Commitments and Contingencies

9 Months Ended

Sep. 30, 2017

Note 8—Commitments and Contingencies

On October 26, 2016, a purported class action lawsuit was filed in the Circuit Court for Baltimore County, Maryland against AFCO, seeking to represent a proposed class of all AFCO stockholders captioned Parshall v. American Farmland Company et. al., Case No. 24C16005745. The complaint names as defendants AFCO, the members of AFCO’s board of directors, AFCO OP, the Company, the Operating Partnership, Farmland Partners OP GP LLC, FPI Heartland LLC, FPI Heartland Operating Partnership, LP and FPI Heartland GP LLC. The complaint alleges that the AFCO directors breached their duties to AFCO in connection with the evaluation and approval of the AFCO Mergers. In addition, the complaint alleges, among other things, that AFCO, AFCO OP, the Company, Farmland Partners OP GP LLC, FPI Heartland LLC, FPI Heartland Operating Partnership, LP and FPI Heartland GP LLC aided and abetted those breaches of duties. On April 18, 2017, the court approved an order to dismiss the lawsuit without prejudice.

In April 2015, the Company entered into a lease agreement for office space. The lease expires on July 31, 2019. The lease commenced on June 1, 2015 and had an initial monthly payment of $10,032, which increased to $10,200 and $10,367 in June of 2016 and June of 2017, respectively, and increases annually thereafter. The Company also entered into two annual leases for farmland and office space on January 1, 2017 and February 2, 2017, respectively. As of September 30, 2017, future minimum lease payments are as follows:


($ in thousands)	Future rental
Year Ending December 31,	payments
2017 (remaining three months)	$	44
2018		126
2019		74
2020		—
2021		—
	$	244

A sale of any of the 38 properties contributed to the Company’s portfolio at the time of its initial public offering that would not provide continued tax deferral to Pittman Hough Farms is contractually restricted until the fifth (with respect to certain properties) or seventh (with respect to certain other properties) anniversary of the completion of the formation transactions, which occurred on April 16, 2014. Furthermore, if any such sale or defeasance is foreseeable, the Company is required to notify Pittman Hough Farms and to cooperate with it in considering strategies to defer or mitigate the recognition of gain under the Code, by any of the equity interest holders of the recipient of the Common units.

The Company has entered into lease agreements in which the Company agreed to complete certain improvement projects on one Florida farm and four South Carolina farms. As of September 30, 2017, future capital commitments associated with the projects are as follows:


($ in thousands)	Future Capital
Year Ending December 31,	Commitments
2017 (remaining three months)	$	4,311
2018		845
	$	5,156

As of September 30, 2017 the Company had the following properties under contract. As of the report date, none of the farm acquisitions below have closed, but are expected to close in Q4 2017 or Q1 2018 and are expected to be accounted for as asset acquisitions.



($ in thousands)		Purchase
Farm State		Price
South Carolina	$	1,120
California		110,000
	$	111,120

See “Note 10—Subsequent Events” for properties put under contract subsequent to September 30, 2017.