Good day, ladies and gentlemen, and welcome to the Gladstone Commercial Corporation's First Quarter 2019 Earnings Conference 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 introduce your host for today's conference, Mr. David Gladstone. Sir, you may begin..

All right. Thank you, Lauren. That was a nice introduction. Thank you all for tuning in and listening to us. I was with a group of brokers yesterday and it's so nice to talk to people and get questions back. Hope we have a lot of good questions today. We really do enjoy this time we have with you on the phone and wish there were more times to talk.

Please come and visit us if you're ever in the Washington, D.C. area, we're in a suburb called McLean, Virginia, and you have an open invitation to stop by and see us here at the office.

Now, going to hear from Michael LiCalsi, General Counsel and Secretary, he is also the President of Gladstone Administration, which serves as an administrator to all of the Gladstone public funds, will make a brief announcement regarding some of the legal and regulatory matters concerning this report.

Michael?.

Thanks, David, and good morning. Today's report may include forward-looking statements under the Securities Act of 1933, the Securities Exchange Act of 1934, including those regarding our future performance.

And 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 risk factors in our Forms 10-Q, 10-K and other documents that we file with the SEC. You can find all these on our Web site, www.gladstonecommercial.com.

Specifically the Investor Relations page or on the SEC's Web site, which is www.sec.gov, and 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 is generally FFO adjusted 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. We ask that you take the opportunity to visit our Web site, once again, gladstonecommercial.com, and sign up for email notification service.

It can also be found on Facebook, keyword there is the Gladstone Companies, and on Twitter and our handle there is @gladstonecomps. Today's call is simply 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.

Those can be found on the Investor Relations page of our Web site. Now, I'll turn the presentation back over to Bob Cutlip, Gladstone Commercial's President.

Bob?.

Thanks, Michael. Good morning everyone.

During the first quarter, we acquired a 26,000 square foot property in a Philadelphia sub market, acquired a 34,800 square foot freezer-cooler industrial property in Indianapolis, renewed a 72,000 square foot tenant whose lease was scheduled to expire in 2020, renewed a 58,000 square foot tenant whose lease was also scheduled to expire in 2020, sold a non-core office property in Maitland, Florida, conduced a non-deal roadshow in Chicago and Milwaukee, and lowered our book leverage to 45.3%.

Subsequent to the end of the quarter, we acquired a two-building 383,000 square foot industrial portfolio in Ocala, Florida, acquired a 54,430 square foot industrial property in Columbus, Ohio, and entered due diligence for the acquisition of an industrial property in Tifton, Georgia.

As noted in our year-end call, we're beginning to enjoy the benefits of our team's focused efforts to improve operating results. We invested significant equity and personnel resources from 2013 to 2018 to renew tenants and re-lease vacant space, to fund operating deficits on vacant space, to improve our balance sheet, and to acquire accretive assets.

The good news is that our occupancy remained high throughout this period. We significantly lowered our book leverage from 63% in 2013, we maintained FFO per share of $1.50 to $1.54, and are now in a path of earnings growth that commenced in 2018. We also improved our cash payout ratio year-over-year.

We were able to consistently improve our financial metrics because we acquired accretive assets each and every year in our target growth markets.

The combination of the positive characteristics of those investments and the capital structure enhancements validate the strength of our growth trajectory and balance sheet security, and I think are worthy of some note.

From 2012 to 2018, the average annual acquisition volume was just under $105 million, with lease terms ranging from seven to 10-plus years with annual lease rate escalations; the average GAAP cap rate on these assets, 8.7%, the average interest rate on fixed rate mortgage debt, 4.6%. These characteristics equate to increase cash flow year-after-year.

We're also approaching the time period at which these leases' cash returns are going to be exceeding the straight line GAAP returns as the seven to 10 year leases are at or are approaching the inflection point from a straight line rent perspective.

This should continue to improve the payout ratio to the benefit of shareholders and our working capital position. Our investment in asset management activities continue to generate positive momentum for our operations during the quarter. We acquired a 26,000 square foot industrial property in a Philadelphia suburb.

