GLADSTONE LAND Corp 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the notes thereto contained elsewhere in this Form 10-K. OVERVIEW General We are an externally-managed, agricultural real estate investment trust (“REIT”) that is engaged in the business of owning and leasing farmland. We are not a grower of crops, nor do we typically farm the properties we own. We currently own 137 farms comprised of 101,079 acres across 13 states in the U.S. We also own several farm-related facilities, such as cooling facilities, packinghouses, processing facilities, and various storage facilities. We conduct substantially all of our activities through, and all of our properties are held, directly or indirectly, by, Gladstone Land Limited Partnership (the “Operating Partnership”). Gladstone Land Corporation controls the sole general partner of the Operating Partnership and currently owns, directly or indirectly, 100.0% of the units of limited partnership interest in the Operating Partnership (“OP Units”). In addition, we have elected for Gladstone Land Advisers, Inc. (“Land Advisers”), a wholly-owned subsidiary of ours, to be treated as a taxable REIT subsidiary (“TRS”). Gladstone Management Corporation (our “Adviser”) manages our real estate portfolio pursuant to an advisory agreement, and Gladstone Administration, LLC (our “Administrator”), provides administrative services to us pursuant to an administration agreement. Our Adviser and our Administrator collectively employ all of our personnel and pay directly their salaries, benefits, and general expenses. As of February 23, 2021: • we owned 137 farms comprised of 101,079 total acres across 13 states in the U.S.; • our occupancy rate (based on gross acreage) was 100.0%, and our farms were leased to 81 different, unrelated third-party tenants growing over 55 different types of crops; • the weighted-average remaining lease term across our agricultural real estate holdings was 6.7 years; and • the weighted-average term to maturity of our notes and bonds payable was 9.7 years, and the weighted-average remaining fixed-price term of our borrowings was 5.9 years, with an expected weighted-average effective interest rate of 3.38% over that term. Portfolio Diversity Since our initial public offering in January 2013 (the “IPO”), we have expanded our portfolio from 12 farms leased to 7 different, unrelated third-party tenants to a current portfolio of 137 farms leased to 81 different, unrelated third-party tenants who grow over 55 different types of crops on our farms. While our focus remains in farmland suitable for growing fresh produce annual row crops, we have also diversified our portfolio into farmland suitable for other crop types, including permanent crops (e.g., almonds, blueberries, pistachios, and wine grapes) and, to a lesser extent, 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 geographic locations (by state) of our farms owned and with leases in place as of December 31, 2020 and 2019 (dollars in thousands): 35 Table of Contents As of and For the Year Ended December 31, 2020 As of and For the Year Ended December 31, 2019 State Number of Farms Total Acres % of Total Acres Lease Revenue % of Total Lease Revenue Number of Farms Total Acres % of Total Acres Lease Revenue % of Total Lease Revenue California (1) 55 25,197 24.9% $ 31,536 55.3% 42 14,830 17.1% $ 21,701 53.3% Florida 23 20,770 20.5% 13,342 23.4% 23 20,770 24.0% 11,115 27.3% Arizona 6 6,280 6.2% 4,739 8.3% 6 6,280 7.3% 2,219 5.5% Colorado 12 32,773 32.4% 3,264 5.7% 10 31,448 36.3% 2,857 7.0% Nebraska 9 7,782 7.7% 1,556 2.7% 8 7,104 8.2% 665 1.6% Michigan 15 962 1.0% 723 1.3% 15 962 1.1% 429 1.1% Washington 3 1,384 1.4% 531 1.0% 1 746 0.9% 506 1.2% Oregon 3 418 0.4% 528 0.9% 3 418 0.5% 515 1.3% Texas 1 3,667 3.6% 450 0.8% 1 3,667 4.2% 527 1.3% North Carolina 2 310 0.3% 153 0.3% 2 310 0.4% 158 0.4% Maryland 4 759 0.8% 135 0.2% — — —% — —% South Carolina 3 597 0.6% 47 0.1% — — —% — —% Delaware 1 180 0.2% 27 —% — — —% — —% TOTALS 137 101,079 100.0% $ 57,031 100.0% 111 86,535 100.0% $ 40,692 100.0% (1) According to the California Chapter of the American Society of Farm Managers and Rural Appraisers, there are eight distinct growing regions within California; our farms are spread across six of these growing regions. Leases General Most of our leases are on a triple-net basis, an arrangement under which, in addition to rent, the tenant is required to pay the related taxes, insurance costs, maintenance, and other operating costs. Our leases generally have original terms ranging from 3 to 10 years for farms growing row crops and 7 to 15 years for farms growing permanent crops (in each case, often with options to extend the lease further). Rent is generally payable to us in advance on either an annual or semi-annual basis, with such rent typically subject to periodic escalation clauses provided for within the lease. Currently, 101 of our farms are leased on a pure, triple-net basis, 33 farms are leased on a partial-net basis (with us, as landlord, responsible for all or a portion of the related property taxes), and 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, and insurance costs). Additionally, 40 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. Lease Expirations 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 December 31, 2020 (dollars in thousands): Year Number of Expiring Leases (1) Expiring Leased Acreage % of Total Acreage Lease Revenues for the Year ended December 31, 2020 % of Total Lease Revenues 2021 (2) 9 8,935 8.9% $ 2,412 4.2% 2022 7 24,897 24.6% 2,595 4.6% 2023 12 7,067 7.0% 6,430 11.3% 2024 7 8,729 8.6% 3,775 6.6% 2025 9 13,962 13.8% 6,505 11.4% Thereafter 41 37,489 37.1% 32,398 56.8% Other (3) 6 — —% 2,916 5.1% Totals 91 101,079 100.0% $ 57,031 100.0% (1) Certain lease agreements encompass multiple farms. (2) Includes three leases that were renewed subsequent to December 31, 2020 (see “ Recent Developments—Portfolio Activity—Existing Properties—Leasing Activity ” below for a summary of these and other recent leasing activities). 36 Table of Contents (3) Consists of ancillary leases (e.g., oil, gas, and mineral leases, telecommunications leases, etc.) with varying expirations on certain of our farms. In addition, includes a net amount of approximately $2.8 million of lease revenue recorded as a result of an early lease termination on one of our properties (see below, under “ Recent Developments—Portfolio Activity—Existing Properties—Leasing Activity—Lease Termination ,” for additional information). We currently have one agricultural lease scheduled to expire within the next six months on a farm in California. We are currently in negotiations with the existing tenant on the farm, as well as other potential tenants, and we anticipate being able to renew the lease at its current market rental rate without incurring any downtime on the farm. We currently anticipate the rental rate on this lease renewal to be relatively flat compared to that of the existing lease. 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. Recent Developments Portfolio Activity Property Acquisitions Since January 1, 2020, through the date of this filing, we have acquired 26 farms, which are summarized in the table below (dollars in thousands, except for footnotes): Property Name Property Location Acquisition Date Total Acreage No. of Farms Primary Crop(s) Lease Term Renewal Options Total Purchase Price Acquisition Costs (1) Annualized Straight-line Rent (2) County Road 18 Phillips, CO 1/15/2020 1,325 2 Sugar beets, edible beans, potatoes, & corn 6.0 years None $ 7,500 $ 39 $ 416 Lamar Valley Chase, NE 5/7/2020 678 1 Potatoes, edible beans, & corn 6.7 years 2 (5 years) 3,500 42 204 Driver Road (3) Kern, CA 6/5/2020 590 1 Pecans 4.7 years 2 (10 years) 14,169 52 784 Mt. Hermon Wicomico & Caroline, MD, and Sussex, DE 8/31/2020 939 5 Sod & vegetables 10.0 years 2 (5 years) 7,347 226 432 Firestone Avenue (4)(5)(6) Fresno, CA 9/3/2020 2,534 3 Pistachios and misc. organic & conventional vegetables 1.2 years 2 (5 years) 31,833 131 1,734 West Lost Hills Road (4)(7)(8) Fresno, CA 10/1/2020 801 1 Pistachios 1.1 years 4 (3 years) 31,827 77 1,752 Tractor Road Bamberg & Orangeburg, SC 10/23/2020 597 3 Sod 9.5 years None 3,765 72 244 American Ave Fresno, CA 12/11/2020 236 1 Current: Table grapes; Future: Almonds 19.9 years 1 (5 years) 3,600 50 241 Round Mountain Ventura, CA 12/15/2020 368 3 Misc. vegetables 1.6 years None 20,750 64 949 West Sierra Tulare, CA 12/17/2020 4,642 1 Almonds, pomegranates (conventional & organic), pistachios, and oats 9.9 years 1 (10 years) 61,500 107 3,886 Eight Mile Road (9) San Joaquin, CA 12/24/2020 1,036 2 Conventional & organic blueberries 10.0 years 3 (5 years) 34,300 81 2,030 Rock Road (9) Whatcom, WA 12/24/2020 638 2 Blueberries 10.0 years 3 (5 years) 31,700 74 1,885 Fountain Springs (4) Tulare, CA 12/31/2020 160 1 Citrus (mandarins & lemons) 7.8 years 2 (5 years) 4,200 50 252 14,544 26 $ 255,991 $ 1,065 $ 14,809 (1) Includes approximately $75,000 of aggregate external legal fees associated with negotiating and originating the leases associated with these acquisitions, which were expensed in the period incurred. (2) Annualized straight-line rent is based on the minimum cash rental payments guaranteed under the respective leases, as required under GAAP, and excludes contingent rental payments, such as participation rents. (3) The lease provides for an initial term of 14.7 years and includes six tenant termination options throughout the initial term. The lease term stated above represents the term through the first available termination option, and the annualized straight-line rent amount represents the rent guaranteed through the noncancellable term of the lease. (4) Lease provides for an annual participation rent component based on the gross crop revenues earned on the farm. The rent figure above represents only the minimum cash guaranteed under the lease. (5) Lease provides for an initial term of 8.2 years but also includes an annual tenant termination option should the tenant become physically unable to continue farming operations on the property, effective as of the end of the then-current lease year (as defined within the lease). The lease term stated above represents the term through the first available termination option, and the annualized straight-line rent amount represents the rent guaranteed through the noncancellable term of the lease. (6) In connection with the acquisition of this property, we also acquired an ownership interest in a related LLC, the sole purpose of which is to own and maintain a pipeline conveying water to this and other neighboring properties. Our acquired ownership, which equated to a 12.5% interest in the LLC, was valued at approximately $280,000 at the time of acquisition and is included within Other assets, net on the accompanying Consolidated Balance Sheets. See “ Investments in Unconsolidated Entities ” below for further information on our aggregate ownership interest in this LLC. 37 Table of Contents (7) Lease provides for an initial term of 3.1 years but also includes an annual tenant termination option should the tenant become physically unable to continue farming operations on the property, effective as of the end of the then-current lease year (as defined within the lease). The lease term stated above represents the term through the first available termination option, and the annualized straight-line rent amount represents the rent guaranteed through the noncancellable term of the lease. (8) In connection with the acquisition of this property, we also acquired an ownership interest in a related LLC, the sole purpose of which is to own and maintain a pipeline conveying water to this and other neighboring properties. Our acquired ownership, which equated to a 12.5% interest in the LLC, was valued at approximately $294,000 at the time of acquisition and is included within Other assets, net on the accompanying Consolidated Balance Sheets. See “ Investments in Unconsolidated Entities ” below for further information on our aggregate ownership interest in this LLC. (9) These two properties were acquired as part of a single transaction. In addition, in connection with the acquisition of these properties, we committed to provide up to $3.0 million as additional compensation for a cold storage facility subject to a ground lease, contingent upon the approval by local municipal entity. We are currently unable to estimate