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Table of Contents

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

Table of Contents

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

Table of Contents

PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GLADSTONE LAND CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
 
 
 
June 30, 2016
 
December 31, 2015
ASSETS
 
 
 
 
Investments in real estate, net
 
$
268,581,945

 
$
221,783,425

Lease intangibles, net
 
2,033,221

 
1,763,541

Cash and cash equivalents
 
2,077,250

 
2,532,522

Deferred financing costs related to borrowings under line of credit, net
 
124,410

 
132,495

Other assets, net
 
2,368,283

 
2,472,042

Total assets
 
$
275,185,109

 
$
228,684,025

LIABILITIES AND EQUITY
 
 
 
 
LIABILITIES:
 
 
 
 
Mortgage notes and bonds payable, net
 
$
165,973,676

 
$
141,578,935

Borrowings under line of credit
 
14,500,000

 
100,000

Accounts payable and accrued expenses
 
3,945,411

 
3,495,339

Due to related parties(1)
 
736,121

 
565,593

Other liabilities
 
7,802,760

 
4,937,439

Total liabilities
 
192,957,968

 
150,677,306

Commitments and contingencies(2)
 

 

EQUITY:
 
 
 
 
Stockholders’ equity:
 
 
 
 
Common stock, $0.001 par value; 20,000,000 shares authorized; 9,992,941 shares issued and outstanding as of June 30, 2016, and December 31, 2015
 
9,993

 
9,993

Additional paid-in capital
 
87,494,872

 
86,892,095

Accumulated deficit
 
(10,988,919
)
 
(8,895,369
)
Total stockholders’ equity
 
76,515,946

 
78,006,719

Non-controlling interests in operating partnership
 
5,711,195

 
—

Total equity
 
82,227,141

 
78,006,719

TOTAL LIABILITIES AND EQUITY
 
$
275,185,109

 
$
228,684,025


(1) 
Refer to Note 5, “Related-Party Transactions,” for additional information.
(2) 
Refer to Note 7, “Commitments and Contingencies,” for additional information.
The accompanying notes are an integral part of these condensed consolidated financial statements.

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GLADSTONE LAND CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
 
 
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
 
2016
 
2015
 
2016
 
2015
OPERATING REVENUES:
 
 
 
 
 
 
 
 
Rental revenue
 
$
4,241,612

 
$
2,780,456

 
$
7,921,085

 
$
5,402,783

Tenant recovery revenue
 
2,829

 
3,397

 
6,032

 
6,794

Total operating revenues
 
4,244,441

 
2,783,853

 
7,927,117

 
5,409,577

OPERATING EXPENSES:
 
 
 
 
 
 
 
 
Depreciation and amortization
 
1,334,973

 
711,803

 
2,311,683

 
1,503,435

Property operating expenses
 
158,578

 
156,405

 
338,781

 
362,170

Acquisition-related expenses
 
24,648

 
178,016

 
119,872

 
348,697

Management fee(1)
 
385,586

 
328,392

 
772,740

 
624,140

Incentive fee(1)
 
158,877

 
—

 
158,877

 
—

Administration fee(1)
 
179,377

 
177,852

 
391,237

 
308,788

General and administrative expenses
 
408,365

 
336,714

 
839,691

 
734,068

Operating expenses before credits from Adviser
 
2,650,404

 
1,889,182

 
4,932,881

 
3,881,298

Credits to fees from Adviser(1)
 
—

 
—

 
—

 
(320,905
)
Total operating expenses, net of credits to fees
 
2,650,404

 
1,889,182

 
4,932,881

 
3,560,393

OPERATING INCOME
 
1,594,037

 
894,671

 
2,994,236

 
1,849,184

OTHER INCOME (EXPENSE):
 
 
 
 
 
 
 
 
Other income
 
8,643

 
1,593

 
103,284

 
21,023

Interest expense
 
(1,486,820
)
 
(947,362
)
 
(2,741,668
)
 
(1,896,731
)
Property and casualty recovery, net
 
—

 
20,809

 
—

 
20,809

Total other expense
 
(1,478,177
)
 
(924,960
)
 
(2,638,384
)
 
(1,854,899
)
NET INCOME (LOSS)
 
115,860

 
(30,289
)
 
355,852

 
(5,715
)
Less net income attributable to non-controlling interests
 
(8,047
)
 
—

 
(13,623
)
 
—

NET INCOME (LOSS) ATTRIBUTABLE TO THE COMPANY
 
$
107,813

 
$
(30,289
)
 
$
342,229

 
$
(5,715
)
EARNINGS (LOSS) PER COMMON SHARE:
 
 
 
 
 
 
 
 
Basic and diluted
 
$
0.01

 
$
(0.00
)
 
$
0.03

 
$
(0.00
)
WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING
 
 
 
 
 
 
 
 
Basic and diluted
 
9,992,941

 
8,439,855

 
9,992,941

 
8,098,681


(1) 
Refer to Note 5, “Related-Party Transactions,” for additional information.
The accompanying notes are an integral part of these condensed consolidated financial statements.


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Table of Contents

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

 
$
7,754

 
$
65,366,309

 
$
(5,404,735
)
 
$
—

 
$
59,969,328

Net income
 
—

 
—

 
—

 
568,545

 
—

 
568,545

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

 
2,239

 
21,525,786

 
—

 
—

 
21,528,025

Distributions
 
—

 
—

 
—

 
(4,059,179
)
 
—

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

 
$
9,993

 
$
86,892,095

 
$
(8,895,369
)
 
$
—

 
$
78,006,719

Net income
 
—

 
—

 
—

 
342,229

 
13,623

 
355,852

Offering costs
 
—

 
—

 
(3,867
)
 
—

 
(25,500
)
 
(29,367
)
Distributions
 
—

 
—

 
—

 
(2,435,779
)
 
(122,137
)
 
(2,557,916
)
Issuance of OP Units as consideration in real estate acquisitions, net
 
—

 
—

 
—

 
—

 
6,451,853

 
6,451,853

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

 
—

 
606,644

 
—

 
(606,644
)
 
—

Balance at June 30, 2016
 
9,992,941

 
$
9,993

 
$
87,494,872

 
$
(10,988,919
)
 
$
5,711,195

 
$
82,227,141

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


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Table of Contents

GLADSTONE LAND CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) 
 
 
For the Six Months Ended June 30,
 
 
2016
 
2015
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
Net income (loss)
 
$
355,852

 
$
(5,715
)
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
2,311,683

 
1,503,435

Amortization of deferred financing costs
 
69,726

 
43,927

Amortization of deferred rent assets and liabilities, net
 
(84,813
)
 
(125,739
)
Property and casualty recovery, net
 
—

 
(20,809
)
Allowance for doubtful accounts
 
50,820

 
—

Changes in operating assets and liabilities:
 
 
 
 
Other assets
 
9,941

 
22,071

Accounts payable, accrued expenses and due to related parties
 
521,763

 
330,717

Other liabilities
 
3,029,581

 
(141,877
)
Net cash provided by operating activities
 
6,264,553

 
1,606,010

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
Acquisition of new real estate
 
(34,375,908
)
 
(35,279,105
)
Capital expenditures on existing real estate
 
(7,883,458
)
 
(1,589,150
)
Decrease in restricted cash
 
—

 
132,741

Deposits on future acquisitions
 
(150,000
)
 
(200,000
)
Deposits applied against real estate investments
 
(416,725
)
 
(350,000
)
Deposits refunded
 
200,000

 
100,000

Insurance proceeds received capitalized as real estate additions
 
—

 
20,809

Net cash used in investing activities
 
(42,626,091
)
 
(37,164,705
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
Proceeds from issuance of equity
 
—

 
14,895,206

Offering costs
 
(251,710
)
 
(877,768
)
Borrowings from mortgage notes payable
 
24,813,000

 
25,450,280

Repayments on mortgage note payable
 
(419,596
)
 
(206,475
)
Net borrowings from (repayments on) line of credit
 
14,400,000

 
(1,200,000
)
Payment of financing fees
 
(77,512
)
 
(116,333
)
Distributions paid on common stock
 
(2,435,779
)
 
(1,846,850
)
Distributions paid to non-controlling interests in Operating Partnership
 
(122,137
)
 
—

Net cash provided by financing activities
 
35,906,266

 
36,098,060

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
 
(455,272
)
 
539,365

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

 
2,619,342

CASH AND CASH EQUIVALENTS AT END OF PERIOD
 
$
2,077,250

 
$
3,158,707

NON-CASH INVESTING AND FINANCING INFORMATION:
 
 
 
 
Issuance of non-controlling interests in operating partnership in conjunction with acquisitions
 
$
6,451,853

 
$
—

Real estate additions included in Accounts payable, accrued expenses and due to related parties
 
1,485,479

 
1,421,863

Real estate additions included in Other liabilities
 
623,808

 
—

Real estate additions removed from Other liabilities
 
700,000

 
—

Common stock offering and OP Unit issuance costs included in Accounts payable, accrued expenses and due to related parties
 
13,598

 
259,776

Financing fees included in Accounts payable, accrued expenses and due to related parties
 
7,912

 
14,382

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

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GLADSTONE LAND CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BUSINESS
Business
Gladstone Land Corporation is a real estate investment trust (“REIT”) that was re-incorporated in Maryland on March 24, 2011, having been previously re-incorporated in Delaware on May 25, 2004, and having been originally incorporated in California on June 14, 1997. We are primarily in the business of owning and leasing farmland, and we conduct substantially all of our operations through a subsidiary, Gladstone Land Limited Partnership (the “Operating Partnership”), a Delaware limited partnership. The Company owned 93.1% and 100.0% of the limited partnership interests in the Operating Partnership ("OP Units") as of June 30, 2016, and December 31, 2015, respectively (see Note 6, "Equity," for additional discussion regarding OP Units).
Subject to certain restrictions and limitations, and pursuant to contractual agreements, our business is managed by Gladstone Management Corporation (the “Adviser”), a Delaware corporation, and administrative services are provided to us by Gladstone Administration, LLC (the “Administrator”), a Delaware limited liability company. Our Adviser and Administrator are both affiliates of ours.
All further references herein to “we,” “us,” “our” and the “Company” refer, collectively, to Gladstone Land Corporation and its consolidated subsidiaries, except where indicated otherwise.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Information
Our interim financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q in accordance with Article 10 of Regulation S-X. Accordingly, certain disclosures accompanying annual financial statements prepared in accordance with GAAP are omitted. In the opinion of our management, all adjustments, consisting solely of normal recurring accruals, necessary for the fair presentation of financial statements for the interim period have been included. The interim financial statements and accompanying notes should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2015, as filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 23, 2016 (the “Form 10-K”). The results of operations for the three and six months ended June 30, 2016, are not necessarily indicative of the results that may be expected for other interim periods or for the full fiscal year.
Use of Estimates
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could materially differ from those estimates.
Reclassifications
Certain line items on the Condensed Consolidated Balance Sheet as of December 31, 2015, the Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2015, and the Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2015, have 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.
Non-controlling Interests
Non-controlling interests are interests in the Operating Partnership not owned by us. We evaluate whether non-controlling interests are subject to redemption features outside of our control. As of June 30, 2016, the non-controlling interests in the Operating Partnership are redeemable for cash or, at our option, shares of our common stock and thus are reported in the equity section of the Condensed Consolidated Balance Sheet but separate from stockholders’ equity. The amount reported for non-controlling interests on the Condensed Statement of Operations represents the portion of income from the Operating Partnership not attributable to us.

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

 
$
—

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

 
141,578,935


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

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adoption permitted. We are currently evaluating the overall impact of ASU 2016-02. We expect our legal expenses to increase marginally, as the new standard requires us to expense indirect leasing costs that were previously capitalized; however, we do not expect ASU 2016-02 to materially impact our consolidated financial statements, as we do not currently have any lease arrangements for which we are the lessee.
NOTE 3. REAL ESTATE AND INTANGIBLE ASSETS
All of our properties are wholly owned on a fee-simple basis. The following table provides certain summary information about our 47 farms as of June 30, 2016:
 
 
 
 
Date
 
Number
of
 
Total
 
Farm
 
Lease
Expiration
 
 
Net Cost
 
 
Property Name
 
Location
 
Acquired
 
Farms
 
Acres
 
Acres
 
Date
 
 
Basis(1)
 
Encumbrances(2)
San Andreas
 
Watsonville, CA
 
6/16/1997
 
1
 
307
 
238
 
12/31/2020
 
 
$
4,766,850

 
$
5,419,371

West Gonzales
 
Oxnard, CA
 
9/15/1998
 
1
 
653
 
502
 
6/30/2020
 
 
12,087,278

 
27,572,207

West Beach
 
Watsonville, CA
 
1/3/2011
 
3
 
196
 
195
 
12/31/2023
 
 
9,284,807

 
5,279,214

Dalton Lane
 
Watsonville, CA
 
7/7/2011
 
1
 
72
 
70
 
10/31/2020
 
 
2,678,229

 
1,749,149

Keysville Road
 
Plant City, FL
 
10/26/2011
 
2
 
61
 
56
 
6/30/2020
 
 
1,239,809

 
897,600

Colding Loop
 
Wimauma, FL
 
8/9/2012
 
1
 
219
 
181
 
6/14/2018
 
 
3,900,918

 
2,640,000

Trapnell Road
 
Plant City, FL
 
9/12/2012
 
3
 
124
 
110
 
6/30/2017
 
 
3,862,689

 
2,522,250

38th Avenue
 
Covert, MI
 
4/5/2013
 
1
 
119
 
89
 
4/4/2020
 
 
1,255,879

 
835,331

Sequoia Street
 
Brooks, OR
 
5/31/2013
 
1
 
218
 
206
 
5/31/2028
 
 
3,091,791

 
1,931,041

Natividad Road
 
Salinas, CA
 
10/21/2013
 
1
 
166
 
166
 
10/31/2024
 
 
8,952,970

 
4,360,413

20th Avenue
 
South Haven, MI
 
11/5/2013
 
3
 
151
 
94
 
11/4/2018
 
 
1,851,986

 
1,245,832

Broadway Road
 
Moorpark, CA
 
12/16/2013
 
1
 
60
 
46
 
12/15/2023
 
 
2,875,864

 
1,868,748

Oregon Trail
 
Echo, OR
 
12/27/2013
 
1
 
1,895
 
1,640
 
12/31/2023
 
 
13,879,837

 
8,720,826

East Shelton
 
Willcox, AZ
 
12/27/2013
 
1
 
1,761
 
1,320
 
2/29/2024
 
 
7,778,747

 
4,173,538

Collins Road
 
Clatskanie, OR
 
5/30/2014
 
2
 
200
 
157
 
9/30/2024
 
 
2,368,937

 
1,681,874

Spring Valley
 
Watsonville, CA
 
6/13/2014
 
1
 
145
 
110
 
9/30/2022
 
 
5,746,921

 
3,675,205

McIntosh Road
 
Dover, FL
 
6/20/2014
 
2
 
94
 
78
 
6/30/2017
(3) 
 
2,453,449

 
1,519,620

Naumann Road
 
Oxnard, CA
 
7/23/2014
 
1
 
68
 
66
 
7/31/2017
 
 
6,793,670

 
4,291,892

Sycamore Road
 
Arvin, CA
 
7/25/2014
 
1
 
326
 
322
 
10/31/2024
 
 
6,848,715

 
3,612,914

Wauchula Road
 
Duette, FL
 
9/29/2014
 
1
 
808
 
590
 
9/30/2024
 
 
13,581,735

 
7,536,338

Santa Clara Avenue
 
Oxnard, CA
 
10/29/2014
 
2
 
333
 
331
 
7/31/2017
 
 
24,170,815

 
15,572,904

Dufau Road
 
Oxnard, CA
 
11/4/2014
 
1
 
65
 
64
 
11/3/2017
 
 
6,031,400

 
3,675,000

Espinosa Road
 
Salinas, CA
 
1/5/2015
 
1
 
331
 
329
 
10/31/2016
 
 
16,358,539

 
10,178,000

Parrish Road
 
Duette, FL
 
3/10/2015
 
1
 
419
 
412
 
6/30/2025
 
 
4,188,751

 
2,374,680

Immokalee Exchange
 
Immokalee, FL
 
6/25/2015
 
2
 
2,678
 
1,644
 
6/30/2020
 
 
15,526,274

 
9,360,000

Holt County
 
Stuart, NE
 
8/20/2015
 
1
 
1,276
 
1,052
 
12/31/2018
 
 
5,441,699

 
3,301,000

Rock County
 
Bassett, NE
 
8/20/2015
 
1
 
1,283
 
1,049
 
12/31/2018
 
 
5,428,714

 
3,301,000

Bear Mountain
 
Arvin, CA
 
9/3/2015
 
3
 
854
 
841
 
1/9/2031
 
 
26,094,518

 
9,979,735

Corbitt Road
 
Immokalee, FL
 
11/2/2015
 
1
 
691
 
390
 
12/31/2021
 
 
3,777,909

 
3,714,880

Reagan Road
 
Willcox, AZ
 
12/22/2015
 
1
 
1,239
 
875
 
12/31/2025
 
 
5,678,064

 
3,723,000

Gunbarrel Road
 
Alamosa, CO
 
3/3/2016
 
3
 
6,191
 
4,730
 
2/28/2021
 
 
25,326,491

 
15,531,000

Calaveras Avenue
 
Coalinga, CA
 
4/5/2016
 
1
 
453
 
442
 
10/31/2025
 
 
15,401,510

 
9,282,000

 
 
 
 
 
 
47
 
23,456
 
18,395
 
 
 
 
$
268,725,765

 
$
181,526,562


(1) 
Consists of the initial acquisition price (including the costs allocated to both tangible and intangible assets acquired and liabilities assumed), plus subsequent improvements and other capitalized costs associated with the properties, and adjusted for accumulated depreciation and amortization. Includes Investments in real estate, net and Lease intangibles, net; plus net above-market lease values included in Other assets; and less net below-market lease values, deferred revenue and unamortized tenant improvements included in Other liabilities, each as shown on the accompanying Condensed Consolidated Balance Sheet.
(2) 
Excludes approximately $1.1 million of deferred financing costs related to mortgage notes and bonds payable included in Mortgage notes and bonds payable, net on the accompanying Condensed Consolidated Balance Sheet.
(3) 
There are two leases in place on this property, one expiring on June 30, 2017, and the other expiring on June 30, 2019.