The transaction is a 15-year sales lease back. The acquisition price, $2.7 million, the going in and GAAP cap rates are 7.6% and 8.8% respectively. And the property can be doubled in size to accommodate the tenant's expansion requirements in the future.

We also acquired a 34,800 square foot freezer-cooler facility in Indianapolis for $3.6 million, which can also be expanded by approximately 50%. The unexpired lease term as [technical difficulty] acquisition and the going in and GAAP cap rates are 7% and 7.7% respectively.

Our asset management team continued our renewal efforts and extended the leases for two of our tenants for five years beyond the current lease expirations in 2020. The tenant sizes are 71,880 square feet and 58,360 square feet, and the properties are located in Syracuse, New York, and Akron, Ohio respectively.

No tenant improvements were required for these lease extensions. Our capital recycling efforts continued during the first quarter with the sale of a 50,000 square foot single story office property in Maitland, Florida. The sales price was $6.9 million and the realized capital gain was $3 million.

This asset was not critical to our strategic holdings and the proceeds from the sale were used to fund first quarter acquisitions. Subsequent to quarter end, we acquired a two building 383,000 square foot industrial portfolio for $19.2 million in Ocala, Florida along the I75 quarter that connects Jacksonville and Orlando.

The transaction is 20-year sale lease back with going in at GAAP cap rates of 7% and 7.7% respectively. We also acquired a 54,430 square foot industrial property in Columbus, Ohio for $3.1 million the unexpired lease term seven years and the property can be nearly doubled in size to accommodate the tenant expansion needs.

The going in and GAAP cap rates are 7.5% and 7.9% respectively.

Market conditions I think are worthy of some comment as noted in our last report, national research firms reported that overall investment sales volume for 2018 exceeded 2017 volume, a critical characteristic, however, is that large portfolio at entity transactions were in excess of 2017 level and are the major contributor to the higher volume, reports also stated that individual property sales for the last two months of 2018 were down compared to prior year and real capital analytics report that investment sales volume is down 11% for the first quarter of 2019 compared to that of the first quarter of 2018.

In addition, we have noticed there is an apparent buyer, seller disconnect in the office sector as evidenced by several notable properties returning to market after being under contract and our experience with mortgage debt reflect that even with the recently reported slowdown by the Fed and raising the Federal Funds interest rate, long-term interest rate has risen approximately 50 basis points over the past 12 months.

Now with that information in mind, significant capital is available on the sidelines with considerable interest in U.S. real estate. The expectation is for the 2019 investment sales volume to be similar to that of 2018 which is really still quite healthy for the industry.

Our team is going to continue to monitor market conditions and actively investigate accretive opportunities that promote our measured our measured growth strategy. As it relates to our growth opportunities and strategy we have noted an increase in activity and sales listing as of late.

Our current pipeline of acquisition candidate is approximately $260 million in volume representing 17 properties, 13 of which are industrial of this total $55 million is either in the letter of intent or due diligence stage and the balance is under initial review.

As I mentioned during our year-end call, we are making a conscious effort to increase our industrial allocation with the heated competition for larger properties, our focus is in fully developed industrial parks, with properties that are predominantly in the size of 50,000 to 300,000 square feet, 24 feet to 28 feet clear height in the warehouse ample trailer parking and occupied by middle market non-rated tenant, a tenant profile which we believe we can underwrite with our proven credit underwriting capability.

The larger property they are trading well above replacement cost in several markets and we don't believe that it's an appropriate strategy for us, to show evidence of this strategy from the last week of September through the first week of April just over six months we have acquired $74 million of properties, 75% of this volume or $56 million were industrial properties and they located in our target locations of Indianapolis, Detroit, Columbus Ohio, Philadelphia and Central Florida.

The average GAAP cap rate, excuse me, GAAP cap rate is 8.3%, we believe this shift to increase in the industrial allocation of our portfolio will result in the long-term benefits of lowering tenant improvement costs for renewal and releasing efforts, reducing the intensity of our property management activity and improving operating efficiencies.

So, in summary, our first quarter activities continued our acquisition and leasing success, refinance maturing loans issue equity to our ATM program and position us well to pursue growth opportunities. Now let's turn it over to Mike for a report on the financial results..

