
 
 
 
 
Basic and diluted
$
(0.10
)
 
$
(0.04
)
 
$
(0.05
)
 
$
(0.07
)
WEIGHTED-AVERAGE SHARES OF COMMON STOCK OUTSTANDING:
 
 
 
 
 
 
 
Basic and diluted
21,418,455

 
18,641,738

 
21,340,268

 
18,336,975



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

4



GLADSTONE LAND CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (Continued)
(In thousands, except share and per-share data)
(Unaudited)
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2020
 
2019
 
2020
 
2019
COMPREHENSIVE INCOME:
 
 
 
 
 
 
 
Net income attributable to the Company
$
184

 
$
173

 
$
3,244

 
$
279

Change in fair value related to interest rate hedging instruments
(169
)
 

 
(1,426
)
 

COMPREHENSIVE INCOME ATTRIBUTABLE TO THE COMPANY
$
15

 
$
173

 
$
1,818

 
$
279


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

5


GLADSTONE LAND CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(In thousands, except share data)
(Unaudited)
 
Three months ended June 30, 2020
 
Series B Preferred Stock
 
Series C Preferred Stock
 
Common Stock
 
Additional
Paid-in 
Capital
 
Accumulated
Other
Comprehensive
Loss
 
Distributions
in Excess of
Accumulated
Earnings
 
Total
Stockholders’
Equity
 
Non-
Controlling
Interests
 
Total
Equity
 
Number
of Shares
 
Par
Value
 
Number
of Shares
 
Par
Value
 
Number
of Shares
 
Par
Value
 
 
 
 
 
Balance at March 31, 2020
5,977,647

 
$
6

 

 
$

 
21,346,458

 
$
21

 
$
348,020

 
$
(1,647
)
 
$
(40,701
)
 
$
305,699

 
$
2,356

 
$
308,055

Issuance of Series B Preferred Stock, net

 

 

 

 

 

 
(66
)
 

 

 
(66
)
 

 
(66
)
Redemptions of Series B Preferred Stock
(5,165
)
 

 

 

 

 

 
(124
)
 

 

 
(124
)
 

 
(124
)
Issuance of Series C Preferred Stock, net

 

 
130,702

 

 

 

 
2,963

 

 

 
2,963

 

 
2,963

Redemption of OP Units

 

 

 

 
144,152

 
0

 
2,092

 

 

 
2,092

 
(2,092
)
 

Issuance of common stock, net

 

 

 

 
44,129

 
1

 
707

 

 

 
708

 

 
708

Comprehensive loss attributable to the Company

 

 

 

 

 

 

 
(169
)
 

 
(169
)
 

 
(169
)
Net income

 

 

 

 

 

 

 

 
184

 
184

 
(2
)
 
182

Dividends—Series B Preferred Stock

 

 

 

 

 

 

 

 
(2,241
)
 
(2,241
)
 

 
(2,241
)
Dividends—Series C Preferred Stock
 
 
 
 

 

 

 

 

 

 
(21
)
 
(21
)
 

 
(21
)
Distributions—OP Units and common stock

 

 

 

 

 

 

 

 
(2,874
)
 
(2,874
)
 
(30
)
 
(2,904
)
Adjustment to non-controlling interests resulting from changes in ownership of the Operating Partnership

 

 

 

 

 

 
(915
)
 

 

 
(915
)
 
915

 

Balance at June 30, 2020
5,972,482

 
$
6

 
130,702

 
$

 
21,534,739

 
$
22

 
$
352,677

 
$
(1,816
)
 
$
(45,653
)
 
$
305,236

 
$
1,147

 
$
306,383

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six months ended June 30, 2020
 
Series B Preferred Stock
 
Series C Preferred Stock
 
Common Stock
 
Additional
Paid-in 
Capital
 
Accumulated
Other
Comprehensive
Loss
 
Distributions
in Excess of
Accumulated
Earnings
 
Total
Stockholders’
Equity
 
Non-
Controlling
Interests
 
Total
Equity
 
Number
of Shares
 
Par
Value
 
Number
of Shares
 
Par
Value
 
Number
of Shares
 
Par
Value
 
 
 
 
 
Balance at December 31, 2019
4,755,869
 
$
5

 
 
$

 
20,936,658
 
$
21

 
$
315,770

 
$
(390
)
 
$
(38,785
)
 
$
276,621

 
$
2,349

 
$
278,970

Issuance of Series B Preferred Stock, net
1,229,531
 
1

 
 