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Real Estate
The following table sets forth the components of our investments in tangible real estate assets as of June 30, 2016, and December 31, 2015:
 
 
June 30, 2016
 
December 31, 2015
Real estate:
 
 
 
 
Land and land improvements
 
$
213,659,402

 
$
192,020,381

Irrigation systems
 
30,615,816

 
21,849,508

Buildings
 
14,623,118

 
11,184,647

Horticulture
 
13,679,327

 
1,490,695

Other improvements
 
4,575,516

 
1,872,606

Real estate, at cost
 
277,153,179

 
228,417,837

Accumulated depreciation
 
(8,571,234
)
 
(6,634,412
)
Real estate, net
 
$
268,581,945

 
$
221,783,425

Real estate depreciation expense on these tangible assets was $1,136,838 and $1,936,822 for the three and six months ended June 30, 2016, respectively, and $539,125 and $1,051,639 for the three and six months ended June 30, 2015, respectively.
Included in the figures above are amounts related to improvements on certain of our properties paid for by our tenants but owned by us, or tenant improvements. As of June 30, 2016, and December 31, 2015, we recorded tenant improvements, net of accumulated depreciation, of $1,733,422 and $1,302,009, respectively. We recorded both depreciation expense and additional rental revenue related to these tenant improvements of $30,753 and $61,537 during the three and six months ended June 30, 2016, respectively, and $10,825 and $9,021 for the three and six months ended June 30, 2015, respectively.
Intangible Assets and Liabilities
The following table summarizes the carrying values of lease intangible assets and the related accumulated amortization as of June 30, 2016, and December 31, 2015:
 
 
June 30, 2016
 
December 31, 2015
Lease intangibles:
 
 
 
 
In-place leases
 
$
1,607,932

 
$
1,225,955

Leasing costs
 
939,676

 
677,112

Tenant relationships
 
886,743

 
886,743

Lease intangibles, at cost
 
3,434,351

 
2,789,810

Accumulated amortization
 
(1,401,130
)
 
(1,026,269
)
Lease intangibles, net
 
$
2,033,221

 
$
1,763,541

Total amortization expense related to these lease intangible assets was $198,135 and $374,861 for the three and six months ended June 30, 2016, respectively, and $172,678 and $451,796 for the three and six months ended June 30, 2015, respectively.

The following table summarizes the carrying values of certain lease intangible assets or liabilities included in Other assets and Other liabilities, respectively, on the accompanying Condensed Consolidated Balance Sheets and the related accumulated amortization or accretion, respectively, as of June 30, 2016, and December 31, 2015.
 
 
June 30, 2016
 
December 31, 2015
 
 
Deferred
Rent Asset
 
Accumulated
(Amortization)
 
Deferred
Rent Asset
 
Accumulated
(Amortization)
Intangible Asset or Liability
 
(Liability)
 
Accretion
 
(Liability)
 
Accretion
Above-market lease values(1)
 
$
19,528

 
$
(10,795
)
 
$
19,528

 
$
(7,540
)
Below-market lease values and deferred revenue(2)
 
(202,579
)
 
37,867

 
(202,579
)
 
23,205

 
 
$
(183,051
)
 
$
27,072

 
$
(183,051
)
 
$
15,665


(1) 
Above-market lease values are included as part of Other assets in the accompanying Condensed Consolidated Balance Sheets, and the related amortization is recorded as a reduction of rental income.
(2) 
Below-market lease values and deferred revenue are included as a part of Other liabilities in the accompanying Condensed Consolidated Balance Sheets, and the related accretion is recorded as an increase to rental income.

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Total amortization related to above-market lease values and deferred revenue was $1,627 and $3,255 for the three and six months ended June 30, 2016, respectively, and $5,395 and $10,790 for the three and six months ended June 30, 2015, respectively. Total accretion related to below-market lease values and deferred revenue was $7,331 and $14,662 for the three and six months ended June 30, 2016, respectively, and $52,590 and $107,733 for the three and six months ended June 30, 2015, respectively.
New Real Estate Activity
Certain acquisitions during the periods presented were accounted for as business combinations in accordance with ASC 805, as there was a prior leasing history on the property. As such, the fair value of all assets acquired and liabilities assumed were determined in accordance with ASC 805, and all acquisition-related costs were expensed as incurred, other than those costs 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.
In addition, total consideration for acquisitions may include a combination of cash and equity securities, such as OP Units. When OP Units are issued in connection with acquisitions, we determine the fair value of the OP Units issued based on the number of units issued multiplied by the closing price of the Company’s common stock on the date of acquisition.
2016 New Real Estate Activity
During the six months ended June 30, 2016, we acquired four new farms in two separate transactions, which are summarized in the table below.
 
 
 
 
 
 
 
 
Number
 
 
 
 
 
 
 
Total
 
 
 
Annualized
 
New
Property
 
Property
 
Acquisition
 
Total
 
of
 
Primary
 
Lease
 
Renewal
 
Purchase
 
Acquisition
 
Straight-line
 
Long-term
Name
 
Location
 
Date
 
Acreage
 
Farms
 
Crop(s)
 
Term
 
Options
 
Price
 
Costs
 
Rent(1)
 
Debt Issued
Gunbarrel Road (2)
 
Alamosa, CO
 
3/3/2016
 
6,191
 
3
 
Organic Potatoes
 
5 years
 
1 (5 years)
 
$
25,735,815

 
$
93,585

(3) 
$
1,590,614

 
$
15,531,000

Calaveras Avenue
 
Coalinga, CA
 
4/5/2016
 
453
 
1
 
Pistachios
 
10 years
 
1 (5 years)
 
15,470,000

 
38,501

(4) 
773,500

(5) 
9,282,000

 
 
 
 
 
 
6,644
 
4
 
 
 
 
 
 
 
$
41,205,815

 
$
132,086

 
$
2,364,114

 
$
24,813,000


(1) 
Annualized straight-line amount is based on the minimum cash rental payments guaranteed under the lease, as required under GAAP.
(2) 
As partial consideration for the acquisition of this property, we issued 745,879 OP Units, constituting an aggregate fair value of approximately $6.5 million as of the acquisition date.
(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 $4,670 of direct leasing costs in connection with this acquisition.
(4) 
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.
(5) 
This lease provides for a variable rent component based on the gross crop revenues earned on the property. The figure above represents only the minimum cash rents guaranteed under the lease.
We determined the fair value of assets acquired and liabilities assumed related to the property acquired during the six months ended June 30, 2016, to be as follows:
 
 
Land and Land
 
 
 
Irrigation
 
Other
 
 
 
In-place
 
Leasing
 
Total
Purchase
Property Name
 
Improvements
 
Buildings
 
Systems
 
Improvements
 
Horticulture
 
Leases
 
Costs
 
Price
Gunbarrel Road
 
$
16,755,814

 
$
3,438,291

 
$
2,830,738

 
$
2,079,102

 
$
—

 
$
381,977

 
$
249,893

 
$
25,735,815

Calaveras Avenue
 
3,615,436

 
—

 
424,112

 
—

 
11,430,452

 
—

 
—

 
15,470,000

 
 
$
20,371,250

 
$
3,438,291

 
$
3,254,850

 
$
2,079,102

 
$
11,430,452

 
$
381,977

 
$
249,893

 
$
41,205,815

The allocation of the purchase price for the property acquired during the six months ended June 30, 2016, is preliminary and may change during the measurement period if we obtain new information regarding the assets acquired or liabilities assumed at the acquisition date.

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Below is a summary of the total operating revenues and earnings recognized on the property acquired during the three and six months ended June 30, 2016:
 
 
 
 
For the three months ended June 30, 2016
 
For the six months ended June 30, 2016
 
 
Acquisition
 
Operating
 
 
 
Operating
 
 
Property Name
 
Date
 
Revenues
 
Earnings(1)
 
Revenues
 
Earnings(1)
Gunbarrel Road
 
3/3/2016
 
$
397,654

 
$
72,522

 
$
521,653

 
$
93,597

Calaveras Avenue
 
4/5/2016
 
183,865

 
76,565

 
183,865

 
76,565

 
 
 
 
$
581,519

 
$
149,087

 
$
705,518

 
$
170,162


(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.
2015 New Real Estate Activity
During the six months ended June 30, 2015, we acquired four new farms in three separate transactions, which are summarized in the table below.
Property
 
Property
 
Acquisition
 
Total
 
Number
of
 
Primary
 
Lease
 
Renewal
 
Total
Purchase
 
Acquisition
 
 
Annualized
Straight-line
 
Long-term
Name
 
Location
 
Date
 
Acreage
 
Farms
 
Crop(s)
 
Term
 
Options
 
Price
 
Costs
 
 
Rent(1)
 
Debt Issued
Espinosa Road(2)
 
Salinas, CA
 
1/5/2015
 
331
 
1
 
Strawberries
 
1.8 years
 
None
 
$
16,905,500

 
$
89,885

(3) 
 
$
778,342

 
$
10,178,000

Parrish Road
 
Duette, FL
 
3/10/2015
 
419
 
1
 
Strawberries
 
10.3 years
 
2 (5 years)
 
3,913,280

 
103,610

(3) 
 
251,832

 
2,374,680

Immokalee Exchange
 
Immokalee, FL
 
6/25/2015
 
2,678
 
2
 
 Misc. Vegetables
 
5.0 years
 
2 (5 years)
 
15,757,700

 
152,571

(3) 
 
960,104

 
9,360,000

 
 
 
 
 
 
3,428
 
4
 
 
 
 
 
 
 
$
36,576,480

 
$
346,066

 
 
$
1,990,278

 
$
21,912,680


(1) 
Annualized straight-line amount is based on the minimum cash rental payments guaranteed under the lease.
(2) 
In connection with this acquisition, our Adviser earned a finder’s fee of $320,905, which the Adviser fully credited back to us during the six months ended June 30, 2015. See Note 5, “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 $7,225 of direct leasing costs in connection with these acquisitions.
We determined the fair value of assets acquired and liabilities assumed related to the properties acquired during the six months ended June 30, 2015, to be as follows:
 
 
Land and Land
 
Buildings and
 
Irrigation
 
In-place
 
Leasing
 
Tenant
 
Total
Purchase
Property Name
 
Improvements
 
Improvements
 
System
 
Leases
 
Costs
 
Relationships
 
Price
Espinosa Road
 
$
15,852,466

 
$
84,478

 
$
497,401

 
$
246,472

 
$
43,894

 
$
180,789

 
$
16,905,500

Parrish Road
 
2,403,064

 
42,619

 
1,299,851

 
54,405

 
77,449

 
35,892

 
3,913,280

Immokalee Exchange
 
14,410,840

 
273,107

 
515,879

 
229,406

 
148,691

 
179,777

 
15,757,700

 
 
$
32,666,370

 
$
400,204

 
$
2,313,131

 
$
530,283

 
$
270,034

 
$
396,458

 
$
36,576,480


Below is a summary of the total operating revenues and earnings recognized on the properties acquired during the three and six months ended June 30, 2015:
 
 
 
 
For the three months ended June 30, 2015
 
For the six months ended June 30, 2015
 
 
Acquisition
 
Operating
 
 
 
Operating
 
 
Property Name
 
Date
 
Revenues
 
Earnings(1)
 
Revenues
 
Earnings(1)
Espinosa Road
 
1/5/2015
 
$
194,585

 
$
101,813

 
$
380,802

 
$
198,871

Parrish Road
 
3/10/2015
 
62,958

 
21,770

 
77,174

 
28,949

Immokalee Exchange
 
6/25/2015
 
—

 
(1,223
)
 
—

 
(1,223
)
 
 
 
 
$
257,543

 
$
122,360

 
$
457,976

 
$
226,597


(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.

12
Table of Contents

Acquired Intangibles and Liabilities
The following table shows the weighted-average amortization period, in years, for the intangible assets acquired and liabilities assumed in connection with new real estate acquired as part of business combinations during the six months ended June 30, 2016 and 2015:
 
 
Weighted-Average
Amortization Period (in Years)
Intangible Assets and Liabilities
 
2016
 
2015
In-place leases
 
5.1

 
4.1
Leasing costs
 
5.1

 
6.1
Tenant relationships
 
—

 
9.5
All intangible assets and liabilities
5.1

 
6.3
Pro-Forma Financials
During the six months ended June 30, 2016 and 2015, we acquired three farms and four farms, respectively, in transactions that qualified as business combinations. The following table reflects pro-forma consolidated financial information as if each farm acquired as part of a business combination was acquired on January 1 of the respective prior fiscal year. In addition, pro-forma earnings have been adjusted to assume that acquisition-related costs related to these farms were incurred at the beginning of the previous fiscal year.
 
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
 
2016
 
2015
 
2016
 
2015
 
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
Operating Data:
 
 
 
 
 
 
 
 
Total operating revenue
 
$
4,244,441

 
$
2,834,979

 
$
7,927,117

 
$
5,629,607

Net income attributable to the company
 
$
92,512

 
$
(293,259
)
 
$
101,372

 
$
517,789

Share and Per-share Data:
 
 
 
 
 
 
 
 
Earnings per share of common stock – basic and diluted
 
$
0.01

 
$
(0.03
)
 
$
0.01

 
$
0.06

Weighted-average common shares outstanding – basic and diluted
 
9,992,941

 
9,060,314

 
9,992,941

 
9,060,314

The pro-forma consolidated results are prepared for informational purposes only. They are not necessarily indicative of what our consolidated financial condition or results of operations actually would have been assuming the acquisitions had occurred at the beginning of the respective previous periods, nor do they purport to represent our consolidated financial position or results of operations for future periods.
Significant Existing Real Estate Activity
On February 1, 2016, we completed certain irrigation improvements on Sycamore Road to increase overall water availability at a total cost of $993,319. As stipulated in the lease agreement with our tenant, we will earn additional rent on the total cost commensurate with the annual yield on the farmland, which will result in additional straight-line rental income of $53,550 per year throughout the remaining lease term.

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

On April 5, 2016, we reimbursed the tenant occupying Wauchula Road for $569,607 of costs incurred to construct certain irrigation improvements on the farm. As stipulated in the lease, beginning with the three months ending June 30, 2016, we will earn an additional $92,634 of annualized, straight-line rental income on this farm throughout the remaining lease term.