Good morning, I will start by reviewing our operating results for the first quarter of 2019.

Our per share numbers I referenced are based on fully diluted weighted average common shares, FFO and core FFO available to common stockholders were both $0.39 per share for the first quarter, this performance demonstrates the accretive yet prudent growth of the company has completed in recent years as well as the performance of the in place portfolio inclusive of maintaining 99% occupancy.

In addition to these accretive deals, our same-store cash rent growth was 2% for the first quarter of 2019 as compared to first quarter of 2018. As Bob mentioned, prior to 2018 core FFO hovered in the $1.50 to $1.54 range for the past number of years as we de-levered the balance sheet and addressed lease rollover.

2018 results demonstrated our highest core FFO per share in the company's history. And we intend to continue to grow profitability for our shareholders in 2019 and beyond. With no near-term meaningful lease expirations, no fractional de-leveraging to do, we are excited about the prospects of continuing to increase earnings going forward.

Our first quarter results reflected the increase in total operating revenues to $28.1 million as compared to total operating expenses of $19.3 million for the period. Let's now take a look at our debt activity and capital structure. We continue to enhance our strong balance sheet as we grow our assets and focus on decreasing over leverage.

We have reduced our debt to gross assets by nearly 15% to 45.3% over the past 5 years through refinancing maturing debt and financing new acquisitions at lower leverage levels. We believe that we are 1% to 2% away from our target leverage level which means that nearly all raised equity going forward will be allocated to accretive acquisition.

As we discussed with analysts, investors, and lenders, we believe there is agreement that this will put us at the proper leverage level going forward. We continue to primarily use long-term mortgage debt to make acquisitions.

As we grow through disciplined investments, we also look to expand our unsecured property pool with additional high quality assets. Over time, we expect this to increase our financing alternatives. So, we continue to manage our balance sheet.

We have repaid $34 million of debt over the past 24 months often with new long-term variable rate mortgages at interest rates equal to the month LIBOR plus a spread, ranging from 2.5% to 2.75%. We have placed interest rate caps on all new variable rate loans.

We also added some of these properties to our unencumbered pool under our line of credit whether advance to permit that placement disposition or in an effort to provide more flexibility in the future by increasing the size of our total unencumbered assets.

In order to improve our balance sheet, we have often put additional equity into the refinanced properties. As previously discussed, this has help significantly reduce leverage and generally enabled us to obtain improved interest rates on our mortgages, thereby reducing the related interest expense by an excess of $500,000 annually.

Looking at our debt profile, 2019 loan maturities are manageable with only $49 million coming due. And a number of these loans have extension options. Further, we have less than $30 million of mortgages maturing in each of 2020 and 21. We have continued to proactively manage and improve our liquidity and maturity profile over time.

Depending on several factors including the tenants credit, property type, location, terms of the lease, leverage and the amount and term of the loan, we are generally seeing all-in REITs and refinances and new acquisition debt ranging from the mid to high 4% range.

We continue to minimize our exposure to rising interest rates with 92% of our existing debt being fixed rate or hedged to fix to interest rates swaps and caps. We have remained active in issuing our common stock using our ATM program.

During the first quarter in net of issuance cost, we opportunistically raised $14.1 million through common stock sales.

While we continue to view the ATM as an extremely efficient way to raise equity, we continually keep our assessment of the relative value of our common stock as compared to trading prices in mind as we determine when to raise capital. As of today, we have $2 million in cash and $33 million availability on to our line of credit.

The current availability and excess to our ATM programs, we believe that we have significant incremental flexibility to fund our current operations, properties we are underwriting, and any non-upcoming improvements at our properties.

We encourage you to also review our quarterly financial supplement posted on our website, which provides more detailed financial and portfolio of information for the quarter.

We feel good about continuing to execute our business plan during the remainder of 2019 and beyond as we continue to increase our high quality asset base and continue to improve our metrics including core FFO and leverage. We are focused on maintaining our high occupancy with strong credit in real estate.

