GLADSTONE LAND Corp

Previous wording

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. For further information about these and other factors that could affect our future results, please see the captions titled “Forward-Looking Statements” and “Risk Factors” in this report and our Annual Report on Form 10-K for the year ended December 31, 2023 (the “Form 10-K”). 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.

Current wording

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. For further information about these and other factors that could affect our future results, please see the captions titled “Forward-Looking Statements” and “Risk Factors” in this report and/or our Annual Report on Form 10-K for the year ended December 31, 2023 (the “Form 10-K”). 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.

Previous wording

We are an externally-managed, agricultural real estate investment trust (“REIT”) that is engaged in the business of owning and leasing farmland. We are not a grower of crops, nor do we typically farm the properties we own. We currently own 168 farms comprised of 111,836 acres located across 15 states in the U.S. and 53,975 acre-feet of water assets in California. We also own several farm-related facilities, such as cooling facilities, packinghouses, processing facilities, and various storage facilities.

Current wording

We are an externally-managed, agricultural real estate investment trust (“REIT”) that is engaged in the business of owning and leasing farmland. We are not a grower of crops, nor do we typically farm the properties we own. We currently own 168 farms comprised of 111,836 acres located across 15 states in the U.S. and 53,787 acre-feet of water assets in California. We also own several farm-related facilities, such as cooling facilities, packinghouses, processing facilities, and various storage facilities.

Previous wording

Our farmland portfolio currently consists of 168 farms leased to 93 different, unrelated third-party tenants who grow over 60 different types of crops on our farms. Our investment focus is in farmland suitable for growing either fresh produce annual row crops (e.g., certain berries and vegetables) or certain permanent crops (e.g., almonds, blueberries, pistachios, and wine grapes), with an ancillary focus on farmland growing certain commodity crops (e.g., beans and corn).

Current wording

Our farmland portfolio currently consists of 168 farms leased to 94 different, unrelated third-party tenants who grow over 60 different types of crops on our farms. Our investment focus is in farmland suitable for growing either fresh produce annual row crops (e.g., certain berries and vegetables) or certain permanent crops (e.g., almonds, blueberries, pistachios, and wine grapes), with an ancillary focus on farmland growing certain commodity crops (e.g., beans and corn).

Previous wording

The following table summarizes the different geographic locations (by state) of our farms owned as of and during the six months ended June 30, 2024 and 2023 (dollars in thousands):

Current wording

The following table summarizes the different geographic locations (by state) of our farms owned as of and during the nine months ended September 30, 2024 and 2023 (dollars in thousands):

Previous wording

Most of our leases are on a triple-net basis, an arrangement under which, in addition to rent, the tenant is required to pay the related taxes, insurance costs, maintenance, and other operating costs. Our leases generally have original terms ranging from 3 to 10 years for farms growing row crops and 7 to 15 years for farms growing permanent crops (in each case, often with options to extend the lease further). Rent is generally payable to us in advance on either an annual, semi-annual, or quarterly basis, with such rent typically subject to periodic escalation clauses as set forth within the lease. Currently, 103 of our farms are leased on a pure, triple-net basis, 49 farms are leased on a partial-net basis (with us, as landlord, responsible for all or a portion of the related property taxes), 3 farms are leased on a single-net basis (with us, as landlord, responsible for the related property taxes, as well as certain maintenance, repairs, or insurance costs), 12 farms are direct-operated, and 1 farm is vacant. Additionally, 28 of our farms are leased under agreements that include a variable rent component, called “participation rents,” that are based on the gross revenues earned on the respective farms (though such leases generally include a guarantee of a minimum amount of rental income).

Current wording

Most of our leases are on a triple-net basis, an arrangement under which, in addition to rent, the tenant is required to pay the related taxes, insurance costs, maintenance, and other operating costs. Our leases generally have original terms ranging from 3 to 10 years for farms growing row crops and 7 to 15 years for farms growing permanent crops (in each case, often with options to extend the lease further). Rent is generally payable to us in advance on either an annual, semi-annual, or quarterly basis, with such rent typically subject to periodic escalation clauses as set forth within the lease. Currently, 103 of our farms are leased on a pure, triple-net basis, 49 farms are leased on a partial-net basis (with us, as landlord, responsible for all or a portion of the related property taxes), 3 farms are leased on a single-net basis (with us, as landlord, responsible for the related property taxes, as well as certain maintenance, repairs, or insurance costs), 1 farm is direct-operated, 1 farm is vacant, and 11 farms are held for sale (see below under “Recent Developments—Portfolio Activity—Existing Properties—Disposition Activity” for further discussion). Additionally, 29 of our farms are leased under agreements that include a variable rent component, called “participation rents,” that are based on the gross revenues earned on the respective farms (though such leases generally include a guarantee of a minimum amount of rental income).

