Steven Dumanski

Steven Dumanski from Janney Montgomery Scott asked about the outlook for property disposition opportunities given the high cost of capital for potential buyers and sought clarification on the quarter-over-quarter decrease in the company's owned acre-feet of water.

Answer

CEO David Gladstone responded that while buyers exist, they are seeking significant discounts, which Gladstone Land is not pursuing unless it's a high-value conversion opportunity, such as selling Florida farmland for housing development. CFO Lewis Parrish clarified that the minor decrease in water assets was due to using a small amount (44 acre-feet) of stored water to irrigate trees during a tenant and well transition.

Steven Dumanski from Janney Montgomery Scott asked about the outlook for property dispositions given the high cost of capital for potential buyers and questioned the reason for the quarter-over-quarter decrease in the company's owned acre-feet of water.

Answer

CEO David Gladstone explained that while potential buyers exist, they are seeking significant discounts, which the company is not willing to accept. He noted strong interest in their Florida properties for housing development but prefers to hold income-producing assets. CFO Lewis Parrish clarified that the minor decrease in water assets (44 acre-feet) was due to using a small amount of stored water to irrigate trees during a tenant transition while waiting for wells to be transferred.

Steven Dumanski from Janney Montgomery Scott asked about the outlook for property disposition opportunities given the high cost of capital for buyers and questioned the reason for the quarter-over-quarter decrease in owned acre-feet of water.

Answer

CEO David Gladstone explained that while potential buyers exist, they are seeking significant discounts, which Gladstone Land is not pursuing. He noted an exception in Florida where housing demand drives higher prices. CFO Lewis Parrish clarified that the small decrease in water assets was due to the temporary use of 44 acre-feet on one property during a tenant and well transition.

Steven Dumanski of Janney Montgomery Scott asked for a year-end target for the percentage of the portfolio that will include annual rent escalators.

Answer

President Jeremy Garber clarified that upon execution of all agreed-upon 2025 and 2026 leases, 56% of the portfolio will feature rent escalations. He also corrected that a previously mentioned 32% figure represents the portion of the portfolio with 10-year lease terms, not the portion with escalators.

Steven Dumanski inquired about potential impacts from the U.S. Postal Service's cost-cutting measures, particularly facility eliminations, and how the regional transportation optimization initiative affects PSTL's strategy.

Answer

Andrew Spodek, Chief Executive Officer, responded that based on constant communication with the USPS, the company does not believe there will be any disruption to the retail network or the types of facilities they invest in. He added that PSTL's acquisition underwriting already accounts for operational shifts within the USPS network.

Steven Dumanski asked for more details on the two property dispositions, specifically why they transacted at a low 4.9% blended cap rate and whether more capital recycling opportunities are anticipated.

Answer

CEO Andrew Spodek explained that the sales resulted from unsolicited inbound offers, not an active marketing process. He noted the transactions reflect the company's belief that its assets are undervalued and demonstrate the ability to extract value. While the primary strategy remains growth through acquisitions, the company will continue to explore opportunistic capital recycling.

Steven Dumanski asked about the drivers behind the significant Q4 leasing velocity, seeking details on specific geographies and tenant industries. He also inquired about any potential lease termination impacts from government tenants.

Answer

John Donahue, President of FSP Property Management, attributed the strong quarter to new deals in Houston and Minneapolis, with Houston and Denver being the strongest markets for the full year. He noted a diverse tenant mix from sectors like government, healthcare, and energy, but a lack of tech. Donahue also stated that the company expects no impact from government lease terminations, as there are no early termination options, and a key government lease is currently in renewal discussions.

Steven Dumanski asked about the drivers behind the strong Q4 leasing velocity, seeking details on specific geographies and tenant industries. He also questioned the potential impact of government tenant downsizing on Franklin Street's portfolio.

Answer

John Donahue, President of FSP Property Management, attributed the Q4 leasing strength to new deals in Houston and Minneapolis across diverse industries including government, healthcare, and energy, while noting the tech sector remains slow. He clarified that FSP expects no impact from government lease terminations, as there are no early termination options, and noted one major government lease is already in renewal discussions.

Steven Dumanski of B. Riley Securities inquired about the strategic rationale for the Pershing Park Plaza disposition, the company's future plans for the Monument Circle property, and current trends in lease renewal negotiations and tenant improvement (TI) costs.

Answer

Jeff Carter, President and CIO, explained that the Pershing Park sale was a strategic decision to capitalize on a strong lease term and a smaller deal size, which is more attractive in the current market, and does not represent a permanent exit from the Atlanta market. John Donahue, President of FSP Property Management, addressed the other questions, stating that FSP is exploring all options for Monument Circle, including leasing and disposition, and is in talks with city and state officials. Regarding leasing trends, Donahue noted an uptick in early renewal dialogues and slightly higher TI costs, which average $4-$5 per square foot per year for renewals and $7-$8 for new deals, resulting in a stable blended cost of around $6.

Steven Dumanski asked about the strategic rationale for the Pershing Park Plaza disposition, the company's future plans for the Monument Circle property, and current trends in tenant improvement (TI) costs for lease renewals.

Answer

Jeffrey Carter, President and CIO, explained the Pershing Park Plaza sale was a strategic transaction based on favorable conditions for that specific asset, not a broader exit from the Atlanta market. John Donahue, President of FSP Property Management, stated that for Monument Circle, the company is exploring all options, including securing an anchor lease or a potential sale. He also noted that tenant improvement costs for renewals average $4-$5 per square foot per year, while new deals trend higher at $7-$8, keeping the blended cost relatively stable.

Steven Dumanski inquired about the strategy behind the Innsbrook Corporate Center disposition, buyer requirements for property occupancy levels, and the relative strength of FSP's various geographical office markets.

Answer

Jeffrey Carter, President and Chief Investment Officer, clarified that the Innsbrook sale was a selective, value-driven disposition based on recent leasing success, not a strategic exit from Virginia. He noted that buyers currently favor stabilized properties with strong lease terms and smaller deal sizes. John Donahue, President of FSP Property Management, added that Sunbelt markets like Houston and Atlanta are showing strength, while the Midwest has been weaker, though positive signs are emerging in Denver.

Steven Dumanski inquired about the strategy behind the recent Innsbrook property disposition, whether it signaled a market exit from Virginia, and what leasing percentage thresholds potential buyers require to transact in the current environment. He also asked for an update on the relative strength and weakness of FSP's various geographical markets.

Answer

Jeffrey Carter, President and Chief Investment Officer, explained that the Innsbrook sale was a selective, value-driven decision based on recent leasing success and favorable market reception, not a strategic exit from Virginia. He noted that buyers prioritize stabilized occupancy with strong weighted average lease term (WALT), quality locations, and smaller deal sizes, rather than a specific leasing percentage. John Donahue, President of FSP Property Management, added that Sunbelt markets like Houston and Atlanta are showing strength, while Midwest markets, particularly Minneapolis, have been weaker. He also noted encouraging signs of recovery in Denver.