With minimal near-term lease expirations along with manageable loan maturities, our heavily be focused on high quality of real estate acquisitions with strong credit tenants. Institutional ownership of our stock increased by 13% at the beginning of 2016 to 53% as of March 31.

Bob and I continue to be very active in meeting with current and potential institutional investors, portfolio managers, investment banks and the like. We look forward to further engaging with not only our existing investor base, lenders, and coverage analysts but also establishing new relationships as the company moves forward to its next chapter.

Now, I'll turn it back to David..

All right, thank you. I think that was a good report, and it's good report from Bob and Michael LiCalsi as well. This is very nice quarter, very straight forward. And main news here is the report that quarter end through April, company's very good positioned to keep paying consistent dividends and to grow those dividends.

The company also continues to grow its assets to the point that we will soon reach a billion dollars in assets. And it will be a millstone for us.

We continue to have a promising list of potential quality properties that we are interested in acquiring during the remainder of 2019 with the increase of the portfolio the property comes a great diversification. We believe that protects the earnings of the company and also your dividend.

The middle market of businesses, like many of our tenants, is doing very fine today. Our tenants are paying their rents, and that's what counts for us, while I'm optimistic that our company will be in good hands in the future, Bob and his team will continue to be cautious in their acquisitions as they've done in the past.

In April, the board voted to maintain the monthly distribution of $0.125 per common share per month for April, May, and June, and it's an annual run rate of $1.50 a year. This is an attractive rate for a well-managed REIT like ours, which we believe is an excellent investment for individuals that want monthly income.

I know you all know that we will increase the distribution amount at some point in time. All I can say is we're not quite there yet, but hopefully at this next meeting and the board to -- Bob and board will get together and talk that one through.

If you want to put some pressure on Bob, just email him and tell him when you want the answer, and we've now paid 171 consecutive common stock cash distributions, and we went through the recent recession without cutting our distribution. And we don't want to hurt that record, it's a good record.

And another point, because the real estate can be depreciated, we're able to shelter most of the income that's coming in for you. Taxpayers don't pay any taxes on those dividends that are return of capital, and last year ending December 31st, the return of capital was 76% of the money paid out.

The return of capital is mainly due to that depreciation shield or depreciation real estate and the deduction from earnings has caused earnings to remain low, but at the same time cash flow is strong. Stock closed Wednesday, let's see, $21.75.

Distribution yield on our stock right around 6.9% now in terms of yields, so that's a great yield for a strong company like this. And triple net REITS generally traded about 4.45% yield. And we could reach that yield we'd be trading at $33 per share.

There's just a lot of room for expansion of this stock price into closer to the real estate industrial stock price. I know the analysts always beat us up a little bit that we're externally managed. And I want you all to just ignore that simply because trillions of dollars of mutual funds are managed externally, and it doesn't seem to harm them at all.

And our high occupancy level is a testament to the underwriting skills of the team, and our emphasis on tenant first and real estate second. We are a REIT that looks first always at the tenant to make sure they can pay the rent, that's where it all begins. Now we have some questions from our shareholders.

Lauran, if you open them on tell them how they can ask the team questions..

Yes, sir, thank you. [Operator Instructions] And our first question comes from Rob Stevenson with Janney. Your line is open..

Good morning guys. Bob, you talked earlier about targeting industrial assets. I mean how are you guys thinking about office acquisitions these days? Does it have -- are you still willing to do them, and it just has to meet a higher return that it historically had relative to industrial.

You guys are still sort of 65% office, where you guys expect that to trend down to over the next year or two?.

Good questions.

I think from the standpoint of the office themselves, the teams really are looking to be sure that wherever we acquire we're close to amenities, ala like the Morgan Stanley acquisition that was in Easton Commons, in Columbus and in Salt Lake City, and Central Square, which is in Lake Mary, which is a nice mixed use community in North Orlando.

We are not going to walk away from office. I mean, if it's sticky real estate and it's really mission critical we will do office, but I really believe going forward we'll be at a 60-40, 70-30 split industrial versus office from an acquisition standpoint.

But I think it's going to take us probably two to three years to get to a point where Mike and I and David think we're comfortable at maybe let's say a 55-45 or a 60-40 split between industrial and office.

