Q2 2024 Gladstone Commercial Corporation Earnings Call
Operator: Greetings and welcome to the Gladstone Commercial Corporation, second quarter earnings call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation.
Greetings and welcome to the Gladstone Commercial Corporation second quarter earnings call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation.
Operator: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. That's a reminder of this conference as being recorded.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
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.
Operator: It is now my pleasure to introduce your host, David Gladstone. Thank you, Mr. Gladstone; you may begin.
David Gladstone: Well, thank you for that nice introduction, and thanks to all of you for calling in. We enjoy this time to give you guys and the analysts that call in. We have a good time on these shows and would like to have a lot of good questions this time.
David Gladstone: Well, thank you for that nice introduction and thanks to all of you for calling in we enjoy this time to give you guys an and.
Michael: The analysts that call in and we have a good time on these shows and wed like to have a lot of good questions. This time now we'll hear from Michael <unk>, Our General Counsel He's also secretary.
David Gladstone: and the analysts that call in. We have a good time on these shows and would like to have a lot of good questions this time. Now we'll hear from Michael LiCalsi, our general counsel and secretary, to give a few legal regulatory matters concerning this call. Michael?
Michael LiCalsi: Now we're here from Michael LaCalsi, our General Counsel. He's also secretary to give a few legal regulatory matters concerned for this call.
Michael: To give a few legal regulatory matters concern for this call Michael Thanks, and good morning, everybody. Today's report May include forward looking statements under the Securities Act of $19 33, and Securities Exchange Act of $19 34, including those regarding our future performance forward looking statements involve certain risks and uncertainties that are based on our current plans.
Michael LiCalsi: Michael. Thanks and good morning, everybody.
Michael LiCalsi: Thanks and good morning everybody. Today's report may include forward-looking statements under the Securities Act of 1933 and the Securities Exchange Act of 1934, including those regarding our future performance. Forward-looking statements involve certain risks and uncertainties that are based on our current plans, which we believe to be reasonable. However, many factors may cause our actual results to be materially different.
Michael LiCalsi: Today's report may include forward-looking statements under the Securities Act of 1933 and Securities Exchange Act of 1934, including those regarding our future performance. Forward-looking statements involve certain risks and uncertainties that are based on our current plans, which we believe to be reasonable. Then many factors may cause our actual results to be materially different.
Michael: Which we believe to be reasonable there are many factors may cause our actual results to be materially different from any future results expressed or implied by these forward looking statements, including all the risk factors in our 10, Qs and 10-Ks that we filed with the SEC and find them on our website specifically the investor's page that's at Gladstone commercial dot com or on the.
Michael LiCalsi: For many future results, express their implied by these forward-looking statements, including all the risk factors in our 10-Qs and 10-Ks that we follow at the SEC and find them on our website, specifically the Investors page that's at GladstoneCommercial.com or on the SEC's website, which is www.sec.gov.
Michael LiCalsi: For many future results expressed or implied by these forward-looking statements, including all the risk factors in our 10-Qs and 10-Ks that we file with the SEC, you can find them on our website, specifically the investors' page, which is at gladstonecommercial.com, or on the SEC's website, which is www.sec.gov. Now, 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.
Michael: <unk> website, which is www dot SEC that G O V that.
Michael LiCalsi: Now 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. And today we'll discuss FFO, which is Funds from Operations. FFO is a non-GAAP accounting term to find its 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. We'll also discuss core FFO, which is generally FFO adjusted for certain other non-recurring revenues and expenses. We believe these metrics are a better indication of our operating results and allow better comparability over our period-over-period performance.
Michael: 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 today, we'll discuss <unk>, which is funds from operations <unk> is a non-GAAP accounting term defined as net income excluding the gains or losses from the sale of real estate and any <unk>.
Michael LiCalsi: Today, we'll discuss FFO, which is funds from operations. FFO is 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. We'll also discuss core FFO, which is generally FFO adjusted for certain other nonrecurring revenues and expenses. We believe these metrics are a better indication of our operating results and allow better comparability of our period-over-period performance.
Michael: <unk> losses on property, plus depreciation and amortization of real estate assets. We'll also discuss core <unk>, which is generally <unk> adjusted for certain other nonrecurring revenues and expenses. We believe these metrics are a better indication of our operating results and allow better comparability.
Michael: Our period over period performance.