 
 

 
27,049

 

 

 
27,050

 

 
27,050

Redemptions of Series B Preferred Stock
(12,918)
 
0

 
 

 
 

 
(309
)
 

 

 
(309
)
 

 
(309
)
Issuance of Series C Preferred Stock, net
 

 
130,702
 

 
 

 
2,963

 

 

 
2,963

 

 
2,963

Redemptions of OP Units
 

 
 

 
144,152
 
0

 
2,092

 

 

 
2,092

 
(2,092
)
 

Issuance of common stock, net
 

 
 

 
453,929
 
1

 
6,031

 

 

 
6,032

 

 
6,032

Comprehensive loss attributable to the Company
 

 
 

 
 

 

 
(1,426
)
 

 
(1,426
)
 

 
(1,426
)
Net income
 

 
 

 
 

 

 

 
3,244

 
3,244

 
39

 
3,283

Dividends—Series B Preferred Stock
 

 
 

 
 

 

 

 
(4,367
)
 
(4,367
)
 

 
(4,367
)
Dividends—Series C Preferred Stock
 

 
 

 
 

 

 

 
(21
)
 
(21
)
 

 
(21
)
Distributions—OP Units and common stock
 

 
 

 
 

 

 

 
(5,724
)
 
(5,724
)
 
(68
)
 
(5,792
)
Adjustment to non-controlling interests resulting from changes in ownership of the Operating Partnership
 

 
 

 
 

 
(919
)
 

 

 
(919
)
 
919

 

Balance at June 30, 2020
5,972,482
 
$
6

 
130,702
 
$

 
21,534,739
 
$
22

 
$
352,677

 
$
(1,816
)
 
$
(45,653
)
 
$
305,236

 
$
1,147

 
$
306,383

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

6






 
Three Months Ended June 30, 2019
 
Series B Preferred Stock
 
Series C Preferred Stock
 
Common Stock
 
Additional
Paid-in 
Capital
 
Accumulated
Other
Comprehensive
Loss
 
Distributions
in Excess of
Accumulated
Earnings
 
Total
Stockholders’
Equity
 
Non-
Controlling
Interests
 
Total
Equity
 
Number
of Shares
 
Par
Value
 
Number
of Shares
 
Par
Value
 
Number
of Shares
 
Par
Value
 
 
 
 
 
Balance at March 31, 2019
1,891,709
 
$
2

 
 

 
18,462,219
 
$
18

 
$
223,480

 
$

 
$
(28,731
)
 
$
194,769

 
$

 
$
194,769

Issuance of Series B Preferred Stock, net
751,159
 
1

 
 

 
 

 
16,755

 

 

 
16,756

 

 
16,756

Redemptions of Series B Preferred Stock
(6,800)
 
0

 
 

 
 

 
(153
)
 

 

 
(153
)
 

 
(153
)
Issuance of common stock, net
 

 
 

 
2,070,551
 
3

 
23,167

 

 

 
23,170

 

 
23,170

Net income
 

 
 

 
 

 

 

 
174

 
174

 

 
174

Dividends—Series B Preferred Stock
 

 
 

 
 

 

 

 
(893
)
 
(893
)
 

 
(893
)
Distributions—OP Units and common stock
 

 
 

 
 

 

 

 
(2,469
)
 
(2,469
)
 

 
(2,469
)
Balance at June 30, 2019
2,636,068
 
$
3



$


20,532,770

$
21


$
263,249


$


$
(31,919
)

$
231,354


$


$
231,354

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six Months Ended June 30, 2019
 
 
 
Series B Preferred Stock
 
Series C Preferred Stock
 
Common Stock
 
Additional
Paid-in 
Capital
 
Accumulated
Other
Comprehensive
Loss
 
Distributions
in Excess of
Accumulated
Earnings
 
Total
Stockholders’
Equity
 
Non-
Controlling
Interests
 
Total
Equity
 
Number
of Shares
 
Par
Value
 
Number
of Shares
 
Par
Value
 
Number
of Shares
 
Par
Value
 
 
 
 
 
 
Balance at December 31, 2018
1,144,393
 
$
1

 
 

 
17,891,340
 
$
18

 
$
202,053

 
$

 
$
(25,826
)
 
$
176,246

 
$
4,807

 
$
181,053

Issuance of Series B Preferred Stock, net
1,499,075
 
2

 
 

 
 

 
33,458

 

 

 
33,460

 

 
33,460

Redemptions of Series B Preferred Stock
(7,400)
 
