GOOD - Earnings call 4 2023 | Gladstone Commercial Corporation

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Operator

Greetings. Welcome to the Gladstone Commercial Year-end and Fourth Quarter Earnings Call. [Operator Instructions] Please note this conference is being recorded. I'll now turn the conference over to Mr. David Gladstone, Chief Executive Officer. Mr. begin now may you your presentation. Gladstone,

David Gladstone

of you you, all you. only of Thank nice listen you. time to sort Rob. to presentation. get your this had That's thank and of more that quarter. the enjoy wish introduction, our nice We away you come We a once It's from day a morning. Okay. take I for we phone in calling to time this

and from Secretary, regulatory hear Now Michael legal call General Counsel us LiCalsi, and give we matters today. our a Michael? the concerning

Michael LiCalsi

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

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

we'll operations. FFO, funds is from Today, discuss which

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

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Today's call that, Form issued Buzz over XX-K, an ask we hand detailed that Commercial's with to And the press our both of so Gladstone yesterday, overview baton Cooper. Buzz? is you for information. release I'll our review more and again, results, President,

Arthur Cooper

Thank time and top discuss the of for you, XXXX of lagged QX our XXXX. remained treasury real directly million you end XXX volumes operations of translated annualized completions Michael, X% more XX% as fell end and industrial feet. rates yield the all benchmark impacts rents in. annual of markets continue calling outsized X% peaked real rates. in volume industrial changes which investment for the markets, According XXXX. real expectations year-over-year than QX volatile sellers' capital to lease Despite accounts XX% CBRE, pricing now estate, net through According vacancy rose despite square were industrial X.X%, year at continues of straight-line the perform. and CBRE, to average year-over-year, just since we thank October to rent, Rates record rates above as asking the of In of to Interest the that estate. the yield investment topics XXXX, and capital volatile capital to XX-year Today, XX-year of to time the through have year and X% volatility first with markets are mind. on will yesterday. This below and for the increasing X.XX% our finishing

portfolio strategies, quarter. the million the of XXXX. to Xth acquiring and According & divesting We and current exited industrial and broader assets, completed XXXX. progress consecutive on credits. X net The Moving struggle office. market of tremendous year XXXX XX% noncore Wakefield, office nearly was made to negative concentration as in QX underwriting path in throughout continued our $XX delivering to for increased from growth annualized to office XXXX diligently December properties, December We straight-line mission-critical rent the of in markets absorption as new on tenants Cushman markets, core noncore industrial XX% assets of our of acquisitions, in of

the Indianapolis, were our XX.X of acquisitions at including with markets, improved throughout established completed of lease Lehigh average in the acquisitions the in Dallas-Fort Chicago, and portfolio Furthermore, weighted growing a year All closing Pennsylvania. years. WAULT Valley Worth, term

X.X $XX.X the management to asset X.X year, million. more of straight-line a addition In square annualized more new XX% acquisitions resulting increase million rent. feet The in net rent than these same-store transactions led than our totaled team million in or leases GAAP during of

predict these developments or XXXX. the go, our that Fed better portfolio positioned will we rates While remain cannot confident we have exactly where interest of control all for

any XX, Portfolio of at our may economic rents December testament cash of position to which XXXX, credits XX.X% base was the a weather we us tenant, of face. of XXX% mission-critical we This our as during is of and assets quality well storms the collected to year. and both nature occupancy

rent there fully which are rates, have believe realize. that yet and escalation last we of X.X%. Industrial annual valuable addition, Most have to renewal. the over X.X% resulting in rents years levers lease few assets market these industrial growth exceeded our to of In escalations we upon are fixed below has

us XX% have cap XXXX, positioning Our normalize. $XXX Since million accretive we than balance million of $XXX more asset our debt healthy deals million. as repaid sheet continue from is expectations by industrial $XXX rates and base mortgage and to unencumbered deploying to at into seller grown X, January flexible, capital

is of office under have building in and those Following X of remaining XXXX. X only we'll the contract, first office mortgages the sales completion X currently the maturity

available in levered million XX% December of $XX.X cash below have as remain and and XXXX. liquidity on facility hand credit revolving via our We

opportunities. successful and But the new accretive be well yet for capitalize do, by was redeploying the legacy office new Federal proceeds assets. mission-critical to selling set Seller a we assets Reserve. In into industrial to short, standards to year noncore we XXXX normalize as have fully positioned on expectations will

of diligence and both be credit additional are leasebacks sale which proposition. of in And value our particular term, expect new source sale leasebacks for hallmarks We provide the us. primary to deals

reduction balance than Since sheet XX%. has the our $XXX again, on Our January from flexible, mortgage of our industrial $XX XXXX, base. a growing more we to X million net of to expect more since debt of to rents months. next And of by in to concentration XX% have and is hand as liquidity increase driven increased than we continue concentration straight-line percentage industrial annualized XXXX, further XX this million