Michael LiCalsi: And please visit our website. Once again, that's GladstoneCommercial.com. Sign up for our email notification service. You'll also find us on Facebook; keyword there is the Gladstone Companies and on Twitter at GladstoneComps.
Michael LiCalsi: Please visit our website, once again, that's GladstoneCommercial.com Sign up for our email notification service. You can also find us on Facebook, where the keyword there is the Gladstone Companies, and on Twitter at GladstoneCom. Today's call is simply an overview of our results, so we ask that you review our press release and Form 10-Q, both issued yesterday, for more detailed information. Now I'll hand it over to Gladstone Commercial President Buzz Cooper. Buzz? Thank you, Michael.
Speaker Change: Please visit our website once again, that's Gladstone commercial dotcom sign up for our email notification service you can also find us on Facebook keyword. There is the Gladstone companies and on Twitter at Gladstone comps.
David Gladstone: And today's call is simply an overview of our results.
David Gladstone: So we asked that you review our press release in Form 10-Q, both issued yesterday for more detailed information.
Bus Cooper: Now hand it over to Gladstone Commercial's President, Bus Cooper Bus. Thank you, Michael, and thank you all for calling in. Today we will discuss our operations and topics that are top of mind. In June, the FOMC decided to keep the benchmark federal funds rate at 5.25 to 5.5 for the seventh consecutive meeting. While this prolonged high interest rate environment has severely impacted real estate capital markets, we continue to see leasing and investment activity normalize. Last week's job report, which missed expectations on job growth, coupled with the downward revised June print, has led many to believe that the U.S.
Buzz Cooper: Last week's job report, which missed expectations on job growth coupled with a downwardly revised June print, has led many to believe that the U.S. is headed toward a recession. This is one of the reasons the stock market dropped significantly in the last few days. Given the economic weakness, the Fed is under increased pressure to reduce interest rates. We believe a single rate cut is assumed by most market participants, with the opportunity for one or two additional cuts by year end.
Bus Cooper: has headed toward a recession. which is one of the reasons the stock market drops significantly in the last few days. Given the economic weakness, the Fed has been under increased pressure to reduce interest rates. We believe a single rate cut is assumed by most market participants, with the opportunity for one or two additional cuts by year end. Although the economic news is negative, aside from one tenant we have not seen a material decrease in tenant credit quality across our portfolio. As it relates to specific asset classes, we see continued outperformance in industrial for both the near and long term.
Buzz Cooper: Although the economic news is negative, aside from one tenant, we have not seen a material decrease in tenant credit quality across our portfolio. In the long term, we see significant tailwinds driven by reshoring and nearshoring manufacturing operations, trends which will benefit our existing portfolio and play to our proven expertise underwriting middle market credit. Moving on to a few company and portfolio-specific highlights for the second quarter. During the quarter, we increased our industrial concentration as a percentage of annualized straight line rent from 60% to 62% and decreased our office from 36% to 34%.
Bus Cooper: In the near term, we see industrial vacancy rates peaking as new developments have slowed for the last several quarters. According to industrial product under construction for Q2, dropped to 291.9 million square feet. The first time under construction product has been below 300 million square feet since Q2 2019. In the long term, we see significant tailwinds driven by reshoring and near-shoring manufacturing operations, trends which will benefit our existing portfolio and play to our proven expertise underwriting middle market credits.
Speaker Change: Two 291 9 million square feet. The first time under construction product has been below 300 million square feet since Q2 2019.
Speaker Change: And the long term, we see significant tailwind driven by re shoring and near shoring manufacturing operations trends, which will benefit our existing portfolio and play to our proven expertise underwriting middle market credits.
Bus Cooper: Moving on to a few company portfolios specific highlights for the second quarter. During the quarter, we increased our industrial concentration as a percentage of industrialized straight line rent from 60 percent to 62 percent and decreased off as from 36 percent to 34 percent. We successfully leased and marked a market nearly one million square feet until Pennsylvania. We acquired an industrial asset in southern Pennsylvania for 11.7 million with a weighted gap cap rate of 12.3 percent. We successfully sold our 29,000 square foot office asset in Egg Harbor, New Jersey. Through the second quarter, our portfolio management team has released or renewed nearly 2.4 million square feet across five assets for an aggregate 3.6 million straight line rent plus up.
