Q1 2020 Earnings Call
Ladies and gentlemen, thank you for setting by and welcome to the Gladstone Commercial Corporation's first quarter earnings ended March 31st 2020 earnings call and Web conference call.
At this time all participants are in listen only mode. After the speaker presentation. There will be a question and answer session to ask a question during the session you'll need to press star one on your telephone. Please be advised that today's conference is being recorded.
If you're acquiring any further assistance. Please press star then zero.
I like to hand, the converts over to your speaker today Mr. David Gladstone. Thank you. Please go ahead.
Well, thank you Jamie for that nice introduction and thanks.
Calling and this is David Gladstone and we do enjoy this time, we have with you on the phone I wish we were doing up more than just once a quarter.
All of people here are healthy we've got some people working from home and some here in the office a we designated Addison.
As an essential business. So we do have people working here in the office and everything seems to be going fine. So this point, then I'll turn it off with Michael accounts see he's our general counsel and Secretary. He is going to give you a legal and regulatory matters concerning.
Colin and the report Michael Thanks, David and good morning. Today's report May include forward looking statements under the Securities Act of 1933, the Securities Exchange Act like in 34, including those regarding <unk> future performance. These forward looking statements involve certain risks and uncertainties that are based on our current plans we believed to be reasonable.
Many factors may cause our actual results to be materially different from any future results expressed or implied that these forward looking statements, including all risk factors that we glued not forms 10-Q, 10-K and other documents we file with the FCC.
Find these on our website, which is Gladstone commercial dotcom.
Specifically from the Investor Relations page on the Fccs website, which is www dot FCC, Don Giovanni and we undertake no obligation to publicly update or revise any of these forward looking statements whether as a result of new information future events or otherwise, except as required by law that today, we will discuss.
FFO, which is funds from operations FFR was a non-GAAP accounting term defined as net income.
Excluding the gains or losses from the sale of real estate and any impairment losses on property plus depreciation and amortization of real estate assets will also discuss FFO as adjusted for comparability and core FFO, which are generally FFO adjusted for certain other nonrecurring revenue and expenses.
We believe these metrics are better indication of our operating results and allow better compare ability of our period over period performance.
We ask everyone to take the opportunity to visit our website once again Gladstone commercial dotcom. Please sign up for our email notification service. There you'll also find us all Facebook keywords, the Gladstone companies and our Twitter handle is at Gladstonecomps.
Today's call is simply an overview of our results. So we ask that you review our press release and form 10-Q issued yesterday for more detailed information again, you can find them on their with Investor Relations page of our web site now with that I'll hand, the baton back to Gladstone commercial President Bob Cutlip Bob.
Thanks, Michael Good morning, everyone.
During the first quarter part 65000 square for industrial property Indianapolis.
Acquired a 321000 square foot three building industrial portfolio in Houston, Saint Louis and Charlotte.
Acquired a 504000 square foot industrial building and Chatsworth, Georgia.
Executed lease amendment to extend a 100000 square foot tenant in Denver, Colorado extended the lease for a 78000 square foot tenant in Springfield, Missouri extended the lease were up 54000 square foot tenant in Delaware, Ohio, and sold and Noncore office property in North Carolina.
As noted on our fourth quarter call, our investment strategies, emphasizing an increase in our portfolios industrial allocation, which we believe will improve our property operating efficiencies reduce capital expenditure levels and potentially result in improved valuation overtime.
To that in our industrial allocation was 33% on January Onest 2019 has increased to 41% as of March 31st 2020.
From January 2019 through March 2020, our investment volume was $201 million.
All of which were industrial properties, providing further evidence of this commitment.
And our intent is to continue to overweight industrial acquisitions market conditions permitting of course in a develop submarkets of our targeted locations.
Our primary focus has been and will be acquisition candidates ranging in size from 50000 to 300000 square feet.
During the quarter, our investment in asset management activities continue to generate positive momentum for our operations.
We acquired five properties, all industrial equating to $72 million in investment volume.
The transactions included 65000 square foot property in Indianapolis for $5.2 million with an average remaining lease term of approximately seven years and a GAAP cap rate of 7.2%.
