What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-08-07 compared with 2023-05-08 · 204 added, 147 removed, 501 unchanged (41% of the section changed)

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The acquisition of additional farms since our IPO has also allowed us to further diversify our portfolio geographically.

The following table summarizes the different geographic locations (by state) of our farms owned as of and during the three months ended March 31, 2023 and 2022 (dollars in thousands):

As of and For the Three Months Ended March 31, 2023 As of and For the Three Months Ended March 31, 2022

The following table summarizes the different geographic locations (by state) of our farms owned as of and during the six months ended June 30, 2023 and 2022 (dollars in thousands):

As of and For the Six Months Ended June 30, 2023 As of and For the Six Months Ended June 30, 2022

Revenue % of Total

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Georgia 2 230 0.2% 112 0.3% 2 230 0.2% 112 0.3%

North Carolina 2 310 0.3% 33 0.2% 2 310 0.3% 33 0.2%

New Jersey 3 116 0.1% 64 0.2% 3 116 0.1% 64 0.2%

Delaware 1 180 0.2% 37 0.1% 1 180 0.2% 36 0.1%

North Carolina 2 310 0.3% 30 0.1% 2 310 0.3% 81 0.2%

TOTALS 169 115,593 100.0% $ 42,412 100.0% 165 113,931 100.0% $ 40,236 100.0%

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Agricultural leases are often shorter term in nature (relative to leases of other types of real estate assets), so in any given year, we may have multiple leases up for extension or renewal.

The following table summarizes the lease expirations by year for the farms owned and with leases in place as of March 31, 2023 (dollars in thousands):

The following table summarizes the lease expirations by year for the farms owned and with leases in place as of June 30, 2023 (dollars in thousands):

Year Number of

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Acreage Lease Revenues for the

Three Months Ended March 31, 2023

Six Months Ended June 30, 2023

10 6,514 5.6% $ 3,103 7.3%

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(1) Certain lease agreements encompass multiple farms.

(2) Includes one lease with a tenant termination option that we do not currently expect to be exercised.

(2) Includes two leases with tenant termination options that we do not currently expect to be exercised.

(3) Includes one lease that was extended subsequent to June 30, 2023 (see “ Recent Developments—Portfolio Activity—Existing Properties—Leasing Activity ” below for a summary of this and certain other recent leasing activities).

(4) Primarily consists of ancillary leases (e.g., renewable energy leases;

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etc.) with varying expirations on certain of our farms.

Also includes one farm that was self-operated as of March 31, 2023, for which we recorded approximately $77,000 of lease revenues attributable to the former tenant during the three months ended March 31, 2023.

Aside from an early termination option available to the tenant on one of our farms in Michigan (which we do not currently expect to be exercised), we currently have two agricultural leases scheduled to expire within the next six months, both on farms in California.

We are currently in negotiations with the existing tenants on each of the farms, as well as other potential tenants, and we anticipate being able to renew the leases at their respective current market rental rates without incurring any downtime on either of the farms.

We currently anticipate the rental rates on these lease renewals to be flat to slightly higher compared to that of the existing leases.

Also includes one farm that was self-operated as of June 30, 2023, for which we recorded approximately $77,000 of lease revenues attributable to the former tenant during the three months ended March 31, 2023.

Aside from two early termination options available to the tenant on two of our farms (neither of which we currently expect to be exercised), we currently have eight agricultural leases scheduled to expire within the next six months.

Overall, we currently anticipate the rental rates on these lease renewals to be relatively flat compared to that of the existing leases.

Regarding all 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.

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Leasing Activity

The following table summarizes certain leasing activity that has occurred on our existing properties since January 1, 2023, through the date of this filing (dollars in thousands, except for footnotes):

The following table summarizes certain leasing activity that has occurred on our existing properties since April 1, 2023, through the date of this filing (dollars in thousands, except for footnotes):

PRIOR LEASES (1)

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/ NN / N) (4)

CA, CO, & NE 5 8,933 $ 4,914 2 3 / 2 / 0 $ 5,509 7.4 0 3 / 2 / 0

(1) Prior leases include one lease that was terminated early during the three months ended March 31, 2023.

In connection with this early termination, during the three months ended March 31, 2023, we wrote off aggregate deferred rent and rent receivable balances of approximately $128,000 against lease revenue.

Upon termination of this lease, we entered into a new lease with a new tenant, effective immediately, which is included in the above table.

CA, CO, FL, MI, & NC 13 18,408 $ 7,802 2 9 / 2 / 2 $ 7,400 5.1 1 6 / 7 / 0

(1) Prior leases include five leases that were terminated early during the three months ended June 30, 2023.

Upon termination of these leases, we entered into new leases with new tenants, effective immediately, which are included in the above table.

(2) In connection with certain of these leases, we committed to provide capital for certain improvements on these farms.

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Self-operated and Non-accrual Properties

As of and during a portion of the three months ended March 31, 2023, we had one farm in California that was self-operated (via a management agreement with an unrelated third-party).

As of and during a portion of the six months ended June 30, 2023, we had one farm in California that was self-operated (via a management agreement with an unrelated third-party).

We are in discussions with potential tenants to lease this farm and currently expect to come to an agreement within the next three months;

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Additionally, due to credit issues with three of our tenants, we determined that the full collectability of the remaining rental payments under the respective leases with these tenants was not deemed to be probable.

As such, during the three months ended March 31, 2023, we recognized lease revenues from the seven leases with these three tenants (three on farms in California and four on farms in Michigan) on a cash basis.

We are continuing to work with the current 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 these tenants on payment plans, deferring a portion of the rent owed to us, or agreeing to terminate the respective leases.

In the event of a termination, we estimate that we would be able to find new tenants to lease each of these properties at market rental rates within 1 to 12 months.

During the three months ended March 31, 2023, we recorded aggregate lease revenues related to the aforementioned properties of approximately $363,000 (including approximately $72,000 of participation rents), as compared to approximately $470,000 (including no participation rents) during the three months ended March 31, 2022.

California Floods

In January 2023, periods of heavy rainfall in California resulted in floods that impacted several areas of the state, including regions where certain of our farms are located.

As a result of the flooding, one of our farms in the Central Valley suffered damage to certain structures located on the farm.