when or if this approval will be obtained. Existing Properties Property Add-on In connection with the acquisition of a 366-acre vineyard located in Napa, California (“Withers Road”), in August 2019, we committed to provide up to approximately $4.0 million as additional compensation, contingent upon the County of Napa approving the planting of additional vineyards on up to 47 acres of the property by February 25, 2020 (the “Permit Deadline”). In addition, if approval was obtained, we also committed to contribute up to $40,000 per approved acre for the development of such vineyards. While approval of the additional plantings was not received from the County of Napa by the Permit Deadline, in March 2020, we executed an agreement with the tenant on Withers Road to extend the Permit Deadline until August 24, 2020. In April 2020, we received notification from the County of Napa informing us that it had approved of additional vineyard plantings on 38.7 acres of the property. As such, in May 2020, we paid additional compensation related to this acquisition of approximately $3.2 million. As a result, and pursuant to a lease amendment, we will earn additional straight-line rental income of approximately $335,000 per year throughout the remaining term of the lease, which expires on December 31, 2029. We will also earn additional rent on any of the aforementioned development costs as they are incurred by us. Leasing Activity The following table summarizes the leasing activity that has occurred on our existing properties since January 1, 2020, through the date of this filing (dollars in thousands): PRIOR LEASES NEW LEASES Farm Locations Number of Leases Total Farm Acres Total Annualized Straight-line Rent (1) # of Leases with Participation Rents Lease Structures (# of NNN / NN / N) (2) Total Annualized Straight-line Rent (1) Wtd. Avg. Term (Years) # of Leases with Participation Rents Lease Structures (# of NNN / NN / N) (2) AZ, CA, CO, FL, NC, & NE 20 30,555 $ 9,508 3 13 / 5 / 2 $ 8,819 4.9 6 14 / 6 / 0 (1) Annualized straight-line rent is based on the minimum cash rental payments guaranteed under the applicable leases (presented on an annualized basis), as required under GAAP, and excludes contingent rental payments, such as participation rents. (2) “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 .” Lease Termination On February 10, 2020, we reached an agreement with a tenant occupying four of our farms in Arizona to terminate the existing leases encompassing those four farms effective February 10, 2020. As part of the termination agreement, the outgoing tenant made a one-time termination payment to us of approximately $3.0 million, which we recognized as additional lease revenue during the year ended December 31, 2020. The prior leases were scheduled to expire on September 15, 2026 (with two of the farms subject to the renewal of certain state leases currently scheduled to expire on February 14, 2022, and February 14, 2025). In connection with the early termination of these leases, during the year ended December 31, 2020, we recognized approximately $89,000 of prepaid rent as additional lease revenue and wrote off an aggregate net deferred rent balance of approximately $254,000 against lease revenue. In addition, approximately $470,000 of unamortized lease intangible assets related to the terminated leases were written off and charged to amortization expense during the year ended December 31, 2020. Upon termination of these leases, we entered into a new, seven-year lease with a new tenant effective immediately. These leases are included in the Leasing Activity table above. Financing Activity Debt Activity 38 Table of Contents Since January 1, 2020, through the date of this filing, we have incurred the following new, long-term borrowings (dollars in thousands, except for footnotes; for further discussion on certain defined terms used below, refer to Note 4, “ Borrowings ,” within the accompanying notes to our consolidated financial statements): Lender Date of Issuance Principal Amount Maturity Date Principal Amortization Stated Interest Rate Expected Effective Interest Rate (1) Interest Rate Terms Farmer Mac (2) 1/10/2020 $ 8,100 1/12/2024 None (interest only) 2.66% 2.66% 2.66%; Fixed throughout term Premier Farm Credit, FLCA 5/14/2020 4,500 1/1/2045 24.6 years 4.00% 2.92% Fixed through December 31, 2029 (variable thereafter) Conterra Agricultural Capital, LLC 6/8/2020 2,100 7/1/2027 30.0 years 3.40% 3.40% Fixed throughout term Farm Credit West, FLCA 6/24/2020 600 5/1/2044 24.2 years 3.00% 1.99% Fixed through July 31, 2026 (variable thereafter) Farm Credit West, FLCA 6/24/2020 600 5/1/2044 24.2 years 3.00% 1.99% Fixed through August 31, 2026 (variable thereafter) Farm Credit West, FLCA 6/25/2020 8,500 11/1/2045 25.0 years 3.75% 2.72% Fixed through June 30, 2030 (variable thereafter) Farm Credit of the Virginias, ACA 8/31/2020 4,481 9/1/2030 25.0 years 3.99% 3.24% Fixed throughout term PGIM Real Estate Finance, LLC 10/1/2020 19,042 7/1/2028 25.0 years 2.47% 2.47% Fixed throughout term PGIM Real Estate Finance, LLC 10/1/2020 19,096 7/1/2028 25.0 years 2.45% 2.45% Fixed throughout term AgAmerica Lending, LLC 10/23/2020 2,259 1/1/2028 30.0 years 3.50% 3.50% Fixed throughout term Farm Credit West, FLCA (3) 12/10/2020 2,160 11/1/2045 24.5 years 3.70% 2.67% Fixed through January 31, 2031 (variable thereafter) Farmer Mac (2) 12/11/2020 3,180 7/31/2023 None (interest only) 2.13% 2.13% Fixed throughout term Farmer Mac (2) 12/11/2020 10,673 10/31/2028 None (interest only) 3.25% 3.25% Fixed throughout term PGIM Real Estate Finance, LLC 12/15/2020 12,450 7/1/2028 None (interest only) 2.98% 2.98% Fixed throughout term MetLife (4) 12/17/2020 36,900 1/5/2030 28.6 years 2.75% 2.75% Fixed throughout term Rabo AgriFinance, LLC (3) 12/24/2020 37,170 12/1/2030 25.0 years 3.21% 3.21% Fixed throughout term Rabo AgriFinance, LLC (3) 12/24/2020 6,195 12/1/2022 None (interest only) 2.46% 2.46% Fixed throughout term Farm Credit West, FLCA 1/28/2021 2,073 11/1/2045 24.8 years 3.23% 2.20% Fixed through December 31, 2027 (variable thereafter) Farmer Mac 2/4/2021 2,460 10/31/2028 25.0 years 3.13% 3.13% Fixed throughout term Total / Weighted-averages $ 182,539 2.95% 2.83% (1) On borrowings from the various Farm Credit associations, we receive interest patronage, or refunded interest, which is typically received in the calendar year following the year in which the related interest expense was accrued. The expected effective interest rates reflected in the table above are the interest rates net of expected interest patronage, which is based on either historical patronage actually received (for pre-existing lenders whom we have received interest patronage from) or indications from the respective lenders of estimated patronage to be paid (for new lenders). See Note 4, “ Borrowings—Farm Credit Notes Payable—Interest Patronage ,” in the accompanying notes to our consolidated financial statements for additional information on interest patronage. (2) Represent amendments to bonds previously issued under the Farmer Mac Facility. (3) Loans were issued as variable-rate loans but were fixed subsequent to their issuance. Certain of these loans were effectively fixed through our entry into interest rate swap agreements with the lender (as counterparty). See Note 4, “ Borrowings—Interest Rate Swap Agreements ,” in the accompanying notes to our consolidated financial statements for further discussion on these agreements. (4) Loan disbursed under the New MetLife Facility. Proceeds from these financings were used to fund new acquisitions, repay existing indebtedness, and for general corporate purposes. Gladstone Securities, an affiliate of ours, earned total financing fees of approximately $270,000 in connection with securing these financings. New MetLife Facility As of December 31, 2019, our facility with Metropolitan Life Insurance Company (“MetLife”) consisted of a total of $200.0 million of term notes (the “Prior MetLife Term Notes”) and $75.0 million of revolving equity lines of credit (the “MetLife Lines of Credit,” and together with the Prior MetLife Term Notes, the “Prior MetLife Facility”). The draw period for the Prior MetLife Term Notes expired on December 31, 2019, with approximately $21.5 million being left undrawn, and MetLife had no obligation to disburse the remaining funds under those notes. 39 Table of Contents On February 20, 2020, we entered into an agreement with MetLife to remove the MetLife Lines of Credit from the Prior MetLife Facility and create a new credit facility consisting of a new $75.0 million long-term note payable (the “New MetLife Term Note”) and the MetLife Lines of Credit (the “New MetLife Facility”). For information on the pertinent terms of the issuances under the new MetLife Facility, refer to Note 4, “ Borrowings—New MetLife Facility ,” within the accompanying notes to our condensed consolidated financial statements. 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 11 different Farm Credit associations (collectively, “Farm Credit”). During the three months ended March 31, 2020, we recorded interest patronage of approximately $1.3 million related to interest accrued on loans from Farm Credit during the year ended December 31, 2019, which resulted in a 20.4% reduction (approximately 98 basis points) to the stated interest rates on such borrowings. During the three months ended September 30, 2020, we also received approximately $306,000 of additional interest patronage related to our Farm Credit Notes Payable, as certain Farm Credit associations paid a portion of the 2020 interest patronage (which relates to interest accrued during 2020 but is typically received in 2021) early. For further discussion on interest patronage, refer to Note 4, “ Borrowings—Farm Credit Notes Payable—Interest Patronage ,” in the accompanying notes to our consolidated financial statements. Farmer Mac Facility On December 5, 2014, we, through certain subsidiaries of our Operating Partnership, entered into a bond purchase agreement (the “Bond Purchase Agreement”) with Federal Agricultural Mortgage Corporation (“Farmer Mac”) and Farmer Mac Mortgage Securities Corporation (the “Bond Purchaser”), for a secured note purchase facility. As subsequently amended, the Bond Purchase Agreement provided for bond issuances up to an aggregate amount of $125.0 million (the “Prior Farmer Mac Facility”) through December 11, 2018, after which date the Bond Purchaser had the option to continue buying new bonds issued under the Farmer Mac Facility. On December 10, 2020, we entered into an amended and restated bond purchase agreement (the “Amended and Restated Bond Purchase Agreement”) with Farmer Mac and the Bond Purchaser, increasing the secured note purchase facility to provide for bond issuances up to an aggregate principal amount of $225.0 million (the “New Farmer Mac Facility”). In addition, the Amended and Restated Bond Purchase Agreement extended the date up to which we can issue new bonds to May 31, 2023 and final maturity date for bonds issued under the Farmer Mac Facility to December 31, 2030. Series D Term Preferred Stock In January 2021, we completed a public offering of 5.00% Series D Cumulative Term Preferred Stock, par value $0.001 per share (the “Series D Term Preferred Stock”), at a public offering price of $25.00 per share. As a result of this offering (including the underwriters’ exercise of their option to purchase additional shares to cover over-allotments), we issued a total of 2,415,000 shares of the Series D Term Preferred Stock for gross proceeds of approximately $60.4 million and net proceeds, after deducting selling concessions and underwriting fees, of approximately $58.5 million. The Series D Term Preferred Stock is traded under the ticker symbol “LANDM” on Nasdaq. The shares of the Series D Term Preferred Stock have a mandatory redemption date of January 31, 2026, and are not convertible into our common stock or any other securities. Generally, we are not permitted to redeem shares of the Series D Term Preferred Stock prior to January 31, 2023, except in limited circumstances to preserve our status as a REIT. On or after January 31, 2023, we may redeem the shares at a redemption price of $25.00 per share, plus any accumulated and unpaid dividends up to, but excluding, the date of redemption. Redemption of Series A Term Preferred Stock On February 12, 2021, we redeemed all of our outstanding shares of our Series A Term Preferred Stock at a cash redemption price of $25.00 per share plus all accrued and unpaid dividends up to, but excluding, the redemption date. In total, we paid approximately $28.8 million for the redemption of the Series A Term Preferred Stock using proceeds from the offering of our Series D Term Preferred Stock. Our Series A Term Preferred Stock was delisted from Nasdaq on the date we redeemed all outstanding shares. In connection with this early redemption, during the three months ending March 31, 2021, we anticipate writing off approximately $127,000 of unamortized issuance costs related to the issuance of the Series A Term Preferred Stock. Equity Activity Series B Preferred Stock On May 31, 2018, we filed a prospectus supplement with the SEC for a continuous public offering of up to 6,000,000 shares (the “Series B Offering”) of our 6.00% Series B Cumulative Redeemable Preferred Stock (the “Series B Preferred Stock”) at an offering price of $25.00 per share for gross proceeds of up to $150.0 million. The Series B Preferred Stock was offered on a continuous, “reasonable best efforts” basis by Gladstone Securities, the dealer-manager for the Series B Offering. 