REAL ESTATE OPERATIONS

9 Months Ended

Sep. 30, 2023

REAL ESTATE OPERATIONS

REAL ESTATE OPERATIONS

NOTE 6. REAL ESTATE OPERATIONS

Real Estate Operations

Land and development costs at September 30, 2023 and December 31, 2022 were as follows (in thousands):

	As of
	September 30, 2023		December 31, 2022
Land and Development Costs	$	358	$	358
Subsurface Interests		340		327
Total Land and Development Costs	$	698	$	685

Subsurface Interests. As of September 30, 2023, the Company owns 352,000 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, 2023, the Company sold subsurface oil, gas, and mineral rights of 465 acres for a sales price of $0.6 million and 3,481 acres for a sales price of $1.0 million, respectively. 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.

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 $0.5 million and $0.2 million in the nine months ended September 30, 2023 and 2022, respectively.

Mitigation Credits. The Company owns an inventory of mitigation credits with a cost basis of $1.9 million as of September 30, 2023. As of December 31, 2022, the Company owned mitigation credits and mitigation credit rights with an aggregate cost basis of $2.6 million. During the nine months ended September 30, 2023, the remaining mitigation credit rights were released and transferred to mitigation credits as they became available for sale. On December 29, 2022, the Company completed the sale of the entity that owned the mitigation bank previously owned by the Company. A balance of mitigation credits and mitigation credit rights were retained by the Company as part of the sale agreement.

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, 2023, 9.45 mitigation credits were sold for $1.1 million resulting in a gain of $0.3 million. During the nine months ended September 30, 2022, 26.62 credits were sold for an aggregate $2.6 million resulting in a gain of $0.8 million.