A 321000 square foot three building portfolio in Houston, Saint Louis and Charlotte for $34.6 million with a lease expiration date of January 30, Onest 2040 at a GAAP cap rate of 7.6% at a 504000 square foot Cross dock facility in Chatsworth, Georgia for 31.9.
Million dollars with a lease expiration date of August 31st 2030, and a GAAP cap rate of 6.9%.
The first quarter investment volume is consistent with our strategy to continue to increase our industrial allocation.
And 65000 square foot property also adds to our Indianapolis concentration.
The three building 20, your sale leaseback transaction or end markets, we wish to increase our presence in the Chatsworth property is that an inland port location in northwest, Georgia, which coincides with our desire to acquire industrial properties at these class one railroad terminal locations in the eastern half to the United States.
Our asset management team continued to deliver on improving our same store operations.
Our south central team extended the lease for our Springfield, Missouri, 78000 square foot office tenant through May of 2026, the tenant improvement package was $5 per square foot.
Our mountain West team extended the lease for our 100000 square foot Denver office tenant through December 2026, the tenant improvement allowance is $15 per square foot.
And our Midwest team extended the lease for our 54000 square foot, Delaware, Ohio, Industrial Tenet through February 2028, and no tenant improvement allowance was required.
These combined effort served to increase the weighted average lease term our entire portfolio.
And from an operations standpoint, our team is implementing energy savings improvements at three office locations in Ohio, Indiana.
These programs require no capital expenditures by Gladstone lower energy consumption in the states.
Upgrade building equipment and lower going forward operating costs for our tenant we plan to implement these energy savings projects at other locations as appropriate.
The onset of coated 19 virus has required increased emphasis on portfolio management.
The company has successfully implemented a work from home arrangement for employees.
However, our active tenant engagement program continues and is delivering positive result.
Well the emphasis on tenant credit we have always engaged our tenants quarterly to discuss the recent financial performance and this strategy has established strong ties with each of them.
During this pandemic, we have appropriately increased our connections with our tenants.
Some interesting at favorable characteristics of our tenant profile were included in our business update press releases.
First.
4% of tenant revenue is from tenants on average contribute 1% or less a company revenue.
And the hospitality oil and gas in airline industries comprised just 2.4% of annual revenue.
The challenges are rising as a result of the virus prompted us to immediately connect with all of our tenants, which we have completed.
There have been and we expect there will be request from tenants for rent deferral and we were addressed them as we are notified by the respective tenant.
Our strategy is to offer rent deferral not rent abatement.
To limit the deferral to a one to three month period, if at all possible and require repayment of the deferred rent over a six to 12 month period.
We will also attempt to include lease extensions and rental rate increases in the agreements.
Now there is no doubt that each agreement will have unique business terms. However, the key objectives are to maintain or increase core FFO per share and to return cash flow to the proper previous levels as soon as possible.
Specific noteworthy highlights of our teams rent collection performance through April are as follows.
All cash base rent for Mark is paid as scheduled.
And approximately 98% of April schedule based Fred has been paid.
The company granted ready to deferrals to three tenants in April representing approximately 2% of total monthly rental income.
These tenants continue to pay partial rent.
The deferrals ranged from wanting to have to three months and the payback period ranges from six to nine months.
We continue to be in conversations with other tenants requesting short term concessions and we'll report the results of those conversations as they evolve.
And a number of tenants are taking advantage of the federal programs available to them and we are hopeful of positive outcomes on their applications.
Anticipating that many on the call are interested in lease expirations through the beginning of 2021 I wanted to summarize the teams thoughts and our current activities.
At lease expiration on March 30, Onest 2020, a tenant vacated a 74000 square foot multistory office building in friendly, Minnesota, a suburb of Minneapolis.
We at least 50% of that building for a 10 year lease term with occupancy that commenced on April onest.
We also have to 10 10000 square foot prospects for the balance balance of the vacant space.
We have lease amendments out for signature with our Raleigh, North Carolina, Tenet, who occupies to adjacent properties, 100% 58000 square foot office building and 20% of a 115000 square foot industrial building.
The balance of the industrial building is occupied by a single tenant under a long term lease.