0

 
 

 
 

 
(166
)
 

 

 
(166
)
 

 
(166
)
Redemption of OP Units
 

 
 

 
570,879
 
1

 
4,714

 

 

 
4,715

 
(4,715
)
 

Issuance of common stock, net
 

 
 

 
2,070,551
 
2

 
23,147

 

 

 
23,149

 

 
23,149

Net income
 

 
 

 
 

 

 

 
279

 
279

 
3

 
282

Dividends—Series B Preferred Stock
 

 
 

 
 

 

 

 
(1,494
)
 
(1,494
)
 

 
(1,494
)
Distributions—OP Units and common stock
 

 
 

 
 

 

 

 
(4,878
)
 
(4,878
)
 
(52
)
 
(4,930
)
Adjustment to non-controlling interests resulting from changes in ownership of the Operating Partnership
 

 
 

 
 

 
43

 

 

 
43

 
(43
)
 

Balance at June 30, 2019
2,636,068
 
$
3

 
 
$

 
20,532,770
 
$
21

 
$
263,249

 
$

 
$
(31,919
)
 
$
231,354

 
$

 
$
231,354


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

7


GLADSTONE LAND CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
For the Six Months Ended June 30,
 
2020
 
2019
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
Net income
$
3,283

 
$
282

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
8,100

 
5,533

Amortization of debt issuance costs
365

 
299

Amortization of deferred rent assets and liabilities, net
(139
)
 
(157
)
Amortization of of right-of-use asset from operating leases and operating lease liabilities, net
(24
)
 
(29
)
Income from investments in unconsolidated entities
(26
)
 

Bad debt expense
12

 
6

Loss on dispositions of real estate assets, net
666

 
19

Property and casualty recovery, net

 
7

Changes in operating assets and liabilities:
 
 
 
Other assets, net
(1,426
)
 
220

Accounts payable and accrued expenses and Due to related parties, net
(501
)
 
(1,344
)
Other liabilities, net
(373
)
 
(580
)
Net cash provided by operating activities
9,937

 
4,256

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
Acquisition of new real estate assets
(25,134
)
 
(48,004
)
Capital expenditures on existing real estate assets
(9,427
)
 
(5,549
)
Proceeds from dispositions of real estate assets
166

 

Change in deposits on real estate acquisitions, net
(705
)
 
(1,050
)
Net cash used in investing activities
(35,100
)
 
(54,603
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
Proceeds from issuance of preferred and common equity
39,563

 
61,394

Offering costs
(2,917
)
 
(4,521
)
Redemption of Series B Preferred Stock
(309
)
 
(166
)
Borrowings from mortgage notes and bonds payable
16,300

 
18,072

Repayments of mortgage notes and bonds payable
(6,588
)
 
(4,247
)
Borrowings from lines of credit

 
14,900

Repayments of lines of credit

 
(14,900
)
Payments of financing fees
(378
)
 
(115
)
Dividends paid on cumulative redeemable preferred stock (Series B and Series C)
(3,625
)
 
(1,165
)
Distributions paid on common stock
(5,724
)
 
(4,878
)
Distributions paid to non-controlling interests in Operating Partnership
(68
)
 
(52
)
Net cash provided by financing activities
36,254

 
64,322

NET INCREASE IN CASH AND CASH EQUIVALENTS
11,091

 
13,975

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
13,688

 
14,730

CASH AND CASH EQUIVALENTS AT END OF PERIOD
$
24,779

 
$
28,705



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

8


GLADSTONE LAND CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In thousands)
(Unaudited)

 
For the Six Months Ended June 30,
 
2020
 
2019
NON-CASH OPERATING, INVESTING, AND FINANCING INFORMATION:
 
 
 
Operating lease right-of-use assets
$

 
$
198

Operating lease liabilities

 
(169
)
Real estate additions included in Accounts payable and accrued expenses and Due to related parties, net
3,785

 
2,465

Stock offering and OP Unit issuance costs included in Accounts payable and accrued expenses and Due to related parties, net

 
99

Financing fees included in Accounts payable and accrued expenses and Due to related parties, net
95

 
20

Unrealized loss related to interest rate hedging instrument
(1,816
)
 



