Welcome to Gladstone Commercial Corporation Second Quarter Earnings Call and Webcast. [Operator Instructions]. I will now turn the conference over to your host David Gladstone. Please begin.

All right. Thank you, Torren that was a nice introduction and we appreciate all of you calling in. We really do enjoy these times on the phone, wish we had more times to talk. If you’re in Washington, DC area we’re located in the suburb called McLean Virginia and have an open invitation to stop-by and see us and say hello. It's about 50 people here and we are a bigger team now and we’re always inviting people to come by and see us. Some of the people here have dogs or they bring them to work so we have a few dogs here to greet you as you come in and now I will turn it over to Michael LiCalsi, he is a General Counsel and Secretary officer, also serves as President of the Gladstone Administrator which serves as an administrator to all of the Gladstone Funds and the related companies as well. He will make a brief introduction and announcement regarding the legal and regulatory matters concerning the call. Micheal?

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 all the factors listed under the caption Risk Factors in our Forms 10-K and 10-Q that we filed with the SEC and those filings can be found on our website at gladstonecommercial.com and on the SEC's website at 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 our 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 the 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. And please see our Form 10-K, filed yesterday with the SEC, and our financial statements for a detailed description of FFO. And today we also plan to discuss core FFO today which is generally FFO adjusted for property acquisition costs and other non-recurring expenses. We believe this is a better indication of the operating results of our portfolio and allows better comparability of period-over-period performance. And to stay up-to-date on our fund, as well as all of the other Gladstone publicly traded funds you can sign up on our website to get e-mail updates on the latest news and you can also follow us on Twitter, our username is GladstoneComps and on Facebook, the keyword, The Gladstone Companies. And finally you can visit our general website to see more information at www.gladstone.com. In the presentation today is an overview and we ask you to read our Press Release issued yesterday and also review our Form 10-Q, for the quarter ended June 30, 2015. Both of these documents are on our website www.gladstonecommercial.com. And now we will begin the presentation by hearing from our President, Bob Cutlip.

Thanks, Michael. Good morning everyone. During the second quarter we acquired two properties and issued new debt on both of these properties, raised $12.1 million of common equity under the ATM program, modified one lease such as the anchored tenant will expand into the entire next year at the lease exploration of another tenant and refinanced $30.4 million of debt that was maturing in 2015 in a combination of new debt and equity. Subsequent to the end of the quarter we also amended our fee structure to be more in-line with our peers, leased up partially vacant property located in Raleigh, North Carolina and acquired another property in Atlanta, Georgia for $13 million. As you can see our acquisitions, capital and asset management teams all contributed to our success this quarter. We have another excellent quarter as we continue to increase our asset base by acquiring new properties. This is our 15th consecutive quarter of closing at least one new acquisition. We crossed the milestone and we now own a 101 properties. We really are pleased with our activity and consistency and we continue to have a strong pipeline for acquisitions. Now for some details, during the quarter-ended June 30, we acquired two additional properties. The first property is a 78,000 square foot office building located in Columbus, Ohio, the purchase price was $7.7 million, the average cap rate is 8.3% over the life of the 15 year lease. We funded this acquisition with cash on hand and issuance of $4.5 million of mortgage debt. The building serves as the headquarters of a privately owned home based healthcare provider. The second acquisition is an 86,000 square foot office property located in Draper, Utah which is a suburb of Salt Lake City. The total purchase price was $22.2 million with an…

Thanks, Bob. Good morning everybody. We continue to set an equity base, our total assets increased $830 million from the two acquisitions we continued this quarter. We continue to focus on decreasing our leverage and issuing new equity under our ATM program to help achieve this goal. We expect the continued decrease in leverage over the next several years through a combination of lower leverage of newly issued debt and refinancing, our maturities is a combination of equity and lower leverage. The amounts outstanding under long term mortgages and our line of credit of 532 million at the end of the quarter and is representative of funding both of our new acquisitions at quarter. In addition we have raised over $31 million in common equity under our ATM program during 2015 and have used these funds to acquire properties, refinance maturing debt and to fund capital improvements of certain of our properties. Debt financing does continue to be available from multiple sources, interest rate has been increasing in anticipation of the federal reserve bank will increase the federal funds rate later this year. At the end of the second quarter interest rates are about 20 basis points higher than they were at the beginning of the year and about 40 basis points higher than they were at the end of the first quarter. Interest rate still remained low from a historic perspective and we continue to actually try to match our acquisitions with cost effective mortgages. Depending on several factors including the tenants credit ratings, property site location, [indiscernible] leverage and the amount in term of loan, we’re generally seeing fixed interest rates ranging from up 4% to 4.5%. As Bob, mentioned we did refinance of about 30.4 million of mortgage debt that was maturing this year with 21.5 million…

That was a good report, Danielle and a good one too from Bob Cutlip and Michael LiCalsi, all have given good reports. Again as you heard the main report for this quarter is that we purchased two properties for about $30 million and placed mortgages on them about 17.5 million locking in the spread between those two. Refinancing mortgage debt to mature significantly at lower rates, every time we refinance it, it seems to help us out on our income. We raised $12.1 million of common equity and as she was just explaining we amended the fee structure to be more in-line with the competitors and I hope this will increase our FFO quicker than we had anticipated in past. We have continued to add quality real estate to the portfolio to the existing investments and we grew our asset base again this quarter. As we continue to grow our market capitalization increases and we hope to see higher trading volumes in the stock in the corresponding uptick and the prices of shares. The distribution rate today is about 9.4% so it's very, very high compared to most of it's other real estate investment trust. As many of you know the company didn’t cut it's monthly cash distribution during the recession, it's quite a success story and we watched some of the very good companies cut their distributions and mostly have then never came back to the size they were before the recession. I just wish some of the analyst would pick up this story and play it up stronger simply because it was quite a fee and quite frankly I think we’re still in a position to do that again, should a similar recession come. Hope it doesn’t come but if it does I think we’re ready for it.…

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

First what was the process behind the management fee reduction?

Yes we went through a lot of analysis, we have been doing it for about 7-8 months, looking at different ways to change it and we saw 3 or 4 weeks [ph] that used something that’s very similar to what we have. So we looked at that and said let's start with that and as you know a lot of the REITs we were out of sort surprised that -- they seem to tinker with their fee every quarter and come up with minor change here or there. So we thought this would be good starting point, the idea again was to get ourselves in shape so that we could increase the dividend over some period of time. So we did a lot of study, looked at a lot of REITs that are internally managed, pulled out their G&A of course it's harder to get to those numbers and they always have some kind of extra fee that they charge for and bring an income. So we have decided that we are trying to follow what the market is doing and that was our best guess of where the market is.

Can you talk a little bit about equity issuance at this point given where the stock price stands?

Yes we have been reticent to issue a lot of shares at this point in time. I would love to do an equity offering but quite frankly it's just the price has dropped so much and we are not alone. The whole REIT industry has been dropping, so the prices on many stocks are very bargain basement and this one certainly is with such a high yield. So from my standpoint we’re very going to be very [indiscernible] in raising additional equity, however it's you and the other analyst would put out a lot of buyers on the stock we would probably be able to get the price with that I'm just joking that.

But you have got the buyout there as you know, I can't do it single-handedly unfortunately. Talk a little bit acquisitions, what's the pipeline look like, what are you anticipating, I’ve to think at this point given that you are somewhat capital constraint, acquisition is going to be a little more difficult.

Well you know as I indicated we have a couple of properties of due diligence, one we are anticipating it's under $10 million that we will be closing this quarter, the other one is in due diligence has a delayed probably a delay closing into the fourth quarter because of the seller request. So I think as David indicated we’re going to hold back and as we typically do we’re going to be looking at even more highly accretive deals before we would bring them to committee. So the competition among my leaders out there is going to become stiffer but that’s just doing it the safe way. We’re hopeful that with the announcement on the fee structure and how this may change in the future and some of our releasing and renewal activities will generate some additional interest but we’re going to be patient that we’re not going to jump off the [indiscernible].

One thing to remember here is as you know in historical terms we used to do some very high accretive transaction. So we know that marketplace very well, because we’re running two business development companies we’re in great position to underwrite the tenant so what may look very risky to some we pretty much reduced the risk by underwriting small or midsized business as a tenant and so we have been pushed back into the category of doing a little higher rate of return in order to cover the dividend on any new shares. The second point you’re right on target though it has restrained our ability. We probably have turned down 2 or 3 fairly large transactions that we’re in sort of a mid-range return closer to what we have been doing in order to bolster our size and so we have had to pass those just for the simple reason as we didn’t want to put deal that was probably not going to cover or just barely cover the dividend that we’re having to pay. So we’re ever mindful and watch what's going on in the stock market because that determines what we can go out and buy.

And you’re looking at things like maybe some higher yield debt type investments rather than strict property investments?

No we have stayed away from lending simply because most of those high rate loans really mean you’re doing the workout you’re dealing with somebody who has got problems, we did do one transaction in which we were trying to do a construction kind of loan that was going to lead us to the point of owning the property, that didn’t really workout as much as we had hope and so we didn’t end up buying the property but we got a great rate of return. I guess we would look at a few more of those but it's not on the agenda to do a lot of that.

Are you looking at any -- is it showing any potential non-traditional sort of equity? I know you have got a senior comment out there but anything on the deferred side maybe, because the preferred market is probably a little cheaper at this point for you than the common equity market?

Yes I love preferred stock as you probably know. We have been able to issue any permanent preferred recently but obviously we have issues with preferred outstanding to-date and I would love to do some more of that and so when you look at that what do you think we can get in terms of rate today?

You had talked to the bankers David but I have think -- it's cheaper than your cost of capital [indiscernible] right now.

We agree. So we’re looking at all alternatives but as you know we terminated our senior common, it never really fit into the non-traded REIT area that well and so we never got a lot of traction even though it's very attractive and very much a better opportunity to put those who like the non-traded REIT world. Anyway that’s where we’re.

[Operator Instructions]. We have no further questions. I would like to turn the call over to David Gladstone for any closing remarks.

All right. Thank you all for calling in and we will see you again next quarter. That’s the end of this call,

Ladies and gentlemen thank you for your participation in today's conference. This concludes the program. You may now disconnect. Have a wonderful day.