What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-08-08 compared with 2024-05-07 · 227 added, 168 removed, 473 unchanged (46% of the section changed)

14 unchanged sentences

We currently own 168 farms comprised of 111,836 acres located across 15 states in the U.S.

and 53,975 acre-feet of water assets in California.

We also own several farm-related facilities, such as cooling facilities, packinghouses, processing facilities, and various storage facilities.

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Portfolio Diversification

Our farmland portfolio currently consists of 168 farms leased to 93 different, unrelated third-party tenants who grow over 60 different types of crops on our farms.

Our farmland portfolio currently consists of 168 farms leased to 93 di fferent, unrelated third-party tenants who grow over 60 different types of crops on our farms.

Our investment focus is in farmland suitable for growing either fresh produce annual row crops (e.g., certain berries and vegetables) or certain permanent crops (e.g., almonds, blueberries, pistachios, and wine grapes), with an ancillary focus on farmland growing certain commodity crops (e.g., beans and corn).

The following table summarizes the different geographic locations (by state) of our farms owned as of and during the three months ended March 31, 2024 and 2023 (dollars in thousands):

As of and For the Three Months Ended March 31, 2024 As of and For the Three Months Ended March 31, 2023

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

As of and For the Six Months Ended June 30, 2024 As of and For the Six Months Ended June 30, 2023

Revenue % of Total

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Michigan 23 1,892 1.7% 495 1.2% 23 1,892 1.6% 487 1.1%

Nebraska 9 7,782 7.0% 314 0.8% 9 7,782 6.7% 693 1.6%

Maryland 6 987 0.9% 230 0.6% 6 987 0.8% 230 0.5%

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New Jersey 3 116 0.1% 66 0.2% 3 116 0.1% 64 0.2%

Nebraska 9 7,782 7.0% 25 0.1% 9 7,782 6.7% 369 1.7%

Delaware 1 180 0.2% 38 0.1% 1 180 0.2% 37 0.1%

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Our leases generally have original terms ranging from 3 to 10 years for farms growing row crops and 7 to 15 years for farms growing permanent crops (in each case, often with options to extend the lease further).

Rent is generally payable to us in advance on either an annual, semi-annual, or quarterly basis, with such rent typically subject to periodic escalation clauses provided for within the lease.

Currently, 105 of our farms are leased on a pure, triple-net basis, 45 farms are leased on a partial-net basis (with us, as landlord, responsible for all or a portion of the related property taxes), 3 farms are leased on a single-net basis (with us, as landlord, responsible for the related property taxes, as well as certain maintenance, repairs, or insurance costs), 11 farms are direct-operated, and 4 farms are vacant.

Rent is generally payable to us in advance on either an annual, semi-annual, or quarterly basis, with such rent typically subject to periodic escalation clauses as set forth within the lease.

Currently, 103 of our farms are leased on a pure, triple-net basis, 49 farms are leased on a partial-net basis (with us, as landlord, responsible for all or a portion of the related property taxes), 3 farms are leased on a single-net basis (with us, as landlord, responsible for the related property taxes, as well as certain maintenance, repairs, or insurance costs), 12 farms are direct-operated, and 1 farm is vacant.

Additionally, 28 of our farms are leased under agreements that include a variable rent component, called “participation rents,” that are based on the gross revenues earned on the respective farms (though such leases generally include a guarantee of a minimum amount of rental income).

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

The following table summarizes the lease expirations by year for the farms owned and with leases in place as of March 31, 2024 (dollars in thousands):

The following table summarizes the lease expirations by year for the farms owned and with leases in place as of June 30, 2024 (dollars in thousands):

Year Number of

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Acreage Lease Revenue for the

Three Months Ended March 31, 2024

Six Months Ended June 30, 2024

2024 9 11,079 9.9% $ 5,079 12.4%

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40 51,381 45.9% 20,032 48.8%

14 37 —% 247 0.6%

Terminated/expired leases

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(1) Certain lease agreements encompass multiple farms.

(2) Each category includes one lease that was terminated subsequent to June 30, 2024;

in both cases, we subsequently entered into management agreements with unrelated third parties to temporarily operate the respective farms on our behalf.

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

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

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

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

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

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

Regarding all vacancies and upcoming lease expirations, there can be no assurance that we will be able to renew the existing leases or execute new leases at rental rates favorable to us, if at all, or be able to find replacement tenants, if necessary.

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Portfolio Activity—Existing Properties

Property Sale

On January 11, 2024, we completed the sale of a 3,748-acre farm in Martin County, Florida, for approximately $65.7 million.

Including closing costs, we recognized a net gain on the sale of approximately $10.4 million.

During the three months ended March 31, 2024 and 2023, we recorded lease revenue related to this farm of approximately $0 and $732,000, respectively.

Leasing Activity

The following table summarizes certain leasing activity that has occurred on our existing properties since January 1, 2024, through the date of this filing (dollars in thousands, except for footnotes):

The following table summarizes certain leasing activity that has occurred on our existing properties since April 1, 2024, through the date of this filing (dollars in thousands, except for footnotes):

PRIOR LEASES NEW LEASES (1)

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/ NN / N) (3)

CA & CO 4 6,344 $ 5,444 1 3 / 1 / 0 $ 4,645 6.1 1 3 / 1 / 0

CA, FL, MI, OR, & WA 11 2,265 $ 3,451 1 7 / 2 / 2 $ 3,929 5.7 2 7 / 4 / 0

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

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Vacant, Direct-operated, and Non-accrual Properties

During a portion of the three months ended March 31, 2024, we had 20 farms (5 in California, 14 in Michigan, and 1 in Washington) that were either vacant or on which lease revenues were recognized on a cash basis (due to credit issues with two tenants causing us to determine that the full collectability of the remaining rental payments under the respective leases were not deemed to be probable).

During the three months ended March 31, 2024, we recorded lease revenue related to the aforementioned farms of approximately $293,000 (including no participation rents), as compared to approximately $1.0 million (including approximately $72,000 of participation rents) during the prior-year period.

During the three months ended March 31, 2024, we entered into a lease agreement with a new tenant on one of the California farms, and subsequent to March 31, 2024, we entered into a short-term management agreement with an unrelated third-party to operate 11 farms in Michigan.

As such, currently, 4 farms (3 in Michigan and 1 in Washington) are vacant, 11 farms in Michigan are direct-operated, and 4 farms in California remain on non-accrual status.

During a portion of the six months ended June 30, 2024, we had 20 farms (5 in California, 14 in Michigan, and 1 in Washington) that were either vacant, direct-operated (via management agreements with unrelated third parties), or on which lease revenues were recognized on a cash basis (due to credit issues with two tenants leading us to determine that the full collectability of the remaining rental payments under the respective leases was not deemed to be probable).

During the six months ended June 30, 2024, we recorded lease revenue related to the aforementioned farms of approximately $561,000 (including no participation rents), as compared to approximately $1.8 million (including approximately $72,000 of participation rents) during the prior-year period.

In addition, subsequent to June 30, 2024, we terminated two leases with a tenant who operated two of our farms (one in California and one in Oregon) and entered into management agreements with unrelated third parties to operate these farms on our behalf.