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

Gary Gerson

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

waiver revenues recovery. cash the total with due period rent by onetime quarter of same-store X.X% This operating same $XX.X was of XXXX. operating quarters in and Fourth XXXX over a results compared the in accelerated Our expenses of reflected the million, and increased revenues charges to increased X rental of same impairment as in for million higher this fee of expenses XXXX. to XXXX. operating of $XX.X due $XX.X operating the by offset were incentive in to $XX.X mainly in period million Expenses million period, the

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

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

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

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

are As $XX.X million of with loan properties X XXXX maturities encumbered sale. due, which held today, for our manageable

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

$XX,XXX proceeds this from We our of proceeds resulting our preferred shares at-the-market F of of $XXX,XXX in common program sales quarter, X,XXX sold stock ATM. net net We stock. received for of Series through

we we new requirements We to to held for sale. have our liquidity activity upcoming continue Presently, properties ensure and that X capital sufficient manage have acquisitions. equity for

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

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

distribution yield The $XX.XX. about X.XX%. at is yesterday closed stock common Our

the turn program David. I'll now back And to

David Gladstone

changes in a by Buzz have impact Well, well a quarter. well. and economy. was performed the to I thank various of Overall, good presented and team you, reacted changes to admirably it's Michael good Gary. you, very lasting report, and very has tell as pandemic That the the reports This and nice just the did

been that heard So today you they've doing things of in of some summary. the

quarter, a fourth acquired office XXXX. We, start. the facilities, properties. sold course, manufacturing again, properties. new we're oriented. During they X December good talking industrial XX, off And both the were noncore of These They end, about are X to

We at sold the noncore/office to quarter, the of X an sold also, our we additional end during least the prem. last quarter, of Subsequent properties.

is existing team a and doing pace, the properties. that job the good growing team at of a commercial the estate managing The real is own great we

those deals of and of them. are up a We working team proud quite have good people that that very come

quality potential are on of to Our list through projects they that They've now. of professionals pursue go the quite the reviewing. to strong acquisitions got a list team continue

tenants the is only seeking acquisition Our team strong after going marginal not ones. and credit

enough really me. that's from Well,

how and listening. from here, Rob, Let's we'll to take stop you'll questions, come questions them and on ask show if some those

Operator

will first with Instructions] Securities. the Massocca from Riley [Operator of line coming Our be today B. John question

John Massocca

maybe a question. quick So

I going still have in that spending? yet of to year? somewhere going operating this back incentive something in into you on be expense potentially But missed considering the Or any decision forward is call you are kind Sorry, the on that touched fee if and it. you XXXX? made it Is

Arthur Cooper

John, it's Buzz.

We are internal having discussions.

point. We Board have at the had not recommendations and formal this any with met

did a looking year. but as we are I cannot all give it So definitive last answer, at alternatives our obviously you we waive

look obviously we be going 'XX, doing to As the want cognizant we thing. of right into

John Massocca

vacant That's of assets terms some both in vacant just disposition of given number partially your on of the quarter-over-quarter potential stayed then understood. provide assets? lease-up of or can kind terms vacancy, fully in and either updates And existing kind flat the you

Arthur Cooper

I'll And obviously, asset have hit on in Parmer. Sure. our Austin discussed asset an previously, first, we

had some We there. have interest

are with who to There tenancy new certainly market work of good the size. disclose down and the continue to or to with. are can't are tenancy, they trying attract that we expansion. some trying requirements running work I in We are that

at But look that. there as time, report building, sell. within other for from it being see to have what standpoint this can the Our from to leasing I in for able the that to is point activity stockholders, hope anything I is don't And best hold there than get of relates then tenancy. us, or that

have I certainly positive. our as have annual here, want I Wislar. that that I comment can to tenants him front leasing on you portfolio. basis. CIO very it's on all know, my on we some the front our of state within have E.J. stay positive a we Do and And think activity And in quarterly

So we're our as ahead to curve the it E.J.? vacancy. of relates

EJ Wislar

today that Buzz. assets. Thanks, held A for held those was at where stand few XX/XX, mentioned of of are it asset for we and in currently. of obviously, additional sale as as look our John, sale current vacant kind office there's things

quarters making at look dispose rate improve want proceeds, sure a whether and see that of vacancy our those capital assets. sell we'd office kind expect we we're over buildings them strategy, or being as break efficient, the we I the allocation those redeploy would as to we few most vacant few next So

John Massocca

basis, that real basis? operating successful And go-forward out of you in sustainable then kind is onetime Okay. Understood. appeals. in is estate a provide called XQ? item kind line on on your of the color that? and a Can quarter, tax on maybe that a was maybe expense just you Or just down And property true-up more some that's some something

Arthur Cooper

may. I to relates and it we I where Gary? be I'll tell as are you let that we can Gary had successes will if that, handle aggressive there. we've appeals,

Gary Gerson

was lowered were the that John, I they I think mentioned, some in Texas, a so on Texas which as in onetime, significant forward. or as I I -- of these them And these was X buildings. a think X going significant. that's taxes of believe were appeals,

a tax from So basically these reappraisals are perspective.