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

9


GLADSTONE LAND CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BUSINESS AND ORGANIZATION
Business and Organization
Gladstone Land Corporation (the “Company”) is an agricultural real estate investment trust (“REIT”) that was re-incorporated in Maryland on March 24, 2011, having been originally incorporated in California on June 14, 1997. Upon the pricing of our initial public offering on January 29, 2013, our shares of common stock began trading on the Nasdaq Stock Market, LLC (“Nasdaq”), under the symbol “LAND.” 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. As we currently control the sole general partner of the Operating Partnership and own, directly or indirectly, a majority of the common units of limited partnership interest in the Operating Partnership (“OP Units”), the financial position and results of operations of the Operating Partnership are consolidated within our financial statements. As of June 30, 2020, and December 31, 2019, the Company owned approximately 99.3% and 98.6%, respectively, of the outstanding OP Units (see Note 8, “Equity,” for additional discussion regarding OP Units).
Gladstone Land Advisers, Inc. (“Land Advisers”), a Delaware corporation and a subsidiary of ours, was created to collect certain non-qualifying income related to our real estate portfolio and to perform certain small-scale farming business operations. We have elected for Land Advisers to be treated as a taxable REIT subsidiary (“TRS”) of ours. Since we currently own 100% of the voting securities of Land Advisers, its financial position and results of operations are consolidated within our financial statements.
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 (see Note 6, “Related-Party Transactions,” for additional discussion regarding our Adviser and Administrator).
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 statement 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, 2019, as filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 19, 2020 (the “Form 10-K”). The results of operations for the three and six months ended June 30, 2020, 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. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, including the impact of extraordinary events, such as the novel coronavirus (“COVID-19”) pandemic, the results of which form the basis for making certain judgments. Actual results may materially differ from these estimates.
Impairment of Real Estate Assets

10


We account for the impairment of our tangible and identifiable intangible real estate assets in accordance with Accounting Standards Codification (“ASC”) 360, “Property, Plant, and Equipment” (“ASC 360”), which requires us to periodically review the carrying value of each property to determine whether indicators of impairment exist. If circumstances support the possibility of impairment, we prepare a projection of the total undiscounted future cash flows of the specific property (without interest charges), including proceeds from disposition, and compare them to the net book value of the property to determine whether the carrying value of the property is recoverable. If the carrying amount is more than the aggregate undiscounted future cash flows, we would recognize an impairment loss to the extent the carrying value exceeds the estimated fair value of the property.
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. As of June 30, 2020, and December 31, 2019, we concluded that none of our properties were impaired. There have been no impairments recognized on our real estate assets since our inception.
Income Taxes
We have operated and intend to continue to operate in a manner that will allow us to qualify as a REIT under the Sections 856-860 of the Internal Revenue Code of 1986, as amended (the “Code”). As a REIT, we generally are not subject to federal corporate income taxes on amounts that we distribute to our stockholders (except income from any foreclosure property), provided that, on an annual basis, we distribute at least 90% of our REIT taxable income (excluding net capital gains) to our stockholders and meet certain other conditions. As such, in general, as long as we qualify as a REIT, no provision for federal income taxes will be necessary, except for taxes on undistributed REIT taxable income and taxes on the income generated by a TRS (such as Land Advisers), if any. For the tax year ended December 31, 2019 and for the six months ended June 30, 2020, we did not have any undistributed REIT taxable income, nor was there any taxable income or loss from Land Advisers. Should we have any taxable income or loss in the future, we will account for any income taxes in accordance with the provisions of ASC 740, “Income Taxes,” using the asset and liability method.
Reclassifications
Certain information on the accompanying Condensed Consolidated Balance Sheet as of December 31, 2019, has been reclassified to conform to the current period’s presentation. These reclassifications had no impact on previously-reported stockholders’ equity, net income, or net change in cash and cash equivalents.
Recently-Issued Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”). ASU 2016-13 requires more timely recognition of credit losses on loans and other financial instruments that are not accounted for at fair market value through net income. The standard also requires that financial assets measured at amortized cost be presented at the net amount anticipated to be collected via an allowance for credit losses that is deducted from the amortized cost basis. Pursuant to ASU 2016-13, we are required to measure all expected credit losses based upon historical experience, current conditions, and reasonable (and supportable) forecasts that affect the collectability of the financial asset. We adopted ASU 2016-13 beginning with the three months ended March 31, 2020, which has not had a material impact on our consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848)” (“ASU 2020-04”). The main provisions of this update provide optional expedients and exceptions for contracts, hedging relationships, and other transactions that reference the London Inter-bank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. ASU 2020-04 is effective for all entities as of March 12, 2020. We adopted ASU 2020-04 beginning with the three months ended March 31, 2020, which has not resulted in a material impact to our consolidated financial statements, as ASU 2020-04 allows for prospective application of any changes in the effective interest rate for LIBOR-based debt and also provides for practical expedients that will allow us to continue to treat our derivative instruments designed as cash flow hedges consistent to how they are accounted for now.
In April 2020, the FASB issued a staff question-and-answer document, “Topic 842 and Topic 840: Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic” (the “COVID-19 Q&A”), to address certain frequently-asked questions pertaining to lease concessions arising from the effects of the COVID-19 pandemic. Existing lease guidance requires entities to determine if a lease concession was a result of a new arrangement reached with the tenant (which would be addressed under the lease modification accounting framework) or if a lease concession was under the enforceable rights and obligations within the existing lease agreement (which would not fall under the lease modification accounting framework). The COVID-19 Q&A clarifies that entities may elect to not evaluate whether lease-related relief granted in light of the effects of COVID-19 is a lease modification, provided that the concession does not result in a substantial increase in rights of the lessor