During the six months ended June 30, 2024, we recorded aggregate lease revenue from these two farms of approximately $1.6 million.

Currently, 1 farm (in Washington) is vacant, 12 farms (1 in California, 10 in Michigan, and 1 in Oregon) are direct-operated, and 4 farms (in California remain) on non-accrual status.

Regarding vacant and direct-operated farms, we are exploring both leasing and selling options, and we are in discussions with both potential tenants and potential buyers for these farms.

We currently expect to come to agreements within the next six months on these farms;

We currently expect to enter into lease or sale agreements within the next six months with respect to each of these farms;

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

Regarding the properties currently on non-accrual status, the tenant on two of the four farms is current with their rental payments to us.

We are continuing to work with the tenant leasing the other two farms and will seek to come to an agreement for the remaining rental payments, if possible.

Regarding the properties currently on non-accrual status, we are continuing to work with each of the tenants and will seek to come to an agreement for the remaining rental payments, if possible.

Such agreement, if one can be reached, may include placing the tenant on a payment plan, deferring a portion of the rent owed to us, or agreeing to terminate the lease.

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Water Asset Acquisitions

In addition, from March 2023 through March 2024, we elected to participate in a groundwater recharge program established by Westlands Water District (“WWD”), a water district located in Fresno County, California.

Under the program, WWD paid for surplus surface water to be delivered to individual landowners’ properties with district-approved groundwater recharge facilities, also known as “water banks.” The landowner was allowed to keep 50% of the net amount of groundwater credits generated under the program (after allowing for certain leave-behind and evaporative losses), and the remaining 50% would be used to recharge the aquifer and retained by WWD.

Delivery of water under this program was subject to surplus water availability at WWD’s discretion.

WWD terminated the program for the 2024 water year effective March 5, 2024.

To date, we have obtained 2,524 acre-feet of water credits, which represents 50% of the total net water credits generated and confirmed by WWD under the program thus far, at a total carrying value of approximately $716,000.

In addition, as a result of being granted these water credits in exchange for transferring and storing this surplus water on behalf of WWD, we recorded approximately $426,000 of non-cash revenue during the three months ended March 31, 2024, which represents the estimated fair value of the water credits obtained during the period.

During 2023, we also entered into various other agreements with certain third parties (including local water districts and private individuals) to either buy water directly, buy a portion of other water districts’ surface water allocations in future years in which allocations are granted, or to store surface water on others’ behalf in one of our groundwater recharge facilities in exchange for a portion of the net groundwater credits produced and recognized by the respective water district.

To date, we have obtained 549 acre-feet of water credits as a result of these agreements at a total carrying value of approximately $166,000.

During the three months ended June 30, 2024, through multiple transactions in two different water districts in California, we obtained 4,899 net acre-feet of water assets at a total cost basis of approximately $1.5 million, or approximately $306 per net acre-foot.

See Note 3, “ Real Estate and Intangible Assets—Investments in Water Assets ,” within the accompanying notes to our condensed consolidated financial statements for further detail on these water transactions.

In addition, on July 15, 2024, we purchased 1,985 gross acre-feet of water from Byron-Bethany Irrigation District (“BBID”), a multi-county water district located in Contra Costa County, California, for the 2024 water year for a total purchase price (including commissions and other closing costs) of approximately $801,000, or approximately $404 per gross acre-foot.

This water was purchased pursuant to a water transfer agreement we entered into with BBID in October 2023, whereby we may elect to purchase up to 15,000 acre-feet of water per water year during years in which BBID has a surplus supply of water through February 28, 2031.

This water is expected to be recognized in our account with the local water district during the three months ending December 31, 2024, net of standard losses, as may be applicable.

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

To date, we have invested approximately $1.5 million to construct groundwater recharge facilities on two of our farms, and we have invested an additional $2.3 million in the aggregate in connection with these agreements that are expected to result in additional groundwater credits in the future;

however, the amount and timing of these credits, if any, is currently unknown and is dependent upon and subject to the recognition of such credits by the respective water districts, in their sole discretion.

Financing Activity

Debt Activity

Farm Credit Notes Payable—Interest Patronage

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

During the three months ended March 31, 2024, we recorded interest patronage of approximately $1.9 million related to interest accrued on the Farm Credit Notes Payable during the year ended December 31, 2023, and during th e three months ended September 30, 2023 , we received approximately $111,000 of interest patronage, as certain Farm Credit associations paid a portion of the 2023 interest patronage (which relates to interest accrued during 2023 but is typically paid during the first half of 2024) early.

In total, 2023 interest patronage resulted in a 22.0% reduction (approximately 101 basis points) to the interest rates on such borrowings.

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

Loan Repayments

From January 1, 2024, through the date of this filing, we repaid approximately $16.2 million of maturing bonds.

On a weighted-average basis, these borrowings bore interest at an annual rate of 3.15%.

Debt Activity—Loan Repayments

From April 1, 2024, through the date of this filing, we repaid approximately $6.0 million of loans.

On a weighted-average basis, these borrowings bore interest at a stated rate of 4.31% and an effective rate (after interest patronage, where applicable) of 3.06%.

Equity Activity

Series E Preferred Stock

On November 9, 2022, we filed a prospectus supplement with the SEC for a continuous public offering (the “Series E Offering”) of up to 8,000,000 shares of our newly-designated 5.00% Series E Cumulative Redeemable Preferred Stock, par value $0.001 per share (the “Series E Preferred Stock”), on a “reasonable best efforts” basis through Gladstone Securities at an offering price of $25.00 per share.

On November 9, 2022, we filed a prospectus supplement with the U.S.

Securities and Exchange Commission (the “SEC”) for a continuous public offering (the “Series E Offering”) of up to 8,000,000 shares of our newly-designated 5.00% Series E Cumulative Redeemable Preferred Stock, par value $0.001 per share (the “Series E Preferred Stock”), on a “reasonable best efforts” basis through Gladstone Securities at an offering price of $25.00 per share.

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

The following table summarizes the sales of our Series E Preferred Stock that occurred from January 1, 2024, through the date of this filing (dollars in thousands):

The following table summarizes the sales of our Series E Preferred Stock that occurred from April 1, 2024, through the date of this filing (dollars in thousands):

Shares Sold Weighted-average

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however, there can be no assurance that a listing will be achieved in such timeframe, or at all.

Repurchase Program

On May 17, 2024, our Board of Directors approved a share repurchase program authorizing us to repurchase up to $20.0 million of our 6.00% Series B Cumulative Redeemable Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”) and up to $35.0 million of our Series C Preferred Stock (the “Repurchase Program”).

The Board’s authorization of the Repurchase Program may be suspended or discontinued at any time, does not obligate us to acquire any particular amount of securities, and expires on May 17, 2025.

Under the Repurchase Program, repurchases are intended to be implemented through open market transactions on U.S.

exchanges and/or in privately-negotiated transactions facilitated by a third-party broker acting as agent for us in accordance with applicable securities laws.

Any repurchases will be made during applicable trading window periods or pursuant to applicable Rule 10b5-1 trading plans.