40 Table of Contents See Note 6, “ Related-Party Transactions—Gladstone Securities—Series B Dealer-Manager Agreement ,” within the accompanying notes to our consolidated financial statements for more details on the dealer-manager agreement entered into with Gladstone Securities in connection with the Series B Offering. The following table summarizes the sales of our Series B Preferred Stock that occurred since January 1, 2020, through the date of this filing (dollars in thousands, except per-share amounts): Number of Shares Sold Weighted-average Offering Price per Share Gross Proceeds Net Proceeds (1) 1,229,531 $ 24.52 $ 30,148 $ 27,664 (1) Net of selling commissions and dealer-manager fees borne by us. Aggregate selling commissions and dealer-manager fees paid to Gladstone Securities as a result of these sales was approximately $2.5 million (of which approximately $2.3 million was remitted by Gladstone Securities to unrelated third-parties involved in the offering, such as participating broker-dealers and wholesalers). The Series B Offering was completed on March 9, 2020 (the “Series B Termination Date”), with the full 6,000,000 allotted shares being sold, and, exclusive of redemptions, resulted in total gross proceeds of approximately $147.5 million and net proceeds, after deducting Series B Selling Commissions, Series B Dealer-Manager Fees, and offering expenses payable by us, of approximately $133.4 million. During the course of the Series B Offering, we paid aggregate selling commissions and dealer-manager fees to Gladstone Securities of approximately $12.5 million, of which approximately $11.7 million, or 93.7%, were remitted by Gladstone Securities to unrelated third-parties involved in the offering, including participating broker-dealers and wholesalers. Excluding Series B Selling Commissions and Series B Dealer-Manager Fees, we incurred approximately $1.6 million of total costs related to the Series B Offering. During the year ended December 31, 2020, we listed the Series B Preferred Stock on Nasdaq under the ticker symbol “LANDO.” Trading of the Series B Preferred Stock on Nasdaq commenced on October 19, 2020. Series C Preferred Stock On April 3, 2020, we filed a new prospectus supplement (which superseded and replaced a previously-filed prospectus supplement) with the SEC for a continuous public offering (the “Series C Offering”) of up to 26,000,000 shares of our newly-designated 6.00% Series C Cumulative Redeemable Preferred Stock (the “Series C Preferred Stock”). Under the Series C Offering, we may sell up to 20,000,000 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 6,000,000 additional shares of our Series C Preferred Stock pursuant to our dividend reinvestment plan (the “DRIP”) to those holders of the Series C Preferred Stock who do not elect to opt-out of such plan. See Note 6, “ Related-Party Transactions—Gladstone Securities—Series C Dealer-Manager Agreement ,” within the accompanying notes to our consolidated financial statements for more details on the dealer-manager agreement entered into with Gladstone Securities in connection with the Series C Offering. The following table summarizes the sales of our Series C Preferred Stock that occurred since January 1, 2020, through the date of this filing (dollars in thousands, except per-share amounts and footnotes): Number of Shares Sold (1) Weighted-average Offering Price Per Share Gross Proceeds Net Proceeds (2) 1,401,961 $ 24.81 $ 34,789 $ 31,895 (1) Excludes share redemptions and shares issued pursuant to the DRIP. From January 1, 2020, through the date of this filing, we redeemed 138 shares and issued approximately 625 shares of the Series C Preferred Stock pursuant to the DRIP. (2) Net of selling commissions and dealer-manager fees borne by us. Aggregate selling commissions and dealer-manager fees paid to Gladstone Securities as a result of these sales was approximately $2.9 million (of which approximately $2.7 million was remitted by Gladstone Securities to unrelated third-parties involved in the offering, such as participating broker-dealers and wholesalers). The Primary Series C Offering will terminate on the date (the “Series C Termination Date”) that is the earlier of either June 1, 2025 (unless terminated earlier or extended by our Board of Directors), or the date on which all 20,000,000 shares in the Primary Series C Offering are sold. There is currently no public market for shares of the Series C Preferred Stock; however, we intend to apply to list the Series C Preferred Stock on Nasdaq or another national securities exchange within one calendar year after the Series C Termination Date, though there can be no assurance that a listing will be achieved in such timeframe, or at all. Common Stock Follow-on Offering 41 Table of Contents In October 2020, we completed a public offering of our common stock. The following table summarizes the details of the offering, including the underwriters’ full exercise of the over-allotment option in connection with the offering (dollars in thousands, except per-share amounts): Number of Shares Sold Weighted-average Offering Price Per Share Gross Proceeds Net Proceeds (1) 1,897,500 $ 14.40 $ 27,324 $ 26,094 (1) Net of underwriter discounts and commissions. At-the-Market Program On May 12, 2020, we terminated the Prior ATM Program (as defined in Note 8, “ Equity—Equity Issuances—Common Stock—At-the-Market-Program ,” within the accompanying notes to our consolidated financial statements) and entered into new equity distribution agreements with Virtu Americas, LLC, and Ladenburg Thalmann & Co., Inc. (each a “Sales Agent”), under which we may issue and sell, from time to time and through the new Sales Agents, shares of our common stock having an aggregate offering price of up to $100.0 million (the “Current ATM Program,” and collectively with the Prior ATM Program, the “ATM Programs”). The following table summarizes the activity under the ATM Programs from January 1, 2020, through the date of this filing (dollars in thousands): Number of Shares Sold Weighted-average Offering Price Per Share Gross Proceeds Net Proceeds (1) 3,620,706 $ 14.77 $ 53,466 $ 52,930 (1) Net of underwriter commissions and discounts. COVID-19 The extent to which the COVID-19 pandemic may impact our business, financial condition, liquidity, results of operations, funds from operations, or prospects will depend on numerous evolving factors that we are not be able to predict at this time, including the duration and long-term scope of the pandemic; the adequate production and distribution of vaccinations; governmental, business, and individuals’ actions that have been and continue to be taken in response to the pandemic; the impact on economic activity from the pandemic and actions taken in response; the effect on our tenants and their farming operations; the ability of our tenants to make their rental payments; any closures of our tenants’ operations; and our ability to secure debt financing, service future debt obligations, or pay distributions to our stockholders. Any of these events could materially adversely impact our business, financial condition, liquidity, results of operations, funds from operations, or prospects. During 2020, we granted short-term rent extensions to two tenants who owed semi-annual rental payments totaling approximately $340,000. Additional time was granted to these tenants due to delays in payments owed to them from their respective processors, which were primarily caused by the strict government-mandated lockdowns in the state of Michigan in response to COVID-19. These rental payments were collected in full during the year ended December 31, 2020, and we have not received any further requests from tenants seeking relief as a result of COVID-19; however, no assurances can be made that we will not receive additional rent deferral or modification requests in the future. 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 anticipated to be phased out during late 2021 or early 2022. LIBOR is currently expected to transition to a new standard rate, the Secured Overnight Financing Rate (“SOFR”), which will incorporate certain overnight repo market data collected from multiple data sets. The current intent is to adjust the SOFR to minimize the differences between the interest that a borrower would be paying using LIBOR versus what it will be paying SOFR. We are currently monitoring the transition and cannot yet assess whether SOFR will become a standard rate for variable-rate debt. Our lines of credit with MetLife and three term loans with Rabo (which are effectively fixed through our entry into interest swap agreements) are currently based upon one-month LIBOR. As such, we expect we will need to renegotiate these agreements in the future. Assuming that SOFR replaces LIBOR and is appropriately adjusted, we currently expect the transition to result in a minimal impact to our overall operations. Our Adviser and Administrator We are externally managed pursuant to contractual arrangements with our Adviser and our Administrator (both affiliates of ours), which collectively employ all of our personnel and pay their salaries, benefits, and general expenses directly. The 42 Table of Contents investment advisory agreement with our Adviser that was in effect through March 31, 2017, and the current administration agreement with our Administrator (the “Administration Agreement”) each became effective February 1, 2013. The advisory agreement with our Adviser that was in effect through June 30, 2019 (the “Prior Advisory Agreement”), was amended and restated on July 9, 2019 (as amended, the “2019 Advisory Agreement”), and again amended and restated on January 14, 2020 (as amended, the “2020 Advisory Agreement,” and, together with the Prior Advisory Agreement and the 2019 Advisory Agreement, the “Advisory Agreements”). The Administration Agreement and each of the Advisory Agreements were approved unanimously by our board of directors, including our independent directors. A summary of the compensation terms for each of the Advisory Agreements and the Administration Agreement is below. Advisory Agreements Pursuant to each of the Prior Advisory Agreement (which was in effect from April 1, 2017, through June 30, 2019), the 2019 Advisory Agreement (which was in effect from July 1, 2019, through December 31, 2019), and the 2020 Advisory Agreement (which has been in effect since January 1, 2020), our Adviser is compensated in the form of a base management fee and, each as applicable, an incentive fee, a capital gains fee, and a termination fee. Our Adviser does not charge acquisition or disposition fees when we acquire or dispose of properties, as is common in other externally-managed REITs. The 2019 Advisory Agreement modified the calculation of the base management and incentive fees to exclude preferred equity from such calculations, while the capital gains and termination fees remained unchanged. The 2020 Advisory Agreement revised and replaced the previous calculation of the base management fee, which was previously based on equity, with a calculation based on gross real estate assets (in each case, as further described below), while all other fees remained unchanged. 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 consolidated financial statements. Base Management Fee Pursuant to the Prior Advisory Agreement, a base management fee was paid quarterly and was calculated as 2.0% per annum (0.50% per quarter) of the calendar quarter’s total adjusted equity, which was defined as total equity plus total mezzanine equity, if any (each as reported on our balance sheet), adjusted to exclude unrealized gains and losses and certain other one-time events and non-cash items (“Total Adjusted Equity”). Pursuant to the 2019 Advisory Agreement, a base management fee was paid quarterly and was calculated as 2.0% per annum (0.50% per quarter) of the prior calendar quarter’s total adjusted common equity, which was defined as common stockholders’ equity plus non-controlling common interests in the Operating Partnership, if any (each as reported on our balance sheet), adjusted to exclude unrealized gains and losses and certain other one-time events and non-cash items (“Total Adjusted Common Equity”). Under the 2020 Advisory Agreement, a base management fee is paid quarterly and is calculated at an annual rate of 0.50% (0.125% per quarter) of the prior calendar quarter’s “Gross Tangible Real Estate,” defined as the gross cost of tangible real estate owned by us (including land and land improvements, irrigation and drainage systems, permanent plantings, farm-related facilities, and other tangible site improvements), prior to any accumulated depreciation, and as shown on our balance sheet or the notes thereto for the applicable quarter. Relevant to prior agreements with our Adviser, which calculated the management fee based on an equity component, management believes the updated fee calculation pursuant to the 2020 Advisory Agreement provides for a more direct correlation between the fee paid to our Adviser and the assets our Adviser is responsible for managing. The following table compares what the historical base management fee has been on an actual basis for the years ended December 31, 2019, 2018, and 2017, versus what it would have been had the 2020 Advisory Agreement been in place during each of those years (dollars in thousands): For the Years Ended December 31, 2019 2018 2017 Actual gross base management fee (1) $ 3,623 $ 2,837 $ 2,041 Hypothetical gross base management fee (2) 3,150 2,433 2,010 Hypothetical increase (decrease) in base management fee $ (473) $ (404) $ (31) (1) Actual figures calculated pursuant to the agreements with our Adviser in place during the respective periods. (2) Calculated as if the 2020 Advisory Agreement had been in place as of January 1, 2017. In addition, had the 2019 Advisory Agreement been in place during the year ended December 31, 2020, the hypothetical base management fee would have been approximately $3.5 million, as compared to the actual base management fee calculated under the 2020 Advisory Agreement of approximately $4.3 million. We are unable to project the impact of the 2020 Advisory Agreement on the base management fee going forward and how it might compare to that of the 2019 Advisory Agreement or 43 Table of Contents the Prior Advisory Agreement, as we are unable to estimate the amount of equity to be issued or new tangible assets to be acquired in future periods. During the year ended December 31, 2019, our Adviser granted us certain non-contractual, unconditional, and irrevocable waivers (as discussed further below, under “ —Results of Operations—Operating Expenses—Related-Party Fees ”), which were applied as credits against the base management fee for the period. We did not have any such waivers for the year ended December 31, 2020. Incentive Fee Pursuant to the Prior Advisory Agreement, an incentive fee was calculated and payable quarterly in arrears if the Pre-Incentive Fee FFO for a particular quarter exceeded a hurdle rate of 1.75% (7.0% annualized) of the prior calendar quarter’s Total Adjusted Equity. Under each of the 2019 Advisory Agreement and the 2020 Advisory Agreement, an incentive fee was and is calculated and payable quarterly in arrears if the Pre-Incentive Fee FFO for a particular quarter exceeded a hurdle rate of 1.75% (7.0% annualized) of the prior calendar quarter’s Total Adjusted Common Equity. For purposes of this calculation, Pre-Incentive Fee FFO is defined in each of the Advisory Agreements as FFO (also as defined in each of the Advisory Agreements) accrued by the Company during the current calendar quarter (prior to any incentive fee calculation for the current calendar quarter), less any dividends paid on preferred stock securities that are not treated as a liability for GAAP purposes. We pay our Adviser an incentive fee with respect to our Pre-Incentive Fee FFO quarterly, as follows: • no Incentive Fee in any calendar quarter in which our Pre-Incentive Fee FFO does not exceed the hurdle rate of 1.75% (7.0% annualized); • 100% of the amount of our Pre-Incentive Fee FFO with respect to that portion of such Pre-Incentive Fee FFO, if any, that exceeds the hurdle rate but is less than 2.1875% in any calendar quarter (8.75% annualized); and • 20% of the amount of our Pre-Incentive fee FFO, if any, that exceeds 2.1875% in any calendar quarter (8.75% annualized). Quarterly Incentive Fee Based on Pre-Incentive Fee FFO Pre-Incentive Fee FFO ( expressed as a percentage of Total Adjusted Equity or Total Adjusted Common Equity, as applicable ) Percentage of Pre-Incentive Fee FFO allocated to Incentive Fee Capital Gains Fee Pursuant to each of the Advisory Agreements, a capital gains-based incentive fee is calculated and payable in arrears at the end of each fiscal year (or upon termination of the agreement with our Adviser). The capital gains fee shall equal: (i) 15% of the cumulative aggregate realized capital gains minus the cumulative aggregate realized capital losses, minus (ii) any aggregate capital gains fees paid in prior periods. For purposes of this calculation, realized capital gains and losses will be calculated as (x) the sales price of the property, minus (y) any costs to sell the property and the then-current gross value of the property (which includes the property’s original acquisition price plus any subsequent, non-reimbursed capital improvements). At the end of each fiscal year, if this figure is negative, no capital gains fee shall be paid. Termination Fee Pursuant to each of the Advisory Agreements, in the event of our termination of the agreement for any reason (with 120 days’ prior written notice and the vote of at least two-thirds of our independent directors), a termination fee would be payable to our Adviser equal to three times the sum of the average annual base management fee and incentive fee earned by the Adviser during the 24-month period prior to such termination. Administration Agreement Pursuant to the Administration Agreement, we pay for our allocable portion of the Administrator’s expenses incurred while performing services to us, including, but not limited to, rent and the salaries and benefits expenses of our Administrator’s 44 Table of Contents employees, including our chief financial officer, treasurer, chief compliance officer, general counsel and secretary (who also serves as our Administrator’s president, general counsel, and secretary), and their respective staffs. As approved by our Board of Directors, effective July 1, 2014, our allocable portion of the Administrator’s expenses is generally derived by multiplying our Administrator’s total expenses by the approximate percentage of time the Administrator’s employees perform services for us in relation to their time spent performing services for all companies serviced by our Administrator under similar contractual agreements. Smaller Reporting Company Status As of December 31, 2018, and through December 31, 2020, we qualified as a “smaller reporting company” under Rule 12b-2 of the Exchange Act, which is defined as a company with a public equity float of less than $250 million or less than $100 million in annual revenues for the previous year and no public float. However, we qualified as a smaller reporting company under an alternate threshold because we had annual revenues of less than $100 million for the previous year and a public float of less than $700 million. As a smaller reporting company, we have reduced disclosure requirements for our public filings, including the reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. Critical Accounting Policies The preparation of our financial statements in accordance with GAAP requires management to make judgments that are subjective in nature to make certain estimates and assumptions. Application of these accounting policies involves the exercise of judgment regarding the use of assumptions as to future uncertainties, and, as a result, actual results could materially differ from these estimates. A summary of all of our significant accounting policies are provided in Note 2, “ Summary of Significant Accounting Policies ,” in the accompanying notes to our consolidated financial statements, located elsewhere in this Form 10-K, and a summary of our critical accounting policies is below. We consider these policies to be critical because they involve estimates and assumptions that require complex, subjective or significant judgments in their application and that materially affect our results of operations. There were no material changes in our critical accounting policies during the year ended December 31, 2020. Purchase Price Allocation When we acquire real estate, we allocate the purchase price to: (i) the tangible assets acquired and liabilities assumed, consisting primarily of land, improvements (including irrigation and drainage systems), permanent plantings, and farm-related facilities and, if applicable, (ii) any identifiable intangible assets and liabilities, which primarily consist of the values of above- and below-market leases, in-place lease values, lease origination costs, and tenant relationships, based in each case on their fair values. Certain of our acquisitions involve sale-leaseback transactions with newly-originated leases, and other of our acquisitions involve the acquisition of farmland that is already being operated as rental property, in which case we will typically assume the lease in place at the time of acquisition. Prior to us early adopting Accounting Standards Update (“ASU”) 2017-01, “Clarifying the Definition of a Business” (as further described in Note 2, “ Summary of Significant Accounting Pronouncements ,” under the caption, “ —Recently-Issued Accounting Pronouncements, ” in the accompanying consolidated financial statements), acquisitions of farmland already being operated as rental property were generally considered to be business combinations under Accounting Standards Codification (“ASC”) 805, “Business Combinations.” However, after our adoption of ASU 2017-01, effective October 1, 2016, we now generally consider both types of acquisitions to be asset acquisitions under ASC 360, “Property Plant and Equipment.” ASC 360 requires us to capitalize the transaction costs incurred in connection with the acquisition, whereas ASC 805 required that all costs related to the acquisition be expensed as incurred, rather than capitalized into the cost of the acquisition. Whether an acquisition is considered an asset acquisition or a business combination, both ASC 360 and ASC 805 require that the purchase price of real estate be allocated to (i) the tangible assets acquired and liabilities assumed, and, if applicable, (ii) any identifiable intangible assets and liabilities, by valuing the property as if it was vacant, based on management’s determination of the relative fair values of such assets and liabilities as of the date of acquisition. For a more detailed discussion on this accounting policy, see Note 2, “ Summary of Significant Accounting Policies—Real Estate and Lease Intangibles ,” in the accompanying notes to our consolidated financial statements. Recently-Issued Accounting Pronouncements See Note 2, “ Summary of Significant Accounting Policies—Recently-Issued Accounting Pronouncements ,” in the accompanying notes to our consolidated financial statements for a description of recently-issued accounting pronouncements. 45 Table of Contents RESULTS OF OPERATIONS For the purposes of the following discussions on certain operating revenues and expenses with regard to the comparison between the years ended December 31, 2020 and 2019: ▪ Same-property basis represents farms owned as of December 31, 2018, and were not vacant at any point during either period presented. ▪ Properties acquired or disposed of are farms that were either acquired or disposed of at any point subsequent to December 31, 2018. From January 1, 2019, through December 31, 2020, we acquired 52 new farms and did not have any farm dispositions; and ▪ Vacant or self-operated properties represent farms that were either vacant (either wholly or partially) or operated by a wholly-owned subsidiary of ours at any point during either period presented. We had two farms that were vacant for a portion of the year December 31, 2019. A comparison of our operating results for the years ended December 31, 2020 and 2019 is below (dollars in thousands): For the Years Ended December 31, 2020 2019 $ Change % Change Operating revenues: Lease revenues: Fixed lease payments $ 51,377 $ 38,168 $ 13,209 34.6% Variable lease payments – participation rents 2,387 2,326 61 2.6% Variable lease payments – tenant reimbursements 457 198 259 130.8% Lease termination income, net 2,810 — 2,810 NM Total operating revenues 57,031 40,692 16,339 40.2% Operating expenses: Depreciation and amortization 16,655 12,790 3,865 30.2% Property operating expenses 1,848 2,473 (625) (25.3)% Base management and incentive fees, net of credits 7,327 2,927 4,400 150.3% Administration fee 1,448 1,207 241 20.0% General and administrative expenses 2,102 1,989 113 5.7% Total operating expenses, net of credits 29,380 21,386 7,994 37.4% Operating income 27,651 19,306 8,345 43.2% Other income (expense) Other income 1,872 938 934 99.6% Interest expense (20,621) (16,331) (4,290) 26.3% Dividends declared on Series A Term Preferred Stock (1,833) (1,833) — —% Loss on dispositions of real estate assets, net (2,180) (328) (1,852) 564.6% Property and casualty recovery, net 70 10 60 600.0% Loss from investments in unconsolidated entities (4) — (4) NM Total other expense, net (22,696) (17,544) (5,152) 29.4% Net income 4,955 1,762 3,193 181.2% Net income attributable to non-controlling interests (29) (21) (8) 38.1% Net income attributable to the Company 4,926 1,741 3,185 182.9% Aggregated dividends declared on and charges related to Series B and Series C Preferred Stock (9,322) (4,240) (5,082) 119.9% Net loss attributable to common stockholders $ (4,396) $ (2,499) $ (1,897) 75.9% NM = Not Meaningful Operating Revenues Lease Revenues 46 Table of Contents The following table provides a summary of our lease revenues during the years ended December 31, 2020 and 2019 (dollars in thousands): For the Years Ended December 31, 2020 2019 $ Change % Change Same-property basis: Fixed lease payments $ 31,894 $ 31,207 $ 687 2.2% Participation rents 2,387 2,326 61 2.6% Lease termination income, net 2,810 — 2,810 —% Total – Same-property basis 37,091 33,533 3,558 10.6% Properties acquired or disposed of: 19,222 6,714 12,508 186.3% Vacant or self-operated properties 261 247 14 5.7% Tenant reimbursements (1) 457 198 259 130.8% Total Lease revenues $ 57,031 $ 40,692 $ 16,339 40.2% (1) Tenant reimbursements generally represent tenant-reimbursed property operating expenses on certain of our farms, including property taxes, insurance premiums, and other property-related expenses. Corresponding amounts were also recorded as property operating expenses during the respective periods. Same-property Basis – 2020 compared to 2019 Lease revenues from fixed lease payments increased for the year ended December 31, 2020, primarily due to recent renewals and amendments at net higher rental rates, as well as additional rents earned on recent capital improvements completed on certain of our farms. These increases were partially offset by the renewals of certain other leases, in which we decreased the fixed base rent component in exchange for adding in a participation rent component to the lease structure. Participation rents related to these leases, if any, are expected to be recorded during the year ending December 31, 2021. Lease revenues from participation rents increased slightly for year ended December 31, 2020, primarily due to the participation rent component of one additional farm becoming active during 2020, partially offset by lease amendments on two other farms during the year, in which we decreased the participation rent component in exchange for higher fixed base cash rents. During the year ended December 31, 2020, 19 of our farms, consisting of 4,844 farm acres, were subject to leases with active participation rent components, as compared to 18 farms consisting of 6,311 farm acres in the prior year. During the year ended December 31, 2020, we received an early lease termination payment from an outgoing tenant on a property of approximately $3.0 million, which we recognized as additional lease revenue upon receipt, less a net balance of approximately $165,000 of aggregate prepaid rent and deferred rent assets balances that were written off against this amount. For further discussion on this lease termination, see above, under “ Overview—Recent Developments—Portfolio Activity—Existing Properties—Leasing Activity—Lease Termination .” Other – 2020 compared to 2019 Lease revenue from properties acquired or disposed of increased for the year ended December 31, 2020, primarily due to additional revenues earned on new farms acquired subsequent to December 31, 2018. Lease revenue for vacant or self-operated properties increased for the year ended December 31, 2020, primarily due to additional revenues earned during 2020 on farms that were vacant for a portion of 2019. Tenant reimbursement revenue increased for the year ended December 31, 2020, primarily due to additional payments made by certain tenants on our behalf (pursuant to the lease agreements) to an unconsolidated entity of ours that conveys water to the respective properties. Operating Expenses Depreciation and Amortization The following table provides a summary of the depreciation and amortization expense recorded during the years ended December 31, 2020 and 2019 (dollars in thousands): 47 Table of Contents For the Years Ended December 31, 2020 2019 $ Change % Change Same-property basis $ 10,887 $ 10,543 $ 344 3.3% Properties acquired or disposed of 5,634 2,101 3,533 168.2% Vacant or self-operated properties 134 146 (12) (8.2)% Total Depreciation and amortization expense $ 16,655 $ 12,790 $ 3,865 30.2% Depreciation and amortization expense on a same-property basis increased for year ended December 31, 2020, as compared to the prior year, primarily due to accelerated amortization expense recognized due to an early lease termination (see above, under “ Overview—Recent Developments—Portfolio Activity—Existing Properties—Leasing Activity—Lease Termination ”), as well as additional depreciation on site improvements completed on certain properties subsequent to December 31, 2018, and partially offset by the expiration of certain lease intangible amortization periods subsequent to December 31, 2018. Depreciation and amortization expense on properties acquired or disposed of increased for the year ended December 31, 2020, as compared to the prior year, primarily due to the additional depreciation and amortization expense incurred on the new farms acquired subsequent to December 31, 2018. Depreciation and amortization expense from vacant or self-operated properties decreased slightly for the year ended December 31, 2020, as compared to the prior year, primarily due to certain tangible assets on two farms that were vacant during a portion of the prior year reaching the end of their useful lives during the year ended December 31, 2020. Property-operating Expenses Property operating expenses consist primarily of real estate taxes, repair and maintenance expense, insurance premiums, and other miscellaneous operating expenses paid for certain of our properties. In addition, from approximately July 2018 through June 2019, we incurred additional expenses related to temporary generator rental costs to power newly-drilled wells on one of our properties. During the second half of 2019, these wells were connected to permanent power sources, and the generators were no longer needed. The following table provides a summary of the property-operating expenses recorded during the years ended December 31, 2020 and 2019 (dollars in thousands): For the Years Ended December 31, 2020 2019 $ Change % Change Same-property basis $ 1,233 $ 2,129 $ (896) (42.1)% Properties acquired or disposed of 142 128 14 10.9% Vacant or self-operated properties 16 18 (2) (11.1)% Tenant-reimbursed property operating expenses (1) 457 198 259 130.8% Total Property operating expenses $ 1,848 $ 2,473 $ (625) (25.3)% (1) Represents certain operating expenses (property taxes, insurance premiums, and other property-related expenses) paid by us that, per the respective leases, are required to be reimbursed to us by the tenant. Corresponding amounts were also recorded as lease revenues during the respective periods. Same-property Basis – 2020 compared to 2019 Property operating expenses decreased for the year ended December 31, 2020, primarily due to additional costs incurred during the prior year for the above-referenced generator rentals and for obtaining certain permits on one of our California properties. Other – 2020 compared to 2019 Property operating expenses on properties acquired or disposed of increased for the year ended December 31, 2020, primarily due to additional miscellaneous property-operating expenses incurred on certain of the new farms we acquired subsequent to December 31, 2018. Property operating expenses on vacant or self-operated properties remained flat for the year ended December 31, 2020. Tenant reimbursement expense increased for the year ended December 31, 2020, primarily due to additional property taxes paid by us on certain of our properties and increased miscellaneous operating costs incurred by us in connection with our ownership interest in an unconsolidated entity. In both of these situations, the respective tenants are contractually obligated to reimburse us per the respective leases. Related-Party Fees Certain fee calculations changed pursuant to amendments to the agreements with our Adviser that were approved on July 9, 2019, and January 14, 2020. For a discussion of the changes to these fees, see above, under “ Overview—Our Adviser and Administrator—Advisory Agreements. ” The following table summarizes the base management, incentive, and capital gains fees 48 Table of Contents due to our Adviser, in each case, as applicable, net of the respective credits, and the administration fee due to our Administrator for the years ended December 31, 2020 and 2019 (dollars in thousands): For the Years Ended December 31, 2020 2019 $ Change % Change Base management fee, gross (1) $ 4,289 $ 3,623 $ 666 18.4% Credits granted by Adviser’s board of directors applied against the base management fee (2) — (1,543) 1,543 (100.0)% Base management fee, net 4,289 2,080 2,209 106.2% Incentive fee, gross (1) 3,038 847 2,191 258.7% Credits granted by Adviser’s board of directors applied against the incentive fee (2) — — — —% Incentive fee, net 3,038 847 2,191 258.7% Capital gains fee, gross (1) — — — —% Credits granted by Adviser’s board of directors applied against the capital gains fee (2) — — — —% Capital gains fee, net — — — —% Total fees to Adviser, gross 7,327 4,470 2,857 63.9% Total credits granted by Adviser’s board of directors (1) — (1,543) 1,543 (100.0)% Total fees to Adviser, net $ 7,327 $ 2,927 $ 4,400 150.3% Administration fee to Administrator (1) $ 1,448 $ 1,207 $ 241 20.0% (1) Reflected as a line item on our accompanying Consolidated Statements of Operations and Comprehensive Income. (2) Represent non-contractual, unconditional, and irrevocable waivers granted to us by our Adviser. The base management fee increased during the year ended December 31, 2020, as compared to the prior year, primarily due to a change in the calculation of the base management fee. For the year ended December 31, 2020, the base management fee was calculated as 0.125% (0.5% per annum) of the respective prior calendar quarter’s Gross Tangible Real Estate, which base was increased due to a large volume of acquisitions during 2019 and 2020, whereas the base management fee for the year ended December 31, 2019, was calculated as 0.5% (2.0% per annum) of either the Total Adjusted Equity (through June 30, 2019) or the Total Adjusted Common Equity (from July 1, 2019, through December 31, 2019) as of the end of the respective prior calendar quarters. See above, under “ Overview—Our Adviser and Administrator—Advisory Agreements—Base Management Fee ,” for further discussion on the calculation of the base management fee for each period. In addition, our Adviser granted us a non-contractual, unconditional, and irrevocable waiver to be applied against the base management fee during the year ended December 31, 2019. Our Adviser earned incentive fees during each of the years ended December 31, 2020 and 2019 due to our Pre-Incentive Fee FFO (as defined in the respective agreements with our Adviser) exceeding the required hurdle rate of the equity base applicable to each period. Incentive fees were earned during the first, third, and fourth quarters of fiscal year 2020, as compared to just the fourth quarter of fiscal year 2019. Our Adviser did not earn a capital gains fee during the year ended December 31, 2020 or 2019, as we did not sell any of our properties during either period. The administration fee paid to our Administrator increased during the year ended December 31, 2020, as compared to the prior year, 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. Other Operating Expenses 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 year ended December 31, 2020, as compared to the prior year, primarily due to increases in certain professional fees and stockholder-related expenses. During the year ended December 31, 2020, we incurred additional legal fees related to an offering that was subsequently aborted, at which time the costs were expensed, and stockholder-related expenses were higher due to a one-time listing fee paid to Nasdaq for the listing of our Series B Preferred Stock. Other Income (Expense) 49 Table of Contents Other income, which generally consists of interest patronage received from Farm Credit (as defined in Note 4, “ Borrowings ,” in the accompanying notes to our consolidated financial statements) and interest earned on short-term investments, increased for the year ended December 31, 2020, as compared to the prior year, primarily driven by additional interest patronage received from Farm Credit (due to increased borrowings from Farm Credit). During the year ended December 31, 2020, we recorded approximately $1.3 million of interest patronage from Farm Credit related to interest accrued during 2019, compared to approximately $700,000 of interest patronage recorded during the prior year. The interest patronage received from Farm Credit during 2020 that related to 2019 interest expense resulted in a 20.4% decrease (approximately 98 basis points) to our effective interest rate on our aggregate borrowings from Farm Credit during the year ended December 31, 2019. During the year ended December 31, 2020, we also received approximately $306,000 of additional interest patronage from Farm Credit, as certain Farm Credit associations prepaid a portion of the 2020 interest patronage (which relates to interest accrued during 2020 but is typically received in 2021). In addition, Other income for the year ended December 31, 2020, also includes $200,000 of income as a result of a commission rebate received in connection with a property acquired during the period. Other income for the year ended December 31, 2019, also includes an aggregate of approximately $208,000 of additional income as a result of accumulated deferred revenue related to a sale agreement for one of our farms that was later terminated and a commission rebate received in connection with a property acquired during the period. Interest expense increased for the year ended December 31, 2020, as compared to the prior year, primarily due to increased overall borrowings. The weighted-average principal balance of our aggregate borrowings (excluding our Series A Term Preferred Stock) outstanding for the year ended December 31, 2020, was approximately $502.4 million, as compared to approximately $397.9 million for the prior year. 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 was 3.95% for each of the years ended December 31, 2020 and 2019. During each of the years ended December 31, 2020 and 2019, we paid aggregate distributions on our Series A Term Preferred Stock (which distributions are treated similar to interest expense) of approximately $1.8 million. During the year ended December 31, 2020, and 2019, we recorded net losses on dispositions of real estate assets primarily due to the disposal of certain irrigation improvements on certain of our farms, partially offset during the year ended December 31, 2020, by net gains recognized on the sale of irrigation pivots on two of our farms that were replaced. The net property and casualty recovery recorded during the years ended December 31, 2020 and 2019 related to insurance recoveries received for certain irrigation improvements that were damaged due to natural disasters. During the year ended December 31, 2020, we recognized a loss in an unconsolidated entity of approximately $4,000. We first acquired an interest in this entity during the three months ended September 30, 2019; there was no material gain or loss recognized during the year ended December 31, 2019. During the year ended December 31, 2020, the aggregate dividends paid on our Series B Preferred Stock and Series C Preferred Stock increased over that of the prior year due to additional shares issued and outstanding during the current year. In addition, during the year ended December 31, 2020, we also wrote off approximately $44,000 of offering costs related to redemptions of our Series B Preferred Stock. LIQUIDITY AND CAPITAL RESOURCES Overview Our current short- and long-term sources of funds include cash and cash equivalents, cash flows from operations, borrowings (including the undrawn commitments available under the New MetLife Facility), and issuances of additional equity securities. Our current available liquidity is approximately $75.3 million, consisting of approximately $51.2 million in cash on hand and, based on the current level of collateral pledged, approximately $24.2 million of availability under the New MetLife Facility (subject to compliance with covenants). Future Capital Needs Our short- and long-term liquidity requirements consist primarily of making distributions to stockholders (including non-controlling OP Unitholders, if any) to maintain our qualification as a REIT, funding our general operating costs, making principal and interest payments on outstanding borrowings, making dividend payments on our Series B Preferred Stock, Series C Preferred Stock, and Series D Term Preferred Stock, and, as capital is available, funding new farmland and farm-related acquisitions consistent with our investment strategy. Notwithstanding the current COVID-19 pandemic, we believe that our current and short-term cash resources will be sufficient to fund our distributions to stockholders (including non-controlling OP Unitholders, if any), service our debt, pay dividends on 50 Table of Contents our Series B Preferred Stock, Series C Preferred Stock, and Series D Term Preferred Stock, and fund our current operating costs in the near term. We expect to meet our long-term liquidity requirements through various sources of capital, including future equity issuances (including, but not limited to, shares of common stock through our ATM Program, OP Units through our Operating Partnership as consideration for future acquisitions, and shares of our Series C Preferred Stock), long-term mortgage indebtedness and bond issuances, and other secured and unsecured borrowings. While public equity markets have experienced significant volatility lately, based on discussions with our lenders, we do not believe there will be a credit freeze in the near term. We are in compliance with all of our debt covenants under our respective credit facilities and borrowings, and we believe we currently have adequate liquidity to cover all near-term debt obligations and operating expenses. We intend to use a significant portion of any current and future available liquidity to purchase additional farms and farm-related facilities. We continue to actively seek and evaluate acquisitions of additional farms and farm-related facilities that satisfy our investment criteria, and despite the current COVID-19 pandemic, our pipeline of potential acquisitions remains healthy. We have several properties under signed purchase and sale agreements or non-binding letters of intent that we hope to consummate over the next six months. We also have many other properties that are in various other stages of our due diligence process. However, all potential acquisitions will be subject to our due diligence investigation of such properties, and there can be no assurance that we will be successful in identifying or acquiring any properties in the future. Cash Flow Resources The following table summarizes total net cash flows for operating, investing, and financing activities for the years ended December 31, 2020 and 2019 (dollars in thousands): 2020 2019 $ Change % Change Net change in cash from: Operating activities $ 25,002 $ 21,370 $ 3,632 17.0% Investing activities (272,901) (262,650) (10,251) (3.9)% Financing activities 243,429 240,238 3,191 1.3% Net change in Cash and cash equivalents $ (4,470) $ (1,042) $ (3,428) 329.0% Operating Activities The majority of cash from operating activities is generated from the rental payments we receive from our tenants, which is first used to fund our property-level operating expenses, with any excess cash being primarily used for principal and interest payments on our borrowings, management fees to our Adviser, administrative fees to our Administrator, and other corporate-level expenses. Cash provided by operating activities increased for the year ended December 31, 2020, as compared to the prior year, primarily due to additional rental payments received from recent acquisitions and an early lease termination payment of approximately $3.0 million received from the outgoing tenant on four of our farms in Arizona, partially offset by increases in the amount of fees paid to our Adviser and interest payments made. Investing Activities The increase in cash used in investing activities for the year ended December 31, 2020, as compared to the prior-year period, was primarily due to an increase in aggregate cash paid for acquisitions of new farms and capital improvements on existing farms during the year ended December 31, 2020, which was approximately $10.2 million more than the prior year. Financing Activities The increase in cash provided by financing activities during the year ended December 31, 2020, as compared to the prior-year period, was primarily due to an increase in aggregate net cash proceeds from equity issuances (including the Series B Preferred Stock, the Series C Preferred Stock, and our common stock) of approximately $14.6 million, partially offset by an increase in distributions of approximately $6.8 million and a decrease in net borrowings of approximately $4.2 million for the year ended December 31, 2020, as compared to that of the prior year. Debt Capital New MetLife Facility As amended on February 20, 2020, the New MetLife Facility currently consists of the $75.0 million New MetLife Term Note and the $75.0 million MetLife Lines of Credit. We currently have $36.9 million outstanding on the New MetLife Term Note and $100,000 outstanding under the MetLife Lines of Credit. While $113.0 million of the full commitment amount under the 51 Table of Contents New MetLife Facility remains undrawn, based on the current level of collateral pledged, we currently have approximately $24.2 million of availability under the New MetLife Facility. The draw period for the New MetLife Term Note expires on December 31, 2022, after which time MetLife has the option to be relieved of its obligation to disburse any additional undrawn funds under the New MetLife Term Note. Farmer Mac Facility As amended on December 10, 2020, our agreement with Farmer Mac Facility provides for bond issuances up to an aggregate amount of $225.0 million by May 31, 2023, after which, Farmer Mac has the option to be relieved of its obligation to purchase additional bonds under this facility. To date, we have issued aggregate bonds of approximately $95.2 million under the Farmer Mac Facility. Farm Credit and Other Lenders Since September 2014, we have closed on 41 separate loans with 11 different Farm Credit associations (for additional information on these