On April 5, 2016, we reimbursed the tenant occupying Parrish Road for $500,000 of our portion of the costs incurred to construct certain irrigation improvements on the farm. As stipulated in the lease, beginning with the three months ending June 30, 2016, we will earn an additional $139,073 of annualized, straight-line rental income on this farm throughout the remaining lease term. In addition, in connection with our acquisition of Parrish Road in March 2015, we committed to providing $745,000

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Table of Contents

as additional compensation and reimbursements of certain costs, contingent upon the approval by a local water management district of increases in certain water permits on the property. These water permits were approved on June 28, 2016, and we remitted $745,000 to the tenant, who was also the seller of the property, on June 30, 2016.
Portfolio Diversification and Concentrations
Diversification
The following table summarizes the geographic locations, by state, of our properties with leases in place as of June 30, 2016 and 2015:
 
 
As of and For the Six Months Ended June 30, 2016
 
As of and For the Six Months Ended June 30, 2015
 
 
Number
of
 
Total
 
% of
Total
 
Rental
 
% of Total
Rental
 
Number
of
 
Total
 
% of
Total
 
Rental
 
% of Total
Rental
State
 
Farms
 
Acres
 
Acres
 
Revenue
 
Revenue
 
Farms
 
Acres
 
Acres
 
Revenue
 
Revenue
California
 
19
 
4,029

 
17.2
%
 
$
4,502,644

 
56.8
%
 
15
 
2,722

 
23.7
%
 
$
3,712,894

 
68.7
%
Florida
 
13
 
5,094

 
21.7
%
 
1,539,217

 
19.4
%
 
12
 
4,401

 
38.4
%
 
820,834

 
15.2
%
Oregon
 
4
 
2,313

 
9.9
%
 
584,962

 
7.4
%
 
4
 
2,313

 
20.2
%
 
583,763

 
10.8
%
Colorado
 
3
 
6,191

 
26.4
%
 
521,653

 
6.6
%
 
—
 
—

 
—
%
 
—

 
—
%
Arizona
 
2
 
3,000

 
12.8
%
 
358,051

 
4.5
%
 
1
 
1,761

 
15.4
%
 
161,935

 
3.0
%
Nebraska
 
2
 
2,559

 
10.9
%
 
289,815

 
3.7
%
 
—
 
—

 
—
%
 
—

 
—
%
Michigan
 
4
 
270

 
1.1
%
 
124,743

 
1.6
%
 
4
 
270

 
2.3
%
 
123,357

 
2.3
%
 
 
47
 
23,456

 
100.0
%
 
$
7,921,085

 
100.0
%
 
36
 
11,467

 
100.0
%
 
$
5,402,783

 
100.0
%
Concentrations
Credit Risk
As of June 30, 2016, our farms were leased to 35 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 $1.5 million, or 18.6% of the rental revenue recorded during the six months ended June 30, 2016. If Dole fails to make rental payments or elects to terminate its leases, and the properties cannot be re-leased on satisfactory terms, there could be a material adverse effect on our financial performance and ability to continue operations. No other individual tenant represented greater than 10.0% of the total rental revenue recorded during the six months ended June 30, 2016.
Geographic Risk
19 of our 47 farms owned as of June 30, 2016, are located in California, and 13 farms are located in Florida. As of June 30, 2016, our farmland in California accounted for 4,029 acres, or 17.2% of the total acreage we owned. Furthermore, these farms accounted for approximately $4.5 million, or 56.8% of the rental revenue recorded during the six months ended June 30, 2016. However, these farms are spread across three of the many different growing regions within California. As of June 30, 2016, our farmland in Florida accounted for 5,094 acres, or 21.7% of the total acreage we owned, and these farms accounted for approximately $1.5 million, or 19.4%, of the rental revenue recorded during the six months ended June 30, 2016. Though we seek to continue to further diversify geographically, as may be desirable or feasible, should an unexpected natural disaster occur where our properties are located, there could be a material adverse effect on our financial performance and ability to continue operations. No other single state accounted for more than 10.0% of the total rental revenue recorded during the six months ended June 30, 2016.

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Table of Contents

NOTE 4. BORROWINGS
Our borrowings as of June 30, 2016, and December 31, 2015, are summarized below:
 
 
 
 
 
 
 
 
 
 
 
As of June 30, 2016
 
 
As of December 31, 2015
Issuer
 
Type of
Issuance
 
Date(s) of
Issuance
 
Initial
Commitment
 
Maturity
Date(s)
 
 
Principal
Outstanding
 
Stated
Interest
Rate(1)
 
 
Undrawn
Commitment
 
 
Principal
Outstanding
 
Stated
Interest
Rate(1)
 
 
Undrawn
Commitment
MetLife
 
Mortgage Note Payable
 
5/9/2014
 
100,000,000

 
1/5/2029
(2) 
 
$
87,470,194

  
3.35%
 
 
12,529,806

(3) 
 
$
87,470,194

 
3.35%
 
 
12,529,806

MetLife
 
Line of Credit
 
5/9/2014
 
25,000,000

 
4/5/2024
 
 
14,500,000

  
2.88%
 
 
10,500,000

(3) 
 
100,000

 
2.58%
 
 
24,900,000

Farm Credit(4)
 
Mortgage Notes Payable
 
9/19/2014
– 4/4/2016
 
31,467,880

 
10/1/2016 –
11/1/2040
 
 
30,487,368

 
3.45%
(5) 
 
—

 
 
21,456,963

 
3.42%
(5) 
 
—

Farmer Mac
 
Bonds Payable
 
12/11/2014
– 3/3/2016
 
125,000,000

 
12/22/2016
– 2/24/2023
(6) 
 
49,069,000

  
2.93%
 
 
75,763,000

(7) 
 
33,706,000

 
2.87%
 
 
41,294,000

Total outstanding principal
 
 
 
 
 
 
181,526,562

 
 
 
 
 
  
  
142,733,157

 
 
 
 
 
Debt issuance costs
 
 
 
 
 
 
(1,052,886
)
 
 
 
 
 
 
 
(1,054,222
)
 
 
 
 
 
Total mortgage notes and bonds payable, net
 
 
 
 
$
180,473,676

 
 
 
 
 
 
 
$
141,678,935

 
 
 
 
 

(1) 
Where applicable, represents the weighted-average, blended rate on the respective borrowing facilities as of each June 30, 2016, and December 31, 2015.
(2) 
If facility is not fully utilized by December 31, 2017, MetLife has the option to be relieved of its obligations to disburse the additional funds under the loan.
(3) 
Based on the properties that were pledged as collateral under the MetLife Facility, as of June 30, 2016, the maximum additional amount we could draw under the facility was approximately $7.1 million.
(4) 
Includes borrowings from Farm Credit CFL and Farm Credit West, each as defined below.
(5) 
Rate is before interest patronage. 2015 interest patronage (as described below) received resulted in a 16.1% reduction to the stated interest rate on such borrowings.
(6) 
If facility is not fully utilized by December 11, 2018, Farmer Mac has the option to be relieved of its obligations to purchase additional bonds under the facility.
(7) 
At each of June 30, 2016, there was no additional availability to draw under this facility, as no additional properties had been pledged as collateral.
The weighted-average interest rate charged on all of our borrowings, excluding the impact of deferred financing costs and before any interest patronage, or refunded interest, was 3.25% and 3.27% for the three and six months ended June 30, 2016, respectively, and 3.57% and 3.56% for the three and six months ended June 30, 2015, respectively. 2015 interest patronage from all Farm Credit Notes Payable (as defined below), which patronage was received during the three months ended March 31, 2016, resulted in a 16.1% reduction to the stated interest rates on such borrowings. We are unable to estimate the amount of patronage to be received, if any, related to interest accrued during 2016 on our Farm Credit Notes Payable.
MetLife Facility
On May 9, 2014, we closed on a facility with Metropolitan Life Insurance Company (“MetLife”) that consists of a $100.0 million long-term note payable that is scheduled to mature on January 5, 2029 (the “MetLife Note Payable”), and a $25.0 million revolving equity line of credit that is scheduled to mature on April 5, 2024 (the “MetLife Line of Credit” and, together with the MetLife Note Payable, the “MetLife Facility”). As amended on September 3, 2015, advances under the MetLife Note Payable bear interest at a fixed rate of 3.35% per annum, plus an unused line fee of 0.20% on undrawn amounts, and interest rates for subsequent disbursements will be based on prevailing market rates at the time of such disbursements. The interest rates on advances and subsequent disbursements will be subject to adjustment every five years. If the full commitment amount of $100.0 million is not drawn by December 31, 2017, MetLife has the option to be relieved of its obligation to disburse the additional funds under this loan. Advances under the MetLife Line of Credit bear interest at a variable rate equal to the three-month LIBOR plus a spread of 2.25%, with a minimum annualized rate of 2.50%, plus an unused fee of 0.20% on undrawn amounts. The interest rate spread on borrowings under the MetLife Line of Credit will be subject to adjustment on April 5, 2017. As of June 30, 2016, we were in compliance with all covenants under the facility.
Farm Credit Notes Payable
Farm Credit CFL Notes Payable
From time to time since September 19, 2014, we, through certain subsidiaries of our Operating Partnership, have entered into various loan agreements with Farm Credit of Central Florida, FLCA (“Farm Credit CFL”). As of June 30, 2016, we have approximately $21.2 million of aggregate borrowings outstanding to Farm Credit CFL that bear interest (before interest patronage) at a weighted-average rate of 3.42% per annum. 2015 interest patronage from Farm Credit CFL borrowings resulted in a 16.1% reduction to the stated interest rates on such borrowings. As of June 30, 2016, we were in compliance with all covenants applicable to these borrowings.

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Farm Credit West Note Payable
On April 4, 2016, in connection with the acquisition of Calaveras Avenue on April 5, 2016, we, through a subsidiary of our Operating Partnership, closed on a loan from Farm Credit West, FLCA ("Farm Credit West"), for approximately $9.3 million. The mortgage note is scheduled to mature on November 1, 2040, and will bear interest (before interest patronage) at a fixed rate of 3.54% per annum through April 30, 2021, thereafter converting to a variable rate to be determined by Farm Credit West unless another fixed rate is established.
As of June 30, 2016, we have approximately $9.3 million of aggregate borrowings outstanding to Farm Credit West that bear interest (before interest patronage) at a rate of 3.54% per annum, and we were in compliance with all covenants applicable to these borrowings.
Farmer Mac Facility
On December 5, 2014, we, through certain subsidiaries of our Operating Partnership, entered into a bond purchase agreement (the “Bond Purchase Agreement”) with Federal Agricultural Mortgage Corporation (“Farmer Mac”) and Farmer Mac Mortgage Securities Corporation (the “Bond Purchaser”), for a secured note purchase facility that provides for bond issuances up to an aggregate principal amount of $75.0 million (the “Farmer Mac Facility”). On June 16, 2016, we entered into an amendment to increase the maximum borrowing capacity under the Farmer Mac Facility from $75.0 million to $125.0 million and extend the term of the Bond Purchase Agreement by two years, to December 11, 2018.
On March 3, 2016, in connection with the acquisition of Gunbarrel Road, we completed the issuances of two bonds under the Farmer Mac Facility: (i) an $11.1 million, seven-year, interest-only bond with a fixed interest rate of 3.08% throughout its term, and (ii) a $4.4 million, seven-year, amortizing bond with a fixed interest rate of 2.98% throughout its term.
As of June 30, 2016, we were in compliance with all covenants under the facility.
Debt Service – Aggregate Maturities
Scheduled principal payments of our aggregate mortgage notes and bonds payable as of June 30, 2016, for the succeeding years are as follows:
 
 
 
Scheduled
Period
 
Principal Payments
For the remaining six months ending December 31:
2016
 
$
4,360,136

For the fiscal years ending December 31:
2017
 
4,399,175

 
2018
 
20,399,431

 
2019
 
8,021,734

 
2020
 
17,710,108

 
Thereafter
 
112,135,978

 
 
 
$
167,026,562

Fair Value
As of June 30, 2016, the aggregate fair value of our long-term, fixed-rate mortgage notes and bonds payable was approximately $168.8 million, as compared to an aggregate carrying value of $165.0 million. The fair value of our long-term, fixed-rate mortgage notes and bonds payable is valued using Level 3 inputs under the hierarchy established by ASC 820-10, “Fair Value Measurements and Disclosures,” and is calculated based on a discounted cash flow analysis, using discount rates based on management’s estimates of market interest rates on long-term debt with comparable terms. Due to their short-term nature and the lack of changes in market credit spreads, the aggregate fair value of our short-term, variable-rate mortgage notes and bonds payable as of June 30, 2016, is deemed to approximate their aggregate carrying value of approximately $2.0 million. Further, due to the revolving nature of the MetLife Line of Credit and the lack of changes in market credit spreads, its fair value as of June 30, 2016, is deemed to approximate its carrying value of $14.5 million. 
NOTE 5. RELATED-PARTY TRANSACTIONS
We are externally managed pursuant to contractual arrangements with our Adviser and our Administrator, which collectively employ all of our personnel and pay their salaries, benefits and general expenses directly. Both our Adviser and Administrator

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are affiliates of ours, as their parent company is owned and controlled by Mr. David Gladstone, our chairman and chief executive officer. In addition, two of our executive officers, Mr. Gladstone and Mr. Terry Brubaker (our vice chairman and chief operating officer), serve as directors and executive officers of each of our Adviser and Administrator. Mr. Michael LiCalsi, our general counsel and secretary, serves as our Administrator’s president.
The current advisory agreement with our Adviser (the “Advisory Agreement”) and the current administration agreement with our Administrator (the “Administration Agreement”) became effective February 1, 2013. A summary of each of these agreements is provided in Note 4 to our consolidated financial statements included in our Form 10-K. There were no material changes to either agreement during the six months ended June 30, 2016.
The following table summarizes the management fees, incentive fees and associated credits and the administration fees reflected in our accompanying Condensed Consolidated Statements of Operations:
 
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
 
2016
 
2015
 
2016
 
2015
Management fee(1)(2)
 
$
385,586

 
$
328,392

 
$
772,740

 
$
624,140

Incentive fee(1)(2)
 
158,877

 
—

 
158,877

 
—

Credits from voluntary, irrevocable waiver by Adviser’s board of directors(2)(3) 
 
—

 
—

 
—

 
(320,905
)
Net fees due to our Adviser
 
$
544,463

 
$
328,392

 
$
931,617

 
$
303,235

Administration fee(1)(2)
 
$
179,377

 
$
177,852

 
$
391,237

 
$
308,788


(1) 
Pursuant to the Advisory and Administration Agreements, accordingly, each of which became effective on February 1, 2013.
(2) 
Reflected as a line item on our accompanying Condensed Consolidated Statements of Operations.
(3) 
The credit received from our Adviser for the three months ended March 31, 2015, was attributable to a finder’s fee earned by our Adviser in connection with a farm we acquired during the three months ended March 31, 2015, which fee was granted to us as a one-time, voluntary and irrevocable waiver to be applied against the fees we pay to our Adviser.
Related-Party Fees Due
Amounts due to related parties on our accompanying Condensed Consolidated Balance Sheets as of June 30, 2016, and December 31, 2015, were as follows:
 
 
June 30, 2016
 
December 31, 2015
Management fee due to Adviser
 
$
385,586

 
$
362,373

Incentive fee due to Adviser
 
158,877

 
—

Other due to Adviser(1)
 
12,281

 
13,140

Total due to Adviser
 
556,744

 
375,513

Administration fee due to Administrator
 
179,377

 
190,080

Total due to Administrator
 
179,377

 
190,080

Total due to related parties(2)
 
$
736,121

 
$
565,593


(1) 
Other fees due to related parties primarily relate to miscellaneous general and administrative expenses paid by our Adviser or Administrator on our behalf.
(2) 
Reflected as a line item on our accompanying Condensed Consolidated Balance Sheets.
NOTE 6. EQUITY
Stockholders’ Equity
As of each June 30, 2016, and December 31, 2015, there were 20,000,000 shares of common stock, par value $0.001 per share, authorized and 9,992,941 shares issued and outstanding.
Non-Controlling Interests in Operating Partnership
We consolidate our Operating Partnership, which is a majority-owned partnership. As of June 30, 2016, and December 31, 2015, we owned approximately 93.1% and 100.0%, respectively, of the outstanding OP Units.
On or after 12 months after becoming a holder of OP Units, each limited partner, other than the Company, has the right, subject to the terms and conditions set forth in the partnership agreement of the Operating Partnership, to require the Operating Partnership to redeem all or a portion of such units in exchange for cash or, at the Company’s option, shares of our common

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stock on a one-for-one basis. The cash redemption per OP Unit would be based on the market price of our common stock at the time of redemption. A limited partner will not be entitled to exercise redemption rights if the delivery of common stock to the redeeming limited partner would breach restrictions on the ownership of common stock imposed under our charter and other limitations thereof.
Regardless of the rights described above, the Operating Partnership will not have an obligation to issue cash to a unitholder upon a redemption request if the Company elects to redeem the OP Units for shares of its common stock. When a non-Company unitholder redeems an OP Unit, non-controlling interest in the Operating Partnership is reduced, and stockholders’ equity is increased.
The Operating Partnership is required to make distributions on each OP Unit in the same amount as those paid on each share of the Company’s common stock, with the distributions on the OP Units held by the Company being utilized to make distributions to the Company’s common stockholders.
As of June 30, 2016, there were 745,879 OP Units held by non-controlling limited partners.
Distributions
The distributions to common stockholders declared by our Board of Directors and paid by us during the six months ended June 30, 2016 and 2015 are reflected in the table below.
Fiscal Year
 
Declaration Date
 
Record Date
 
Payment Date
 
Distributions per
Common Share
2016
 
January 12, 2016
 
January 22, 2016
 
February 2, 2016
 
$
0.04000

 
 
January 12, 2016
 
February 18, 2016
 
February 29, 2016
 
0.04000

 
 
January 12, 2016
 
March 21, 2016
 
March 31, 2016
 
0.04000

 
 
April 12, 2016
 
April 22, 2016
 
May 2, 2016
 
0.04125

 
 
April 12, 2016
 
May 19, 2016
 
May 31, 2016
 
0.04125

 
 
April 12, 2016
 
June 17, 2016
 
June 30, 2016
 
0.04125

 
 
 
 
Six Months Ended June 30, 2016
 
$
0.24375

 
 
 
 
 
 
 
 
 
2015
 
January 13, 2015
 
January 23, 2015
 
February 3, 2015
 
$
0.03500

 
 
January 13, 2015
 
February 18, 2015
 
February 27, 2015
 
0.03500

 
 
January 13, 2015
 
March 20, 2015
 
March 31, 2015
 
0.03500

 
 
April 14, 2015
 
April 24, 2015
 
May 4, 2015
 
0.04000

 
 
April 14, 2015
 
May 19, 2015
 
May 28, 2015
 
0.04000

 
 
April 14, 2015
 
June 19, 2015
 
June 30, 2015
 
0.04000

 
 
 
 
Six Months Ended June 30, 2015
 
$
0.22500

The same amounts were paid as distributions on each OP Unit held by non-controlling limited partners of the Operating Partnership as of the above record dates.
We will provide information related to the federal income tax characterization of our 2016 distributions in an IRS Form 1099-DIV, which will be mailed to our stockholders in January 2017.
Registration Statement
We filed a universal registration statement on Form S-3 (File No. 333-194539) with the SEC on March 13, 2014, which the SEC declared effective on April 2, 2014. This universal registration statement permits us to issue up to an aggregate of $300.0 million in securities, consisting of common stock, senior common stock, preferred stock, subscription rights, debt securities and depository shares, including through separate, concurrent offerings of two or more of such securities. As of June 30, 2016, we have issued 2,156,080 shares of common stock for gross proceeds of $23.3 million under this universal registration statement. Additionally, subsequent to June 30, 2016, we sold $31,934 shares of our common stock under the ATM Program (as defined below, under "At-the-Market Program") pursuant to this universal registration statement.