The following table summarizes repurchase activity under the Repurchase Program that occurred from April 1, 2024, through the date of this filing (dollars in thousands, except per-share amounts):

Series B Preferred Stock:

Number of shares repurchased 96,931

Gross repurchase price (1)

Weighted-average repurchase price per share $ 20.99

Gain on repurchase (2)

Series C Preferred Stock:

Number of shares repurchased 146,962

Gross repurchase price (1)

Weighted-average repurchase price per share $ 20.73

Gain on repurchase (2)

(1) Inclusive of broker commissions.

(2) The gain on the repurchase of cumulative redeemable preferred stock is included within Gain (loss) on extinguishment of cumulative redeemable preferred stock on our accompanying Condensed Consolidated Statements of Operations and Comprehensive Income.

Impact of Inflation and Interest Rates

According to the U.S.

Bureau of Labor Statistics, the consumer price index (“CPI”) grew at an annual rate of 3.5% through March 31, 2024, as overall inflation continued to ease from the peak levels experienced in the summer of 2022, when it reached the highest rates seen in over 40 years.

The increase in food prices has also slowed but has generally kept pace with the rate of inflation until the past few months, as the overall food segment increased at an annual rate of 2.2% through March 31, 2024.

In addition, according to the NCREIF Farmland Index, which, as of March 31, 2024, consisted of approximately $15.8 billion of farms across the U.S., the total return on U.S.

farmland (including appreciation and income) was 3.6% for the 12 months ended March 31, 2024.

Despite the slowdown in food prices in recent months, prices remain high, as the overall food segment has increased by 10.9%% over the past two years, outpacing overall inflation of 8.6% over the same time period.

Although our farm operators have experienced increases in input costs, we believe such increases will be somewhat mitigated to the extent that food price increases continue to outpace or keep pace with inflation.

Bureau of Labor Statistics, the consumer price index (“CPI”) grew at an annual rate of 3.0% through June 30, 2024, as overall inflation continued to ease from the peak levels experienced in the summer of 2022, when it reached the highest rates seen in over 40 years.

In addition, according to the NCREIF Farmland Index, which, as of June 30, 2024, consisted of approximately $16.0 billion of farms across the U.S., the total return on U.S.

farmland (including appreciation and income) was 2.5% for the 12 months ended June 30, 2024.

Despite the slowdown of increased food prices in recent months, prices remain high, as the food segment has increased by 8.1% over the past two years, outpacing overall CPI of 6.0% over the same time period.

To combat inflation, the Federal Reserve raised its benchmark funds rate 11 times between March 2022 and July 2023, resulting in the highest target rate seen since January 2001.

Since that time, it has held rates flat, and many now expect the Federal Reserve to begin cutting rates later this year, though the timing of such rate cuts, if any, remains uncertain.

Despite evidence that economic growth is beginning to slow, including a first-quarter economic growth report that was the weakest in nearly two years, inflation continues to be higher than desired, and the labor market remains strong.

As such, the Federal Reserve has stated its desire to see more evidence of inflation being on a sustainable path to its target rate of 2.0%, indicating a “higher-for-longer” stance.

Since that time, the Federal Reserve has held rates flat, stating its desire to see more evidence of inflation being on a sustainable path to its target rate of 2.0% and indicating a “higher-for-longer” stance.

Despite inflation continuing to run higher than the target rate, with evidence that economic growth is beginning to slow, including a weaker labor market, most now expect the Federal Reserve to begin cutting rates later this year, though the timing and extent of such rate cuts, if any, remains uncertain.

As a result of this uncertainty, interest rates remain somewhat volatile.

The yield on the 10-year US Treasury Note has withdrawn from the 16-year high it achieved in October 2023 but still remains well above 4.0%.

As such, interest rates on long-term financing continue to be high, limiting our ability to finance new acquisitions at favorable terms.

The yield on the 10-year US Treasury Note has withdrawn from the 16-year high it achieved in October 2023 and recently fell to its lowest point of the year.

However, as it is still hovering near 4.0%, interest rates on long-term financing continue to be high, limiting our ability to finance new acquisitions on favorable terms.

Over 99.9% of our borrowings are currently at fixed rates, and on a weighted-average basis, these rates are fixed at an effective interest rate of 3.40% for another 3.9 years.

As such, with respect to our current borrowings, we have experienced minimal impact from the recent increases in interest rates, and we believe we are well-protected against any further interest rate increases, which remain a possibility.

As such, with respect to our current borrowings, we have experienced minimal impact from the higher interest rates experienced over the past couple of years, and we believe we are well-protected against a prolonged period of elevated interest rates, which remains a possibility.

Our Adviser and Administrator

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The base management and incentive fees are described below.

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

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

Base Management Fee

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A summary of our significant accounting policies is provided in Note 2 to our consolidated financial statements in our Form 10-K.

There were no material changes to our critical accounting policies during the three months ended March 31, 2024.

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

RESULTS OF OPERATIONS

For the purposes of the following discussions on certain operating revenues and expenses with regard to the comparison between the three months ended March 31, 2024 and 2023:

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

• Same-property basis represents farms owned as of March 31, 2023, which were not vacant or direct-operated at any point during either period presented and full collectability of future rental payments under the respective leases was deemed probable during the entirety of both periods;

• Properties acquired or disposed of are farms that were either acquired or disposed of at any point subsequent to March 31, 2023.

From April 1, 2023, through June 30, 2024, we did not acquire any new farms and had one farm disposition;

• Vacant, direct-operated, or non-accrual properties are:

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

◦ Farms that were direct-operated at any point during either period presented;

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

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

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

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

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

From January 1, 2023, through March 31, 2024, we did not acquire any new farms and had one farm disposition;

From January 1, 2023, through June 30, 2024, we did not acquire any new farms and had one farm disposition;

• Vacant, direct-operated, or non-accrual properties are:

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

16 of our farms were vacant during a portion of either of the three months ended March 31, 2024 or 2023;

◦ Farms that were direct-operated at any point during either period presented;

None of our farms were direct-operated during either of the three months ended March 31, 2024 or 2023;

We recognized revenue from four different leases with three separate

tenants (encompassing six different farms) on a cash basis during a portion of either of the three months ended March 31, 2024 or 2023.

A comparison of results of components comprising our operating income for the three months ended March 31, 2024 and 2023 is below (dollars in thousands):

For the Three Months Ended March 31,

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

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

For the Three Months Ended June 30,

2024 2023 $ Change % Change

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Fixed lease payments $ 20,068 $ 21,118 $ (1,050) (5.0) %

Variable lease payments – participation rents — 195 (195) (100.0) %

Variable lease payments – participation rents 1,117 — 1,117 NM

Variable lease payments – tenant reimbursements and other 85 92 (7) (7.6) %

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Operating income $ 7,864 $ 7,827 $ 37 0.5 %

For the Six Months Ended June 30,

2024 2023 $ Change % Change

Operating revenues:

Lease revenues:

Fixed lease payments $ 39,666 $ 42,078 $ (2,412) (5.7) %

Variable lease payments – participation rents 1,112 195 917 470.3 %

Variable lease payments – tenant reimbursements 318 139 179 128.8 %

Total lease revenues 41,096 42,412 (1,316) (3.1) %

Other operating revenues 453 — 453 NM

Total operating revenues 41,549 42,412 (863) (2.0) %

Operating expenses:

Depreciation and amortization 17,602 18,163 (561) (3.1) %

Property operating expenses 2,096 2,015 81 4.0 %

Base management and incentive fees 4,233 4,296 (63) (1.5) %

Administration fee 1,156 1,090 66 6.1 %

General and administrative expenses 1,337 1,577 (240) (15.2) %

Total operating expenses 26,424 27,141 (717) (2.6) %

Operating income $ 15,125 $ 15,271 $ (146) (1.0) %

NM = Not Meaningful

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Lease revenue

The following table provides a summary of our lease revenues during the three months ended March 31, 2024 and 2023 (dollars in thousands):

For the Three Months Ended March 31,

2024 2023 $ Change % Change

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

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

2024 2023 $ Change % Change 2024 2023 $ Change % Change

Same-property basis:

Fixed lease payments $ 19,745 $ 19,397 $ 348 1.8% $ 38,996 $ 38,601 $ 395 1.0%

Participation rents — 123 (123) (100.0)%

Participation rents 879 — 879 NM 874 123 751 610.6%

Total – Same-property basis 20,624 19,397 1,227 6.3% 39,870 38,724 1,146 3.0%

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Fixed lease payments 323 989 (666) (67.3)% 670 2,014 (1,344) (66.7)%

Participation rents — 72 (72) (100.0)%

Participation rents 238 — 238 NM 238 72 166 230.6%

Total – Vacant, direct-operated, or non-accrual properties 561 989 (428) (43.3)% 908 2,086 (1,178) (56.5)%

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Total Lease revenues $ 21,270 $ 21,210 $ 60 0.3% $ 41,096 $ 42,412 $ (1,316) (3.1)%

NM = Not Meaningful

(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.

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Same-property Basis – 2024 compared to 2023

Lease revenues from fixed lease payments remained relatively flat for the three months ended March 31, 2024 as compared to the prior-year period.

Lease revenues from participation rents decreased for the three months ended March 31, 2024, due to insufficient information available to us as of March 31, 2024, to allow certain amounts to be reasonably determinable.

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

Lease revenues from participation rents increased primarily due to additional information related to the 2023 harvest on certain of our farms not being made available to us until the three months ended June 30, 2024, thus allowing such amounts to be reasonably determinable and recorded.

Other – 2024 compared to 2023

Lease revenue from properties acquired or disposed of decreased due to the sale of a 3,748-acre farm in Florida on January 11, 2024.

Fixed lease payments from vacant, direct-operated, or non-accrual properties decreased primarily due to revenue from certain of our leases being recognized on a cash basis during a portion of the three months ended March 31, 2024 (rather than a straight-line basis), due to full collectability of future rental payments under the respective leases deemed not to be probable as a result of tenant credit issues.

In addition, 16 of our farms were vacant for portions of each of the three months ended March 31, 2024 and 2023.

The decrease in lease revenue from vacant, direct-operated, or non-accrual properties was partially offset by cash collections (in part or in whole) from tenants occupying certain of these properties during the three months ended March 31, 2024.

Fixed lease payments from vacant, direct-operated, or non-accrual properties decreased primarily due to revenue from certain of our leases being recognized on a cash basis during a portion of the current-year periods (rather than a straight-line basis), due to full collectability of future rental payments under the respective leases deemed not to be probable as a result of tenant credit issues.

In addition, certain of our farms were either direct-operated (on a temporary basis via management agreements with unrelated third-parties) or vacant for portions of each of the six months ended June 30, 2024 and 2023.

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

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

Amounts recorded during the current-year period include increased reimbursements from certain tenants for costs to deliver water to their farms via a pipeline owned by an unconsolidated entity of ours.

Amounts recorded during the current-year periods include increased reimbursements from certain tenants for costs to deliver water to their farms via a pipeline owned by an unconsolidated entity of ours.

Other Operating Revenue

Other operating revenue consists of non-lease revenue generated as a result of activities performed on certain of our properties.

During the three months ended March 31, 2024, we recognized approximately $426,000 of non-cash revenue associated with the transfer and storing of surplus water on behalf of a government municipality using a groundwater recharge facility constructed on one of our farms.

See above under “ Recent Developments—Portfolio Activity–Existing Properties—Water Asset Acquisitions ” for further discussion.

During the three and six months ended June 30, 2024, we recognized approximately $27,000 and $453,000, respectively, of non-cash revenue associated with the transfer and storing of surplus water on behalf of a government municipality using a groundwater recharge facility constructed on one of our farms.

See Note 3, “ Real Estate and Intangible Assets—Investments in Water Assets ,” within the accompanying notes to our condensed consolidated financial statements for further discussion.

Operating Expenses

Depreciation and amortization

Depreciation and amortization expense decreased primarily due to the disposition of certain assets, including the sale of a 3,748-acre farm in Florida, and certain other assets reaching the end of their useful lives.

Depreciation and amortization expense decreased primarily due to the disposition of certain assets, including the sale of a 3,748-acre farm in Florida in the first quarter of 2024, and certain other assets reaching the end of their useful lives.

This decrease was partially offset by additional depreciation expense associated with new capital improvements made on certain of our farms.

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Property operating expenses consist primarily of real estate taxes, repair and maintenance expenses, insurance premiums, and other miscellaneous operating expenses paid for certain of our properties.

The following table provides a summary of the property-operating expenses recorded during the three months ended March 31, 2024 and 2023 (dollars in thousands):

For the Three Months Ended March 31,

2024 2023 $ Change % Change

The following table provides a summary of the property-operating expenses recorded during the three and six months ended June 30, 2024 and 2023 (dollars in thousands):

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

2024 2023 $ Change % Change 2024 2023 $ Change % Change

Same-property basis $ 766 $ 641 $ 125 19.5% $ 1,259 $ 1,428 $ (169) (11.8)%

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Same-property Basis – 2024 compared to 2023

Property operating expenses decreased primarily due to a decrease in legal fees and other costs incurred in connection with protecting water rights on certain farms in California, as well as a decrease in repairs and maintenance expense incurred during the prior-year period as a result of minor damage cause by natural disasters at certain farms.

Property operating expenses increased primarily due to additional property taxes paid by us on behalf of one of our tenants who terminated their lease subsequent to June 30, 2024.

For the six months ended June 30, 2024, this increase was partially offset by a decrease in legal fees and other costs incurred in connection with protecting water rights on certain farms in California, as well as a decrease in repairs and maintenance expense incurred during the prior-year period as a result of minor damage at certain farms caused by natural disasters.

Other – 2024 compared to 2023

Property operating expenses on properties acquired or disposed of decreased due to the sale of one farm in Florida, as discussed elsewhere.

Property operating expenses attributable to vacant, direct-operated, or non-accrual properties decreased primarily due to a decrease in legal fees incurred in connection with rent collection or lease termination efforts for those tenants on farms that were placed on non-accrual status and a decrease in third-party property management expenses.

This decrease was partially offset by an increase in property tax expense.

Property operating expenses attributable to vacant, direct-operated, or non-accrual properties increased primarily due to additional property management fees incurred on certain farms that were direct-operated for a portion of the current year-periods (via management agreements with unrelated third-parties) and additional property taxes incurred, including those paid on behalf of certain tenants leasing farms that were placed on non-accrual status.