Buzz Cooper: We successfully leased and marked to market nearly 1 million square feet in Taylor, Pennsylvania. We acquired an industrial asset in Southern Pennsylvania for $11.7 million with a weighted gap cap rate of 12.3%. Through the remainder of 2024, we have just 6,600 square feet of expiring leases. And, in addition, we should close on a sale of two medical office building properties located in Georgia that we have held for sale. As of June 30th, we had two medical offices, as I just referenced, that are held for sale.
Speaker Change: Moving onto a few company and portfolio specific highlights for the second quarter during the quarter, we increased our industrial concentration as a percentage of annualized straight line rent from 60% to 62% and decreased office from 36% to 34%.
Speaker Change: We successfully leased in mark to market, nearly 1 million square feet and Taylor, Pennsylvania.
Speaker Change: We inquired in industrial asset in southern Pennsylvania for $11 7 million with a weighted GAAP cap rate of 12, 3% we.
Speaker Change: We successfully sold our 29000 square foot office asset in egg Harbor, New Jersey.
Speaker Change: Through the second quarter, our portfolio management team has re leased or renewed nearly two 4 million square feet across five assets for an aggregate $3 6 million straight line rent plus up through.
Bus Cooper: Through the remainder of 2024, we have just 6,600 square feet of expiring leases. We collected 100 percent of cash-based rents, and portfolio occupancy increased at 98.5 percent. Subsequent to the end of the quarter, we also renewed a lease on 72,000 square feet of office lease in Columbus, Ohio, to the end of the year 2030. And in addition, we should close shortly on a sale of two medical office building properties located in Georgia that we have held for sale.
Speaker Change: Through the remainder of 2024, we have just 6600 square feet of expiring leases.
Speaker Change: We collected 100% of cash base rents and portfolio occupancy increased to 98 five.
Speaker Change: <unk> subs.
Speaker Change: Subsequent to the end of the quarter. We also renewed a lease on 72000 square feet of office lease in Columbus, Ohio to the end of the year 2030.
Speaker Change: And in addition.
Speaker Change: Should close shortly on a sale of two medical office building properties located in Georgia that we have held for sale.
Bus Cooper: Lastly, we raised an additional 21.6 million in net proceeds from the sale of approximately 1.5 million shares of common stock, and 100,000 in net proceeds from the sale of 3,200 shares of Series F's preferred stock.
Speaker Change: Lastly, we raised an additional $21 6 million in net proceeds from the sale of approximately one 5 million shares of common stock and 100000 of net proceeds from the sale of 3200 shares of series F preferred stock.
Bus Cooper: Before turning the call over to Gary, I will highlight our plans and goals for the next 12 months. We will continue growing our industrial concentration as capital markets open up and we dispose of non-core office assets. We plan to increase this concentration above 70 percent of industrialized straight line rent in the next 6 to 12 months. and we currently have one opportunity under contract for 10 million, scheduled to close in the third quarter. We will continue disposing of non-core office assets. As of June 30th, we had two medical offices, a just reference that are held for sale, and we will use the proceeds from these sales and our existing cash flow to redeploy into industrial assets.
Speaker Change: Before turning the call over to Gary I'll highlight our plans and goals for the next 12 months.
We will continue growing our industrial concentration as capital markets open up and we dispose of non core office assets. We plan to increase this concentration above 70% of annualized straight line rent in the next six to 12 months.
Gary: And we currently have one opportunity under contract for 10 million scheduled to close in the third quarter. We will continue disposing of non core office assets.
Gary: As of June 30, we had two medical offices I just referenced that are held for sale and we will use the proceeds from these sales and our existing cash flow to redeploy into industrial assets.
Buzz Cooper: And we will use the proceeds from these sales and our existing cash flow to redeploy into industrial assets. We will leverage our proprietary in-house credit underwriting. Again, the sale e-spec is a hallmark of our value proposition.
Bus Cooper: We will leverage our proprietary in-house credit underwriting expertise to capitalize on sale-leaseback opportunities. Again, the sale leaseback is a hallmark of our value proposition. We will keep a healthy and flexible balance sheet. As of June 30th, we have liquidity of 52.5 in, including 42.1 million of availability under our credit facility and 10.4 million in cash. We remain below 50% levered as of June 30th, 2020-4. Successfully completing these goals will better position us for our next stage of growth, including obtaining, rating, and private placements, and expanding our industrial portfolio in new and existing markets.