associations, see Note 4, “ Borrowings ,” within the accompanying notes to our consolidated financial statements). We also currently have borrowing relationships with three other agricultural lenders and are continuously reaching out to other lenders to establish prospective new relationships. While we do not have any additional availability under any of these programs based on the properties currently pledged as collateral, we expect to enter into additional borrowing agreements with existing and new lenders in connection with certain potential new acquisitions in the future. We currently have one farm worth approximately $1.6 million that is unencumbered and eligible to be pledged as collateral. Equity Capital The following table provides information on equity sales that have occurred since January 1, 2020, through the date of this filing (dollars in thousands, except per-share amounts): Type of Issuance Number of Shares Sold Weighted-average Offering Price Per Share Gross Proceeds Net Proceeds (1) Series B Preferred Stock (2) 1,229,531 $ 24.52 $ 30,148 $ 27,664 Series C Preferred Stock (2)(3) 1,401,961 24.81 34,789 31,895 Series D Term Preferred Stock (4) 2,415,000 25.00 60,375 58,488 Common Stock – Follow-on (4) 1,897,500 14.40 27,324 26,094 Common Stock – ATM Program 3,620,706 14.77 48,025 52,930 (1) Net of selling commissions and dealer-manager fees or underwriting discounts and commissions (in each case, as applicable). (2) Excludes share redemptions during the applicable time period. (3) Excludes approximately 625 shares issued pursuant to the DRIP. (4) Includes the underwriters’ exercise in full of the over-allotment option in connection with the offering. Our 2020 Registration Statement (as defined in Note 8, “ Equity—Registration Statement ,” within the accompanying notes to our consolidated financial statements) permits us to issue up to an aggregate of $1.0 billion in securities (including approximately $650.0 million originally reserved for issuance of shares of the Series C Preferred Stock), 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 $34.8 million of Series C Preferred Stock, $60.4 million of Series D Term Preferred Stock, and $75.3 million of common stock (including approximately $48.0 million through our ATM Program) respectively, under the 2020 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 December 31, 2020, we did not have any off-balance sheet arrangements. NON-GAAP FINANCIAL INFORMATION Funds from Operations, Core Funds from Operations, and Adjusted Funds from Operations The National Association of Real Estate Investment Trusts (“NAREIT”) developed funds from operations (“FFO”) as a relative non-GAAP supplemental measure of operating performance of an equity REIT to recognize that income-producing real estate 52 Table of Contents 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. 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. The non-GAAP financial measures presented herein have limitations as analytical tools and should not be considered in isolation or as a substitute for an analysis of our results calculated in accordance with GAAP. We believe that net income is the most directly-comparable GAAP measure to each of FFO, CFFO, and AFFO. Specifically, we believe that FFO is helpful to investors in better understanding our operating performance, primarily because its calculation excludes depreciation and amortization expense on real estate assets, as we believe that GAAP historical cost depreciation of real estate assets is generally not correlated with changes in the value of those assets, particularly with farmland real estate, the value of which does not diminish in a predictable manner over time, as historical cost depreciation implies. Further, we believe that CFFO and AFFO are helpful in understanding our operating performance in that it removes certain items that, by their nature, are not comparable on a period-over-period basis and therefore tend to obscure actual operating performance. In addition, we believe that providing CFFO and AFFO as additional performance metrics allows investors to gauge our overall performance in a manner that is more similar to how our performance is measured by management (including their respective per-share amounts), as well as by analysts and the overall investment community. We calculate CFFO by adjusting FFO for the following items: • Acquisition- and disposition-related expenses . Acquisition- and disposition-related expenses (including due diligence costs on acquisitions not consummated and certain auditing and accounting fees incurred that were directly related to completed acquisitions or dispositions) are incurred for investment purposes and do not correlate with the ongoing operations of our existing portfolio. Further, certain auditing and accounting fees incurred vary depending on the number and complexity of acquisitions or dispositions completed during the period. Due to the inconsistency in which these costs are incurred and how they have historically been treated for accounting purposes, we believe the exclusion of these expenses improves comparability of our operating results on a period-to-period basis. Other adjustments . We will adjust for certain non-recurring charges and receipts and will explain such adjustments accordingly. We believe the exclusion of these amounts improves comparability of our operating results on a period-to-period basis and will apply consistent definitions of CFFO for all prior-year periods presented to provide consistency and better comparability. Further, we calculate AFFO by adjusting CFFO for the following items: • Rent adjustments. This adjustment removes the effects of straight-lining rental income, as well as the amortization related to above-market lease values and lease incentives and accretion related to below-market lease values, other deferred revenue, and tenant improvements, resulting in rental income reflected on a modified accrual cash basis. 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. As a result, cash rents received during a particular period may not necessarily be comparable to other periods or represent the cash rents indicative of a given lease year. Therefore, we further adjust AFFO to normalize the cash rent received pertaining to a lease year over that respective lease year on a straight-line basis, resulting in cash rent being recognized ratably over the period in which the cash rent is earned. • Amortization of debt issuance costs . The amortization of costs incurred to obtain financing is excluded from AFFO, as it is a non-cash expense item that is not directly related to the operating performance of our properties. • Other adjustments . We will adjust for certain non-cash charges and receipts and will explain such adjustments accordingly. We believe the exclusion of such non-cash amounts improves comparability of our operating results on a period-to-period basis and will apply consistent definitions of AFFO for all prior-year periods presented to provide consistency and better comparability. 53 Table of Contents We believe the foregoing adjustments aid our investors’ understanding of our ongoing operational performance. FFO, CFFO and AFFO do not represent cash flows from operating activities in accordance with GAAP, which, unlike FFO, CFFO, and AFFO, generally reflects all cash effects of transactions and other events in the determination of net income, and should not be considered an alternative to net income as an indication of our performance or to cash flows from operations as a measure of liquidity or ability to make distributions. Comparisons of FFO, CFFO, and AFFO, using the NAREIT definition for FFO and the definitions above for CFFO and AFFO, to similarly-titled measures for other REITs may not necessarily be meaningful due to possible differences in the definitions used by such REITs. Diluted funds from operations (“Diluted FFO”), diluted core funds from operations (“Diluted CFFO”), and diluted adjusted funds from operations (“Diluted AFFO”) per share are FFO, CFFO, and AFFO, respectively, divided by the weighted-average number of total shares (including shares of our common stock and OP Units held by non-controlling limited partners) outstanding on a fully-diluted basis during a period. We believe that diluted earnings per share is the most directly-comparable GAAP measure to each of Diluted FFO, CFFO, and AFFO per share. Because many REITs provide Diluted FFO, CFFO, and AFFO per share information to the investment community, we believe these are useful supplemental measures when comparing us to other REITs. 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 years ended December 31, 2020 and 2019 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 Years Ended December 31, 2020 2019 Net income $ 4,955 $ 1,762 Less: Aggregate dividends declared on Series B Preferred Stock and Series C Preferred Stock (1) (9,322) (4,240) Net loss available to common stockholders and non-controlling OP Unitholders (4,367) (2,478) Plus: Real estate and intangible depreciation and amortization 16,655 12,790 Plus: Losses on dispositions of real estate assets, net 2,180 328 Adjustments for unconsolidated entities (2) 18 1 FFO available to common stockholders and non-controlling OP Unitholders 14,486 10,641 Plus: Acquisition- and disposition-related expenses 210 380 Plus (less): Other nonrecurring charges (receipts), net (3) 159 (1) CFFO available to common stockholders and non-controlling OP Unitholders 14,855 11,020 Net rent adjustments (1,305) (382) Plus: Amortization of debt issuance costs 756 630 Plus: Other non-cash charges, net (4) 40 — AFFO available to common stockholders and non-controlling OP Unitholders $ 14,346 $ 11,268 Weighted average common stock outstanding—basic & diluted 22,258,121 19,602,533 Weighted-average common OP Units outstanding 131,745 235,613 Weighted-average total common shares outstanding 22,389,866 19,838,146 Diluted FFO per weighted average total common share $ 0.65 $ 0.54 Diluted CFFO per weighted average total common share $ 0.66 $ 0.56 Diluted AFFO per weighted average total common share $ 0.64 $ 0.57 (1) Includes (i) cash dividends paid on our Series B Preferred Stock and Series C Preferred Stock, (ii) the pro-rata write-off of offering costs related to shares of Series B Preferred Stock and Series C Preferred Stock that were redeemed, and (iii) the value of additional shares of Series C Preferred Stock issued pursuant to the DRIP. (2) Represents our pro-rata share of depreciation expense recorded in unconsolidated entities during the period. 54 Table of Contents (3) Consists primarily of costs related to an aborted offering and a one-time listing application fee that were charged to expense during the year ended December 31, 2020, partially offset by net property and casualty recoveries recorded, net of the cost of related repairs expensed, as a result of the damage caused to certain irrigation improvements by natural disasters on certain of our properties. (4) Consists of (i) the pro-rata write-off of offering costs related to shares of the Series B Preferred Stock and Series C Preferred Stock that were redeemed, which were noncash charges, (ii) the amount of dividends on the Series C Preferred Stock paid via issuing new shares (pursuant to the DRIP), and (iii) our remaining pro-rata share of income (loss) recorded from investments in unconsolidated entities during the period. Net Asset Value Real estate companies are required to record real estate using the historical cost basis of the real estate, adjusted for accumulated depreciation and amortization, and, as a result, the carrying value of the real estate does not typically change as the fair value of the assets change. Thus, one challenge is determining the fair value of the real estate in order to allow stockholders to see the value of the real estate increase or decrease over time, which we believe is useful to our investors. Determination of Fair Value Our Board of Directors reviews and approves the valuations of our properties pursuant to a valuation policy approved by our Board of Directors (the “Valuation Policy”). Such review and approval occurs in three phases: (i) prior to its quarterly meetings, the Board of Directors receives written valuation recommendations and supporting materials that are provided by professionals of the Adviser and Administrator, with oversight and direction from the chief valuation officer, who is