This increase was partially offset by a decrease in legal fees incurred in connection with rent collection or lease termination efforts for those tenants on farms that were placed on non-accrual status.

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

Such expenses will fluctuate commensurate with the timing and amount of miscellaneous operating costs incurred by the underlying entities.

Amounts recorded during the current-year period include additional costs to deliver water to certain of our farms via a pipeline owned by an unconsolidated entity of ours, which costs were reimbursed to us by our tenants.

Amounts recorded during the current-year periods include additional costs to deliver water to certain of our farms via a pipeline owned by an unconsolidated entity of ours, which costs were reimbursed to us by our tenants.

Related-Party Fees

The following table provides the calculations of the base management and incentive fees due to our Adviser pursuant to the Advisory Agreement for the three months ended March 31, 2024 and 2023 (dollars in thousands;

The following table provides the calculations of the base management and incentive fees due to our Adviser pursuant to the Advisory Agreement for the three and six months ended June 30, 2024 and 2023 (dollars in thousands;

for further discussion on certain defined terms used below, refer to Note 6, “ Related-Party Transactions ,” within the accompanying notes to our condensed consolidated financial statements):

Quarter Ended

Quarter Ended Year to Date

March 31 June 30

2024 Fee Calculations:

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Gross Tangible Real Estate (1)(2)

$ 1,437,812 $ 1,384,228

Quarterly rate 0.150 % 0.150 %

Base management fee (3)

$ 2,157 $ 2,076 $ 4,233

Incentive Fee:

Total Adjusted Common Equity (1)(2)

$ 344,128 $ 346,578

First hurdle quarterly rate 1.750 % 1.750 %

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Pre-Incentive Fee FFO (1)

$ 5,988 $ 4,974

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

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Gross Tangible Real Estate (1)(2)

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

Quarterly rate 0.150 % 0.150 %

Base management fee (3)

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

Incentive Fee:

Total Adjusted Common Equity (1)(2)

$ 358,689 $ 362,411

First hurdle quarterly rate 1.750 % 1.750 %

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Pre-Incentive Fee FFO (1)

$ 5,303 $ 4,400

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

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(3) Reflected as a line item on our accompanying Condensed Consolidated Statements of Operations and Comprehensive Income.

The base management fee increased primarily due to additional assets acquired and improvements made on certain of our farms since December 31, 2022.

No incentive fee was earned by our Adviser during either of the three months ended March 31, 2024 or 2023, as our Pre-Incentive Fee FFO did not surpass the required hurdle rate in either period.

The base management fee decreased due to the disposition of certain assets since December 31, 2022, largely driven by the sale of a 3,748-acre farm in Florida in the first quarter of 2024.

No incentive fee was earned by our Adviser during either of the three and six months ended June 30, 2024 or 2023, as our Pre-Incentive Fee FFO did not surpass the required hurdle rate in either period.

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

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General and administrative expenses consist primarily of professional fees, director fees, stockholder-related expenses, overhead insurance, acquisition-related costs for investments no longer being pursued, and other miscellaneous expenses.

General and administrative expenses decreased during the current-year period, primarily due to a decrease in stockholder-related expenses related to the annual stockholders’ meeting and the listing of the Series C Preferred Stock on Nasdaq in the first half of 2023.

The decrease was also attributable to a decrease in professional fees, particularly lower legal and accounting costs.

A comparison of results of other components contributing to net loss attributable to common stockholders for the three months ended March 31, 2024 and 2023 is below (dollars in thousands):

For the Three Months Ended March 31,

General and administrative expenses decreased during the current-year periods, primarily due to a decrease in stockholder-related expenses related to the listing of the Series C Preferred Stock on Nasdaq in 2023.

The decrease was also attributable to a decrease in acquisition-related costs for investments no longer being pursued and lower professional fees.

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

For the Three Months Ended June 30,

2024 2023 $ Change % Change

Operating income $ 7,864 $ 7,827 $ 37 0.5%

Other income (expense):

Other expense (income):

Other income 497 364 133 36.5%

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

Gain (loss) on dispositions of real estate assets, net 10,273 (481) 10,754 (2,235.8)%

(Loss) gain on dispositions of real estate assets, net (2,800) 6,394 (9,194) (143.8)%

Property and casualty loss, net (9) — (9) NM

Loss from investments in unconsolidated entities (85) (33) (52) 157.6%

Total other (expense) income, net (8,687) 28 (8,715) (31,125.0)%

Net (loss) income (823) 7,855 (8,678) (110.5)%

Net income attributable to non-controlling interests — — — NM

Net (loss) income attributable to the Company (823) 7,855 (8,678) (110.5)%

Aggregate dividends declared on and gain (loss) recognized on extinguishment of cumulative redeemable preferred stock, net (5,831) (6,128) 297 (4.8)%

Net (loss) income attributable to common stockholders $ (6,654) $ 1,727 $ (8,381) (485.3)%

For the Six Months Ended June 30,

2024 2023 $ Change % Change

Operating income $ 15,125 $ 15,271 $ (146) (1.0)%

Other expense (income):

Other income 2,925 2,984 (59) (2.0)%

Interest expense (11,090) (11,979) 889 (7.4)%

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

Gain on dispositions of real estate assets, net 7,473 5,914 1,559 26.4%

Property and casualty loss, net (9) (1,016) 1,007 (99.1)%

Loss from investments in unconsolidated entities (171) (60) (111) 185.0%

Total other income (expense), net 6,306 (5,695) 12,001 (210.7)%

Total other expense, net (2,381) (5,666) 3,285 (58.0)%

Net income 12,744 9,605 3,139 32.7%

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Net income attributable to the Company 12,744 9,605 3,139 32.7%

Aggregate dividends declared on and charges related to extinguishment of cumulative redeemable preferred stock (6,118) (6,070) (48) 0.8%

Aggregate dividends declared on and gain (loss) recognized on extinguishment of cumulative redeemable preferred stock, net (11,949) (12,198) 249 (2.0)%

Net income (loss) attributable to common stockholders $ 795 $ (2,593) $ 3,388 (130.7)%

NM = Not Meaningful

Other Income (Expense)

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

Other (Expense) Income

Other income generally consists of interest patronage received from Farm Credit (as defined in Note 4, “ Borrowings ,” in the accompanying notes to our condensed consolidated financial statements) and interest earned on short-term investments.

Other income increased during the three months ended June 30, 2024, primarily due to additional income earned on short-term investments due to higher interest rates, but decreased slightly for the six months ended June 30, 2024, primarily due to less interest patronage received from Farm Credit (primarily due to decreased borrowings from Farm Credit).

During the three months ended March 31, 2024, we recorded approximately $1.9 million of interest patronage from Farm Credit related to interest accrued during 2023, as compared to approximately $2.3 million of interest patronage recorded during the prior-year period that related to interest accrued during 2022.

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Interest expense decreased, primarily due to a decrease in overall borrowings.

The weighted-average principal balance of our aggregate borrowings (excluding our cumulative term preferred stock) outstanding for the three months ended March 31, 2024, was approximately $557.6 million, as compared to approximately $612.2 million for the prior-year period.

