GOOD - Earnings call transcript Q1 2024 | Gladstone Commercial Corporation

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Operator

Greetings, and welcome to the Gladstone Commercial Quarter Ending March 31, 2024 Conference 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. .

David Gladstone

doing. Again, of a this and you hear we we've Latonia. we introduction, morning wish you, time don't. back what all the and lot thank for been to we thank had you with more nice do and to we a Well, have enjoy time you talk We calling but in forth,

regulatory our matters going hear the the from Deputy he's General to and you Counsel, we're report First, legal and Hellmold, and concerning call today. give to Erich Erich?

Erich Hellmold

these We any at information, whether undertake to website current or under or obligation otherwise, can XX-K Those and report including reasonable. Thank to the of Securities results on revise to we risks Investors and forward-looking events future we good plans, any www.sec.gov. certain or future SEC's Securities morning. different by you, a forward-looking uncertainties result update our Forms which and regarding by those our and may Many required actual results of Today's may that be cause law. be publicly our statements, include forward-looking SEC. new XXXX documents the These these materially XXXX, forward-looking risk or XX-Q, implied statements future from no all section, file as our with involve found www.gladstonecommercial.com, of statements, believe performance. specifically other on the the website, Exchange the except in be our expressed of are factors factors Act statements Act upon including as based

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

for visit www.gladstonecommercial.com Please website, e-mail sign notification our and service. our up

find You Companies, on XX-Q results, detailed call our that Form there overview information. you Today's more Twitter an is so Gladstone is and press our @GladstoneComps. release the of we also for can Keyword issued us ask Facebook. review yesterday and

Now Commercial's Gladstone I'll President, Cooper. over turn to Buzz it

Arthur Cooper

and Thank X% Total closed top XXXX X.X% that lease markets impacted CBRE, on across declined estate. commercial from a in commercial impacts continue through volume of outsized of and on discuss which opportunities according full to Sale credit, real leasebacks, Interest than XX% our all have April that real XXXX. fell leveraging XXXX, We in the better topics acquisitions. of for to investment nearly a the Last real tenant sale-leaseback traditional capitalize in the volume XX% thank as After to CPI the you, XXXX. XXXX. of remainder industry. to performed X.X% prints, expertise decline we Erich, number. and to to fell continue underwriting third-party calling lease volume our volatility focusing volume proposition will relatively XX% and volume, XX%, credit at year-over-year net capital you year of Compared total by of of to as estate net in. CBRE. by a quarter, value October of sale-leaseback estate the fell plan According XXXX are X.XX% U.S. we for a operations XX-year Today, mind. to couple our rates Treasury again increased XX-year had February yesterday This hot as has noted hallmark investment are

accounts for in our vacancy X.X%. QX year-over-year, now industrial classes, perform the at to annualized average asset asking rent. rate specific According straight-line of X% terms XX% end and was estate rose CBRE, the rents year In of XXXX and sector, the by to industrial tenant in stickiness. real plenty Vacancy class industrial continues industrial near-shoring to we of the initiatives is a in excuse demand centers, and fundamentals largely avoid. driven driven reshoring where by manufacturing and Any -- we distribution see fundamentals is big-box that record less, leases particularly me, softness sub-asset of

to office office noncore industrial increased renewing portfolio Moving of made expiring markets from of tenants' noncore groundbreaking assets, and our strategies, continues below XX% December X diligently of square current lowest signs -- to leases located in properties and exited on volume concentration $XX acquiring XXXX tremendous to struggle nearly million of assets early core declined through on XXXX new and completed annualized the to straight-line as as According on added acquisitions in credit. rent well industrial out. December actionable underwriting office. have X as with and We under dispositions. The contract opportunities XXXX. bottoming delivering month. XXX,XXX potential feet, closing in with renewals Currently, opportunities rent pipeline multiple as mission-critical increased the broader divesting we market and in path term the for progress to lease of and XXXX QX These record. We markets, this growth JLL, opportunity include XX% our

on particularly credit. tenant remain We disciplined,

in believe this we've seen are of While we year, too risky that number economic times. credits these many opportunities a