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At-the-Market Program
On August 7, 2015, we entered into equity distribution agreements with Cantor Fitzgerald & Co. and Ladenburg Thalmann & Co., Inc. (each a “Sales Agent”), under which we may issue and sell, from time to time and through the Sales Agents, shares of our common stock up to $30.0 million (the “ATM Program”). During the six months ended June 30, 2016, no shares were issued or sold under the ATM Program. Through June 30, 2016, we have issued and sold 32,627 shares of our common stock at an average sales price of $9.19 per share for gross proceeds of approximately $300,000 and net proceeds of $295,000. See Note 9, "Subsequent Events," for discussion on shares sold under the ATM Program subsequent to June 30, 2016.
NOTE 7. COMMITMENTS AND CONTINGENCIES
Operating Obligations
Upon acquiring Espinosa Road in January 2015, we assumed an eminent domain lawsuit brought by the California Department of Transportation (“CalTrans”) against the previous owner of the property for approximately 4.5 acres of nonfarmable land. CalTrans had offered $160,000 to the previous owner as payment for the 4.5 acres; however, this offer was rejected by the previous owner. Upon acquiring the property, we informed CalTrans of our intention to accept this offer of $160,000 as fair compensation for the 4.5 nonfarmable acres. On May 3, 2016, the matter was settled in our favor, and on July 5, 2016, we received the $160,000 payment from CalTrans. See Note 9, "Subsequent Events" for further discussion on this settlement.
In connection with the lease we executed upon our acquisition of Bear Mountain in September 2015, we agreed to fund the development of the property into an almond orchard. The development will include the removal of 274 acres of old grape vineyards, the installation of a new irrigation system, including the drilling of three new wells, and the planting of over 800 acres of new almond trees. The project is estimated to cost approximately $7.8 million and is expected to be completed during the three months ending September 30, 2016. As stipulated in the lease, we will earn additional rent on the total cost of the development project commensurate with the yield on the initial acquisition and based on the timing of related cash disbursement made by us. As of June 30, 2016, we have expended or accrued approximately $7.1 million related to this project; however, we are unable to estimate the total amount of additional rent to be earned related to this project at this time.
Litigation
We are not currently subject to any material known or threatened litigation.
NOTE 8. EARNINGS (LOSS) PER SHARE OF COMMON STOCK
The following table sets forth the computation of basic and diluted earnings per common share for the three and six months ended June 30, 2016 and 2015, computed using the weighted average number of shares outstanding during the respective periods. The non-controlling limited partners’ outstanding OP Units (which may be redeemed for shares of common stock) have been excluded from the diluted earnings per share calculation, as there would be no effect on the amounts since the non-controlling limited partners’ share of income would also be added back to net income. Net income figures are presented net of non-controlling interests in the earnings per share calculations.
 
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
 
2016
 
2015
 
2016
 
2015
Net income (loss) attributable to the Company
 
$
107,813

 
$
(30,289
)
 
$
342,229

 
$
(5,715
)
Weighted average number of common shares outstanding – basic and diluted
 
9,992,941

 
8,439,855

 
9,992,941

 
8,098,681

Earnings (loss) per common share – basic and diluted
 
$
0.01

 
$
0.00

 
$
0.03

 
$
0.00

For the three and six months ended June 30, 2016, the weighted-average number of OP Units held by non-controlling limited partners was 745,879 and 491,788, respectively. There were no OP Units held by anyone other than the Company during 2015.

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NOTE 9. SUBSEQUENT EVENTS
Investing and Financing Activity
On July 1, 2016, we acquired one farm in St. Lucie County, Florida (“Orange Avenue”), for approximately $5.1 million. The property is comprised of 401 acres of farmland and will be farmed for miscellaneous vegetables. At closing, we executed a new seven-year, partial-net lease with a new tenant that includes two, seven-year extension options. The lease provides for minimum annualized, straight-line rents of approximately $291,000. We will account for this acquisition as an asset acquisition in accordance with ASC 360.
In connection with the acquisition of Orange Avenue, on July 1, 2016, we closed on a loan from Farm Credit CFL for approximately $3.1 million. The mortgage note is scheduled to mature on June 1, 2023, and will bear interest (before interest patronage) at a fixed rate of 3.78% per annum throughout its term.
CalTrans Settlement
On July 5, 2016, we received payment of approximately $164,000 (including $4,000 of accrued interest) from CalTrans in connection with the settlement of an eminent domain lawsuit for 4.5 acres of nonfarmable land on Espinosa Road. As cash settlement did not occur until after June 30, 2016, the portion of this payment allocated to our cost basis of the 4.5 nonfarmable acres, which was approximately $156,000, is included in Investments in real estate, net on our Condensed Consolidated Balance Sheet as of June 30, 2016.
ATM Program
Subsequent to June 30, 2016, through the date of this filing, we have sold 31,934 shares of our common stock at an average sales price of $11.29 per share under the ATM Program for gross proceeds of approximately $360,000 and net proceeds of approximately $355,000.
Distributions
On July 12, 2016, our Board of Directors declared the following monthly cash distributions to common stockholders:
Record Date
 
Payment Date
 
Distribution per
Common Share
July 22, 2016
 
August 2, 2016
 
$
0.04125

August 22, 2016
 
August 31, 2016
 
0.04125

September 21, 2016
 
September 30, 2016
 
0.04125

Total:
 
 
 
$
0.12375

The same amounts will be paid as distributions on each OP Unit held by non-controlling limited partners of the Operating Partnership as of the above record dates.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
All statements contained herein, other than historical facts, may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements may relate to, among other things, future events or our future performance or financial condition. In some cases, you can identify forward-looking statements by terminology such as “may,” “might,” “believe,” “will,” “provided,” “anticipate,” “future,” “could,” “growth,” “plan,” “intend,” “expect,” “should,” “would,” “if,” “seek,” “possible,” “potential,” “likely” or the negative of such terms or comparable terminology. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our business, financial condition, liquidity, results of operations, funds from operations or prospects to be materially different from any future business, financial condition, liquidity, results of operations, funds from operations or prospects expressed or implied by such forward-looking statements and include, but are not limited to:
 
•
Changes in our industry, interest rates or the general economy;
•
Natural disasters or climactic changes impacting the regions in which our tenants operate;
•
The degree and nature of our competition;
•
Failure to maintain our qualification as a REIT;
•
Changes in our business strategy; and
•
Loss of our key personnel.
For further information about these and other factors that could affect our future results, please see the caption titled “Risk Factors” in our Annual Report on Form 10-K (the “Form 10-K”) for the year ended December 31, 2015, which we filed with the Securities and Exchange Commission (the “SEC”) on February 23, 2016. We caution readers not to place undue reliance on any such forward-looking statements, which are made pursuant to the Private Securities Litigation Reform Act of 1995 and, as such, speak only as of the date made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this Quarterly Report on Form 10-Q (the “Quarterly Report”), except as required by law.
All references to “we,” “our,” “us” and the “Company” in this Quarterly Report mean Gladstone Land Corporation and its consolidated subsidiaries, except where it is made clear that the term refers only to Gladstone Land Corporation.
OVERVIEW
General
We are an externally-managed real estate investment trust (“REIT”) that is engaged primarily in the business of owning and leasing farmland; we are not a grower, nor do we farm the properties we own. We currently own 48 farms comprised of 23,857 acres across seven states in the U.S. (Arizona, California, Colorado, Florida, Michigan, Nebraska and Oregon). We also own several farm-related facilities, such as cooling facilities, box barns, packinghouses, processing facilities and various storage facilities. These farms and facilities are leased to 35 different, unrelated tenants that are either independent or corporate farming operations. We intend to acquire more farmland in these and other states in our regions of focus that is already or will be leased to farmers, and we expect that most of our future tenants will also be independent or corporate farming operations that are unrelated to us. We also expect to acquire more property related to farming, such as cooling facilities, freezer buildings, packinghouses, box barns, silos, storage facilities, greenhouses, processing plants and distribution centers. We generally lease our properties on a triple-net basis, an arrangement under which, in addition to rent, the tenant is required to pay the related taxes, insurance costs (including drought insurance if we were to acquire properties that depend upon rainwater for irrigation), maintenance and other operating costs. We may also elect to sell farmland at certain times, such as when the land could be developed by others for urban or suburban uses.
We were incorporated in 1997, primarily for the purpose of operating strawberry farms through our former subsidiary, Coastal Berry Company, LLC (“Coastal Berry”), an entity that provided growing, packaging, marketing and distribution of fresh berries and other agricultural products. We operated Coastal Berry as our primary business until 2004, when it was sold to Dole Food Company (“Dole”). Since 2004, our operations have consisted of leasing our farms to third-party tenants. We do not currently intend to enter into the business of growing, packing or marketing farmed products; however, if we do so in the future, we expect that it would be through a taxable REIT subsidiary (“TRS”).
We conduct substantially all of our investment activities through, and all of our properties are held, directly or indirectly, by, Gladstone Land Limited Partnership (the “Operating Partnership”). Gladstone Land Corporation controls the Operating

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Partnership as its sole general partner and currently owns approximately 93.1% of the units of limited partnership interest in the Operating Partnership (“OP Units”).
We intend to continue to lease our farms and farm-related facilities to independent or corporate farming operations that sell their products through national corporate marketers-distributors. We expect to continue to earn rental and interest income from our investments.
Gladstone Management Corporation (our “Adviser”) manages our real estate portfolio pursuant to an advisory agreement, and Gladstone Administration, LLC (our “Administrator”) provides administrative services to us pursuant to an administration agreement. Our Adviser and our Administrator collectively employ all of our personnel and pay directly their salaries, benefits and general expenses.
Leases
General
Most of our agricultural leases are on a triple-net basis and have original terms ranging from 3 to 10 years for farms growing row crops and 5 to 15 years for farms growing permanent crops, often with options to extend the lease further. Rent is generally payable to us up front on either an annual or semi-annual basis. Further, most of our leases contain provisions that provide for annual increases in the rental amounts payable by the tenants, often referred to as escalation clauses. The escalation clauses may specify fixed dollar amount or percentage increases each year, or it may be variable, based on standard cost of living or inflation indices. In addition, some leases that are longer-term in nature may require a regular survey of comparable land rents, with the rent owed per the lease being adjusted to reflect then-current market rents. We also have leases that include variable rents based on the success of the harvest each year. In these types of agreements, we will generally require the lease to include the guarantee of a minimum amount of rental income that satisfies our investment return criteria. Currently, our 48 farms are leased under agricultural leases with original terms ranging from 3 to 15 years, with 31 farms leased on a pure triple-net basis, and 17 farms leased on a partial-net basis, with the landlord responsible for all or a portion of the related property taxes. Additionally, four of our farms are leased under agreements that include a variable rent component.
We monitor our tenants’ credit quality on an ongoing basis by, among other things, periodically conducting site visits of the properties to ensure farming operations are taking place and to assess the general maintenance of the properties. To date, we have not identified any changes to credit quality of our tenants, and all tenants continue to pay pursuant to the terms of their respective leases.
Lease Expirations
Farm leases are often short-term in nature, so in any given year, we may have multiple leases up for renewal or extension. As of January 1, 2016, we had two agricultural leases that were originally due to expire in 2016. We have renewed one of these leases for an additional three years at an annualized, straight-line rental rate representing an increase of 17.9% over that of the previous lease. This lease was renewed prior to its expiration and with the existing tenant, thus incurring no downtime on the farm.
We have one remaining agricultural lease due to expire in 2016. We have begun negotiations with the existing tenant on the farm, and we anticipate renewing the lease prior to its expiration. Further, given the current market conditions in the region where the farm is located, we expect to be able to renew the lease at a higher rental rate than that of the existing lease. However, there can be no assurance that we will be able to renew the lease at a rate favorable to us, if at all, or be able to find a replacement tenant, if necessary.
The following table summarizes the lease expirations by year for our properties with leases in place as of June 30, 2016:
 
 
Number of
Expiring
 
 
Expiring
Leased
 
% of
Total
 
Rental Revenue for the
Six Months Ended
 
% of Total
Rental
Year
 
Leases
 
 
Acreage
 
Acreage
 
June 30, 2016
 
Revenue
2016
 
3
(1) 
 
331
 
1.4%
 
$
405,203

 
5.1%
2017
 
8
  
 
647
 
2.8%
 
1,088,380

 
13.7%
2018
 
5
  
 
2,929
 
12.4%
 
469,870

 
5.9%
2019
 
1
  
 
37
 
0.2%
 
30,218

 
0.4%
2020
 
6
  
 
3,890
 
16.6%
 
2,128,649

 
26.9%
2021
 
3
  
 
6,882
 
29.3%
 
647,505

 
8.2%
Thereafter
 
15
  
 
8,740
 
37.3%
 
3,151,260

 
39.8%
Totals
 
41
  
 
23,456
 
100.0%
 
$
7,921,085

 
100.0%


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(1) 
Includes: (i) the agricultural lease mentioned above, (ii) 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 $16,032 of rental revenue during the six months ended June 30, 2016, and (iii) 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 six months ended June 30, 2016.
Recent Developments
Investment, Leasing and Other Portfolio Activity
Property Acquisitions
Since April 1, 2016, we have acquired two farms in two 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)
 
Calaveras Avenue
 
Coalinga, CA
 
4/5/2016
 
453
 
1
 
Pistachios
 
10 years
 
1 (5 years)
 
$
15,470,000

 
$
38,501

(2) 
 
$
773,500

(3) 
Orange Avenue
 
Fort Pierce, FL
 
7/1/2016
 
401
 
1
 
Vegetables
 
7 years
 
2 (7 years)
 
5,100,000

 
13,464

(2) 
 
291,173

 
 
 
 
 
 
 
854
 
2
 
 
 
 
 
 
 
$
20,570,000

 
$
51,965

 
 
$
1,064,673

 

(1) 
Annualized straight-line amount is based on the minimum cash rental payments guaranteed under the lease, as required under GAAP.
(2) 
Acquisition will be accounted for as an asset acquisition under ASC 360. As such, all acquisition-related costs will be capitalized and allocated among the identifiable assets acquired. The figures above represent only the costs paid or accrued for as of the date of this filing.
(3) 
This lease provides for a variable rent component based on the gross crop revenues earned on the property. The figure above represents only the minimum cash rents guaranteed under the lease.
Existing Properties
Since April 1, 2016, the following significant events occurred with regard to our already-existing properties:
 
•
Wauchula Road. On April 5, 2016, we reimbursed the tenant for $569,607 of costs incurred to construct certain irrigation improvements on the farm. As stipulated in the lease, beginning with the three months ending June 30, 2016, we will earn an additional $92,634 of annualized, straight-line rental income on this farm throughout the remaining lease term.
•
Parrish Road. On April 5, 2016, we reimbursed the tenant $500,000, which represented our portion of the costs incurred to construct certain irrigation improvements on the farm. As stipulated in the lease, beginning with the three months ending June 30, 2016, we will earn an additional $139,073 of annualized, straight-line rental income on this farm throughout the remaining lease term. In addition, in connection with our acquisition of the property in March 2015, we committed to providing $745,000 as additional compensation and reimbursements of certain costs, contingent upon the approval by a local water management district of increases in certain water permits on the property. These water permits were approved on June 28, 2016, and we remitted $745,000 to the tenant, who was also the seller of the property, on June 30, 2016.
•
Espinosa Road. On July 5, 2016, we received payment of approximately $164,000 (including $4,000 of accrued interest) from the California Department of Transportation ("CalTrans") in connection with the settlement of an eminent domain lawsuit for 4.5 acres of nonfarmable land on Espinosa Road (the "CalTrans Settlement"). The portion of this payment allocated to our cost basis of the 4.5 nonfarmable acres was approximately $156,000.
Financing Activity
Farm Credit
Farm Credit CFL
During the three months ended March 31, 2016, we received interest patronage, or refunded interest, from Farm Credit of Central Florida, FLCA (“Farm Credit CFL”), representing a 16.1% refund of the interest accrued on all borrowings from Farm Credit CFL during the year ended December 31, 2015. This interest patronage reduced the interest rates on our borrowings from Farm Credit CFL during the year ended December 31, 2015, from a weighted-average stated interest rate of 3.42% to a weighted-average effective interest rate of 2.87%. We are unable to estimate the amount of interest patronage to be received, if any, related to interest accrued during 2016 on our Farm Credit CFL borrowings.
On July 1, 2016, we closed on a loan from Farm Credit CFL for approximately $3.1 million. Terms of this note are summarized in the following table:

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Date of
Issuance
 
Initial
Commitment
 
Maturity
Date
 
Principal
Amortization
 
Interest Rate Terms(1)
7/1/2016
 
$
3,120,000

 
6/1/2023
 
36 years
 
3.78% fixed throughout term

(1) 
Rate represents the stated interest rate, before interest patronage.
Proceeds from this note were used in the acquisition of Orange Avenue.
Farm Credit West
On April 4, 2016, we closed on a loan from Farm Credit West, FLCA (“Farm Credit West”), for approximately $9.3 million. Terms of this note are summarized in the following table:
Date of
Issuance
 
Initial
Commitment
 
Maturity
Date
 
Principal
Amortization
 
Interest Rate Terms(1)
4/4/2016
 
$
9,282,000

 
11/1/2040
 
24 years
 
3.54% fixed through 4/30/2021, variable thereafter

(1) 
Rate represents the stated interest rate, before interest patronage.
Proceeds from this note were used in the acquisition of Calaveras Avenue.
Farmer Mac
On June 16, 2016, we, through certain subsidiaries of ours, entered into an amendment to the bond purchase agreement (the "Bond Purchase Agreement") with Federal Agricultural Mortgage Corporation ("Farmer Mac") and Farmer Mac Mortgage Securities Corporation, a wholly-owned subsidiary of Farmer Mac, regarding a secured note purchase facility (the "Farmer Mac Facility"). The amendment increased the maximum borrowing capacity under the Farmer Mac Facility from $75.0 million to $125.0 million and extended the term of the Bond Purchase Agreement by two years, to December 11, 2018. Other than the increase in the maximum borrowing capacity and extension, the terms of the Bond Purchase Agreement remained unchanged.
At-the-Market Program
On August 7, 2015, we entered into equity distribution agreements with Cantor Fitzgerald & Co. and Ladenburg Thalmann & Co., Inc. (each a “Sales Agent”), under which we may issue and sell, from time to time and through the Sales Agents, shares of our common stock up to $30.0 million (the “ATM Program”). No shares were sold under the ATM Program during the three or six months ended June 30, 2016; however, subsequent to June 30, 2016, through the date of this filing, we sold 31,934 shares of our common stock at an average sales price of $11.29 per share for gross proceeds of approximately $360,000 and net proceeds of $355,000. To date, we have sold 64,561 shares of our common stock at an average sales price of $10.23 per share under the ATM Program for gross proceeds of approximately $660,000 and net proceeds of $650,000.

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Portfolio Diversity
Since our initial public offering in January 2013 (the “IPO”), we have expanded our original portfolio of 12 farms leased to 7 different, unrelated tenants to a current portfolio of 48 farms leased to 35 different, unrelated tenants. While our focus remains in farmland suitable for growing fresh produce annual row crops, such as berries and vegetables, we have also begun to diversify our portfolio into farmland suitable for other crop types, including permanent crops, consisting primarily of almonds, pistachios and blueberries, and certain commodity crops, consisting primarily of corn and beans. The following table summarizes the different sources of revenues for our properties with leases in place as of and for the six months ended June 30, 2016 and 2015:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annualized GAAP
 
 
As of and For the
 
As of and For the
 
Rental Revenue as of
 
 
Six Months Ended June 30, 2016
 
Six Months Ended June 30, 2015
 
June 30, 2016
Revenue Source
 
Total
Farmable
Acres
 
% of 
Total
Farmable
Acres
 
Rental
Revenue
 
% of 
Total
Revenue
 
Total
Farmable
Acres
 
% of 
Total
Farmable
Acres
 
Rental
Revenue
 
% of 
Total
Revenue
 
Total Rental
Revenue
 
% of 
Total
Revenue
Annual row crops – fresh produce(1)
 
9,313
 
50.6%
 
$
5,406,186

 
68.2%
 
6,903
 
78.2%
 
$
4,324,577

 
80.0%
 
$
11,233,522

 
65.7%
Annual row crops – commodity crops(2)
 
7,347
 
40.0%
 
767,447

 
9.7%
 
1,460
 
16.5%
 
220,281

 
4.1%
 
1,625,399

 
9.5%
Subtotal – Total annual row crops
 
16,660
 
90.6%
 
6,173,633

 
77.9%
 
8,363
 
94.7%
 
4,544,858

 
84.1%
 
12,858,921

 
75.2%
Permanent crops(3)
 
1,735
 
9.4%
 
919,267

 
11.6%
 
466
 
5.3%
 
280,284

 
5.2%
 
2,370,201

 
13.9%
Subtotal – Total crops
 
18,395
 
100.0%
 
7,092,900

 
89.5%
 
8,829
 
100.0%
 
4,825,142

 
89.3%
 
15,229,122

 
89.1%
Facilities and other(4)
 
—
 
—
 
828,185

 
10.5%
 
—
 
—
 
577,641

 
10.7%
 
1,855,536

 
10.9%
Total
 
18,395
 
100.0%
 
$
7,921,085

 
100.0%
 
8,829
 
100.0%
 
$
5,402,783

 
100.0%
 
$
17,084,658

 
100.0%

(1) 
Includes berries and other fruits, such as melons, raspberries and strawberries, and vegetables, such as cabbage, carrots, celery, cilantro, cucumbers, edamame, green beans, lettuce, mint, onions, peas, peppers, potatoes, radicchio, spinach and tomatoes.
(2) 
Includes alfalfa, barley, corn, edible beans, grass, popcorn, soybeans and wheat.
(3) 
Includes almonds, avocados, blueberries, lemons and pistachios.
(4) 
Consists primarily of rental revenue from: (i) farm-related facilities, such as coolers, packinghouses, distribution centers, residential houses for tenant farmers and other farm-related buildings; (ii) a surface area lease with an oil company on a small parcel of one of our properties; and (iii) unimproved or nonfarmable acreage on certain of our farms.
Our acquisition of 36 farms since our IPO has also allowed us to further diversify our portfolio geographically. The following table summarizes the different geographic locations of our properties with leases in place as of and for the six months ended June 30, 2016 and 2015:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Annualized GAAP
 
 
As of and For the
 
As of and For the
 
Rental Revenue as of
 
 
Six Months Ended June 30, 2016
 
Six Months Ended June 30, 2015
 
June 30, 2016(1)
State
 
Total
Acres
 
% of
Total
Acres
 
Rental
Revenue
 
% of 
Total
Rental
Revenue
 
Total
Acres
 
% of
Total
Acres
 
Rental
Revenue
 
% of 
Total
Rental
Revenue
 
Total
Rental
Revenue
 
% of 
Total
Rental
Revenue
California
 
4,029
 
17.2%
 
$
4,502,644

 
56.8%
 
2,722
 
23.7%
 
$
3,712,894

 
68.7%
 
$
9,545,819

 
55.9%
Florida
 
5,094
 
21.7%
 
1,539,217

 
19.4%
 
4,401
 
38.4%
 
820,834

 
15.2%
 
3,206,821

 
18.8%
Oregon
 
2,313
 
9.9%
 
584,962

 
7.4%
 
2,313
 
20.2%
 
583,763

 
10.8%
 
1,169,924

 
6.8%
Colorado
 
6,191
 
26.4%
 
521,653

 
6.6%
 
—
 
—
 
—

 
—
 
1,590,614

 
9.3%
Arizona
 
3,000
 
12.8%
 
358,051

 
4.5%
 
1,761
 
15.4%
 
161,935

 
3.0%
 
742,363

 
4.3%
Nebraska
 
2,559
 
10.9%
 
289,815

 
3.7%
 
—
 
—
 
—

 
—
 
579,630

 
3.4%
Michigan
 
270
 
1.1%
 
124,743

 
1.6%
 
270
 
2.3%
 
123,357

 
2.3%
 
249,487

 
1.5%
 
 
23,456
 
100.0%
 
$
7,921,085

 
100.0%
 
11,467
 
100.0%
 
$
5,402,783

 
100.0%
 
$
17,084,658

 
100.0%

(1) 
Annualized GAAP rental revenue is based on the minimum rental payments required per the leases in place as of June 30, 2016, and includes the amortization of any above-market lease values or accretion of any below-market lease values, deferred revenue and tenant improvements.

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Our Adviser and Administrator
We are externally managed pursuant to a contractual investment advisory arrangement (the “Advisory Agreement”) with our Adviser, under which our Adviser directly employs certain of our personnel and pays their payroll, benefits and general expenses directly, and our Administrator provides administrative services to us pursuant to a separate administration agreement with our Administrator (the “Administration Agreement”). Both our Adviser and Administrator are affiliates of ours, as their parent company is owned and controlled by Mr. David Gladstone, our chairman and chief executive officer. In addition, two of our executive officers, Mr. Gladstone and Mr. Terry Brubaker (our vice chairman and chief operating officer), serve as directors and executive officers of each of our Adviser and Administrator. Mr. Michael LiCalsi, our general counsel and secretary, also serves as our Administrator’s president. A summary of each of these agreements is provided in Note 4 to our consolidated financial statements in our 2015 Form 10-K. There were no material changes to either of these agreements during the six months ended June 30, 2016.
Critical Accounting Policies
The preparation of our financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) requires management to make judgments that are subjective in nature to make certain estimates and assumptions. Application of these accounting policies involves the exercise of judgment regarding the use of assumptions as to future uncertainties, and, as a result, actual results could materially differ from these estimates. A summary of our significant accounting policies is provided in Note 2 to our consolidated financial statements in our 2015 Form 10-K. There were no material changes to our critical accounting policies during the six months ended June 30, 2016.
RESULTS OF OPERATIONS
A comparison of our operating results for the three and six months ended June 30, 2016 and 2015 is below:

 
 
For the Three Months Ended June 30,
 
 
 
 
 
 
2016
 
2015
 
$ Change
 
% Change
Operating revenues:
 
 
 
 
 
 
 
 
Rental revenues
 
$
4,241,612

 
$
2,780,456

 
$
1,461,156

 
52.6%
Tenant recovery revenue
 
2,829

 
3,397

 
(568
)
 
(16.7)%
Total operating revenues
 
4,244,441

 
2,783,853

 
1,460,588

 
52.5%
Operating expenses:
 
 
 
 
 
 
 
 
Depreciation and amortization
 
1,334,973

 
711,803

 
623,170

 
87.5%
Property operating expenses
 
158,578

 
156,405

 
2,173

 
1.4%
Acquisition-related expenses
 
24,648

 
178,016

 
(153,368
)
 
(86.2)%
Management and incentive fees, net of fee credits
 
544,463

 
328,392

 
216,071

 
65.8%
Administration fee
 
179,377

 
177,852

 
1,525

 
0.9%
General and administrative
 
408,365

 
336,714

 
71,651

 
21.3%
Total operating expenses
 
2,650,404

 
1,889,182

 
761,222

 
40.3%
Operating income
 
1,594,037

 
894,671

 
699,366

 
78.2%
Other income (expense)
 
 
 
 
 
 
 
 
Other income
 
8,643

 
1,593

 
7,050

 
442.6%
Interest expense
 
(1,486,820
)
 
(947,362
)
 
(539,458
)
 
56.9%
Property and casualty recovery, net
 
—

 
20,809

 
(20,809
)
 
(100.0)%
Total other expense
 
(1,478,177
)
 
(924,960
)
 
(553,217
)
 
59.8%
Net income (loss)
 
115,860

 
(30,289
)
 
146,149

 
(482.5)%
Less net income attributable to non-controlling interests
 
(8,047
)
 
—

 
(8,047
)
 
N/A
Net income (loss) attributable to the Company
 
$
107,813

 
$
(30,289
)
 
$
138,102

 
(455.9)%
N/A = Not Applicable

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For the Six Months Ended June 30,
 
 
 
 
 
 
2016
 
2015
 
$ Change
 
% Change
Operating revenues:
 
 
 
 
 
 
 
 
Rental revenues
 
$
7,921,085

 
$
5,402,783

 
$
2,518,302

 
46.6%
Tenant recovery revenue
 
6,032

 
6,794

 
(762
)
 
(11.2)%
Total operating revenues
 
7,927,117

 
5,409,577

 
2,517,540

 
46.5%
Operating expenses:
 
 
 
 
 
 
 
 
Depreciation and amortization
 
2,311,683

 
1,503,435

 
808,248

 
53.8%
Property operating expenses
 
338,781

 
362,170

 
(23,389
)
 
(6.5)%
Acquisition-related expenses
 
119,872

 
348,697

 
(228,825
)
 
(65.6)%
Management and incentive fees, net of fee credits
 
931,617

 
303,235

 
628,382

 
207.2%
Administration fee
 
391,237

 
308,788

 
82,449

 
26.7%
General and administrative
 
839,691

 
734,068

 
105,623

 
14.4%
Total operating expenses
 
4,932,881

 
3,560,393

 
1,372,488

 
38.5%
Operating income
 
2,994,236

 
1,849,184

 
1,145,052

 
61.9%
Other income (expense)
 
 
 
 
 
 
 
 
Other income
 
103,284

 
21,023

 
82,261

 
391.3%
Interest expense
 
(2,741,668
)
 
(1,896,731
)
 
(844,937
)
 
44.5%
Property and casualty recovery, net
 
—

 
20,809

 
(20,809
)
 
(100.0)%
Total other expense
 
(2,638,384
)
 
(1,854,899
)
 
(783,485
)
 
42.2%
Net income (loss)
 
355,852

 
(5,715
)
 
361,567

 
(6,326.6)%
Less net income attributable to non-controlling interests
 
(13,623
)
 
—

 
(13,623
)
 
N/A
Net income (loss) attributable to the Company
 
$
342,229

 
$
(5,715
)
 
$
347,944

 
(6,088.3)%
N/A = Not Applicable
Operating Revenues
Rental revenues increased for both the three and six months ended June 30, 2016, as compared to the respective prior-year periods, primarily as a result of acquiring new farms, as well as our ability to renew existing leases at higher rental rates and earning additional revenue on capital improvements made to certain properties. For the three and six months ended June 30, 2016, we recorded approximately $1.1 million and $1.7 million, respectively, of rental revenue attributable to 11 new farms that we acquired since June 30, 2015. In addition, during the three and six months ended June 30, 2016, we recorded additional rental revenue of approximately $240,000 and $574,000, respectively, over that of the respective prior-year periods attributable to the farms we acquired during the prior-year periods, primarily due to owning these farms for the full periods. On a same-property basis, which includes only the properties owned for the entirety of both periods presented, rental revenues increased by approximately $108,000, or 3.9%, and $211,000, or 4.3%, for the three and six months ended June 30, 2016, respectively, primarily due to our ability to renew existing leases at higher rates and earning additional revenue on capital improvements constructed on certain properties.
Tenant recovery revenue, which represents real estate taxes and insurance premiums paid on certain of our properties that, per the leases, are required to be reimbursed by the tenant, remained relatively flat for both the three and six months ended June 30, 2016, as compared to the respective prior-year periods. Corresponding amounts were also recorded as property operating expenses during the respective periods.
Operating Expenses
Depreciation and amortization expenses increased for the three and six months ended June 30, 2016, as compared to the respective prior-year periods, as a result of the additional farms we acquired, as mentioned above, and additional site improvements constructed on existing properties since June 30, 2015. For the three and six months ended June 30, 2016, we recorded additional depreciation and amortization expense of approximately $546,000 and $766,000, respectively, as a result of the 11 farms we acquired since June 30, 2015. In addition, during the three and six months ended June 30, 2016, we recorded additional depreciation and amortization expense of approximately $59,000 and $169,000, respectively, over that of the respective prior-year periods attributable to the farms we acquired during the prior-year periods, primarily due to owning these farms for the full periods. On a same-property portfolio basis, depreciation and amortization expense increased by

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approximately $18,000, or 2.5%, for the three months ended June 30, 2016, due to capital improvements made on certain of those properties and decreased by approximately $126,000, or 9.9%, for the six months ended June 30, 2016, primarily as a result of certain lease intangible amortization periods expiring.
Property operating expenses consist primarily of real estate taxes, insurance expense and other overhead expenses paid for certain of our properties. Property operating expenses remained relatively flat for the three months ended June 30, 2016, and decreased for the six months ended June 30, 2016, as compared to the respective prior-year periods. The decrease for the six months ended June 30, 2016, was primarily due to a decrease in aggregate property tax expense on our overall portfolio, as well as lower repairs and maintenance expenses incurred on certain of our properties. During the three months ended December 31, 2015, two of our partial-net leases converted to pure, triple-net leases, and, beginning in 2016, certain of our properties were entered into land conservation contracts under the California Land Conservation Act, restricting the land to agricultural use and reducing the property tax assessments on those properties. For the three and six months ended June 30, 2016, we accrued approximately $122,000 and $265,000, respectively, of real estate taxes related to certain of our farms, which included the recognition of certain prior-period supplemental taxes as a result of stepped-up tax assessments of those properties after our acquisitions of them, as compared to approximately $133,000 and $284,000 during the respective prior-year periods.
Acquisition-related expenses generally consist of legal fees and fees incurred for third-party reports prepared in connection with potential acquisitions and the related due diligence analyses. Acquisition-related expenses decreased for the three and six months ended June 30, 2016, as compared to the respective prior-year periods, primarily due to the differences in accounting treatment of such expenses incurred in connection with the properties acquired during each of the respective periods (acquisition-related costs that are incurred as part of a transaction accounted for as a business combination are expensed as incurred, while acquisition-related costs that are incurred as part of a transaction accounted for an asset acquisition are capitalized and allocated among the identifiable tangible assets acquired), as well as due to closing on a larger number of separate acquisitions during the prior-year period. In connection with the four farms acquired during the six months ended June 30, 2016, we incurred approximately $132,000 of aggregate acquisition-related costs. Of this amount, during the three and six months ended June 30, 2016, approximately $5,000 and $89,000, respectively, was expensed as incurred, while $39,000 and $43,000, respectively, was capitalized and allocated among the assets acquired. In addition, in connection with the farms we acquired during the six months ended June 30, 2016, approximately $2,000 of the acquisition-related costs incurred was expensed during prior periods. For the four farms acquired during the six months ended June 30, 2015, we incurred approximately $346,000 of aggregate acquisition-related costs. Of this amount, during the three and six months ended June 30, 2015, approximately $156,000 and $339,000, respectively, was expensed as incurred, while $5,000 and $7,000, respectively, was capitalized and allocated among the assets acquired. In addition, in connection with the farms we acquired during the six months ended June 30, 2015, approximately $8,000 of the acquisition-related costs incurred was expensed during prior periods, and $1,000 was expensed during subsequent periods.
The aggregate fees to our Adviser, including both the management and incentive fees, increased for both the three and six months ended June 30, 2016, as compared to the respective prior-year periods. For the three and six months ended June 30, 2016, the gross management fee increased by approximately $57,000 and $149,000, respectively, primarily due to additional common equity raised over the prior 12 months. Since June 30, 2015, we have raised approximately $21.5 million of net proceeds from follow-on common stock offerings, increasing the base (the cost basis of our common stockholders' equity) on which the management fee is calculated. In addition, in connection with one of our acquisitions during the three months ended March 31, 2015, our Adviser earned a finder's fee of approximately $321,000, which the Adviser applied as a credit to the management fee for the three months ended March 31, 2015. Our Adviser also earned an incentive fee of approximately $159,000 during the three months ended June 30, 2016, due to our pre-incentive fee funds from operations exceeding the required hurdle rate of our total stockholders' equity at the end of the quarter, as stipulated in our Advisory Agreement. The increase in our pre-incentive fee funds from operations was primarily due to an increase in rental revenues earned on properties acquired during and subsequent to the six months ended June 30, 2015, coupled with a decrease in operating expenses other than depreciation and amortization expense. No incentive fee was earned in either prior-year period.
The administration fee paid to our Administrator remained relatively flat for the three months ended June 30, 2016, and increased for the six months ended June 30, 2016, as compared to the respective prior-year periods. The increase for the six months ended June 30, 2016, was primarily due to us using a higher share of our Administrator’s resources in relation to those used by other funds engaged by our Administrator during the three months ended March 31, 2016.
General and administrative expenses increased for both the three and six months ended June 30, 2016, as compared to the respective prior-year periods, primarily as a result of additional legal costs incurred related to obtaining certain permits on one of our California properties and completing the CalTrans Settlement on Espinosa Road, increased state filing fees, additional costs associated with updating the valuations of certain of our farms and additional advertising and marketing expenses incurred during the current-year periods. These increases were partially offset by lower overhead insurance expense. In addition, during the three months ended June 30, 2016, we wrote off approximately $64,000 of deferred rent asset balances

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related to a lease on one of our Florida properties that we expect to terminate prior to its expiration. We expect this early termination and the re-leasing of this property to occur during the three months ending September 30, 2016; however, if the current lease is terminated early, there can be no guaranty that we will be able to re-lease this property on terms favorable to us, or at all.
Other Income (Expense)
Other income, which consists primarily of interest earned on short-term investments and interest patronage received from Farm Credit CFL, increased for the three and six months ended June 30, 2016, as compared to the respective prior-year periods, primarily due to additional interest patronage received from Farm Credit CFL. During the three months ended March 31, 2016, we received approximately $94,000 from Farm Credit CFL of interest patronage related to interest accrued during 2015, compared to $15,000 of interest patronage received during the prior-year period. The receipt of this interest patronage resulted in a 16.1% decrease in our effective interest rate on our aggregate borrowings from Farm Credit CFL during the year ended December 31, 2015.
Interest expense increased for both the three and six months ended June 30, 2016, as compared to the respective prior-year periods, primarily due to increased overall borrowings. The weighted-average balance of our aggregate borrowings for the three and six months ended June 30, 2016, was approximately $178.8 million and $163.6 million, respectively, as compared to $103.5 million and $104.0 million, respectively, for the respective prior-year periods. Including interest patronage received on our Farm Credit CFL borrowings, the overall effective interest rate charged on our aggregate borrowings, excluding the impact of deferred financing costs, was 3.3% and 3.2% for the three and six months ended June 30, 2016, respectively, as compared to 3.6% and 3.5% for the respective prior-year periods.
During the three months ended June 30, 2015, we received additional insurance proceeds as a result of a fire on one of our properties in California. This claim was closed during the three months ended September 30, 2015.
LIQUIDITY AND CAPITAL RESOURCES
Overview
Since our IPO in January 2013, we have invested approximately $229.8 million into 36 new farms, and we have expended or accrued an additional $14.6 million for capital improvements on existing properties. Our current short- and long-term sources of funds include cash and cash equivalents, cash flows from operations, borrowings, including the undrawn commitments available under the MetLife Facility and the Farmer Mac Facility, and issuances of additional equity securities. Our current available liquidity is approximately $8.2 million, consisting of $2.8 million in cash and, based on the current level of collateral pledged, $5.4 million of availability under the MetLife Facility, subject to compliance with covenants. Further, we are currently in discussions with certain of our lenders regarding modifications to existing credit facilities that would result in an increase to the aggregate liquidity available to us.
As of June 30, 2016, our total-debt-to-total-capitalization ratio, at book value, was 68.8%, which is up from 64.7% as of December 31, 2015. However, on a fair value basis, our total-debt-to-total capitalization ratio as of June 30, 2016, was 55.3%, which is up from 50.2% as of December 31, 2015 (see “Non-GAAP Financial Information—Net Asset Value” below for an explanation of our fair value process). We are currently exploring additional options for further access to capital, including negotiations with certain of our lenders.
Future Capital Needs
Our short- and long-term liquidity requirements consist primarily of making distributions to stockholders to maintain our qualification as a REIT, funding our general operating costs, making principal and interest payments on outstanding borrowings and funding new farmland acquisitions and other investments consistent with our investment strategy. We intend to use a significant portion of our available liquidity to purchase additional farms and farm-related properties. Our pipeline of potential acquisitions remains healthy, as we continue to actively seek and evaluate acquisitions of additional farms that satisfy our investment criteria. We currently have five properties under either a signed purchase and sale agreement or a signed, non-binding letter of intent for an aggregate proposed purchase price of approximately $62.2 million, a portion of which is expected to be paid in OP Units. We currently have the capital required to complete these transactions, and we expect them all to be consummated during the second half of the year. We also have many other properties that are in various other stages of our due diligence process. However, all potential acquisitions will be subject to our due diligence investigation of such properties, and there can be no assurance that we will be successful in identifying or acquiring any properties in the future.

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We believe that our current and short-term cash resources will be sufficient to fund our distributions to stockholders, service our debt and fund our current operating costs in the near term. We expect to meet our long-term liquidity requirements through various sources of capital, including future equity issuances (including OP Units through our Operating Partnership as consideration for future acquisitions), long-term mortgage indebtedness and bond issuances and other secured and unsecured borrowings.
Cash Flow Resources
The following table summarizes total cash flows for operating, investing and financing activities for the six months ended June 30, 2016 and 2015:
 
 
 
For the Six Months Ended June 30,
 
 
 
 
 
 
2016
 
2015
 
$ Change
 
% Change
Net change in cash from:
 
 
 
 
 
 
 
 
Operating activities
 
$
6,264,553

 
$
1,606,010

 
$
4,658,543

 
290.1%
Investing activities
 
(42,626,091
)
 
(37,164,705
)
 
(5,461,386
)
 
14.7%
Financing activities
 
35,906,266

 
36,098,060

 
(191,794
)
 
(0.5)%
Net change in Cash and cash equivalents
 
$
(455,272
)
 
$
539,365

 
$
(994,637
)
 
(184.4)%
Operating Activities
The majority of cash from operating activities is generated from the rental payments we receive from our tenants, which is first used to fund our property-level operating expenses, with any excess cash being primarily used for principal and interest payments on our borrowings, management fees to our Adviser, administrative fees to our Administrator and other corporate-level expenses. The increase in cash provided by operating activities during the six months ended June 30, 2016, as compared to the prior-year period, was primarily due to additional rental payments received from farms we have acquired during the past 12 months, particularly prepaid rent received on the four farms acquired during the six months ended June 30, 2016. This increase was partially offset by increases in certain operating expenses as a result of increased acquisition activity, as well as an increase in cash paid for interest due to increased borrowings during the six months ended June 30, 2016.
Investing Activities
The increase in cash used in investing activities during the six months ended June 30, 2016, as compared to the prior-year period, was primarily due to additional capital improvements made on existing properties during the six months ended June 30, 2016, which exceeded that of the prior-year period by approximately $6.3 million, partially offset by a decrease in cash paid for acquisitions of new real estate during the six months ended June 30, 2016, which was approximately $1.0 million less than that of the prior-year period.
Financing Activities
The decrease in cash provided by financing activities during the six months ended June 30, 2016, as compared to the prior-year period, was primarily due to the proceeds received from a public offering we completed during the three months ended June 30, 2015, and increased aggregate distributions paid on our common stock and OP Units held outside of the Company, due in part to additional OP Units being issued as partial consideration in connection with a property acquired during the three months ended March 31, 2016. Partially offsetting this overall decrease was an increase in our net borrowings during the six months ended June 30, 2016, which exceeded that of the prior-year period by approximately $14.7 million.
Debt Capital
MetLife Facility
Under our credit facility with Metropolitan Life Insurance Company ("MetLife"), which consists of a $100.0 million long-term note payable (the "MetLife Note Payable") and a $25.0 million revolving equity line of credit (the "MetLife Line of Credit" and, together with the MetLife Note Payable, the "MetLife Facility"), the MetLife Note Payable bears interest at a fixed rate of 3.35% per annum, plus an unused line fee of 0.20% on undrawn amounts, and interest rates for subsequent disbursements will be based on prevailing market rates at the time of such disbursements. The interest rates on the current balance and any subsequent disbursements will be subject to adjustment on August 31, 2020. If the full commitment amount of $100.0 million is not drawn by December 31, 2017, MetLife has the option to be relieved of its obligation to disburse the additional funds under this loan. Advances under the MetLife Line of Credit bear interest at a variable rate equal to the three-month LIBOR plus

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a spread of 2.25%, with a minimum annualized rate of 2.50%, plus an unused fee of 0.20% on undrawn amounts. The interest rate spread on borrowings under the MetLife Line of Credit will be subject to adjustment on April 5, 2017.
Currently, there is approximately $85.9 million outstanding under the MetLife Note Payable that bears interest at a fixed rate of 3.35% per annum and $19.5 million outstanding under the MetLife Line of Credit that bears interest at a rate of 2.90% per annum. While approximately $19.6 million of the full commitment amount remains undrawn, based on the current level of collateral pledged, we currently have approximately $5.4 million of availability under the MetLife Facility.
In addition, we have been in discussions with MetLife to expand the MetLife Facility and modify certain terms of the agreement that would result in additional borrowing availability based on the current collateral pool. We expect to complete this expansion and modification during the three months ending September 30, 2016; however, there can be no assurance that we will be able to enter into any agreement with terms favorable to us, or at all.
Farm Credit Notes Payable
Farm Credit CFL Notes Payable
Since September 19, 2014, we have closed on nine separate loans with Farm Credit CFL for an aggregate amount of approximately $25.3 million. We currently have $24.2 million outstanding under the Farm Credit CFL Notes Payable that bear interest at an expected weighted-average effective rate (net of expected interest patronage) of 2.50% and have a weighted-average maturity date of March 2030. While we do not currently have any additional availability under our program with Farm Credit CFL based on the properties currently pledged as collateral, we may enter into additional borrowing agreements with Farm Credit CFL in connection with certain potential new acquisitions.
Additionally, we have been in discussions with and have received a non-binding term sheet from Farm Credit CFL for a new borrowing facility that would provide us with additional borrowing availability based on our existing collateral pledged under our existing borrowings with them. However, there can be no assurance that we will be able to enter into any agreements with terms favorable to us, or at all.
Farm Credit West Note Payable
On April 4, 2016, we closed on a loan with Farm Credit West for approximately $9.3 million that bears interest at an expected effective interest rate (net of expected interest patronage) of 2.79% and has a maturity date of November 1, 2040. While we do not currently have any additional availability under our program with Farm Credit West based on the property currently pledged as collateral, we expect to enter into additional borrowing agreements with Farm Credit West in connection with certain potential new acquisitions.
Farmer Mac Facility
On December 5, 2014, we entered into an agreement with Farmer Mac that provides for bond issuances up to an aggregate amount of $75.0 million, which amount was increased to $125.0 million, pursuant to an amendment entered into on June 16, 2016. To date, we have issued aggregate bonds of approximately $49.2 million under the facility, and we currently have $49.0 million outstanding that bear interest at a weighted-average interest rate of 2.93% and have a weighted-average maturity date of September 2020. While approximately $75.8 million of the full commitment balance remains undrawn, we currently have no additional availability under the Farmer Mac Facility based on the current level of collateral pledged. However, we expect to pledge certain potential new property acquisitions as collateral under the Farmer Mac Facility to utilize some or all of this remaining commitment balance. If we have not issued bonds such that the aggregate bond issuances total $125.0 million by December 11, 2018, Farmer Mac has the option to be relieved of its obligation to purchase additional bonds under this facility.
Equity Capital
Including approximately $29.3 million reserved for issuance under our ATM Program, we currently have the ability to raise up to $276.4 million of additional equity capital through the sale and issuance of securities that are registered under our registration statement on Form S-3 (File No. 333-194539) in one or more future offerings. However, in the future, we may be limited in the amount of securities we may sell on Form S-3 should the market value of our common stock held by non-affiliates decrease below $75.0 million, as has been the case at certain times during the past 12 months. As we are currently above the $75.0 million threshold, this limitation will not impact us until the next measurement period, which will be when we file our 2016 Form 10-K. However, there can be no assurance that we will be above the $75.0 million threshold at that time.
In addition, we have the ability to, and may in the future, issue additional OP Units to third parties as consideration in future property acquisitions.

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Off-Balance Sheet Arrangements
As of June 30, 2016, we did not have any material off-balance sheet arrangements.
NON-GAAP FINANCIAL INFORMATION
Funds from Operations, Core Funds from Operations and Adjusted Funds from Operations
The National Association of Real Estate Investment Trusts (“NAREIT”) developed funds from operations (“FFO”) as a relative non-GAAP supplemental measure of operating performance of an equity REIT to recognize that income-producing real estate historically has not depreciated on the same basis determined under GAAP. FFO, as defined by NAREIT, is net income (computed in accordance with GAAP), excluding gains or losses from sales of property and impairment losses on property, plus depreciation and amortization of real estate assets, and after adjustments for unconsolidated partnerships and joint ventures. We further present core FFO (“CFFO”) and adjusted FFO (“AFFO”) as additional non-GAAP financial measures, as we believe both CFFO and AFFO improve comparability on a period-over-period basis and are more useful supplemental metrics for investors to use in assessing our operational performance on a more sustainable basis than FFO. We believe that net income is the most directly-comparable GAAP measure to each FFO, CFFO and AFFO.
We calculate CFFO by adjusting FFO for the following items:
 
•
Acquisition-related expenses. Acquisition-related expenses (i.e., due diligence costs) are incurred for investment purposes and do not correlate with the ongoing operations of our existing portfolio. Further, due to the inconsistency in which these costs are incurred and how they are treated for accounting purposes, we believe the exclusion of these expenses improves comparability of our results on a period-to-period basis.
•
Acquisition-related accounting fees. Certain auditing and accounting fees we incur are directly related to acquisitions and vary depending on the number and complexity of acquisitions completed during a period. Due to the inconsistency in which these costs are incurred, we believe the exclusion of these expenses improves comparability of our results on a period-to-period basis.
•
Other adjustments. We will adjust for certain non-recurring charges and receipts and will explain such adjustments accordingly.
Further, we calculate AFFO by adjusting CFFO for the following items:
 
•
Cash rent adjustment. This adjustment removes the effects of straight-lining rental income, as well as the amortization related to above-market lease values and accretion related to below-market lease values, deferred revenue and tenant improvements, resulting in rental income reflected on a modified accrual cash basis. In addition to these adjustments, beginning with the three months ended June 30, 2015, we modified our calculation in our definition of AFFO to provide greater consistency and comparability due to the period-to-period volatility in which cash rents are received. To coincide with our tenants’ harvest seasons, our leases typically provide for cash rents to be paid at various points throughout the lease year, usually annually or semi-annually. As a result, cash rents received during a particular period may not necessarily be comparable to other periods or represent the cash rents indicative of a given lease year. Therefore, we have adjusted AFFO to normalize the cash rent received pertaining to a lease year over that respective lease year on a straight-line basis, resulting in cash rent being recognized ratably over the period in which the cash rent is earned. We will apply the same modified definition of AFFO for all prior-year periods presented to provide consistency and better comparability.
•
Amortization of deferred financing costs. The amortization of costs incurred to obtain financing is excluded from AFFO, as it is a non-cash expense item.


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The following table provides a reconciliation of our FFO, CFFO and AFFO for the three and six months ended June 30, 2016 and 2015 to the most directly-comparable GAAP measure, net income (loss), and a computation of diluted FFO, CFFO and AFFO per share, computed using the weighted-average number of total shares (including shares of our common stock and OP Units held by non-controlling limited partners) outstanding during the respective periods.
 
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
 
2016
 
2015
 
2016
 
2015
Net income (loss)
 
$
115,860

 
$
(30,289
)
 
$
355,852

 
$
(5,715
)
Plus: Real estate and intangible depreciation and amortization
 
1,334,973

 
711,803

 
2,311,683

 
1,503,435

FFO available to common stockholders and OP Unit holders
 
1,450,833

 
681,514

 
2,667,535

 
1,497,720

Plus: Acquisition-related expenses
 
24,648

 
178,016

 
119,872

 
348,697

Plus: Acquisition-related accounting fees
 
12,900

 
13,750

 
27,400

 
48,750

(Minus) plus: Other one-time (receipts) charges, net(1)
 
—

 
(20,809
)
 
—

 
(331,749
)
CFFO available to common stockholders and OP Unit holders
 
1,488,381

 
852,471

 
2,814,807

 
1,563,418

Net adjustment for cash rents
 
(66,606
)
 
(158,449
)
 
(169,363
)
 
(255,044
)
Plus: Amortization of deferred financing costs
 
35,372

 
22,902

 
69,726

 
43,927

AFFO available to common stockholders and OP Unit holders
 
$
1,457,147

 
$
716,924

 
$
2,715,170

 
$
1,352,301

 
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding – basic and diluted
 
9,992,941

 
8,439,855

 
9,992,941

 
8,098,681

Weighted-average OP Units outstanding(2)
 
745,879

 
—

 
491,788

 
—

Weighted-average total shares outstanding
 
10,738,820

 
8,439,855

 
10,484,729

 
8,098,681

 
 
 
 
 
 
 
 
 
Diluted FFO per weighted-average total share
 
$
0.14

 
$
0.08

 
$
0.25

 
$
0.18

Diluted CFFO per weighted-average total share
 
$
0.14

 
$
0.10

 
$
0.27

 
$
0.19

Diluted AFFO per weighted-average total share
 
$
0.14

 
$
0.08

 
$
0.26

 
$
0.17


(1) 
2015 adjustments consist of the removal of (i) a credit we received from our Advisor related to a new property acquisition during the three months ended March 31, 2015, (ii) repairs incurred as a result of a fire that were expensed during the three months ended March 31, 2015, and (iii) insurance proceeds received during the three months ended June 30, 2015, as a result of the same fire.
(2) 
Includes only OP Units held by third parties. As of June 30, 2016, there were 745,879 OP Units held by non-controlling limited partners, representing 6.9% of all OP Units issued and outstanding. There were no OP Units held by anyone other than the Company during 2015.
FFO, CFFO and AFFO do not represent cash flows from operating activities in accordance with GAAP, which, unlike FFO, CFFO and AFFO, generally reflects all cash effects of transactions and other events in the determination of net income, and should not be considered an alternative to net income as an indication of our performance or to cash flows from operations as a measure of liquidity or ability to make distributions. Comparisons of FFO, CFFO and AFFO, using the NAREIT definition for FFO and the definitions above for CFFO and AFFO, to similarly-titled measures for other REITs may not necessarily be meaningful due to possible differences in the definitions used by such REITs.
Diluted funds from operations (“Diluted FFO”), diluted core funds from operations (“Diluted CFFO”) and diluted adjusted funds from operations (“Diluted AFFO”) per share are FFO, CFFO and AFFO, respectively, divided by the weighted-average number of total shares (including shares of our common stock and OP Units held by non-controlling limited partners) outstanding on a fully-diluted basis during a period. We believe that diluted earnings per share is the most directly-comparable GAAP measure to each Diluted FFO, CFFO and AFFO per share.
We believe that FFO, CFFO and AFFO and Diluted FFO, CFFO and AFFO per share are useful to investors because they provide investors with a further context for evaluating our FFO, CFFO and AFFO results in the same manner that investors use net income and EPS in evaluating net income. In addition, because many REITs provide FFO, CFFO and AFFO and Diluted FFO, CFFO and AFFO per share information to the investment community, we believe these are useful supplemental measures when comparing us to other REITs.

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Net Asset Value
The following table provides certain summary information about our 47 farm properties held as of June 30, 2016.
 
 
 
 
Date
 
No. of
 
Total
 
Farm
 
Net Cost
 
Prior Fair
 
Current Fair
 
 
Property Name
 
Location
 
Acquired
 
Farms
 
Acres
 
Acres
 
Basis(1)
 
Value(2)
 
Value
 
 
San Andreas
 
Watsonville, CA
 
6/16/1997
 
1
 
307
 
238
 
$
4,766,850

 
$
13,600,000

 
$
13,600,000

 
(5) 
West Gonzales
 
Oxnard, CA
 
9/15/1998
 
1
 
653
 
502
 
12,087,278

 
53,000,000

 
53,000,000

 
(5) 
West Beach
 
Watsonville, CA
 
1/3/2011
 
3
 
196
 
195
 
9,284,807

 
11,860,000

 
11,860,000

 
(5) 
Dalton Lane
 
Watsonville, CA
 
7/7/2011
 
1
 
72
 
70
 
2,678,229

 
3,172,000

 
3,172,000

 
(4) 
Keysville Road
 
Plant City, FL
 
10/26/2011
 
2
 
61
 
56
 
1,239,809

 
1,582,000

 
1,582,000

 
(4) 
Colding Loop
 
Wimauma, FL
 
8/9/2012
 
1
 
219
 
181
 
3,900,918

 
4,457,000

 
4,457,000

 
(4) 
Trapnell Road
 
Plant City, FL
 
9/12/2012
 
3
 
124
 
110
 
3,862,689

 
4,856,000

 
4,856,000

 
(4) 
38th Avenue
 
Covert, MI
 
4/5/2013
 
1
 
119
 
89
 
1,255,879

 
1,476,000

 
1,478,000

 
(4) 
Sequoia Street
 
Brooks, OR
 
5/31/2013
 
1
 
218
 
206
 
3,091,791

 
3,352,000

 
3,483,000

 
(4) 
Natividad Road
 
Salinas, CA
 
10/21/2013
 
1
 
166
 
166
 
8,952,970

 
8,500,000

 
8,500,000

 
(5) 
20th Avenue
 
South Haven, MI
 
11/5/2013
 
3
 
151
 
94
 
1,851,986

 
2,195,000

 
2,195,000

 
(4) 
Broadway Road
 
Moorpark, CA
 
12/16/2013
 
1
 
60
 
46
 
2,875,864

 
3,524,000

 
3,524,000

 
(4) 
Oregon Trail
 
Echo, OR
 
12/27/2013
 
1
 
1,895
 
1,640
 
13,879,837

 
14,740,000

 
14,740,000

 
(4) 
East Shelton
 
Willcox, AZ
 
12/27/2013
 
1
 
1,761
 
1,320
 
7,778,747

 
8,330,000

 
8,330,000

 
(5) 
Collins Road
 
Clatskanie, OR
 
5/30/2014
 
2
 
200
 
157
 
2,368,937

 
2,901,000

 
2,901,000

 
(4) 
Spring Valley
 
Watsonville, CA
 
6/13/2014
 
1
 
145
 
110
 
5,746,921

 
6,925,000

 
6,925,000

 
(5) 
McIntosh Road
 
Dover, FL
 
6/20/2014
 
2
 
94
 
78
 
2,453,449

 
2,722,000

 
2,725,000

 
(4) 
Naumann Road
 
Oxnard, CA
 
7/23/2014
 
1
 
68
 
66
 
6,793,670

 
7,048,000

 
7,048,000

 
(4) 
Sycamore Road
 
Arvin, CA
 
7/25/2014
 
1
 
326
 
322
 
6,848,715

 
7,733,000

 
7,733,000

 
(5) 
Wauchula Road
 
Duette, FL
 
9/29/2014
 
1
 
808
 
590
 
13,581,735

 
16,800,000

 
16,800,000

 
(5) 
Santa Clara Avenue
 
Oxnard, CA
 
10/29/2014
 
2
 
333
 
331
 
24,170,815

 
26,694,000

 
26,694,000

 
(4) 
Dufau Road
 
Oxnard, CA
 
11/4/2014
 
1
 
65
 
64
 
6,031,400

 
6,383,000

 
6,383,000

 
(4) 
Espinosa Road
 
Salinas, CA
 
1/5/2015
 
1
 
331
 
329
 
16,358,539

 
18,212,000

 
18,212,000

 
(4) 
Parrish Road
 
Duette, FL
 
3/10/2015
 
1
 
419
 
412
 
4,188,751

 
7,000,000

 
7,000,000

 
(5) 
Immokalee Exchange
 
Immokalee, FL
 
6/25/2015
 
2
 
2,678
 
1,644
 
15,526,274

 
15,757,700

 
15,975,000

 
(4) 
Holt County
 
Stuart, NE
 
8/20/2015
 
1
 
1,276
 
1,052
 
5,441,699

 
5,504,000

 
5,504,000

 
(3) 
Rock County
 
Bassett, NE
 
8/20/2015
 
1
 
1,283
 
1,049
 
5,428,714

 
5,504,000

 
5,504,000

 
(3) 
Bear Mountain
 
Arvin, CA
 
9/3/2015
 
3
 
854
 
841
 
26,094,518

 
18,922,500

 
22,176,000

 
(5)(6) 
Corbitt Road
 
Immokalee, FL
 
11/2/2015
 
1
 
691
 
390
 
3,777,909

 
3,760,000

 
3,760,000

 
(3) 
Reagan Road
 
Willcox, AZ
 
12/22/2015
 
1
 
1,239
 
875
 
5,678,064

 
5,700,000

 
5,700,000

 
(3) 
Gunbarrel Road
 
Alamosa, CO
 
3/3/2016
 
3
 
6,191
 
4,730
 
25,326,491

 
25,884,991

 
25,884,991

 
(3) 
Calaveras Avenue
 
Coalinga, CA
 
4/5/2016
 
1
 
453
 
442
 
15,401,510

 
—

 
15,470,000

 
(3) 
 
 
 
 
 
 
47
 
23,456
 
18,395
 
$
268,725,765

 
$
318,095,191

 
$
337,171,991

 
  

(1) 
Consists of the initial acquisition price (including the costs allocated to both tangible and intangible assets acquired and liabilities assumed), plus subsequent improvements and other capitalized costs associated with the properties, and adjusted for accumulated depreciation and amortization. Includes Investments in real estate, net and Lease intangibles, net; plus net above-market lease values included in Other assets; and less net below-market lease values, deferred revenue and unamortized tenant improvements included in Other liabilities, each as shown on the accompanying Condensed Consolidated Balance Sheet.
(2) 
As reported in our Quarterly Report on Form 10-Q for the three months ended March 31, 2016.
(3) 
Valued at the agreed-upon purchase price.
(4) 
Represents values as determined by our internal valuation process, as described below.
(5) 
Represents values as determined by third-party appraisals performed between October 2015 and April 2016.
(6) 
Value excludes approximately $3.9 million of capitalized costs incurred related to the development of an almond orchard on the property. The property will be re-appraised upon completion of the project, which is expected to be during the three months ending September 30, 2016.
Real estate companies are required to record real estate using the historical cost basis of the real estate, adjusted for accumulated depreciation and amortization, and, as a result, the carrying value of the real estate does not typically change as the fair value of the assets change. Thus, a difficulty in owning shares of an asset-based company is determining the fair value of the assets so that stockholders can see the value of the assets increase or decrease over time. For this reason, we believe determining the fair value of our real estate assets is useful to our investors.

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Determination of Fair Value
Our Board of Directors reviews and approves the valuations of our properties pursuant to a valuation policy approved by our Board of Directors (the “Valuation Policy”). Such review and approval occurs in three phases: (i) prior to its quarterly meetings, the Board of Directors receives written valuation recommendations and supporting materials that are provided by professionals of the Adviser and Administrator, with oversight and direction from the chief valuation officer, who is also employed by the Administrator (collectively, the “Valuation Team”); (ii) the valuation committee of the Board of Directors (the “Valuation Committee”), which is comprised entirely of independent directors, meets to review the valuation recommendations and supporting materials; and (iii) after the Valuation Committee concludes its meeting, it and the chief valuation officer present the Valuation Committee’s findings to the entire Board of Directors so that the full Board of Directors may review and approve the fair values of our properties in accordance with the Valuation Policy. Further, on a quarterly basis, the Board of Directors reviews the Valuation Policy to determine if changes thereto are advisable and also reviews whether the Valuation Team has applied the Valuation Policy consistently.
Per the Valuation Policy, our valuations are derived based on the following:
•
For properties acquired within 12 months prior to the date of valuation, the purchase price of the property will generally be used as the current fair value unless overriding factors apply. In situations where OP Units are issued as partial or whole consideration in connection with the acquisition of a property, the fair value of the property will generally be the lower of: (i) the agreed-upon purchase price between the seller and the buyer (as shown in the purchase and sale agreement or contribution agreement and using the agreed-upon pricing of the OP Units, if applicable), or (ii) the value as determined by an independent, third-party appraiser.
•
For real estate we acquired more than one year prior to the date of valuation, we determine the fair value either by relying on estimates provided by independent, third-party appraisers or through an internal valuation process. In addition, if significant capital improvements take place on a property, we will typically have those properties reappraised upon completion of the project by an independent, third-party appraiser. In any case, we intend to have each property valued by an independent, third-party appraiser at least once every three years, with interim values generally being determined by our internal valuation process.
Various methodologies were used, both by the appraisers and in our internal valuations, to determine the fair value of our real estate on an “As Is” basis, including the sales comparison, income capitalization (or a discounted cash flow analysis) and cost approaches of valuation. In performing their analyses, the appraisers (i) performed site visits to the properties, (ii) discussed each property with our Adviser and reviewed property-level information, including, but not limited to, property operating data, prior appraisals (as available), existing lease agreements, farm acreage, location, access to water and water rights, potential for future development and other property-level information, and (iii) reviewed information from a variety of sources about regional market conditions applicable to each of our properties, including, but not limited to, recent sale prices of comparable farmland, market rents for similar farmland, estimated marketing and exposure time, market capitalization rates and the current economic environment, among others. In performing our internal valuations, we will consider the most recent appraisal available and use similar methodologies in determining an updated fair value. We will also obtain updated market data related to the property, such as updated sales and market rent comparisons and market capitalization rates, and perform an updated assessment of the tenants’ credit risk profiles, among others. Sources of this data may come from market inputs from recent acquisitions of our own portfolio of real estate, recent appraisals of properties we own that are similar in nature and in the same region (as applicable) as the property being valued, market conditions and trends we observe in our due diligence process and conversations with appraisers, brokers and farmers.
A breakdown of the methodologies used to value our properties and the aggregate value as of June 30, 2016, determined by each method is shown in the table below:
Valuation Method
 
No. of
Farms
 
Total Portfolio
Fair Value
 
 
% of Total
Fair Value
Purchase Price
 
8
 
$
61,822,991

  
 
18.3%
Internal Valuation
 
25
 
119,425,000

(1) 
 
35.4%
Third-party Appraisal
 
14
 
155,924,000

  
 
46.3%
Total
 
47
 
$
337,171,991

  
 
100.0%

(1) 
95.0% of this valuation, or approximately $113.4 million, is supported by values as determined by third-party appraisals performed between January 2013 and June 2015. The difference of $6.0 million represents the net appreciation of those properties since the time of such appraisals, as determined according to our Valuation Policy.
Some of the significant assumptions used by appraisers and the Valuation Team in valuing our portfolio as of June 30, 2016, include land values per farmable acre, market rental rates per farmable acre and capitalization rates, among others. These

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assumptions were applied on a farm-by-farm basis and were selected based on several factors, including comparable land sales, surveys of both existing and current market rates, discussions with other brokers and farmers, soil quality, size, location and other factors deemed appropriate. A summary of these significant assumptions is provided in the following table:
 
 
Appraisal Assumptions
 
Internal Valuation Assumptions
 
 
Range
(Low - High)
 
Weighted
Average
 
Range
(Low - High)
 
Weighted
Average
Land Value (per farmable acre)
 
$4,630 – $105,000
 
$
59,499

 
$8,854 – $100,705
 
$
47,738

Market Rent (per farmable acre)
 
$260 – $3,700
 
$
2,555

 
$452 – $5,019
 
$
2,281

Market Capitalization Rate
 
3.12% – 5.00%
 
3.91%
 
3.37% – 6.50%
 
4.51%
The table above applies only to the farmland portion of our portfolio and exclude assumptions made relating to farm-related property, such as cooling facilities and box barns, and other structures on our properties, including residential housing and horticulture, as their aggregate value was considered to be insignificant in relation to that of the farmland.
Our Valuation Team reviews the appraisals, including the significant assumptions and inputs used in determining the appraised values, and considers any developments that may have occurred since the time the appraisals were performed. Developments considered that may have an impact on the fair value of our real estate include, but are not limited to, changes in tenant credit profiles; changes in lease terms, such as expirations and notices of non-renewals or to vacate; and potential asset sales, particularly those at prices different from the appraised values of our properties.
Management believes that the purchase prices of the farms acquired during the previous 12 months, the most recent appraisals available for the farms acquired prior to the previous 12 months that were not valued internally, which appraisals were performed between the periods of October 2015 and April 2016, and the farms that were valued internally during the previous 12 months, fairly represent the current market values of the properties as of June 30, 2016, and, accordingly, did not make any adjustment to these values.
A quarterly roll-forward of the change in our portfolio value for the three months ended June 30, 2016, from the prior value basis as of December 31, 2015, is provided in the table below:
Total portfolio fair value as of March 31, 2016
 
 
 
$
318,095,191

Plus acquisitions:
 
 
 
 
Calaveras Avenue
 
$
15,470,000

 
 
Total acquisitions for the three months ended June 30, 2016
 
 
 
15,470,000

Plus value appreciation (depreciation):
 
 
 
 
38th Avenue
 
2,000

 
 
Sequoia Street
 
131,000

 
 
McIntosh Road
 
3,000

 
 
Immokalee Exchange
 
217,300

 
 
Bear Mountain
 
3,253,500

 
 
Total net appreciation for the three months ended June 30, 2016
 
 
 
3,606,800

Total portfolio fair value as of June 30, 2016
 
 
 
$
337,171,991

In addition, using a discounted cash flow analysis, management determined that the fair value of all encumbrances on our properties as of June 30, 2016, was approximately $185.3 million, as compared to a carrying value (excluding unamortized related debt issuance costs) of $181.5 million.
Calculation of Estimated Net Asset Value
To provide our stockholders with an estimate of the fair value of our real estate assets, we intend to estimate the fair value of our farm properties, expressed in terms of net asset value (“NAV”) per share, and provide that to our stockholders on a quarterly basis. NAV is a non-GAAP, supplemental measure of financial position of an equity REIT and is calculated as total equity, adjusted for the increase or decrease in fair value of our real estate assets and encumbrances relative to their respective costs bases. Estimated NAV is then divided by our total shares outstanding to calculate the estimated NAV per share.
The fair values presented above and their usage in the calculation of net asset value per share presented below have been prepared by, and is the responsibility of, management. PricewaterhouseCoopers LLP has neither examined, compiled nor performed any procedures with respect to the fair values or the calculation of net asset value per share, which utilizes information that is not disclosed within the financial statements, and, accordingly, does not express an opinion or any other form of assurance with respect thereto.

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As of June 30, 2016, we estimate our NAV per share to be $13.68, as detailed below:
Total assets
 
$
275,185,109

 
 
Less: net cost basis of tangible real estate and intangible lease assets(1)
 
(270,623,900
)
 
 
Plus: estimated fair value of property portfolio(2)
 
337,171,991

 
 
Estimated fair value of total assets
 
 
 
$
341,733,200

Total liabilities
 
192,957,968

 
 
Less: net cost basis of intangible lease liabilities(3)
 
(1,898,135
)
 
 
Less: book value of aggregate borrowings(4)
 
(181,526,562
)
 
 
Plus: fair value of aggregate borrowings(5)
 
185,290,326

 
 
Estimated fair value of total liabilities
 
 
 
194,823,597

Estimated NAV
 
 
 
$
146,909,603

Shares outstanding(6)
 
 
 
10,738,820

Estimated NAV per share
 
 
 
$
13.68


(1) 
Adjusted for $8,734 of net above-market lease values, included in Other assets on the accompanying Condensed Consolidated Balance Sheet.
(2) 
Per current value basis presented in the table above.
(3) 
Adjusted for $164,713 of net below-market lease values and deferred revenue and $1,733,422 of unamortized tenant improvements, both included in Other liabilities on the accompanying Condensed Consolidated Balance Sheet.
(4) 
Excludes $1,052,886 of deferred financing costs related to mortgage notes and bonds payable included in Mortgage notes and bonds payable, net on the accompanying Condensed Consolidated Balance Sheet.
(5) 
Valued using a discounted cash flow model.
(6) 
Includes 745,879 OP Units held by non-controlling limited partners, representing 6.9% of all OP Units issued and outstanding.
A quarterly roll-forward in the estimated NAV per share for the three months ended June 30, 2016, is provided below:
Estimated NAV per share as of March 31, 2016
 
 
 
$
13.87

Plus net income
 
 
 
0.01

Plus change in valuations:
 
 
 
 
Net change in unrealized appreciation of farmland portfolio(1)
 
$
0.12

 
 
Net change in unrealized fair value of borrowings
 
(0.20
)
 
 
Net change in valuations
 
 
 
(0.08
)
Less distributions
 
 
 
(0.12
)
Estimated NAV per share as of June 30, 2016
 
 
 
$
13.68


(1) 
The net change in unrealized appreciation of farmland portfolio consists of three components: (i) an increase of $0.34 due to the net appreciation in value of nine farms that were valued during the three months ended June 30, 2016, (ii) an increase of $0.12 due to the aggregate depreciation and amortization expense recorded during the three months ended June 30, 2016, and (iii) a decrease of $0.34 due to capital improvements made on certain properties that have not yet been considered in the determination of the respective properties’ estimated fair values.
Comparison of estimated NAV, using the above definition, to similarly-titled measures for other REITs, may not necessarily be meaningful, due to possible differences in the calculation or application of the definition of NAV used by such REITs. In addition, the trading price of our common shares may differ significantly from our most recent estimated NAV per share calculation. For example, while we estimated the NAV per share as of June 30, 2016, to be $13.68 per the calculation above, the closing price of our common stock on June 30, 2016, was $11.06, and it has subsequently traded between $10.89 and $11.50 per share.
While management believes the values presented reflect current market conditions, the ultimate amount realized on any asset will be based on the timing of such dispositions and the then-current market conditions. There can be no assurance that the ultimate realized value upon disposition of an asset will approximate the estimated fair value above.
We intend to report any adjustments to the estimated NAV, as well as to the values of our properties, in this section on a quarterly basis, but in no case less than annually. However, the determination of estimated NAV is subjective and involves a number of assumptions, judgments and estimates, and minor adjustments to these assumptions, judgments or estimates may have a material impact on our overall portfolio valuation. In addition, many of the assumptions used are sensitive to market conditions and can change frequently. Changes in the market environment and other events that may occur during our ownership of these properties may cause the values reported above to vary from the actual fair value that may be obtained in the open market.

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ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market-sensitive instruments. The primary market risk that we believe we are and will be exposed to is interest rate risk. Certain of our existing leases contain escalations based on market indices, and certain of our existing borrowings are subject to variable interest rates. Further, the interest rates on certain of our fixed-rate borrowings are either fixed for a finite period before converting to variable rate or are subject to periodic adjustments. Although we seek to mitigate this risk by structuring certain provisions into many of our leases, such as escalation clauses or adjusting the rent to prevailing market rents at two- to three-year intervals, these features do not eliminate this risk. To date, we have not entered into any derivative contracts to attempt to manage our exposure to interest rate fluctuations.
As of June 30, 2016, the fair value of our fixed-rate borrowings outstanding, which accounted for 90.9% of our total indebtedness, at cost, as of June 30, 2016, was approximately $168.8 million. However, interest rate fluctuations may affect the fair value of our fixed-rate borrowings. If market interest rates had been one percentage point lower or higher than those rates in place as of June 30, 2016, the fair value of our fixed-rate borrowings would have increased or decreased by approximately $6.1 million or $5.8 million, respectively.
There have been no material changes in the quantitative and qualitative market risk disclosures for the three months ended June 30, 2016, from that disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, as filed with the SEC on February 23, 2016.
 
ITEM 4.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of June 30, 2016, our management, including our chief executive officer and chief financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, the chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of June 30, 2016, in providing a reasonable level of assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable SEC rules and forms, including providing a reasonable level of assurance that information required to be disclosed by us in such reports is accumulated and communicated to our management, including our chief executive officer and our chief financial officer, as appropriate to allow timely decisions regarding required disclosure. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated can provide only reasonable assurance of necessarily achieving the desired control objectives, and management was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2016, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


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PART II – OTHER INFORMATION
 
Item 1.
Legal Proceedings
We are not currently subject to any material legal proceedings, nor, to our knowledge, are any such material legal proceedings threatened against us.
 
Item 1A.
Risk Factors
Our business is subject to certain risks and events that, if they occur, could adversely affect our financial condition and results of operations and the trading price of our securities. For a discussion of these risks, please refer to this section and the section captioned “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015, filed by us with the U.S. Securities and Exchange Commission on February 23, 2016. The risks described below and in our Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may materially and adversely affect our business, financial condition and/or operating results in the future.
We may enter into tax protection agreements in the future if we issue OP Units in connection with the acquisition of properties, which could limit our ability to sell or otherwise dispose of certain properties.
Our Operating Partnership may enter into tax protection agreements in connection with issuing OP Units to acquire additional properties which could provide that if we dispose of any interest in the protected acquired property prior to a certain time, we will indemnify the other party for its tax liabilities attributable to the built-in gain that exists with respect to such property. Therefore, although it may be in our stockholders’ best interests that we sell one of these properties, it may be economically prohibitive for us to do so if we are a party to such a tax protection agreement. While we do not currently have any of these tax protection agreements in place currently, we cannot guarantee that we will not enter into such agreements in the future.
Our redemption of OP Units could result in the issuance of a large number of new shares of our common stock and/or force us to expend significant cash, which may limit our funds necessary to make distributions on our common stock.
As of the date of this Quarterly Report, third parties owned approximately 6.9% of the outstanding OP Units. Following any contractual lock-up provisions, including the one-year mandatory holding period, a non-controlling limited partner of our Operating Partnership may require us to redeem the OP Units it holds for cash. At our election, we may satisfy the redemption through the issuance of shares of our common stock on a one-for-one basis. However, the limited partners’ redemption right may not be exercised if and to the extent that the delivery of the shares upon such exercise would result in any person violating the ownership and transfer restrictions set forth in our charter. If a large number of OP Units were redeemed, it could result in the issuance of a large number of new shares of our common stock, which could dilute our existing stockholders’ ownership. Alternatively, if we were to redeem a large number of OP Units for cash, we may be required to expend significant amounts to pay the redemption price, which may limit our funds necessary to make distributions on our common stock. Further, if we do not have sufficient cash on hand at the time the OP Units are tendered for redemption, we may be forced to sell additional shares of our common stock in order to raise cash, which could cause dilution to our existing stockholders and adversely affect the market price of our common stock.
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
Sales of Unregistered Securities
None.
Issuer Purchases of Equity Securities
None.
 
Item 3.
Defaults Upon Senior Securities
Not applicable.

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Item 4.
Mine Safety Disclosures
Not applicable.
 
Item 5.
Other Information
None.
 

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Item 6.
Exhibits
EXHIBIT INDEX
 
Exhibit
Number
 
Exhibit Description
3.1
 
Articles of Incorporation of the Registrant, incorporated by reference to Exhibit 3.1 to Pre-Effective Amendment No. 2 to the Registration Statement on Form S-11 (File No. 333-183965), filed November 2, 2012.
3.2
 
Amended and Restated Bylaws of the Registrant, incorporated by reference to Exhibit 3.2 to Pre-Effective Amendment No. 3 to the Registration Statement on Form S-11 (File No. 333-183965), filed November 15, 2012.
4.1
 
Form of Common Stock Certificate of the Registrant, incorporated by reference to Exhibit 4.1 to Pre-Effective Amendment No. 4 to the Registration Statement on Form S-11 (File No. 333-183965), filed December 27, 2012.
10.1
 
Amendment No. 1 to AgVantage® Bond Purchase Agreement, dated June 16, 2016, by and among Gladstone Lending Company, LLC, as Issuer, Farmer Mac Mortgage Securities Corporation, as Bond Purchaser, and Federal Agricultural Mortgage Corporation, as Guarantor, incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K (File No. 001-35795), filed June 20, 2016.
11
 
Computation of Per Share Earnings from Operations (included in the notes to the unaudited financial statements contained in this Report).
31.1
 
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
31.2
 
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.1
 
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
32.2
 
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).
101.INS***
 
XBRL Instance Document
101.SCH***
 
XBRL Taxonomy Extension Schema Document
101.CAL***
 
XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB***
 
XBRL Taxonomy Extension Label Linkbase Document
101.PRE***
 
XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF***
 
XBRL Definition Linkbase
***
Attached as Exhibit 101 to this Quarterly Report on Form 10-Q are the following materials, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets as of June 30, 2016, and December 31, 2015, (ii) the Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2016 and 2015, (iii) the Condensed Consolidated Statements of Equity for the six months ended June 30, 2016, and the year ended December 31, 2015, (iv) the Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2016 and 2015 and (vi) the Notes to the Condensed Consolidated Financial Statements.


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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
Gladstone Land Corporation
 
 
 
Date: August 2, 2016
By:
 
/s/ Lewis Parrish
 
 
 
Lewis Parrish
 
 
 
Chief Financial Officer and
Assistant Treasurer
 
 
 
Date: August 2, 2016
By:
 
/s/ David Gladstone
 
 
 
David Gladstone
 
 
 
Chief Executive Officer and
Chairman of the Board of Directors


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