GOOD - Earnings call transcript Q2 2024 | Gladstone Commercial Corporation

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Operator

Greetings, and welcome to the Gladstone Commercial Corporation Second Quarter Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, David Gladstone. Thank you, Mr. Gladstone, you may begin.

David Gladstone

that calling and in. for of to you for you thank nice thanks introduction, all Well, a these We and have call have the this a analysts time enjoy time questions that in, with lot of and this like and would shows you good guys good to on time. we

give call. from regulatory matters legal Michael hear Counsel Michael? we'll few our General and on a this he's Now LiCalsi, also Secretary to concerned

Michael LiCalsi

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

statements that current be our Forward-looking risks certain believe reasonable. involve and are based to we which uncertainties on plans,

by factors file with results and many be results from we materially these may in XX-Ks including that different SEC. implied future forward-looking the all our our The statements, factors XX-Qs risk actual to any the or cause expressed

is gladstonecommercial.com page the can SEC's specifically the You investors which our website, them or on find www.sec.gov. that's on website,

a undertake estate excluding no assets. term as and a Now FFO, whether or or from future real non-GAAP we'll no information, And FFO by as of of net losses otherwise, defined on income, impairment any operations. from today, statements, sale of funds and obligation depreciation the of amortization events any is law. is update losses we discuss as forward-looking or estate result required these to gains which accounting publicly except the real property, plus revise

results sign indication Please website, is believe operating and our metrics of again, other visit revenues We nonrecurring notification service. FFO, for our these better performance. We'll that's certain once period-over-period comparability also better and a discuss generally gladstonecommercial.com, e-mail our FFO allow which for up adjusted our core are expenses. of

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

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

Arthur Cooper

Michael, will discuss our the all federal In and meeting. calling to of for Thank that the in. X.XX% mind. thank X.X% for June, rate to you, funds you benchmark the at operations keep topics top are FOMC seventh and Today, consecutive decided we

While investment markets, has rate activity prolonged continue this high environment impacted severely estate interest leasing see real and normalize. capital to we

is reasons report, U.S. that has Last missed print, believe in expectations coupled the job a to toward led week's few which on is market growth, the with downward dropped last stock the revised one many of recession, which significantly headed job a June days. the

rates. weakness, Given increased pressure is reduce interest the economic under the to Fed

for single We most by cut market or believe X the cuts with X rate assumed participants a by is year-end. opportunity additional

not credit aside economic material tenant seen in across have tenant, news decrease the our is we quality one Although portfolio. from negative, a

As see for in and outperformance it near to relates specific long industrial continued both asset term. classes, we the

XXX.X to peaking, CBRE dropped last In term, square have under vacancy According the to industrial the developments we for slowed feet. product for million construction rates as several industrial near new see quarters. QX

first The XXXX. feet XXX been product time square below construction has million under since QX,

our the will market In which portfolio benefit trends our tailwinds see manufacturing nearshoring middle driven play operations, and term, by credits. reshoring long and we to existing expertise significant proven underwriting

and company Moving for specific few portfolio quarter. a to on highlights the second

$XX.X nearly straight-line management feet sold straight-line up. million foot X.X team New million Taylor, our million Jersey. quarter, Harbor, our and We or mark-to-market percentage square feet XX.X%. successfully second Through plus XX% XX% rate Pennsylvania of industrial annualized cap office from We in acquired decreased increased with to as X asset GAAP we rent We quarter, concentration nearly leased portfolio X an in million weighted renewed office XX%. XX% $X.X from to the assets the Egg aggregate Southern Pennsylvania. for of an successfully square and in rent our industrial square During XX,XXX a has across asset a released for

the We collected leases. office in and XX,XXX at the a base of end feet remainder just year to feet XXXX, we Ohio on also rents X,XXX the we have of Subsequent lease occupancy of to square XXXX. of Through XX.X%. cash Columbus, quarter, XXX% the expiring the lease of square end portfolio increased of renewed

X shortly office we on that properties close building And in held in addition, a have for of Georgia located medical we should sale sale.