Gary: We will leverage our proprietary in house credit underwriting.
Gary: Expertise to capitalize on sale leaseback opportunities again, the sale leaseback is a hallmark of our value proposition.
Gary: We will keep a healthy and flexible balance sheet as of June 30, we had liquidity of $52 5 million, including $42 1 million of availability under our credit facility.
Gary: And $10 4 million in cash we remain below 50% Levered as of June 32024.
Gary: Successfully completing these goals will better position us for our next stage of growth, including obtaining.
Gary: Rating and private placements and expanding our industrial portfolio in new and existing markets.
Gary Gerson: I will now turn the call over to Gary Gerson, our CFO, to review our financial results for the quarter and liquidity position. Thank you, Buzz. I will start my remarks regarding our financial results this morning by reviewing our operating results for the second quarter of 2024. All per share numbers referenced are based on fully diluted weighted average common shares. FFO and core FFO per share available to common stockholders were both 36 cents per share for the quarter. FFO and core FFO for the six months to June 30th were 69 cents and 70 cents per share, respectively.
Buzz Cooper: I'll start my remarks regarding our financial results this morning by reviewing our operating results for the second quarter of 2025. All per share numbers referenced are based on fully diluted weighted average common shares. FFO and core FFO per share available to common stockholders were both 36 cents per share for the quarter. FFO and core FFO available to common stockholders during the second quarter of 2023 were both $0.41 per share. FFO and Core FFO for the six months ended June 30 were $0.69 and $0.70 per share, respectively.
Buzz Cooper: FFO and Core FFO for the same period in 2023 were $0.77 and $0.78 per share, respectively. As of today, we have no 2024 loan maturities, and our 2025 loan maturities are manageable at $25.5 million. As of the end of the quarter, we had $81.2 million of revolver borrowings outstanding.
Gary Gerson: FFO and core FFO for the same period in 2023 were 77 and 78 cents per share, respectively. Over this, our same store cash rent in the two quarters of 2024, first two quarters of 2024, decreased by 2.9% over the same period in 2023. This was due to accelerated lease termination in 2023. Our second quarter results reflected total operating revenues of $37.1 million with operating expenses of $26 million, as compared to operating revenues of $38.7 million and operating expenses of $33.7 million for the same period in 2023. Expenses were higher in 2023, period, mainly due to impairment charges offset by a waiver of the incentive fee.
Gary Gerson: Looking at our debt profile, 37% is fixed rate, 51% is hedged floating rate, and 12% is floating rate, which is the amount drawn on a revolving credit facility and one mortgage note. As of June 30, our effective average sofa is 5.33%. Our outstanding bank term loans are hedged with $310 million of interest rate swaps and the remainder with interest rate caps. We continue to monitor interest rates closely and update our hedging strategy accordingly. As of today, we have no 2024 loan maturities, and our 2025 loan maturities are manageable at $25.5 million. As of the end of the quarter, we had $81.2 million of revolver borrowing savings.
Gary: $10 million of interest interest rate swaps and the remainder with interest rate caps, we continue monitoring to monitor interest rates closely and update our hedging strategies accordingly.
Gary: As of today, we have no 2024 loan maturities and our 2025 loan maturities are manageable at $25 $5 million as of the end of the quarter, we had $81 $2 million of revolver borrowings outstanding.
Gary Gerson: standing. During the six months ended June 30, 2024, we sold 756,214 shares of common stock under our ATM program, raising net proceeds of $10.6 million. We also received net proceeds of $600,000 from sales of our series of preferred stock through June 30. We continue to manage our equity activity to ensure that we have sufficient liquidity for up-coming capital reforms and new acquisitions. For present, we have two properties held today. As of today, we have approximately $4 million in cash and $60.3 million of availability under our credit facility. We encourage you to also review our quarterly financial supplement posted on our website, which provides more detailed financial and portfolio information for the quarter.
Gary: During the six months ended June 32024, we sold 756214 shares of common stock under our ATM program raising net proceeds of $10 6 million. We also received net proceeds of $600000 from sales of our series F.
Gary: Preferred stock through June 30, we continue to manage our equity activity to ensure that we have sufficient liquidity for upfront capital requirements and new acquisitions.
President: President we had two properties held.