Previous wording

(3)Primarily consists of ancillary leases (e.g., renewable energy leases; oil, gas, and mineral leases; telecommunications leases; etc.) with varying expirations on certain of our farms.

Current wording

(2)Primarily consists of ancillary leases (e.g., renewable energy leases; oil, gas, and mineral leases; telecommunications leases; etc.) with varying expirations on certain of our farms.

Previous wording

We currently have nine agricultural leases scheduled to expire within the next six months. We are currently exploring a variety of options with certain of these properties, including negotiating lease terms with existing and prospective new tenants, discussing sale options with prospective buyers, and considering operating the properties ourselves via third-party management agreements. Regarding all vacancies and upcoming lease expirations, there can be no assurance that we will be able to renew the existing leases or execute new leases at rental rates favorable to us, if at all, or be able to find replacement tenants, if necessary.

Current wording

We currently have nine agricultural leases scheduled to expire within the next six months. We are currently exploring a variety of options with certain of these properties, including negotiating lease terms with existing and prospective new tenants (potentially through an adjusted lease structure whereby we would decrease the fixed base rent amounts in exchange for increasing the participation rent component), discussing sale options with prospective buyers, and considering operating the properties ourselves via third-party management agreements. Regarding all vacancies and upcoming lease expirations, there can be no assurance that we will be able to renew the existing leases or execute new leases at rental rates favorable to us, if at all, or be able to find replacement tenants, if necessary.

Previous wording

(1)In connection with certain of these leases, we committed to provide capital for certain improvements on these farms. See “Liquidity and Capital Resources—Operating Commitments and Obligations—Operating Obligations” below for additional information on these and other commitments.

Current wording

(1)In connection with certain of these leases, we committed to provide cash allowances or capital for certain operations and improvements on these farms, which are excluded in the figures above. See Note 3, “Real Estate and Intangible Assets—Intangible Assets and Liabilities,” within the accompanying notes to our condensed consolidated financial statements and “Liquidity and Capital Resources—Operating Commitments and Obligations—Operating Obligations” below for additional information on these and other commitments.

Previous wording

(2)Based on the minimum cash rental payments guaranteed under the applicable leases (presented on an annualized basis), as required under GAAP, and excludes contingent rental payments, such as participation rents.

Current wording

(2)Based on the minimum cash rental payments guaranteed under the applicable leases (presented on an annualized basis), as required under GAAP, and excludes contingent rental payments, such as participation rents. In executing certain lease renewals, particularly those on certain western permanent crop farms, we reduced or eliminated the base rent component in exchange for significantly increasing the participation rent component, the results of which will not be known until the second half of 2025.

Previous wording

During a portion of the six months ended June 30, 2024, we had 20 farms (5 in California, 14 in Michigan, and 1 in Washington) that were either vacant, direct-operated (via management agreements with unrelated third parties), or on which lease revenues were recognized on a cash basis (due to credit issues with two tenants leading us to determine that the full collectability of the remaining rental payments under the respective leases was not deemed to be probable). During the six months ended June 30, 2024, we recorded lease revenue related to the aforementioned farms of approximately $561,000 (including no participation rents), as compared to approximately $1.8 million (including approximately $72,000 of participation rents) during the prior-year period.

Current wording

During a portion of the nine months ended September 30, 2024, we had 20 farms (5 in California, 13 in Michigan, 1 in Oregon, and 1 in Washington) that were either vacant, direct-operated (via management agreements with unrelated third parties), or on which lease revenues were recognized on a cash basis (due to credit issues with two tenants leading us to determine that the full collectability of the remaining rental payments under the respective leases was not deemed to be probable). During the nine months ended September 30, 2024, we recorded lease revenue related to the aforementioned farms of approximately $778,000 (including no participation rents), as compared to approximately $2.1 million (including approximately $195,000 of participation rents) during the prior-year period.