11


or obligations of the lessee. This election is available for concessions that result in the total payments required by the modified contract being substantially the same as or less than the total payments required by the original contract. In July 2020, we granted rent deferrals to two tenants who owed aggregate rents of approximately $343,000, which was originally scheduled to be paid on July 1, 2020. The agreements with these tenants provide for extensions of up to 123 days, extending the new due dates for these rental payments to be on or before November 1, 2020. We anticipate electing to not evaluate these lease amendments under the lease modification accounting framework.
NOTE 3. REAL ESTATE AND INTANGIBLE ASSETS
All of our properties are wholly-owned on a fee-simple basis, except where noted. The following table provides certain summary information about the 115 farms we owned as of June 30, 2020 (dollars in thousands, except for footnotes):
Location
 
No. of Farms
 
Total
Acres
 
Farm Acres
 
Net Cost Basis(1)
 
Encumbrances(2)
California(3)
 
43
 
15,420
 
14,203
 
$
436,744

 
$
268,244

Florida
 
23
 
20,770
 
16,256
 
210,474

 
131,359

Arizona(4)
 
6
 
6,280
 
5,228
 
58,498

 
22,087

Colorado
 
12
 
32,773
 
25,577
 
48,864

 
31,047

Nebraska
 
9
 
7,782
 
7,050
 
30,825

 
19,331

Michigan
 
15
 
962
 
682
 
12,262

 
7,573

Texas
 
1
 
3,667
 
2,219
 
8,363

 
5,173

Washington
 
1
 
746
 
417
 
8,031

 
4,957

Oregon
 
3
 
418
 
363
 
6,198

 
3,785

North Carolina
 
2
 
310
 
295
 
2,264

 
1,206

 
 
115
 
89,128
 
72,290
 
$
822,523

 
$
494,762

(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 Investments in real estate, net (excluding improvements paid for by the tenant) and Lease intangibles, net; plus net above-market lease values, lease incentives, and investments in special-purpose LLCs included in Other assets, net; and less net below-market lease values and other deferred revenue included in Other liabilities, net; each as shown on the accompanying Condensed Consolidated Balance Sheets.
(2) 
Excludes approximately $3.1 million of debt issuance costs related to notes and bonds payable, included in Notes and bonds payable, net on the accompanying Condensed Consolidated Balance Sheet.
(3) 
Includes ownership in a special-purpose LLC that owns a pipeline conveying water to one of our properties. As of June 30, 2020, this investment had a net carrying value of approximately $613,000 and is included within Other assets, net on the accompanying Condensed Consolidated Balance Sheet.
(4) 
Includes two farms in which we own a leasehold interest via ground leases with the State of Arizona that expire in February 2022 and February 2025, respectively. In total, these two farms consist of 1,368 total acres and 1,221 farm acres and had an aggregate net cost basis of approximately $1.9 million as of June 30, 2020 (included in Lease intangibles, net on the accompanying Condensed Consolidated Balance Sheet).
Real Estate
The following table sets forth the components of our investments in tangible real estate assets as of June 30, 2020, and December 31, 2019 (dollars in thousands):
 
June 30, 2020
 
December 31, 2019
Real estate:
 
 
 
Land and land improvements
$
609,792

 
$
583,247

Irrigation and drainage systems
115,293

 
108,222

Horticulture
108,779

 
107,941

Farm-related facilities
21,250

 
20,665

Other site improvements
7,215

 
7,180

Real estate, at gross cost
862,329

 
827,255

Accumulated depreciation
(41,566
)
 
(35,174
)
Real estate, net
$
820,763

 
$
792,081


Real estate depreciation expense on these tangible assets was approximately $3.5 million and $7.0 million for the three and six months ended June 30, 2020, respectively, and approximately $2.6 million and $4.9 million for the three and six months ended June 30, 2019, respectively.

