Gladstone Commercial Q4 2024 Earnings Report

Gladstone Commercial EPS Results

• Actual EPS: $0.35
• Consensus EPS: $0.11
• Beat/Miss: Beat by +$0.24
• One Year Ago EPS: N/A

Gladstone Commercial Revenue Results

• Actual Revenue: $37.38 million
• Expected Revenue: $38.04 million
• Beat/Miss: Missed by -$658.00 thousand
• YoY Revenue Growth: N/A

Gladstone Commercial Announcement Details

• Quarter: Q4 2024
• Date: 2/18/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, February 19, 2025
• Conference Call Time: 8:30AM ET

Gladstone Commercial (NASDAQ:GOOD) is a real estate investment trust focused on acquiring, owning, and operating net leased industrial and office properties across the United States. Including payments through January 2024, Gladstone Commercial has paid 229 consecutive monthly cash distributions on its common stock. Prior to paying distributions on a monthly basis, Gladstone Commercial paid five consecutive quarterly cash distributions. Gladstone Commercial has never skipped or deferred a distribution since its inception in 2003.

Gladstone Commercial Q4 2024 Earnings Call Transcript

Presentation

[Operator]

Greetings. Welcome to Gladstone Commercial Corporation Year End Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded.

[Operator]

It is now my pleasure to introduce Mr. David Gladstone, Chief Executive Officer. Thank you, sir. You may begin.

[David Gladstone, CEO at Gladstone Commercial]

Well, thank you, Sherry. That was a nice introduction and thanks to all of you for calling in this morning. We enjoy the time that we have with you on the phone and wish we had more time to talk to you.

[David Gladstone, CEO at Gladstone Commercial]

Now, we'll hear from Michael Licalsi. He's our General Counsel and Secretary to give you the legal and regulatory matters concerning the call of this report. Michael?

[Michael Licalsi, General Counsel & Secretary at Gladstone Investment]

Thanks, David, 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.

[Michael Licalsi, General Counsel & Secretary at Gladstone Investment]

These forward looking statements involve certain risks and uncertainties that are based on our current plans, which we believe to be reasonable. And 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 Forms 10 Q, 10 K and other documents we file with the SEC, and find them on our website at gladstonecommercial.com.

[Michael Licalsi, General Counsel & Secretary at Gladstone Investment]

Specifically, go to the Investors page

[Michael Licalsi, General Counsel & Secretary at Gladstone Investment]

or you can go to

[Michael Licalsi, General Counsel & Secretary at Gladstone Investment]

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. Today, we will discuss FFO, which is funds from operations. The 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 non recurring revenues and expenses.

[Michael Licalsi, General Counsel & Secretary at Gladstone Investment]

And we believe these metrics are a better indication of our operating results and allow better comparability of our period over period performance. Please visit our website, once again that's gladstonecommercial.com, sign up for our email notification service. You can also find us on Facebook. The keyword there is The Gladstone Companies and Twitter, which is now x, gladstonecomps. Today's call is an overview of our results, so we ask that you review our press release and Form 10 K, both issued yesterday for more detailed information.

[Michael Licalsi, General Counsel & Secretary at Gladstone Investment]

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

[Buzz Cooper, President at Gladstone Commercial]

Thank you, Michael, and thank you all for joining today's call. We look forward to updating you on our quarter and year end results, current portfolio and our 2025 outlook. Focusing first on the broader economic environment. Last month, Donald Trump assumed office, ushering in a new administration, policy goals and economic agenda. Shortly thereafter, the Federal Reserve announced a pause in interest rate cuts after progress toward the 2% long term inflation target stalled.

[Buzz Cooper, President at Gladstone Commercial]

The length of the pause is still to be determined, but in the meantime, U. S. Treasury yields remain volatile. Looking back on 2024, industrial real estate continued to outperform in spite of numerous headwinds, including interest rate volatility, inflation and labor disputes. According to Cushman Wakefield, net absorption totaled 135,000,000 square feet for the year, on par with forecasts.

[Buzz Cooper, President at Gladstone Commercial]

Q4 twenty twenty four industrial vacancy rose by 150 basis points to 6.7. This pace of increase was the slowest in two years, signaling that we may approach peak vacancy in the near future. Finally, new deliveries fell in Q4 twenty twenty four to the lowest level since mid-twenty twenty one, driven by high interest rates and the excess new supply we saw coming online post COVID. While industrial fundamentals held up during the year, we have yet to see capital markets fully return. According to CBRE, for the year end 12/31/2024, single asset investment volume increased by 5.1% year over year to $67,900,000,000 Total commercial rate real estate volume over the same period increased by 6.4%.