Previous wording

Currently, 1 farm (in Washington) is vacant, 12 farms (1 in California, 10 in Michigan, and 1 in Oregon) are direct-operated, and 4 farms (in California remain) on non-accrual status. Regarding vacant and direct-operated farms, we are exploring both leasing and selling options, and we are in discussions with both potential tenants and potential buyers for these farms. We currently expect to enter into lease or sale agreements within the next six months with respect to each of these farms; however, there can be no guarantee that we will be able to reach lease or sale agreements with tenants or buyers at favorable terms, or at all. Regarding the properties currently on non-accrual status, we are continuing to work with each of the tenants and will seek to come to an agreement for the remaining rental payments, if possible. Such agreement, if one can be reached, may include placing the tenant on a payment plan, deferring a portion of the rent owed to us, or agreeing to terminate the lease. In the event of a termination, we estimate that we would be able to find new tenants to lease each of these properties to at market rental rates within 1 to 12 months.

Current wording

Currently, 1 farm (in Washington) is vacant, 1 farm (in Oregon) is direct-operated, 5 farms (in California) are on non-accrual status, and 11 farms (in Michigan) are held for sale. Regarding vacant and direct-operated farms, we are exploring both leasing and selling options, and we are in discussions with both potential tenants and potential buyers for these farms. We currently expect to enter into lease or sale agreements within the next six months with respect to each of these farms; however, there can be no guarantee that we will be able to reach lease or sale agreements with tenants or buyers at favorable terms, or at all. Regarding the properties currently on non-accrual status, we are continuing to work with each of the tenants and will seek to come to an agreement for the remaining rental payments, if possible. Such agreement, if one can be reached, may include placing the tenant on a payment plan, deferring a portion of the rent owed to us, or agreeing to terminate the lease. In the event of a termination, we estimate that we would be able to find new tenants to lease each of these properties to at market rental rates within 1 to 12 months.

Previous wording

In addition, on July 15, 2024, we purchased 1,985 gross acre-feet of water from Byron-Bethany Irrigation District (“BBID”), a multi-county water district located in Contra Costa County, California, for the 2024 water year for a total purchase price (including commissions and other closing costs) of approximately $801,000, or approximately $404 per gross acre-foot. This water was purchased pursuant to a water transfer agreement we entered into with BBID in October 2023, whereby we may elect to purchase up to 15,000 acre-feet of water per water year during years in which BBID has a surplus supply of water through February 28, 2031. This water is expected to be recognized in our account with the local water district during the three months ending December 31, 2024, net of standard losses, as may be applicable.

Current wording

During the three months ended September 30, 2024, we purchased a total of 2,260 gross acre-feet of water from Byron-Bethany Irrigation District (“BBID”), a multi-county water district located in Contra Costa County, California, for the 2024 water year for a total purchase price (including commissions and other closing costs) of approximately $883,000, or approximately $391 per gross acre-foot. This water was purchased pursuant to a water transfer agreement we entered into with BBID in October 2023, whereby we may elect to purchase up to 15,000 acre-feet of water per water year during years in which BBID has a surplus supply of water through February 28, 2031. This water is expected to be recognized in our account with the local water district within the next six months, net of standard losses, as may be applicable.

Previous wording

We currently own a total of 53,975 acre-feet of long-term water assets, and our investments in these long-term water assets have an aggregate carrying value of approximately $36.9 million.

Current wording

We currently own a total of 53,787 acre-feet of long-term water assets, and our investments in these long-term water assets have an aggregate carrying value of approximately $36.8 million.

Previous wording

From April 1, 2024, through the date of this filing, we repaid approximately $6.0 million of loans. On a weighted-average basis, these borrowings bore interest at a stated rate of 4.31% and an effective rate (after interest patronage, where applicable) of 3.06%.

Current wording

From July 1, 2024, through the date of this filing, we repaid approximately $13.3 million of loans that were scheduled to either mature or reprice. On a weighted-average basis, these borrowings bore interest at a stated rate of 4.28% and an effective rate (after interest patronage, where applicable) of 3.33%.

Previous wording

(1)Net of underwriting discounts, selling commissions, and dealer-manager fees borne by us. Aggregate selling commissions and dealer-manager fees paid to Gladstone Securities as a result of these sales was approximately $10,000.