Speaker Change: As of today, we have approximately $4 million in cash and $63 million of availability under our credit facility. We encourage you to also review our quarterly financial supplement posted on our website, which provides more detailed financial and portfolio information for the quarter. Our common stock dividend is <unk> 30 per share per quarter or $1 20.
Gary Gerson: Our common stock dividend is 30 cents per share of a quarter, or $1.20 per year. Our common stock closed yesterday at $14.36, and our distribution yield on the stock is 8.36%.
Speaker Change: Per year, our common stock closed yesterday at $14 36 and our.
Dave: Abuse and yield on the stock is 836% and now I will turn the program back to Dave.
David Gladstone: And now, I'll turn the program back today. Oh, thank you. That was a good report, Gary, and good ones from Buzz and Michael, too. I think the team has performed very, very well. Overall, very nice quarter. We've got to keep it up. So we've got to do this again next quarter.
David Gladstone: If you heard today and summary during the second quarter, we acquired one industrial facility and we saw one non-core property. We also renewed leases on five of our properties. So we're doing great there. Commercial team is growing. Real estate and it's a good part of the team is doing a great job. Managing the properties we are especially in all of our areas that we're in. Our team of strong professionals continues to pursue the potential quality properties that we're looking for and the acquisitions that they are reviewing. Got a good backlog of strong persons in this skilled analysis of these businesses.
Buzz Cooper: To be heard today in summary, during the second quarter, we acquired one industrial facility, and we sold one non-core property.
David Gladstone: We underwrite the businesses if we were lending them money because, in reality, we're letting them rent our real estate.
David Gladstone: Okay, operator, let's stop here and have the operator come in and help us with the listeners. They want to ask us some questions. So give us all the questions, please. Thank you.
Operator: We will now be conducting a question and answer the session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please. Well, we pull for questions.
Gaurav Mehta: Our first question comes from Gorov Metav from Alliance Global Partners.
Gaurav Mehta: Please proceed. Thank you. Good morning. I wanted to ask from the transaction market.
Bus Cooper: I wanted to get some more color on your acquisition pipeline and what's the difference between the transaction and the market? Thank you, Gorov. As I mentioned, we do have one transaction that will close. It is a North of 10 cap. Average cap. We have also put out two L.O.I.s, of which they also were above 10 on a straight line basis on the cap. And we've had some 20 or so under review. Obviously, we're not going to bid them all, but the pipeline we believe will pick up here toward the end of the year as we believe credit will become more available as interest rates drop.
Speaker Change: <unk> also put out two LOI of which they also were above 10 on a straight line basis on the cap and we have some 20 or so under review, obviously, we're not going to bid them all but the pipeline. We believe we will pick up here towards the end of the year as.
Speaker Change: We believe credit will become more available as interest rates dropped.
Gaurav Mehta: And definitely see a pick up going into 25. I'm sure, as you're aware, in the marketplace, everyone is reference day. Slow down if you will as it relates to the first half of the year, but we're hopeful of a pick up here going forward. Okay, thank you.
Speaker Change: And definitely see a pickup going into 25 I'm sure as you're aware.
Speaker Change: In the marketplace, everyone has referenced a slowdown if you will as it relates to the first half of the year, but we're hopeful of a pick up here going forward.
Speaker Change: Okay. Thank you second question I wanted to ask was incentive fee waiver.
Gaurav Mehta: The second question I wanted to ask was, do you expect incentive to be able to continue for the next few quarters? Hey, Gaurav, thanks for the question. You know, we waived the incentive fee for the entire year 2023, and we've begun a partial payment beginning Q1 of this year. And so far we've credited back 44% of the incentive fee. I mean, we intend to, you know, in consultation with the board, take consideration of both our shareholders and our stakeholders and, you know, decide how much we're going to be paying. But the intent is to pay at a reduced rate to ensure both that, you know, we're rewarding our people, but also that, you know, we're giving back to the shareholders.
Speaker Change: Do you expect incentive fees to continue for next few quarters.
Speaker Change: Hey, Thanks for the question.
Speaker Change: We waived the incentive fee for the entire year 2023, and we began a partial payment beginning Q1 of this year and so far we've credited back 44% of the incentive fee.
We intend to in consultation with our board.
Speaker Change: Take consideration of both our shareholders and our stakeholders and decide how much we're going to be paying but the intent is to pay at a reduced rate to ensure both that.