We are still in the process of assessing the damage;

however, as of March 31, 2023, we estimated the carrying value of the structures on this property damaged by the floods to be approximately $855,000.

As such, during the three months ended March 31, 2023, we wrote down the carrying value of these structures and also

recorded a corresponding property and casualty loss, included within Property and casualty (loss) recovery, net on the accompanying Condensed Consolidated Statements of Operations and Comprehensive Income.

We currently expect the damage to be fully covered by either insurance or the tenant’s obligations pursuant to the lease.

Certain of our other farms in California suffered minor damage as a result of the floods, but no other farms were materially impacted.

As such, during a portion of the six months ended June 30, 2023, we recognized lease revenues from the seven leases with these three tenants (four leases on farms in Michigan and three leases on farms in California) on a cash basis.

During the three months ended June 30, 2023, we terminated the lease agreements with the prior tenant occupying the four farms in Michigan and entered into new, short-term lease agreements on each of the farms with a new tenant.

The tenant occupying two of the three California farms is current in their rental payments to us and may be placed back on full accrual status later in the year if certain conditions (including, but not limited to, timely receipt of rental payments) continue to be met.

We are continuing to work with the current tenant on the third farm in California 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 an early termination of any of the aforementioned farms, we estimate that we would be able to find new tenants to lease each of these properties at market rental rates within 1 to 12 months.

During the three and six months ended June 30, 2023, we recorded aggregate lease revenues related to the aforementioned properties of approximately $263,000 and $625,000, respectively, as compared to approximately $545,000 and $1.0 million during the respective prior-year periods.

Financing Activity

Debt Activity

Farm Credit Notes Payable—Interest Patronage

From time to time since September 2014, we, through certain subsidiaries of our Operating Partnership, have entered into various loan agreements (collectively, the “Farm Credit Notes Payable”) with 13 different Farm Credit associations (collectively, “Farm Credit”).

During the three months ended March 31, 2023, we recorded interest patronage of approximately $2.3 million related to interest accrued on the Farm Credit Notes Payable during the year ended December 31, 2022, and during the three months ended September 30, 2022, we received approximately $113,000 of interest patronage, as certain Farm Credit associations paid a portion of the 2022 interest patronage (which relates to interest accrued during 2022 but is typically paid during the first half of 2023) early.

In total, 2022 interest patronage resulted in a 24.1% reduction (approximately 109 basis points) to the interest rates on such borrowings.

For further discussion on interest patronage, refer to Note 4, “ Borrowings—Farm Credit Notes Payable—Interest Patronage ,” in the accompanying notes to our condensed consolidated financial statements.

Farmer Mac Facility

On June 2, 2023, we amended our agreement with Federal Agricultural Mortgage Corporation (“Farmer Mac”), which provides for bond issuances up to an aggregate amount of $225.0 million (the “Farmer Mac Facility”).

Pursuant to the amendment, the date through which we may issue new bonds under the Farmer Mac Facility was extended to December 31, 2026, and the final maturity date for new bonds issued under the facility will be the date that is ten years from the applicable issuance date.

Loan Repayments

From January 1, 2023, through the date of this filing, we repaid approximately $21.8 million of maturing loans.

From April 1, 2023, through the date of this filing, we repaid approximately $5.7 million of maturing loans.

On a weighted-average basis, these borrowings bore interest at a stated rate of 2.86% and an effective interest rate (after interest patronage, where applicable) of 2.52%.

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The Primary Series C Offering terminated on December 31, 2022, and the DRIP was terminated effective March 22, 2023.

From January 1, 2023, through the date of this filing, we issued approximately 6,913 shares of the Series C Preferred Stock pursuant to the DRIP and redeemed 400 shares that were tendered for optional redemption.

From April 1, 2023, through the date of this filing, we redeemed 39,093 shares that were tendered for optional redemption, which we satisfied with an aggregate cash payment of approximately $951,000.

During the three months ended June 30, 2023, we listed the Series C Preferred Stock on Nasdaq under the ticker symbol “LANDP.” Trading of the Series C Preferred Stock on Nasdaq commenced on June 8, 2023.

Series E Preferred Stock

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See Note 6, “Related-Party Transactions—Gladstone Securities—Dealer-Manager Agreements,” for a discussion of the commissions and fees to be paid to Gladstone Securities in connection with the Series E Offering.

The following table summarizes the sales of our Series E Preferred Stock that occurred from January 1, 2023, through the date of this filing (dollars in thousands):

The following table summarizes the sales of our Series E Preferred Stock that occurred from April 1, 2023, through the date of this filing (dollars in thousands):

Shares Sold Weighted-average

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On April 13, 2023, we entered into separate amended and restated equity distribution agreements with the Sales Agents to allow us to sell shares of our common stock having an aggregate offering price of up to $500.0 million.

The following table summarizes the activity under the ATM Program from January 1, 2023, through the date of this filing (dollars in thousands):

The following table summarizes the activity under the ATM Program from April 1, 2023, through the date of this filing (dollars in thousands):

Number of Shares Sold Weighted-average

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According to the U.S.

Bureau of Labor Statistics, the consumer price index (“CPI”) grew at an annual rate of 5.0% through March 2023, 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.

However, food prices have continued to outpace the rate of inflation, with the overall food segment increasing at an annual rate of 8.5% through March 2023, and the food at home segment (which encompasses over 90% of the crops grown on our farms) growing by 8.4%.

In addition, according to the NCREIF Farmland Index, which, as of March 31, 2023, consisted of approximately $15.9 billion of farms across the U.S., the total return on U.S.

farmland (including appreciation and income) was 8.9% for the 12 months ended March 31, 2023.

If the increases in food prices continue to outpace inflation, we believe this will help mitigate the increase in input costs currently experienced by our farm operators.

While showing signs of slowing from its peak levels, overall inflation remains significantly above the Federal Reserve’s target long-term rate of 2.0%, leading the Federal Reserve to raise its benchmark funds rate ten times since March 2022.

As such, interest rates remain volatile in response to competing concerns regarding inflationary pressures, coupled with the threat of a near-term recession.

Bureau of Labor Statistics, the consumer price index (“CPI”) grew at an annual rate of 3.0% through June 30, 2023, 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.

Food prices have continued to outpace the rate of inflation, with the overall food segment increasing at an annual rate of 5.7% through June 30, 2023, and the food at home segment (which encompasses over 90% of the crops grown on our farms) growing by 4.7%.