12


Included in the figures above are amounts related to improvements made on certain of our properties paid for by our tenants but owned by us, or tenant improvements. As of June 30, 2020, and December 31, 2019, we recorded tenant improvements, net of accumulated depreciation, of approximately $2.1 million and $2.2 million, respectively. We recorded both depreciation expense and additional lease revenue related to these tenant improvements of approximately $76,000 and $152,000 for the three and six months ended June 30, 2020, respectively, and approximately $72,000 and $146,000 for the three and six months ended June 30, 2019, 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, 2020, and December 31, 2019 (dollars in thousands):
 
June 30, 2020
 
December 31, 2019
Lease intangibles:
 
 
 
Leasehold interest – land
$
3,498

 
$
3,498

In-place leases
2,007

 
2,293

Leasing costs
1,584

 
2,066

Tenant relationships
414

 
414

Lease intangibles, at cost
7,503

 
8,271

Accumulated amortization
(3,823
)
 
(3,444
)
Lease intangibles, net
$
3,680

 
$
4,827


Total amortization expense related to these lease intangible assets, including amounts charged to amortization expense due to early lease terminations, was approximately $321,000 and $1.1 million for the three and six months ended June 30, 2020, respectively, and approximately $326,000 and $650,000 for the three and six months ended June 30 2019, respectively. See below, under “Significant Existing Real Estate Activity—Leasing Activity—Lease Termination” for further discussion of this lease termination.
The following table summarizes the carrying values of certain lease intangible assets or liabilities included in Other assets, net or Other liabilities, net, respectively, on the accompanying Condensed Consolidated Balance Sheets and the related accumulated amortization or accretion, respectively, as of June 30, 2020, and December 31, 2019 (dollars in thousands):
 
 
June 30, 2020
 
December 31, 2019
Intangible Asset or Liability
 
Deferred
Rent Asset
(Liability)
 
Accumulated
(Amortization)
Accretion
 
Deferred
Rent Asset
(Liability)
 
Accumulated
(Amortization)
Accretion
Above-market lease values and lease incentives(1)
 
$
201

 
$
(103
)
 
$
111

 
$
(41
)
Below-market lease values and other deferred revenue(2)
 
(886
)
 
307

 
(886
)
 
257

 
 
$
(685
)
 
$
204

 
$
(775
)
 
$
216

(1) 
Net above-market lease values and lease incentives are included as part of Other assets, net on the accompanying Condensed Consolidated Balance Sheets, and the related amortization is recorded as a reduction of Lease revenue on the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income.
(2) 
Net below-market lease values and other deferred revenue are included as a part of Other liabilities, net on the accompanying Condensed Consolidated Balance Sheets, and the related accretion is recorded as an increase to Lease revenue on the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income.
Total amortization related to above-market lease values and lease incentives was approximately $31,000 and $62,000 for the three and six months ended June 30, 2020, respectively, and approximately $33,000 and $66,000 for the three and six months ended June 30, 2019, respectively. Total accretion related to below-market lease values and other deferred revenue was approximately $25,000 and $50,000 for the three and six months ended June 30, 2020, respectively, and approximately $39,000 and $77,000 for the three and six months ended June 30, 2019, respectively.
Acquisitions
2020 Acquisitions

13


During the six months ended June 30, 2020, we acquired four new farms, which are summarized in the table below (dollars in thousands, except for footnotes):
Property
Name
 
Property
Location
 
Acquisition
Date
 
Total
Acres
 
No. of
Farms
 
Primary
Crop(s)
 
Lease
Term
 
Renewal
Options
 
Total
Purchase
Price
 
Acquisition
Costs
(1)
 
Annualized
Straight-line
Rent
(2)
 
New
Long-term
Debt
County Road 18
 
Phillips, CO
 
1/15/2020
 
1,325
 
2
 
Sugar beets, edible beans, potatoes, & corn
 
6.0 years
 
None
 
$
7,500

 
$
39

 
$
417

 
$
4,500

Lamar Valley
 
Chase, NE
 
5/7/2020
 
678
 
1
 
Potatoes, edible beans, & corn
 
6.7 years
 
2 (5 years)
 
