Good day, ladies and gentlemen. And welcome to the Gladstone Commercial Corporation’s Fourth Quarter and Year ended December 31, 2014 Earnings Call and Webcast. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to David Gladstone. Please begin.

All right. Thank you, Latoya. That was nice introduction and thanks all of you for calling in. We always enjoy this time we have on the phone. We wish there were more times to have these conversations. If you are ever in the Washington D.C. area, come by and visit us, we are located in suburb called McLean, Virginia and you have an open invitation to stop by and see us if you are here. You will see a great team at work. There are about 60 members of the team now, so we are no longer a small management company. We have some people that bring their dogs to work, I would say, if you have puppy or two. Now let’s hear from Michael LiCalsi, he is our General Counsel and Secretary, he also serves as President of our Administrator. Michael?

Good morning, everyone. The report that you are about to hear may include forward-looking statements within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, including statements with regard to the future performance of the company. These forward-looking statements involve certain risks and uncertainties that are based on our current plans, which we believe to be reasonable. There are many factors that may cause our actual results to be materially different from any future results expressed or implied by these forward-looking statements, including the factors listed under the caption Risk Factors of our Forms 10-K and 10-Q we filed with the SEC and they can be found on our website gladstonecommercial.com and on the SEC's website at www.sec.gov. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. And in report today, we also plan to talk about funds from operations, or FFO. 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 from property, plus depreciation and amortization of real estate assets. And the National Association of REITs, or NAREIT, has endorsed FFO as one of the non-accounting standards that we can use in discussion of REITs. Please see our Form 10-K, filed yesterday with the SEC, and our financial statements for a detailed description of FFO. We also plan to discuss core FFO today, which is generally FFO adjusted for property acquisition costs and gains on debt extinguishments. We believe this is a better indication of our operating results of our portfolio and allows comparability of period-over-period performance. And to stay up-to-date, you can signup on our website to get updates by e-mail on the latest news involving Gladstone Commercial and our other publicly-traded funds, you could follow us on Twitter, user name GladstoneComps; and on Facebook, keyword, The Gladstone Companies. You go to our general website to see more information www.gladstone.com. The presentation today is an overview and we ask you to read our press release issued yesterday and also review our Form 10-K, for the quarter ended December 31, 2014. You can find both of those on our website www.gladstonecommercial.com. And now we will begin the presentation today by hearing from our President, Bob Cutlip.

Thanks, Michael. Good morning, everyone. During the fourth quarter, we acquired three properties, issuing new debt on two, and funded the other property with equity, raised $28.7 million of common equity under the ATM program with Cantor Fitzgerald, returned the Roseville, Minnesota property via a deed-in-lieu transaction to our lender, leased one of our vacant properties in Richmond to Xerox affiliate for three-year lease, completed the expansion of our one of our property and extended the lease with the existing tenant through 2034, extended two leases that were set to expire in 2015 and executed a lease for a tenant to occupy a third of our industrial property in Bolingbrook, Illinois. Subsequent to the end of the quarter, we also extended two of our leases that were set to expire in 2015 and one lease that were set to expire in 2016. So as you can see from the statistics our acquisitions, capital and asset management teams all contributed to our fourth quarter success. We had a very active quarter to close out 2014 as we continue to increase our asset base by acquiring new properties. So in 2014 we invested nearly $145 million at a weighted average cap rate of 9.0%. That performance included 10 acquisitions with each of our regions contributing accretive transactions and extension at one of our properties resulting in a lease extension and a straight loan for build-to-suite with a 15-year lease attached. These transactions include investments in the strong markets of Phoenix, Denver, Dallas, Indianapolis, Sacramento and Columbus, Ohio. So as indicated each of our regions were contributing throughout the year. This was our 13th consecutive quarter closing new acquisitions. We are extremely pleased with our activity and consistency over the last several months and we continue to have a strong pipeline of acquisitions…