I just think that long-term when we look at free cash flow raising the dividend, tenant improvement cost, capital improvements industrial plays really well into that because of the lesser cost you pay, and plus, you look at the market conditions, e-commerce is not going away, home delivery is going to continue to grow as you read in almost every research report.

And I think we play extremely well in these developed sub-markets, where it is last mile or it is a manufacturer.

I think -- and David hit the nail on the head, our ability to underwrite credit is better than, I believe, anyone else out there, and therefore, we can attack these middle market tenants who are manufacturers or who are, let's say, the last mile deliverers..

Okay.

And then, what are you guys thinking about in terms of dispositions currently? I mean, is there anything that's on your radar screen where you want to get rid of it sooner rather than later or it doesn't really fit the portfolio or maybe you've had attractive offer type of thing? I mean, how should we be thinking about depositions over the remainder of the year?.

Well, it's like the disposition we did in January. We had such an attractive offer from a user, and as the team knows, I am not a proponent of single storey office, because of the re-leasing cost involved there.

And so, when we bought that three building portfolio, although we weren't thinking of exiting the property, one of the tenants who was going to elect to leave was 225,000 square foot tenants and that 50,000 square foot building.

And then a user who has a campus nearby offered to acquire the property at a very, very nice price, and so, we exited that property, and we were able to redeploy the capital.

Going forward, I think Mike and I believe, we'll probably be somewhere between maybe $10 to $15 million a year, and once again, these will be in what I think are like, single property, non-core markets that –- the good tenants are not in a big rush to exit, but if we can sell coincidentally with acquiring in our target markets, I think that's how the team's going to emphasize identifying dispositions, getting them on the list and then as we're acquiring we'll exit, but it won't be a high number from a volume standpoint per year..

Okay.

And then one for Mike, we've seen a bounce back here in the preferred market, how are you guys thinking about the balance sheet mix going here, going forward here? I mean, you're about 11% preferred equity, you know, where some of these deals are priced recently, have you guys thinking about opening up the Series D via the ATM, or marketed offering, and issuing there rather than comment at this point?.

Fair question, Rob, I mean, as I stated in the past and to your point, with it being 11% to 12% of the total balance sheet, it is still a bit, a couple of points overweighed as compared to peer set. I saw the print last week it's six and three quarters. There has been some wider deals in the low to mid sevens.

I would say, strictly on our Series D as of this morning, 692. If there is a sub-seven execution that may work for us, but as we've stated throughout, I mean, our only real interest here to do a preferred trade. We don't want to go above that 11 to 12 points of preferred that we have.

So, with the series A being seven and three quarters and the series B at seven and a half, we did a traditional math as our peers would, where we roughly need to save up 75 basis points. So, I'm cautiously optimistic, we're seeing execution in that marketplace and we saw the sub-seven print last week. It's just close right now..

And just remind me, are the A and the B redeemable at this point?.

They are..

Okay. Thanks, guys, appreciate it..

Thanks, Rob..

Thank you..

Our next question comes from Barry Oxford from D.A. Davidson. Your line is open..

Great, thanks guys.

Just building up to some of Rob's questions, when we look at your ATM and your need for equity and given the fact that you're target leverage matrix, if your stock price were to retreat back and you couldn't go to the ATM or you just didn't want to because of where the stock price is, can you continue to act on your 2019 plan without raising leverage again going forward?.

I'll start with it Barry..

Yes..

Trading at 21.75, I mean, over the last couple of years, we've been active in the ATM market and able to source deals at minimum north of $19 a share. So, I mean, there is a good bit of cushion there, obviously, if macro bands or otherwise, there's a massive REIT slice in the tenure that causes REITs to trade off.

I mean, that will impact our underwritten cost of capital and would impact what deals that we chase, but in a normalized environment, we feel pretty good about our way to efficiently access the ATM market and raise their requisite equity capital to complete the 2019 business plan..

Great, great, great. And then just one last question, when you guys are in the marketplace, you talk about that pipeline, are there small -- for lack of a better word, small industrial portfolios out there for sale.

Are there a lot of them or not so much?.