The office lease will be extended for five years and the industrial lease for one year.
No tenant improvements are required for the lease extensions.
As noted last quarter GM is expected to vacate our Austin, Texas property at the end of August.
Our active marketing of the property with the assistance from the local chamber of Commerce has resulted in two prospects for the entire building and two additional prospects each for approximately one third of the building.
It's interesting to note that our GAAP rent at the property a $14 at 50 cents per square foot compares very favorably in the Submarket with current space offerings in the low to mid $20 per square foot on a triple net basis.
And for the balance of the expiring tennis through the first quarter of 2021, we're in active conversations and are hopeful of positive outcomes.
Market conditions are worthy of comment, particularly with the adverse effects from the onset of the cobot 19 virus.
Economic forecasters are estimating that second quarter GDP may drop by double digit numbers.
This slowdown in economic activity will certainly impact our industry.
Real capital analytics and noted National research firm stated that the buyer pool is shrinking for commercial properties during the first quarter.
From 2016 to 2019, the U.S. markets saw on average 2100 unique buyers each month. This number reduced during the first quarter is estimated at 790 buyers in March.
This will almost certainly have a dampening effect short term on investment sales volume as we enter the second quarter.
In addition conversation with investment sales professionals indicate that cap rates for industrial and office properties appear to be expanding in a number of mark markets, which could be positive long term for everyone.
East Coast ports have reported they are expecting import volumes for the first half of 2020 to be as much as 10% below the levels for the same period in 2019, they are expecting import volumes to expand in the third in the fourth quarter.
We will continue to monitor the evolving market market conditions, and we'll adjust our strategy accordingly.
And as it relates to growth opportunities investment sales listings have moderated driven primarily by the effect of the virus. Our current pipeline of acquisition candidates is approximately $255 million and volume representing 18 properties 16 of which are industrial because of the stay at home directives.
In many states a number of these properties are currently in a whole position, but with some of the states opening up soon we believe that that hold position will move to more positive conditions. Soon our team is steady state actively engaged in the markets as we do believe acquisition opportunities will arise that we can and will pursue.
So in summary, as one may conclude our entire team across all our disciplines are contributing to our success in overall stability.
Our first quarter activities reflected strong acquisition results and leasing success refinance maturing mortgages issued common equity through our ATM program and collectively positions us well to pursue growth opportunities now lets turn it over to Mike for report on the financial results.
Good morning, I'll start by reviewing our operating results for the first quarter of 2020 all per share numbers I reference are based on fully diluted weighted average common shares.
FFO and core FFO available to common stockholders were 39040 cents per share respectively. This performance demonstrates the accretive prudent growth at the company are completed in recent years well as the performance of the portfolio in place. In addition to these accretive deals our same store cash rent continues to grow at 2% on annualized basis with another.
Over the years of improving the balance sheet behind us, including de leveraging the portfolio and substantial acquisitions. Both at the end of 2019 in the early part of 2020, we're excited about the prospects to grow profitability for our shareholders as well as increasing the industrial allocation of the portfolio as Bob laid out our team is actively engaged with every tenant of ours as we enter.
And maximize shareholder value through and beyond the Cobiz 19 pandemic, we're pleased with the teams and portfolios performance through April but these are unchartered times, which we will continue to navigate together.
Our first quarter results, reflecting an increase in total operating revenues of 33.6 million as compared to total operating expenses of 24.1 billion for the period.
We continue to enhance our strong balance sheet as we grow our assets and focus on decreasing our leverage we've reduced our debt to gross assets by nearly 15% of 46% over the past five years through refinancing maturing debt and financing new acquisitions at lower leverage levels. We believe that we're 1% to 2% away from our target leverage level, which means that nearly all raised equity will go.
Toward accretive acquisitions, we continue to primarily use long term mortgage debt to make acquisitions as we grow through disciplined investments. We'll also look to expand our unsecured property equal with additional high quality assets over time, we expect this will increase our financing alternatives as we continue to manage our balance sheet, we prepaid $63 million it out over the past 24 months.
