Gladstone mercial (US:GOOD)2021-08-10 18:29Financial Data and Key Metrics Changes - FFO adjusted for comparability and core FFO available to common stockholders were $0.36 and $0.37 per share for Q2 2021, compared to $0.40 and $0.41 per share in Q2 2020 [25] - Total operating revenues for Q2 2021 were stable at $33.4 million, with operating expenses of $25 million, compared to $33.5 million and $25.9 million for the same period in 2020 [26] - Same-store cash rent in Q2 grew by 2.8% over Q2 2020, and for the first six months of 2021, it grew by 4% over the same period in 2020 [25] Business Line Data and Key Metrics Changes - The company acquired a 25,200 square foot industrial service facility in Baytown, Texas for $8.1 million and an 80,600 square foot industrial facility in St. Louis, Missouri for $22 million [6][10] - The asset management team extended, expanded, and/or leased 1.27 million square feet covering 12 tenants, with an average weighted lease term of 8.6 years [11] - 100% of cash-based rents were collected during Q2 2021, with July collections at 99% [13] Market Data and Key Metrics Changes - Industrial activity remains strong, with second quarter vacancy rates at 4% to 4.5% and net absorption exceeding 100 million square feet [18] - Office vacancy increased to 16.5%, but negative absorption has improved compared to previous quarters [19] - E-commerce and logistics demand continue to drive the industrial sector, while office rents increased approximately 1% quarter-over-quarter [20] Company Strategy and Development Direction - The company is focusing on increasing its industrial allocation from 49% today to a target of 60% within the next 18 months [9] - The current pipeline of acquisition candidates is approximately $360 million, with a focus on industrial properties [21] - The company is exploring dual strategies for its Austin office property, considering both re-leasing and selling options [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to manage lease expirations, with only 2.9% of leases expiring through year-end 2021 [14] - The team is optimistic about future performance, citing strong tenant performance and a robust acquisition strategy [22] - Management noted that the operating environment remains challenging but emphasized the team's capability to navigate these conditions [38] Other Important Information - The company issued $100 million of Series G preferred stock, primarily to redeem Series D preferred stock, reducing total dividend expenses and providing additional investable capital [28] - Institutional ownership of the stock has increased to 54.3% as of June 30, a 7% increase over the last five years [33] Q&A Session Summary Question: Can you talk about the sequential revenue drop and its causes? - Management indicated that the drop was due to accelerated rents from Q1 not carrying into Q2 and increased G&A costs in Q2 compared to Q1 [41][42] Question: What is the status of the 310 million square feet of vacant space leased? - The free rent period for the leases does not start until November [43] Question: What was the spread on the rents for the renewals since the end of Q1? - Renewals represented about $6.3 million of straight-line rent, which increased by approximately 8.5% [44] Question: Has the investment expectation for 2021 changed? - Management expects to remain above $110 million in investments, with increased market activity [50] Question: What is the current cap rate environment for smaller assets? - Cap rates in secondary markets are in the mid- to high 5s, while gateway markets are lower [51] Question: What is the confidence level for potential transactions in the Austin market? - Increased interest in property tours and buyer inquiries has led to confidence in potential transactions by the end of Q3 [53]