Good morning. We continued our goal of consistently growing our asset and equity base in 2014. Our total assets increased to $788 million this year which was a 40% increase in total asset last year. We are also focused on decreasing our leverage and then issuing new equity under our ATM program with Cantor Fitzgerald to help achieve this goal. We expect to continue this growth throughout 2015. The amounts outstanding under long-term mortgages and was $503 million at the end of the year and is representative of funding both of our new acquisitions in the fourth quarter. In addition, till today we have raised over $45 million in common equity under our ATM program with Cantor which began in September of 2014 and have used these funds to acquire properties and to reduce the outstanding balance under our line of credit. Reviewing our upcoming long-term debt maturity, we have mortgage debt in the aggregate principal amount of $42.4 million payable during the remainder of this year and $99 million payable during 2016. The 2015 principal amount payable includes $34.6 million of principal payments due on three mortgages that mature in the second half of this year. And we do anticipate being able to refinance these mortgages with combination of new mortgage debt and equity. We’ve already begun discussions with lenders on these upcoming maturities and we expect to refinance them during this summer. The 2016 principal amount payable include $92 million of balloon principal payment due on nine mortgages that mature throughout the year and we also anticipate being able to refinance these mortgages as a combination of new mortgage debt and equity. We’ve also begun discussions with lenders on the debt that matures during the first quarter of 2015. We intend to decrease the leverage on these refinancings…

All right. That’s a good report, Danielle and a good one from Bob Cutlip and also from Michael LiCalsi. We encourage all our listeners to read the press release and the annual reports filed yesterday with the SEC. It’s called Form 10-K, and there are lot of good material on those documents. You can find them on our website, www.GladstoneCommercial.com and also on the SEC website. The main news again we purchased two properties for about $41 million and placed mortgages on those properties of $18.5 million, extended to leases that were originally scheduled to expire in 2015. We finally leased that 42,000 square foot building down in Richmond, seemed like it took forever, but got that one in with the good tenant. And we are now 99. At December 31st we’re 99% occupied over the entire portfolio that may go down if we don’t find some tenants for the two or three that we have leaving our buildings this year. And then we raised close to $30 million in common equity under the ATM program, which has been working for us very well. We have continued to add quality real estate to our portfolio, shoring up existing investments and grew the asset base. We continue to grow all of our market capitalization increase and we hope to see higher trading volumes in our stock and corresponding uptick in the stock price because the distribution rate is very high for real estate investment trust. As many of you know, this company didn’t kind of monthly cash distribution during the recession, that was quite a success story what some of the good companies cut their distributions. Just want to do this one more time. As an example, this company first ex-dividend in 2008 was $1.36 per share. The distribution is now…

Thank you. [Operator Instructions] We have a question from John Roberts of Hilliard Lyons. Your line is open.

Hey David.

Hello John.

How are you doing?

I am good today. How are you?

Freezing to death out here in the south, but was to be 10 below tonight. So shattering all kinds of records, David, and I am sure it’s coming your way after it leaves us.

Yeah. It was 11 this morning when I got up.

I don’t know if this question is for you, Bob, or Danielle, but usually I try to get a pre-conference call report out in the evening that you guys announced, I was unable to though because you did not provide the line item information. You provided sort of lumped information on cost and revenue. So I couldn’t do my usual quarterly number charts and discuss the individual.

That wasn’t in the K.

While if David was in the K, but you don’t have quarterly numbers. You just got the aggregate numbers for the full year.

Okay.

And I tried to back it up by subtracting the previous three quarters, but you must have restated previous quarters for some of the properties you sold because nothing came out as it should and I don’t want to put…

We didn’t restate so…

John, I aggregated it together on the press release, but I can post something to the website after this call that has the detail breakout for quarterly, December 31st versus September 30th. So that would be helpful.

That would be super. I mean, I just like to see what the Q numbers are.

Okay. I’ll post it to the website.

Super. And if you could send me, maybe if you can email that to me, Danielle?

Sure.

I’d appreciate it. And then David, I think you guys explained all the courses I had and from our previous discussion that I think what you guys are doing is probably appropriate given the size of the company. As I talked to you when I -- when I was there about the external versus internal and you stated that real well that small REIT really being externally managed can actually be saved as savior so to speak, some of the internally small managed REITs if you had a business because they couldn't survive so.

Exactly. So that’s a good plus for us. And I think we’ll be at the billion dollar mark by July of 2016.And so as a result, we will have a very deep detail discussion and my guess is by then we should be able to cut the management fee. It’s not a guarantee; a lot of the external managers call themselves as charging only at 1.5%. But as you look at all the other expenses, they flow through it adds up and we've done that now fourth time as they externally managed in and we are far and away ahead of all of it in terms of low cost.