Often with new long term, Barry overrate mortgages as interest rates equal to the one month LIBOR plus the spread ranging from 2.5% of 2.75%. We're pleased interest rate caps on all new variable rate loans. We also added some of the properties to our unencumbered pool under our line of credit whether in advance of permanent placement disposition or in an effort.
Hi, more flexibility in the future by increasing the size of our total unencumbered assets.
Looking at our debt profile 2020 in 2021 loan maturities are very manageable going 7 million at 21 million coming due respectively. A number of these loans that extension options. We have continued to proactively managed to improve our liquidity in maturity profile over time, we continue to minimize our exposure to rising interest rates with over 90% of.
Our existing that being fixed rate or has to fix their interest rate swaps and caps.
We've also been extremely active and issuing our common stock using our ATM program during the first quarter and net of issuance costs, we opportunistically raised $28 million to the common stock sales had an average net share price of $21 from 22 cents this meaningful and extremely cost efficient means of raising capital demonstrates investor demand first docket normalize.
Economic times and was extremely well time prior to the outbreak of Koby 19, all the equity with raise in January which is up no as it resulted in a onetime drag on core FFO at nearly $100000 as it's supported all first quarter acquisitions, including the March 32 million dollar acquisition in Georgia. This drag clearly will not occur.
In the second quarter, and four and forward in total our fourth quarter and first 40 ATM equity raise activity fully supported the nearly $135 million of acquisitions. We've made between November onest in mid March.
Also as mentioned on our last call. We did successfully issue our series six and five a perpetual preferred in October totaling $69 million outstanding using the proceeds to redeem our previously existing series a series B perpetual preferred.
The dividend paid savings reap from reviewing securities equates to an excess of $400000 here.
We believe these capital markets transactions continue to speak to the growth of the company in balance sheet enhancements that they've been achieved as well as long term prospects for further prosperity incremental bank back and going forward and access to more efficient capital.
As of today, we have $3 million in cash and $29.5 million of availability under our line of credit with our current availability at the strong performance of our portfolio and access to our ATM programs. We believe that we have significant incremental flexibility to fund our current operations near and long term properties, we're underwriting any known upcoming improvements at our properties.
We encourage you to also review our quarterly financial supplement posted on our website, which provide more detailed financial and portfolio information for the quarter.
We feel good about continuing to execute our business plan as we continue to manage our existing portfolio increase our high quality asset base and continue to improve our metrics. We're focused on maintaining our high occupancy was strong credit and real estate.
Institutional ownership of our stock has increased over time to 56% as of March 30, Onest, Bob and I continue to be very after the meeting with our current and potential investors portfolio managers coverage analysts investment banks and alike. We look forward to establishing new relationships at the company moves forward to its next chapter.
Regarding the common stock dividend, we did increase it in the first quarter and while the increase was small we've also announced that we're leaving the dividend as it is in the second quarter, we have not cut for suspending the dividend since our IPO in 2003.
Our stock close yesterday at $16.05 distribution yield on the stock is currently 9.4%. Many Reits are trading at much lower dividend yields and now I'll turn the program back to David Okay. Thank you my counts the good Oh, the good report and Bob you end Michael accounts. It did good report to I think.
I think we have not been hurt much by all the government regulations on this new virus is out there.
You had a nice quarter after all and I think the quarter ending June 30 will be a good quarter as well I heard a lot today. The team is hard at work and acquired five industrial properties with a good credit tenants and collected all of the rents that redo it and the first quarter and 98% of the April rents.
And you got a few negotiated short term rental deferrals think we'll collect those.
And we've executed on several leasing initiatives, which I think we'll be strength going forward because there is good for us.
Commercial team is growing the real estate assets in the company at a really good pace as you saw we get a lot and this quarter just ending the team is doing great job of managing the properties that company owns our team has some very strong from professionals and they continue to pursue holiday properties.
On the list of acquisitions that they're reviewing acquisition team is seeking strong credit tenants and no great tenets make excellent investments our asset managers are actively managing we're developing a.
Good group of asset managers.
And it's a just a different environment now, but quite frankly this seems like an excellent buying opportunity. So we're looking at everything that we see with the idea that.