3,500

 
47

 
204

 
2,100

Driver Road(3)
 
Kern, CA
 
6/5/2020
 
590
 
1
 
Pecans
 
4.7 years
 
2 (10 years)
 
14,169

 
53

 
784

 
8,500

 
 
 
 
 
 
2,593
 
4
 
 
 
 
 
 
 
$
25,169

 
$
139

 
$
1,405

 
$
15,100

(1) 
Includes approximately $18,000 of aggregate external legal fees associated with negotiating and originating the leases associated with these acquisitions, which costs were expensed in the period incurred.
(2) 
Annualized straight-line rent is based on the minimum cash rental payments guaranteed under the applicable leases, as required under GAAP, and excludes contingent rental payments, such as participation rents.
(3) 
The lease provides for an initial term of 14.7 years and includes six tenant termination options throughout the initial term. The lease term stated above represents the term through the first available termination option, and the annualized straight-line rent amount represents the rent guaranteed through the noncancelable term of the lease.
During the three and six months ended June 30, 2020, we recognized lease revenue of approximately $191,000 and $280,000, respectively, and net income of approximately $125,000 and $196,000, respectively, related to the above acquisition.
2019 Acquisitions
During the six months ended June 30, 2019, we acquired 13 new farms, which are summarized in the table below (dollars in thousands, except for footnotes):
Property
Name
 
Property
Location
 
Acquisition
Date
 
Total
Acres
 
No. of
Farms
 
Primary
Crop(s)
 
Lease
Term
 
Renewal
Options
 
Total
Purchase
Price
 
Acquisition
Costs
(1)
 
Annualized
Straight-line
Rent
(2)
 
New
Long-term
Debt
Somerset Road
 
Lincoln, NE
 
1/22/2019
 
695
 
1
 
Popcorn & edible beans
 
4.9 years
 
1 (5 years)
 
$
2,400

 
$
33

 
$
126

 
$
1,440

Greenhills Boulevard(3)
 
Madera, CA
 
4/9/2019
 
928
 
1
 
Pistachios
 
10.6 years
 
2 (5 years)
 
28,550

 
141

 
1,721

 
17,130

Van Buren Trail
 
Van Buren, MI
 
5/29/2019
 
159
 
2
 
Blueberries & cranberries
 
10.6 years
 
2 (5 years)
 
2,682

 
26

 
206

 
1,609

Blue Star Highway
 
Allegran & Van Buren, MI
 
6/4/2019
 
357
 
8
 
Blueberries
 
10.6 years
 
2 (5 years)
 
5,100

 
30

 
390

 
3,060

Yolo County Line Road
 
Yolo, CA
 
6/13/2019
 
542
 
1
 
Olives for olive oil
 
14.6 years
 
1 (5 years)
 
9,190

 
68

 
624

 
5,514

 
 
 
 
 
 
2,681
 
13
 
 
 
 
 
 
 
$
47,922

 
$
298

 
$
3,067

 
$
28,753

(1) 
Includes approximately $18,000 of external legal fees associated with negotiating and originating the lease associated with this acquisition, which cost was expensed in the period incurred.
(2) 
Annualized straight-line rent is based on the minimum cash rental payments guaranteed under the applicable leases, as required under GAAP, and excludes contingent rental payments, such as participation rents.
(3) 
Lease provides for a participation rent component based on the gross crop revenues earned on the farm. The rent figure above represents only the minimum cash guaranteed under the lease.
During the three and six months ended June 30, 2019, we recognized operating revenues of approximately $503,000 and $527,000, respectively, and net income of approximately $218,000 and $220,000, respectively, related to the above acquisitions.
Purchase Price Allocations
The allocation of the aggregate purchase price for the farms acquired during each of the six months ended June 30, 2020 and 2019 is as follows (dollars in thousands):
Acquisition Period
 