[Buzz Cooper, President at Gladstone Commercial]

Moving on to our portfolio, we are once again very confident heading into the new year and quarter. During 2024, we collected 100% of cash base rents, acquired campus properties for $26,800,000 totaling 316,727 square feet, increased portfolio industrial concentration as a percentage of and realized straight line rent to 63% renewed or extended more than 2,900,000 square feet of leases at 11 properties, resulting in a $3,800,000 net increase in GAAP rent. We sold seven properties consisting of five office and two medical office properties. We increased portfolio occupancy to 98.7% as of 12/31/2024. And we closed on a $75,000,000 private placement of senior unsecured notes.

[Buzz Cooper, President at Gladstone Commercial]

While we remain focused on increasing our industrial concentration to at least 70% in the near term, we will not compromise our underwriting standards to achieve this goal. Over the past year, we reviewed and underwrote hundreds of opportunities, many of which did not meet our target criteria. We saw numerous opportunities with credit that showed cracks in the face of rate increases or real estate that was overpriced due to inflation or eager purchasers. We will not loosen our underwriting standards to acquire those assets. And we are confident our disciplined approach will drive long term value as evidenced by the private placement we did close in December.

[Buzz Cooper, President at Gladstone Commercial]

Looking forward to 2025, we firmly believe that we are well positioned to capitalize on the right opportunities regardless of the economic environment. With more than $98,000,000 in availability via our line of credit and cash on hand, we remain well positioned to deploy capital into accretive industrial acquisitions. Several opportunities are currently under exclusivity or contract with closing expected in the coming months. Our portfolio continues to generate sustainable cash flow. We are more than 98% occupied as of December 31, and we have not seen our tenant credit quality deteriorate in the face of higher for longer interest rates.

[Buzz Cooper, President at Gladstone Commercial]

Our portfolio management team has done a superb job over the last year and will continue to slightly dispose of non core office assets. Finally, our balance sheet is further strengthened by the private placement with the potential for follow on offerings in the future. We will continue to be mindful of our overall leverage as we grow our balance sheet and portfolio of mission critical assets. I will now turn the call over to Gary to review our financial results for the quarter and liquidity position. Gary?

[Gary Gerson, CFO & Assistant Treasurer at Gladstone Commercial]

Thank you, Buzz, and good morning, everyone. I'll start my remarks regarding our financial results this morning by reviewing our operating results for the fourth quarter of twenty twenty four. 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 $0.35 per share for the quarter. FFO and core FFO available to common stockholders during the fourth quarter of twenty twenty three were both $0.36 per share.

[Gary Gerson, CFO & Assistant Treasurer at Gladstone Commercial]

FFO and core FFO for the twelve months ended December 31 were $1.41 and $1.42 per share, respectively. FFO and core FFO for the same period in 2023 were $1.46 and $1.47 per share, respectively. Same store rents increased by 5% in the three months ended December 31 over the same period in 2023 due to increased straight line rent rates and recovery revenue associated with one of our properties. Our same store rent for the year ended December 2024 increased by 2.3% over the same time period in 2023 due to an increase in recovery revenue from property operating expenses and a settlement received at one of our properties related to deferred maintenance during the current period, partially offset by accelerated rent attributable to a lease terminated in the prior period. Our fourth quarter results reflected total operating revenues of $37,400,000 with operating expenses of $25,000,000 as compared to operating revenues of $35,900,000 and operating expenses of $28,100,000 for the same period in 2023.

[Gary Gerson, CFO & Assistant Treasurer at Gladstone Commercial]

Operating revenues were higher in 2024 due to increased straight line rental rates and recovered revenue associated with one of our properties. Expenses were higher in 2023 than the 2023 period mainly due to larger impairment charges offset by higher property operating expenses in 2024. Looking at our debt profile, 49% is fixed rate, 50% is hedged floating rate and 1% is floating rate, which is the amount drawn on our revolving credit facility and one mortgage note. As of December 31, our effective average SOFR rate was 4.49%. Our outstanding bank term loans are hedged with $310,000,000 of interest rate swaps and the remainder with interest rate caps.

[Gary Gerson, CFO & Assistant Treasurer at Gladstone Commercial]

We continue to monitor interest rates closely and update our hedging strategy as needed. As of today, our 2025 loan maturities are manageable at $10,400,000 As of the end of the quarter, we had $1,900,000 of revolver borrowings outstanding. Comparing year end 2024 to 2023, we reduced overall leverage from 46.1 of gross assets to 44.1%. We reduced secured net mortgage debt from $283,900,000 to $258,600,000 and reduced total net debt from $726,900,000 to $682,400,000 We issued $75,000,000 of senior unsecured notes in a private placement with institutional investors, entering a new market for raising long term debt capital. And as Buzz mentioned, we've increased our percentage of industrial from 60% to 63% and reduced our office from 36% to 33%.

[Gary Gerson, CFO & Assistant Treasurer at Gladstone Commercial]

During the year ended 12/31/2024, we sold 3,699,597 shares of common stock under our ATM program, raising net proceeds of $53,500,000 We also received net proceeds of $1,100,000 from the sales of our Series F preferred stock through December 31. We continue to manage our equity activity to ensure that we have sufficient liquidity for upcoming capital requirements and new acquisition. At present, we have two properties held for sale. As of today, we have approximately $8,000,000 in cash and $90,000,000 of availability under our line of credit. We encourage you to review our quarterly financial supplement posted on our website, which provides more detailed financial and portfolio information for the quarter.

[Gary Gerson, CFO & Assistant Treasurer at Gladstone Commercial]

Our common stock dividend is $0.3 per share per quarter or $1.2 per year. Our stock closed yesterday at $16.04 with a yield of approximately 7.5. And now I'll return the program back to David.

[David Gladstone, CEO at Gladstone Commercial]

That was a good report, Gary,

[David Gladstone, CEO at Gladstone Commercial]

and

[David Gladstone, CEO at Gladstone Commercial]

a good one from Buzz and Michael too. The team that we've got now is performing very well. Overall, a very nice quarter. You heard today in summary, during the fourth quarter, we acquired an industrial facility in Saint Clair, Missouri. And we spent about $5,200,000 doing that.

[David Gladstone, CEO at Gladstone Commercial]

So we may have some more this month, but that's the one that we did in the last quarter. We sold one non performing core property, so that's gone. And we renewed leases of two of our properties, so we are still in very good shape. The commercial team is growing the real estate that we own at a good pace, and the team is doing a great job managing the partnership the parties that we've done, especially during these challenging times. Our team of strong professionals continues to pursue potential quality properties and the list of acquisitions that we're reviewing continues to grow nicely.

[David Gladstone, CEO at Gladstone Commercial]

The acquisition team is seeking strong credit tenants. A lot of people talk about being location, location, location. We are always into who is the team that's running the business. Okay. Let's stop here.

[David Gladstone, CEO at Gladstone Commercial]

And operator, if you'll come on and help some of our listeners ask a lot of good questions for this time.

[Operator]

Yes, sir. Our first question is from Gaurav Mehta with Alliance Global Partners. Please proceed.

[Gaurav Mehta, Managing Director at Alliance Global Partners]

Yes. Thank you. Good morning.

[Buzz Cooper, President at Gladstone Commercial]

Good morning.

[David Gladstone, CEO at Gladstone Commercial]

Good morning.

[Gaurav Mehta, Managing Director at Alliance Global Partners]

I wanted to ask you on your balance sheet, I was hoping to get some more color on your leverage expectations. I think you said it's 44.1% as of 4Q. And just wanted to hear if that's close to your target number or you expect your leverage to go lower? And then as a follow-up on the balance sheet, also wanted to learn what your expectations were between and unsecured debt mix within your capital structure?

[Gary Gerson, CFO & Assistant Treasurer at Gladstone Commercial]

Well, our goal is to continue to delever, getting down. We're at 44.1. We'd like to get that down further, probably in the lower 40s. And then as far as secured debt, we continue to decrease that as an overall proportion of our debt and an absolute basis. So that's really where we're going with that.

[Gary Gerson, CFO & Assistant Treasurer at Gladstone Commercial]

We want to get build up on the unsecured debt and but overall less debt on the balance sheet.

[Gaurav Mehta, Managing Director at Alliance Global Partners]

Okay.

[Gaurav Mehta, Managing Director at Alliance Global Partners]

That's my

[Gaurav Mehta, Managing Director at Alliance Global Partners]

second question. And then a follow-up on your industrial focus. I think you said 70% in the near term. Do you expect to achieve that 70% this year?