In addition, according to the NCREIF Farmland Index, which, as of June 30, 2023, consisted of approximately $16.2 billion of farms across the U.S., the total return on U.S.

farmland (including appreciation and income) was 8.2% for the 12 months ended June 30, 2023.

If the increases in food prices continue to outpace inflation, we believe this will help mitigate any increase in input costs experienced by our farm operators.

To combat inflation, the Federal Reserve has raised its benchmark funds rate 11 times since March 2022, resulting in the highest target rate seen since January 2001.

While slowing down significantly from its peak levels, overall inflation, and particularly “core inflation” (which excludes transitory costs, such as food and energy), remains above the Federal Reserve’s target long-term rate of 2.0%, leading many to believe additional rate increases remain possible through the rest of 2023.

As such, interest rates remain volatile in response to competing concerns regarding inflationary pressures, coupled with the continued threat of a near-term recession.

The yield on the 10-year U.S.

Treasury Note has increased substantially over the past 12 months and recently surpassed 4% for the first time since 2008, which adversely affects interest rates on long-term financing.

In addition, global recessionary conditions appear likely to occur within the next 12 months, caused in part by inflation, the potential emergence of new public health emergencies, and geopolitical conditions, although the actual timeline, impact, and duration are unknown.

Treasury Note has increased substantially over the past 12 months, again surpassing 4% (a level that, prior to a year ago, had not been seen since 2008), which adversely affects interest rates on long-term financing.

In addition, while waning somewhat recently, the threat of global recessionary conditions continues to persist, caused in part by inflation, the potential emergence of new public health emergencies, and geopolitical conditions, although the actual timeline, impact, and duration, if any such conditions materialize, are unknown.

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 3.35% for another 4.6 years.

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LIBOR Transition

The majority of our debt is at fixed rates, and we currently have very limited exposure to variable-rate debt based upon the London Interbank Offered Rate (“LIBOR”), which is currently being phased out and is anticipated to be completely phased out by June 2023.

LIBOR is currently transitioning to a new standard rate, the Secured Overnight Financing Rate (“SOFR”), which incorporates certain overnight repo market data collected from multiple data sets.

SOFR was formally adopted by the Alternative Reference Rates Committee in July 2021.

The majority of our debt is at fixed rates, and we currently have very limited exposure to variable-rate debt.

Previously, our variable-rate debt was based upon the London Interbank Offered Rate (“LIBOR”), which was phased out in June 2023.

LIBOR has since transitioned to a new standard rate, the Secured Overnight Financing Rate (“SOFR”), which was formally adopted by the Alternative Reference Rates Committee in July 2021 as a benchmark interest rate that incorporates certain overnight repo market data collected from multiple data sets.

The intent was to adjust the SOFR to minimize the differences between the interest that a borrower was paying using LIBOR versus what it will be paying SOFR.

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The base management and incentive fees are described below.

For information on the capital gains and termination fees, refer to Note 6, “ Related-Party Transactions—Our Adviser and Administrator—Advisory Agreements ,” within the accompanying notes to our condensed consolidated financial statements.

For information on the capital gains and termination fees, refer to Note 6, “ Related-Party

Transactions—Our Adviser and Administrator—Advisory Agreements ,” within the accompanying notes to our condensed consolidated financial statements.

Base Management Fee

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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 three months ended March 31, 2023.

There were no material changes to our critical accounting policies during the six months ended June 30, 2023.

RESULTS OF OPERATIONS

For the purposes of the following discussions on certain operating revenues and expenses with regard to the comparison between the three months ended March 31, 2023 and 2022:

For the purposes of the following discussions on certain operating revenues and expenses:

• With regard to the comparison between the three months ended June 30, 2023 and 2022:

◦ Same-property basis represents farms owned as of March 31, 2022, which were not vacant at any point during either period presented and full collectability of future rental payments under the respective leases was deemed probable during the entirety of both periods;

◦ Properties acquired or disposed of are farms that were either acquired or disposed of at any point subsequent to March 31, 2022.

From April 1, 2022, through June 30, 2023, we acquired five new farms and had one partial farm disposition;

◦ Vacant, self-operated, or non-accrual properties are:

* Farms that were vacant (either wholly or partially) at any point during either period presented.

We did not have any vacant farms during either of the three months ended June 30, 2023 or 2022;

* Farms that were self-operated at any point during either period presented.

One of our farms was self-operated (via a management agreement with an unrelated third-party) during the three months ended June 30, 2023;

* Farms with leases where revenue was recognized on a cash basis during either period presented (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.

During a portion of the three months ended June 30, 2023, we recognized revenue from 7 different leases with 3 separate tenants (encompassing 17 different farms) on a cash basis.

• With regard to the comparison between the six months ended June 30, 2023 and 2022:

◦ Same-property basis represents farms owned as of December 31, 2021, which were not vacant at any point during either period presented and full collectability of future rental payments under the respective leases was deemed probable during the entirety of both periods;

◦ Properties acquired or disposed of are farms that were either acquired or disposed of at any point subsequent to December 31, 2021.

From January 1, 2022, through March 31, 2023, we acquired five new farms and did not have any farm dispositions;

From January 1, 2022, through June 30, 2023, we acquired five new farms and had one partial farm disposition;

◦ Vacant, self-operated, or non-accrual properties are:

◦ Farms that were vacant (either wholly or partially) at any point during either period presented.

We did not have any vacant farms during either of the three months ended March 31, 2023 or 2022;

We did not have any vacant farms during either of the six months ended June 30, 2023 or 2022;

◦ Farms that were self-operated at any point during either period presented.

One of our farms was self-operated (via a management agreement with an unrelated third-party) during a portion of the three months ended March 31, 2023;

◦ Farms with leases where revenue was recognized on a cash basis during either period presented (rather than a straight-line basis, as prescribed under GAAP) due to full collectability of future rental payments under the respective leases deemed not to be probable as a result of tenant credit issues.

During the three months ended March 31, 2023, we recognized revenue from 7 different leases with 3 separate tenants (encompassing 17 different farms) on a cash basis.