In six months that will be all looking back and we wish we done this or that so we're making are making our statements now the middle market businesses like many of our tenants and our and our buildings.
They are challenged with the government restrictions related to the new virus that we have but the tenants are paying their rents.
Committing to pay us if we deferred a little bit of it.
These are times that have never been seen before but our our team is just first class and I think they'll do a good job for us So I'm going to stop here and Jimmy would you come on in Monterrey. So we can get some questions from the people out there listening to this.
Certainly as a reminder to ask a question you will need to press Star then one on your touched on telephone to withdraw your question press. The pound key please standby will be compiled the culinary roster.
Our first question comes from Gaurav Mehta with National Securities. Your line is now open.
Good morning.
Thanks for taking my my question.
First question on your on your tenant someone's willing if she good breakdown, what you're seeing car hearing from you all facets of course is industrial tenants.
Well I mean, we see the comments in the receipt of of requests have been more from the office side.
What's interesting is that we're receiving requests that I think are valid requests from some of our more middle market companies, who are meeting request, but we're also receiving what I would call opportunity opportunistic requests.
From very very strong tenants.
One of them toll told us that they said this letter this form letter out to 90 landlords and of course, a multibillion dollar company with over $1 billion in cash.
We're not going to address those but guar of we have received more from office as compared to industrial I don't know if thats going to change going forward.
But we really have have received nominal requests at this point.
Okay. Other question garage.
So I had a follow up on the on the G. M. I think you talked about having multiple prospects for that building. Although the same prospects that you were talking to a that you talked about on the last earnings call. Our or are these new guys that you're talking too.
There's two of them are the same and two of them our new.
We did have a couple of let's say smaller tenants that were interested theyve gone quiet on us.
One of the larger tenants is there in Austin and the other one is in California, well no name.
In talking with the chamber and with our investment sales broker if governor Abbott does open up the state here close soon they expect to see activity pick up.
Okay. Thanks, that's all I had.
Okay next question.
Thank you. Our next question comes from Rob Stevenson with Janney. Your line is now open.
Hi, Good morning, guys. Bob are you getting any additional term or rate or something else from the tenants in exchange for.
For the deferrals not only the couple that you've done thus far but any ask going forward.
We we have been in negotiations with people, who have one had rent abatement and for those we have required extensions Fortunately.
The request was withdrawn.
What we prefer it we can is to maintain the core FFO per share and to get the cash back as soon as possible. Many of the tenants are not really interested in doing extensions at this time, but if in fact any rent abatement is requested there will be an extension so that we will maintain our FFO per share.
I mean, I'd love to do extensions, we have asked on each case, but you have with the three that we've done so far.
They're just they're repaying within six to nine months and that is acceptable to us.
And well, but we'll see how it goes forward Rob is their interest charge on that six to nine month no.
Okay.
Mike when you look at the cash and debt capacity, what's the liquidity today, you know a month after the the balance sheet numbers and how much of that are you guys willing to deploy into acquisitions in the next quarter or too given the likely state of the U.S. economy.
Sure Rob with respect to liquidity.
As I mentioned on our revolver, we have $29.5 million availability. We also typically carry $2 million to $5 million of cash today. We have three so were in excess of $30 million of availability as we think about obligations specific to the cash back.
As I made mention we did repay.
Mortgage.
Subsequent to quarter end, so the only we only a $7 million the mortgage is coming due in 2020. So we certainly could cover that adds to deploying capital into potential acquisitions, that's largely subject on cost of capital.
Today with our stock is trading north of 16 et cetera, nine for their view.
As you know, we're generally doing deals at roughly 50% LTV.
There are pockets of debt capital that are still free but with the nine four did that that's challenging so.
What we've been guiding two is.
Optimism that we get to the back half of second quarter with much more normalized environment from a a personal and professional basis as well as the stock market basis. So we we real time course, correct for a what makes sense for us from an investment strategy perspective really on daily basis.
Okay.
And then the the covenant page in the supplemental was very helpful.
So the the tightest one looks to be the dividend payout is that covenant on a trailing 12 months measurement.
That's correct trailing 12, and if that 95, you Peel that back the last couple quarters have been slightly below the 95. So as we look at Q2 in Q3, we will have the benefit of six months of activity.