Gaurav Mehta: Okay, thank you. That's all I had.
Operator: Thank you. Operator, any other questions?
Rob Stevenson: Our next question comes from Rob Stevenson from Jenny. Please proceed. Good morning.
Rob Stevenson: Gary, in the release, there's a line about the core FFO increase primarily due to the accelerated rent related to a termination fee on a property sold during the quarter.
Gary Gerson: Is that the 2.6 million dollar property was sold in the second quarter? Yeah, that was the, yes, that was the harbor property.
Rob Stevenson: Okay.
Gary Gerson: And then what was how big was that termination fee? I didn't see that. It was about $570,000. Okay, that's helpful. Thank you.
Rob Stevenson: And then there's a footnote about two properties classified as health for sale for 9.3 million in 26,000 and change square feet.
Gary Gerson: Those are the medical office sales in Georgia that you alluded to? Correct, sir. Okay, perfect.
Rob Stevenson: And then I guess the other question for me winds up being, you know, how aggressive should we expect you guys to be in the back half of the year on dispositions if and when rates come down? Is there a bunch of pent-up demand from 1031 buyers and other people who might be interested in your office assets and maybe some of the industrial assets that you don't want to own longer term? Is that sort of, you know, needs to be matched with acquisitions?
Bus Cooper: How should we be thinking about the dispositions? Obviously, we're going to recycle that capital into new deals, and yes, we hope to be aggressively doing that as it relates to sales. The team has done a great job, obviously, in the past year with over a total of nine office buildings sold since last July. We will continue that. However, we've only got a vacancy factor within that office portfolio of 6.4%, and as I referenced, with only one small vacancy here to the end of the year. We will be aggressive in looking to sell them. We'll be opportunistic, and we are hopeful of what pickup as rates do come down.
Buzz Cooper: Obviously, we're going to recycle that capital into new deals, and yes, we hope to be aggressively doing that. As it relates to sales, the team has done a great job in the past year with a total of nine office buildings sold since last July. We will continue that. However, we've only got a vacancy factor within that office portfolio of 6.4 percent, and as I referenced, with only one small vacancy here until the end of the year. We will be aggressive in looking to sell them, we'll be opportunistic, and we are hopeful of a pickup as rates do come down.
Rob Stevenson: Okay, and then last one for me, you indicated that you had one credit, one tenant where you were seeing, you know, credit deteriorate.
Bus Cooper: Is that an office or an industrial tenant, and is that likely to need to be retenanted or the assets sold? How are you guys thinking about that as the tenant sort of slides down the credit spectrum? Yes, it was a small industrial box for distribution of retail product. We anticipated being sold an effective traded paper on it currently. It represented less than 1% of straight line rent, but we do anticipate that being off our books here relatively shortly.
Speaker Change: On it currently.
Speaker Change: It represented less than 1% of straight line rent.
Speaker Change: But we do anticipate that being off our books here relatively shortly.
Rob Stevenson: Okay, that's helpful.
Rob Stevenson: Thanks, guys.
Speaker Change: Okay. That's helpful. Thanks, guys have a great day.
Rob Stevenson: Have a great day. Thank you. Thanks, Rob.
Speaker Change: Thanks, Rob operator, do we have anybody else wants to ask a question.
Operator: Thank you. Thanks, Rob. Operator, do we have anybody else who wants to ask a question?
Operator: Operator, do we have anybody else who wants to ask a question? We do.
Dave Storms: Our next question comes from Dave Storms from Stonegate. Please proceed. More, then. Appreciate it. More questions.
Speaker Change: Thank you. Our next question comes from David storms from Stonegate. Please proceed.
Robert Stevenson: Thank you for taking the time this morning. I appreciate you taking the time to answer questions. Just, as you continue divesting from non-core assets, is there any sort of profile of office assets that you would consider renewing?
David Storms: Loren and I appreciate you taking questions.
Bus Cooper: Just as you continue divesting from non-core assets, is there any sort of profile of office assets that you would consider renewing? We certainly would renew any that we can and have done so. And as a result, we've got longer term that allows us to garner the income and the rent off of those properties as we hope that the marketplace for office especially improves to then allow us, too, to continue opportunistically sell some of those assets. Certainly have one or two in Florida that are a great example, but we're not ready to dispose of them at this point in time.
David Storms: Just as you continue divesting from non core assets.
