Gladstone Commercial Corporation

Hello, this is David Gladstone and we don't have an introduction because they're having some kind of fire at the place that's handling this, but Sydney was on and she's very good at giving introductions and we always enjoy this time that we have with you guys and wish there were more times to talk like this. We're going to start out with Michael LiCalsi, our General Counsel and Secretary to give the legal and regulatory matters concerning this call. Michael.

Thanks, David, and good morning. 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. These forward-looking statements involve certain risks and uncertainties that are based on our current plans, which we believe to be reasonable. Many factors may cause our actual results to be materially different For any future results expressed or implied by these forward-looking statements, including all risk factors, you can find in our forms 10Q, 10K, and other documents that we file with the SEC. Those can be found on our website, specifically the Investor Relations page, www.gladstonecommercial.com, or any 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. And today we will 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 adjusts FFO for certain other non-recurring revenues and expenses. We believe this is a better indication of our operating results and allows better comparability of our period-over-period performance. Please take the opportunity to visit our website, once again, gladstonecommercial.com, sign up for our email notification service. It can also be found on Facebook at keyword the Gladstone Companies and on Twitter. The handle there is at Gladstone Comps. Today's call is simply an overview of our results, so we ask that you review our press release in Form 10-Q, both of which were issued yesterday for more detailed information. Again, you can find those on the Investor Relations page of our website. With that, I'll hand the presentation back over to Gladstone Commercial's president, Bob Cutlett.

Bob? Thanks, Michael, and good morning, everyone. During the second quarter, we acquired a two-building, 383,000-square-foot industrial portfolio in Ocala, Florida, acquired a 54,400-square-foot industrial property in Columbus, Ohio, acquired a 676,000-square-foot industrial property in Tifton, Georgia, executed a lease amendment to expand our anchored tenant in an Indianapolis office property resulting in a fully leased building, executed both a lease amendment with our existing tenant and a new lease in Salt Lake City, increasing the occupancy of the office property to 100%, held 16 meetings at REIT Week with investors, coverage analysts, and lenders, refinanced $21.5 million in mortgage debt, and approached our long-term leverage target with our book leverage totaling 45.6%. Subsequent to the end of the quarter, we acquired a 78,500 square foot industrial property in Denton, Texas, recast the company's line of credit and term loan, and entered due diligence for the acquisition of a 211,000 square foot industrial property in Temple, Texas. As these activities reflect, our team had a very busy second quarter. As noted on our first quarter call, we're beginning to enjoy the benefits of our team's focused efforts across all functions to improve operating results. This has been accomplished through three major activities. Number one, we acquired accretive assets. During the period from 2012 through 2018, the average gap cap rate on acquisitions of approximately $105 million per year was 8.7%, with mortgage debt placed at a 4.6% interest rate. Number two, we renewed expiring leases and we re-leased vacant space. We maintained occupancy greater than 96% during the highest Lease expiration period in company history And number three, we refinanced maturing mortgages at lower leverage levels We've lowered our leverage from a high of 63% in 2013 to 45.6% as of the end of the second quarter The results of these efforts equate to increasing cash flow year after year and an improved capital structure as we approach $1 billion in total assets and the outcome of the recent recast of our line of credit and term loan, inclusive of adding additional syndicate partners, further demonstrates the improvement in our operating position, which we believe will create opportunities for growth. Mike is going to expand upon the characteristics of this recast shortly. Our investment and asset management activities continue to generate positive momentum for our operations during the quarter. We acquired a 383,000 square foot two building industrial portfolio along the I-75 corridor in Ocala, Florida. The transaction is a 20-year sale leaseback. The acquisition price was $19.1 million and the going in and gap cap rates are 7 and 7.7% respectively. We also acquired a 54,400 square foot industrial property in Columbus, Ohio. The acquisition price was $3.1 million. The going in and gap cap rates are 7.5 and 7.9% respectively. and the remaining lease term is seven years. The size of the land parcel enables us to nearly double the size of the building, offering long-term flexibility for our tenant. We concluded the quarter by acquiring a 676,000 square foot industrial property in Tifton, Georgia. The acquisition price was $17.7 million and the going in and gap cap rates are 8.5 and 8.9% respectively. The remaining lease term, 8.5 years. The tenant chose this location along the I-75 corridor due to its proximity to the Port of Jacksonville where it imports inventory and exports product to international customers. In addition, the tenant was able to get the property designated as a foreign trade zone to gain beneficial tax treatment of its operations and streamline the customs process. All of these characteristics serve to solidify their commitment to the property. Subsequent to quarter end, We acquired a 78,500 square foot industrial building in Denton, Texas. The acquisition price was $6.5 million and the going in and gap cap rates are 6.4% and 7.1% respectively. There are 12 years remaining on the existing lease and we did just close this property yesterday. We have also entered due diligence for a 211,000 square foot industrial property along the I-35 corridor north of Austin, Texas. This transaction is expected to be structured as a 20-year sale lease back. Our asset management team continued to deliver on renewal and releasing efforts, with our Midwest team expanding the anchor tenant in an Indianapolis office property by 9,000 square feet to increase their position to 89% of the 87,000 square foot building. The tenant also extended their entire lease through 2031. This transaction also brought the total occupancy in the building to 100%. This success reinforces the viability of our anchored multi-tenant strategy that we initiated five years ago. Our Mountain West team leased 24,000 square feet in a Salt Lake City office property increasing the occupancy to 100%. The existing tenant expanded by 17,000 square feet and the balance of the space was leased to a third party. Tenant improvement costs for the entire 24,000 square feet totaled just $3 per square foot. Anticipating that many on the call are interested in lease expirations through 2020, I wanted to offer the team's thoughts for your information. During the remainder of 2019, we have three leases expiring representing $2.4 million of annual gap rent. $2.1 million of this total expires on December 31st. One tenant has formally notified us that they are vacating at the end of the year, and we are actively marketing the space and have prospects at the property. Thank you for joining us. With a lease expiration date of August 31, 2020, we are pursuing two separate scenarios. They renew their lease or they vacate all or a portion of the space. They are not required to provide notice to us until December of this year. Therefore, we have begun to actively plan a release scenario by preparing space design concepts for a multi-tenant or full building user and are engaging the market to identify potential tenant prospects, and to validate current market rents and tenant improvement requirements. This information is going to be helpful for either renewal negotiations or a new lease scenario. I think it's interesting to note that our gap rent at the property of $14.50 per square foot compares favorably in the sub-market with current space offerings in the low to mid $20 per square foot on a triple net basis. As it relates to growth opportunities in our strategy, we have noted an increase in activity in sales listings as of late. Our current pipeline of acquisition candidates is approximately $260 million in volume, representing 17 properties, 13 of which are industrial. Of this total, approximately $55 million is either in the letter of intent or due diligence stage, and the balance is under initial review. As noted previously, we have made a conscious effort to increase our industrial allocations. Our focus is in fully developed industrial parks with properties that are 50,000 to 300,000 square foot in size, 24 to 28 foot clear heights in the warehouse, ample trailer parking, and occupied by middle market non-rated tenants. A tenant profile which we believe and our history represents we can underwrite with our proven credit underwriting capabilities. The larger properties are trading well above replacement costs in several markets, and we do not believe that is an appropriate strategy for us. To show evidence of this strategy, from the last week of September through the end of June, just over nine months, we have acquired $95 million of property. 80% of this volume, or $76 million, were industrial properties. And in the second quarter alone, our investment volume was $40 million, all of which are industrial. The properties are located in our target locations and the average gap Thank you for joining us. and is positioning us well to pursue growth opportunities. Now let's turn it over to Mike for a report on the financial results.