Gladstone Commercial (GOOD)

Michael LiCalsi General Counsel & Secretary
David Gladstone Chairman & CEO
Bob Cutlip President
Gary Gerson CFO & Assistant Treasurer
Craig Kucera B Riley and Securities
John Massocca Ladenburg
Brian Hollenden Aegis
Call transcript
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Greetings and welcome to Gladstone Commercial's Third Quarter Earnings Call. At this time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions].

As a reminder, this conference is being recorded. turn over to Mr. your like now the to conference host, I'd Gladstone, Officer. Executive and David Chief Chairman Thank you, sir. proceed. Please,

David Gladstone

calling you, Thank Latanya. for to That introduction in. nice and was thanks of all a you

chance enjoy mentioned I with have once ask more we every it I we time with quarter. for As we these to only to you do talk time, you times and wish had questions. a you, a but

give Counsel you from hearing legal Michael he and by Secretary. concerning out, General He'll matters Michael? start we'll regulatory Now, report. the is and LiCalsi, call our the

Michael LiCalsi

may Thanks, of David. Good include Exchange those morning forward-looking the and future under everybody. Act Act Today's Securities our XXXX, including call regarding the Securities of statements XXXX performance.

are be our believe with XX-K results by results any these documents statements, which the we expressed And plans, reasonable. to XX-Q, based from implied other on in our cause involve forward-looking be uncertainties Now statements our file to current future we Forms or and factors certain including Factors many may risks different actual SEC. all Risk forward-looking materially that these and

that's or You otherwise, And obligation forward-looking website as them on website, go undertake except or a information, specifically the we statements, page, revise required result update any find as or of the to events whether SEC's www.gladstonecommercial.com publicly Investors no on by new future can to our www.sec.gov. these law. of

estate, adjusted excluding which are comparability, gains any also will of real adjusted FFO, revenues amortization defined certain generally discuss other expenses. and depreciation we will core Funds impairment FFO losses Operations. the property, plus income, which today, real Now, accounting estate focus, on assets. from sale and nonrecurring or a for the FFO discuss FFO, We'll term FFO From for as we as net losses of is non-GAAP and

that better our metrics website you are performance. And we these operating e-mail for ask of our service. comparability a we period-over-period and gladstonecommercial.com, notification allow sign-up indication better our Now visit of believe results our

The keyword @GladstoneComps. information. Today's The the yesterday call page press release for You of over handle could on our detailed our is also Form Companies Investors both you they're that, find I'll results, Twitter so and it on that our Facebook. there XX-Q, website. overview issued Gladstone is of more an Bob? we ask review us to Cutlip. President, Commercial's Again, With and hand Bob Gladstone is

Bob Cutlip

you, Thank Good Mike. morning, everyone.

renewed Port X.X%. of our rated industrial Tulsa Texas quarter, third of during a San year Austin XXX% rate lease of in feet XX,XXX We in we million and and quarter, and a industrial through grade years through During leased term and XX.X facility in third continued investment at XXX,XXX cap rate October facility tenant. the We and GAAP industrial lease building of XX,XXX occupancy. XXX,XXX facility lease office square at Antonio, term acquired product the to of Illinois, storage on Catoosa, rents St. XX increasing a Texas our the of Chicago collected yard an industrial Missouri, of focus of Louis, for foot and acquisitions a which for square scheduled flex foot Commenced years Acquired XXXX remaining just with $XX of foot cash-based XX.X of our of XXXX, square remaining lease rents. XXX% November XX,XXX foot is square X.X%. property the West million square Peru, in cap $X.X GAAP a with

industrial all nature. assets reinforce have in our increase Our our million investments acquisition The allocation. portfolios further is strategy approaching $XXX to industrial volume XXXX been recent since and

striking from increased has industrial Our to of today. allocation distance within XX% XX%

XX% long-term to objective term objective the within months. two our XX next next XX% And within to the is plus years. plus reach XX% reach near is Our to

success focus. range size foot continue and Our acquisition expect this we been the with to square in XXX,XXX candidates to XX,XXX has

sales front, over a commercial professional. long We're investment XX Ryan He acquiring sold as West having a familiarity of history Vice Carter, a and we us properties the years experience On our to possesses the with our has has excited developing company team. hired principal an personnel Ryan and and investment strong and join with through Executive has President that as to Ryan our several the lead as years senior agreed prior strategy. properties regions. a to Midwest extremely

management XX million deliver extended, X.X expanded our improving with these operations. team X.X improvement of foot. feet allowance September the average straight-line million. team lease transactions just to term $X.XX asset continued $XX.X tenant an The years per Our of of covering totaled rent tenants square XXth, leased and and/or square same-store annualized Year-to-date weighted ending a

by the going in many will on Anticipating occupancy team's but forward. also positive vacancy outcomes a As increased and that our for to only not Tulsa, noted in lease the wanted the payments summarize leases lease facility the in on thoughts These releasing call through the and by very our million I square lease of positive and very quarter. the reduced interested per impact X.X%, increased our in in XXXX, two over rate are square introduction, XXX,XXX industrial foot result Austin, are the $X activities. expirations performance straight-line same-store XXX,XXX foot year,

We expiring our and the have July, of of end of XXXX is at in are and the expiration June, of October. lease X.X% end about end dates

able be expirations be rent of should on to emphasis future we'll top-line So growth continue portfolio. expansion and our through the manageable, quite our

team success. our lease largest vacancy recent office As has everyone knows, the and our been Austin excellent achieved has

for and during first worthy third is product since of nearly by was former of end of Investment we comment, result of was the particularly and three the the sizeable for virus. from we continued onset the sales this reflects with considerably reports we quarter, or prospects on that property Since review COVID-XX the adverse September to is and statistics space, volume both quarters and property have about September million that by of transaction research final expect positive XXX,XXX the the replaced for about square of office leased months are quarter, to of approximately feet impact XXXX, the the occupant. the types feet, $XXX billion leasing and highest with noted approximately completely a types XXX than alone year Real challenges. same-store XX% building. have the under vacant of performance activity second exceeding And effects straight-line will in additional overall increased X% balance according over forward. net absorption until Capital strong, Market industrial the transaction XX% XXX% square for of A to construction. the be feet to straight have for exceeded when GM. straight-line the XXXX. improvements all some Industrial Prices all prior introduction, quarter relating the continues The this property occupied property with since at million rent any with from square level, As at the the activity XXth nine year, therefore vacancy rents XXX conditions fourth going this increasing higher be XX% we first Analytics. the Austin for

increased space be is challenges disruption other to square as Office construction. This sector. And growth square currently quarter. And Although per all feet square basis. vacancy quarters, product vacancy is million over negative industrial it million witnessed million relates negative on as activity improvement we're over which available XXX for hand is And absorption over absorption e-commerce include creating XX sectors, supply prior supply the as of approximately demand million logistics on the sublease does figure under and feet new to XXX the was listings. according continues investment about of product continue the JLL drive estimated however, national seeing sales not increased feet for Research. feet to chain opportunities, XX a level three to an office square

Our three review. one and in initial exceeding properties totaling is in volume, industrial. and properties, letter million; $XXX of $XX of under the the diligence are are in Of XX balance $XX balance intent is million; due the properties approximately representing million acquisition current are pipeline properties, XX three which are of office the about candidates stage,

to staying third acquisitions, engagement quarter our pursue markets to believe we we as opportunities strong that will team In opportunities. acquisition positions reflected pursue. to engaged is industrial arise continue us and target summary, actively continued will activities and in growth rental active our and collectively well close can Our success, leasing and we collection identify

results, turn to it markets the on Gary like activities. financial including our I'd over report for a Now capital to

Gary Gerson

months were $X.XX weighted to average core available respectively. were share for share $X.XX and FFO by available quarter during per third Thank fully FFO and third shares. common adjusted first I'll of reviewing during referenced shareholders of the first adjusted shareholders FFO and the $X.XX FFO share are good diluted and on core common share my results for everyone. $X.XX shareholders available quarter. common start available our you, the remarks for based per to per stock and morning, numbers to I FFO Bob, were FFO and the comparability $X.XX per XXXX XXXX All to core common comparability share and were for core common respectively. and for shareholders $X.XX $X.XX of and quarter respectively. FFO months the respectively. XXXX nine nine $X.XX FFO operating

over X.X% first third same-store nine at the of over in the the first for the months XXXX quarter of at X.X% quarter XXXX, XXXX. grew nine Our rent of and it grew cash third months

to of of $XX.X operating same for total Our expenses XXXX. third revenues reflected with $XX.X the results quarter million period operating revenues compared of million operating million $XX.X $XX.X of million and as in operating expenses

focus balance leverage. and We our on continued enhance our continue to to grow our we as assets reducing sheet, strong

We from through leverage have We past lower believe and at the X% level. leverage maturing target years reduced XX.X% debt, refinancing over X% and to gross our six financing to we're new assets levels. away between acquisitions our debt

debt continue to We mortgage long-term make primarily to acquisitions. use

additional As time, also we expect assets. this continue pool we investments, expand increase quality debt options. grow property through unsecured with high financing our to disciplined our will Over we

XX% X.X% at XX.X% floating is rate, rate. Looking our and fixed rate, is is floating hedged profile, debt

As are in our with coming of $X.X XXXX. manageable today in $XX maturities million XXXX due loan and XXXX due XXXX and million

million million these term We $XX XXXX, We credit time. of in appropriate the a consisted amounts component. at a our the quarter first delayed loan will of $XX facility draw with which upsized finance

drew $XX proceeds properties. acquire quarter were down utilized remaining the million. The accretive to we This

outstanding. the $X.X borrowings million As we the had of of end of revolver quarter

While liquidity, entering the third through equity been we've with ATM program. issuing our quarter sufficient active in

ended we nine raised XX, September $XX.X XXXX, of and through sales. million common the net months stock issuance During costs,

to investments. equity capital upcoming liquidity actively continue that manage We to have for ensure sufficient our we

also current our availability, we availability today, strong to our under in of access approximately line million significant We increased program, performance credit. to that over have of As fund our the information of and of to ATM financial near our $XX has have on current provides our more flexibility million Institutional our long-term. to $XX.X we our posted incremental encourage operations With portfolio portfolio believe, detailed quarterly and quarter. supplement we and stock of cash review our website, XX.X%. financial the and time ownership which for you

investors, the to potential managers, look company to and continue new active relationships very banks. We forward We investment analysts be as establishing coverage in and with current meeting portfolio grows.

raised have year. per share common $XX.XXXX quarter, to per per our $X.XXXX dividend or We stock

cut since IPO in not or have We XXXX. dividend our the suspended

back now yesterday on I'll Our And The distribution David. common at to our $XX. stock program X.XX%. yield is stock turn the closed at

David Gladstone

the you That and LiCalsi various performed much a a too. by Thank Cutlip from the Team government report well good Michael Bob not very very virus. and one quarter has and we've incurred to good this Gary reactions much. was

a nice So we with quarter. very ended up

quarter first managers professional of which team million in the seeking the at You've XX we know tenants asset dragged was the the lease transactions excellent Austin active strong managing that heard year-to-date, dividend it's we properties in They maximize own And different we rents. that been about a like challenges annualized growing the we've numbers that previous team investments. their will new pay during new our increasing they $XX.X we the the be during pace on the we to have and is did. That been in class our team already we're also industrial and the first these to property environment today, straight-line real The teams are is This doing continue is many the continues with estate Commercial to rents the challenges, a the restrictions during great their real and outlook, rents to list half over and time. impressive. tenants never lot challenged That while one order now and in doing leased -- estate value. quality great managing middle our ending assets job. Including The back job. on government team collected and and sure With today has group team the properties the to owns are we business team properties fantastic well reviewing. but and pay very the a our quarter we're shape. cash-based quality us with that XXX% September credit we're make times The the XX, team I'm good two It's to thinking estate seen acquired are in tenants, the continue at second. a done us team especially the executed represents a transactions of good been but the acquisition pandemic the tenants and company strong have the quarter is and future up look own, team's has and a the and our of there in there real the related job a really the acquisitions pursue credit leases of was a Austin paying and to property. led about down had and has market of before quite virus. for

on listeners a our ask and and here have help come stop few questions. our operator let's Okay,


this you. conduct [Operator will we session. Instructions]. Thank At question-and-answer time, a

question first comes Please Securities. from with Riley Craig and Our Kucera B. proceed.

Craig Kucera

Yes, story to quarter. and morning, think I dots just make connecting this thinking Austin, here which the hey here a of guys. good want sure I I'm big about is the part

infer you building thought And the guess tenant. leased but be they whereas just So high that, rent would you $XX, as close was but top $XX, building half on were paying to that It the your of additional the rent, we or at at from you that about how GM you what building, pretty same that $XX, shows color total that to like back looks the up maybe should could be get about, to close that closer actually to think might I XXs. before great.

Bob Cutlip

confidentiality in, we’ve as a got and agreement tenant. with And Craig. the indicated non-disclosure a Sure, I've

ended new couple look but specific of you very, disclose I up indicated can't range. think to that building. of be location. the rents, I which if So still numbers. we rents asking going to probably But we that about are in quarters where at low we're than mid in And the relates to of course rents, the that balance XXs, good at were very last feel and We less price that straight-line, new it asking the

up, about the has out tenant. So right picked for have we since what -- now very activity with excited building that we're we've RFP building on got the of a XX to XX% outcome still will be ultimate and lease one

market. see research going But been comprise, the some how indicates just in and that all of a third I -- over that encouraged Austin activity released, to was reports just things definitely you because CBRE of leasing, Austin fact as recently done up and strongest fourth when out tech unfold. we're we're one in picked in see that the so signaled quarter were of think, the over has And leases have the

third very, encouraged, it going going with us in forward; very to we of But still us. is leasing strong participated we're property. we that So be course, that for quarter think

Craig Kucera

starts additional here, tenant is color it. free your maybe of take a agreement you give period non-disclosure and us far rent, that as hit that at a can of paying point as recognizing there it statement? rent start income is but what there Got And or an course occupancy might to and

Bob Cutlip

say minimal, were All our very was tenant it I can is and improvements low.

job did be about we absolutely we're believe who in new in a an who outcome. we're excited So about tenant Team time. phenomenal negotiations, and for the there the this long very could encouraged

Craig Kucera

the that for has same more years the been those me been over assets building have one topic, past vacant. on And

or contemplated it, of still or they leasing to holds it down those leased potentially which it assets it that you've that about thinking line you get something be you were going might is leased up once You've and up selling you are leased half are long-term that sell those down up the up? all

Bob Cutlip

the Well table. we the on options all don't, are

I the to not Gary lease and balance goal a long-term, it the us get now decision and I very And into know, to right be to be want is of so of we efficiency is industrial side. I'm then, think another which that industrial to operating or industrial and standpoint, I industrial on compared that into as could XX% assets. releasing. property to And for at the portfolio, as all releasing office make an less very, could from exit our indicated, as and think our point, an industrial objective this know, I think to whether will redeploy redeployed as much we sale player, is you more a I building. huge that David expensive

Craig Kucera

cumulative one more are where it. to going for you kind Got year thinking so. kind for as versus of where or then your acquisitions XXXX quarter last were you're sorry, thinking closings in settle of we for about far me, as thoughts the just And

Bob Cutlip

be now When we've a of bond $XXX that wanted million think kind year had much two back those all our come the that'll $XX we Xst, to of intent we at not the beginning million, close of within months sticking strong. some We've somewhere at with got by this XXXX been speak to off thought be this another has in to first year. really the $XX probably January the with saying of number back, between over I so year disruption and and of $XXX The we but properties been the million start February. -- and part million that of we've team extremely of more the a a the We may $XXX million end letter of particularly under would with finish wind the XXXX. and

Craig Kucera

it. That's Thanks. Okay.

Bob Cutlip

say I on lot $X within And and we're a do participate say listings. lease let's extremely the more staying to successful. lot let's our a staying are on focused team markets. sale million is we -- And seeing million $XX our target range mean We're backs.

those of, to saw money excess middle that you we was business. private put offload equity can company work We XX so the assets As were that two the and and one in years. leases that. market companies non-traded kind did one well, the We like XX underwrite was we can they of into those like with credit that operating

Craig Kucera

Okay. Appreciate color. the Thanks.

David Gladstone

Other questions?


question next from comes Ladenburg. Massocca proceed. Our Please with John

John Massocca

morning. Good

Bob Cutlip

you're How John. doing? morning, Good

John Massocca

Not bad.

on color Can lease still you there's front, touched is maybe So of? how on left but for that's any expiration a the know that you XXXX, on just a maybe what progressing little composed give I bit and XXXX.

Bob Cutlip


the get we and end still of which the is it Salt space, to square -- very But December. of in XX,XXX we City what across lead a building that about line, office the done. They occupied the an leases, tenant encouraged move. building. And the those very in so balance have foot it's the far. square property third expire Lake goal have We are strong going as a property not talking somewhat take tenant But done Right for then XX John by I good And you know, a But now until two Florida. at we're foot like a the XX,XXX have other to about. feel in Tampa, prospect we're it's tenant. we of to

So October. headway the expiring, line. leases we've July of just across got then June, and don't a year indicated are as in yet, have bit we we that but the And it little have I goal next three

actually we already that before out. they which move are tenant But out tenant negotiations in of is another have tenant we would final in we're conversations, July. One moves in in the that moving that

about what's encouraged there. on somewhat going So

John Massocca

kind but And Austin and office And the about we Okay. of properties could redeploying obviously, rate little with XX% capital of exposure that bit talked or cap versus into guess recycling maybe then, I out industrial. a what's be of kind how you to in headwind of to for potentially bigger specifically, do what industrial couple maybe office industrial the environment desire a more that a from get balance years. for versus appetite

Bob Cutlip


mean, six I As everybody single-story you those know you sold knows last our to which in think still office I continue do to to we've despise, and I'm do the that of and have I the on as assessment done that's team been exited office have we going interested and years, an next probably are that. have environment. use And over Gary that why properties, we're know two mixed probably three properties properties. some in suburban I

going million single-story go And us. I great basis. it And much let's to long-term which strategy that it's $XX looker will that just John, critical. say, from operating but our $XX better product. and I $XX renew a probably less out redeploy and/or costs and industrial. yes, be year. out we of release to of -- agree, the million cost will to on million just those efficiencies, stickier then and rate, to to buy, properties. too impact assets office foot million, $XX long-term think regardless, are releasing of the smaller properties them square a there's to under move arbitrage, exit bringing of have to cap to if not move a of We're I high I'm at can facilities, we are $XX more million some to but per major we that's going going particularly or capital. think And be keep to we well are we'll The But to those, a Most play continue type mission anywhere

John Massocca

specific areas maybe you industrial, what's you potentially guess might to between that of the of looks cap the to attractive I rate of of And you the look and out in kind kind capital some today recycle office some looking office the of? then Okay. mixed that at, is be

Bob Cutlip

Well, the say -- from mid-Xs low-Xs the side, deals are on I to make industrial for sense us going seeing where that would that we're in in.

we that. higher You fortunate. this We But in last markets. than bought seeing were were quarter that's what saw that two really target we're the our

XX people parking of that a As not there's smart makes the suit are that at replacement, into lobbies lot higher. that that. I and rate can And of on replacement, much look side, product office completely the are but deals There's the replacement, probably office X.X, at frankly, office quarter are points requirements. bunch like any needs. product still selling sense. really We're and know, a are quite you not can smart. looking redoing across compression you between find that a finding cap we selling we're XX sellers mean country HVAC are industrial let's assets say in basis X CapEx to that the who is roof We're the our

think So on way talking we're impact the to total forward that do I I going as it's be kind significant It's our products, XX think million to the going going XX, out arbitrage pipeline, than it per forward. arbitrage, XX% to a think but and we points one office of that's can and you see are And anyhow, less year, since million maybe say. it about our don't have of $XX same-store I per at we're probably I XX, $XX let's going tell, still of to share. FFO is basis performance going and long-term look be the

John Massocca

it the Thanks taking me. questions. That's understood. for for Okay,

Bob Cutlip


David Gladstone

Next question, please.


[Operator Instructions].

Brian proceed. Hollenden Please question next Aegis. comes from Our with

Brian Hollenden

Austin Austin does was quarter. same-store the been impacts quarter? know asset How for What would that in have still XX% your leased full that asset revenue. I that same-store was the much X.X% the revenue the

Bob Cutlip

boy. I the you, might have about been we're It to I to for talking would quarter, full would kind -- say have but tell have of a

Gary Gerson

million. X.X a About

Bob Cutlip

rent and and million million X.X of rent, X.X of shares. XX got a About million we've

So about September you the in XX only because participating that. But moved do was can calculation they it probably XXth. days on really

Brian Hollenden

and year-to-date you Okay. versus exclude that you lease increase for how transactions an getting XX about Austin industrial of And are then office much asset? when

Bob Cutlip

was I you of specifics. and the have our September were All done, were an we of another excess five that We had is them through industrial. on rent roll the rent which I were of in can of through September. at down October, XX balance XX% that lease tell the did end the assets there. don't straight-line that a And office down overall the

so straight-line high-single-digit. rent to the And our reduced that increase

but and was a there roll was it cold an bought in And industrial So property property, back was that storage. XXXX. big We down. that

in were is for market. over year. The there the rents every we X% the So years. the well in got for us And another increases tenant to XX rents key that I'm going get X% to

Brian Hollenden

pipeline in for little front that you're you does a a that of over one you coming next on like, the just few three bit was have due last quite last about the then can quarter, months? this what maybe look LOI acquisition you. couple Thank seeing talk me, and And the assets diligence quarters, it maybe in three

Bob Cutlip

combination well manufacturing What bottom intent letter typically the secondary sure, has and our third distribution, growth at Yes. something is those quasi in what the a if a close for into seeing that of we of get about and side. our we're XX quasi stage, is we been markets, due and properties us, diligence, for on in that playing history with of

of going see we're to expect amount that continue that I So to velocity.

I over the couple anywhere, As really we per between we average on last of indicated XX our years. average million acquisitions and copy XX million

we're of then opportunity is million for a us at expectation to still I that we're to year level, the by stay think If going pipeline say portfolio our grow more to larger would think I peers, the and $XXX I we'll and forward. that's that to my And and there. we Gary's competitive continue. excess million million competing a not have going against much in the have expectations, $XXX $XXX

Brian Hollenden

you. Thank

David Gladstone

question? Next


Craig from Kucera question We Please with have B. proceed. follow-up a Riley.

Craig Kucera

just guys, for me. one more Hey,

did other a there. was other that other booked sort quarter Just that just Q, income. Are any that $X.X you of of curious, kind next out going you legal a there lawsuits through unique situation? the two? settlements legal And in really any have I'm potential million over close have or might Or that do settlements

Bob Cutlip

That was very unique non-recurring situation that one-time. a

coming we don't have else up. no, anything like that So

Craig Kucera

Okay, thanks. Appreciate it.

David Gladstone

question? Next


Gladstone, for we you further would back please. to time, this closing it to have queue. questions Mr. At comments, turn in like no over I

David Gladstone

for lot only time all next calling of you bring questions. meet we'd from up a a and good to more your concerns thank quarter we Well, and once ask meet, and and in you questions hear some all and because asking you good love we

the that's end for calling So you of in. Thank this.


today's does you. Thank This conclude teleconference.

disconnect You for and this at a day. have participation lines you and great your time your may thank