also employed by the Administrator (collectively, the “Valuation Team”); (ii) the valuation committee of the Board of Directors (the “Valuation Committee”), which is comprised entirely of independent directors, meets to review the valuation recommendations and supporting materials; and (iii) after the Valuation Committee concludes its meeting, it and the chief valuation officer present the Valuation Committee’s findings to the entire Board of Directors so that the full Board of Directors may review and approve the fair values of our properties in accordance with the Valuation Policy. Further, on a quarterly basis, the Board of Directors reviews the Valuation Policy to determine if changes thereto are advisable and also reviews whether the Valuation Team has applied the Valuation Policy consistently. Per the Valuation Policy, our valuations are generally derived based on the following: • For properties acquired within 12 months prior to the date of valuation, the purchase price of the property will generally be used as the current fair value unless overriding factors apply. In situations where OP Units are issued as partial or whole consideration in connection with the acquisition of a property, the fair value of the property will generally be the lower of: (i) the agreed-upon purchase price between the seller and the buyer (as shown in the purchase and sale agreement or contribution agreement and using the agreed-upon pricing of the OP Units, if applicable), or (ii) the value as determined by an independent, third-party appraiser. • For real estate we acquired more than one year prior to the date of valuation, we determine the fair value either by relying on estimates provided by independent, third-party appraisers or through an internal valuation process. In addition, if significant capital improvements take place on a property, we will typically have those properties reappraised upon completion of the project by an independent, third-party appraiser. In any case, we intend to have each property valued by an independent, third-party appraiser via a full appraisal at least once every three years, with interim values generally being determined by either: (i) a restricted appraisal (a “desk appraisal”) performed by an independent, third-party appraiser, or (ii) our internal valuation process. Various methodologies were used, both by the appraisers and in our internal valuations, to determine the fair value of our real estate, including the sales comparison, income capitalization (or a discounted cash flow analysis), and cost approaches of valuation. In performing their analyses, the appraisers typically (i) conducted site visits to the properties (where full appraisals were performed), (ii) discussed each property with our Adviser and reviewed property-level information, including, but not limited to, property operating data, prior appraisals (as available), existing lease agreements, farm acreage, location, access to water and water rights, potential for future development, and other property-level information, and (iii) reviewed information from a variety of sources about regional market conditions applicable to each of our properties, including, but not limited to, recent sale prices of comparable farmland, market rents for similar farmland, estimated marketing and exposure time, market capitalization rates, and the current economic environment, among others. In performing our internal valuations, we will consider the most recent appraisal available and use similar methodologies in determining an updated fair value. We will also obtain updated market data related to the property, such as updated sales and market rent comparisons and market capitalization rates, and perform an updated assessment of the tenants’ credit risk profiles, among others. Sources of this data may come from market inputs from recent acquisitions of our own portfolio of real estate, recent appraisals of properties we own that are similar in nature and in the same region (as applicable) as the property being valued, market conditions and trends we observe in our due diligence process, and conversations with appraisers, brokers, and farmers. A breakdown of the methodologies used to value our properties and the aggregate value as of December 31, 2020, determined by each method is shown in the table below (dollars in thousands, except in footnotes): 55 Table of Contents Valuation Method Number of Farms Total Acres Farm Acres Net Cost Basis (1) Current Fair Value % of Total Fair Value Purchase Price 26 14,544 13,458 $ 256,097 $ 255,991 22.0% Third-party Appraisal (2) 111 86,535 70,024 792,557 906,533 78.0% Total 137 101,079 83,482 $ 1,048,654 $ 1,162,524 100.0% (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 March 2020 and December 2020. Some of the significant assumptions used by appraisers and the Valuation Team in valuing our portfolio as of December 31, 2020, 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 is provided in the following table: Range (Low - High) Weighted Average Land Value (per farmable acre) $678 – $127,436 $ 35,890 Market Rent (per farmable acre) $421 – $3,759 $ 1,991 Market Capitalization Rate 3.68% – 10.06% 4.70% Note: Figures in the table above apply only to the farmland portion of our portfolio and exclude assumptions made relating to farm-related facilities (e.g., cooling facilities), and other structures on our properties (e.g., residential housing), as their aggregate value was considered to be insignificant in relation to that of the farmland. Our Valuation Team reviews the appraisals, including the significant assumptions and inputs used in determining the appraised values, and considers any developments that may have occurred since the time the appraisals were performed. Developments considered that may have an impact on the fair value of our real estate include, but are not limited to, changes in tenant credit profiles, changes in lease terms (such as expirations and notices of non-renewals or to vacate), and potential asset sales (particularly those at prices different from the appraised values of our properties). Management believes that the purchase prices of the farms acquired during the previous 12 months 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 December 31, 2020, 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 December 31, 2020, from the prior value basis as of September 30, 2020, is provided in the table below (dollars in thousands): Total portfolio fair value as of September 30, 2020 $ 970,881 Plus: Acquisition of 14 new farms during the three months ended December 31, 2020 191,643 Plus (less) net value appreciation (depreciation) during the three months ended December 31, 2020: 10 farms valued via third-party appraisals $ — Total net appreciation for the three months ended December 31, 2020 — Total portfolio fair value as of December 31, 2020 $ 1,162,524 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 December 31, 2020, was approximately $628.3 million, as compared to a carrying value (excluding unamortized related debt issuance costs) of approximately $627.6 million. In addition, due to the short-term maturity of our Series A Term Preferred Stock (which had a mandatory redemption date of September 30, 2021, and was redeemed on February 12, 2021), its carrying value (exclusive of unamortized offering costs) of approximately $28.8 million was deemed to approximate its fair value as of December 31, 2020. The fair value of our Series B Preferred Stock was determined using the closing stock price as of December 31, 2020, of $25.05 per share. 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 C Preferred Stock to be $25.00 per share as of December 31, 2020 (see Exhibit 99.1 to this Form 10-K). Calculation of Estimated Net Asset Value To provide our stockholders with an estimate of the fair value of our real estate assets, we intend to estimate the fair value of our farms and farm-related properties and provide an estimated net asset value (“NAV”) on a quarterly basis. NAV is a non- 56 Table of Contents GAAP, supplemental measure of financial position of an equity REIT and is calculated as total equity, adjusted for the increase or decrease in fair value of our real estate assets and long-term borrowings (including any preferred stock required to be treated as debt for GAAP purposes) relative to their respective costs bases. Further, we calculate NAV per common share by dividing NAV by our total common shares outstanding (consisting of our common stock and OP Units held by non-controlling limited partners). The fair values presented above and their usage in the calculation of net asset value per share presented below have been prepared by and is the responsibility of management. PricewaterhouseCoopers LLP has neither examined, compiled, nor performed any procedures with respect to the fair values or the calculation of net asset value per 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 December 31, 2020, we estimate the NAV per common share to be $12.23. 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): Total equity per balance sheet $ 383,790 Fair value adjustment for long-term assets: Less: net cost basis of tangible and intangible real estate holdings (1) $ (1,048,654) Plus: estimated fair value of real estate holdings (2) 1,162,524 Net fair value adjustment for real estate holdings 113,870 Fair value adjustment for long-term liabilities: Plus: book value of aggregate long-term indebtedness (3) 656,340 Less: fair value of aggregate long-term indebtedness (3)(4) (657,045) Net fair value adjustment for long-term indebtedness (705) Estimated NAV $ 496,955 Less: aggregate fair value of Series B Preferred Stock and Series C Preferred Stock (5) (176,410) Estimated NAV available to common stockholders and non-controlling OP Unitholders $ 320,545 Total common shares and OP Units outstanding (6) 26,219,019 Estimated NAV per common share and non-controlling OP Unit $ 12.23 (1) Per Net Cost Basis as presented in the table above. (2) Per Current Fair Value as presented in the table above. (3) Includes the principal balances outstanding of all long-term borrowings (consisting of notes and bonds payable) and the Series A Term Preferred Stock. (4) Long-term notes and bonds payable were valued using a discounted cash flow model. The Series A Term Preferred Stock was valued at its liquidation value. (5) The Series B Preferred Stock was valued based on its closing stock price as of December 31, 2020, while the Series C Preferred Stock was valued at its liquidation values, as discussed above. (6) Includes 26,219,019 shares of common stock and zero OP Units held by non-controlling OP Unitholders. A quarterly rollforward in the estimated NAV per common share and OP Unit for the three months ended December 31, 2020, is provided below: Estimated NAV per common share and non-controlling OP Unit as of September 30, 2020 $ 11.97 Less net loss attributable to common stockholders and non-controlling OP Unitholders (0.10) Adjustments for net change in valuations: Net change in unrealized fair value of farmland portfolio (1) $ 0.15 Net change in unrealized fair value of long-term indebtedness 0.07 Net change in valuations 0.22 Less distributions on common stock and non-controlling OP Units (0.13) Plus net accretive effect of equity issuances 0.27 Estimated NAV per common share and non-controlling OP Unit as of December 31, 2020 $ 12.23 (1) The net change in unrealized fair value of our farmland portfolio consists of three components: (i) no change due to the farms that were valued during the three months ended December 31, 2020, (ii) an increase of $0.19 per share due to the aggregate depreciation and amortization expense recorded during the three months ended December 31, 2020, and (iii) a decrease of $0.04 per share due to 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 57 Table of Contents 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 $12.23 as of December 31, 2020, based on the calculation above, the closing price of our common stock on December 31, 2020, was $14.64. 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. 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. There can be no assurance that the ultimate realized value upon disposition of an asset will approximate the estimated fair value above. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This Item is not applicable to smaller reporting companies. 58 Table of Contents