A comparison of results of components comprising our operating income for the three months ended March 31, 2023 and 2022 is below (dollars in thousands):

For the Three Months Ended March 31,

One of our farms was self-operated (via a management agreement with an unrelated third-party) during a portion of the six months ended June 30, 2023;

◦ Farms with leases where revenue was recognized on a cash basis during either period presented (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.

During a portion of the six months ended June 30, 2023, we recognized revenue from 7 different leases with 3 separate tenants (encompassing 17 different farms) on a cash basis.

A comparison of results of components comprising our operating income for the three and six months ended June 30, 2023 and 2022 is below (dollars in thousands):

For the Three Months Ended June 30,

2023 2022 $ Change % Change

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Fixed lease payments $ 21,118 $ 20,273 $ 845 4.2 %

Variable lease payments – participation rents 195 — 195 NM

Variable lease payments – tenant reimbursements 47 5 42 840.0%

Variable lease payments – participation rents — 20 (20) (100.0) %

Variable lease payments – tenant reimbursements 92 — 92 NM

Total operating revenues 21,210 20,293 917 4.5 %

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NM = Not Meaningful

For the Six Months Ended June 30,

2023 2022 $ Change % Change

Operating revenues:

Lease revenues:

The following table provides a summary of our lease revenues during the three months ended March 31, 2023 and 2022 (dollars in thousands):

For the Three Months Ended March 31,

2023 2022 $ Change % Change

Fixed lease payments $ 42,078 $ 40,210 $ 1,868 4.6 %

Variable lease payments – participation rents 195 20 175 875.0 %

Variable lease payments – tenant reimbursements 139 6 133 2,216.7 %

Total operating revenues 42,412 40,236 2,176 5.4 %

Operating expenses:

Depreciation and amortization 18,163 16,738 1,425 8.5 %

Property operating expenses 2,015 1,398 617 44.1 %

Base management and incentive fees 4,296 5,210 (914) (17.5) %

Administration fee 1,090 926 164 17.7 %

General and administrative expenses 1,577 1,253 324 25.9 %

Total operating expenses 27,141 25,525 1,616 6.3 %

Operating income $ 15,271 $ 14,711 $ 560 3.8 %

Operating Revenues

Lease revenues

The following table provides a summary of our lease revenues during the three and six months ended June 30, 2023 and 2022 (dollars in thousands):

For the Three Months Ended June 30, For the Six Months Ended June 30,

2023 2022 $ Change % Change 2023 2022 $ Change % Change

Same-property basis:

Fixed lease payments $ 19,795 $ 19,687 $ 108 0.5% $ 39,400 $ 39,155 $ 245 0.6%

Participation rents 123 — 123 NM

Participation rents — (10) 10 (100.0)% 123 (10) 133 (1,330.0)%

Total – Same-property basis 19,795 19,677 118 0.6% 39,523 39,145 378 1.0%

Properties acquired or disposed of:

Fixed lease payments 1,075 — 1,075 NM

Participation rents — — — NM

Total – Properties acquired or disposed of 1,075 — 1,075 NM

Fixed lease payments 1,077 71 1,006 1,416.9% 2,152 71 2,081 2,931.0%

Participation rents — — — NM — — — NM

Total – Properties acquired or disposed of 1,077 71 1,006 1,416.9% 2,152 71 2,081 2,931.0%

Vacant, self-operated, or non-accrual, properties:

Fixed lease payments 246 514 (268) (52.1)% 526 983 (457) (46.5)%

Participation rents 72 — 72 NM

Participation rents — 31 (31) (100.0)% 72 31 41 132.3%

Total – Vacant, self-operated, or non-accrual properties 246 545 (299) (54.9)% 598 1,014 (416) (41.0)%

Tenant reimbursements and other (1)

47 5 42 840.0%

92 — 92 NM 139 6 133 2,216.7%

Total Lease revenues $ 21,210 $ 20,293 $ 917 4.5% $ 42,412 $ 40,236 $ 2,176 5.4%

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Same-property Basis – 2023 compared to 2022

Lease revenues from fixed lease payments remained relatively flat for the three months ended March 31, 2023, as compared to the prior-year period.

Lease revenues from fixed lease payments increased primarily due to additional rents earned on capital improvements completed on certain of our farms and a one-time payment received for easement access across a portion of one of our farms.

This increase was partially offset by the execution of one lease agreement in the fourth quarter of 2022, pursuant to which we agreed to reduce the fixed base rent amount in exchange for increasing the participation rent components in the lease, the result of which will not be known until later in 2023.

Lease revenues from participation rents increased primarily due to additional information being made available to us during the three months ended March 31, 2023, that allowed such amounts to be reasonably determinable and thus recorded.

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Lease revenue from properties acquired or disposed of increased primarily due to additional revenues earned on new farms acquired subsequent to December 31, 2021.

Fixed lease payments from vacant, self-operated, or non-accrual properties decreased primarily due to revenue from certain of our leases being recognized on a cash basis during the three months ended March 31, 2023 (rather than a straight-line basis, as prescribed under GAAP), due to full collectability of future rental payments under the respective leases deemed not to be probable as a result of tenant credit issues.

These leases will continue to be recognized on a non-accrual basis until we deem full collectability of future rental payment under these leases to be probable.

In addition, one of our farms was self-operated (via a management agreement with an unrelated third-party) for a portion of the three months ended March 31, 2023.

This decrease was partially offset by cash collections (in part or in whole) from tenants occupying certain of these properties during the three months ended March 31, 2023.

Fixed lease payments from vacant, self-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 three and six months ended June 30, 2023 (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.

During the three months ended June 30, 2023, we entered into new short-term lease agreements with a new tenant on four of these properties and began recognizing such revenues on a straight-line basis.

The remaining leases will continue to be recognized on a non-accrual basis until we deem full collectability of future rental payment under the leases to be probable.

In addition, one of our farms was self-operated (via a management agreement with an unrelated third-party) for the three months ended June 30, 2023, and a portion of the six months ended June 30, 2023.

The decrease in lease revenues from vacant, self-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, 2023.

The fluctuations in tenant reimbursement revenue are primarily driven by payments made by certain tenants on our behalf (pursuant to the lease agreements) to unconsolidated entities of ours that convey water to the respective properties.