95%, but our aspirations are to continue to dial that number down overtime.
And how challenging it on your conversations with the lender or is it to get a temporary waiver on that if it was needed for a quarter or something like that hurt too.
Sure well, we're very fortunate to have through April highly performing office and industrial portfolio. So I would not say those are top of mind discussions, but I will say that we're talking to the entire.
Lending group made about six banks that and that went from four to six just last year that refinance as we look back in the rear view was a fantastic way for us to avoid any type of rifai risk.
I can't ever promise the future.
But I think our lending group has been supportive in very challenging times in the past at a higher leverage level and aspires to continue to be.
Supportive.
If we ever needed any type of modification, but.
To be fair Theyre doing a hell of a lot more hand in combat with no retail hospitality et cetera.
And then last one for me have you guys issued anything under the series half at this point.
Not today, I'd say I would say Rob from a long term perspective, we have do not have significant desire to massively overweight on preferred so although we will issue preferred traded as well as potentially nontraded.
If you think about today the comment has a day of yield of nine for the series that comp deals eight one so if there would be for incremental capital.
We could happen do it but we have not today.
Thanks, guys appreciate it.
Okay next question.
Thank you. Our next question comes from Barry, Oxford with D.A. Davidson. Your line is now open.
Great. Thanks, guys I just to build on Rob's question.
Regarding the.
The dividend.
You can especially if you're pushing up against covenants and you have a high payout ratio and you have a high yield at 9% arguably you know maybe you're not getting full credit in the marketplace.
Why not make an adjustment to that dividend and and David If you want to comment to that'd be great.
We don't cut the dividend I own a lot of stock and I don't like my dividend.
Barry State specific covenant package as well as getting credit in the marketplace to be fair. We are not really any higher than we have been during my three and a half year tenure here. So these these numbers do not reflect anything that has been.
Adversely impacted based upon the portfolio performance because again, we have been highly performing.
I think again, we can never predict the future, but the aspirations are when we all get out.
From underneath this pandemic that in a normalized environment people will appreciate that we continue to be trading at a relatively significant discount even as compared to net we peer set and we will see a recovery in the share price. So.
Today, we are pleased with the performance.
It was just a matter of a few weeks ago or we had board meetings and concurred to leave the dividend as is.
Hurt Davids comments as well so understanding there are other people out there that out of need or strategically that are making cuts that is not top of mind to us.
Did to add another comment to that in conversations with some of my colleagues in tier one bank to who has been with me since I joined the company in 2012 and and have seen how we have evolved through the years. They said based on your history and what you have done we don't think it's wise at this point for you to to lower the dividend.
And they said if the economy completely falls apart then you'll go with other people as they lower their dividend, you'll do the same but but they're they're telling me. Bob you know you guys have come a long way you're in a great position. The next couple of years ahead of you look very very good.
Why would you do that so as David said and Mike has reconfirmed that's why at the last Board meeting we said, we're just holding the dividend.
Right now I can't I can appreciate all that.
Bob switching gears, just a little bit to acquisitions, you mentioned or you still feel like that cap rate.
Kind of have backed up a little bit do you know are you is it more into 25.
Or 50 basis point range.
It's what we're hearing from investment salespeople is that is that industrial is anywhere from 15 to maybe 25 and office is anywhere from 30 to 50 and that is predominantly more in the Midwest as compared to some of the southern markets and of course, we're not actively pursuing the the west coast.
Acquisition. So they don't have those expansions don't apply to the west coast.
Got you appreciate it guys. Thanks Amelle. Thanks, Bert Okay next question. Please.
Thank you. Our next question comes from Henry Coffey with Wedbush Wedbush. Your line is now open [laughter], yes. Good morning, everyone and thank you for taking my question.
What are the bright spots in that and the docs dark spots inside this equation are there other areas of your portfolio, where because of shop at home as opposed to stay at home and and the like and potential shortening of the supply chain, we're seeing some big.
Positive moves other areas, obviously of your portfolio, where they may be some clients that are going to suffer permanent impairment here.