Excluding interest patronage received on certain of our Farm Credit borrowings and the impact of debt issuance costs, the weighted-average interest rate charged on our aggregate borrowings for the three months ended March 31, 2024, was 3.81%, as compared to 3.77% for the prior-year period.

During the three months ended March 31, 2024, we recorded a net capital gain, driven by the sale of a 3,748-acre farm in Martin County, Florida for approximately $65.7 million, which after accounting for closing costs, resulted in a net gain of

approximately $10.4 million.

The net loss recorded during the three months ended March 31, 2023, related to the disposals of certain irrigation and other improvements on certain of our farms.

The weighted-average principal balance of our aggregate borrowings (excluding our cumulative term preferred stock) outstanding for the three and six months ended June 30, 2024, was approximately $553.5 million and $555.5 million, respectively, as compared to approximately $600.1 million and $606.1 million for the respective prior-year periods.

Excluding interest patronage received on certain of our Farm Credit borrowings and the impact of debt issuance costs, the weighted-average interest rate charged on our aggregate borrowings for the three and six months ended June 30, 2024, was 3.83% and 3.82%, respectively, as compared to 3.79% and 3.78% for the respective prior-year periods.

During the six months ended June 30, 2024, we recorded a net capital gain, driven by the sale of a 3,748-acre farm in Martin County, Florida, for approximately $65.7 million, which after accounting for closing costs, resulted in a net gain of approximately $10.4 million.

During the three and six months ended June 30, 2023, we recorded a net capital gain, driven by the sale of a 138-acre parcel of unfarmed land in Florida for $9.6 million, which, after accounting for closing costs, resulted in a net gain of approximately $6.4 million.

The net loss recorded during the three months ended June 30, 2024, related to the removal of some permanent plantings and the disposal of certain irrigation and other improvements on certain of our farms.

The net property and casualty loss relates to net expenses incurred and insurance recoveries received for certain improvements that were damaged due to natural disasters.

The property and casualty loss recorded during the three months ended March 31, 2023, was primarily due to the heavy rainfall that occurred in California in early 2023 and the resulting flooding, which damaged certain structures located on one of our farms in the Central Valley.

The property and casualty loss recorded during the six months ended June 30, 2023, was primarily due to the heavy rainfall that occurred in California in early 2023 and the resulting flooding, which damaged certain structures located on one of our farms in the Central Valley.

LIQUIDITY AND CAPITAL RESOURCES

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In addition, the weighted-average remaining term of our notes and bonds payable is approximately 8.4 years.

As such, with respect to our current borrowings, we have experienced minimal impact from increased interest rates over the past two years, and we believe we are well-protected against any future interest rate increases.

Despite ongoing uncertainty in the markets, based on discussions with our lenders, we do not believe there will be a credit freeze on agricultural lending in the near term.

As such, with respect to our current borrowings, we have experienced minimal impact from increased interest rates in recent years, and we believe we are well-protected against a prolonged high rate environment.

Despite ongoing uncertainty in the markets, based on discussions with our lenders and other market participants, we do not believe there will be a credit freeze on agricultural lending in the near term.

We are in compliance with all of our debt covenants under our respective credit facilities and borrowings, and we believe we currently have adequate liquidity to cover all near- and long-term debt obligations and operating expenses.

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making distributions to common stockholders (including non-controlling OP Unitholders, if any) to maintain our qualification as a REIT;

and, as capital is available, funding capital improvements on existing farms and new farmland and farm-related acquisitions consistent with our investment strategy.

In the near term, we believe that our current and short-term cash resources will be sufficient to service our debt;

fund our current operating costs;

pay dividends on our currently-designated preferred securities;

and fund our distributions to common stockholders (including non-controlling OP Unitholders).

and, as capital is available, funding capital improvements on existing farms, repurchasing shares of preferred stock

under our Repurchase Program, and funding new farmland and farm-related acquisitions consistent with our investment strategy.

In the near term, we believe that our current and short-term cash resources will be sufficient to service our debt, fund our current level of operating costs, pay dividends on our currently-designated preferred securities, and fund our distributions to common stockholders (including non-controlling OP Unitholders).

We expect to meet our long-term liquidity requirements through various sources of capital, including capacity under current lines of credit, long-term mortgage indebtedness and bond issuances, future equity issuances (including, but not limited to, shares of our Series E Preferred Stock, OP Units through our Operating Partnership as consideration for future acquisitions, and shares of common stock through our ATM Program), and other secured and unsecured borrowings.

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

Below is a summary of certain of those projects for which we have incurred or accrued costs as March 31, 2024 (dollars in thousands):

Below is a summary of certain of those projects for which we have incurred or accrued costs as June 30, 2024 (dollars in thousands):

Location(s) Farm

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or Accrued as of

March 31, 2024

June 30, 2024

Columbia, OR 157 $ 1,800 (2) Q3 2024 $ 1,146

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

Future minimum lease payments due under the remaining non-cancelable terms of these leases as of March 31, 2024, are as follows (dollars in thousands):

Future minimum lease payments due under the remaining non-cancelable terms of these leases as of June 30, 2024, are as follows (dollars in thousands):

Period Future Lease Payments (1)

For the remaining nine months ending December 31:

For the remaining six months ending December 31:

For the fiscal years ending December 31:

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

As a result of these ground leases, we recorded lease expense of approximately $26,000 and $25,000 during the three months ended March 31, 2024 and 2023 , respectively.

As a result of these ground leases, we recorded lease expense of approximately $26,000 and $52,000 during the three and six months ended June 30, 2024 , respectively, and approximately $26,000 and $51,000 during the three and six months ended June 30, 2023 , respectively.

Cash Flow Resources

The following table summarizes total net cash flows from operating, investing, and financing activities for the three months ended March 31, 2024 and 2023 (dollars in thousands):

For the Three Months Ended March 31,

The following table summarizes total net cash flows from operating, investing, and financing activities for the six months ended June 30, 2024 and 2023 (dollars in thousands):

For the Six Months Ended June 30,

2024 2023 $ Change % Change

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The majority of cash from operating activities is generated from the rental payments we receive from our tenants, which is first used to fund our property-level operating expenses, with any excess cash being primarily used for principal and interest payments on our borrowings, management fees to our Adviser, administrative fees to our Administrator, and other corporate-level expenses.

Cash provided by operating activities decreased, largely due to a decrease in fixed lease cash payments received (primarily due to the disposition of one farm in Florida, as well as due to the timing of when certain cash rental payments were received), partially offset by a decrease in interest payments made and aggregate fees paid to our Advisor during the current-year period.

Cash provided by operating activities decreased, largely due to a decrease in fixed lease cash payments received (primarily due to the disposition of one farm in Florida, as well as due to the timing of when certain cash rental payments were received), partially offset by an increase in cash payments received toward participation rents and a decrease in interest payments made.

Investing Activities

The change in cash from investing activities was primarily due to proceeds received from the sale of a 3,748-acre farm in Florida for approximately $65.7 million during the three months ended March 31, 2024, which resulted in a net gain of approximately $10.4 million, and a decrease in the amount of cash paid for capital improvements on existing farms during the current-year period.