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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 months ended March 31, 2023 and 2022 (dollars in thousands):

For the Three Months Ended March 31,

2023 2022 $ Change % Change

The following table provides a summary of the property-operating expenses recorded during the three and six months ended June 30, 2023 and 2022 (dollars in thousands):

For the Three Months Ended June 30, For the Six Months Ended June 30,

2023 2022 $ Change % Change 2023 2022 $ Change % Change

Same-property basis $ 750 $ 574 $ 176 30.7% $ 1,604 $ 1,229 $ 375 30.5%

Properties acquired or disposed of 4 — 4 NM

Properties acquired or disposed of 2 — 2 NM 6 — 6 NM

Vacant, self-operated, or non-accrual properties 67 109 (42) (38.5)% 295 146 149 102.1%

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Same-property Basis – 2023 compared to 2022

Property operating expenses increased primarily due to higher legal fees and other costs incurred in connection with protecting water rights on certain farms in California, as well as additional repair and maintenance expenses incurred as a result of natural disasters at certain of our farms.

This increase was partially offset by a decrease in property tax expenses.

Property operating expenses increased primarily due to higher legal fees and other costs incurred in connection with protecting water rights on certain farms in California and consulting fees incurred on certain farms in Florida.

We also recorded additional repair and maintenance expenses as a result of natural disasters at certain of our farms and increased legal fees related to drafting new lease agreements.

Other – 2023 compared to 2022

Property operating expenses attributable to vacant, self-operated, or non-accrual properties increased primarily due to third-party property management expenses incurred on a farm that was self-operated for a portion of the three months ended March 31, 2023.

The increase in property operating expenses was also attributable to additional legal fees incurred in connection with rent collection or lease termination efforts for those tenants on farms that were placed on non-accrual status.

Property operating expenses attributable to vacant, self-operated, or non-accrual properties decreased during the three months ended June 30, 2023, and increased during the six months ended June 30, 2023.

The decrease during the three months ended June 30, 2023, was primarily due to lower repair and maintenance expenses incurred on certain of our farms, while the increase during the six months ended June 30, 2023, was primarily due to additional legal fees incurred in connection with rent collection or lease termination efforts for those tenants on farms that were placed on non-accrual status.

The fluctuations in tenant-reimbursed property operating expenses are primarily driven by miscellaneous property operating costs incurred by us in connection with our ownership interests in certain unconsolidated entities, for which our tenants are contractually obligated to reimburse us under the terms of the respective leases.

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Related-Party Fees

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 months ended March 31, 2023 and 2022 (dollars in thousands;

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, 2023 and 2022 (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):

Quarter Ended

Quarter Ended Year to Date

March 31 June 30

FY 2023 Fee Calculations:

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Gross Tangible Real Estate (1)(2)

$ 1,432,394 $ 1,431,761

Quarterly rate 0.150 % 0.150 %

Base management fee (3)

$ 2,148 $ 2,148 $ 4,296

Incentive Fee:

Total Adjusted Common Equity (1)(2)

$ 358,689 $ 362,411

First hurdle quarterly rate 1.750 % 1.750 %

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Pre-Incentive Fee FFO (1)

$ 5,303 $ 4,400

100% of Pre-Incentive Fee FFO in excess of first hurdle threshold, up to second hurdle threshold $ — $ —

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Gross Tangible Real Estate (1)(2)

$ 1,357,800 $ 1,361,757

Quarterly rate 0.150 % 0.150 %

Base management fee (3)

$ 2,036 $ 2,043 $ 4,079

Incentive Fee:

Total Adjusted Common Equity (1)(2)

$ 378,299 $ 381,201

First hurdle quarterly rate 1.750 % 1.750 %

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Pre-Incentive Fee FFO (1)

$ 7,751 $ 4,819

100% of Pre-Incentive Fee FFO in excess of first hurdle threshold, up to second hurdle threshold $ 1,131 $ —

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Total Incentive fee (3)

$ 1,131 $ — $ 1,131

Total fees due to Adviser $ 3,167 $ 2,043 $ 5,210

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Our Adviser earned an incentive fee during the three months ended March 31, 2022, due to our Pre-Incentive Fee FFO (as defined in the Advisory Agreement) exceeding the required hurdle rate of the applicable equity base during the first quarter of fiscal year 2022.

No incentive fee was earned by our Adviser during the three months ended March 31, 2023, as our Pre-Incentive Fee FFO did not surpass the required hurdle rate.

No incentive fee was earned by our Adviser during either of the first or second quarters of fiscal year 2023 or during the second quarter of 2022, as our Pre-Incentive Fee FFO did not surpass the required hurdle rate.

The administration fee paid to our Administrator increased primarily due to hiring additional personnel and us using a higher overall share of our Administrator’s resources in relation to those used by other funds and affiliated companies serviced by our Administrator.

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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 increased during the three months ended March 31, 2023, primarily due to stockholder-related expenses incurred related to the annual stockholders’ meeting and higher professional fees..

A comparison of results of other components contributing to net loss attributable to common stockholders for the three months ended March 31, 2023 and 2022 is below (dollars in thousands):

For the Three Months Ended March 31,

General and administrative expenses increased during each of the three and six months ended June 30, 2023, primarily due to an increase in acquisition-related costs for investments no longer being pursued and higher audit fees.

The increase during the six months ended June 30, 2023, was further driven by additional stockholder-related expenses incurred related to the annual stockholders’ meeting and the listing of the Series C Preferred Stock on Nasdaq, partially offset by a decrease in directors fees.