You know I think the ones that I would be most concerned with and.
Our probably the retail which is very small small percentage, but we have some day care centers that those people those people can't work amazed and they're in their in states, where there is shut down right. Now so if I had to think about a dark spot I think it would be that I think a maybe.
Great spot did that is not really dark, but we've got to once the automotive industry, we got to see where that goes forward.
Fortunately or unfortunately, one of our tenants is connected to the the auto industry is doing the PE equipment as well and so.
That's encouraging and to the to the two of the tenants are very large and they're stable, but but we've got to watch that very closely because if it extends for the next two to three months on the auto industry not coming back then I would be concerned there on the bright spot I think you know it sounds crazy, but this in our middle.
Market approach the business companies have been business a long time.
They're not really huge assets there are assets on the industrial side that are primarily under 300000 square feet. Those are good going concerns and I do believe with now some of the onshoring of manufacturing, it's not going to happen tomorrow, but we're starting to see some of these clients pick up more work in the future.
That is that is program is not there now because things have slowed down for everyone but.
I'm I'm just cautiously optimistic that for the most part that is going to be a bright spot for us and and we think although it's not a bright spot today as I've indicated in the past and I indicated in the call today, we're very interested in the inland Port expansion program that is taking place between the ports and.
A class one railroads with all the deepening of the ports on the East coast and the shifting of some of the manufacturing from China to Singapore, Vietnam, and India and with the ability to do larger you shifts up to 14 14000, we think that we're going to be able to.
Partner with these ports and class one railroads at these inland port locations to acquire properties that are in our size theyre not that they're not going to be the large sides are going to be transload facilities, they're going to be sale leaseback opportunities, but there is that's kind of a silver lining that I'm looking at Henry right now.
I was there any wanting your portfolio is benefiting from all this.
Shop at home, let just.
Distribution.
Yeah I think this.
Henry It's a it's a mixed bag, but some of the people that are in our warehouses or last mile people as well as on the retail side, where.
Stuff comes in and it goes back out to the grocery store wherever it's going we've got some.
Some that are.
If you go to the hardware store today, and that's an independent it's probably our group that's doing that so.
So I.
Youve when you do an underwriting you trace all the way back where the dollars are going to come from and why they gonna come so whether you're doing an underwriting for retail shop, we have.
What do we have two or three you have two or three.
[music].
We Walgreens Walgreens offerings as a threeq Henry wall Yep, I mean, Walgreens is cranking, along there not having a big problem because they're selling.
And we have as Bob mentioned, a couple of day care centers there close so they've got no revenue coming in.
And one other reasons. They are closed is because the state has closed them, but when they come back up I don't know.
Exactly that but my guess is most families are getting a little tired at work and live and together and the daycares will fill up again no guarantee you that of course, but.
These are temporary things that are going on.
We do.
Six weeks or eight weeks of this kind of stuff and then start to open up I think people are getting bullish enough. So that those will come back pretty quick I can't predict the future and neither can anybody but when we do an underwriting.
If it has some question about where the money is coming from we just don't do it we're always looking for strength. So I think we're in good shape and time will tell.
The.
Next quarter and will have gone through the most difficult period.
That is the reopening period that we're going through now and I think as can be pretty good.
Well. Thank you for your comments and it's nice being with a company that has your history.
Well, we've been around for awhile, and we paid our dividend for ever in a day and there's no desire to cut the dividend even if it make our financial numbers look stronger in a temporary way, we want to stay with our shareholders and pay them dividends.
Next question.
Our next question comes from John Massocca with Ladenburg Thalmann align is now open.
Good morning.
All right.
Yes.
And you look at kind of the balance of properties that are at least at quarter end I mean, it has the current kind of pandemic and also maybe the.
Relativity in commodities and impacted some of your potential re leasing operations there.
On the releasing side John is what you're talking about yes on the realignment that yes, I think when I when I think what we have vacant right now.
You know central to northern Ohio has absolutely shut down and we have two properties. There that are are you know are partially leaf because their multi tenant buildings, but they're not fully leased and and weve see that activity drop Minneapolis has come back and in fact as I indicated we.