The change in cash from investing activities was primarily due to proceeds received from the sale of a 3,748-acre farm in Florida for approximately $65.7 million during the six months ended June 30, 2024, which resulted in a net gain of approximately $10.4 million, and a decrease in the amount of cash paid for capital improvements on existing farms during the current-year period.

Financing Activities

The change in cash from financing activities was primarily due to a decrease in aggregate net cash proceeds received from preferred and common equity offerings of approximately $14.1 million and a decrease in aggregate net borrowings of approximately $5.5 million.

The change in cash from financing activities was primarily due to a decrease in aggregate net cash proceeds received from preferred and common equity offerings of approximately $17.0 million, partially offset by a decrease in aggregate debt repayments of approximately $8.0 million.

MetLife Facility

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Equity Capital

The following table provides information on equity sales that have occurred since January 1, 2024 (dollars in thousands, except per-share amounts):

The following table provides information on equity sales that occurred since January 1, 2024 (dollars in thousands, except per-share amounts):

Type of Issuance Number of

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Off-Balance Sheet Arrangements

As of March 31, 2024, we did not have any material off-balance sheet arrangements.

As of June 30, 2024, we did not have any material off-balance sheet arrangements.

NON-GAAP FINANCIAL INFORMATION

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We believe that FFO, CFFO, and AFFO and Diluted FFO, CFFO, and AFFO per share are useful to investors because they provide investors with a further context for evaluating our FFO, CFFO, and AFFO results in the same manner that investors use net income and EPS in evaluating net income.

The following table provides a reconciliation of our FFO, CFFO, and AFFO for the three months ended March 31, 2024 and 2023 to the most directly-comparable GAAP measure, net income, and a computation of diluted FFO, CFFO, and AFFO per share, using the weighted-average number of total shares (including shares of our common stock and OP Units held by non-controlling OP Unitholders) outstanding during the respective periods (dollars in thousands, except per-share amounts):

For the Three Months Ended March 31,

Net income $ 13,567 $ 1,750

Aggregate dividends declared on and charges related to extinguishment of cumulative redeemable preferred stock (1)

The following table provides a reconciliation of our FFO, CFFO, and AFFO for the three and six months ended June 30, 2024 and 2023 to the most directly-comparable GAAP measure, net income, and a computation of diluted FFO, CFFO, and AFFO per share, using the weighted-average number of total shares (including shares of our common stock and OP Units held by non-controlling OP Unitholders) outstanding during the respective periods (dollars in thousands, except per-share amounts):

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

2024 2023 2024 2023

Net income (loss) attributable to common stockholders and non-controlling OP Unitholders 7,449 (4,320)

Net (loss) income $ (823) $ 7,855 $ 12,744 $ 9,605

Aggregate dividends declared on and gains on or charges related to extinguishment of cumulative redeemable preferred stock, net (1)

(5,831) (6,128) (11,949) (12,198)

Net (loss) income attributable to common stockholders and non-controlling OP Unitholders (6,654) 1,727 795 (2,593)

Real estate and intangible depreciation and amortization 8,813 9,044 17,602 18,163

(Gains) losses on dispositions of real estate assets, net (10,273) 481

Losses (gains) on dispositions of real estate assets, net 2,800 (6,394) (7,473) (5,914)

Adjustments for unconsolidated entities (2)

FFO available to common stockholders and non-controlling OP Unitholders 4,974 4,400 10,962 9,703

Acquisition- and disposition-related expenses, net — 19

Acquisition- and disposition-related (credits) expenses, net (11) 74 (13) 92

Other nonrecurring charges, net (3)

48 142 61 1,279

CFFO available to common stockholders and non-controlling OP Unitholders 5,011 4,616 11,010 11,074

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

(605) 55 (1,169) 278

AFFO available to common stockholders and non-controlling OP Unitholders 3,703 3,649 8,833 9,548

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Distributions declared per common share $ 0.14 $ 0.14 $ 0.28 $ 0.28

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

(1) Includes (i) cash dividends paid on our cumulative redeemable preferred stock, (ii) the value of additional shares of Series C Preferred Stock issued pursuant to the DRIP, and (iii) the net (gain) loss recognized as a result of shares of cumulative redeemable preferred stock that were redeemed during the respective periods.

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

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

(4) Consists of (i) the amount of dividends on the Series C Preferred Stock paid via issuing new shares (pursuant to the DRIP), (ii) the pro-rata write-off of offering costs related to shares of cumulative redeemable preferred stock that were redeemed, which were non-cash charges, (iii) our remaining pro-rata share of (income) loss recorded from investments in unconsolidated entities during the respective periods, and (iv) less non-cash income recorded as a result of additional water assets received as consideration in certain transactions.

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

(4) Consists of (i) the amount of dividends on the Series C Preferred Stock paid via issuing new shares (pursuant to the DRIP), (ii) the net (gain) loss recognized as a result of shares of cumulative redeemable preferred stock that were redeemed, which were non-cash (gains) charges, (iii) our remaining pro-rata share of (income) loss recorded from investments in unconsolidated entities, and (iv) less non-cash income recorded as a result of additional water assets received as consideration in certain transactions.

Net Asset Value

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(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.

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.

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Sources of this data may come from market inputs from recent acquisitions of our own portfolio of real estate, recent appraisals of properties we own that are similar in nature and in the same region (as applicable) as the property being valued, market conditions and trends we observe in our due diligence process, and conversations with appraisers, brokers, and farmers.

A breakdown of the methodologies used to value our properties and the aggregate value as of March 31, 2024, determined by each method is shown in the table below (dollars in thousands, except in footnotes):

A breakdown of the methodologies used to value our properties and the aggregate value as of June 30, 2024, determined by each method is shown in the table below (dollars in thousands, except in footnotes):

Valuation Method Number

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(1) Consists of the initial acquisition price (including the costs allocated to both tangible and intangible assets acquired and liabilities assumed), plus subsequent improvements and other capitalized costs paid for by us that were associated with the properties, and adjusted for accumulated depreciation and amortization.

(2) Appraisals performed between June 2023 and March 2024.

Some of the significant assumptions used by appraisers and the Valuation Team in valuing our portfolio as of March 31, 2024, include land values per farmable acre, market rental rates per farmable acre and the resulting net operating income (“NOI”) at the property level, and capitalization rates, among others.

(2) Appraisals performed between June 2023 and June 2024.

Some of the significant assumptions used by appraisers and the Valuation Team in valuing our portfolio as of June 30, 2024, include land values per farmable acre, market rental rates per farmable acre and the resulting net operating income (“NOI”) at the property level, and capitalization rates, among others.

These assumptions were applied on a farm-by-farm basis and were selected based on several factors, including comparable land sales, surveys of both existing and current market rates, discussions with other brokers and farmers, soil quality, size, location, and other factors deemed appropriate.

A summary of these significant assumptions as of March 31, 2024, is provided in the following table:

A summary of these significant assumptions as of June 30, 2024, is provided in the following table:

Appraisal Assumptions Internal Valuation Assumptions

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Developments considered that may have an impact on the fair value of our real estate include, but are not limited to, changes in tenant credit profiles, changes in lease terms (such as expirations and notices of non-renewals or to vacate), and potential asset sales (particularly those at prices different from the appraised values of our properties).