Current wording

(1)Net of underwriting discounts, selling commissions, and dealer-manager fees borne by us. Aggregate selling commissions and dealer-manager fees paid to Gladstone Securities as a result of these sales was approximately $9,000.

Previous wording

On May 17, 2024, our Board of Directors approved a share repurchase program authorizing us to repurchase up to $20.0 million of our 6.00% Series B Cumulative Redeemable Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”) and up to $35.0 million of our Series C Preferred Stock (the “Repurchase Program”). The Board’s authorization of the Repurchase Program may be suspended or discontinued at any time, does not obligate us to acquire any particular amount of securities, and expires on May 17, 2025. Under the Repurchase Program, repurchases are intended to be implemented through open market transactions on U.S. exchanges and/or in privately-negotiated transactions facilitated by a third-party broker acting as agent for us in accordance with applicable securities laws. Any repurchases will be made during applicable trading window periods or pursuant to applicable Rule 10b5-1 trading plans.

Current wording

On May 17, 2024, our Board of Directors approved a share repurchase program authorizing us to repurchase up to $20.0 million of our 6.00% Series B Cumulative Redeemable Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”) and up to $35.0 million of our 6.00% Series C Cumulative Redeemable Preferred Stock, par value $0.01 per share (the “Series C Preferred Stock” and, collectively, the “Repurchase Program”). The Board’s authorization of the Repurchase Program may be suspended or discontinued at any time, does not obligate us to acquire any particular amount of securities, and expires on May 17, 2025. Under the Repurchase Program, repurchases are intended to be implemented through open market transactions on U.S. exchanges and/or in privately-negotiated transactions facilitated by a third-party broker acting as agent for us in accordance with applicable securities laws. Any repurchases will be made during applicable trading window periods or pursuant to applicable Rule 10b5-1 trading plans.

Previous wording

According to the U.S. Bureau of Labor Statistics, the consumer price index (“CPI”) grew at an annual rate of 3.0% through June 30, 2024, as overall inflation continued to ease from the peak levels experienced in the summer of 2022, when it reached the highest rates seen in over 40 years. The increase in food prices has also slowed but has generally kept pace with the rate of inflation until the past few months, as the overall food segment increased at an annual rate of 2.2% through June 30, 2024. In addition, according to the NCREIF Farmland Index, which, as of June 30, 2024, consisted of approximately $16.0 billion of farms across the U.S., the total return on U.S. farmland (including appreciation and income) was 2.5% for the 12 months ended June 30, 2024. Despite the slowdown of increased food prices in recent months, prices remain high, as the food segment has increased by 8.1% over the past two years, outpacing overall CPI of 6.0% over the same time period. Although our farm operators have experienced increases in input costs, we believe such increases will be somewhat mitigated to the extent that food price increases continue to outpace or keep pace with the rate of inflation.

Current wording

According to the U.S. Bureau of Labor Statistics, the consumer price index (“CPI”) grew at an annual rate of 2.4% through September 30, 2024, as overall inflation continued to ease from the peak levels experienced in the summer of 2022, when it reached the highest rates seen in over 40 years. The increase in food prices has also slowed but has generally kept pace with the rate of inflation until the pastfew months, as the overall food segment increased at an annual rate of 2.3% through September 30, 2024. In addition, according to the NCREIF Farmland Index, which, as of September 30, 2024, consisted of approximately $16.5 billion of farms across the U.S., the total return on U.S. farmland (including appreciation and income) was 2.6% for the 12 months ended September 30, 2024. Despite the slowdown of increased food prices in recent months, prices remain high, as the food segment has increased by 18.0% over the past three years, outpacing overall CPI of 14.9% over the same time period. Although our farm operators have experienced increases in input costs, we believe such increases will be somewhat mitigated to the extent that food price increases continue to outpace or keep pace with the rate of inflation.

Previous wording

To combat inflation, the Federal Reserve raised its benchmark funds rate 11 times between March 2022 and July 2023, resulting in the highest target rate seen since January 2001. Since that time, the Federal Reserve has held rates flat, stating its desire to see more evidence of inflation being on a sustainable path to its target rate of 2.0% and indicating a “higher-for-longer” stance. Despite inflation continuing to run higher than the target rate, with evidence that economic growth is beginning to slow, including a weaker labor market, most now expect the Federal Reserve to begin cutting rates later this year, though the timing and extent of such rate cuts, if any, remains uncertain. As a result of this uncertainty, interest rates remain somewhat volatile. The yield on the 10-year US Treasury Note has withdrawn from the 16-year high it achieved in October 2023 and recently fell to its lowest point of the year. However, as it is still hovering near 4.0%, interest rates on long-term financing continue to be high, limiting our ability to finance new acquisitions on favorable terms.