X.X stock Lastly, proceeds the approximately shares from sale $XXX,XXX we of preferred common million $XX.X sale net the of an in F of X,XXX from of in and net raised stock. shares Series million additional proceeds

over call plans I and Before the months. next goals our highlight for Gary, to the turning will XX

next currently third continue we to of markets rent growing this opportunity will our the under scheduled concentration as office dispose We up plan in contract increase million We open X months, above XX we to have the assets. for close industrial quarter. capital noncore $XX and XX% of straight-line and in one annualized to concentration

office will of noncore continue assets. We disposing

June held redeploy for just X and that flow cash from of will referenced industrial XX, we sale, existing sales are we our into As proceeds had to medical I and these use offices the assets.

to underwriting our proprietary on expertise sale-leaseback in-house leverage will opportunities. We capitalize credit

of hallmark our value a is sale-leaseback the Again, proposition.

sheet. balance We flexible and keep a healthy will

new including As million June below of of $XX.X we Successfully remain industrial the XX% better placements and levered liquidity Gary availability We Gerson, goals and will completing in $XX.X had million over now credit and of to of cash. results financial our quarter million, XX, turn XXXX. will June for liquidity as under position facility for our portfolio and our review I us XX, these $XX.X our of next CFO, our to stage growth, call rating including markets. obtaining position. in and existing private expanding

Gary Gerson

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

were during FFO the the and $X.XX stockholders and $X.XX $X.XX months available core FFO second were both and FFO FFO period for per in core respectively. per X for XXXX share. XX of the quarter share, common respectively. were share, and ended FFO core same June per and to $X.XX $X.XX XXXX FFO

of Over the was XXXX. period in our decreased -- in termination same due first X.X% cash this This to the two XXXX accelerated -- rent quarters in same-store XXXX X over by of lease XXXX. quarter

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

fee. Expenses period, waiver mainly due were to charges higher in impairment a the XXXX incentive of by offset

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

As of XX, June is X.XX%. average SOFR our effective

Our caps. hedged accordingly. our and we outstanding with swaps interest monitor And continue the rates interest with bank interest closely to loans term are strategy hedging rate of update remainder $XXX million rate and

XXXX loan million. As manageable of maturities, have at loan and are maturities today, no $XX.X our we XXXX

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

ended under of ATM of June months common XXXX, net proceeds raising our XXX,XXX program, XX, stock million. During the we $XX.X X sold shares

received F Series XX. June also preferred stock sales through proceeds We net our of from of $XXX,XXX

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

today, cash facility. we approximately in of of million have million under As $X availability $XX.X and our credit

which provides our website, to our financial supplement quarterly you more the also review and on financial posted encourage We for portfolio information quarter. detailed

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

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

David Gladstone

a ones and from good good and report, was Gary, Buzz Michael That you. too. Thank

the it quarter. got very, a has very well. team think very Overall, up. I keep performed to We've nice

next to quarter. So we've got again do this

second acquired and you today property. one in quarter, facility, the If summary, one industrial noncore we during sold we heard

We leases X also our of renewed on properties.

great we're So doing there.

of and we're of growing especially Our managing that doing our real team the estate, a properties great all is a in is in. good have, areas part the team we commercial job

team continues skilled We and them strong the of are reality, analysis the if we're pursue a underwrite were the good got that as estate. real quality of looking reviewing. We've for letting the that and rent businesses. to business Our persons lending because them our in potential we backlog we're strong in these professionals in acquisitions properties they money

and Okay, in operator -- ask operator let's some the stop here to and help us us have that questions. want listeners the come with

please. So give the questions, all us

Operator

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

Gaurav Mehta

get wanted market. pipeline you transaction ask are to I more what on rates some on I cap seeing market? wanted acquisition the your in the and to color

Arthur Cooper

Gaurav. you, Thank

cap XX that transaction -- we north As was will -- of a close. I one it It average mentioned, is do cap. have

a of And have so on out above the basis straight-line under they or we cap. XX on put also were We also which have review. LOIs, X some XX

not see we're the to you're Obviously, more the forward. of the believe a as available relates the will, here first a 'XX. as will you end slowdown, going pipeline, as to into But going pickup we them it will if the of rates a going of interest and everyone aware I'm all. pickup pick the year, sure, hopeful but half we're in year, credit up become the toward believe, we drop bid definitely as marketplace, referenced has here

