REAL ESTATE OPERATIONS

9 Months Ended

Sep. 30, 2022

REAL ESTATE OPERATIONS

REAL ESTATE OPERATIONS

NOTE 6. REAL ESTATE OPERATIONS

Real Estate Operations

Land and development costs at September 30, 2022 and December 31, 2021 were as follows (in thousands):

	As of
	September 30, 2022		December 31, 2021
Land and Development Costs	$	358	$	358
Subsurface Interests		327		334
Total Land and Development Costs	$	685	$	692

Subsurface Interests. As of September 30, 2022, the Company owns 355,000 acres of Subsurface Interests. The Company leases certain of the Subsurface Interests to mineral exploration firms for exploration. The Company’s subsurface operations consist of revenue from the leasing of exploration rights and in some instances, additional revenues from royalties applicable to production from the leased acreage, which revenues are included within real estate operations in the consolidated statements of operations. During the three and nine months ended September 30, 2022, the Company sold subsurface oil, gas, and mineral rights of 1,500 acres for a sales price of $0.7 million and 14,582 acres for a sales price of $1.6 million, respectively. During the three and nine months ended September 30, 2021, the Company sold subsurface oil, gas, and mineral rights of 4,700 acres for a sales price of $0.9 million and 39,200 acres for a sales price of $3.5 million, respectively. Revenues received from oil royalties totaled $0.03 million during the nine months ended September 30, 2022 and 2021.

The Company is not prohibited from selling any or all of its Subsurface Interests. The Company may release surface entry rights or other rights upon request of a surface owner for a negotiated release fee typically based on a percentage of the surface value. Should the Company complete a transaction to sell all or a portion of its Subsurface Interests or complete a release transaction, the Company may utilize the like-kind exchange structure in acquiring one or more replacement investments including income-producing properties. Cash payments for the release of surface entry rights totaled $0.2 million and $0.1 million during the nine months ended September 30, 2022 and 2021, respectively.

Mitigation Credits. The Company owns mitigation credits and mitigation credit rights with an aggregate cost basis of $22.8 million and $24.7 million as of September 30, 2022 and December 31, 2021, respectively. During the three months ended September 30, 2021, the Company completed the Interest Purchase, hereinafter defined in Note 7, “Investment in Joint Ventures”. As a result of the Interest Purchase, as of September 30, 2021, the Company owns 100% of the Mitigation Bank, and therefore its underlying assets, which includes an inventory of mitigation credits. Certain of the mitigation credits are currently available for sale with the remainder to become available as they are released to the Mitigation Bank by the applicable state and federal authorities pursuant to the completion of phases of the approved mitigation plans (“Mitigation Credit Rights”). At the time of the Interest Purchase on September 30, 2021, the Company’s cost basis in the newly acquired mitigation credits and Mitigation Credit Rights totaled $0.9 million and $21.6 million, respectively, which is comprised of (i) $15.6 million of the $18.0 million Interest Purchase allocated to the mitigation credit assets and (ii) the $6.9 million previously recorded value of the retained interest in the entity that owns the Mitigation Bank. During the nine months ended September 30, 2022, 15.62 credits were released to the Mitigation Bank.

Revenues and the cost of sales of mitigation credit sales are reported as revenues from, and direct costs of, real estate operations, respectively, in the consolidated statements of operations. During the nine months ended September 30, 2022, 26.62 credits were sold for an aggregate $2.6 million and related cost of sales of $1.7 million. During the nine months ended September 30, 2021, the Company sold mitigation credits for proceeds of $0.2 million with a cost basis of $0.1 million.