Current wording

After holding rates flat since July 2023, the Federal Reserve cut interest rates for the first time in four years in September 2024, reducing its benchmark funds rate by 50 basis points and marking what many believe to be the beginning of a new monetary easing policy. This rate cut came on the heels of data indicating a slowing U.S. economy, including cooling inflation and a weaker labor market. However, since the September meeting, U.S. Treasury yields have spiked amidst stronger-than-expected U.S. macroeconomic data. Despite this, most still expect the Federal Reserve to continue cutting rates throughout the remainder of 2024 and into 2025, though the timing and extent of such rate cuts, if any, remains uncertain. As a result of this uncertainty, interest rates remain somewhat volatile. The yield on the 10-year US Treasury Note still remains well above 4.0%, and, as a result, interest rates on long-term financing continue to be high, thus limiting our ability to finance new acquisitions on favorable terms.

Previous wording

Over 99.9% of our borrowings are currently at fixed rates, and on a weighted-average basis, these rates are fixed at an effective interest rate of 3.40% for another 3.9 years. As such, with respect to our current borrowings, we have experienced minimal impact from the higher interest rates experienced over the past couple of years, and we believe we are well-protected against a prolonged period of elevated interest rates, which remains a possibility.

Current wording

Over 99.9% of our borrowings are currently at fixed rates, and on a weighted-average basis, these rates are fixed at an effective interest rate of 3.40% for another 3.7 years. As such, with respect to our current borrowings, we have experienced minimal impact from the higher interest rates experienced over the past couple of years, and we believe we are well-protected against a prolonged period of elevated interest rates, which remains a possibility.

Previous wording

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 Form 10-K. There were no material changes to our critical accounting policies during the six months ended June 30, 2024.

Current wording

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 Form 10-K. There were no material changes to our critical accounting policies during the nine months ended September 30, 2024.

Previous wording

From April 1, 2023 through June 30, 2024, we had 22 farms which were either vacant, direct-operated, or placed on non-accrual during all or a portion of either period.

Current wording

From July 1, 2023 through September 30, 2024, we had 23 farms which were either vacant, direct-operated, or placed on non-accrual during all or a portion of either period.

Previous wording

For the purposes of the following discussions on certain operating revenues and expenses with regard to the comparison between the six months ended June 30, 2024 and 2023:

Current wording

For the purposes of the following discussions on certain operating revenues and expenses with regard to the comparison between the nine months ended September 30, 2024 and 2023:

Previous wording

From January 1, 2023 through June 30, 2024, we had 22 farms which were either vacant, direct-operated, or placed on non-accrual during all or a portion of either period.

Current wording

From January 1, 2023 through September 30, 2024, we had 25 farms which were either vacant, direct-operated, or placed on non-accrual during all or a portion of either period.

Previous wording

A comparison of results of components comprising our operating income for the three and six months ended June 30, 2024 and 2023 is below (dollars in thousands):

Current wording

A comparison of results of components comprising our operating income for the three and nine months ended September 30, 2024 and 2023 is below (dollars in thousands):

Previous wording

The following table provides a summary of our lease revenues during the three and six months ended June 30, 2024 and 2023 (dollars in thousands):

Current wording

The following table provides a summary of our lease revenues during the three and nine months ended September 30, 2024 and 2023 (dollars in thousands):

Previous wording

Lease revenues from fixed lease payments increased primarily due to the accelerated recognition of certain deferred rent asset balances attributable to the shortening of the expected lease terms associated with leases on three of our farms.

Current wording

Lease revenues from fixed lease payments decreased primarily due to the execution of certain lease agreements in 2024, pursuant to which we agreed to reduce the fixed base rent amounts in exchange for increasing the participation rent components in the leases, the majority of which will be realized in 2025. This decrease was partially offset by an increase in fixed lease payments attributable to the accelerated recognition of certain deferred rent asset balances attributable to the shortening of the expected lease terms associated with leases on three of our farms, additional rents earned on capital improvements completed on certain of our farms, and recent lease renewals.