Land and Land
Improvements
 
Irrigation &
Drainage Systems
 
Horticulture
 
Farm-related
Facilities
 
Total Purchase
Price
2020 Acquisitions
 
$
22,630

 
$
2,119

 
$
369

 
$
51

 
$
25,169

2019 Acquisitions
 
18,209

 
4,022

 
23,989

 
1,702

 
47,922


Significant Existing Real Estate Activity
Property Add-on

14


In connection with the acquisition of a 366-acre vineyard located in Napa, California (“Withers Road”), on August 28, 2019, we committed to provide up to approximately $4.0 million as additional compensation, contingent upon the County of Napa approving the planting of additional vineyards on up to 47 acres of the property by February 25, 2020 (the “Permit Deadline”). In addition, if approval was obtained, we also committed to contribute up to $40,000 per approved acre for the development of such vineyards. While approval of the additional plantings was not received from the County of Napa by the Permit Deadline, in March 2020, we executed an agreement with the tenant on Withers Road to extend the Permit Deadline until August 24, 2020.
In April 2020, we received notification from the County of Napa informing us that it had approved of additional vineyard plantings on 38.7 acres of the property. As such, in May 2020, we paid additional compensation related to this acquisition of approximately $3.2 million. As a result, and pursuant to a lease amendment, we will earn additional straight-line rental income of approximately $335,000 per year throughout the remaining term of the lease, which expires on December 31, 2029. We will also earn additional rent on any of the aforementioned development costs as they are incurred by us.
Leasing Activity
The following table summarizes certain leasing activity that occurred on our existing properties during the six months ended June 30, 2020 (dollars in thousands):
 
 
 
 
PRIOR LEASES
 
NEW LEASES(1)(2)
Farm
Locations
Number
of
Leases
Total
Farm
Acres
 
Total
Annualized
Straight-line
Rent(3)
# of Leases
with
Participation
Rents
Lease
Structures
(# of NNN
/ NN / N)(4)
 
Total
Annualized
Straight-line
Rent
(3)
Wtd. Avg.
Term
(Years)
# of Leases
with
Participation
Rents
Lease
Structures
(# of NNN
/ NN / N)
(4)
AZ, CA, & NE
10
6,525
 
$
4,661

3
6 / 2 / 2
 
$
4,758

6.2
4
6 / 3 / 0
(1) 
In connection with certain of these leases, we committed to provide capital for certain improvements on these farms. See Note 7, “Commitments and Contingencies—Operating Obligations,” for additional information on these commitments.
(2) 
Two of the prior leases encompassing four of our farms were renewed under a single lease encompassing the same four farms.
(3) 
Annualized straight-line rent is based on the minimum cash rental payments guaranteed under the leases (presented on an annualized basis), as required under GAAP, and excludes contingent rental payments, such as participation rents.
(4) 
“NNN” refers to leases under triple-net lease arrangements, “NN” refers to leases under partial-net lease arrangements, and “N” refers to leases under single-net lease arrangements. For a description of each of these types of lease arrangements, see “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview—Leases—General.”
Lease Termination
On February 10, 2020, we reached an agreement with a tenant occupying four of our farms in Arizona to terminate the existing leases encompassing those four farms effective February 10, 2020. As part of the termination agreement, the outgoing tenant made a one-time termination payment to us of approximately $3.0 million, which we recognized as additional lease revenue during the six months ended June 30, 2020. The prior leases were scheduled to expire on September 15, 2026 (with two of the farms subject to the renewal of certain state leases currently scheduled to expire on February 14, 2022, and February 14, 2025). In connection with the early termination of these leases, during the six months ended June 30, 2020, we recognized approximately $89,000 of prepaid rent as additional lease revenue and wrote off an aggregate net deferred rent balance of approximately $254,000 against lease revenue. In addition, approximately $470,000 of unamortized lease intangible assets related to the terminated leases were written off and charged to amortization expense during the six months ended June 30, 2020. Upon termination of these leases, we entered into a new, seven-year lease with a new tenant effective immediately. These leases are included in the Leasing Activity table above.
Investments in Unconsolidated Entities
In connection with the acquisition of 2,110 gross acres of farmland located in Fresno County, California (“Sutter Avenue”), which occurred in two phases during the year ended December 31, 2019, we also acquired an ownership in a related LLC, the sole purpose of which is to own and maintain a pipeline conveying water to this and other neighboring properties. On August 16, 2019, we acquired an 11.75% ownership interest in the LLC that was valued at approximately $280,000 at the time of acquisition. On November 1, 2019, we acquired an additional 13.25% interest in the LLC that was valued at approximately $307,000 at the time of acquisition. As our investment in the LLC is deemed to constitute “significant influence,” we have accounted for this investment under the equity method.
During the three and six months ended June 30, 2020, we recorded (loss) income of approximately $(8,000) and $26,000, respectively (included on our Condensed Consolidated Statements of Operations and Comprehensive Income as Income from investments in unconsolidated entities), which represents our pro-rata share of the (loss) income recognized by the LLC. Prior to fiscal year 2020, we had not recorded any material income or loss related to our ownership interest in the LLC. Our combined ownersh