A comparison of results of other components contributing to net loss attributable to common stockholders for the three and six months ended June 30, 2023 and 2022 is below (dollars in thousands):

For the Three Months Ended June 30,

2023 2022 $ Change % Change

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Dividends declared on cumulative term preferred stock (755) (755) — —%

Loss on dispositions of real estate assets, net (481) (976) 495 (50.7)%

Gain (loss) on dispositions of real estate assets, net 6,394 (305) 6,699 (2,196.4)%

Loss from investments in unconsolidated entities (33) — (33) NM

Total other income (expense), net 28 (7,520) 7,548 (100.4)%

Net income 7,855 613 7,242 1,181.4%

Net loss attributable to non-controlling interests — 3 (3) (100.0)%

Net income attributable to the Company 7,855 616 7,239 1,175.2%

Aggregate dividends declared on and charges related to extinguishment of cumulative redeemable preferred stock (6,128) (4,489) (1,639) 36.5%

Net income (loss) attributable to common stockholders $ 1,727 $ (3,873) $ 5,600 (144.6)%

For the Six Months Ended June 30,

2023 2022 $ Change % Change

Operating income $ 15,271 $ 14,711 $ 560 3.8%

Other income (expense):

Other income 2,984 2,829 155 5.5%

Interest expense (11,979) (12,971) 992 (7.6)%

Dividends declared on cumulative term preferred stock (1,509) (1,509) — —%

Gain (loss) on dispositions of real estate assets, net 5,914 (1,280) 7,194 (562.0)%

Property and casualty (loss) recovery, net (1,016) 49 (1,065) (2,173.5)%

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Net loss attributable to common stockholders $ (2,593) $ (6,610) $ 4,017 (60.8)%

NM = Not Meaningful

Other Income (Expense)

Other income, which 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, 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 income earned on short-term investments due to higher interest rates.

Other income, which 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, increased primarily due to additional income earned on short-term investments due to higher interest rates, partially offset by less interest patronage received from Farm Credit (primarily due to decreased borrowings from Farm Credit).

During the three months ended March 31, 2023, we recorded approximately $2.3 million of interest patronage from Farm Credit related to interest accrued during 2022, as compared to approximately $2.8 million of interest patronage recorded during the prior-year period that related to interest accrued during 2021.

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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 months ended March 31, 2023, was approximately $612.2 million, as compared to approximately $664.3 million for the prior-year period.

Excluding interest patronage received on certain of our Farm Credit borrowings and the impact of debt issuance costs, the overall effective interest rate charged on our aggregate borrowings for the three months ended March 31, 2023, was 3.77% as compared to 3.72% for the prior-year period.

Losses on dispositions of real estate assets related to the disposals of certain irrigation and other improvements on certain of our farms.

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, 2023, was approximately $600.1 million and $606.1 million, respectively, as compared to approximately $666.9 million and $665.6 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, 2023, was 3.79% and 3.78%, respectively, as compared to 3.75% and 3.73% for the respective prior-year periods.

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 losses recorded during each of the three and six months ended June 30, 2022, related to the disposals of certain irrigation and other improvements on certain of our farms.

The net property and casualty (loss) recovery related 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 three months ended March 31, 2023, was primarily due to the heavy rainfall that occurred in California in early 2023, resulting in floods that impacted several areas of the state, including regions where certain of our farms are located.

See Item 2, “ Management’s Discussion and Analysis of Financial Condition and Results of Operations—Recent Developments ,” for further discussion on the damage caused by the California floods.

The aggregate dividends paid on our cumulative redeemable preferred stock increased due to additional shares of the Series C Preferred Stock and Series E Preferred Stock issued and outstanding during the current-year period.

The property and casualty loss recorded during the six months ended June 30, 2023, was the result of 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.

We continue to work with our tenant on this farm to assess the damage and come to a solution regarding the repairs.

LIQUIDITY AND CAPITAL RESOURCES

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In connection with the execution of certain lease agreements, we have committed to provide capital improvements on certain of our farms.

Below is a summary of certain of those projects for which we have incurred or accrued costs as March 31, 2023 (dollars in thousands):

Below is a summary of certain of those projects for which we have incurred or accrued costs as June 30, 2023 (dollars in thousands):

Location(s) Farm

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or Accrued as of

March 31, 2023

June 30, 2023

Lucie, FL 549 $ 230 Q3 2023 $ 185

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In connection with certain farms acquired through a leasehold interest, we assumed certain ground lease arrangements under which we are the lessee.

Future minimum lease payments due under the remaining non-cancelable terms of these leases as of March 31, 2023, is as follows (dollars in thousands):

Future minimum lease payments due under the remaining non-cancelable terms of these leases as of June 30, 2023, is as follows (dollars in thousands):

Period Future Lease Payments (1)

For the remaining nine months ending December 31:

For the remaining six months ending December 31:

For the fiscal years ending December 31:

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The amounts shown above represent estimated amounts based on the lease rates currently in place.

As a result of these ground leases, we recorded lease expense (included within Property operating expenses on the accompanying Condensed Consolidated Statement of Operations and Comprehensive Income) of approximately $25,000 and $23,000 during the three months ended March 31, 2023 and 2022, respectively.

As a result of these ground leases, we recorded lease expense (included within Property operating expenses on the accompanying Condensed Consolidated Statement of Operations and Comprehensive Income) of approximately $26,000 and $51,000 during the three and six months ended June 30, 2023, respectively, and approximately $23,000 and $46,000 during the three and six months ended June 30, 2022 , respectively.

Cash Flow Resources

The following table summarizes total net cash flows from operating, investing, and financing activities for the three months ended March 31, 2023 and 2022 (dollars in thousands):

For the Three Months Ended March 31,

The following table summarizes total net cash flows from operating, investing, and financing activities for the six months ended June 30, 2023 and 2022 (dollars in thousands):

For the Six Months Ended June 30,

2023 2022 $ Change % Change

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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.

Cash provided by operating activities decreased primarily due to less interest patronage received during the three months ended March 31, 2023 (as a significant portion was received subsequent to March 31, 2023), and an increase in certain non-rent receivables from two entities that we expect to collect in full over the next couple of months.

Cash provided by operating activities increased primarily due to additional rental payments received from recent acquisitions and a decrease in aggregate fees paid to our Adviser during the six months ended June 30, 2023.

This increase was partially offset due to the timing of certain interest payments made during the six months ended June 30, 2023, as compared to the prior-year period.

Investing Activities

The decrease in cash used in investing activities was primarily due to a decrease in the amount of cash paid for capital improvements on existing farms during the current-year period.

The change in cash from investing activities was primarily due to proceeds received from the sale of a 138-acre parcel of unfarmed land in Florida for $9.6 million during the six months ended June 30, 2023, which resulted in a net gain of approximately $6.4 million, and a decrease in the amount of cash paid for capital improvements on existing farms during the current-year period.

Financing Activities

The decrease in cash provided by financing activities was primarily due to a decrease in aggregate net cash proceeds received from preferred and common equity offerings of approximately $31.2 million and a decrease in aggregate net borrowings of approximately $19.8 million.