Gaurav Mehta

Okay.

continue fee waiver. next Do to expect Second quarters? for fee ask question to few wanted incentive you I waiver was incentive

Gary Gerson

for we the much take and of we're to our to our people how pay XX% consideration fee we've is Thanks stakeholders rewarding of a our be both we to, this the payment and the giving We I we're a the intend that our credited back beginning rate also incentive at to in both and reduced began partial decide for the paying. going intent of to mean so shareholders. far, but ensure that consultation the QX XXXX, But with and year shareholders we're waived question. fee. Board, entire incentive back year,

David Gladstone

questions? Operator, any other

Operator

from Our Janney. next Stevenson Rob question comes from

Robert Stevenson

rent Gary, the the sold there's million a property the that core on $X.X fee increase quarter. second in to property FFO a to due a about sold accelerated quarter? related in the the Is termination release, the we primarily during line

Gary Gerson

Yes, Harbor the it property. was Egg was the that --

Robert Stevenson

then what was And that Okay. was big termination fee? -- how

Gary Gerson

It was about $XXX,XXX.

Robert Stevenson

office square a helpful. alluded footnote sales that medical about as Okay. Buzz, properties for and to? Those $X.X held are in million you then And for there's change Georgia classified X sale the XX,XXX in feet. That's

Arthur Cooper

Correct, sir.

Robert Stevenson

should Perfect. should expect from other being, you back the of a me be then the How bunch dispositions, office for to want needs own that to don't there be XXXX on come some about pent-up demand year longer who the the if of of be interested Okay. you matched Is with to buyers be when Is in acquisitions? assets sort and question rates assets maybe winds your term? people half we guys of how might up down? And and in guess other that I we thinking dispositions? aggressive the and industrial

Arthur Cooper

recycle deals. Obviously, doing we're aggressively new hope to we be that yes, And to into going that. capital

As it since sold over last the has relates to a X of in sales, job, great the buildings obviously, a past total year office with July. done team

continue will We that.

However, year. that here we've vacancy vacancy and a with as only small end X.X%, I until within one of office the portfolio got the only factor referenced of

in be sell are aggressive looking down. of opportunistic, do and be hopeful will We rates as we a We'll them. come pickup, to

Robert Stevenson

then And one Okay. last me. for

the that tenant credit seeing that assets that slides you need deteriorate. where likely Is office the that How to to you spectrum? indicated credit You down are or had that, of or is tenant? an guys industrial sort you tenant sold? And credit one -- about be as one thinking were retenanted an

Arthur Cooper

a was we less than here our Currently, it anticipate in X% small relatively being it. sold, it have that Yes, of off for it being We rent, books of product. straight-line distribution retail but fact, industrial traded represented box shortly. paper on anticipate do

David Gladstone

to do ask else Thanks, have anybody Rob. Operator, wants who question? we a

Operator

do. We

comes question Storms Stonegate. Our from Dave from next

David Joseph Storms

Just from would continue there that any sort noncore assets assets, of divesting as consider you of you office renewing? profile is

Arthur Cooper

of great allow point to time. we term result, opportunistically as we're continue a garner office We us hope them those dispose and for certainly to, off are properties, got then would us but marketplace at assets, X the to example, especially Florida certainly income the that have longer to renew of a some this any ready X so. improves And sell of done and in as we've to that the not allows or those have we can in that that rent

are to we book. office certainly referenced would as off offers, we Cincinnati. extend, property But entertain the but in I any on And have certainly, internally moving looking then we're to discussions asset that the going

those. of look relates to to as to going be we're it dispositions So opportunistic,

David Joseph Storms

Understood. helpful. the And macro. just That's very then turning to

any had that hair. recent very regards economic thought year, we Does You also unemployment up mentioned still to expected the is your basis? this with that data, are change Or underwriting? rate cuts tick later this with a but process of tenant-by-tenant

Arthur Cooper

to underwriting see interest occupancy and change, believe we're a rate as value to relates of credit and Our lack stick forth, to should going our we've is product. with is as go and underwriting it to shown the us to will disciplines. we And both for result, our so But tenant as see the do going cuts, a add. more that of over that we profile. default that not Obviously, allow after, our better years word, those rates

David Gladstone

We have one more question?