Previous wording

Fixed lease payments from vacant, direct-operated, or non-accrual properties decreased primarily due to revenue from certain of our leases being recognized on a cash basis during a portion of the current-year periods (rather than a straight-line basis), due to full collectability of future rental payments under the respective leases deemed not to be probable as a result of tenant credit issues. In addition, certain of our farms were either direct-operated (on a temporary basis via management agreements with unrelated third-parties) or vacant for portions of each of the six months ended June 30, 2024 and 2023. The decrease in lease revenue from vacant, direct-operated, or non-accrual properties was partially offset by cash collections (in part or in whole) from tenants occupying certain of these properties during the three and six months ended June 30, 2024.

Current wording

Lease revenue from vacant, direct-operated, or non-accrual properties decreased primarily due to revenues from certain of our leases being recognized on a cash basis during a portion of the current-year periods (rather than a straight-line basis), due to full collectability of future rental payments under the respective leases deemed not to be probable as a result of tenant credit issues. In addition, certain of our farms were either direct-operated (on a temporary basis via management agreements with unrelated third-parties) or vacant for portions of each of the nine months ended September 30, 2024 and 2023. The decrease in lease revenue from vacant, direct-operated, or non-accrual properties was partially offset by cash collections (in part or in whole) from tenants occupying certain of these properties during the nine months ended September 30, 2024.

Previous wording

Other operating revenue consists of non-lease revenue generated as a result of activities performed on certain of our properties. During the three and six months ended June 30, 2024, we recognized approximately $27,000 and $453,000, respectively, of non-cash revenue associated with the transfer and storing of surplus water on behalf of a government municipality using a groundwater recharge facility constructed on one of our farms. See Note 3, “Real Estate and Intangible Assets—Investments in Water Assets,” within the accompanying notes to our condensed consolidated financial statements for further discussion.

Current wording

Other operating revenue consists of non-lease revenue generated as a result of activities performed on certain of our properties. During the three and nine months ended September 30, 2024, we recognized approximately $0 and $453,000, respectively, of non-cash revenue associated with the transfer and storing of surplus water on behalf of a government municipality using a groundwater recharge facility constructed on one of our farms. See Note 3, “Real Estate and Intangible Assets—Investments in Water Assets,” within the accompanying notes to our condensed consolidated financial statements for further discussion.

Previous wording

Property operating expenses consist primarily of real estate taxes, repair and maintenance expenses, insurance premiums, and other miscellaneous operating expenses paid for certain of our properties. The following table provides a summary of the property-operating expenses recorded during the three and six months ended June 30, 2024 and 2023 (dollars in thousands):

Current wording

Property operating expenses consist primarily of real estate taxes, repair and maintenance expenses, insurance premiums, and other miscellaneous operating expenses paid for certain of our properties. The following table provides a summary of the property-operating expenses recorded during the three and nine months ended September 30, 2024 and 2023 (dollars in thousands):

Previous wording

Property operating expenses increased primarily due to additional property taxes paid by us on behalf of one of our tenants who terminated their lease subsequent to June 30, 2024. For the six months ended June 30, 2024, this increase was partially offset by a decrease in legal fees and other costs incurred in connection with protecting water rights on certain farms in California, as well as a decrease in repairs and maintenance expense incurred during the prior-year period as a result of minor damage at certain farms caused by natural disasters.

Current wording

Property operating expenses increased primarily due to additional property taxes paid by us on behalf of one of our tenants who terminated their lease during the three months ended September 30, 2024. For the nine months ended September 30, 2024, this increase was partially offset by a decrease in legal fees and other costs incurred in connection with protecting water rights on certain farms in California, as well as a decrease in repairs and maintenance expense incurred during the prior-year period as a result of minor damage at certain farms caused by natural disasters.

Previous wording

Property operating expenses attributable to vacant, direct-operated, or non-accrual properties increased primarily due to additional property management fees incurred on certain farms that were direct-operated for a portion of the current year-periods (via management agreements with unrelated third-parties) and additional property taxes incurred, including those paid on behalf of certain tenants leasing farms that were placed on non-accrual status. This increase was partially offset by a decrease in legal fees incurred in connection with rent collection or lease termination efforts for those tenants on farms that were placed on non-accrual status.