The change in cash from financing activities was primarily due to a decrease in aggregate net cash proceeds received from preferred and common equity offerings of approximately $62.0 million and a decrease in aggregate net borrowings of approximately $27.0 million.

MetLife Facility

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Farmer Mac Facility

Our agreement with Federal Agricultural Mortgage Corporation (“Farmer Mac”) provides for bond issuances up to an aggregate amount of $225.0 million (the “Farmer Mac Facility”) by May 31, 2023, after which Farmer Mac has no obligation to purchase additional bonds under this facility.

As amended in June 2023, the Farmer Mac Facility provides for bond issuances up to an aggregate amount of $225.0 million by December 31, 2026, after which Farmer Mac has no obligation to purchase additional bonds under this facility.

To date, we have issued aggregate bonds of approximately $100.1 million under the Farmer Mac Facility.

We are currently in discussions with Farmer Mac to extend the period during which we may issue new bonds under the facility, and we expect to execute such an agreement during the three months ending June 30, 2023.

Farm Credit and Other Lenders

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Our 2023 Registration Statement (as defined in Note 8, “ Equity—Registration Statement ,” within the accompanying notes to our condensed consolidated financial statements) permits us to issue up to an aggregate of $1.5 billion in securities, consisting of common stock, preferred stock, warrants, debt securities, depository shares, subscription rights, and units, including through separate, concurrent offerings of two or more of such securities.

To date, we have issued approximately $553,000 of Series E Preferred Stock under the 2023 Registration Statement.

To date, we have issued approximately $2.5 million of Series E Preferred Stock and $2.2 million of common stock under the 2023 Registration Statement.

In addition, we have the ability to, and expect to in the future, issue additional OP Units to third parties as consideration in future property acquisitions.

Off-Balance Sheet Arrangements

As of March 31, 2023, we did not have any material off-balance sheet arrangements.

As of June 30, 2023, we did not have any material off-balance sheet arrangements.

NON-GAAP FINANCIAL INFORMATION

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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 as 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.

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 of our operational performance, 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.

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In addition to these adjustments, we also modify the calculation of cash rents within 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.

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.

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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.

The following table provides a reconciliation of our FFO, CFFO, and AFFO for the three months ended March 31, 2023 and 2022 to the most directly-comparable GAAP measure, net income, and a computation of diluted FFO, CFFO, and AFFO per share, using the weighted-average number of total shares (including shares of our common stock and OP Units held by non-controlling OP Unitholders) outstanding during the respective periods (dollars in thousands, except per-share amounts):

For the Three Months Ended March 31,

The following table provides a reconciliation of our FFO, CFFO, and AFFO for the three and six months ended June 30, 2023 and 2022 to the most directly-comparable GAAP measure, net income, and a computation of diluted FFO, CFFO, and AFFO per share, using the weighted-average number of total shares (including shares of our common stock and OP Units held by non-controlling OP Unitholders) outstanding during the respective periods (dollars in thousands, except per-share amounts):

For the Three Months Ended June 30, For the Six Months Ended June 30,

2023 2022 2023 2022

Net income $ 7,855 $ 613 $ 9,605 $ 1,800

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(6,128) (4,489) (12,198) (8,404)

Net loss attributable to common stockholders and non-controlling OP Unitholders (4,320) (2,728)

Net income (loss) attributable to common stockholders and non-controlling OP Unitholders 1,727 (3,876) (2,593) (6,604)

Real estate and intangible depreciation and amortization 9,044 8,392 18,163 16,738

Losses on dispositions of real estate assets, net 481 976

(Gains) losses on dispositions of real estate assets, net (6,394) 305 (5,914) 1,280

Adjustments for unconsolidated entities (2)

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Acquisition- and disposition-related expenses, net 74 (88) 92 21

Other nonrecurring charges (receipts), net (3)

Other nonrecurring charges, net (3)

142 — 1,279 (49)

CFFO available to common stockholders and non-controlling OP Unitholders 4,616 4,731 11,074 11,411

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Amortization of debt issuance costs 259 277 519 548

Other non-cash charges (4)

Other non-cash charges, net (4)

55 192 278 342

AFFO available to common stockholders and non-controlling OP Unitholders 3,829 4,469 9,868 10,851

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(2) Represents our pro-rata share of depreciation expense recorded in unconsolidated entities during the respective periods.

(3) Consists primarily of (i) net property and casualty losses (recoveries) recorded and the cost of related repairs expensed as a result of the damage caused to certain improvements by natural disasters on certain of our farms, (ii) costs related to the amendment, termination, and listing of shares from the Series C Offering that were expensed, and (iii) the write-off of certain unallocated costs related to a prior universal registration statement.

(4) Consists of (i) the amount of dividends on the Series C Preferred Stock paid via issuing new shares (pursuant to the DRIP), (ii) the pro-rata write-off of offering costs related to shares of Series C Preferred Stock that were redeemed, which were noncash charges, and (iii) our remaining pro-rata share of (income) loss recorded from investments in unconsolidated entities during the respective periods.

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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 March 31, 2023, determined by each method is shown in the table below (dollars in thousands, except in footnotes):

A breakdown of the methodologies used to value our properties and the aggregate value as of June 30, 2023, determined by each method is shown in the table below (dollars in thousands, except in footnotes):

Valuation Method Number of

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(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 paid for by us that were associated with the properties, and adjusted for accumulated depreciation and amortization.

(2) Appraisals performed between June 2022 and March 2023.

Some of the significant assumptions used by appraisers and the Valuation Team in valuing our portfolio as of March 31, 2023, include land values per farmable acre, market rental rates per farmable acre and the resulting net operating income (“NOI”) at the property level, and capitalization rates, among others.

(2) Appraisals performed between July 2022 and June 2023.

Some of the significant assumptions used by appraisers and the Valuation Team in valuing our portfolio as of June 30, 2023, include land values per farmable acre, market rental rates per farmable acre and the resulting net operating income (“NOI”) at the property level, and capitalization rates, among others.