We're chasing one right now that is a five-property industrial portfolio which is going to trade and I'll just give you the average, because who knows where it's going to end up. It's somewhere between $28 million and $32 million. We're starting to see a few more of these that are in, let's say, within our window of opportunity at this point.

Most of the deals that we're seeing, Barry, are anywhere from $7 million to $15-$18 million in these developed sub-markets, because they're ranging anywhere from 50,000 to close to 200,000 square feet. And I really like that size based on where I think the market is, because I think there's really upside in the rents..

Right, right. Okay, that's all from me. Thanks so much, guys..

Thanks, Barry..

Our next question comes from Henry Coffey with Wedbush. Your line is open..

Yes, good morning, everyone..

Good morning..

And really just two questions.

When you look to buy a property what's the ideal mix that you have in the back of your mind and even though maybe you don't get it the day you closed the property, but are you able to kind of queue up like we termed that going into the deal or is that more of a challenge?.

Sure, not a challenge in today's normalized environment, Henry. I would say at book equity -- book debt to gross assets of 45.3% in appreciating we have about $14 million of scheduled amortization on an annual basis, we're underwriting deals plus or minus 50% debt, 50% equity.

So your point, I mean, in typical environments we have day one long-term debt, if it's an accelerated closed process, we could in a minimum basis tap into our credit facility and then execute the debt after the fact. And the ATM, we just programmatically issue either prior or accommodation of prior afterwards to get that 50% of equity..

Are your sellers open to up REITs or are there more institutional parties looking for cash?.

Henry, a good question, we did our first up REIT transaction last fall, and we're starting to see more interested sellers in the up REIT transaction for state planning purposes. These are primarily private owners, developers that are just thinking long-term.

So I think there's going to be an increase in that opportunity, and of course, that's a less costly transaction for us and I think it will just continue to expand over the next several months..

And then it looks like you got a good handle on $35 million-$50 million of additional properties by year end, is that a fair way to read your pipeline or….

No, I think it's going to be higher than that. As I indicated the last six months, we closed about $75 million with a $260 million pipeline. Right now with $55 million in the letter of intent or due diligence stage, I would be very surprised -- our goal has been somewhere around $120 million this year.

And I think that is achievable unless the bottom falls out of the market. I mean, as David and I've always said, so long as we've got our margin of a 100 to 150 basis points over our WACC weighted average cost to capital, we're going to buy in those markets with our credit tenants.

And I don't see an issue, at least near terms, with the velocity dropping..

Excellent, thank you..

Thanks, Henry..

Our next question….

Are there questions….

Yes. Our next question comes from Craig Kucera with B Riley FBR. Your line is open..

Hi, good morning, guys..

Good morning..

Good morning. I saw you had a lease termination this quarter.

Can you give us some color on where that building was and do you anticipate trying to sell it or potentially release that asset?.

That was the tenant that was going to leave that single-storey office property which we also sold. So that's the only termination, yes..

Got it, got it. And you mentioned in your commentary that you had the potential to double the space at the Columbus acquisition.

Has the tenant indicated that they eventually might need to expand on that kind of order?.

Of the three tenants that we have expansion capabilities, one has indicated they may, with the long-term lease, I mean David and I like long-term relationship and having that extra land and really it turns out to be free land because if we expand it we already paid for the land, it gives us an opportunity to extend that relationship, so I am really excited about what the team has done in finding properties that do have expansion land as part of the deal and we are going to continue to look for those.

But only one of the three right now has mentioned it right now but they are long-term leases and if they in growth situation, it's good to have the ability to say, "Yup, we can expand that," it happened with our Lear facility in Vance, Alabama at the Mercedes Benz assembly plant, when we bought that back in 2013 Buzz Copper our leader down there said to the developer, I am going to buy this deal, I really like to have some additional land, well as it turned out, they came to us at the end of 2016 saying Mercedes Benz is doubling their dug-on investment in their plant there and we need to expand the building and we expanded by 75,000.

So we are going to continue to look at those type of acquisitions..

Got it.

And one more for me, appreciate the color on the pipeline but as far as the assets that are currently under LOI or contract what is our composition, I mean are they heavily geared towards industrial and are they in your target markets?.