Management believes that the purchase prices of the farms acquired during the previous 12 months and the most recent appraisals available for the farms acquired prior to the previous 12 months fairly represent the current market values of the properties as of March 31, 2024, and, accordingly, did not make any adjustment to these values.

A quarterly roll-forward of the change in our portfolio value for the three months ended March 31, 2024, from the prior value basis as of December 31, 2023, is provided in the table below (dollars in thousands):

Total portfolio fair value as of December 31, 2023 $ 1,566,474

Acquisition of water assets during the three months ended March 31, 2024 771

Sale of one farm during the three months ended March 31, 2024 (65,651)

Change in value of farms during the three months ended March 31, 2024

Farms valued via third-party appraisals $ (3,675)

Net change in value of farms during the three months ended March 31, 2024 (3,675)

Management believes that the purchase prices of the farms acquired during the previous 12 months and the most recent appraisals available for the farms acquired prior to the previous 12 months fairly represent the current market values of the properties as of June 30, 2024, and, accordingly, did not make any adjustment to these values.

A quarterly roll-forward of the change in our portfolio value for the three months ended June 30, 2024, from the prior value basis as of March 31, 2024, is provided in the table below (dollars in thousands):

Total portfolio fair value as of March 31, 2024 $ 1,497,919

Acquisition of water assets during the three months ended June 30, 2024 1,499

Change in value of farms during the three months ended June 30, 2024

Farms valued via third-party appraisals $ (13,765)

Net change in value of farms during the three months ended June 30, 2024 (13,765)

Total portfolio fair value as of June 30, 2024 $ 1,485,653

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

Using a discounted cash flow analysis, management determined that the fair value of all long-term encumbrances on our properties as of March 31, 2024, was approximately $506.8 million, as compared to a carrying value (excluding unamortized related debt issuance costs) of approximately $554.8 million.

The fair values of our Series B Preferred Stock, Series C Preferred Stock, and Series D Term Preferred Stock were determined using the closing stock prices as of March 31, 2024, of $20.04 per share, $20.02 per share, and $23.96 per share, respectively.

Finally, pursuant to Financial Industry Regulatory Authority Rule 2310(b)(5), with the assistance of a third-party valuation expert, we determined the estimated value of our Series E Preferred Stock to be $25.00 per share as of March 31, 2024 (see Exhibit 99.1 to this Form 10-Q).

Using a discounted cash flow analysis, management determined that the fair value of all long-term encumbrances on our properties as of June 30, 2024, was approximately $503.0 million, as compared to a carrying value (excluding unamortized related debt issuance costs) of approximately $551.9 million.

The fair values of our Series B Preferred Stock, Series C Preferred Stock, and Series D Term Preferred Stock were determined using the closing stock prices as of June 30, 2024, of $21.08 per share, $21.05 per share, and $24.20 per share, respectively.

Finally, pursuant to Financial Industry Regulatory Authority Rule 2310(b)(5), with the assistance of a third-party valuation expert, we determined the estimated value of our Series E Preferred Stock to be $25.00 per share as of June 30, 2024 (see Exhibit 99.1 to this Form 10-Q).

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-

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 cost bases.

NAV is a non-GAAP, supplemental measure of financial position of an equity REIT and is calculated as total equity, adjusted for the increase or decrease in fair value of our real estate assets and long-term borrowings (including any preferred stock required to be treated as debt for GAAP purposes) relative to their respective cost 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).

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PricewaterhouseCoopers LLP has neither examined, compiled, nor performed any procedures with respect to the fair values or the calculation of net asset value per common share, which utilizes information that is not disclosed within the financial statements, and, accordingly, does not express an opinion or any other form of assurance with respect thereto.

As of March 31, 2024, we estimate the NAV per common share to be $18.50.

As of June 30, 2024, we estimate the NAV per common share to be $17.59.

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

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Fair value adjustment for long-term assets:

net cost basis of tangible and intangible real estate holdings (1)

net cost basis of real estate holdings and related assets (1)

$ (1,271,852)

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

The Series D Term Preferred Stock was valued based on its closing stock price as of March 31, 2024.

(5) The Series B Preferred Stock and Series C Preferred Stock were valued based on their respective closing stock prices as of March 31, 2024, while the Series E Preferred Stock was valued at its liquidation value, as discussed above.

A quarterly roll-forward in the estimated NAV per common share for the three months ended March 31, 2024, is provided below:

Estimated NAV per common share and non-controlling OP Unit as of December 31, 2023 $ 19.06

Plus net income attributable to common stockholders and non-controlling OP Unitholders 0.21

The Series D Term Preferred Stock was valued based on its closing stock price as of June 30, 2024.

(5) The Series B Preferred Stock and Series C Preferred Stock were valued based on their respective closing stock prices as of June 30, 2024, while the Series E Preferred Stock was valued at its liquidation value, as discussed above.

A quarterly roll-forward in the estimated NAV per common share for the three months ended June 30, 2024, is provided below:

Estimated NAV per common share and non-controlling OP Unit as of March 31, 2024 $ 18.50

Less net loss attributable to common stockholders and non-controlling OP Unitholders (0.19)

Adjustments for net change in valuations:

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

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

Estimated NAV per common share and non-controlling OP Unit as of March 31, 2024 $ 18.50

Plus (less) net accretive (dilutive) effect of equity issuances and redemptions, net —

Estimated NAV per common share and non-controlling OP Unit as of June 30, 2024 $ 17.59

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

(i) a decrease of $0.10 per share due to the net depreciation in value of the farms that were valued during the three months ended March 31, 2024, (ii) an increase of $0.25 per share due to the decrease in net book value of our real estate holdings as a result of the aggregate depreciation and amortization expense recorded during the three months ended March 31, 2024, and (iii) a decrease of $0.38 per share due to net asset dispositions or capital improvements made on certain farms that have not yet been considered in the determination of the respective farms’ estimated fair values.

(i) a decrease of $0.39 per share due to the net depreciation in value of the farms that were valued during the three months ended June 30, 2024, (ii) an increase of $0.25 per share due to the decrease in net book value of our real estate holdings as a result of the aggregate depreciation and amortization expense recorded during the three months ended June 30, 2024, and (iii) an increase of $0.02 per share due to net asset dispositions or capital improvements made on certain farms that have not yet been considered in the determination of the respective farms’ estimated fair values.

Comparison of estimated NAV and estimated NAV per common share, using the definitions above, to similarly-titled measures for other REITs may not necessarily be meaningful due to possible differences in the calculation or application of the definition of NAV used by such REITs.

In addition, the trading price of our common shares may differ significantly from our most recent

estimated NAV per common share calculation.

For example, while we estimated our NAV per common share to be $18.50 as of March 31, 2024, based on the calculation above, the closing price of our common stock on March 31, 2024, was $13.34 per share.

In addition, the trading price of our common shares may differ significantly from our most recent estimated NAV per common share calculation.

For example, while we estimated our NAV per common share to be $17.59 as of June 30, 2024, based on the calculation above, the closing price of our common stock on June 30, 2024, was $13.69 per share.

The determination of estimated NAV is subjective and involves a number of assumptions, judgments, and estimates, and minor adjustments to these assumptions, judgments, or estimates may have a material impact on our overall portfolio valuation.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis