GOOD - Earnings call 3 2023 | Gladstone Commercial Corporation

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Operator

Greetings, and welcome to the Gladstone Commercial Corporation Third Quarter Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, David Gladstone, Chief Executive Officer. Please proceed, sir.

David Gladstone

Thank you so much for that nice introduction, and thanks to all of you for calling in. we had you with more time and the you. this we wish time enjoy have on with phone, We to talk

Counsel Now he's us from hear legal and General good information. we'll gives Secretary regulatory Michael and and first our LiCalsi,

ahead. go Michael, So

Michael LiCalsi

and Good XXXX, report may are morning, forward-looking actual many our performance. including the by we those the statements include with Securities the any materially statements to Today's be Forms current including future other XXXX reasonable. believe factors SEC. plans, our risks XX-K from forward-looking on these These that of to regarding based Act and factors documents And everybody. and may involve different we Exchange risk implied David. cause forward-looking our our on Thanks, Securities all results file Act results statements, or uncertainties certain expressed of in future be which XX-Q,

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

amortization operating We'll allow other a believe comparability assets. are results also and FFO, is these estate is certain We which any funds FFO, sale our performance. our or nonrecurring impairment gains discuss net on indication period-over-period better estate we'll of real Today, income, the real expenses. accounting from for losses a plus core and of operations. of is term It non-GAAP better excluding FFO as the and depreciation and defined which generally losses of property, from discuss revenue adjusted metrics

our website, service. once up Please notification go again, our sign e-mail for gladstonecommercial.com, to

Facebook, on Companies, that's and @GladstoneComps. us and find Gladstone keyword, The Twitter also can You

information. we press both release yesterday for results, you and overview detailed is ask our more issued so call Today's XX-Q Form an that of review our

hand I'll over President, Cooper. Commercial's that, With Buzz it Gladstone to

Arthur Cooper

operations and that in. all top mind. you, our of for topics and thank discuss will Thank are calling Michael, you Today, we

Before highlight operate. to briefly discussing broader in portfolio developments, I economic would which backdrop like we the

XXXX, a reshoring in by market all its The by markets the becoming significantly. outperform, continues the basis market years. feel target asset markets XX to impacts slowing work-from-home raised level new Fed's to initiatives. slight real and the the estate policies absorption, across to highest to policy with dynamic, the more the July continue classes rate XX despite today. policies e-commerce real In of in points, in demand in continues Fed construction geopolitics, pronounced estate Uncertainty impact volatile world The primarily office contributing driven is industrial rates starts rent Fed of capital while are slowing which and raising

few portfolio assets, to sticking markets are office growth we noncore we underwriting uncertainty, like With core to developments highlight this mission-critical Despite strategies, diligently focusing and I and outperformance. By industrial the these for the believe that, our strategies, quarter. acquiring assets on in a growth we would portfolio our position credits. third divesting of for path tenants

million assets X in transactions. XX.X%. medical for Eatontown, GAAP X,XXX Burleson, rate separate a cap place. million We a Cedar industrial New have and square XXX,XXX concentration Jersey; in we strategy in We XX-year X foot acquired Taylorsville, stated of sale-leaseback property in since of of XXXX. XX%, combined to XX-year Texas sold September a with as manufacturing acquired office a a We Hill, our and Pennsylvania; increased Pittsburgh, for First, a a percent lease in industrial in Utah at Texas as rent straight-line initiated facility distribution XX, before transaction foot annual a $XX square $X.X

Ohio office and new straight-line Albany, Wilmington, our on extensions leases XXXX We XXXX, in leases term resulted extended X property. and increases. through respectively Carolina The rent New North asset and industrial

by acquired to for distribution same-store in quarter, foot grew management rate X.X%. XX,XXX X.X% QX $X.X team industrial a the a XXXX GAAP quarter, sale-leaseback we a During Pennsylvania QX facility asset the square cap million Allentown, XXXX. our manufacturing XX-year transaction the revenues in end Subsequent of of at to

Again, Indianapolis, are XX.X%. the outlined to for value sold subsequent leases at at consistent transaction office XX,XXX through GAAP office and we Year-to-date, our have legacy additional foot our disposition new all cap an end X in to Indiana the million $X.X our industrial we facility office and XX-year strategy distribution assets extensions X quarter, sale-leaseback a with assets. a create rate These continues assets. of square of the developments of also executed acquired and a repositioning team manufacturing sustained or in

combined to long yield. accretive on during is This sales stabilized in recycling on the the positions office cap disposition capital in point new in short The better GAAP resulting third and highly the was a the in X.XX% term portfolio acquisitions term. basis XXX and rate rate cap increase quarter the portfolio X.XX%, the was

from our outcome example GAAP XX% Fort Lauderdale our of of our XXXX, and tenants to executing has and a we acquisitions industrial strength percentage long-term well-located lease. growing with full our at annualized strategic to building asset rent a office XX%. to of that able was plans Since a for increase be for industrial of quality concentration Furthermore, portfolio, were rent allows Another asset. the our MSA. increased This XX% by are straight-line tremendous as all mission-critical same-store generate shareholders to a us

the as rents to insulate their the United benefit back Our like to operations from to that manufacturing geopolitical bring of States. also initiatives new the year. would I company point to try out corporations the tensions all are beginning themselves from collected XXX% of to acquisitions poised has reshoring since

favorable the utilizing that negotiating tenant both plan Going sale-leaseback for and negotiate continue mutually for transactions. underwriting in we buyer targeting appreciate as experience skills. are leveraging particularly and assets, transactions our to forward, our these to opportunities We the industrial acquisitions leases seller

transactions of third-party to the evaluate the with in goal always months. X will increasing well as industrial further our concentration We XX next

opportunities, pipeline the remainder our LOI initial end of $XX As of under the of in million consists $XXX quarter, review. with stage were of the million the

While buyer the to somewhat sellers at third and more we new in year yields opportunities narrowed spread expect the seller in normalize. attractive the see between quarter, bid-ask as expectations

position. financial I to the to Gerson, our Gary will now call turn quarter review and for over our Gary? our the CFO, results liquidity

Gary Gerson

and are you, this Thank my weighted operating by of and results remarks the reviewing $X.XX regarding average the All quarter, referenced start common on available results fully share share XXXX. third our common Buzz. core common for financial $X.XX FFO diluted share, respectively. FFO quarter and the numbers were to $X.XX $X.XX core for during per of FFO stockholders to per morning were per and stockholders based per XXXX shares. share third our quarter respectively. FFO available I'll

for derivative share, fees FFO respectively. further property and expenses maturities were was were for months increased September and ended Core respectively. costs. period affected and and FFO interest XX in and the FFO this FFO $X.XX XXXX and FFO core core defeasance to was distribution, by $X.XX costs. professional related X quarter affected onetime $X.XX FFO per $X.XX, the same by

quarters the This revenues. in X first onetime same the rental to a XXXX and increased due XXXX. X.X% was of period in accelerated rent same-store increased Our by over recovery

the $XX.X $XX.X operating operating expenses operating due period million resulted a expenses this taken versus expenses impairment of $XX.XX revisions and of for of due of Operating XXXX of million operating taken million fund as the and same XXXX waiver expense period, XXXX. with XXXX, to in in reflected also fee $XX.X results depreciation total tenant costs. in Our lower in revenues charges in lower in related million to to incentive in compared revenues to third of in assets reduced improvement $X.X operating period million same $XX.X quarter the were and XXXX mainly million the

XX.X% profile, and Looking floating the to facility. is rate, amount our is XX% on hedged X.X% rate, revolving rate our credit is fixed is which floating drawn debt

SOFR our September effective average rate XX, was X.XX%. of As

loans term remainder hedged caps. bank are million the interest rate interest with outstanding $XXX with swaps Our and of

rates interest needed. our and closely strategy as very update We to hedging continue monitor

As of XXXX today, manageable. our maturities XXXX loan and are

coming no have and due maturities XXXX. XXXX We $XX.X million in further in

outstanding. million F our preferred borrowings or activity received we issuing through at-the-market net As our $XX.XX in the no equity of this proceeds Series revolver stock. had We quarter program. quarter, the of end ATM of had We sales of of from $XXX,XXX

We continue requirements we capital to ensure that to new and our equity manage for liquidity activity have upcoming acquisitions. sufficient

line posted portfolio on As have in quarterly information you our approximately of financial availability million review credit. and detailed for more million our of website, under encourage We to $XX.X which our supplement today, provides and quarter. financial we also of the cash $X

per stock year. quarter is per dividend common share Our or per $X.XX $X.XX

David. yield a with program Our closed now common per turn to And share yesterday I'll back the $XX.XX at X.XX%. stock of

David Gladstone

Buzz have to interest which very Wonderful. has estate presented and I companies. Michael, Very much The say, the were of various impact well from good for challenges the report. lasting very to higher always team too. Good real rates, admirably, difficult and by one reacted performed

company very the quarter nice Overall, and though, well. doing is

In summary, a third the noncore quarter, heard facilities. acquired industrial X during We X You lot today. properties. we sold

All buildings. are of office them

renting to continuing get business the of see you office So of out we're space.

to We acquired our we or of industrial well. leased also the renewed facility properties. end Subsequent as X quarter, of X the

during a of the growing team managing properties pace, real job is the own, and estate these especially we the at interest high times these with very rates. team commercial own we The a doing good is great

Our list on acquisitions team of they pursue of are potential the reviewing. strong quality professionals continues properties to

in Acquisition teams saw a little for us. opportunities pickup

to some have the the from in get So stop on people call. going questions operator at and time point come I'm and this the on

Operator

first from Scott. [Operator with Instructions] question Stevenson Our Montgomery Janney Rob comes

Robert Stevenson

of markets still buyers are assets? XXXX there assets in any there demand is your types these users? the today, various Buzz, your smaller Or for of office

Arthur Cooper

of their users the value-add we There are owner have office more the few majority are looking looking reposition than developers per to, to They're going that properties multifamily. They them see majority as honestly are it in into to respective of se. but properties. reposition a sold generally occupancy The markets.

Robert Stevenson

any months? to that planning and Okay. next That's known helpful. the move-outs nonrenewals over you're And XX for XX

Arthur Cooper

one We've moving see. process very we you our we me as we in know front of the tenancy and do, tightly. got as out, know, is are in of, Let that stay

know But very know our point one, to relates in do time, and happening closely tenants to have and managers it I managers asset portfolio diligence due work as hard of that we ground. a this what's Our on under building but the at sale. with

Robert Stevenson

models? third Gary, acquisitions, And the helpful. then, that quarter anything there to drag wise have quarter should also were third the going any from did fourth of our be moving the higher parts that here that of about and do lot the dispositions quarter else in That's or rates. third that's we a you do But in quarter and when carrying alternatively earnings. over thinking you impact either Obviously, Okay. updating away going is

Gary Gerson

I an G&A have as mean, had a and amount dispositions we did related realized have costs -- defeasance some associated we to quarter. unusual as some -- mortgage a going Rob. on this of some did with We also losses to costs forth. We're cap, cap then And of well financial so high thanks, unusually maturities.

those won't going forward. So be

turn couple in But some the increase continue. costs, those, due a hoping to into when down credit, line was on of unfortunate more mortgages will in refinance of we the credit -- market line the of with have primarily to it, go but unfortunately, but market drag as the we on interest of going the mortgage the that did to mortgages rates instead expensive the refinancing go to cheaper,

as we less as our of dispose operating drag we'll properties, office see expenses. dispositions, of as in But far a

quarters, as be. that can't of definitely to So going overall... I hopefully, couple that's an see But you'll the what over increase forecast in next

Robert Stevenson

is are that Or expecting fourth to And the you're come you've you for change, the acquisition other releases, close down? that various on wise or costs in than pricing waiting disposition financing to there sort the of in anything stuff to mentioned cetera, et quarter?

Gary Gerson

will fourth now number have a in We sale. quarter. close for those, let have they in buildings a I'll that. we're of Buzz, held right But have number a -- you we do but to the of I'll some for Buzz, give word this But hoping

Arthur Cooper

Sure.

On the hit is year-end. we months acquisition will, out, here if X.X side, Rob, you before

review to that's under to love few get to in occur. sure a would this quarter. not have push we closed I'm going We that

the in would point I the when beginning the guess, as we say likely at closed, saw -- on at Friday. of end this this you at month But closed, just just sorry, year. not right I most So of time,

people time, in our it, activity can this books end doing and less of toward lack seen are sellers push of versus a for Haven't portfolio. the that the We and seen those point dispose on our word, you assets the I sale packages we try bit. think, properties are, all out which I'll for a to call on we've for the at brokers going sitting But the year-over-year relatives, currently better 'XX as get to plethora tells of a of 'XX, in them year. the sidelines

We don't have looking were over at fall look unless see $XXX But end new to time, of foresee, any at. in we're good [ at of still several have dollars that a we will year, the million of that in before our this close some quickly something sales to volume but I the laps. ] I don't point into acquisitions

Robert Stevenson

the you acquisitions there proceeds teed any just that line then have up? towards on dispositions, And get until go Okay. repayment

Gary Gerson

maybe the encumbered that building with.. the Equals mortgage and/or that

Operator

comes Stonegate. question from with Storms next The Dave

David Joseph Storms

you of will us or of your talk if to term your how lease kind over term XXXX. Just, lease profile about curious profile think the can you shift

Arthur Cooper

As new reflect looking it wallet. years order Dave, that, as for XX-plus course, relates in I of to mentioned, long-term acquisitions, increase closings, recent our obviously lease we're backs, to sale a

that pushing renewals, for a renewals. But have they are generally, looking we are at. the are X-year and we On longer few

the puts concentration any into obviously that origination we but versus great So of 'XX. expiring sale on the leasebacks, lease to not do renewal XX-, have XX-year concentration, side

increase believe our wallet I forward. able So wallet be to keep going we'll and our

David Joseph Storms

those see up the taken relates of quarter basis the end to And you it's And points in and much numbers it since then occupancy, you up? the a XX is as helpful. to the occupancy do or headroom year think concessions having step so quarter. are kind anything like more any Very How other just to here to there? give that of or every get

Arthur Cooper

concessions TI as there some relates to dollars. new With leases, are obviously, it

and just get overall. are accretive others. than company we our to do We however, yes, But in to occupancy. sure not, help We away give Marketplace, going need larger make portfolio that are to transactions to these concessions see the some

But the term. get done cost to the between a team has job actually negotiating that term in and balance great

an numbers overall. deal capital itself deal portfolio the creative can to we existing As know, expense create to and positive into the

In cases, than much fact, a of deal. would new they accretive be couple in a on they're more

TI door. accretive the obviously, can So portfolio dollars we look capital at spend to the improvement into out it because and relates carefully dollars tenant as the new dollars, existing as as it be

David Joseph Storms

X helpful. And and if very And more, How those Pennsylvania Southward markets? then think your about Westward more or forward? just you of going I you could. right It Very, you looks core one Indianapolis. in are were do last geographic kind focused in focusing Do -- then... acquisitions acquisitions like

Arthur Cooper

Sure.

more country will, too of We play. the been we've time. Rockies at east. has point to South, growth Midwest to of Majority the expensive west if are this just in It's as seen the focused you in to Texas, various not Southeast, industries from

opportunities. that's because focus the see we where where we is that So see the

for that from to returns you've But in of the look growth looking get evaluation the we're of tenancy. past, our as we path away to can in it look the And get the to relates for. we -- so acquisitions credit not we're as going heard necessities that

Georgia, Florida, But over you the in of accretive to being few assets going have with created. New not see Northeast, be if a be in but in we the look will, in to mostly got but couple to south, opportunities it's Jersey to say as we they've you're there, growth Ohio When concentration Northeast portfolio. I with going build to the to a Illinois, and to the a this

Okay?

David Joseph Storms

sorry. Yes,

Operator

next [Operator comes with B. question John Massocca Riley. Instructions] from Our

John Massocca

disposition any this occupied, sales? sold of of were ones even guess either dispositions, or the of went kind NOI kind vacant. quarter were quarter subsequent that So that were or assets as the gross rough to And sticking of result rate of what's I end with for that cap a away kind the

Arthur Cooper

you, for one got John, I've second. answer give that me

the building. in we tenant had building discussed that down a the dispositions, South With a Carolina previously that one purchased had

did that here building, the or not So close responsible last had quarter. been beginning it one, at we but indeed the for however, --

complete vacancy -- And the that I'm all other I under give one. looking we have mentioned, they one of held are dispositions, Gary good get answer toward we, you're because and currently think, are occupied, the not coming did that what all as that the On you not we the will end feel but that for, they're for year we very our sale, that dispositions have sold. others contract. as laser saved we about sure those up

we the we've then to -- for are having look with repositioning actively for year, it first properties tours several it as well months, the into leases either relates sales And had next as because buildings X we as as at early generally occupied sorry, the engaged our property several multi-tenant.

John Massocca

maybe comparing the is guess, on I asked Okay. mean, how to cap rates? another way, acquisition cap I rate dispositions

Arthur Cooper

As to I the basis think, [ it. one that earlier, point I swing ] XXX had, mentioned on

We to are what the sure do is to that portfolio. making going accretive can we be

We empty it if the it -- building building. with as associated is also carrying that weigh an have relates the to burn to

Also, us as value the as to value increased that have the building result we the again, tenancy. as doing mentioned an the couple are building that, portfolio. renewals full but are that ability we increasing in a with a reference redeploy of we the balance to has might So give that of out, office of cash

John Massocca

And I you mentioned XQ call -- starting on full is mean the kind sorry, of that it's call Okay. that think it you other the impact side, stuff caps. any I on And relates XQ important, of swaps -- interest is if about and the maybe that then on the current swapping couple of balance sheet replaced came the kind think worth guess I out that the kind Or to that onetime is in was next in as of quarter? kind there mid-quarter? quarters. the noting of reflected rates of

Gary Gerson

we that right Well, beginning at now, was of the have of the July. $XXX one swaps, forward starting, million started

this all So that's quarter. within

are swaps. any will our there ongoing those be loans. They what So with They're additional effects on are. they term

cap We probably swap -- be working we're anything don't realized that but strategy. quarter, might where the moment in interest that now, go. hedging a given on would right our We cap little rates any have losses plans in or right maturities quarter some see first but -- any at should have you it. on don't first could bit change to We some

John Massocca

Okay. fee. incentive And incentive in then that couple the lastly, the you've adviser the near of term? it I about of kind for should quarters? How think last waived we know

Arthur Cooper

Obviously, will the occurred that occur at level. discussions -- Board

made in But We this anything will have what we currently right point be not that do to at waiving any time. are time decisions doing in it. at than different discussed the

Operator

would I There to it no queue comments. are time. for at in to turn closing like questions back this you

David Gladstone

of much, you all for those Okay. in. Thank so all calling good love have. questions you, you We

ended as questions we this lot thank of all we That's again. quarter, end you with well. good the a of and call, Next

Operator

conclude does teleconference. today's This you. Thank

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

Gladstone Commercial (GOOD) 7 Nov 232023 Q3 Earnings call transcript