John Massocca

Okay.

So was 'XX, true-up essentially? it's a base tax rate what it's a not lower just in budgeted

Gary Gerson

Yes.

Operator

The line is next the with of Storms question Stonegate. from Dave

David Joseph Storms

of of X end Kind to I story nice giant what's there? a occupancy just a a wins Is want or product to that the start, couple of really the good the jump of win? had quarter. subsequent real

Arthur Cooper

them. do and obviously, we stay ahead work of We're and, the tenants As expirations with well in of front discussions. lease our mentioned,

there my in as and same-store operating square referenced rent. GAAP we -- So million some the have X.X several in I on successes had net notes X.X exactly increase feet of million on

So success. we good again, had are, actively there engaged and

will go for that well a XXXX. give couple We working stead ask into a good specific, that continue because with. of lack here as to our been a on X word, light is comment as also I'll to in we concentration, that he's better asset relative we are E.J.

EJ Wislar

Carolina. occupancy The the to thanks. in increase was vacant asset related sale Yes, X office South also of

next in got few So And more that was assets vacant or a so. an the improvement here I will before, mentioned we've office that there. sold quarter be as

David Joseph Storms

mentioned increased higher being focus? you is that Is on just comment a you what's that enough of that Kind tenants. strong in comments those and tenants? more that high-grade Or credit on low-grade higher quality spread And then more Very shrinking quality of that the you're driving demand a focus can between on tenants? focusing comment helpful. on

Arthur Cooper

market market and also with tenancy. tenancies. the our what the we've to of history, focused always in to been from of with the us is market take that let I'll company of credit on standpoint E.J. the Obviously, way E.J.? providing our specific

EJ Wislar

tenancy tenants, of assets strong moderate-to-low a coverage investment-grade countercyclical with is mean a is, underlying when look revenue do EBITDA Yes. and And in so strong asset portion industry corporate like assets it leverage, we margins, operates tenants. to to mission-critical mission-critical fixed-charge free those and acquire doesn't defensible that are what we moat, Dave, or industrial What strong and has say an level. the flow we and at acquire generating ratios, we cash the outsized when EBITDA necessarily mean where high-quality rated

there's so for acquire do leased something to asset also certainly be very we is to but And to tenants. like to underlying said rated an important assets that the investment-grade tenants, acquiring

we grade, into additional investment So that underwrite that it's middle helps those tenants but when market not granular them. just get say also information credit their us of upper tenants, operations we kind

David Joseph Storms

have then helpful. or in just X you sense Understood. what be is That's to And for your of more XXXX very me. focus another? Do geographic going a way one

Arthur Cooper

of from in of the as been the relates to seen, Southeast, it has obviously the have We health Central standpoint country, nature. growth, South

E.J. we've had as where we So our But markets. concentration, in a are we those it's good and more certainly time, not more more there. the good do, seeing specific Midwest this and it's Northeast not point success the as And a at focus. It's also West, certainly, well the had that's success. in we have the that comes get way. the I'll on let on

EJ Wislar

Obviously, demographic at Yes. to look strong what formation. markets, like Dave. we with When environments we is inflows our well as business business-friendly as see

Sunbelt as and a places meaning to We markets those leads sticky, manufacturing the the the got we space as the like like that into manufacturing so well. well probability. light and strong select on Midwest markets. are renewal got increases which invested And they've the as base, tenants very significant assets, They've us focusing capital that like be some

would over next to years. focus us I markets the few continue expect So on you'll see those

David Gladstone

Rob, more Okay. any questions?

Operator

questions no Gladstone. are additional this Mr. at time, There

David Gladstone

more ask when We questions. need you We Oh, terrible. questions. that's like it

hold So going your to questions quarter. now to you're have until next

you the next of That's conference see we'll So end call. this quarter.

Operator

This today's conclude you. Thank will call.

participation. your for disconnect this your We time. at lines thank may You you

Gladstone Commercial (GOOD) 22 Feb 242023 Q4 Earnings call transcript