[Buzz Cooper, President at Gladstone Commercial]

Sure. We're very hopeful of that. Obviously, it's going to be in combination of acquisitions as well as dispositions. But I believe that we will as it relates to the percentage relative to straight line rent.

[Gaurav Mehta, Managing Director at Alliance Global Partners]

Okay. Thank you. That's all I had.

[Gary Gerson, CFO & Assistant Treasurer at Gladstone Commercial]

Thank you.

[Buzz Cooper, President at Gladstone Commercial]

Thanks, Rob.

[David Gladstone, CEO at Gladstone Commercial]

Okay. Do we have another question, operator?

[Operator]

Yes. Our next question is from Rob Stevenson with Janney Montgomery Scott. Please proceed.

[Robert Stevenson, Managing Director at Janney Montgomery Scott]

Good morning, guys. Buzz, given your acquisition commentary, can you talk about the market depth today for the office assets that you want to sell over the next twelve to eighteen months? Are the transactions happening? And what the sort of pricing looks like these days relative to six, twelve, eighteen months ago on the office side?

[Buzz Cooper, President at Gladstone Commercial]

Sure. Thanks, Rob. And as you know, we've been very selective on our sales. We are not looking to just sell to sell. We our office portfolio has a vacancy factor of 7%.

[Buzz Cooper, President at Gladstone Commercial]

But as we look to sell, it's going to be opportunistic at this point in time, as well as we want to make sure that we backfill that income that we may be losing with industrial income. So I think we will identify four or five that we will sell here during the year. But if we see something opportunistically on the sales side relative to office, we'll take it. We know it's important to continue to drive down that office portfolio. But again, I would reiterate it is performing.

[Robert Stevenson, Managing Director at Janney Montgomery Scott]

Okay. And where is the 130 basis points of vacancy today? Is that aggregated in one or two assets? And what's the prospects for releasing or selling those in 'twenty five?

[Buzz Cooper, President at Gladstone Commercial]

The majority of the occupancy excuse me, vacancy is in one or two assets, a couple of which that will from expiring rents here, for instance, a property in Carolina that's going to fall off the books at the March at the expiration of that lease. So we won't have that office property to re lease or have to worry about. Majority is one or two assets, but as it relates to our overall concerns over this year, we have two of the properties that make up approximately 3% of those leases that are coming due are scheduled to be sold or have a lease in place that they have an option to purchase. Of the others that we have specific to office, we have turned proposals on two of those buildings and are waiting response to extending the leases.

[Robert Stevenson, Managing Director at Janney Montgomery Scott]

Okay. That's helpful. And then one for you, David. How should we be thinking about the incentive fee waivers going forward? Is 'twenty five likely to look a lot like how you did it in 'twenty four?

[Robert Stevenson, Managing Director at Janney Montgomery Scott]

Is there something that fundamentally flips in 2025 and commercial goes back to paying the entire incentive fee this year? How should we be thinking about that as we play with our models over the next few days?

[David Gladstone, CEO at Gladstone Commercial]

Well, as you can imagine, everybody here would like to go back to the original. And so they're working hard to fill in where they need to fill in, in order to get it back to a stronger payment to the employees here. But you know our position, we don't pay ourselves if we're not doing a good job for our shareholders. It's shareholders first at this company. Rob, I wish I knew the projections well enough to say to you when we'll be back to that.

[David Gladstone, CEO at Gladstone Commercial]

But I don't have a date yet in mind. And I think we're going to be much stronger this year than we were last year. So hopefully, that gives you a feeling of security about what we're doing here. Do you have any more questions?

[Operator]

Yes. Our next question is from John Massocca with B. Riley Securities. Please proceed.

[John Massocca, Senior Research Analyst at B Riley Financial]

Good morning.

[David Gladstone, CEO at Gladstone Commercial]

Good morning.

[Buzz Cooper, President at Gladstone Commercial]

Good morning.

[Gaurav Mehta, Managing Director at Alliance Global Partners]

Good morning, John.

[John Massocca, Senior Research Analyst at B Riley Financial]

Let me starting off with the balance sheet. Given the private placement on security issuance you recently completed, I mean, is that kind of how we should expect funding to go forward? I guess is that pricing kind of the correct pricing at least in the current market in terms of interest rate?

[Gary Gerson, CFO & Assistant Treasurer at Gladstone Commercial]

John, this is Gary.

[Gary Gerson, CFO & Assistant Treasurer at Gladstone Commercial]

I think we should expect that to be not our primary mode of financing. Obviously, we have the line of credit, we have bank term loans. But yes, we intend to continue on with private placements. The market willing that the interest rate we got we felt was pretty strong for a first time issuer. So it might hopefully indicative and hopefully maybe even less in the future.

[John Massocca, Senior Research Analyst at B Riley Financial]

That's helpful. And then on the leasing front, can you just provide a little color on leasing activity in 4Q? I know you gave kind of numbers and metrics, but were those industrial assets, office properties and kind of maybe how did rents trend versus what was in place before renewal or releasing?

[Buzz Cooper, President at Gladstone Commercial]

They were both office and industrial. Majority was industrial. They also were plus ups as relates to industrial but also in the office. The office deals were mostly on five years. We see that trend continuing as we look to renew current

[Buzz Cooper, President at Gladstone Commercial]

office

[Buzz Cooper, President at Gladstone Commercial]

buildings. And then on the industrial side, various pockets around the country. And again, we did see a large one last year up in Pennsylvania. We are seeing a plus up in rents as it relates to those renewals.

[John Massocca, Senior Research Analyst at B Riley Financial]

Okay. And then I know if I talked about it in the last earnings call, but maybe more in the context of 2025, just broad strokes, what's kind of the CapEx expectations, just balancing the relatively small amount of leases expiring in the current year versus maybe some more meaningful lease expirations in 'twenty six and 'twenty seven, just trying to think about how spending there might go in the current year?

[Buzz Cooper, President at Gladstone Commercial]

Obviously, CapEx that we have been spending on renewals is what I'll term positive CapEx for us, both with the retention of the tenancy, but it does bring an increase in rent. So we don't have a lot of expense from a capital exposure point within our buildings. Majority of it is leasing expenses and improvements to the buildings. Of that, we have it budgeted. We are it's very manageable.

[Buzz Cooper, President at Gladstone Commercial]

But again, a majority of it has been and will be here in the certainly next nine months going to be for those dollars that we had to spend in leasing commissions plus up that we had coming out of 2024.

[David Gladstone, CEO at Gladstone Commercial]

Okay. Do we have any other questions today?

[Operator]

Yes, we do. Our next question is from Dave Storms with Stonegate Capital. Please proceed.

[Dave Storms, Director of Equity Research at Stonegate Capital Partners]

Good morning.

[Buzz Cooper, President at Gladstone Commercial]

Good morning, Dave.

[Gary Gerson, CFO & Assistant Treasurer at Gladstone Commercial]

Good

[Gary Gerson, CFO & Assistant Treasurer at Gladstone Commercial]

morning.

[Dave Storms, Director of Equity Research at Stonegate Capital Partners]

Just hoping to maybe get a sense of around the timing for some of the two wholesale assets. Anything you can provide there?

[Buzz Cooper, President at Gladstone Commercial]

As to timing, one is going to be in the April '1 per contract. We don't see a reason for that not to occur. And the other would be in the second quarter. I think early April most likely.

[Dave Storms, Director of Equity Research at Stonegate Capital Partners]

And then just as it relates to the recycling program, is there any sense of what you're seeing in the spreading cap rates between maybe those held for sale assets and what you might have in the acquisition pipeline?

[Buzz Cooper, President at Gladstone Commercial]

Dave, I'm not sure I understand that question unless you're asking the cap rate difference between sale to acquisition?

[Dave Storms, Director of Equity Research at Stonegate Capital Partners]

Yes, essentially.

[Buzz Cooper, President at Gladstone Commercial]

Okay. So obviously, on the acquisition side, we are seeing cap rates that need to play in an area of 7.5% to 8% going in basis. Our sales are probably somewhat a little bit higher than that just because they're office, but not dramatically so because we don't have the pressure to other than within the industry to get office off our books, we can be selective.

[Dave Storms, Director of Equity Research at Stonegate Capital Partners]

Understood. That's very helpful. Thank you. And then just one more for me. Are you seeing any early impacts from some of the rhetoric around tariffs and some of the implementation of those tariffs?

[Buzz Cooper, President at Gladstone Commercial]

Yes. Thank you for that. We've canvassed our tenancy, do not see an immediate impact as it relates to the potential threat of tariffs. Of course, we've got to see where they who and where they hit. But our tenancy currently does not has not expressed any such fear.

[Buzz Cooper, President at Gladstone Commercial]

We are looking for that it may help create more industrial opportunities with reshoring onshore. So we are not currently seeing a great deal of stress as a result. Thank you.

[David Gladstone, CEO at Gladstone Commercial]

Okay.

[David Gladstone, CEO at Gladstone Commercial]

Do we have any other questions today?

[Operator]

Yes. Our final question is from Craig Cootera with Lucid Capital Markets. Please proceed.

[Craig Kucera, MD - Equity Research at Lucid Capital Markets]

Yes. Hi. Good morning, guys. Just following up on some of the discussion on capital recycling. Can you give us a sense broadly of the dollar amount of what you might be acquiring and selling as you're reviewing things?

[Buzz Cooper, President at Gladstone Commercial]

On the acquisition side, I'm hoping that it is a good bit more than what we had in 2024. We're looking forward to getting back to our, what I'll call, what I think is more normal production of $100,000,000 a year. So I'm hopeful for that. I think we have a pretty good pipeline going in. They're not all booked, obviously.

[Buzz Cooper, President at Gladstone Commercial]

And as it relates to dispositions, that will allow us to be more discerning in our dispositions, looking to get rid of some of the office assets that we feel might be problematic down the road as it relates to what people are looking for in the marketplace. We've been, I think, pleasantly surprised with some of our dispositions on the creative activity of the buyers, either turning it into pickle balls, turning it into single family and apartments. And again, just to remind, we don't have properties in CBDs. So as a result, there's some local buyers that find some of our properties attractive to reposition.

[Craig Kucera, MD - Equity Research at Lucid Capital Markets]

Okay, great. You mentioned you had the North Carolina asset. I think it was an office asset expiring at the end of this quarter, which you expected to sell. But for the remaining twenty twenty five expirations, are those office or industrial?

[Buzz Cooper, President at Gladstone Commercial]

One is an industrial that is again under a lease with a purchase option, which we believe will get exercised and two others are office of which we do have and that's approximately 110,000 square feet. We do have exchange paper as it relates to renewals.

[Craig Kucera, MD - Equity Research at Lucid Capital Markets]

Got it. And just one more for me. You did reclass a lease as a sales type this quarter. Is that going to still be a component of the base management's fee calculation?

[Gary Gerson, CFO & Assistant Treasurer at Gladstone Commercial]

Yes, that will be. It's an odd kind of addition to the accounting, this ASC eight forty two. This is the property, the industrial property that Buzz mentioned. And when they entered into the lease in November with our expectation of a sale, we had to, given the guidance, reclassified as a sales type lease. It's kind of an odd deal.

[Gary Gerson, CFO & Assistant Treasurer at Gladstone Commercial]

That's one of the reasons we have that large gain on sale, on our balance, on our income statement. And so but yes, to answer your question, we are accounting for that as part of the base management fee. It's still a piece of real estate on our balance sheet. But even though it's not on our balance sheet as a piece of real estate.

[Craig Kucera, MD - Equity Research at Lucid Capital Markets]

Got it. That's what I figured. I just wanted to double check. Thank you. Thank you.

[Craig Kucera, MD - Equity Research at Lucid Capital Markets]

That's all for me.

[David Gladstone, CEO at Gladstone Commercial]

Okay. Any more questions today?

[Operator]

There are no further questions.

[David Gladstone, CEO at Gladstone Commercial]

Well, that was a little bit better than last quarter in terms of number of questions, but we'd love to have more questions. So next quarter, I hope you guys get all tuned up and ask us lots of questions because we enjoy answering them and I know our audience likes to hear. All right. That's the end of this presentation. And so we'll say goodbye until next quarter.

[Operator]

Thank you. This will conclude today's conference. You may disconnect your lines at this time. And thank you for your

[Operator]

participation.

Participants

Executives

• David Gladstone, CEO
• Buzz Cooper, President
• Gary Gerson, CFO & Assistant Treasurer

Analysts

• Michael Licalsi, General Counsel & Secretary at Gladstone Investment
• Gaurav Mehta, Managing Director at Alliance Global Partners
• Robert Stevenson, Managing Director at Janney Montgomery Scott
• John Massocca, Senior Research Analyst at B Riley Financial
• Dave Storms, Director of Equity Research at Stonegate Capital Partners
• Craig Kucera, MD - Equity Research at Lucid Capital Markets