million addition of net subsequent the totaled sale an with we of we end sold noncore $XXX,XXX. Also with to the straight-line management quarter, weighted $X.XX of the average leases, X square new continued the subsequent term a In and rent. of we to led first portfolio additional X.X of office than these The in than In noncore renewed in annualized more reposition of property. end million in feet properties. X quarter, office the our additional quarter same-store of XX% rent And a years to leases rent to XXXX. XXXX, team or resulting asset GAAP acquisition, straight-line million increase transactions the our X.X $XX.X more of

and the positioned XXXX for interest cannot remain as predict XXXX, developments our XXXX. credits and to that exactly we This we March storm occupancy face. where of rents both our beyond. go, we Portfolio us quality control confident XX.X% portfolio While testament of tenants, for have Fed all February is our assets of any a may or and mission-critical was the XXX% economic of XX, collected since cash-based weather nature our at of rates which we better to position may

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

healthy XXXX, net positioning mortgage deals million Only of capital base us mortgages is XXXX. sheet January we've grown and at Our XX%. $XXX unencumbered rates as office cap Since remain flexible, to deploying of debt balance into the repaid maturity first X normalize. continue accretive X, seller in asset and our these industrial and over expectations by is

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

expect can time. the of predict rates, cannot sort we short-term but normalization of some course We interest with

well will to we expect capitalize new normalization accretive on positioned opportunities. be we that happens, As

proposition. source new term, and expect additional value provide of deals. credit both Sale We diligence of leasebacks leasebacks sale a be our in hallmarks primary particular to

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

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

Gary Gerson

our common lower for to to per QX our quarter results and per FFO weighted common FFO Thank FFO financial due my available additional All for QX increases this $X.XX FFO quarter per-share diluted versus expenses share. XXXX quarter. the are in QX core stockholders I'll available -- fully attributable FFO during referenced share results of XXXX XXXX were prior you, share to stockholders start common in was XXXX leases XXXX revenues first quarter based expiring XXXX attributable by rates. morning Buzz. to on fourth to QX core the XXXX. lower per the in $X.XX and the average to both reviewing operating shares. share regarding were and both per of interest first numbers were QX in remarks

rent activity rental QX X.X% increased XXXX of XXXX. same rates mostly to due the the cash same-store leasing was Our period first over XXXX. quarter subsequent in to increases in in This from by

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

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

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

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

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

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

stock. sales received We had $XXX,XXX quarter. revolver end net of we sales As We common outstanding. no of of the of Series of stock had preferred million our borrowings quarter, from F the $XX.X this proceeds

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

for we properties sale. held have X Presently,

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

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

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

David Gladstone

here. with from stomach good That a Michael; Michael Michael home you. Thank good flu. one report, was -- is and a He's Buzz and not Gary, not Okay. a

a our team to performed very see for doing continuing really has good nice our well. we add and quarter, Overall, our things very as of records shareholders. to this So

you sold as properties. quarter, X we office heard, first the During

to it end property and on for we XX -- we've we're renewed additional or of sold while X working properties So is and X Subsequent sale? X we're out an of those. And the XXXX, quarter, the since that. of office leases presently January sold have office

Arthur Cooper

David Gladstone

Just X. had thought one. you I another

had. properties we away have become company. the an We real office industrial We're estate that from

team is and We those managing commercial job still we those doing good pace, estate. the off. own. and the the a own of at And working a growing the most properties is Sold real great team

was to that Somebody do they in if for it what's Fed July, quarter cut rate make interest much a asked the cut said I this much. going doesn't Not me year, and going difference us? to if

They strong we're properties which fit to continue is industrial professionals. team for, pursue that what looking our is So properties. into

tenants. credit acquisition Our strong team seeking is

there. job good a doing we're So

me the rather get to our get from the great some So continuing talk, who on than questions Latoya? let's people and follow operator company.