David Storms: Or any sort of profile of office assets that you would consider renewing.
Buzz Cooper: We certainly would renew any that we can and have done so, and as a result, we've got longer terms that allow us to garner the income and the rent off of those properties as we hope that the marketplace for office space, especially improves to then allow us, too, to continue to opportunistically sell some of those assets. We certainly have one or two in Florida that are a great example, but we're not ready to dispose of them at this point in time.
Speaker Change: We certainly would renew any of that we can and have done so and as a result, we've got longer term that allows us.
Speaker Change: To garner the income and the rent off of those properties as we hope that the marketplace for office, especially improves to then allow us to to continue opportunistically sell some of those assets certainly have one or two in Florida that are a great example, but we're not ready to dispose of them at this point in time, but we would certainly entertain any or.
Dave Storms: But we would certainly entertain any offers, but we are looking to extend, as I referenced the office property in Cincinnati, and then certainly we're going to have discussions internally on moving that asset off the book. So we're going to look to be opportunistic as relates to dispositions of those. Understood. That's very helpful.
Buzz Cooper: But we would certainly entertain any offers, but we are looking to extend, as I referenced, the office property in Cincinnati, and then certainly we're going to have discussions internally on moving that asset off the books. So we're going to look to be opportunistic as relates to dispositions of those assets.
Dave Storms: And then just turn into the macro. You mentioned great cuts that are expected later this year, but also with the recent economic data, we had unemployment kick up a hair. Does that change any of your thought process with regards to underwriting, or is it still very, you know, tenant by tenant basis? Our underwriting is not going to change as it relates to the credit profile. Obviously, we've shown that over the years with both our occupancy and default rates and so forth, that underwriting of our tenant is our value add.
Bus Cooper: And as a result, we're going to stick to those disciplines, but as we do see and believe we will see interest rate cuts, that should allow us to go after, for lack of better word, more product. Understood.
Dave Storms: Thank you for taking my questions. Thank you. Good luck. Thank you.
Operator: Do we have one more question? Yes.
Operator: Yes, our next question comes from John Massocca from B Riley Securities. Please proceed.
John Massocca: Our next question comes from John Mesa Oco from Be Riley Securities. Please proceed. Good morning.
John Massocca: I was wondering if you could give a little more color, maybe on the leasing activity in the quarter, just given the size of it. Was there any kind of TI's or significant kind of concessions involved in that lease up? And then maybe how much of that leasing was dealing with lease maturities that happened in the quarter and how much is just, you know, marked a marketing stuff that's maybe a little bit, you know, that was going to be true later in the timeframe. Certainly, there are leasing commissions and TI's, not on all of the transactions that have been done in the...
Bus Cooper: past quarter, but certainly are very successful lease up in Taylor, Pennsylvania, had with it TI as well as leasing commission, but from the standpoint of the plus-up that resulted in that of approximately 95% rent. Obviously, you have to do it, should do it, but you got to pay the piper as well, but we feel very confident of that. So the majority of our assets that we do have leasing commissions, and the team is working hard to keep the TI dollars down, and if we have to do that in reference to what the tenant needs and to the building improvements, but we are not throwing dollars out there just to get it the least done.
Bus Cooper: They've got to be, for lack of a word, improvements to the building, so they are associated; but we've done a great job keeping those down in these recent renewals.
John Massocca: Okay, then maybe kind of just broad strokes down the Taylor specifically, but what are you kind of seeing in terms of the TI-D to close new leases with industrial versus maybe some of the office leasing I've done in past quarters? If you would explain that to me a little bit, what you're looking for, would it be like a ti per square foot? I mean, how is that kind of trending?
Bus Cooper: I mean, maybe how is that in the industrial space today versus what you were seeing with new leases or lease up in that space 12 months ago, and then maybe also with just office. I know obviously it's not as relevant to the current quarter, but I'm just intrigued how that's all trending. Sure, and obviously office is more expensive, which is obviously why we move toward industrial as it relates to cost of reteniting the properties. We are fact seeing a decrease in the demands for office as it relates to the concessions, so that's a good item.
Buzz Cooper: Sure, and obviously, office space is more expensive, which is obviously why we moved toward industrial as it relates to the cost of re-tenanting the properties. We are, in fact, seeing a decrease in the demand for office space as it relates to concessions, so that's a good item. On the industrial side, it's basically remained the same from what we saw two or three years ago, although vacancy rates are down a little bit. Rental rates have remained steady as well as increased, but TI dollars have not jumped as a percentage of what is needed in order to keep the tenant.