These 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 as of March 31, 2023, is provided in the following table:

A summary of these significant assumptions as of June 30, 2023, is provided in the following table:

Appraisal Assumptions Internal Valuation Assumptions

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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 and the most recent appraisals available for the farms acquired prior to the previous 12 months fairly represent the current market values of the properties as of March 31, 2023, 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 March 31, 2023, from the prior value basis as of December 31, 2022, is provided in the table below (dollars in thousands):

Total portfolio fair value as of December 31, 2022 $ 1,568,272

Acquisitions of new farms during the three months ended March 31, 2023 —

Plus net value appreciation during the three months ended March 31, 2023

Farms valued via third-party appraisals $ 11,655

Total net appreciation for the three months ended March 31, 2023 11,655

Management believes that the purchase prices of the farms acquired during the previous 12 months and the most recent appraisals available for the farms acquired prior to the previous 12 months fairly represent the current market values of the properties as of June 30, 2023, 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, 2023, from the prior value basis as of March 31, 2023, is provided in the table below (dollars in thousands):

Total portfolio fair value as of March 31, 2023 $ 1,579,927

Acquisition of water credits during the three months ended June 30, 2023 4

Partial sale of one farm during the three months ended June 30, 2023 (2,610)

Change in value of farms during the three months ended June 30, 2023

Farms valued via third-party appraisals $ 845

Net change in value of farms during the three months ended June 30, 2023 845

Total portfolio fair value as of June 30, 2023 $ 1,578,166

Management also determined fair values of all of its long-term borrowings and preferred stock.

Using a discounted cash flow analysis, management determined that the fair value of all long-term encumbrances on our properties as of March 31, 2023, was approximately $553.6 million, as compared to a carrying value (excluding unamortized related debt issuance costs) of approximately $602.3 million.

The fair values of our Series B Preferred Stock and Series D Term Preferred Stock were determined using the closing stock prices as of March 31, 2023, of $23.25 per share and $24.00 per share, respectively.

Finally, pursuant to Financial Industry Regulatory Authority Rule 2310(b)(5), with the assistance of a third-party valuation expert, we determined the estimated value of each of our Series C Preferred Stock and Series E Preferred Stock to be $25.00 per share as of March 31, 2023 (see Exhibits 99.1 and 99.2 to this Form 10-Q).

Using a discounted cash flow analysis, management determined that the fair value of all long-term encumbrances on our properties as of June 30, 2023, was approximately $541.2 million, as compared to a carrying value (excluding unamortized related debt issuance costs) of approximately $596.9 million.

The fair values of our Series B Preferred Stock, Series C Preferred Stock, and Series D Term Preferred Stock were determined using the closing stock prices as of June 30, 2023, of $20.75 per share, $20.27 per share, and $23.55 per share, respectively.

Finally, pursuant to Financial Industry Regulatory Authority Rule 2310(b)(5), with the assistance of a third-party valuation expert, we determined the estimated value of each of our Series E Preferred Stock to be $25.00 per share as of June 30, 2023 (see Exhibit 99.1 to this Form 10-Q).

Calculation of Estimated Net Asset Value

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PricewaterhouseCoopers LLP has neither examined, compiled, nor performed any procedures with respect to the fair values or the calculation of net asset value per common 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.

As of March 31, 2023, we estimate the NAV per common share to be $17.12.

As of June 30, 2023, we estimate the NAV per common share to be $19.15.

A reconciliation of NAV to total equity, which we believe is the most directly-comparable GAAP measure, is provided below (dollars in thousands, except per-share data) :

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(4) Long-term notes and bonds payable were valued using a discounted cash flow model.

The Series D Term Preferred Stock was valued based on its closing stock price as of March 31, 2023.

(5) The Series B Preferred Stock was valued based on its closing stock price as of March 31, 2023, while the Series C Preferred Stock and Series E Preferred Stock were each valued at its liquidation value, as discussed above.

A quarterly roll-forward in the estimated NAV per common share for the three months ended March 31, 2023, is provided below:

Estimated NAV per common share and non-controlling OP Unit as of December 31, 2022 $ 17.08

Less net loss attributable to common stockholders and non-controlling OP Unitholders (0.12)

The Series D Term Preferred Stock was valued based on its closing stock price as of June 30, 2023.

(5) The Series B Preferred Stock and Series C Preferred Stock were valued based on their respective closing stock prices as of June 30, 2023, while the Series E Preferred Stock was valued at its liquidation value, as discussed above.

A quarterly roll-forward in the estimated NAV per common share for the three months ended June 30, 2023, is provided below:

Estimated NAV per common share and non-controlling OP Unit as of March 31, 2023 $ 17.12

Plus net income attributable to common stockholders and non-controlling OP Unitholders 0.05

Adjustments for net change in valuations:

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Net change in unrealized fair value of long-term indebtedness 0.23

Net change in unrealized fair value of preferred equity securities 1.77

Net change in valuations 2.14

Less distributions on common stock and non-controlling OP Units (0.14)

Plus net accretive effect of equity issuances 0.09

Estimated NAV per common share and non-controlling OP Unit as of March 31, 2023 $ 17.12

Less net dilutive effect of equity issuances and redemptions, net (0.02)

Estimated NAV per common share and non-controlling OP Unit as of June 30, 2023 $ 19.15

(1) The net change in unrealized fair value of our farmland portfolio consists of three components:

(i) an increase of $0.33 per share due to the net appreciation in value of the farms that were valued during the three months ended March 31, 2023, (ii) an increase of $0.25 per share due to the aggregate depreciation and amortization expense recorded during the three months ended March 31, 2023, and (iii) an increase of $0.01 per share due to net disposition of certain assets that did not impact the respective farms’ estimated fair values.

(i) an increase of $0.02 per share due to the net appreciation in value of the farms that were valued during the three months ended June 30, 2023, (ii) an increase of $0.25 per share due to the decrease in net book value of our real estate holdings as a result of the aggregate depreciation and amortization expense recorded during the three months ended June 30, 2023, and (iii) a decrease of $0.13 per share due to net capital improvements made on certain farms that have not yet been considered in the determination of the respective farms’ estimated fair values.

Comparison of estimated NAV and estimated NAV per common share, using the definitions above, 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 common share calculation.

For example, while we estimated our NAV per common share to be $17.12 as of March 31, 2023, based on the calculation above, the closing price of our common stock on March 31, 2023, was $16.65 per share.

For example, while we estimated our NAV per common share to be $19.15 as of June 30, 2023, based on the calculation above, the closing price of our common stock on June 30, 2023, was $16.27 per share.

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.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis