What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-07 compared with 2023-08-07 · 162 added, 160 removed, 545 unchanged (37% of the section changed)

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We are an externally-managed, agricultural real estate investment trust (“REIT”) that is engaged in the business of owning and leasing farmland.

With the exception of one farm in California, which is currently self-operated (on a temporary basis and via a management agreement with an unrelated third-party), we are not a grower of crops, nor do we typically farm the properties we own.

With the exception of 1 farm in California and 11 farms in Michigan which are currently self-operated (on a temporary basis and via management agreements with unrelated third-parties), we are not a grower of crops, nor do we typically farm the properties we own.

We currently own 169 farms comprised of 115,593 acres located across 15 states in the U.S.

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Portfolio Diversification

Since our initial public offering in January 2013 (the “IPO”), we have expanded our portfolio from 12 farms leased to 7 different, unrelated tenants to a current portfolio of 169 farms leased to 92 different, unrelated third-party tenants who grow over 60 different types of crops on our farms.

Our farmland portfolio currently consists of 169 farms leased to 92 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).

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 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

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

As of and For the Nine Months Ended September 30, 2023 As of and For the Nine Months Ended September 30, 2022

Revenue % of Total

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New Jersey 3 116 0.1% 97 0.1% 3 116 0.1% 97 0.1%

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

North Carolina 2 310 0.3% 72 0.1% 2 310 0.3% 113 0.2%

Delaware 1 180 0.2% 56 0.1% 1 180 0.2% 55 0.1%

TOTALS 169 115,593 100.0% $ 65,946 100.0% 169 115,288 100.0% $ 64,445 100.0%

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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 provided for within the lease.

Currently, 106 of our farms are leased on a pure, triple-net basis, 59 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), and 1 farm is self-operated.

Currently, 105 of our farms are leased on a pure, triple-net basis, 46 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 self-operated, and 3 farms are vacant.

Additionally, 27 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.

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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 June 30, 2023 (dollars in thousands):

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

Year Number of

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Acreage Lease Revenues for the

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

7 6,081 5.3% $ 4,763 7.2%

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(1) Certain lease agreements encompass multiple farms.

(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).

(2) Includes one lease with a tenant termination option that expired subsequent to September 30, 2023, without being exercised.

Also includes four leases on properties in Michigan (encompassing 14 total farms) that expired subsequent to September 30, 2023.

(3) 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 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.

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 any of the farms.

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

Also includes one farm that was self-operated as of September 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.

We currently have three agricultural leases scheduled to expire within the next six months.

We are currently exploring a variety of options with the underlying properties, including negotiating lease terms with existing and potential new tenants, discussing sale options with prospective buyers, and considering operating the properties ourselves via third-party management agreements.

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 April 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 July 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, 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.

CA & CO 9 14,591 $ 5,886 1 4 / 5 / 0 $ 6,193 7.1 1 4 / 5 / 0

(1) Prior leases include one lease that was terminated early during the three months ended September 30, 2023.

Upon termination of this lease, 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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(4) “NNN” refers to leases under triple-net lease arrangements, “NN” refers to leases under partial-net lease arrangements, and “N” refers to leases under single-net lease arrangements, in each case, as described above under “ Leases—General .”

Self-operated and Non-accrual Properties

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;

however, there can be no guarantee that we will be able to reach a lease agreement with a tenant at favorable terms to us, or at all.

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 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.

Water Acquisition

On October 9, 2023, we entered into a water transfer agreement with Byron-Bethany Irrigation District (“BBID”), a multi-county water district located in Contra Costa County, California.

Pursuant to the agreement, which expires on February 28, 2031, 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.

Initial consideration consisted of $750,000, plus incremental costs based on the number of acre-feet we elected to purchase for the 2023 water year.

As such, on October 12, 2023, we paid approximately $1.2 million (including the initial payment of $750,000) to purchase 7,000 acre-feet of water for the 2023 water year.

Our ability to purchase water under this contract in future years will be subject to BBID having surplus water available in such water years, and prices will be determined based on water transfer rates established by certain Federal and state governing agencies.

To the extent surplus water supplies are available, water purchases in future years are at our sole option (up to a maximum of 15,000 acre-feet of water per water year), and we are not obligated to purchase water in any water year in which BBID has surplus water supplies.

In addition, all water transfers are subject to approval by the U.S.

Department of Interior, Bureau of Reclamation.

We plan to store this water in a groundwater recharge facility recently constructed on one of our farms, and we currently intend to hold this water for the long-term for future use on our farms.

Self-operated, Non-accrual, and Vacant Properties

During a portion of the nine months ended September 30, 2023, we had 18 farms (4 in California and 14 in Michigan) that were either self-operated or on which lease revenues were recognized on a cash basis (due to credit issues with three tenants causing us to determine that the full collectibility of the remaining rental payments under the respective leases were not deemed to be probable).

Currently, 1 farm in California and 11 farms in Michigan are self-operated (on a temporary basis via management agreements with unrelated third-parties).

One California farm was fully re-leased during the three months ended September 30, 2023, and the other two California farms are currently expected to return to full accrual status later in the year pending, among other factors, continued on-time rental payments made by the tenant.

Additionally, three farms in Michigan are currently vacant.

Regarding self-operated and vacant farms, we are in discussions with potential tenants to lease these farms and currently expect to come to agreements within the next three months;

however, there can be no guarantee that we will be able to reach lease agreements with tenants at favorable terms to us, or at all.

During the three and nine months ended September 30, 2023, we recorded aggregate lease revenues related to the aforementioned farms of approximately $156,000 and $782,000, respectively, as compared to approximately $525,000 and $1.6 million during the respective prior-year periods.

Financing Activity

Debt Activity

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

From July 1, 2023, through the date of this filing, we repaid approximately $6.9 million of maturing loans.

On a weighted-average basis, these borrowings bore interest at a stated rate of 3.39% and an effective interest rate (after interest patronage, where applicable) of 3.00%.

Equity Activity

Series C Preferred Stock

On April 3, 2020, we filed a prospectus supplement with the SEC for a continuous public offering (the “Series C Offering”) of our 6.00% Series C Cumulative Redeemable Preferred Stock (the “Series C Preferred Stock”).

Under the Series C Offering, as amended, we were permitted to sell up to 10,200,000 shares of our Series C Preferred Stock on a “reasonable best efforts” basis through Gladstone Securities at an offering price of $25.00 per share (the “Primary Series C Offering”) and up to 200,000 additional shares of our Series C Preferred Stock pursuant to our dividend reinvestment plan (the “DRIP”) at a price of $22.75 per share.

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

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 April 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 July 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 April 1, 2023, through the date of this filing (dollars in thousands):

The following table summarizes the activity under the ATM Program from July 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 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.

Bureau of Labor Statistics, the consumer price index (“CPI”) grew at an annual rate of 3.7% through September 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.

The increase in food prices has also slowed but still continues to keep pace with the rate of inflation, with the overall food segment also increasing at an annual rate of 3.7% through September 30, 2023.

In addition, according to the NCREIF Farmland Index, which, as of September 30, 2023, consisted of approximately $16.4 billion of farms across the U.S., the total return on U.S.

farmland (including appreciation and income) was 5.8% for the 12 months ended September 30, 2023.

If the increases in food prices continue to outpace or at least keep pace with 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.

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 another rate increase remains possible in the near-term future.

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, 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.

Treasury Note has increased substantially since reaching a historic low in 2020 and recently surpassed 5% for the first time since 2007, which adversely affects interest rates on long-term financing.

In addition, while the U.S.

economy has proven to be resilient and its outlook has improved somewhat in recent months, fears of global recessionary conditions continue to persist, caused in part by stubborn inflation, rising borrowing costs, and geopolitical conditions (including instability arising from armed conflict), 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 4.3 years.

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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 six months ended June 30, 2023.

There were no material changes to our critical accounting policies during the nine months ended September 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 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;

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

◦ Same-property basis represents farms owned as of June 30, 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 June 30, 2022.

From July 1, 2022, through September 30, 2023, we acquired four 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;

We did not have any vacant farms during either of the three months ended September 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;

One of our farms was self-operated (via a management agreement with an unrelated third-party) during the three months ended September 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:

During a portion of the three months ended September 30, 2023, we recognized revenue from two different leases with one tenant (encompassing two different farms) on a cash basis.

• With regard to the comparison between the nine months ended September 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 June 30, 2023, we acquired five new farms and had one partial farm disposition;

From January 1, 2022, through September 30, 2023, we acquired four 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 six months ended June 30, 2023 or 2022;

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

One of our farms was self-operated (via a management agreement with an unrelated third-party) during a portion of the nine months ended September 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,

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

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

For the Three Months Ended September 30,

2023 2022 $ Change % Change

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Variable lease payments – participation rents 2,385 3,003 (618) (20.6) %

Variable lease payments – tenant reimbursements 92 — 92 NM

Variable lease payments – tenant reimbursements and other 47 28 19 67.9%

Total operating revenues 23,534 24,209 (675) (2.8) %

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General and administrative expenses 605 729 (124) (17.0) %

Write-off of costs associated with Series C cumulative redeemable preferred stock — 851 (851) (100.0) %

Total operating expenses 14,136 14,566 (430) (3.0) %

Operating income $ 9,398 $ 9,643 $ (245) (2.5) %

NM = Not Meaningful

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

2023 2022 $ Change % Change

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General and administrative expenses 2,181 1,983 198 10.0 %

Write-off of costs associated with Series C cumulative redeemable preferred stock — 851 (851) (100.0) %

Total operating expenses 41,276 40,091 1,185 3.0 %

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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,

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

For the Three Months Ended September 30, For the Nine Months Ended September 30,

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

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Fixed lease payments 81 264 (183) (69.3)% 682 1,528 (846) (55.4)%

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

Participation rents — — — NM 72 31 41 132.3%

Total – Vacant, self-operated, or non-accrual properties 81 264 (183) (69.3)% 754 1,559 (805) (51.6)%

Tenant reimbursements and other (1)

92 — 92 NM 139 6 133 2,216.7%

47 28 19 67.9% 186 34 152 447.1%

Total Lease revenues $ 23,534 $ 24,208 $ (674) (2.8)% $ 65,946 $ 64,445 $ 1,501 2.3%

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Similar amounts are also recorded as property operating expenses during the respective periods.

2023 amounts also include late fees received from certain tenants.

Same-property Basis – 2023 compared to 2022

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.

These amounts were originally scheduled to be paid during the three months ended December 31, 2022;

however, sufficient information to record such amounts were not known at the time.

Lease revenues from fixed lease payments remained relatively flat for the three months ended September 30, 2023, and increased during the nine months ended September 30, 2023.

The increase during the nine months ended September 30, 2023, was primarily due to additional rents earned on capital improvements completed on certain of our farms and two one-time payments received for easement access across portions of two of our farms.

Both periods were negatively impacted 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.

The amount of lease revenues from participation rents is largely dependent upon when certain information is made available to allow us to determine such amounts to be reasonably estimable and thus recorded.

Based on the participation rents recorded thus far, the decrease was primarily driven by lower production (i.e., pounds per acre) on certain almond and pistachio farms (partly due to the alternate-bearing nature of such tree crops but also due to the harvest of such crops coming at the end of a multi-year drought), coupled with weaker crop prices, particularly in the almond market, which continued to be hampered with oversupply exacerbated by supply chain disruptions that occurred during the height of the COVID-19 pandemic.

Other – 2023 compared to 2022

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 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.

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 nine months ended September 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.

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

No revenue has been recognized as a result of operations at farms that were self-operated during any period presented.

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.

As such, the timing of revenue fluctuates as payments are made by our tenants.

Amounts recorded during the three and nine months ended September 30, 2023, also include late fees received from certain tenants.

Operating Expenses

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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 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,

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

For the Three Months Ended September 30, For the Nine Months Ended September 30,

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

Same-property basis $ 648 $ 643 $ 5 0.8% $ 2,172 $ 1,840 $ 332 18.0%

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%

Properties acquired or disposed of 1 21 (20) (95.2)% 5 25 (20) (80.0)%

Vacant, self-operated, or non-accrual properties 22 2 20 NM 398 175 223 127.4%

Tenant-reimbursed property operating expenses (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 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.

Property operating expenses increased primarily due to additional property management and consulting fees incurred across our portfolio, as well as higher legal fees related to drafting new lease agreements.

We also recorded additional repairs and

maintenance expense as a result of minor damage caused by natural disasters at certain of our farms.

This increase was partially offset by a decrease in real estate tax expense.

Other – 2023 compared to 2022

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.

Property operating expenses on properties acquired or disposed of decreased, primarily due to additional legal fees incurred in the prior-year periods on certain farms acquired subsequent to December 31, 2021.

Property operating expenses attributable to vacant, self-operated, or non-accrual properties increased primarily due to additional legal fees incurred in connection with rent collection, lease termination, or re-leasing efforts on such farms.

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 and six months ended June 30, 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 nine months ended September 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 Year to Date

March 31 June 30

March 31 June 30 September 30

FY 2023 Fee Calculations:

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Total Incentive fee (3)

$ — $ — $ 789 $ 789

Total fees due to Adviser $ 2,149 $ 2,148 $ 2,939 $ 7,236

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The base management fee increased primarily due to additional assets acquired and improvements made on certain of our farms since December 31, 2021.

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 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.

Our Adviser earned an incentive fee during each of the three and nine months ended September 30, 2023 and 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 third quarter of 2023 and during the first and third quarters of 2022, respectively.

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 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,

General and administrative expenses decreased during the three months ended September 30, 2023, primarily due to a decrease in acquisition-related costs for investments no longer being pursued.

The increase during the nine months ended September 30, 2023, was primarily due to additional legal and stockholder-related expenses incurred related to the listing of the Series C Preferred Stock.

During each of the three and nine months ended September 30, 2022, we wrote off $851,000 of costs (including approximately $798,000 of unamortized deferred offering costs) related to the Series C Offering due to an amendment that reduced the number of shares of Series C Preferred Stock to be offered.

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

For the Three Months Ended September 30,

2023 2022 $ Change % Change

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

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

Loss on dispositions of real estate assets, net (4) (819) 815 (99.5)%

Loss from investments in unconsolidated entities (24) (24) — —%

Total other income (expense), net (6,257) (7,837) 1,580 (20.2)%

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Aggregate dividends declared on and charges related to extinguishment of cumulative redeemable preferred stock (6,105) (5,398) (707) 13.1%

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

For the Six Months Ended June 30,

Net loss attributable to common stockholders $ (2,964) $ (3,594) $ 630 (17.5)%

For the Nine Months Ended September 30,

2023 2022 $ Change % Change

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Net loss attributable to common stockholders $ (5,557) $ (10,204) $ 4,647 (45.5)%

NM = Not Meaningful

Other Income (Expense)

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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 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 weighted-average principal balance of our aggregate borrowings (excluding our cumulative term preferred stock) outstanding for the three and nine months ended September 30, 2023, was approximately $589.5 million and $600.5 million, respectively, as compared to approximately $649.2 million and $660.1 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 nine months ended September 30, 2023, was 3.81% and 3.79%, respectively, as compared to 3.82% and 3.76% for the respective prior-year periods.

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 each of the three and nine months ended September 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 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.

The property and casualty loss recorded during the nine months ended September 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.

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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 June 30, 2023 (dollars in thousands):

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

Location(s) Farm

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or Accrued as of

June 30, 2023

Lucie, FL 549 $ 230 Q3 2023 $ 185

September 30, 2023

Umatilla, OR 135 $ 2,750 (2) Q4 2023 $ 2,308

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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 June 30, 2023, is as follows (dollars in thousands):

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

Period Future Lease Payments (1)

For the remaining six months ending December 31:

For the remaining three 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 $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.

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 $77,000 during the three and nine months ended September 30, 2023, respectively, and approximately $23,000 and $69,000 during the three and nine months ended September 30, 2022 , respectively.

Cash Flow Resources

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,

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

For the Nine Months Ended September 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 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.

Cash provided by operating activities decreased slightly, primarily due to the timing of certain interest payments made during the nine months ended September 30, 2023, as compared to the prior-year period.

This was partially offset by a decrease in aggregate fees paid to our Advisor during the nine months ended September 30, 2023.

Investing Activities

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.

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

Financing Activities

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While $213.0 million of the full commitment amount under the MetLife Facility remains undrawn, based on the level of collateral pledged, we currently have approximately $110.3 million of availability under the MetLife Facility.

The draw period for both term notes expires on December 31, 2024, after which MetLife has no obligation to disburse any additional undrawn funds under the term notes.

The revolving equity lines of credit mature on April 5, 2024, and the draw period for the term notes expires on December 31, 2024, after which MetLife has no obligation to disburse any additional undrawn funds under the term notes.

We have been in discussions with MetLife regarding extending the maturity dates of the lines of credit and currently expect to have an agreement finalized by the end of 2023.

Farmer Mac Facility

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Off-Balance Sheet Arrangements

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

As of September 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.

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.

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.

supplemental metrics for investors to use in assessing our operational performance on a more sustainable basis than FFO.

We believe that these additional performance metrics, along with the most directly-comparable GAAP measure, provide investors with helpful insight regarding how management measures our ongoing performance, as each of CFFO and AFFO (and their respective per-share amounts) are used by management and our board of directors, as appropriate, in assessing overall performance, as well as in certain decision-making analysis, including, but not limited to, the timing of acquisitions and potential equity raises (and the type of securities to offer in any such equity raises), the determination of any fee credits, and declarations of distributions on our common stock.

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FFO, CFFO and AFFO do not represent cash flows from operating activities in accordance with GAAP, which, unlike FFO, CFFO, and AFFO, generally reflects all cash effects of transactions and other events in the determination of net income, and should not be considered an alternative to net income as an indication of our performance or to cash flows from operations as a measure of liquidity or ability to make distributions.

Comparisons of FFO, CFFO, and AFFO, using the NAREIT definition for FFO and the definitions above for CFFO and AFFO, to similarly-titled measures for other REITs may not necessarily be meaningful due to possible differences in the definitions used by such REITs.

Comparisons of FFO, CFFO, and AFFO, using the NAREIT definition for

FFO and the definitions above for CFFO and AFFO, to similarly-titled measures for other REITs may not necessarily be meaningful due to possible differences in the definitions used by such REITs.

Diluted funds from operations (“Diluted FFO”), diluted core funds from operations (“Diluted CFFO”), and diluted adjusted funds from operations (“Diluted AFFO”) per share are FFO, CFFO, and AFFO, respectively, divided by the weighted-average number of total shares (including shares of our common stock and OP Units held by non-controlling limited partners) outstanding on a fully-diluted basis during a period.

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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 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,

The following table provides a reconciliation of our FFO, CFFO, and AFFO for the three and nine months ended September 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 September 30, For the Nine Months Ended September 30,

2023 2022 2023 2022

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(6,105) (5,398) (18,303) (13,801)

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

Net loss attributable to common stockholders and non-controlling OP Unitholders (2,964) (3,592) (5,557) (10,195)

Real estate and intangible depreciation and amortization 9,244 9,146 27,407 25,883

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

Losses (gains) on dispositions of real estate assets, net 4 819 (5,910) 2,100

Adjustments for unconsolidated entities (2)

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Amortization of debt issuance costs 247 269 766 817

Other non-cash charges, net (4)

Other non-cash (receipts) charges, net (4)

1 264 279 606

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Distributions declared per total common share $ 0.14 $ 0.14 $ 0.41 $ 0.41

(1) Includes (i) cash dividends paid on our Series B Preferred Stock, Series C Preferred Stock, and Series E Preferred Stock, (ii) the value of additional shares of Series C Preferred Stock issued pursuant to the DRIP, and (iii) the pro-rata write-off of offering costs related to shares of Series C Preferred Stock that were redeemed during the respective periods.

(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.

(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 and Series E 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.

Net Asset Value

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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 June 30, 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 September 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 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.

(2) Appraisals performed between December 2022 and October 2023.

Some of the significant assumptions used by appraisers and the Valuation Team in valuing our portfolio as of September 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 June 30, 2023, is provided in the following table:

A summary of these significant assumptions as of September 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 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

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 September 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 September 30, 2023, from the prior value basis as of June 30, 2023, is provided in the table below (dollars in thousands):

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

Acquisition of water credits during the three months ended September 30, 2023 18

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

Farms valued via third-party appraisals $ 1,147

Net change in value of farms during the three months ended September 30, 2023 1,147

Total portfolio fair value as of September 30, 2023 $ 1,579,331

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 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).

Using a discounted cash flow analysis, management determined that the fair value of all long-term encumbrances on our properties as of September 30, 2023, was approximately $527.1 million, as compared to a carrying value (excluding unamortized related debt issuance costs) of approximately $587.2 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 September 30, 2023, of $18.10 per share, $18.07 per share, and $23.75 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 our Series E Preferred Stock to be $25.00 per share as of September 30, 2023 (see Exhibit 99.1 to this Form 10-Q).

Calculation of Estimated Net Asset Value

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The fair values presented above and their usage in the calculation of net asset value per share presented below have been prepared by and are the responsibility of management.

PricewaterhouseCoopers LLP has neither examined, compiled, nor performed any procedures with respect to the fair values or the calculation of net asset value per 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 June 30, 2023, we estimate the NAV per common share to be $19.15.

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 September 30, 2023, we estimate the NAV per common share to be $20.33.

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 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

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

(5) The Series B Preferred Stock and Series C Preferred Stock were valued based on their respective closing stock prices as of September 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 September 30, 2023, is provided below:

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

Plus net income attributable to common stockholders and non-controlling OP Unitholders (0.08)

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Less net dilutive effect of equity issuances and redemptions, net 0.04

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

Estimated NAV per common share and non-controlling OP Unit as of September 30, 2023 $ 20.33

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

(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.

(i) an increase of $0.03 per share due to the net appreciation in value of the farms that were valued during the three months ended September 30, 2023, (ii) an increase of $0.26 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 September 30, 2023, and (iii) a decrease of $0.10 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 $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.

For example, while we estimated our NAV per common share to be $20.33 as of September 30, 2023, based on the calculation above, the closing price of our common stock on September 30, 2023, was $14.23 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.

In addition, many of the assumptions used are sensitive to market conditions and can change frequently.

Changes in the market environment and other events that may occur during our ownership of these properties may cause the values reported above to vary from the actual fair value that may be obtained in the open market.

Changes in the market

environment and other events that may occur during our ownership of these properties may cause the values reported above to vary from the actual fair value that may be obtained in the open market.

Further, while management believes the values presented reflect current market conditions, the ultimate amount realized on any asset will be based on the timing of such dispositions and the then-current market conditions.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis