Good morning and welcome to the Gladstone Commercial Corporation Fourth Quarter and Year Ended December 31, 2013, Shareholders' Conference Call. (Operator Instructions) Now I'd like to turn the conference over to David Gladstone. Mr. Gladstone, please go ahead.

All right. Thank you, Keith, for that nice introduction. This is David Gladstone, Chairman. And thanks to all of you for calling in. We always enjoy the time we have with you on these phone calls and wish there was more time to talk about the company. Here in the Washington, D.C. area, we are located in a suburb called McLean, Virginia. And you have an open invitation to stop by and see us when you are in this area. There's a great team at work and there's about 60 members of the team now, so we're no longer a small business. And by the way, some of the people even bring their dogs to work, so you can see them when you come by here too. To start off, we'll want to start with Michael LiCalsi. He is our current lawyer. He does a lot of the legal work here. He is also President of the Administrator that runs a lot of the services that we provide to the different funds. And he will present our statement regarding forward-looking statements.

Good morning, everyone. This report that is about to be given, they include statements that may constitute forward-looking statements within the meaning of the Securities Act of 1933 or 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 plan, 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 all those factors listed under the caption Risk Factors in our company’s Form 10-K and Form 10-Q filings that we file with Securities and Exchange Commission. Those Form 10-Q and 10-K filings can be found on our website at www.gladstonecommercial.com and on the SEC's website at www.sec.gov. The company undertakes no obligation to publicly update or revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In our talk today, we plan to talk about funds from operation or FFO. And since FFO is a non-GAAP accounting term, I need to define FFO 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. The National Association of REITs or NAREIT has endorsed FFO as one of the non-accounting standards that we and other REITs can use in our discussion of REIT. Please see our Form 10-K filed yesterday with the SEC and our financial statements for a detailed description of FFO. We'll begin the presentation today from hearing from our President, Bob Cutlip.

Thanks, Michael. Good morning, everyone. During the fourth quarter, we acquired two properties and closed long-term financing on both of these transactions, refinanced the mortgage on an existing property where the mortgage was maturing, commenced construction to expand one of our properties and simultaneously extended the lease through 2034 and issued additional common equity in an overnight raise. We had a very good year in 2013. We deployed a total of $134 million in new acquisitions or expansions at our existing properties, exceeding our 2012 annual performance by about $27 million. We also acquired our first property in the west as we seek to expand our presence there. The fourth quarter marked our ninth consecutive quarter of closing acquisitions consistent with our objective of increasing our total asset base. In the last few years, we've increased our total real estate assets by about 50%. The listed properties in our acquisition pipeline remains robust and we hope to announce additional acquisitions in the near future. Now let's describe some details. During the quarter ended December 31st, we acquired two additional properties. The first property acquired was a 99,800 square foot office building located in Englewood, Colorado, a Southern submarket of Denver. The property is the The Class A, LEED Gold multistoried office building that's leased to ViaSat, an innovator in satellite and other wireless networking systems. The purchase price was $18.3 million, which equates to an average cap rate of 80.2% over the life of the lease. We funded this acquisition with proceeds from our common equity raise in November and the issuance of $11.3 million of mortgage debt on the property. The assets has close to eight years remaining on the lease and has several renewal options. The second property acquired was a 156,200 square foot industrial building purchased for…

Good morning. As Bob mentioned we continued to grow asset and equity base in the fourth quarter. Our total assets increased to $690 million from our two new acquisitions during the quarter, which is a 4% increase from last quarter and a 23% increase in asset during 2013. The amounts outstanding under long-term mortgages and our line of credit increased about $447 million as a result of the funding of our new acquisitions. Reviewing our upcoming long-term debt maturities, we have mortgage debt in the aggregate principal amount of $24.8 million payable during the remainder of 2014 and $22.4 million payable during 2015. The 2014 and 2015 principal amounts payable include balloon principal payments due in June of 2014 and three mortgages that mature in the second half of 2015. We're now working on the mortgage for 2014 and anticipate being able to refinance the mortgages that come due in 2015 with new mortgage debt. We now intend to increase the leverage on the new lease refinancing in order to continue our strategy of producing our overall leverage. We intend to pay the additional debt amortization payments from operating cash flow and borrowings under our line of credit. The weighted average interest rate on the new debt issued during 2013 was 4.5% plus the weighted average interest rate in all of our existing mortgages dropped 25 basis points during 2013 to 5.4% from the lower rates we were able to achieve on new mortgages during 2013. We also continued our strategy during 2013 of lowering our overall leverage by reducing our weighted average loan to value on new issued debt to 60% from 68% in 2012. Now turning to equity, as Bob mentioned, we completed an overnight offering of common equity during the quarter. We issued 1.2 million shares of…

Thank you, Danielle. That was a good report and certainly a good report from Bob Cutlip too. For those of you who want to keep up with everything, we encourage you all to listen to and read our press releases and annual report that was filed yesterday with the SEC called Form 10-K. There's just an abundant information. This is just a summary when we give you these reports every quarter, but there is a good material in those documents. And you can find them all on our website at www.gladstonecommercial.com. And to stay up to date with the latest news, you can follow us on Twitter as well as on Facebook. Under Twitter, it's GladstoneComps, and on Facebook keywords The Gladstone Company. And you can go to our general website and see more information about all the Gladstone companies at www.gladstone.com. The main news to report for this quarter is obviously the acquisition of the two new properties and the closing on the long-term financing on these properties. We refinanced mortgage that was coming due and we raised additional common equity. All of these are very positive news for our shareholders, as we've added quality real estate to our portfolio, we shored up the existing investments and we've grown our asset base in excess of $130 million during 2013. And as we continue to grow and our market capitalization increases, we hope to see higher trading volume in our stock and hope to see a corresponding uptick in the stock price. We continue to have a nice list of potential properties that we're interested in acquiring. And the list of properties, we hope to be able to grow the asset portfolio even more during 2014. And with the increase in portfolio of properties comes greater diversification, and certainly that's…

(Operator Instructions) And the first question comes from John Roberts with Hilliard Lyons.

Obviously, you've been pretty consistently waving your incentive fees. Can you talk a little bit about the strategy on that and what you anticipate doing going forward since you're not covering the dividend unless you're waving the fees?

Sure. That's one of the things that we always look at when we're doing a new deal. Unfortunately when we raise capital and try to get it to work quickly, sometimes we're not as good at that as we'd like to be. And so as a result, in order to cover those new shares that have been issued, we need to use that by giving back some of our incentive comp. As time goes on, that will go away. As we get bigger and the new offerings have less dilutive effect on the earnings power, I think all of that will go away. We all understand that. People give up in the short range in order to get long-term benefits for us and our shareholders. And I think it shows something to shareholders that we're willing to give that up in order to make sure that we continue to grow the asset base and the earnings base of the company. So not excited about giving it up, but at the same time, it's just a short-term give-up. We'll eventually get back to normal and be able to pay it all out.

Well, it shows some shareholder-friendliness, David.

Yeah, we are friendly to shareholder. And as sitting around the table, we're all big shareholders. So what we give up on one side, we generally get on the other side.

Obviously you're not going to see any growth in FFO until that goes. Any timeframe that your expectations on when we might get by that?

John, you're always asking for projections. It's really hard in this business. Until we get to about $1 billion in assets, I think it's going to take us that time to get there, John. We're about $680 million, $690 million. Probably another year before we get past that. And so we're looking at maybe 2015 to start to think about that. So that's where we are. But the good news is for all those shareholders, the dividend is very solid positioned, certainly in the preferred shares, but in the common shares very solid coverage ratio because of the ability to give back the incentive comps. So people who are buying that are buying it with a good deal of certainty that they're going to get their dividend. Nothing is guaranteed of course, but I think it's pretty well covered.

Next question comes from Dan Donlan with Ladenburg Thalmann.

This is actually John Massocca on for Dan Donlan. I noticed in the fourth quarter, you announced you're doing expansion at your Canton, North Carolina, property. Could you maybe give us a little more color on that deal? And then as kind of a follow-up, was any construction actually completed in the fourth quarter?

Certain, John, that is the 230,000 square foot industrial facility. We were expanding by 150,000 square feet. The expansion is clearly infrastructure for additional circulation for their trucking as well as for distribution. The company has consolidated into this located from, I believe, it was one other location. And there was really no construction done in the fourth quarter we did. The design was completed and we began moving (inaudible), but weather turned bad on us. We're still anticipating that the building will be completed in August. And as this property as we place money into this transaction, the tenant actually began paying rent on the in-placed capital. And as I indicated earlier, with this transaction, we're extending a lease on the building to 2044.

One quick broader question, if you will. Have you seen kind of change in leasing demand particularly for suburban office properties? I mean have you kind of been improving here that affected in a positive way your ability to kind of lease and re-lease your suburban office properties?

We are seeing more demand out there really across the board. As I indicated, most of the year, we were seeing more office opportunities and suburban market spend reversing industrial opportunity. And of course a lot of that relates to some of the institutions chasing industrial properties. But yes, we're seeing our ability (inaudible) for offices is not great. And if you look at the macro, everyone is saying that really from a space per employee standpoint, that's dropping from, let's say, 250 down into the 100 to 150 with a millennial. That could be a change. But with us picking facilities that we think really are mission-critical and therefore the people around it want to be there. We still feel confident long term with the movement that we're going into the secondary growth markets.

(Operator Instructions)

It sounds like we don't have any more. All right, we again thank you all for calling in and look forward to you next quarter.