Operator

Massocca from Riley Securities. comes B. next Our John question from

John Massocca

size the leasing of Was the of lease in was or TIs if I kind give in any kind of quarter you concessions that given little significant involved up? a it. on could maybe there just activity the color wondering more

how maybe and going then dealing just stuff of was with mature that time later much that's to the bit, the lease leasing mark-to-marketing much in little how in And happened is that that was frame? maybe maturities a quarter

Arthur Cooper

of it, confident but approximately plus-up got in but do not and But well past as the have of as the to as very leasing from of pay resulted lease-up the the on to but standpoint quarter, have obviously, certainly, it in well, done you it, with that. XX% feel TI that Taylor, piper are commissions that you our very the there transactions TIs, we in of that rent, should had do commission. leasing Certainly, Pennsylvania been all successful

building dollars So of tenant team the to and we leasing the And just do have do, the not there down. assets out in it what have working the hard done. to dollars majority are we our to TI if the that but needs we do keep that commissions, and to is the to get lease throwing improvements, reference

these word, to building we've improvements but lack They've in are job done better renewals. those so recent of for keeping be, associated, got to a great they down the

John Massocca

industrial the then Okay. in leases of you Taylor done kind maybe but to leasing past terms of new quarters? the you've the with broad versus close And kind strokes, in what seeing maybe TID of of office specifically, are just some

Arthur Cooper

you If explain you're me little looking to a that would for? bit what

John Massocca

to ago? lease industrial how that but that seeing versus that is square all per obviously, I I as kind I up with in new know then space trending? foot. or XX intrigued maybe office, I'm space how mean relevant TI months trending. And maybe today current a were quarter, also what leases with mean, like not of is just how just It's in the you it's that's the

Arthur Cooper

the to obviously obviously, And as is which more retenanting toward Sure. why we office relates it is moved industrial, cost of properties. expensive,

We decrease are, as a demands the office, in fact, seeing concession. for relates in to it

a So good item. that's

a have jumped the but of little remained steady have remained needed to basically order tenant. down are TI well ago. it's up, as years rates side, or Rental the same is we bit. as dollars industrial percentage the as the saw not in X a from what Vacancy X what On keep rates

John Massocca

Okay.

just size Okay. specifically is one And then office the and office just looks today, Austin in terms both with kind asset? leasing, kind environment the of maybe of of given just like of leasing maybe broadly that Austin what

Arthur Cooper

top it side made that and the X is the stabilizing mind here space down the overall be had relates of also Sublease seems the We've always as we've is come deals ask world Of tours last office there, Austin We've market on progress in office. in seen X there, we're seeing for And some the uptick as course, an itself. TI for activity. weeks. us, the for tech Austin. has on down, to to

for year-end. So we might as good future, Again, And it not us think. something one market markets very looking course, of by would getting of not-too-distant in on a are depend the has and there Florida hopeful what been overall, expensive but certainly as you're at.

going to an what from in do TI We so Ohio, office a to not of was retain is to it not as in problem have have dollars. any CBD we expensive to relates transaction, as Cincinnati, we building but for just, keep, the we're don't did cash it cost that to do standpoint us but

David Gladstone

more got questions? John, you any Operator?

Operator

believe look Gladstone comments. any for don't questions. I does floor It like to has more David does that he session. has disconnected. to I This back he would our over the question-and-answer like closing conclude turn

David Gladstone

and to in for some you thank all fun forward do, good look we questions. Well, quarter. we to That and next calling asking was

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

Operator

teleconference. today's This concludes

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

Gladstone Commercial (GOOD) 7 Aug 242024 Q2 Earnings call transcript