Current wording

Property operating expenses attributable to vacant, direct-operated, or non-accrual properties increased primarily due to additional property management fees incurred on certain farms that were direct-operated for a portion of the current year-periods (via management agreements with unrelated third-parties) and additional property taxes incurred on those farms. For the three months ended September 30, 2024, this increase was also attributable to an increase in legal fees incurred in connection with rent collection or lease termination efforts on certain farms that were direct-operated or on non-accrual status.

Previous wording

The following table provides the calculations of the base management and incentive fees due to our Adviser pursuant to the Advisory Agreement for the three and six months ended June 30, 2024 and 2023 (dollars in thousands; for further discussion on certain defined terms used below, refer to Note 6, “Related-Party Transactions,” within the accompanying notes to our condensed consolidated financial statements):

Current wording

The following table provides the calculations of the base management and incentive fees due to our Adviser pursuant to the Advisory Agreement and credits granted to us by our Adviser for the three and nine months ended September 30, 2024 and 2023 (dollars in thousands; for further discussion on certain defined terms used below, refer to Note 6, “Related-Party Transactions,” within the accompanying notes to our condensed consolidated financial statements):

Previous wording

General and administrative expenses consist primarily of professional fees, director fees, stockholder-related expenses, overhead insurance, acquisition-related costs for investments no longer being pursued, and other miscellaneous expenses. General and administrative expenses decreased during the current-year periods, primarily due to a decrease in stockholder-related expenses related to the listing of the Series C Preferred Stock on Nasdaq in 2023. The decrease was also attributable to a decrease in acquisition-related costs for investments no longer being pursued and lower professional fees.

Current wording

General and administrative expenses consist primarily of professional fees, director fees, stockholder-related expenses, overhead insurance, acquisition-related costs for investments no longer being pursued, and other miscellaneous expenses. General and administrative expenses decreased during the nine months ended September 30, 2024, primarily due to additional expenses incurred in the prior year related to the listing of the Series C Preferred Stock on Nasdaq and acquisition-related costs for investments no longer being pursued.

Previous wording

A comparison of results of other components contributing to net loss attributable to common stockholders for the three and six months ended June 30, 2024 and 2023 is below (dollars in thousands):

Current wording

A comparison of results of other components contributing to net loss attributable to common stockholders for the three and nine months ended September 30, 2024 and 2023 is below (dollars in thousands):

Previous wording

Other income generally consists of interest patronage received from Farm Credit (as defined in Note 4, “Borrowings,” in the accompanying notes to our condensed consolidated financial statements) and interest earned on short-term investments. Other income increased during the three months ended June 30, 2024, primarily due to additional income earned on short-term investments due to higher interest rates, but decreased slightly for the six months ended June 30, 2024, primarily due to less interest patronage received from Farm Credit (primarily due to decreased borrowings from Farm Credit).

Current wording

Other income generally consists of interest patronage received from Farm Credit (as defined in Note 4, “Borrowings,” in the accompanying notes to our condensed consolidated financial statements) and interest earned on short-term investments. Other income decreased primarily due to less interest patronage received from Farm Credit (primarily due to decreased borrowings from Farm Credit), partially offset by an increase in additional interest earned on short-term investments due to higher interest rates.

Previous wording

Interest expense decreased, primarily due to a decrease in overall borrowings. The weighted-average principal balance of our aggregate borrowings (excluding our cumulative term preferred stock) outstanding for the three and six months ended June 30, 2024, was approximately $553.5 million and $555.5 million, respectively, as compared to approximately $600.1 million and $606.1 million for the respective prior-year periods. Excluding interest patronage received on certain of our Farm Credit borrowings and the impact of debt issuance costs, the weighted-average interest rate charged on our aggregate borrowings for the three and six months ended June 30, 2024, was 3.83% and 3.82%, respectively, as compared to 3.79% and 3.78% for the respective prior-year periods.

Current wording

September 30, 2024, was approximately $540.9 million and $550.6 million, respectively, as compared to approximately $589.5 million and $600.5 million for the respective prior-year periods. Excluding interest patronage received on certain of our Farm Credit borrowings and the impact of debt issuance costs, the weighted-average interest rate charged on our aggregate borrowings for the three and nine months ended September 30, 2024, was 3.83% and 3.82%, respectively, as compared to 3.81% and 3.79% for the respective prior-year periods.