Operator

Instructions] comes Global first Our from question Mehta Gaurav Alliance [Operator Partners. with

Gaurav Mehta

you hoping seeing ask acquisition on cap what your market more to rates some market? the on wanted get to color kind transaction I you're pipeline of the and in

Arthur Cooper

look brokers don't and there, that looking rent the seeing would. be we this time BoVs. some make as and obviously These are a point their -- currently are to deal today opportunities, able sure level look We close we will they seeing, tenants again, profile just the going economic know financials doing strictly they we fit however, the at our is forward. credit times, many we the several at of we really at at activity industrial, out to are and the in we're pay take wish to What

do many see good we opportunities. said, being That

a We that should close that are X we have do have going this actionable. find in month. opportunity pipeline We the few to

coming, able relates but on -- on up borrowing so are cost, said, and it's volume seller as but we to X.X being expectations accretive in to it it And make deals. some generally us That depends to deals need about obviously see be we an looking at accretive we come basis cap. end do the that being our to above

Gaurav Mehta

Okay.

an you some on There incentive but fee get what should incentive to was clarification so recorded was expect giver incentive quarter, wanted and was in the wanted to fee. this also just an we there ask going fee forward? I question on Second

Arthur Cooper

will time, made Relative not fee to the was fee, this point part decision in discussions receiving between to incentive incentive after the management going due at capacity. of the At comment fact obviously, the the end on be to and a here, end forward the begin reduced we we that, the at might I'm going the determination to of where Board, with at the of that the next quarter make quarter. Board

Operator

with Stevenson Janney is Rob The Montgomery from next Scott. question

Robert Stevenson

for market term a of redeploy little decent your you leverage, reduced lease and accelerating dispositions the left? office a level if bit tenant what the days? on these And et Can portfolio, got talk or well-occupied into order in it's assets thoughts to about are some office in industrial your good cetera,

Arthur Cooper

mentioned, And X have held for as are sale that office, Sure. Rob. do we obviously

moving We are relates very to taking at assets, a as looking it the disciplined market. approach

more than others to it Some frothy are relates opportunities. as

as that program. being in sales South, So new some match disciplined the evaluating said, want with portfolio, industrial the also to relates it overall just more office as in we are the buildings of course, we we have But because, side those. our are we being acquisitions up and with theme of opportunities our recycling we see within an in to

Robert Stevenson

negative this the fee rate or then, other that was other than Okay. incentive forward? a going goes Gary, run on quarterly earnings? positive with nonrecurring fairly the whatever waiver anything the than quarter first incentive Or And clean fee in is

Gary Gerson

would absolutely. This I pretty is is, say this No, quarter. clean a yes,

Operator

Dave The Stonegate. comes question next from with Storms

David Joseph Storms

Just strong have really to in rents? to you're rates continue occupancy do push ask, ability same-store How hoping to you much numbers seeing numbers. and

Arthur Cooper

we coming for are allow up they Dave, of for opportunities will as that such. couple a have renewal

fixed However, have our of do escalations. deals most

up the tenant acquire the to gives maybe comes such, it, in when opportunity then ability than opportunity that we and, those industrial portfolio company the the rates our versus -- an open it another lease years so renewal, a the or few to and a or rates contractual improvements as wish as today higher rent. make referenced to However, push discuss the us to relates gives have report may within ago, us

David Joseph Storms

Very mentioned acquisition times. helpful. And environment, credit couple the then just in you of quality a

close to sense preferred what you're what sense a might the is Just quality get get a between to of try would be your delta be? rate credit to X what of those in how market trying the Just converging. seeing and

Arthur Cooper

separately, it do pricing evaluate our to the we pass make risk, to we every some that As that side, and we to if relates credit get and it first, on the sure credit we offset have muster that of building into to the would on going both Otherwise, course, so. your opportunity. do we if are and, sure But location, type the I'm all factors, I credit. an consideration of pass we question. functionality specifically take answered not could of

up, follow you if So please. to need

David Gladstone

midsized raise a underwriting is And the of to We're owing to The when let's equipment money in follow raise often into group thing but balance pay turns because so have or on thing our And are asking it's just enter the businesses, it you very a their out that. they it order property mindful money almost up sounds your Dave debt sell it money a which to buy do a just it, like as to And much people another when bank. location, who are not about. to history sheet. something same many you on but doing lease, what else, renting want debt, has long good of off some and small and to properties. times, they're not face

from underwriting still doing underwriting and of long been so businesses standpoint, time have of smaller Buzz things. I. So I up a for my business. grew these we're in has the part that long,