They are all industrial, the only one that is not one of our original target markets which David has talked with me about is Tifton, Georgia and I will tell you that being an Atlanta boy for a long part of my career, it is south of Atlanta, but I think the positive aspect of Tifton Georgia is long I75 and its equidistant from the port of Brunswick and port of Jacksonville in fact our tenant there.

When we closed this deal in probably six weeks is exporting product out of the port of Jacksonville with the port lowering the depth of the channel and so I think we are going to see more opportunities along that 75 quarter in that Tifton area. But every other one was in Chicago, Jacksonville, Columbus Ohio and they are all industrial..

Got it.

And what are typical terms for the assets that are under LOI initial cap rate kind of give us some color there?.

They are ranging anywhere from the high 6s to the low 7s going in, that's what we are seeing right now.

I think Rob brought it up before about the split of cap rates, our split between let's say industrial and office is about 50 basis points to 75 basis points higher so I am at a 675 on the industrial, I am at a 7.25 to 7.50 on the office but the deals that we have now are anywhere from the high 6s to the kind of low to mid 7s going in..

Got it, all right, thank you..

Thanks..

Our next question comes from Merrill Ross with Boenning. Your line is open..

Thank you.

I see that the amount of lease expirations in 2020 has declined with some success in renewals, but can you talk about particularly the GM renewals since that's your biggest property?.

No, I will talk about all of them. I won't get into specifics because of course we are in negotiations with the number of them already.

Right now as you know, as I indicated we had 11 leases scheduled to expire next year in 2020 and quite frankly our team is already talking with people in the 2021 timeframe because we would like to start two years out, right now we have the two done and we have proposals out on five others and we've begun discussions with GM I think when I talk about -- to think about the GM program it was brought to my attention and a lot of question GM is closing a lot of plants, what's going to happen here.

Our property is one of their four innovations center and when they began to cut back at the plants interested transparency they actually cut people in our building by 100 in their staff but they have just recently increased their staff by 80 in the building, and then Buzz Copper and his partner EJ who are leading that effort to re-lease that property or renew that property have collected a lot of good market intel and what we are finding Austin is really on fire.

The current rental rates compared to our building for let's say nominal TI are at least $4 to $5 higher than what GM is paying now and if you go to the $25 to $30 for TI it's $6 to $7. So we bought that property going in cap rate of 7.4% so our return is extremely good right now since we bought in 2013.

So I am pretty encouraged the brokers and even our colleagues Buzz's counter parts there who are owners of property are saying they really have very limited places to go, particularly with that size.

So I'm encouraged that we are going to get something done, I am hopeful let's say at least 12 months before their lease expiration and their lease expires in August of 2020..

Great. It sounds very interesting, keep on that one..

Thank you..

[Operator Instructions] our next question comes from John Massocca with Ladenburg Thalmann. Your line is open..

Good morning. This is Brandon Travis on for John, two questions for you.

First on the Orlando portfolio can you give any additional color on how the acquisition is sourced and then can you give us some general color what to expect timing wise for acquisitions this year?.

You are talking about the two building industrial.

It was sourced third party through one of our broker contacts and relationship which is pretty typical, I mean we probably are able to go direct on sale leaseback and 10% to 15% of our product but it's evolved to where even in most of the cases people say listen I need to go to markets because I am going to get a better price.

So, this is one with broker relationship with Brandon Flick and [indiscernible] who runs our Southeast region..

And to the second piece of your question having about $30 million of deals in the bond year-to-date and guiding to about $120 million I would say the remaining $90 million would probably be from a modeling perspective Brandon just doing it pro rata for throughout the year..

Yes, I would say pro rata, yes..

Okay, good. Thank you..

Thank you..

Thank you. I am not showing any further questions at this time. I would now like to turn the call back to Mr. Gladstone for any closing remarks..

All right, thank you for calling in, and you had a nice list of questions, we really appreciate it when you ask us questions and get us off track and let us talk about the business. So anyway, we will see in about 90 days. Thank you for calling. That's the end of this call..

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program, and you may all disconnect. Everyone have a wonderful day..