Right. Hey on the vacant property in Texas, the medical office building, you mentioned that you got somebody who maybe wants to buy it, and somebody wants to lease it, are you expecting -- which way -- A, which way are you expecting to go and B, would there be a loss on the sale or you expect the gain on the sale?

We expect it, John. It’s Bob. We expect it. We probably got the lease but we are kind of leaving options open. And know it would -- the numbers that we kept in promoting to the buyer is definitely the game.

Yeah.

That location next to the hospital campus is good. Our challenge has been that the hospital ahead built some facilities. And so they had brought in-house a number of activities that they’ve had in third-party locations. And so we just had to be patient but now the activity has picked up and we would like to be long-term holders, probably prefer to get a nice 7 to 10-year lease with a group. But we are going to leave our options open right now and see how it pans out over the next two or three months.

Right. Well, obviously I follow a lot of healthcare REITs. So if you want any introduction as there is some potential buyers, let me know, Bob.

Okay. Thank you very much. I will definitely call you, John.

All right. You’re welcome. As far as the ATM program, that was a big junk of equity you issued in Q4. Are you expecting that same number going forward?

Well, we slow it down sometimes when we don’t have the funnel build up and already to close. So the idea is you turn it on and off like a ticket. And when you need some money to do the next transaction, you turn it on and also very sensitive to the price of the stock. We really don’t like to issue the stock at low prices, so you’ve got to be careful. I think if we didn’t do the ATM program, the stock price actually will probably go up a little bit. But we just got to build our equity base, we’re about $270 million in equity and the market cap is still relatively low compared to so many other REITs. So we just got to build our sales up so that we can attract more shareholders.

Yeah. Understand, David. Okay. Thanks. You answered my all questions, most of my questions on the call already, David. Thank you very much.

Okay. Next question please.

Yes. The next question is from Robert Stevenson of Janney. Your line is open.

Good morning, guys. Can you talk about what your target leverage level is and the time frame for getting there?

Well, we are about 60% now in terms of leverage. So I don't know Bob what you issued for now. I keep telling them don't delever too much. It’s helping us pay the dividend and the stock price. So I don’t know what you want to tell us.

Let me tell you what our plan is for this year. We of course I think as Danielle indicated, we’ve gone from 68% to 60% in 2014. The targets for our team this year is between 55% and 58% on the deals that they pursue and of course every deal is unique and we want to make sure that we’re accretive. And because of our cost of capital is still higher than we wanted to be, we will look at every deal individually. And David and I will then make that decision with Danielle. But that’s kind of what we are looking at. Danielle, do you want to add something?

Yeah. One other thing, as I mentioned, we had about $35 million of debt refinancing this year and $92 million next year and that was put on it much higher leverage in 2005 and 2006. So we’ll get some more leverage just refinancing that by the nature of it. So it’s new deal, plus the refinancing, but we will keep it down this year.

Yeah. Good point.

Okay. And then how are you viewing preferred stock these, the expensive debt or quasi equity to help out?

Well, if we could get permanent, we’ll call it equity, but everything now is some kind of due date in the future, so we look at that as debt. So if we have to pay it back, even though it’s a security and it has less complications when they come due, then that would -- we still look at it is as debt, because it does come due and we always want to meet our obligations. So for us, it’s debt. And I like it for time to time, it is good substitute for a long-term debt. And I don’t know where analysts look at it, but some people saying we’ve got too much preferred stock. And I am just glad I don’t have to run my company by all the comp -- all the people that tell me how to run it. So we're just going to keep doing on same old thing that I've been doing for 25 or so years.

Okay. And then last question, do you guys have a drip in place?

We do have a drip. It’s not used much because most of the brokerage houses won’t pull down the shares from the drip. They actually go into the market and buy. So if you have a drip with say one of the big brokerage houses, all they will do is pull it down from the market rather than pull it down from ours. We are ready to issue new shares under the drip. We just haven’t had.

We have no demand.

Okay. We have no demand for our drip.

All right. Thanks, guys.

You’re welcome.

[Operator Instructions] There is no one else in queue at this time. I’ll turn the call back over to David for closing remarks.

All right. Well, thank you all for calling in. We’re hopeful that a few more analysts would have given us a few more questions. But if you have more questions, let us know. We’ll do our best to answer them on our website. That’s the end of this. Thank you.

Thank you. Ladies and gentlemen, this concludes today's conference. You may now disconnect. Good day.