John Massocca: I'm sure.
Bus Cooper: On the industrial side, it's basically remained the same from what we saw two or three years ago. Vacancy rates are down a little bit. Rental rates have remained steady, as well as up, but the ti dollars have not jumped as a percentage of what is needed in order to keep the tenant.
Speaker Change: Rental rates have remained steady as well as up but the ti dollars have not jumped as a percentage.
Speaker Change: What is needed in order to keep the tenant.
Bus Cooper: Okay, and then maybe just in terms of leasing, you know, what is the kind of office leasing environment look like today, both kind of broadly and maybe just specifically with Austin, just given the size of that one Austin office asset. Of course, Austin is always top of mind for us, and we've made some progress there as it relates to activity. We've had four tours here in the last six weeks. We've seen an uptick in the overall office market for Austin. Subway spaces come down as the tech world seems to be stabilizing itself. And on the deals that we're seeing there, the ask on the TI side is also down for office.
Buzz Cooper: Okay, and then maybe just in terms of leasing, you know, what does the kind of office leasing environment look like today, both kind of broadly and maybe just specifically with Austin, just given the size of that one Austin office asset? Of course, Austin is always...
Speaker Change: Sure. Okay, and then maybe just in terms of leasing what is the kind of office leasing environment looks like today, both kind of broadly and maybe specifically with <unk>.
Austin: Austin, just given the size of that one Austin office asset.
Buzz Cooper: Of course, Austin is always top of mind for us, and we've made some progress there as it relates to activity. We've had four tours here in the last six weeks, and we've seen an uptick in the overall office market in Austin. Sub-lease spaces are coming down as the tech world seems to be stabilizing itself. And on the deals that we're seeing there, the ask on the TI side is also down for office space. So we are hopeful of getting something there in the not-too-distant future, but certainly by year-end.
Austin: Of course, Austin is always top of mind for us and we've made.
Austin: Some some progress there as it relates to <unk>.
Activity, we've had four tours here in the last six weeks.
Austin: <unk>.
Austin: We've seen a uptick in the overall office market for Austin Sublease space has come down.
Austin: As the tech world seems to be stabilizing itself.
Austin: And on the deals that we're seeing there the ask on the Ti side is also down.
Bus Cooper: So we are hopeful of getting something there in the not too distant future, but certainly by year end.
Austin: For office so.
Austin: We are hopeful of getting something there.
Speaker Change: In the not too distant future, but certainly by year end and overall of course, it will depend what markets Youre looking at again, Florida has been a very good market for us and not as expensive as one might think.
Buzz Cooper: And overall, of course, it would depend on what market you're looking at. Again, Florida has been a very good market for us and not as expensive as one might think. We don't have any CBD, so that is not a problem for us from the standpoint of cost to keep. But we're going to do what we have to do to retain customers, just as we did in the office building in Cincinnati, Ohio. But it was not an expensive transaction as compared to TI cash dollars.
Bus Cooper: And overall, of course, it would depend what market you're looking at. Again, Florida has been a very good market for us and not as expensive as one might think. We don't have any CBD, so that is not a problem for us from the standpoint of cost to keep, but we're going to do it. We have to do it to retain just as we did in office building in Cincinnati, Ohio, but it was not an expensive transaction as it relates to TI cash.
John Massocca: John, you got any more questions? I don't believe that he has any more questions; that does look like he has disconnected.
Operator: John, do you have any more questions? Operators.
Operator: I don't believe that he has any more questions. It does look like he has disconnected. This does conclude our question and answer session. I would like to turn the floor back over to David Gladstone for closing comments. Well, we thank you for joining us this evening, and we look forward to seeing you next time.
Operator: This does conclude our question-and-answer session.
David Gladstone: I would like to turn the floor back over to David Gladstone for closing comments. Well, we thank you all for calling in and asking some good questions. That was fun to do, and we look forward to next quarter, so we'll see you next quarter.
David Gladstone: Well, we thank you all for calling in and asking some good questions. That was fun to do, and we look forward to next quarter, so we'll see you next quarter. That's the end of this call.
Operator: That's the end of this call.
Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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