We we've released 50% of the building that went vacant at the end of March and with two more prospects for that facility and then there's another facility there in Minneapolis that the tenants can be vacating in the next I think two months or Muskie's me next month, but.
But we have two prospects one is a charter school, which we're seeing a lot more interest in charter schools at some of these single storey office is that we have but I think I think central and northern Ohio is going to be a difficult play for US. There is there's no doubt about it we we on the other side of it.
Have a property in eastern comments in Columbus, and the anchor tenants there.
A tenant moved out at the end of last year and the anchor tenant has agreed to take the balance of the building so.
I'm encouraged there so it's kind of a mixed bag. It depends upon I think the specific location of the property. If it's not in a location where you have more of an urban.
Mixed use area on the office side, we have we will have difficulties, but as you can see from the once we're now getting larger activities. If they're in stronger markets were seeing activity and I don't believe we're going to have difficulty as you know my big elephant on in this room is GM and.
We've got to press that to to get that to conclusion here over the next several months.
Okay.
Just as a reminder is this a that comes to asset still in your guys portfolio and still Bacon.
Which.
Hi.
Yes, yes, yes, we have that's the one important at tusa in Tulsa.
Yes, it's still in our portfolio and we do have a prospect for the entire building. It's on a shorter term lease, but we're expecting an RFP for that yeah in the next week or so.
Since the end no single asset Doe makes up a big percentages of the vacancy as it stands today right, obviously depends on apps and that would be a significant portion of it.
Hey, everyone. There one is is around 1% or so it or less.
Okay.
I mean.
Digging a little deeper on the kind of portfolio stands today on the industrial side I mean have you seen kind of a difference that impacts within your industrial assets with regards to say manufacturing properties versus what would be kind of categorize distribution.
Assets and has that been reflected and maybe deferral requests or just kind of overall sentiment as you as you've reached out to tenants and then roughly what is maybe the breakdown between those two categories as it pertains to like the size of your portfolio.
I would say one of our deferrals is a manufacturer just in time.
For a and assembly plant menu and assembly plant.
And as I indicated I, depending upon how the auto industry goes we have.
We have 123 assets up in the Detroit area that service General Motors and forward.
Those could be question marks for us.
But I would say that if I had to split between distribution and manufacturing I would say that were probably 40% manufacturing and 60% distribution and quite frankly, we not receive much you note in very very few calls I mean, most of the call have been more on the office side than on the.
Industrial side.
Got it makes sense and then switching gears to the balance sheet at sorry, if I may have missed this in prepared remarks, but.
What is kind of the availability and maybe pricing on.
Operating level debt today.
And you're saying.
Yeah, sure so single asset financing.
We've seen as low as the high twos to the high three so about 100 basis point bandwidth call. It 275 to 375 on the type of assets that we've been pursuing obviously there are challenges today from a timing perspective, if not in other ways in terms of getting that type of financing John I mean.
Packaway speaking, it's a challenged to get into Fraser to go out and and look at a property.
I think lots of financing at various initiatives.
Okay shop, the equity side is more of the roadblocks and obviously.
We have our credit facility as well, which is very efficiently price with a material availability as well as an accordion feature that we could go back to talk to our lenders about.
Okay, and it sounds a bit like the any kind of restrictions on property level financing or almost more operational rather than a willingness for banks to land that a fair characterization.
CMBS from Scott.
Thanks, a lot that financing does exist is out there.
How those conversations.
It is not our world today, but obviously the investment grade bond market has been opened and been the most efficiently price market high yield is there it's a little little expensive.
Yes.
The short answer is there are.
Alternatives and opportunities to borrow.
And some aspect from the bank Salon.
Alright, Thank you very much that's it for me.
Thanks, John John next question.
Thank you and I'm showing no further questions in the queue at this time I'd like to turn the call back to David Gladstone for any closing remarks.
Well. Thank you off of calling I think we're in good shape today, hopefully our tenants continue to pay.
Had good luck with them so far and I think this is a short term problem with that will turnaround strong and we get into the summer month.
At the end of this and thanks for calling in.
Oh no.
Thanks for your participation on today's conference. This does conclude your program and you may now disconnect.
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