Previous wording

During the six months ended June 30, 2024, we recorded a net capital gain, driven by the sale of a 3,748-acre farm in Martin County, Florida, for approximately $65.7 million, which after accounting for closing costs, resulted in a net gain of approximately $10.4 million. During the three and six months ended June 30, 2023, we recorded a net capital gain, driven by the sale of a 138-acre parcel of unfarmed land in Florida for $9.6 million, which, after accounting for closing costs, resulted in a net gain of approximately $6.4 million. The net loss recorded during the three months ended June 30, 2024, related to the removal of some permanent plantings and the disposal of certain irrigation and other improvements on certain of our farms.

Current wording

During the nine months ended September 30, 2024, we recorded a net capital gain, driven by the sale of a 3,748-acre farm in Martin County, Florida, for approximately $65.7 million, which after accounting for closing costs, resulted in a net gain of approximately $10.4 million. During the nine months ended September 30, 2023, we recorded a net capital gain, driven by the sale of a 138-acre parcel of unfarmed land in Florida for $9.6 million, which, after accounting for closing costs, resulted in a net gain of approximately $6.4 million. The net losses recorded during the three months ended September 30, 2024 and 2023 related to the removal of some permanent plantings and the disposal of certain irrigation and other improvements on certain of our farms.

Previous wording

The net property and casualty loss relates to net expenses incurred and insurance recoveries received for certain improvements that were damaged due to natural disasters. The property and casualty loss recorded during the six months ended June 30, 2023, was primarily due to the heavy rainfall that occurred in California in early 2023 and the resulting flooding, which damaged certain structures located on one of our farms in the Central Valley.

Current wording

The net property and casualty loss relates to net expenses incurred and insurance recoveries received for certain improvements that were damaged due to natural disasters. The property and casualty loss recorded during three and nine months ended September 30, 2024, was primarily due to damage caused by Hurricane Helene to certain permanent plants on one of ourfarms in Georgia. The property and casualty loss recorded during the nine months ended September 30, 2023, was primarily due to the heavy rainfall that occurred in California in early 2023 and the resulting flooding, which damaged certain structures located on one of our farms in the Central Valley.

Previous wording

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 our credit facility with Metropolitan Life Insurance Company (“MetLife”)), and issuances of additional equity securities. Our current available liquidity is approximately $179.2 million, consisting of approximately $32.7 million in cash on hand and, based on the current level of collateral pledged, approximately $146.5 million of availability under our credit facility with MetLife (subject to compliance with covenants) and other undrawn lines of credit, notes, or bonds. In addition, we currently have certain properties valued at a total of approximately $148.3 million that are unencumbered and eligible to be pledged as collateral.

Current wording

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 our credit facility with Metropolitan Life Insurance Company (“MetLife”)), and issuances of additional equity securities. Our current available liquidity is approximately $164.4 million, consisting of approximately $19.8 million in cash on hand and, based on the current level of collateral pledged, approximately $144.6 million of availability under our credit facility with MetLife (subject to compliance with covenants) and other undrawn lines of credit, notes, or bonds. In addition, we currently have certain properties valued at a total of approximately $159.8 million that are unencumbered and eligible to be pledged as collateral.

Previous wording

Over 99.9% of our borrowings are currently at fixed rates, and on a weighted-average basis, these rates are fixed at an effective interest rate of 3.40% for another 3.9 years. In addition, the weighted-average remaining term of our notes and bonds payable is approximately 8.4 years. As such, with respect to our current borrowings, we have experienced minimal impact from increased interest rates in recent years, and we believe we are well-protected against a prolonged high rate environment. Despite ongoing uncertainty in the markets, based on discussions with our lenders and other market participants, we do not believe there will be a credit freeze on agricultural lending in the near term. We are in compliance with all of our debt covenants under our respective credit facilities and borrowings, and we believe we currently have adequate liquidity to cover all near- and long-term debt obligations and operating expenses.

Current wording

Over 99.9% of our borrowings are currently at fixed rates, and on a weighted-average basis, these rates are fixed at an effective interest rate of 3.40% for another 3.7 years. In addition, the weighted-average remaining term of our notes and bonds payable is approximately 8.2 years. As such, with respect to our current borrowings, we have experienced minimal impact from increased interest rates in recent years, and we believe we are well-protected against a prolonged high rate environment. We are in compliance with all of our debt covenants under our respective credit facilities and borrowings, and we believe we currently have adequate liquidity to cover all near- and long-term debt obligations and operating expenses.