government any so X up interest pushing interest kind rates. because continues way everything in money go comfortable to lived of don't feel to much interest that's the to businesses, cheap interesting May tied back be after on rate. We us thing now with really wonderful rates. it's going expect going these to you still probably but we I'm soon So an tell of for years spend going not that really low I some the to marketplace. anytime there,

continue going got a this. of some sheet, strong it's So at where like as income. back producing at rates forward, can world Hopefully, I interest go think good increase balance we we we look the we've can got We've to point. were. dividend dependent on to not and just along coming they a But our

bust So on then and atmosphere. way go it just continues into kind hopefully, this of a

a question. have So who Latoya, ask to wants anyone we else

Operator

Riley from question John The with Massocca comes next B. Securities.

John Massocca

are Can the just X over update outlook on provide XXXX? re-leasing of you for expiring that remainder leases the any

Arthur Cooper

Sure.

are is that approximately We significant deep have it represents, with in it. has upwards It have of we will I think, -- X expiring, that the of X% X.X provide discussions upside. we a that to

So we're looking here forward quickly. to having very that behind us

that we're relates The That's with And others are concern, in great current that's talks X take and are, tenant a it hopeful of have will we have to as that another feet. X,XXX square we a not over. lease. the we

comfortable. feel we So

square other and feet is on nice again, X obviously of to have these the we'll in long-term manageable. We relates very small up announce going majority X,XXX a -- plus to lease. something And as with hopefully, not-too-distant it the have that vacancy future leases, to

John Massocca

in just fee maybe then us I walk incentive think credited through how that size of trying was there to I'm credits, -- determined? And is Okay. mean, any the was in the terms why quarter of credit of back? number the the can specific you

Arthur Cooper

we staff should was was correct the discussions, stockholder, number, proceeding stockholder. company also but and our it relative that -- was will, do in the we do employees itself stockholder our you not a with it something and aligned as if it we with for aligned that the felt us and relative kept could with Obviously, it are we to felt the

John Massocca

to of $XXX,XXX-something gross incentive whole I'm cetera? the on a of half number? just the it based quarter in amount, Is the trying et why think fee it, versus like a or percentage of

Gary Gerson

would but fee, not FFO. is turn Gary. affect the to to we a do trying we're What is this and that incentive income degree John, significantly on to want

going of take going look that to we as that stated. -- how reduced really take because, be a again, at much being trying we're the at rate here shareholders. would capacity, we've quarters, stated, couple with be alignment the has the next some, And we're not it's so at Buzz as to be over although doesn't although we And going idea we're to to we're a affect trying in FFO understand to it's to going

-- can't I assume exact that it's X/X really would to you around, we amount. This that's scientific. too. did be honest in I give I that we quite with case next quarter this time be significant amount, take, So and rebate. And basically you, quite the if an would mean, the mean, But forward, going a not

John Massocca

who Okay. know then quarter and a dispositions completed, helpful. it quarter-to-date, And redevelopment some color for properties. Just financial a it back who's to Is today. looking a That's and in maybe trying mean the I first very assets? little the in on bit buyer lastly, office other Is about talked of the I that you the get market were play? the is little dispositions these of Maybe ability more owners? that counterparty on

Arthur Cooper

tell have they generally coming heard being what yes, they're Sure. is, the And redeveloped. don't to in we but and have us seen door,

Some an are turn they into are one building office going least to We've at pickleball apartment states seen types. turning multifamily that into facility. a

it's can with we're going property. what the them. much do play they're we're But the gamut. as obviously perform, they There not concerned So long as to is as for a value-add across -- as

David Gladstone

that, the John, getting rents some do people to future. control happy are buying the they're tenant, of course. of for these of building and the We're and

Operator

back you, further for comments. Gladstone, to questions no are turn I'll Mr. queue at closing time. in it There this

David Gladstone

talking come the good shucks, when have we we more wanted these enjoy meetings such we That calling for but. in. We're as of is all Oh, and thank because end as and we to having analysts. well this, some shareholders, them questions, the fun you to

Operator

conclude does This you. today's teleconference. Thank

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

Gladstone Commercial (GOOD) 7 May 242024 Q1 Earnings call transcript