Item 1A. Risk Factors

Risks Related to Our Business and Farms

Illiquidity of real estate investments could significantly impede our ability to respond to adverse changes in the performance of our farms and harm our financial condition.

Investments in real estate, including our investments in farmland, are relatively illiquid compared to other types of financial assets. As a result, our ability to promptly sell one or more farms in our portfolio in response to changing economic, financial and investment conditions may be limited. Return of capital and realization of gains, if any, from an investment generally will occur upon disposition or refinancing of the underlying property. We may be unable to realize our investment objectives by sale, other disposition or refinancing at attractive prices within any given period of time or may otherwise be unable to complete any exit strategy. In particular, weakness in or even the lack of an established market for a property, changes in the financial condition or prospects of prospective purchasers, changes in national or international economic conditions and changes in laws or regulations or fiscal policies of jurisdictions in which the property is located in each case may limit our ability to dispose of a property. Accordingly, we may encounter difficulties to the extent we need to address liquidity needs through the sale or other disposition of our farms.

In addition, the Internal Revenue Code of 1986, as amended, (the “Code”), imposes restrictions on a REIT's ability to dispose of farms that are not applicable to other types of real estate companies. In particular, the tax laws applicable to REITs effectively require that we hold our farms for investment, rather than primarily for sale in the ordinary course of business, which may cause us to forego or defer sales of farms that otherwise would be in our best interests. Moreover, if we acquire farms from C corporations ( e.g. , corporations generally subject to full corporate-level tax) in certain non-taxable transactions, built-in gain recognized on the non-taxable disposition of such farms within 10 years of our acquisition will be subject to tax at the highest applicable U.S. federal corporate income tax rate. Therefore, we may not be able to vary our portfolio in response to economic or other conditions promptly, on favorable terms or at all, which could harm our financial condition.

The geographic concentration of our portfolio could cause us to be more susceptible to adverse weather, economic or regulatory changes or developments in the markets in which our farms are located than if we owned a more geographically diverse portfolio, which could materially adversely affect the value of our farms and our ability to lease our farms on favorable terms or at all.

As of December 31, 2015, 92.8% of the appraised value of our portfolio was located in California, Florida and Illinois, which exposes us to greater economic risks than if we owned a more geographically diverse portfolio. As of December 31, 2015, our farms in California, Illinois and Florida represent approximately 73.7%, 14.5% and 6.7%, respectively, of the total 2015 fixed and participating rent of our portfolio. In addition, subsequent to December 31, 2015, we closed on the acquisition of several thousand acres of farmland in the Pacific USDA region and in California, specifically, which significantly increased our concentration in that region and state. The acquisition of a similar portfolio of geographically concentrated farms could further increase our concentration of farms in a geographic region. We are particularly susceptible to developments or conditions in these states and/or the specific counties in which our farms are located, including adverse weather conditions (such as drought, windstorms, tornados, floods, hail and temperature extremes), transportation conditions (including conditions relating to truck and rail transportation and the navigation of the Mississippi River), crop disease, pests and other adverse growing conditions, and unfavorable or uncertain political, economic, business or regulatory conditions (such as changes in price supports, subsidies and environmental regulations). Any such developments or conditions could materially adversely affect the value of our farms and our ability to lease our farms on favorable terms or at all, which could materially adversely affect our financial condition, results of operations, cash flow and ability to make distributions to our stockholders.

Our portfolio is concentrated in a limited number of farms, which subjects us to an increased risk of significant loss if any farm declines in value or if we are unable to lease a farm.

As of December 31, 2015, we  owned 18 farms located in six states across the U.S., with those that are not under development leased to a number of tenants. One consequence of a limited number of investments is that the aggregate returns we realize may be substantially adversely affected by the unfavorable performance of a small number of leases or a significant decline in the value of any single property. In addition, while we do not intend to invest 35% or more of our total assets in a particular property at the time of investment, it is possible that, as the values of our farms change, one property may comprise in excess of 35% of the value of our total assets, further if we were to acquire a portfolio of multiple farms, it is possible that the aggregate purchase could be more than 35% of our total assets. Lack of diversification will increase the potential that a single underperforming investment could have a material adverse effect on our cash flows and the price we could realize from the sale of our farms. Since our current real estate portfolio is

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concentrated across only six states, we are also currently vulnerable to any adverse change in the political or regulatory climate in those states or sp ecific counties where our farms are located, which could materially adversely affect our portfolio and our ability to lease farms.

We currently rely significantly on rent from our Golden Eagle Ranch and expect to rely significantly on rent from our recently acquired Kingfisher Ranch and the farms acquired through the Sun Dial acquisition, which are comprised of both fixed and participating rent, to generate a substantial portion of our rental income and, therefore, are more susceptible to adverse events with respect to these properties, which if such events occur could materially adversely affect our financial condition, results of operations and ability to make distributions to our stockholders.

As of December 31, 2015, one property in our portfolio, Golden Eagle Ranch, represented 41.4% of our 2015 fixed and participating rent received to date, which includes certain rent from participating leases for 2014 that was not recognized in 2014 but does not include certain rent to be paid under participating leases for 2015 that has not yet been paid or recognized. In the second half of 2015, we acquired Kingfisher Ranch for a gross purchase price of approximately $19.9 million and in January 2016, we acquired a portfolio of farms for a gross purchase price of $63.5 million (excluding transaction costs) in a sale leaseback transaction, with the ultimate tenant being the same tenant that is the tenant for our Golden Eagle Ranch, and we expect to rely significantly on rent from these farms, both from base and participating rent, in the future. Therefore, the financial failure of these properties or of a tenant that leases portions of these properties is likely to have a material adverse effect on our financial condition, results of operations and ability to make distributions to our stockholders.

Our investments in mature permanent crop farms with trees or vines that have a finite multi-year lifespan have a higher risk profile than our commodity and specialty/vegetable row crop farms because if mature permanent crops are damaged or diseased, or if the variety falls out of market favor, it requires multiple years and substantial capital to redevelop the farm, which could materially adversely affect our results of operations and ability to make distributions to our stockholders.

As of December 31, 2015, 6 of our 18 farms, or approximately 28% of our tillable acres, were planted with a majority of mature permanent crops, and, in the future, we expect to add to our investments in farmland used for mature permanent crops. For example, subsequent to December 31, 2015, we closed on the acquisition of several thousand acres of permanent crop farmland. The future acquisition of similar portfolios of permanent crop farms could significantly increase our concentration of permanent crop farms, which are as a category, diversified across multiple crops including grapes, almonds, pistachios, walnuts, pecans, lemons and other fresh citrus and avocados and which could make us more susceptible to adverse events with respect to these types of crops. In addition, this number will increase as our development farms focused on permanent crops become productive. Permanent crops have plant structures (such as trees, vines or bushes) that produce yearly crops without being replanted. Permanent crops involve more risk than specialty/vegetable and commodity row crops because permanent crops require more time and capital to plant. As a result, permanent crops are more expensive to replace and more susceptible to disease and poor weather. If a farmer loses a permanent crop to drought, flooding, fire or disease, there would generally be significant time and capital needed to return the land to production because a tree or vine may take years to grow before bearing fruit.

The trees or vines on permanent crop farmland have finite productive lifespans and, as such, require replanting either in scheduled portions over time or in full towards the end of the lifespan as productivity declines and the property is no longer commercially viable. Additionally, permanent crop farmland prevents the farmer from being able to rotate crop types to keep up with changing market conditions or changes to the weather or soil. If demand for one type of permanent crop decreases, the permanent crop farmer cannot easily convert the farmland to another type of crop because permanent crop farmland is dedicated to one crop during the lifespan of the trees or vines and therefore cannot easily be rotated to adapt to changing environmental or market conditions.

We currently lease many of our farms to family-owned farms and small and medium-sized independent farming operations, which may have limited financial and personnel resources and, therefore, may be less stable than larger companies or agribusinesses, which could impact our ability to generate rental revenue.

We expect to lease many of our farms to family-owned farms and medium-sized farming operations, which will expose us to a number of unique risks related to these entities. For example, family-owned farms and medium-sized agricultural businesses are more likely than larger farming operations to have difficulty making lease payments when they experience adverse events. They also tend to experience significant fluctuations in their operating results and to be more vulnerable to competitors' actions and market conditions, as well as general economic downturns. In addition, our target tenants for our commodity row farms may face intense competition, including competition from companies with greater financial resources, which could lead to price pressure on crops that could lower our tenants' income, which in turn could impact our ability to generate rental revenue.

Furthermore, the success of a family-owned farm or medium-sized business may also depend on the management talents and efforts of one or a small group of persons. The death, disability or resignation of one or more of these persons could have a material adverse impact on our tenant and, in turn, on us.

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Our shorter-term leases, which are less than three years in duration, m ake us more susceptible to decreases in prevailing market rental rates than would be the case if we entered into longer-term leases, which could have a material adverse effect on our results of operations and ability to make distributions to our stockholde rs.

Currently, leases representing 17.6% of 2015 fixed and participating rent, which represents rent received for the year ended December 31, 2015, are set to expire in 2016 and will need to be renewed for 2017, some of which are for mature permanent farms with longer-term leases. For our six non-development farms that are farmed for specialty/vegetable and commodity row crops, our leases have, and we expect to continue to primarily enter into leases having, terms of one to three years. As a result, we will be required to frequently re-lease our farms upon the expiration of our leases, which will make us more susceptible to declines in market rental rates than we would be if we were to enter into longer-term leases. As a result, decreases in the prevailing market rental rates in the geographic areas in which we own farms could have a material adverse effect on our results of operations and ability to make distributions to our stockholders.

Our investments in mature permanent crop farms have long-term participating leases, which means that a portion of our cash flow attributable to participating rent is exposed to various risks, including risks related to declining crop prices, lower than average crop production due to alternate bearing crops and the risk of being unable to take advantage of prevailing market rates, which could have a material adverse effect on our results of operations and ability to make distributions to our stockholders.

We currently have multi-year leases with fixed and participating components on all of our mature permanent crop farms and in the future, as we acquire more permanent crop farms or renew our current permanent crop property leases, we may enter into multi-year fixed and / or participating leases consistent with our past practice for mature permanent farms. Participating leases may continue to be either formulaic participating or crop share leases, and the gross revenue participation may vary based on crop prices or crop yield. In 2015, participating rent comprised approximately 45% of total fixed and participating revenues. Such leases may also provide for annual rent escalations based on a fixed dollar amount or a percentage per acre. By entering into long-term leases with participating rent components, we are subject to various risks, including risks relating to declining crop prices and lower than average crop production due to inclement weather or alternate bearing crops, both of which could reduce the amount of rent we receive under such leases. As an example, our Kingfisher Ranch (a pistachio property acquired in the third quarter of 2015), experienced a weak 2015 production yield, and the tenant had to pursue insurance claims under its crop insurance policies which were settled in full in the fourth quarter of 2015.  The full insurance settlement recognition in 2015 will result in little to no 2016 participating revenues at Kingfisher Ranch for the 2015 crop.  Additionally, our inability to increase our rental rates if prevailing land values or rental rates increase could have a material adverse effect on our results of operations and ability to make distributions to our stockholders.

Our investments in development farmland may have inherent risks, including those relating to the longer period between development and commercial productivity for our permanent crop development farms, the cost of development, profitability of newly-developed farms, higher ongoing costs and delayed development, all of which could adversely impact our results of operations and cash flow.

Our development farms involve risks that are different and, in most cases, greater than, the risks associated with our acquisition of fully developed and commercially productive farms. In addition to the risks associated with real estate investments in general as described elsewhere, the risks associated with our development farms include, among other things:

Additionally, the time frame required for development and for the permanent development farms to become commercially productive means that we may not be able to lease the farms and in turn generate revenue with respect to such farms for several years. If any of the above events occur, the development of such farms may hinder our growth and have a material adverse effect on our results of operations and cash flow. In addition, new development farms, regardless of whether or not they are ultimately productive, typically require substantial time and attention from management.

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Our business is dependent in part upon the profitability of our tenants' farming oper ations, and any downturn in the profitability of their farming operations could have a material adverse effect on the amount of rent we can collect and, consequently, our cash flow and ability to make distributions to our stockholders.

We depend on our tenants to operate the farms we own in a manner that generates revenues sufficient to allow them to meet their obligations to us, including their obligations to pay rent and real estate taxes, maintain certain insurance coverage and maintain the farms generally. The ability of our tenants to fulfill their obligations under our leases depends, in part, upon the overall profitability of their farming operations, which could be adversely impacted by, among other things, adverse weather conditions, crop prices, global supply of arable farmland, crop disease, pests, contaminants, and unfavorable or uncertain political, economic, business or regulatory conditions. We do not typically receive financial statements from our tenants in the ordinary course of business. We will be particularly susceptible to any decline in the profitability of our tenants' farming operations in connection with our leases that do not require 100% of the annual rent to be paid in advance of each spring planting season or if we utilize percentage rent clauses, such as leases for Kimberly Vineyard, Blue Heron Farms, Quail Run Vineyard, Golden Eagle Ranch, Falcon Farms, Kingfisher Ranch and the mature portion of Condor Ranch, pursuant to which a portion of the rent is a fixed base rent and the remaining amount of rent depends on crop yields and prices realized by our tenants. The portion of our revenue that we derive from participating leases could be adversely affected by a general economic downturn. Also, many farms are dependent on a limited number of key individuals whose injury or death may significantly affect the successful operation of the farm. As a result of such circumstances, our operating results and financial condition would be materially adversely affected. We can provide no assurances that, if a tenant defaults on its obligations to us under a lease, we will be able to lease or re-lease that property on economically favorable terms in a timely manner, or at all. In addition, we may experience delays in enforcing our rights as landlord and may incur substantial costs in protecting our investment.

The rents we are able to negotiate for the farms we own will be based, in part, on each tenant's expectation of the land's future productivity. To the extent we lease to tenants whose operations become less profitable, prospective tenants may assume reduction in profitability is due, in part, to less productive land, which could make it more difficult to negotiate favorable rental rates for such farms. Our tenants' profitability could also be adversely affected by declines in market prices for permanent crops, specialty/vegetable row crops or commodity row crops grown on our farms.

As a result, any downturn in the profitability of the farming operations of our tenants or a downturn in the agricultural industry as a whole could have a material adverse effect, and to the extent applicable, now or in the future, any tenant concentration in our portfolio may exacerbate any such potential impacts, on our financial condition, results of operations, cash flow and ability to make distributions to our stockholders.

We may be subject to risks associated with our tenants' financial condition and liquidity position.

A majority of our leases do not require the full payment of rent in cash in advance of the planting season, which subjects us to credit risk exposure to our farm-operator tenants and the risks associated with farming operations, such as weather, commodity price fluctuations and other factors. We will also be exposed to these risks with respect to participating leases for which a portion of the rent is based on a percentage of a tenant's farming revenues (such as our leases for Golden Eagle Ranch, Kimberly Vineyard, Blue Heron Farms, Falcon Farms, and Kingfisher Ranch and the mature portion of Condor Ranch and Quail Run Vineyard and including the leases we entered into upon closing the Sun Dial acquisition in January 2016) and leases with terms greater than one year. Further, while separate leases exist for each farm, a tenant may be the tenant on multiple of our farms, which increases our exposure to that tenant’s financial condition, as is the case with our tenant (including affiliates of the tenant) on Kimberly Vineyard who is also the tenant on Quail Run Vineyard, and our tenant (including affiliates of the tenant) on our Golden Eagle Ranch, who is the same tenant on the four farmland properties acquired in the Sun Dial acquisition. We also may not become aware of a tenant's financial distress until the tenant fails to make payments to us when due, which may significantly reduce the amount of time we have to evict the tenant and re-lease the property to a new tenant before the start of the spring planting season, and in the event of a tenant bankruptcy we may not be able to terminate the lease. Further, we expect that many of our future tenants will be independent farming operations, about which there is generally little or no publicly available operating and financial information. As a result, we may not learn all of the material information we need to know regarding these businesses through our investigations, making it possible that we could lease farms to tenants that ultimately are unable to pay rent to us. We can provide no assurance that, in the event we terminate a lease in connection with a tenant bankruptcy, we will be able to lease or re-lease that property on economically favorable terms in a timely manner or at all, which could have a material adverse effect on our revenues and financial condition. In addition, in the future a significant number of our farms may be concentrated in a limited number of tenants, which would exacerbate the foregoing risks.  Subsequent to December 31, 2015, we closed on the acquisition of several thousand acres of mature permanent crop farmland in California, and concurrently entered into four new leases with affiliates of the sellers, who are also the tenants at our Golden Eagle ranch, thereby substantially increasing our rent concentration to this particular tenant.  

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We may be unable to collect balances due on our leases from any tenants in bankruptcy, which could materially adversely affect our financial condition, results of operations and cash flow.

We are subject to tenant credit risk. Our tenants, particularly those that may depend on debt and leverage, could be susceptible to bankruptcy in the event that their cash flows are insufficient to satisfy their financial obligations, including meeting their obligations to us under their leases. A tenant in bankruptcy may be able to restrict our ability to collect unpaid rent and interest during the bankruptcy proceeding and may reject the lease. If a bankrupt tenant rejects a lease with us, any claim we might have for breach of the lease, excluding a claim against collateral securing the lease, would be treated as a general unsecured claim. Our claim would likely be capped at the amount the tenant owed us for unpaid rent prior to the bankruptcy unrelated to the termination, plus the greater of one year of lease payments or 15% of the remaining lease payments payable under the lease, but in no case more than three years of lease payments. In addition, a tenant may assert in a bankruptcy proceeding that its lease should be re-characterized as a financing agreement. If such a claim is successful, our rights and remedies as a lender, compared to a landlord, will generally be more limited. In the event of a tenant bankruptcy, we may also be required to fund certain expenses and obligations ( e.g. , real estate taxes, debt costs and maintenance expenses) to preserve the value of our farms, avoid the imposition of liens on our farms or transition our farms to a new tenant. In the event of the tenant's breach of its obligations to us or its rejection of the lease in bankruptcy proceedings, we may be unable to locate a replacement tenant in a timely manner or on comparable or better terms. As a result, our financial condition, results of operations and ability to make distributions to our stockholders could be materially adversely affected if a tenant declares bankruptcy.

Our failure to identify and consummate acquisitions that meet our investment criteria would significantly impede our ability to achieve our business objectives, including growing our portfolio and diversifying by geography, crop type and tenant, which could materially adversely affect our results of operations and ability to make distributions to our stockholders.

Our ability to expand through acquisitions is integral to our business strategy and requires that we identify and consummate suitable acquisition or investment opportunities that meet our investment criteria and are compatible with our growth strategy. While we continue to actively seek and evaluate farms for potential purchase, there is no guarantee that we will be able to continue to find and acquire such farms at attractive prices or that such acquisitions will not initially result in our portfolio being concentrated in a certain geography or crop type.

Additionally, we compete for the acquisition of farmland and farms related to farming with many other entities engaged in agricultural and real estate investment activities, including individual and family operators of farming businesses, corporate agriculture companies, financial institutions, institutional pension funds, real estate companies, private equity funds and other private real estate investors. These competitors may prevent us from acquiring desirable farms or may cause an increase in the price we must pay for such farms. Our competitors may have greater resources than we do and may be willing to pay more for certain assets or may have a more compatible operating philosophy with our acquisition targets. In particular, larger institutions may enjoy significant competitive advantages that result from, among other things, a lower cost of capital and enhanced operating efficiencies. Our competitors may also adopt transaction structures similar to ours, which would decrease our competitive advantage in offering flexible transaction terms. In addition, the number of entities and the amount of funds competing for suitable investment farms may increase, resulting in increased demand and increased prices paid for these farms. New entrants are also a competitive threat. If we pay higher prices for farms, our profitability may decrease, and you may experience a lower return on your investment. Our failure to identify and consummate acquisitions that meet our investment criteria, including our target allocation ranges for crop type, would significantly impede our ability to achieve our business objectives, including growing our portfolio and diversifying by geography, crop type and tenant, which could materially adversely affect our results of operations and ability to make distributions to our stockholders.

Some state laws prohibit or restrict the ownership of agricultural land by business entities, which could impede the growth of our portfolio and our ability to diversify geographically.

Certain states, including Iowa, North Dakota, South Dakota, Minnesota, Oklahoma, Wisconsin, Missouri and Kansas, in which a substantial amount of farmland is located, have laws that prohibit or restrict to varying degrees the ownership of agricultural land by corporations or business entities like us. Additional states may, in the future, pass similar or more restrictive laws, and we may not be legally permitted, or it may become overly burdensome or expensive, to acquire farms in these states, which could impede the growth of our portfolio and our ability to diversify geographically in states that might otherwise offer compelling investment opportunities.

Failure to succeed in new markets could have a material adverse effect on our results of operations and ability to make distributions to our stockholders.

Our portfolio is comprised of farms located in Alabama, Arkansas, California, Florida, Georgia and Illinois. If we acquire farms located in new markets, we may face risks associated with a lack of market knowledge or understanding of the local market, including the availability and identity of quality tenant farmers, forging new business relationships in the area and unfamiliarity with local government requirements and procedures. Furthermore, the negotiation of a potential expansion into new markets would divert

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management time and other resources. As a result, we may have difficulties executing our business strategy in these new markets, which could have a material adverse effect on our results of operations and ability to make distributions to our stockholders.

Our platform may not be as scalable as we anticipate, and we could face difficulties growing our business without significant new investment in personnel and infrastructure, which could disrupt our business and operations and impede the growth of our business.

Our platform for operating our business may not be as scalable as we anticipate or able to support significant growth without substantial new investment in personnel and infrastructure. While we have employment contracts with Messrs. Gimbel, Cowan, Lewis, Spitzer, and Ms. Sichel, we will rely to a significant degree on the services provided pursuant to the Transitional Services Agreement as well as on the skills of our Agricultural Sub-Adviser in sourcing, managing and disposing of our investments. Accordingly, we will need to make significant new investments in personnel and infrastructure to support that transition as well as to support our growth. If we are unable to make significant investments on a timely basis or at reasonable costs, if the Transitional Services Agreement is terminated or not renewed, or if we are unable to renew the agreement with our Agricultural Sub-Adviser, our business and operations could be materially adversely affected.

We depend upon our President and Chief Investment Officer and our Agricultural Sub-Adviser and its key personnel, and we may not be able to secure suitable replacements in the event that we fail to retain their services.

Some of our senior executive officers have limited experience acquiring, owning and net leasing farmland. Accordingly, we rely on the skills of our Agricultural Sub-Adviser and its key personnel, as well as the experience of our President and Chief Investment Officer, in sourcing, managing and disposing of our investments. Our Agricultural Sub-Adviser's ability to successfully manage our investments depends on the experience, relationships and expertise of its key personnel. There can be no assurance that these individuals will remain in the employ of our Agricultural Sub-Adviser or otherwise continue to be able to carry on their current duties. Our Agricultural Sub-Adviser may not be able to successfully recruit additional personnel and any additional personnel that are recruited may not have the requisite skills, knowledge or experience necessary or desirable to enhance the incumbent management. The officers and employees of our Agricultural Sub-Adviser have substantial responsibilities outside the management of our investments. Our Agricultural Sub-Adviser sources farms for other clients, and we are subject to our Agricultural Sub-Adviser's allocation procedures and, therefore, we may not receive the opportunity to purchase all of the farms sourced by our Agricultural Sub-Adviser. Accordingly, any loss of our President and Chief Investment Officer or our Agricultural Sub-Adviser and its key personnel could have a material adverse effect on our ability to implement our business strategy and achieve our investment objectives.

Our Amended and Restated Sub-Advisory Agreement and relationship with our Agricultural Sub-Adviser may create conflicts of interest or the perception of such conflicts.

Our Agricultural Sub-Adviser will receive a quarterly management fee from us that is based on the appraised value of our portfolio, regardless of the revenues generated by our portfolio. For example, we will pay our Agricultural Sub-Adviser a management fee for a specific period even if we experienced a net loss during the same period. The management fee may not sufficiently incentivize our Agricultural Sub-Adviser to recommend properties and manage our properties in a manner that generates attractive risk-adjusted returns for us. This could hurt both our ability to make distributions to our stockholders and the market price of our common stock.

In addition, we will pay our Agricultural Sub-Adviser fees upon the acquisition and disposition of properties. In evaluating properties, the opportunity to earn fees upon the acquisition and disposition of properties may lead our Agricultural Sub-Adviser to place undue emphasis on acquiring and disposing properties in order to generate additional fees, or it could give rise to such perception. To the extent our Agricultural Sub-Adviser engaged in such behaviors or was perceived to have engaged in such behaviors, it could negatively impact the market price of our common stock.

If our farms do not have access to adequate water supplies or proper drainage, it could harm our ability to lease the farms or to farm them on favorable terms or at all, which could have a material adverse impact on the value of our farms and our results of operations and our ability to make distributions to our stockholders.

In order to lease farmland, there must be access to sufficient water as well as proper drainage to make the property suitable for farming. Additionally, the ability of our current tenants to make their rental payments is also dependent upon sufficient water access and supply and proper drainage. Although we believe the farms in our current portfolio have, and we expect to acquire farms with, sufficient water and access to proper drainage, our analysis and surveys of the water availability and our properties may be incorrect, and water availability and rights may be affected by federal, state and local government regulations, policies and practices as well as private sector rights, actions and inactions. On farms that presently have access to sufficient water, future regulatory or government actions could restrict the ability to draw upon those water sources. Accordingly, there may be a need to drill additional wells in the future, and we would be required to obtain permits prior to drilling such wells, which are required by state and county regulations. Such permits may be difficult or costly to obtain, particularly in areas where there is a limited supply of water, such as the farming

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regions of California, and there can be no assurance that such additional wells would produce sufficient water supplies to support farming operations adequately. Similarly, our farms may be subject to governmental regulations relating to the quality and disposition of rainwater runoff or other water to be used for irrigation, and in such case we could incur costs in order to retain this water and comply with such regulations. In instances where sufficient water is not available to any of our farms, we may need to pur chase water, and such costs may be material. If we are unable to obtain or maintain sufficient water supplies for our farms or if they do not have proper drainage, or the costs incurred to obtain or maintain the water supplies cause the farming operation to be less profitable, our ability to lease our farms for farming on favorable terms or at all would be significantly impaired, which could have a material adverse impact on the value of our farms and our results of operations and ability to make distribut ions to our stockholders.

Additionally, our current farms in the Midwest, including our Pleasant Plains Farm, Macomb Farm and Kane County Farms properties, and any farms that we invest in in the future that depend upon rain water rather than local water access, our tenants on that property may be susceptible to extended droughts, and any failure on the part of such tenants to procure adequate crop insurance would impact the ability of such tenants to make rental payments, which would have a material adverse impact on our ability to generate returns on our farms.

Our farms may be subject to adverse weather conditions, seasonal variability or alternate bearing, crop disease and other contaminants, which may affect our tenants' ability to pay rent and thereby have a material adverse effect on our results of operations, financial condition and our ability to make distributions to stockholders.

Our farms are vulnerable to adverse weather conditions, including drought, windstorms, tornados, floods and temperature extremes, which are quite common but difficult to predict. Unfavorable growing conditions can reduce both crop size and crop quality. Seasonal factors, including supply and consumer demand, may also have an effect on the crops grown by our tenants. In extreme cases, entire harvests may be lost in some geographic areas.

A significant portion of the U.S. has experienced severe drought conditions over the past few years, most recently in California. While this current drought has affected a majority of California, and could have negative short-term impacts on U.S. agriculture generally, including less crop production, increased competition for farmland due to distressed sales and lower farm income, it has yet to significantly adversely impact our farms. However, if the drought were to increase in severity or to continue for a more extended period of time, it could have a materially adverse impact on our farming operations on our farms in that region or longer-term effects on the U.S. agricultural industry generally. In addition, farms located near rivers or other water sources may be more susceptible to floods and drainage problems in periods of sustained rains. Our farms may also be vulnerable to crop disease, pests and other contaminants. Damages to tenants' crops from drainage issues, crop disease or pests may vary in severity and effect, depending on the stage of production at the time of the drainage issue, infection or infestation, and, with respect to infestation or infection, the type of treatment applied and climatic conditions. The costs to control infestations vary depending on the severity of the damage and the extent of the plantings affected. These drainage issues or infestations can increase the costs and decrease the revenues of our tenants. Tenants may also incur losses from product recalls, fines or litigation due to other contaminants that may cause food borne illness. It is difficult to predict the occurrence or severity of such product recalls, fines or litigation as well as their impact upon our tenants.

We utilize participating leases for all of our mature permanent crop farms pursuant to which the amount of the rent depends, to a large extent, on crop yields and prices in regions where such arrangements are prevalent. Further, we invest in property used for permanent crops, which are more expensive to replace and more susceptible to disease and poor weather than specialty/vegetable and commodity row crops because permanent crops produce yearly crops without being replanted. If a farmer loses a permanent crop to drought, flooding, fire or disease, there would generally be significant time and capital needed to return the land to production because a tree or vine may take years to grow before bearing fruit. Permanent crop farmland also prevents the farmer from being able to rotate crop types to keep up with changes to the weather or soil. As a result, the risks associated with weather conditions, seasonal variability, crop disease and other contaminants are magnified in the case of permanent crops. Therefore, adverse weather conditions, seasonal variability, crop disease, pests and other contaminants could adversely affect our tenants' ability to continue to meet their obligations to us and our ability to lease or re-lease farms on favorable terms, or at all, which could have a material adverse effect on the value of our farms, our results of operations, financial condition and our ability to make distributions to our stockholders.

The seasonal variability of the crops grown on our farms that are subject to participating leases or that may be subject to participating leases in the future could have a material adverse effect on our revenues, the timing of revenues and / or our ability to make distributions to our stockholders.

We utilize participating leases for all of our mature permanent farms, pursuant to which the amount of rent depends, to a certain extent, on crop yields and prices and the timing of receipt of crop revenue by our tenants. A crop season is characterized by cultivation and the growing of the crop during the course of the year, with the resultant harvest generally occurring in the fall. Rent derived from participating leases will generally be recorded in the fourth quarter of each calendar year in the case of citrus crops and the vineyards. However, in the case of tree nuts (almonds, walnuts, pistachios and pecans) and potentially in the case of certain other crops, our share of the crop revenue only generates income for us at the point in time our tenant is irrevocably entitled to receive a payment for the

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delivery of the crop. Our tenants receive the income from the sale of such crop generally when delivered by the packing house to the ultimate distributor. That process of selling tree nuts in different stages stretches over a period of months in the year following the harvest and the percentage of the crop sold in each quarter of the following year is not consistent from year to year. Accordingly, the seasonal variability of the crops grown on such farms can be expected to cause quart erly fluctuations in our revenues. For example, while Golden Eagle Ranch generated strong participating revenues in 2015 due to the strength of the 2014 crop production as well as high almond prices throughout the majority of 2015 when the 2014 crop was so ld by the tenant, the 2015 crop production at Golden Eagle Ranch was significantly lower due to poor growing conditions and, when combined with a more recent decline in almond prices , is expected to result in substantially lower participating rents from Go lden Eagle Ranch in 2016 than were recorded in 2015.   Therefore, d ue to the year over year decline in participating rents expected from Golden Eagle Ranch during 2016, the Company expects 2016 operating revenues generated from same-property farms to be low er in 2016 than in 2015.  

Additionally, our quarterly earnings may be adversely affected by factors outside our control, including weather conditions and poor economic factors in certain markets in which we operate. This seasonality can be expected to cause periodic fluctuations in productivity, which in turn could affect a tenant's ability to meet its obligations to us under its lease. We can provide no assurances that our cash flows will be sufficient to offset any shortfalls that occur as a result of these fluctuations, and we may have to enter into short-term borrowings in certain quarters in order to make distributions to our stockholders, or we may not be able to make distributions at all. As a result, volatility in our financial performance resulting from the seasonal variability of the crops grown on our farms that are subject to participating leases could have a material adverse effect on our revenues and our ability to make distributions to our stockholders.

Future climate changes could materially adversely impact the value of our farms, our ability to lease our farms, our results of operations and our ability to make distributions to our stockholders.

In addition to the general risks that adverse weather conditions pose for the tenants of our farms and their subsequent ability to comply with the terms of their leases, including their ability to make their rental payments, the value of our farms and the operations of our tenants may be subject to risks associated with long-term effects of climate change. Some climatologists have predicted that the impacts of climate change could include increases in average temperatures, more extreme temperatures, changes in rainfall patterns, severe droughts and increases in volatile weather over time. The effects of climate change may be more significant along coastlines, such as in California and Florida, where 13 of our 18 farms are currently located and where future farms we acquire may be located (including the properties acquired from Sun Dial in January 2016), due to rising sea levels resulting from melting of polar ice caps, which could result in increased risk of coastal erosion, flooding, degradation in the quality of groundwater aquifers and expanding agricultural weed and pest populations. Such effects of climate change could make our farms less suitable for farming or other alternative uses, which could materially adversely impact the value of our farms, our ability to lease our farms or otherwise generate revenues from our farms, our results of operations and our ability to make distributions to our stockholders.

Agricultural technology enhancements, including genetic engineering, could adversely impact our anticipated returns, which in turn could have a materially adverse effect on our results of operations and financial condition.

Future advances in seed technology, genetic engineering, irrigation improvements and other agricultural technology enhancements may lead to higher crop production on existing farmland, which could put downward pressure on the demand for crops. As a result, we could experience a reduction in our anticipated returns, which are, in part, based on certain assumptions regarding increased global demand for permanent crops and commodity crops and declining availability of farmland, which in turn could have a materially adverse effect on our results of operations and financial condition.

The market prices of the crops that our tenants may produce on our farms have experienced volatility in the past and may experience volatility in the future, which may affect our tenants' ability to pay rent and, accordingly, may have a material adverse impact on our financial condition, results of operations and our ability to make distributions to our stockholders.

Prices of crops are volatile and can fluctuate due to conditions that are difficult to predict, including global competition with respect to supply and resources, crop yields, technological developments, severe weather and crop disease in the major crop production regions worldwide, domestic and international demand for a given crop and for U.S. agricultural products generally, and changes in governmental policies regarding agriculture, energy, trade, fiscal and monetary issues, particularly with regard to subsidies and tariffs, any of which may result in either increases or decreases in the value of the crops that our tenants produce each year. Other material factors contributing to fluctuations in crop prices are changes in global prosperity, fluctuations in foreign trade and export markets, and eruptions in military conflicts or civil unrest. Additionally, in periods of increased prices, global consumers may prefer low cost producers. Competition may also increase from alternative farming ventures, such as vertical farming (cultivation in skyscraper greenhouses or vertical structures) and hydroponic farming (cultivation in water with mineral supplements, without soil). Any of these factors could adversely affect our tenants' ability to meet their obligations to us and our ability to lease or re-lease farms on favorable terms, or at all, which could have a material adverse impact on the value of our farms, our financial condition, results of operations and our ability to make distributions to our stockholders.

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Adverse changes in government pol icies related to farming, including decreases in farm subsidies, tax incentives or the percentage of ethanol that must be blended into fuel, could reduce prices of crops and the profitability of farming operations, which could materially adversely affect t he value of our farms and our results of operations.

There are a number of government programs that provide subsidies and tax and other incentives to farm operators. Some of these programs have been in operation since the 1930s and were intended to stabilize the income to farm operators and protect them from agricultural setbacks such as wind damage, floods, drought and crop disease. In addition, in recent years both the U.S. federal government and certain state governmental agencies have required that transportation fuel sold in the U.S. contain a minimum volume of renewable fuel, including ethanol. These renewable fuel requirements have caused ethanol demand to increase, which in in certain periods has had a positive impact on the price of corn and specialty/vegetable and commodity row crop farmland prices in general. The elimination or reduction of any of these subsidies or other incentives, the widespread use of other forms of renewable fuel or reduction in renewable fuel requirements in the future could reduce the prices of crops and the profitability of farming operations, which could materially adversely impact the value of our farms and our ability to lease them on favorable terms, or at all, which would have a material adverse effect on our results of operations.

Acquiring farmland and farms related to farming during periods when such farms are experiencing substantial inflows of capital and intense competition may result in inflated purchase prices and increase the likelihood that our farms will not appreciate in value and may, instead, decrease in value.

The allocation of substantial amounts of capital for investment in farmland and farming related farms and significant competition for income-producing real estate may inflate the purchase prices for such assets. If we acquire farms in such an inflated environment, it is possible that the value of our assets may not appreciate and may, instead, decrease in value, perhaps significantly, below the amount we paid for such assets. In addition to macroeconomic and local economic factors, technical factors, such as a decrease in the amount of capital allocated to the purchase of farmland and farming related farms and the number of investors participating in the sector, could cause the value of our assets to decline.

Valuations and appraisals of our properties are estimates of fair value and may not necessarily correspond to realizable value upon the sale of such properties; therefore, net asset value per share may not reflect the amount that would be realized upon a sale of each of our properties or portfolio, in the aggregate.

In determining the fair value of our investments in real estate as of December 31, 2015, we relied on independent, third-party appraisal firms that employ a certified appraiser with local knowledge and expertise who is certified as either an A.R.A. or M.A.I. appraiser or is state certified as a Certified General Real Estate Appraiser or a Certified General Appraiser and who performed their formal appraisals as of December 31, 2015. The Company’s independent auditors have not audited or reviewed these appraisals. Each appraisal is unique and certain of the factors reviewed and evaluated in each appraisal are particular to the geography, climate, crop type and pricing, market area and market trends associated with the relevant property. Some of the significant assumptions used by the independent, third party appraisers in valuing each property generally included (i) that all applicable zoning, use regulations and restrictions had been complied with, (ii) that all information, estimates and opinions furnished to appraisers were obtained from sources considered reliable and believed to be true and correct, (iii) reliance on certain water requirement and rights information provided to the appraisers and (iv) that no significant changes to the property had occurred since the date of the onsite inspection, among others, as well as certain property-specific assumptions set forth in each applicable appraisal. Further, appraisers typically utilize at least one of the following three approaches to value: (i) the cost approach, which establishes value by estimating the current costs of reproducing the improvements (less loss in value from depreciation) and adding land value to it; (ii) the income capitalization approach, which establishes value indicated by the subject property’s net earning power based on the capitalization of income; and/or (iii) the comparable sales approach, which establishes value indicated by recent sales of comparable properties in the market place, with each approach leading to a final opinion of the appraised value of the subject property by the appraiser. The income capitalization approach is very sensitive to the final capitalization rate chosen, with small changes in the capitalization rate resulting in significant changes in market value. Factors considered during the land valuation process utilized for the comparable sales approach, include, among others, prominence of location, size, shape, availability of utilities, zoning, topography, property rights, financing, property improvements, market conditions and land use mix. Additionally, depending on the approach to valuation used, appraisals may include assumptions regarding the land values per acre, market rental rates per acre, depreciation and capitalization rates. Such assumptions are particular to each appraisal and necessarily vary depending on the location of the property and crop type as well as various other market trends and economic factors specific to the property (i.e., appraisers may refer to the property's lease terms to conduct quantitative analyses or to publicly available resources such as the Illinois Society of Professional Farm Managers and Rural Appraisers, if and as applicable).

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In addition, the ultimate realization of the value of our properties depend to a great extent on economic and other conditions beyond our control and the control of the appraisers. Moreover, valuations do not ne cessarily represent the price at which a property would sell, since market prices of properties can only be determined by negotiation between a willing buyer and seller. Therefore, the valuations of our properties may not correspond to the realizable value upon a sale of those properties individually or as a portfolio, in aggregate, and therefore, our estimated net asset value per share may not be indicative of the proceeds a stockholder would receive upon the sale of his or her shares in a market transacti on resulting in either or both of those outcomes and the proceeds were distributed to the stockholders.

If the U.S. Federal Reserve or other central banks embark on a substantial tightening of monetary policy in the future that causes real interest rates to rise, it may cause land prices to decline if the rise in real interest rates is not accompanied by rises in the general levels of inflation, and we would also experience higher costs of our financing. A stronger U.S. dollar could also negatively impact exports, which could negatively impact our financial results.

A substantial tightening of monetary policy by the U.S. Federal Reserve or other central banks would increase credit costs (through the resulting increase in interest rates) and decrease credit availability. This could hurt farm operators because higher real interest rates make it more difficult for farm operators to qualify for loans and increase their borrowing costs. Higher interest rates also tend to decrease U.S. and world economic growth, thus decreasing the demand for agricultural crops. Moreover, a stronger U.S. dollar could affect the level of agricultural exports from the United States, potentially causing demand for exports to decline, which could negatively impact our financial results.

All of these consequences could reduce farm income. If increases in real interest rates (which is defined as nominal interest rates minus the inflation rate) or changes in the value of the U.S. dollar are not accompanied by higher levels of farm income and rents, this could lead to declines in agricultural land values and a reduction in our profitability, either of which would have a material adverse effect on our business or results of operations, financial condition and ability to make distributions to our stockholders. Furthermore, increases in interest rates would also increase our costs of borrowing money, which would negatively impact our financial condition, our results of operations, and ability to make distributions to our stockholders.

Certain employees who manage and operate our business and operations in most instances will dedicate a significant portion of their time to us and such portion of time may vary.

While a vast majority of their time is spent working for the Company, certain employees spend a minor portion of their time (5-10%) at Optima Group Holdings LLC, the managing member of AFA prior to the Internalization Transaction of our management (“Optima”). Further, while Mr. Lewis, our Chief Financial Officer and Treasurer, dedicates a significant amount of his time to our business, he also dedicates time to Optima. Accordingly, we have hired Andreas Spitzer, Executive Vice President, Finance, to fully dedicate his time to the financial role, with the intent to have him transition to full-time Chief Financial Officer after two reporting periods.

We recently internalized our management, which will expose us to new and additional responsibilities, costs and risks and we may not manage this transition effectively.

We recently internalized our management, which will expose us to new and additional responsibilities, costs and risks. For example, our expenses now include the compensation and benefits of our officers and other personnel and consultants, as well as overhead costs previously paid by our external manager, AFA and its affiliates. Furthermore, our officers and other personnel will provide us services that were previously provided by AFA and its affiliates. We can provide no assurance that we will be able to continue to provide those services at the same level or for the same costs as provided by AFA and its affiliates, and there may be unforeseen costs, expenses and difficulties associated with continuing to provide those services on a self-managed basis. We will also be subject to potential liabilities that are commonly faced by employers, such as workers disability and compensation claims, potential labor disputes and other employee-related liabilities and grievances. Further, we will bear the costs of the establishment and maintenance of health, retirement and similar benefit plans of our employees. Accordingly, the internalization of our management could materially adversely affect our financial condition and operating results.

In connection with the internalization of our management, we entered into a Transitional Services Agreement with our Operating Partnership and Optima, pursuant to which Optima agreed to, among other things, provide us with access to certain infrastructure and supporting services, information technology systems and financial reporting infrastructure, including relevant employees. Until we establish a more substantial independent employee base, infrastructure and internal capabilities, we will continue to rely significantly on Optima's infrastructure and supporting services to operate our business successfully. If Optima does not perform its obligations under the Transitional Services Agreement, if the Transitional Services Agreement is terminated by either party, if we do not build a sufficient management structure and cannot renew the Transitional Services Agreement, or if we fail to plan and manage the internalization of our management efficiently and effectively, we may be unable to manage our assets, farms or personnel, or timely report our financial results and our business will be materially adversely affected.

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We have limited operating history as a REIT and a publicly traded company, and we cannot assure you that the past experience of our senior management team will be sufficient to successfully operate ou r company as a REIT or a publicly traded company.

We have limited operating history as a REIT and a publicly traded company. We cannot assure you that the past experience of our senior management team will be sufficient to successfully operate our company as a REIT or a publicly traded company, including the requirements to timely meet the disclosure requirements of the SEC. We are required to develop and implement control systems and procedures in order to qualify and maintain our qualification as a REIT, satisfy our periodic and current reporting requirements under applicable SEC regulations and comply with the listing standards, and this transition could place a significant strain on our management systems, infrastructure and other resources, any of which could materially adversely impact our business, results of operations and financial condition. See “—Risks Related to Our Status as a REIT—Failure to qualify or to maintain our qualification as a REIT would have significant adverse consequences to the value of our common stock.”

We depend on external sources of capital that are outside of our control and may not be available to us on commercially reasonable terms or at all, which could limit our ability to, among other things, acquire additional farms, meet our capital and operating needs or make the cash distributions to our stockholders necessary to qualify and maintain our qualification as a REIT.

In order to qualify and maintain our qualification as a REIT, we generally are required under the Code to, among other things, distribute annually at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gain. In addition, we will be subject to income tax at regular corporate rates to the extent that we distribute less than 100% of our REIT taxable income, including any net capital gains. Because of these distribution requirements, we may not be able to fund future capital needs, including acquisition opportunities and principal and interest payments on any outstanding debt, from operating cash flow. Consequently, we rely on third-party sources to fund our capital needs. We may not be able to obtain such financing on favorable terms, in the time period we desire or at all. Any debt we incur will increase our leverage, expose us to the risk of default and may impose operating restrictions on us, and any additional equity we raise (including the issuance of Common Units) could be dilutive to existing stockholders. Our access to third-party sources of capital depends, in part, on:

Our growth strategy is in large part based on utilizing our common stock (or Common Units) as a currency to acquire additional farmland properties, and thereby gain operating scale and efficiencies. If the market price per share of our common stock trades at a substantial discount to the underlying net asset value per share of our common stock, we may not be able to use our common stock (or Common Units) as a form of capital to execute our growth strategy without substantially diluting the share value of our existing shareholders, or at all.

In addition, our revolving credit facilities contain certain customary restrictions, requirements and other limitations on our ability to incur indebtedness. Our revolving credit facilities provide for borrowing availability based on the appraised value of our properties which serve as collateral to the borrowed monies.  To the extent the appraised values of our properties decrease, we may not be able to borrow additional amounts, or we may no longer be in compliance with maximum indebtedness to property value thresholds.   Accordingly, we may be unable to obtain the third-party financing that we believe to be optimal, which may cause us to have less cash for distributions to stockholders. Our use of external sources of financing could also make us more vulnerable to a downturn in our business or the economy generally and a significant increase in the ratio of our indebtedness to our assets may have an adverse effect on the market price of our common stock.

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Debt, and the use of debt to finance future acquisitions or for other purposes, could restrict our operations, inhibit our a bility to grow our business and revenues, and negatively affect our business and financial results.

As of December 31, 2015, we had approximately $27.2 million of outstanding indebtedness, with $62.8 million in available credit remaining. We intend to incur additional debt in connection with future acquisitions or for other purposes and, if we are successful in acquiring a portfolio of properties, such as the portfolio of properties in California which we recently acquired, our leverage may increase significantly over a shorter period of time than if we acquire properties on a farm by farm basis. If necessary, we also may borrow funds to make distributions to our stockholders in order to qualify and maintain our qualification as a REIT for U.S. federal income tax purposes. To the extent that we do not have sufficient funds to repay our debt at maturity, it may be necessary to refinance the debt through debt or equity financings, which may not be available on acceptable terms or at all and which could be dilutive to our stockholders. If we are unable to refinance our debt on acceptable terms or at all, we may be forced to dispose of farms at inopportune times or on disadvantageous terms, which could result in losses. To the extent we cannot meet our future debt service obligations, we will risk losing to foreclosure some or all of our farms that may be pledged to secure our obligations. An increase in our degree of leverage also could make us more vulnerable to a downturn in business or the economy generally.

Failure to hedge effectively against interest rate changes may materially adversely affect our results of operations.

We may experience interest rate volatility in connection with variable-rate debt that we may owe or may make, from time to time. The interest rates on our revolving credit facilities are variable. Although we have not entered into any derivative contracts to attempt to manage our exposure to interest rate fluctuations, we may, in a manner consistent with our qualification as a REIT, seek to mitigate our exposure to changing interest rates by using interest rate hedging arrangements such as interest rate swaps and caps in the future. These derivative instruments involve cost and risk and may not be effective in reducing our exposure to interest rate changes. Risks inherent in derivative instruments include the risk that counterparties to derivative contracts may be unable to perform their obligations, the risk that interest rates move in a direction contrary to, or move slower than the period contemplated by, the direction or time period that the derivative instrument is designed to cover, and the risk that the terms of such instrument will not be legally enforceable. While we intend to design our hedging strategies to protect against adverse movements in interest rates, derivative instruments that we are likely to use may also involve immediate costs, which could reduce our ability to make distributions to our stockholders. Likewise, ineffective hedges, as well as the occurrence of any of the risks inherent in derivatives, could materially adversely affect our results of operations or reduce your overall investment returns. We will review each of our derivative contracts and will periodically evaluate their effectiveness against their stated purposes.

Complying with REIT requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities.

The REIT provisions of the Code limit our ability to hedge our liabilities. Generally, income from a hedging transaction we enter into (i) to manage risk of interest rate changes with respect to borrowings incurred or to be incurred to acquire or carry real estate assets, (ii) to manage the risk of currency fluctuations with respect to any item of income or gain (or any property which generates such income or gain) that constitutes “qualifying income” for purposes of the 75% or 95% gross income tests applicable to REITs,or (iii) that hedges against transactions described in clause (i) or (ii) and is entered into in connection with the extinguishment of debt or sale of property that is being hedged against by the transaction described in clause (i) or (ii), does not constitute “gross income” for purposes of the 75% or 95% gross income tests, provided that we properly identify the hedging transaction pursuant to the applicable sections of the Code and Treasury Regulations. To the extent that we enter into other types of hedging transactions, or fail to make the proper tax identifications, the income from those transactions is likely to be treated as non-qualifying income for purposes of both gross income tests. As a result of these rules, we may need to limit our use of otherwise advantageous hedging techniques or implement those hedges through a TRS. The use of a TRS could increase the cost of our hedging activities (because our TRS would be subject to tax on income or gain resulting from hedges entered into by it) or expose us to greater risks than we would otherwise want to bear. In addition, net losses in any TRS of ours will generally not provide any tax benefit except for being carried forward for use against future taxable income in the TRS.

We may be subject to litigation or threatened litigation, which may divert management time and attention, require us to pay damages and expenses or restrict the operation of our business.

We may be subject to litigation or threatened litigation, including claims relating to the actions of our tenants and otherwise in the ordinary course of business. In particular, we are subject to the risk of complaints by our tenants involving premises liability claims and alleged violations of landlord-tenant laws, which may give rise to litigation or governmental investigations, as well as claims and litigation relating to real estate rights or uses of our farms. Some of these claims may result in significant defense costs and potentially significant judgments against us, some of which are not, or cannot be, insured against. Additionally, our business and financial condition has become more visible, which we believe may result in threatened or actual litigation, including by competitors and other third parties. Whether or not any dispute actually proceeds to litigation, we may be required to devote significant management time and attention to its successful resolution (through litigation, settlement or otherwise), which would detract from our management's ability to focus on our business. Any such resolution could involve the payment of damages or expenses by us, which may be

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significant, or involve our agreeme nt with terms that restrict the operation of our business. We generally intend to vigorously defend ourselves; however, we cannot be certain of the ultimate outcomes of those claims that may arise in the future. Resolution of these types of matters against us may result in our having to pay significant fines, judgments or settlements, which, if uninsured, or if the fines, judgments and settlements exceed insured levels, could materially adversely impact our earnings and cash flows, thereby having a material adverse effect on our financial condition, results of operations, cash flows and our ability to make distributions to our stockholders. Certain litigation or the resolution of certain litigation may affect the availability or cost of some of our insurance coverage and could expose us to increased risks that would be uninsured, and/or adversely impact our ability to attract officers and directors, which could materially adversely impact our results of operations, cash flows and our ability to make distribut ions on, and the value of, our common stock.

Liability for uninsured or underinsured losses could adversely affect our financial condition and revenues.

Our farms may be damaged by adverse weather conditions and natural disasters, such as earthquakes, floods and tornados. Our insurance may not be adequate to cover all damages or losses from these events, or we may view it as not economically prudent to purchase insurance for certain types of losses. Should an uninsured loss or a loss in excess of insured limits occur, we could lose our capital investment in the affected property, as well as anticipated future revenues from such property and, in the case of debt which is recourse to us, we would remain obligated for any mortgage debt or other financial obligations related to the property. If an insured liability to a third party were to occur, we could incur the cost of defense and settlement with, or court ordered damages to, that third party. In addition, inflation, changes in building or zoning codes and ordinances, environmental considerations and other factors may also make it infeasible to use insurance proceeds to replace a property if it is damaged or destroyed. Under such circumstances, the insurance proceeds received by us might not be adequate to restore its economic position with respect to the affected property. Further, if any such loss is insured, we may be required to pay a significant deductible on any claim for recovery of such a loss prior to our insurer being obligated to reimburse us for the loss, or the amount of the loss may exceed our coverage for the loss, which could have a material adverse effect on our cash flow.

In addition, although it is expected that most of our leases will provide for at least a minimum fixed rental payment, we have structured many leases to provide for some or all of the rent to be “percentage rent,” determined as a percentage of the revenue from crops grown on land owned by us. There currently is no commercially reasonable insurance available that provides coverage for 100% of the lost revenue resulting from damage to crops grown on land owned by us. Our revenues could be materially adversely affected if damage to crops on land that are subject to leases with percentage rent provisions results in the revenue from such crops grown on such land to being diminished or lost.

Potential liability for environmental matters could adversely affect our financial condition.

We are subject to the risk of liabilities under federal, state and local environmental laws applicable to agricultural farms, including those related to wetlands, groundwater and water runoff. Some of these laws could subject us to:

Our costs of investigation, remediation or removal of hazardous substances may be substantial. In addition, the presence of hazardous substances on one of our farms, or the failure to properly remediate a contaminated property, could adversely affect our ability to sell or lease the property or to borrow using the property as collateral. We may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property. Additionally, we could become subject to new, stricter environmental regulations, which could diminish the utility of our farms and have a material adverse impact on our results of operations.

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The presence of en dangered or threatened species on or near our acquired farms could restrict the activities of our tenants, which could in turn have a material adverse effect on the value of our farms and our results of operations.

Federal, state and local laws and regulations intended to protect threatened or endangered species could restrict certain activities on our farms. The size of any area subject to restriction would vary depending on the protected species at issue, the time of year and other factors, and there can be no assurance that such federal, state and local laws will not become more restrictive over time. If portions of our farms are deemed to be part of or bordering habitats for such endangered or threatened species that could be disturbed by the agricultural activities of our tenants, it could impair the ability of the land to be used for farming, which in turn could have a material adverse impact on the value of our assets and our results of operations.

We may be required to permit the owners of the mineral rights on our farms to enter and occupy parts of the farms for the purposes of drilling and operating oil or gas wells, which could materially adversely impact the rental value of our farms.

Although we own the surface rights to our farms and expect to own the surface rights to farms that we acquire, other persons may own the rights to any minerals, such as oil and natural gas that may be located under the surfaces of these farms. Currently there is no mineral development on any of our farms, but we can provide no assurances that third parties will not assert claims for mineral rights on our farms or that farms that we acquire in the future will not be subject to third-party mineral rights. To the extent that third parties have mineral rights on farms that we currently own or acquire in the future, we expect that we would be required to permit third parties to enter such farms for the purpose of drilling and operating oil or gas wells on the premises. We will also be required to set aside a reasonable portion of the surface area of our farms to accommodate these oil and gas operations. The devotion of a portion of our farms to these oil and gas operations would reduce the amount of the surface available for farming or farm-related uses. Such activities might also disrupt the productivity of the farmland or property related to farming or increase the risk of environmental liabilities, any of which could materially adversely impact the rents that we receive from leasing these farms.

If our tenants fail to comply with applicable labor regulations, it could have an adverse effect on our tenants' ability to make rental payments to us and, in turn, our ability to make distributions to our stockholders.

State, county and federal governments have implemented a number of regulations governing labor practices used in connection with farming operations. For example, these regulations seek to provide for minimum wages and minimum and maximum work hours, as well as to restrict the hiring of illegal immigrants. If one of our tenants is accused of violating, or found to have violated such regulations, it could have a material adverse effect on the tenant's results of operations, which could materially adversely affect its ability to make its rental payments to us and, in turn, our ability to make distributions to our stockholders.

New legislation or regulations affecting the U.S. agricultural sector, particularly with respect to water use in California, could materially adversely affect the value of our farms and results of operations.

If Congress implements new legislation or regulations affecting the U.S. agricultural sector, these changes could materially adversely affect the value of our farms and results of operations by requiring the reformulation of our business to meet new standards, including environmental standards. In the first quarter of 2014, The Agricultural Act of 2014, or the Act, was signed into U.S. law. It enacts a series of changes with respect to farmland, including, but not limited to, repealing direct payments and enhancing crop insurance. Given its recent passage, we cannot determine what prospective effect, if any, the Act will have on U.S. farmland generally, and our business specifically. In addition, in 2014, California passed the Sustainable Groundwater Management Act of 2014 (“SGMA”) which, among other objectives, seeks to achieve a sustainable balance in identified aquifers throughout California. The SGMA authorizes local and regional agencies to form groundwater sustainability agencies that will prepare and submit a groundwater sustainability plan (“GSP”) to the California Department of Water Resources by either 2020 or 2022 (depending upon priority rating of the basin), with the intention of achieving groundwater sustainability within 20 years. The implementation of the GSPs, while not yet defined, may have an impact on the water availability for our farms and therefore impact crop production, which may adversely affect our revenues or land valuations; however, the details of such water management decisions will take time to finalize and implementation will vary by water district. Moreover, legislation or regulation implemented in the U.S. or elsewhere in the world relating to genetically modified crops could negatively impact the price of impacted crops, which could impact the lease rates we can charge for our farms, thereby hurting our financial performance.

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Risks Related to Our Organizational Structure

Our charter contains certain restrictions on ownership and transfer of our stock that may delay, defer or prevent a change of control or other transaction that might involve a premium price for our shares of common stock or that our stockholders otherwise believe to be in their best interests.

In order to qualify as a REIT, not more than 50% in value of our outstanding stock may be owned, directly or indirectly, by or for five or fewer individuals (as defined in the Code to include certain entities such as private foundations) at any time during the last half of any taxable year (beginning with our second taxable year as a REIT). In order to help us qualify as a REIT, our charter generally prohibits any person or entity from beneficially owning (i) more than 9.8% (in value or in number of shares, whichever is more restrictive) of the outstanding shares of our common stock or (ii) more than 9.8% in value of the aggregate of the outstanding shares of all classes and series of our stock, in each case, excluding any shares of our stock not treated as outstanding for U.S. federal income tax purposes. We refer to these restrictions as the “ownership limits.” These ownership limits may prevent or delay a change in control and, as a result, could adversely affect our stockholders' ability to realize a premium for their shares of our common stock. Our Board of Directors, in its sole and absolute discretion, may exempt a person, prospectively or retroactively, from these ownership limits if certain conditions are satisfied. This ownership limit as well as other restrictions on ownership and transfer of our stock in our charter may:

We could increase the number of authorized shares of our stock, issue additional shares of our stock and classify and reclassify unissued stock without stockholder approval, which may delay, defer or prevent a change of control or other transaction that might involve a premium price for our shares of common stock or that our stockholders otherwise believe to be in their best interests.

Our charter authorizes our Board of Directors to, without stockholder approval, amend our charter to increase or decrease the aggregate number of authorized shares of stock, to authorize us to issue additional shares of our common or preferred stock and to classify or reclassify unissued shares of our common or preferred stock and to thereafter authorize us to issue such classified or reclassified shares of stock. We believe these charter provisions will provide us with increased flexibility in structuring possible future financings and acquisitions and in meeting other needs that might arise. The additional classes or series, as well as the additional authorized shares of our common stock, will be available for issuance without further action by our stockholders, unless such action is required by applicable law or the rules of any stock exchange or automated quotation system on which our securities may be listed or traded. Although our Board of Directors has no such intention at the present time, it could establish a class or series of preferred stock that could, depending on the terms of such series, delay, defer or prevent a transaction or a change of control that might involve a premium price for our shares of common stock or that our stockholders otherwise believe to be in their best interests.

Certain provisions of Maryland law could inhibit changes in control, which may discourage third parties from conducting a tender offer or seeking other change of control transactions that could involve a premium price for our shares of common stock or that our stockholders otherwise believe to be in their best interests.

Certain provisions of the Maryland General Corporation Law, or the MGCL, may have the effect of inhibiting a third party from making a proposal to acquire us or of impeding a change of control under certain circumstances that otherwise could provide the holders of shares of our common stock with the opportunity to realize a premium over the then-prevailing market price of such shares including the Maryland business combination and control share provisions.

As permitted by the MGCL, our Board of Directors has adopted a resolution exempting any business combinations between us and any other person or entity from the business combination provisions of the MGCL, provided that the business combination is first approved by our Board of Directors (including a majority of directors who are not affiliates or associates of such persons). In addition, pursuant to a provision in our bylaws, we have opted out of the control share provisions of the MGCL. However, our Board of Directors may by resolution elect to opt in to the business combination provisions of the MGCL and we may, by amendment to our bylaws, opt in to the control share provisions of the MGCL in the future.

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Title 3, Subtitle 8 of the MGCL permits our Board of Directors, without stockholder approval and regardless of what is currently provided in our char ter or our bylaws, to implement takeover defenses, including adopting a classified board or increasing the vote required to remove a director. These provisions may have the effect of inhibiting a third party from making an acquisition proposal for our comp any or of delaying, deferring or preventing a change in control of our company under circumstances that otherwise could provide the holders of our common stock with the opportunity to realize a premium over the then-current market price. Our charter contai ns a provision whereby we elect to be subject to the provisions of Title 3, Subtitle 8 of the MGCL relating to the filling of vacancies on our Board of Directors.

Our charter, our bylaws and Maryland law also contain other provisions, including the provisions of our charter on removal of directors and the advance notice provisions of our bylaws, that may delay, defer or prevent a transaction or a change of control that might involve a premium price for our shares of common stock or otherwise be in the best interest of our stockholders.

Each item discussed above may delay, deter or prevent a change in control of our company, even if a proposed transaction is at a premium over the then-current market price for our common stock. Further, these provisions may apply in instances where some stockholders consider a transaction beneficial to them. As a result, our stock price may be negatively affected by these provisions.

Certain provisions in the amended partnership agreement may delay or prevent unsolicited acquisitions of us.

Provisions in the amended partnership agreement may delay, or make more difficult, unsolicited acquisitions of us or changes of our control. These provisions could discourage third parties from making proposals involving an unsolicited acquisition of us or change of our control, although some of our stockholders might consider such proposals, if made, desirable. These provisions include, among others:

Our charter contains provisions that make removal of our directors difficult, which could make it difficult for our stockholders to effect changes to our management.

Our charter contains provisions that make removal of our directors difficult, which could make it difficult for our stockholders to effect changes to our senior management and may prevent a change in control of our company that is in the best interests of our stockholders. Our charter provides that a director may only be removed for cause upon the affirmative vote of holders of two-thirds of all the votes entitled to be cast generally in the election of directors. Vacancies may be filled only by a majority of the remaining directors in office, even if less than a quorum. These requirements make it more difficult to change our senior management by removing and replacing directors and may prevent a change in control of our company that is in the best interests of our stockholders.

Our Board of Directors may change our strategies, policies and procedures without stockholder approval.

Our policies, including any policies with respect to investments, financing, leverage, growth, debt, capitalization and distributions, are determined exclusively by our Board of Directors or those committees of officers to whom our Board of Directors may delegate such authority. Our Board of Directors or the committees or officers to which such decisions are delegated have the ability to amend or revise these and our other policies at any time, without notice to or a vote of our stockholders. In addition, a change in our investment policies, including the manner in which we allocate our resources across our portfolio or the types of assets in which we seek to invest, may increase our leverage and/or our exposure to interest rate risk, real estate market fluctuations and liquidity risk. Changes to our policies with regards to the foregoing could materially adversely affect our financial condition, results of operations and cash flow.

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Our rights and the rights of our stockholders to take action against our directors and officers are limited, which could l imit your recourse in the event of actions that you do not believe are in your best interests.

Maryland law provides that a director or officer has no liability in that capacity if he or she satisfies his or her duties to us and our stockholders. As permitted by Maryland law, our charter limits the liability of our directors and officers to us and our stockholders for money damages to the maximum extent permitted by Maryland law. Under current Maryland law and our charter, our directors and officers do not have any liability to us or our stockholders for money damages, except for liability resulting from:

In addition, our charter and bylaws authorize us, and our bylaws require us, to indemnify each present and former director or officer, to the maximum extent permitted by Maryland law, in the defense of any proceeding to which he or she is made, or threatened to be made, a party by reason of his or her service to us. In addition, we may be obligated to advance the defense costs incurred by our directors and officers. We also have entered into indemnification agreements with our officers and directors granting them express indemnification rights. As a result, we and our stockholders may have more limited rights against our directors and officers than might otherwise exist. Accordingly, in the event that actions taken in good faith by any of our directors or officers impede the performance of our company, your ability to recover damages from such director or officer will be limited with respect to directors and may be limited with respect to officers.

We rely on funds received from our Operating Partnership to pay liabilities, and the interests of our stockholders are structurally subordinated to all liabilities and obligations of our Operating Partnership and its subsidiaries.

All of our farms are owned by, and we conduct substantially all of our operations through, our Operating Partnership and our other subsidiaries. We do not have, apart from an interest in our Operating Partnership, any independent operations. As a result, we rely on cash distributions and other payments from our Operating Partnership and our other subsidiaries to pay any dividends we might declare on shares of our common stock. We also rely on distributions from our Operating Partnership and other subsidiaries to meet our other financial obligations, including any tax liability on taxable income allocated to us from our Operating Partnership or other subsidiaries. As an equity investor in our Operating Partnership and other subsidiaries, our right to receive assets upon their liquidation or reorganization will be effectively subordinated to the claims of their creditors. To the extent that we are recognized as a creditor of such subsidiaries, our claims may still be subordinate to any security interest in or other lien on their assets and to any of such subsidiaries' debt or other obligations that are senior to our claims. Therefore, in the event of our bankruptcy, liquidation or reorganization, our assets and those of our Operating Partnership and its subsidiaries will be available to satisfy the claims of our stockholders only after all of our and our Operating Partnership's and its subsidiaries' liabilities and obligations have been paid in full.

Conflicts of interest may exist or could arise in the future between the interests of our stockholders and the interests of holders of Common Units, which may impede business decisions that could benefit our stockholders.

Conflicts of interest may exist or could arise in the future as a result of the relationships between us and our affiliates, on the one hand, and our Operating Partnership or any of its partners, on the other. Our directors and officers have duties to us under Maryland law in connection with their management of us. At the same time, we will have duties and obligations to our Operating Partnership and its limited partners under Delaware law as modified by the amended partnership agreement of our Operating Partnership in connection with the management of our Operating Partnership as the sole general partner. The limited partners of our Operating Partnership expressly will acknowledge that the general partner of our Operating Partnership will be acting for the benefit of our Operating Partnership, the limited partners and our stockholders collectively. When deciding whether to cause our Operating Partnership to take or decline to take any actions, the general partner will be under no obligation to give priority to the separate interests of (i) the limited partners of our Operating Partnership (including, without limitation, the tax interests of our limited partners, except as provided in a separate written agreement) or (ii) our stockholders. Nevertheless, the duties and obligations of the general partner of our Operating Partnership may come into conflict with the duties of our directors and officers to us and our stockholders.

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Our Operating Partnership may issue additional Common Units to third parties without the consent of our stockholders, which would reduce our ownership percentage in our Operating Partners hip and could have a dilutive effect on the amount of distributions made to us by our Operating Partnership and, therefore, the amount of distributions we can make to our stockholders.

As of December 31, 2015, we own approximately 83.8% of the outstanding Common Units in our Operating Partnership (on a fully diluted basis). We may, in connection with our acquisition of farms, as compensation or otherwise, issue additional Common Units. Such issuances would reduce our ownership percentage in our Operating Partnership and could affect the amount of distributions made to us by our Operating Partnership and, therefore, the amount of distributions we can make to our stockholders. Because you will not directly own Common Units, you will not have any voting rights with respect to any such issuances or other partnership level activities of our Operating Partnership.

Risks Related to Our Status as a REIT

Failure to qualify or to maintain our qualification as a REIT would have significant adverse consequences to the value of our common stock.

We elected to be treated as a REIT commencing with our taxable year ended December 31, 2012. The Code generally requires that a REIT distribute at least 90% of its taxable income (without regard to the dividends paid deduction and excluding net capital gains) to stockholders annually, and a REIT must pay tax at regular corporate rates to the extent that it distributes less than 100% of its taxable income (including capital gains) in a given year. In addition, a REIT is required to pay a 4% nondeductible excise tax on the amount, if any, by which the distributions it makes in a calendar year are less than the sum of 85% of its ordinary income, 95% of its capital gain net income and 100% of its undistributed income from prior years. To avoid entity-level U.S. federal income and excise taxes on retained income, we anticipate distributing at least 100% of our taxable income.

We believe that we have been and are organized, and have operated and will operate, in a manner that will allow us to qualify as a REIT commencing with our taxable year ended December 31, 2012. However, we cannot assure you that we have been and are organized and have operated or will operate as such. This is because qualification as a REIT involves the application of highly technical and complex provisions of the Code as to which there is only limited judicial and administrative interpretations and involves the determination of facts and circumstances not entirely within our control. We have not requested and do not intend to request a ruling from the U.S. Internal Revenue Service, or the IRS, that we qualify as a REIT. The complexity of these provisions and of the applicable Treasury Regulations is greater in the case of a REIT that, like us, was a C corporation before electing to be taxable as a REIT, holds its assets through one or more partnerships and cannot operate its properties (which must be leased to unrelated tenants). Moreover, in order to qualify as a REIT, we must meet, on an ongoing basis, various tests regarding the nature and diversification of our assets and our income, the ownership of our outstanding stock, the absence of retained earnings from non-REIT periods and the amount of our distributions. Our ability to satisfy the asset tests depends upon our analysis of the characterization and fair market values of our assets, some of which are not susceptible to a precise determination. Our compliance with the REIT gross income and quarterly asset requirements also depends upon our ability to manage successfully the composition of our gross income and assets on an ongoing basis. Future legislation, new regulations, administrative interpretations or court decisions may significantly change the tax laws or the application of the tax laws with respect to qualification as a REIT for U.S. federal income tax purposes or the U.S. federal income tax consequences of such qualification. Accordingly, it is possible that we may not meet the requirements for qualification as a REIT.

If, with respect to any taxable year, we fail to maintain our qualification as a REIT, we would not be allowed to deduct distributions to stockholders in computing our taxable income. If we were not entitled to relief under the relevant statutory provisions, we would also be disqualified from treatment as a REIT for the four subsequent taxable years. If we fail to qualify as a REIT, we would be subject to entity-level income tax, including any applicable alternative minimum tax, on our taxable income at regular corporate tax rates. As a result, the amount available for distribution to holders of our common stock would be reduced for the year or years involved, and we would no longer be required to make distributions. In addition, our failure to qualify as a REIT could impair our ability to expand our business and raise capital, and adversely affect the value of our common stock.  We consolidate into our financial statements the results of two TRSs.  Transactions entered by a TRS that are not at arm’s length may be subject to excise tax.

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We may o we certain taxes notwithstanding our qualification as a REIT.

Even if we qualify as a REIT, we will be subject to certain U.S. federal, state and local taxes on our income and property, on taxable income that we do not distribute to our stockholders, on net income from certain “prohibited transactions” and on income from certain activities conducted as a result of foreclosure. We may, in certain circumstances, be required to pay an excise or penalty tax (which could be significant in amount) in order to utilize one or more relief provisions under the Code to maintain our qualification as a REIT. In addition, we may engage in certain activities through one or more TRSs, and the income of those subsidiaries will be subject to U.S. federal income tax at regular corporate rates. Furthermore, to the extent that we conduct operations outside of the United States, our operations would subject us to applicable foreign taxes, regardless of our status as a REIT for U.S. federal income tax purposes.

In the case of assets we owned as of January 1, 2012, the start of our first REIT taxable year, we also will be subject to U.S. federal income tax, sometimes called the “sting tax,” at the highest regular corporate tax rate, which is currently 35%, on all or a portion of the gain recognized from a taxable disposition of any such assets occurring within the 10-year period following that date, to the extent of the asset's built-in gain based on the fair market value of the asset as of that date in excess of our then tax basis in the asset. Gain from a sale of such an asset occurring after the 10-year period ends will not be subject to this sting tax. We are under no obligations to retain these assets to avoid this tax. We estimate the maximum amount of built-in gain potentially subject to the sting tax is approximately $7,077,000, which corresponds to a maximum potential tax of approximately $2,477,000 (based on current tax rates and the valuation of the properties).

If our Operating Partnership is treated as a corporation for U.S. federal income tax purposes, we will cease to qualify as a REIT.

We believe our Operating Partnership has qualified and will continue to qualify as a partnership for U.S. federal income tax purposes. Assuming that it qualifies as a partnership for U.S. federal income tax purposes, our Operating Partnership generally will not be subject to U.S. federal income tax on its income. Instead, its partners, including us, generally are required to pay tax on their respective allocable share of our Operating Partnership's income. No assurance can be provided, however, that the IRS will not challenge our Operating Partnership's status as a partnership for U.S. federal income tax purposes or that a court would not sustain such a challenge. If the IRS were successful in treating our Operating Partnership as a corporation for U.S. federal income tax purposes, we would fail to meet the gross income tests and certain of the asset tests applicable to REITs and, therefore, cease to qualify as a REIT, and our Operating Partnership would become subject to U.S. federal, state and local income tax. The payment by our Operating Partnership of income tax would reduce significantly the amount of cash available to our partnership to satisfy obligations to make principal and interest payments on its debt and to make distribution to its partners, including us.

There are uncertainties relating to our distribution of non-REIT earnings and profits.

To qualify as a REIT, we must not have any non-REIT accumulated earnings and profits, as measured for U.S. federal income tax purposes, at the end of any REIT taxable year. Thus, we had to distribute any such non-REIT accumulated earnings and profits that we had when we elected to be taxable as a REIT prior to the end of our first REIT taxable year ended December 31, 2012. We believe we made sufficient distributions in 2012 and had no accumulated earnings and profits in our prior years so that we did not have any undistributed non-REIT earnings and profits at the end of 2012. However, the determination of the amounts of any such non-REIT earnings and profits is a complex factual and legal determination. If it is subsequently determined that we had undistributed non-REIT earnings and profits as of the end of our first taxable year as a REIT or at the end of any subsequent taxable year, we could fail to qualify as a REIT.

Dividends payable by REITs generally do not qualify for reduced tax rates.

The maximum U.S. federal income tax rate for certain qualified dividends payable to U.S. stockholders that are individuals, trusts and estates generally is 20%. Dividends payable by REITs, however, are generally not eligible for the reduced rates and therefore may be subject to a 39.6% maximum U.S. federal income tax rate on ordinary income when paid to such stockholders. Although the reduced U.S. federal income tax rate applicable to dividend income from regular corporate dividends does not adversely affect the taxation of REITs or dividends paid by REITs, the more favorable rates applicable to regular corporate dividends could cause investors who are individuals, trusts and estates or are otherwise sensitive to these lower rates to perceive investments in REITs to be relatively less attractive than investments in the stock of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our common stock.

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A portion of our distributions may be treated as a return of capital for U.S. federal income tax purposes, which could reduce the basis of a stockholder's inv estment in shares of our common stock and may trigger taxable gain.

A portion of our distributions may be treated as a return of capital for U.S. federal income tax purposes. As a general matter, a portion of our distributions will be treated as a return of capital for U.S. federal income tax purposes if the aggregate amount of our distributions for a year exceeds our current and accumulated earnings and profits for that year. To the extent that a distribution is treated as a return of capital for U.S. federal income tax purposes, it will reduce a holder's adjusted tax basis in the holder's shares, and to the extent that it exceeds the holder's adjusted tax basis will be treated as gain resulting from a sale or exchange of such shares.

Complying with the REIT requirements may cause us to forego otherwise attractive opportunities or liquidate certain of our investments.

To qualify as a REIT for U.S. federal income tax purposes, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts we distribute to our stockholders and the ownership of our stock. We may be required to make distributions to our stockholders at disadvantageous times or when we do not have funds readily available for distribution. Thus, compliance with the REIT requirements may, for instance, hinder our ability to make certain otherwise attractive investments or undertake other activities that might otherwise be beneficial to us and our stockholders, or may require us to borrow or liquidate investments in unfavorable market conditions and, therefore, may hinder our investment performance.

As a REIT, at the end of each calendar quarter, at least 75% of the value of our assets must consist of cash, cash items, government securities and qualified real estate assets. The remainder of our investments in securities (other than cash, cash items, government securities, securities issued by a TRS and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our total assets (other than cash, cash items, government securities, securities issued by a TRS and qualified real estate assets) can consist of the securities of any one issuer, no more than 25% of the value of our total assets (20% for taxable years beginning on or after January 1, 2018) can be represented by securities of one or more TRSs, and, for taxable years beginning on or after January 1, 2015, not more than 25% of the value of our total assets may be represented by debt instruments of publicly offered REITs that are not secured by mortgages on real property or interests in real property. After meeting these requirements at the close of a calendar quarter, if we fail to comply with these requirements at the end of any subsequent calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification. As a result, we may be required to liquidate from our portfolio otherwise attractive investments. These actions could have the effect of reducing our income and amounts available for distribution to our stockholders.

We may be subject to a 100% penalty tax on any prohibited transactions that we enter into or may be required to forego certain otherwise beneficial opportunities in order to avoid the penalty tax on prohibited transactions.

If we are found to have held, acquired or developed inventory or property primarily for sale to customers in the ordinary course of business, we may be subject to a 100% tax on net income from “prohibited transactions” under U.S. federal tax laws on the gain from disposition of the property unless the disposition qualifies for one or more safe harbor exceptions for properties that have been held by us for at least two years and satisfy certain additional requirements (or the disposition is made through a TRS and, therefore, is subject to corporate U.S. federal income tax).

The term “prohibited transactions” generally includes a sale or other disposition of property (other than foreclosure property) that is (i) of a kind that is properly included in inventory if on hand at the close of the taxable year or (ii) held primarily for sale to customers in the ordinary course of a trade or business. Whether property is held “primarily for sale to customers in the ordinary course of a trade or business” depends on the specific facts and circumstances. The Code provides a safe harbor pursuant to which sales of properties held for at least two years and meeting certain additional requirements will not be treated as prohibited transactions, but compliance with the safe harbor may not always be practical.

We intend to conduct our operations so that no farm (or other interests in real property) that we own outside of a TRS will be treated as, or as having been, held for sale to customers in the ordinary course of our business. We intend to hold our farms for investment with a view to long-term appreciation, to engage in the business of acquiring, owning, leasing and developing farms and to make sales of farms (or other interests in real property) that are consistent with our investment objectives; however, no assurance can be given that any particular farm or other interest in real property in which we hold a direct or indirect interest will not be treated as property held for sale to or that the safe-harbor provisions will apply.

Additionally, the potential application of the prohibited transactions tax could cause us to forego potential dispositions of our farms or interests therein or to forego other opportunities that might otherwise be attractive to us, or to hold investments or undertake such dispositions or other opportunities through a TRS, which would generally result in corporate income taxes being incurred.

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We have acquired and expect to continue to acquire from time to time crops that we believe are treated as inventory, including (i) crops received as in-kind payments of rent and/or (ii) with respect to certain of our farms under development, crops we harvest during the development phase prior to leasing the farm. In past years, we have not sold any such crops through a TRS, and going forward it may not be feasible (or desirable) to earn the revenue from such sales through a TRS for U.S. federal income tax purposes. Any gain from a sale of inventory in excess of direc tly connected deductions (and without any offset for any losses from other inventory sales) is subject to the 100% prohibited transaction tax. We have incurred prohibited transaction tax in the past, and we may incur such tax in future periods. Moreover, c urrent law provides little guidance as to the deductions that are allowed to offset the gain subject to 100% tax, and thus the IRS might disagree with our calculations of the amount of gain subject to 100% tax.

REIT distribution requirements could adversely affect our liquidity and adversely affect our ability to execute our business plan.

In order to maintain our qualification as a REIT and to meet the REIT distribution requirements, we may need to modify our business plans. Our cash flow from operations may be insufficient to fund required distributions, for example, as a result of differences in timing between our cash flow, the receipt of income for GAAP purposes and the recognition of income for U.S. federal income tax purposes, the effect of non-deductible capital expenditures, the creation of reserves, payment of required debt service or amortization payments, or the need to make additional investments in qualifying real estate assets. The insufficiency of our cash flow to cover our distribution requirements could require us to (i) sell assets in adverse market conditions, (ii) borrow on unfavorable terms, (iii) distribute amounts that would otherwise be invested in future acquisitions or capital expenditures or used for the repayment of debt, (iv) pay dividends in the form of “taxable stock dividends” or (v) use cash reserves, in order to comply with the REIT distribution requirements. As a result, compliance with the REIT distribution requirements could adversely affect the market value of our common stock. The inability of our cash flow to cover our distribution requirements could have an adverse impact on our ability to raise short- and long-term debt or sell equity securities. In addition, if we are compelled to liquidate our assets to repay obligations to our lenders or make distributions to our stockholders, we may be subject to a 100% tax on any resultant gain if we sell assets that are treated as property held primarily for sale to customers in the ordinary course of business, and, in the case of properties held at the end of 2011 (or subsequently acquired in tax deferred transactions from regular C corporations), we may be subject to an entity-level sting tax.

The ability of our Board of Directors to revoke our REIT qualification without stockholder approval may cause adverse consequences to our stockholders.

Our charter provides that our Board of Directors may revoke or otherwise terminate our REIT election, without the approval of our stockholders, if it determines that it is no longer in our best interest to continue to qualify as a REIT. If we cease to be a REIT, we will not be allowed a deduction for dividends paid to stockholders in computing our taxable income and will be subject to U.S. federal income tax at regular corporate rates and state and local taxes, which may have adverse consequences on our total return to our stockholders.

Our ability to provide certain services to our tenants may be limited by the REIT rules or may have to be provided through a TRS.

As a REIT, we generally cannot provide services to our tenants other than those that are customarily provided by landlords, nor can we derive income from a third party that provides such services. If we forego providing such services to our tenants, we may be at disadvantage to competitors who are not subject to the same restrictions. However, we can provide such non-customary services to tenants or share in the revenue from such services if we do so through a TRS, though income earned through the TRS will be subject to regular corporate income taxes.

Although our use of TRSs may partially mitigate the impact of meeting certain requirements necessary to maintain our qualification as a REIT, there are limits on our ability to own TRSs, and a failure to comply with the limits would jeopardize our REIT qualification and may result in the application of a 100% excise tax.

A REIT may own up to 100% of the stock of one or more TRSs. A TRS may hold assets and earn income that would not be qualifying assets or income if held or earned directly by a REIT. Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a TRS. A corporation of which a TRS directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a TRS. Overall, no more than 25% of the value of a REIT's assets (20% for taxable years beginning on or after January 1, 2018) may consist of securities of one or more TRSs. In addition, rules limit the deductibility of interest paid or accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation. Rules also impose a 100% excise tax on certain transactions between a TRS and its parent REIT that are treated as not being conducted on an arm's-length basis.

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We have jointl y elect ed with American Farmland TRS LLC, a Delaware limited liability company, ( “ AFTRS ” ), for it to be treated as a TRS under the Code for U.S. federal income tax purposes. We also made a TRS election jointly with AFCO CA TRS, LLC, or the Kingfisher TRS, our wholly-owned subsidiary to which we assigned our rights to acquire a solar farm owned by the lessee of Kingfisher Ranch. AFTRS, the Kingfisher TRS and any other TRSs that we form wil l pay U.S. federal, state and local income tax on their taxable income, and their after-tax net income will be available for distribution to us but is not required to be distributed to us unless necessary to maintain our REIT qualification. Although we wil l monitor the aggregate value of the securities of such TRSs and intend to conduct our affairs so that such securities will represent less than 25% of the value of our total assets (20% for taxable years beginning on or after January 1, 2018) , there can be no assurance that we will be able to comply with the TRS limitation in all market conditions.

The IRS may treat sale-leaseback transactions as loans, which could jeopardize our REIT status.

The IRS may take the position that transactions in which we acquire a property and lease it back to the seller do not qualify as leases for U.S. federal income tax purposes but are, instead, financing arrangements or loans. If a sale-leaseback transaction were so re-characterized, we might fail to satisfy the asset or income tests required for REIT qualification and consequently could lose our REIT status. Alternatively, the amount of our REIT taxable income could be recalculated, which could cause us to fail the distribution test for REIT qualification.

Possible legislative, regulatory or other actions could adversely affect our stockholders and us.

The rules dealing with U.S. federal, state and local income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S. Treasury Department. Changes to tax laws (which changes may have retroactive application) could adversely affect our stockholders or us. In recent years, many such changes have been made and changes are likely to continue to occur in the future. We cannot predict whether, when, in what form, or with what effective dates, tax laws, regulations and rulings may be enacted, promulgated or decided, which could result in an increase in our, or our stockholders', tax liability or require changes in the manner in which we operate in order to minimize increases in our tax liability. A shortfall in tax revenues for states and municipalities in which we operate may lead to an increase in the frequency and size of such changes. If such changes occur, we may be required to pay additional taxes on our assets or income and/or be subject to additional restrictions. These increased tax costs could, among other things, adversely affect our financial condition, the results of operations and the amount of our dividend payments.

Stockholders are urged to consult with their own tax advisors with respect to the impact that recent legislation may have on their investment and the status of legislative, regulatory or administrative developments and proposals and their potential effect on their investment in our shares. If any of these proposals or legislation containing similar provisions were to become law, it could severely impact our ability to qualify to be taxed as a REIT and/or subject us to significant amount of U.S. federal income tax at the corporate level. Any resulting corporate tax liability could be substantial and would reduce the amount of cash available for distribution to our stockholders, which in turn could have an adverse impact on the value of our common stock.

Our property taxes could increase due to property tax rate changes or reassessment, which could impact our cash flow.

Even if we qualify as a REIT for U.S. federal income tax purposes, we will be required to pay state and local taxes on our properties. The real property taxes on our properties may increase as property tax rates change or as our properties are assessed or reassessed by taxing authorities. In particular, our portfolio of properties may be reassessed as a result of the Offering. Therefore, the amount of property taxes we pay in the future may increase substantially from what we have paid in the past and such increases may not be covered by tenants pursuant to our lease agreements. If the property taxes we pay increase, our financial condition, results of operations, cash flow, per share trading price of our common stock and our ability to satisfy our principal and interest obligations and to make distributions to our stockholders could be adversely affected.

Risks Related to the Market for Our Common Stock

The market price and trading volume of our common stock may be volatile.

The stock markets, including the NYSE MKT LLC, (“NYSE MKT” or “NYSE MKT LLC”), on which our common stock is listed, historically have experienced significant price and volume fluctuations.  Accordingly, the per share trading price of our common stock may be similarly volatile and the trading volume in our common stock may fluctuate and cause significant price variations to occur, and investors in shares of our common stock may from time to time experience a decrease in the value of their shares, including decreases unrelated to our operating performance or prospects.

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Some of the factors that could negatively affect our share price or result in fluctuations in the price or tradin g volume of our common stock include:

In the past, securities class action litigation has often been instituted against companies following periods of volatility in the price of their common stock. This type of litigation could result in substantial costs and divert our management's attention and resources, which could have a material adverse effect on us, including our financial condition, results of operations, cash flow and per share trading price of our common stock.

Our cash available for distribution to stockholders may not be sufficient to make distributions, and we may need to borrow in order to make such distributions or may not be able to make such distributions at all.

In order to remain competitive with alternative investments, our distribution rate may exceed our cash available for distribution, including cash generated from operations. In the event this happens, we intend to fund the difference out of any excess cash on hand or from borrowings. To the extent we borrow to fund distributions, our future interest costs would increase, thereby reducing our earnings and ability to make distributions from what they otherwise would have been. If we do not have sufficient cash available for distribution generated by our assets to pay the quarterly distribution set by our Board of Directors, or if cash available for distribution decreases in future periods, the market price of our common stock could decrease.

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All distributions will be made at the discretion of our Board of Directors and will depend on our earnings, our financial condition, whether or not we have qualified as a REIT, and other factors as our Board of Directors may deem relevant from time to time. We may not be able to make distributions in the future. In addition, some of our distributions may include a return of capital. To the extent that our Board of Directors approves distributions in excess of our then current and accumulated earnings and profits, these excess distributions would generally be considered a return of ca pital for U.S. federal income tax purposes to the extent of your adjusted tax basis in your shares. A return of capital is not taxable, but it has the effect of reducing your adjusted tax basis in your investment. To the extent that distributions exceed th e adjusted tax basis of your shares, they will be treated for tax purposes as a gain from the sale or exchange of your stock. If we borrow to fund distributions, our future interest costs would increase, thereby reducing our earnings and ability to make di stributions from what they otherwise would have been.

The number of shares of our common stock available for future issuance or sale may have adverse effects on the market price of our common stock.

As of December 31, 2015, approximately 16,890,847 shares of our common stock were outstanding, 10,890,847 of which will be eligible for future sale beginning on April 18, 2016. Additionally 806,400 shares of our common stock are available for future issuance under our 2014 Equity Incentive Plan and, as of December 31, 2015, other than the Common Units held by us, approximately 3,269,556 Common Units in our Operating Partnership were outstanding, which are redeemable at the option of the holders beginning on October 23, 2016, for cash, or at our option, for shares of our common stock, on a one-for-one basis. We have agreed to register the shares issuable upon redemption of the Common Units so that such shares will be freely tradable under the securities laws.

We cannot predict the effect, if any, of future sales of our common stock, or the availability of shares for future sales, on the market price of our common stock. The market price of our common stock may decline significantly when the restrictions on resale by certain of our stockholders lapse. Sales of substantial amounts of common stock, including shares of common stock issuable upon the redemption of outstanding Common Units, or the perception that such sales could occur, may adversely affect the prevailing market price for our common stock.

In addition, we may issue additional shares in subsequent public offerings or private placements to make new investments or for other purposes. We are not required to offer any such shares to existing stockholders on a preemptive basis. Therefore, it may not be possible for existing stockholders to participate in such future share issuances, which may dilute the existing stockholders' interests in us.

Future offerings of debt securities, which would be senior to our common stock upon liquidation, preferred equity securities, which may be senior to our common stock for purposes of dividend distributions or upon liquidation, and Common Units in connection with future acquisitions may materially adversely affect us, including the per share trading price of our common stock.

Our charter provides that we may issue up to 300,000,000 shares of our common stock, $0.01 par value per share, and up to 10,000,000 shares of preferred stock, $0.01 par value per share. Moreover, under Maryland law and our charter, our Board of Directors has the power to increase the aggregate number of shares of stock or the number of shares of stock of any class or series that we are authorized to issue without stockholder approval. Similarly, the amended partnership agreement authorizes us to issue an unlimited number of additional Common Units, which may be exchangeable for shares of our common stock. In addition, equity awards representing 806,400 share equivalents are available for future issuance under the 2014 Equity Incentive Plan (with full value awards counting as one share equivalent).

In the future, we may issue debt or equity securities or incur other financial obligations, including stock dividends and shares that may be issued in exchange for Common Units and equity plan shares/units. Upon liquidation, holders of our debt securities and shares of preferred stock and lenders with respect to other borrowings will be entitled to receive payments prior to distributions to the holders of our common stock. Additionally, any convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of our common stock and may result in dilution to owners of our common stock. Holders of our common stock are not entitled to preemptive rights or other protections against dilution. Our preferred stock, if issued, could have a preference on liquidating distributions or a preference on dividend payments that could limit our ability pay dividends to the holders of our common stock. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, our stockholders bear the risk that our future offerings could reduce the per share trading price of our common stock and dilute their interest in us. In addition, the issuance of Common Units in connection with future acquisitions and the redemption of such Common Units for common stock may be dilutive to our stockholders and could have an adverse effect on the per share trading price of our common stock.

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Increases in market interest rates may have an adverse effect on the market price of our common stock.

One of the factors that investors may consider in deciding whether to buy or sell our common stock is our distribution yield, which is our distribution rate as a percentage of our share price, relative to market interest rates. If market interest rates increase, prospective investors may desire a higher distribution yield on our common stock or may seek securities paying higher dividends or interest. The market price of our common stock likely will be based primarily on the earnings that we derive from rental income with respect to our farms and our related distributions to stockholders, and not from the underlying appraised value of the farms themselves. As a result, interest rate fluctuations and capital market conditions are likely to affect the market price of our common stock, and such effects could be significant. For instance, if interest rates rise without an increase in our distribution rate, the market price of our common stock could decrease because potential investors may require a higher distribution yield on our common stock as market rates on interest-bearing securities, such as bonds, rise.

We are an “emerging growth company,” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make shares of our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including the requirements to:

We will remain an “emerging growth company” until the earliest to occur of (i) the last day of the fiscal year during which our total annual revenue equals or exceeds $1 billion (subject to adjustment for inflation), (ii) the last day of the fiscal year following the fifth anniversary of this offering, (iii) the date on which we have, during the previous three-year period, issued more than $1 billion in non-convertible debt or (iv) the date on which we are deemed to be a “large accelerated filer” under the Exchange Act.

We cannot predict if investors will find shares of our common stock less attractive because we will not be subject to the same reporting and other requirements as other public companies. If some investors find shares of our common stock less attractive as a result, there may be a less active trading market for our common stock, and the per share trading price of our common stock could decline and may be more volatile.

We are obligated to develop and maintain proper and effective internal control over financial reporting. If there are deficiencies in our disclosure controls and procedures or internal control over financial reporting, we may be unable to accurately present our financial statements, which could materially adversely affect us, including our business, reputation, results of operations, financial condition or liquidity.

Effective internal controls are necessary for us to accurately report our financial results. Section 404 of the Sarbanes-Oxley Act of 2002 will require us to evaluate and report on our internal control over financial reporting. There can be no guarantee that our internal control over financial reporting will be effective in accomplishing all control objectives all of the time. Furthermore, as we grow our business, our internal controls will become more complex, and we may require significantly more resources to ensure our internal controls remain effective. Deficiencies, including any material weakness, in our internal control over financial reporting which may occur in the future could result in misstatements of our financial statements that could require a restatement, failing to meet our public company reporting obligations and causing investors to lose confidence in our reported financial information. These events could materially adversely affect us, including our business, reputation, results of operations, financial condition or liquidity.