Gladstone Commercial Corporation (GOOD) Q4 2015 Earnings Report, Transcript and Summary

Good day ladies and gentlemen and welcome to Gladstone Commercial Fourth Quarter Ended December 31, 2015 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 is being recorded. I would now turn the call over to your host David Gladstone. Please go ahead.

All right. Thank you, Stephanie. We appreciate that nice introduction and boy, most of all, we thank all of for calling. We enjoy this time with you, on the phone and wish there were more time to talk about things. Please come and visit us if you're in the Washington DC area. We're located in the suburb called McLean Virginia and you have an open invitation to stop by and see us. If you're in this area. You'll see a great team at work. It's about 60 members here in the office and now, we'll hear from Michael LiCalsi. He is our General Counsel and Secretary. Michael is also the President of Gladstone Administrator, which serves as the administrator to all Gladstone Funds and the related companies as well. He will make a brief announcement regarding some of legal and regulatory matters concerning this call. 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 all of the risk factors included in our Forms 10-K and 10-Q that we filed with the SEC. They can be found on our website www.gladstonecommercial.com and on the SEC's website 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 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. We also plan to discuss core FFO today, which is generally FFO adjusted for property acquisition costs and other non-recurring expenses. And 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. You can also follow us on Twitter, 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-K, for the year ended December 31, 2015. We also prepared a financial supplement this quarter to provide further detail in our portfolio and results of operation and you can find all of these in our website gladstonecommercial.com. And now we will begin the presentation today by hearing from Gladstone Commercial's President, Bob Cutlip.

Thanks, Michael. Good morning everyone. During the fourth quarter, we acquired $6.6 million property and financed it with a long-term mortgage of $3.8 million. Expanded our line of credit facility to $110 million, adding three banks and reducing the cost in the facility. Sold three properties for a total gain on sale of $1.5 million. Extended leases with existing tenants at five of our properties, executed a lease with a new tenant for the majority of our Maple Heights, Ohio property. Modified one lease such as the tenant will expand into the additional space than our Minneapolis property and repay $27.2 million of maturing debt on six properties. Subsequent to the end of the quarter. We also received repayment of $5.9 million development loan, plus a 22% return on this investment and signed a Letter of Intent for 13,000 square feet and in our partially vacant Chicago property. As you can see, our acquisitions capital and asset management teams were all very active and contributed to our success this quarter. We had another excellent quarter, as we continue to increase our asset base by acquiring new properties. While also selectively selling properties as part of our asset recycling program. This was our 17th consecutive quarter of closing at least one new acquisition. We're extremely pleased with our activity and the consistency over the last number of years and we continue to have a very good pipeline of acquisition candidates. Now, for some details. During the quarter ended December 31, we acquired a 90,000 square foot industrial facility in the Atlanta I-20 West Submarket. The purchase price was $6.6 million. The lease term 18 years and the average cap rate 9.2%. Universal Pasteurization, a market leading High Pressure Pasteurization food processor is the tenant. In addition, to this excellent cap rate. The acquisition price included additional land which will enable us to expand the building by about 50%, if necessary. Subsequent to the end of the year, we successfully exited our $5.9 million second mortgage development loan and achieved a 22% return on our invested capital during the whole period, on exit. This was the first and a new program we created to participate with developers on build-to-suit projects nationwide. And this investment provided very good risk adjustment returns to our shareholders. Under this program, we expect to own many of these properties at construction completion with a credit qualified long-term lease. Otherwise, we'll exit with the developer as we did in this case, with a sizable return. Our acquisitions team has been placing significant focus on acquiring properties in secondary growth markets. The hallmark of our continuing high occupancy remains and will continue to remain, thorough tenant credit underwriting and the mission critical nature of the property. We also critically evaluate the real estate and closing transactions in growth markets leads to properties and land constraint locations overtime and hopefully, subsequent increases in property values, that will benefit our shareholders. Over the past two years, we've invested in Phoenix, Salt Lake City, Denver three times, Dallas four times, Austin, Atlanta twice, Indianapolis, Columbus Ohio twice and Minneapolis to promote this strategy. The last three acquisitions have been in Atlanta and Salt Lake City. Two markets in which we wish to increase our concentration over time. Our asset management team was quite busy in 2015 renewing existing leases and leasing our available space. During the fourth quarter alone, we executed a three year lease for 80% of our industrial property in Maple Heights, Ohio. After the existing tenants expired at the end of December. Extended the lease of one of our office tenants in our Indianapolis property, extended the remaining three leases that were set to expire in 2016, and extended the lease of our 280,000 square foot office, an industrial tenant located in Duncan South Carolina that lease was extended through 2028. With all these leasing activities completed, we expect our same store rents to be stable and growing in 2016 and expect our occupancy to remain at a high level. We only have two fully vacant properties remaining today. We've engaged the broker to sell the Dayton, Ohio office property and anticipated sale to close in the next six months. The second property in Eastham, Massachusetts of 86,000 square foot freezer, cooler industrial property and we're actively pursuing new tenants for that property at this time. So from a 2015 bottom line perspective, the two vacant properties comprised less than 1.5% of our 2015 rents and we're hopeful that one of the properties will be sold within the next six months. In summation, our portfolio is 97.4% occupied and our team successfully concluded 15 of 17 leases that were set to expire in 2015 and 2016, with leasing activity exceeding 1 million square feet. And the better news, is that only 5% of forecast rental income is expiring over the next four years through calendar year 2019. During the period that we anticipate the industry may well experience some headwinds, at some point in time. So we believe, our occupancy should remain high even if economic conditions deteriorate. We also executed on our capital recycling program, during the quarter. We sold three properties located in Columbus, Ohio; Birmingham, Alabama and Columbia, Missouri for a net gain on sale of $1.5 million. All three of these properties were sold to the existing users of the building. We consider these industrial assets to be non-core to our long-term strategy. We will continue to review our assets during 2016 and beyond to determine, if any of these assets are good disposition candidates and are in line with our focus of increasing our concentration in growth markets. In summary, we continued our acquisitions program during the quarter, renewed and expanded tenants on our properties, sold non-core assets, expanded our line of credit and refinanced maturing mortgage debt at lower interest rates. We continue to have a strong pipeline of acquisition candidates and will adhere to our strategy of only acquiring properties in growth markets that are accreted to our operations. Now, let's turn to Danielle Jones, our Chief Financial Officer to report on financial results.

Good morning, everybody. As Bob referenced, we had a very active quarter. Our total assets at the end of the year were about $833 million, which is reflected of the one acquisition completed this quarter coupled with certain ongoing tenant improvement projects, partially offset by the asset sale. We continue to focus on decreasing our leverage and have been refinancing debt at lower leverage levels. We expect to continue decreasing leverage over the next several years through a combination of lower leverage on newly issued debt and refinancing our mortgage maturities with lower leverage. We've reduced our leverage in Q4 by repaying maturing mortgage debt, which reduced the amount outstanding under long-term mortgage in our line of credit to about $530 million, which is a 2% drop from the third quarter. In addition, we raised $10.5 million in common equity and used these funds to acquire property, refinance the debt and to fund capital improvement to certain of our properties. You may have seen, that we filed a new registration statement for $500 million in January. Our existing registration statement was set to expire in September, 2016. We decided to file a new registration statement now because our current ATM program needs to be renewed and we also have the $38.5 million of term preferred equity that matures in January, 2017. We currently plan to refinance this equity with another tranche of preferred in 2016. We do not anticipate raising large amounts of equity in the current market environment. We filed the registration statement because it is for a three-year term and we want to be in a position to access equity, when we needed and market conditions permit. We also amended our line of credit during the fourth quarter in order to position us for growth over the next few years. We expanded the line from $75 million to $85 million and added a $25 million, five-year term loan facility. We also extended the maturity date of line for one year through August, 2018. The interest rate in line was reduced 25 basis points at each leveraged tier and the interest on the term loan is five basis points less than a line of credit. The total maximum commitment was increased from $100 million to $150 million. We also expanded the number of banks in the line, in addition to KeyBank and Comerica Bank. We added Fifth Third Bank, US Bank and Huntington Bank to the syndicate. We believe this addition of three strong lenders wonder illustrates the confidence in our long-term strategy. We currently have $57.3 million outstanding under both the line in term loan facility, at a weighted average interest rate of about 2.9%. We continue to only use our line of credit to make acquisitions that we believe can be financed with longer term mortgage debt or that we believe, a good additions to our unsecured property pool required under our line of credit. The market for long-term mortgages continues to be strong and the environment is very competitive. The CMBS market remains active, but its underwriting terms has become slightly more conservative and restrictive than they were in the first half of 2015. Lenders tighter credit metrics have had very little impact on our access to credit because we have been leveraging assets at loan to values of less than 60% rather than seeking to maximize leverage. However, interest rates continue to be volatile. For example, during 2015 the yield on a 10-year treasury ranged from a low of 1.6% at the end of January to high of 2.5% in late June, which is about 90 basis points swing. At the end of 2015, the yield on a 10-year treasury was 2.3%, which is about 23 basis points lower than at second quarter highs and since the beginning of 2016, the yield on the 10-year treasury has declined to approximately 1.6%. While the yield has retreated from its highs last year. Lenders have increased the margin at which they lend, in response to the increase volatility in anticipation of increasing interest rate. With regards to overall borrowing cost, this increase in margins has more than offset the decline in the 10-year treasury's yield. However, interest rate still remain attractively low, it may continually to actually try to match our acquisitions with cost-effective mortgages. Depending on several factors including the tenants credit rating, property type, location, the terms of the lease, leverage and the amount and term of loan, we're generally seeing fixed interest rates ranging from 4.5% to about 4.75%. To this end, we did repay $27.2 million maturing mortgage debt this quarter, by refinancing $3.6 million with new variable rate mortgage debt with an interest rate cap and the remainder with borrowings under our line of credit and cash on hand. This combination lowered loan to value of our portfolio. The weighted average interest rate and the maturing debt was 5.7% and the rate on the new mortgage debt is about 2.7% today, which is a 3% decreased from the mortgage debt that was repaid. Total 2015 refinancing was $57.5 million, at a new weighted average interest rate of 2.7%. Prior to refinancing, the mortgages had a weighted average interest rate of 5.5%. The combined refinancing will reduce our annual debt service by approximately $1.8 million. We also issued new debt during the fourth quarter of $3.8 million on our acquisition at a fixed rate of 4.6%, which was the lower end of the range making this deal very accretive for our shareholders. Reviewing our upcoming maturities. We have balloon principal payments from seven mortgages of $69 million payable throughout 2016. We anticipate being able to refinance loans with the combination of new mortgage debt and equity. The weighted average interest rate on the 2016 debt is 5.7% and while interest rates are anticipated to increase from today's lows, we still expect to achieve at least 100 basis point interest rate reduction, when we refinance these loans in 2016. We've already begun discussions with lenders and the debt that matures during the second quarter 2016 and expect to refinance some of this, before the end of the first quarter. We also have $61 million of mortgages debt maturing in 2017. Weighted average interest rate on this debt is 6.1%, so again we should achieve better rate and this goes straight to the bottom line. We are focused on our strategy of lowering our leverage, by reducing our weighted average loan to value, a newly issued debt and refinance debt. We also continue to increase our common market capitalization and have issued over 2.9 million shares of common stock during 2015. We have decreased our loan to our loan to value from a high of 67%, 2009 to 53% today. As of today, our available liquidity is approximately $22.3 million comprised of $3 million in cash and available borrowing capacity of $19.3 million under our line of credit. With that current availability and access to our ATM program. We have enough availability to fund our operations, deals in our pipeline and any known upcoming improvement at our properties. And now, we will review the results. All per share numbers I referenced are fully diluted weighted average common shares. Core FFO available to common stock holders was $33.4 million or $1.53 per share for the year and with approximately $8.9 million or $0.39 per share for the quarter, which increased from compared to the third quarter. Quarterly core FFO per share increased because of the additional revenue, we achieved from the acquisitions completed during the last two quarters coupled with a decrease in property operating expenses at certain of our properties. We also had a decrease in general and administrative expenses from lower professional fees driven by lower acquisition volume. This results to the second quarter completed under our revised fee structure and as you can see, we do not have a credit to our incentive fee paid to our advisor this quarter and our core FFO per share increased quarter-over-quarter. We believe the changes to the fee structure bought us more in line with a current REIT market practice, we're hopeful it will facilitate our growth of FFO in the future. We also believe, this amended fee structure will allow us to become more competitive in forcing and retaining talented investment and operations professional. As Mike mentioned, we also posted a quarterly finance supplement to our website under the presentations link, which provides more detail financial and portfolio information for our investors and analyst. Well 2016, brings with challenges as we work on debt maturities and the headwinds and the global macroeconomic conditions. We believe, we have the right team in plan and place to reposition and continue our growth activities. We are confident with a remainder of 2016 will be successful, as we continue to increase our asset and equity base and decrease our leverage. We are focused on maintaining our high occupancy. And I'll turn the program back over to David.

Well, that was a good report Danielle and good reports from both Bob Cutlip and Michael LiCalsi. Good team in place today. The main news of course in 2015 is that, we renewed all of our 2016 leases leaving only 5% of forecast rents and expiring through 2019, that's a very solid base to work from now, with 97.4% occupancy. We refinance the maturing loans, at lower interest rates, saving about $1.8 million and we expanded our line of credit, added pretty strong lenders and that reduced our cost as well. So this diversification of lenders is always very secure for all of our shareholders. Revising our fee structure during the year, is much more in line with all the REIT marketplace. We've been very friendly to our shareholders in the past and now we've put it in place with complete new structure of that, is very favorable to shareholders. And we've of course been investing in more buildings, in growth marketplaces consistent with a strategy we're going after certain marketplaces that Bob and the team like. We've continued to add the quality real estate that we like in our portfolio and shore up any existing properties. We've continue to grow all of our market capitalization leases increases and we hope to see high trading volumes in the stock, in the corresponding uptake and the stock price because the distribution rate today is very, very high. As many of you know, the company did not cut its monthly cash distribution during the recession, that was quite a success story. We watched some very good companies cut their distributions and most of them never came back. They never recovered to the dividend level, they had during that period of time. So here's what we're doing today. We need to increase the common stock market capitalization in order to increase the trading volume, to give investors who want to buy a lot of stock, the ability to do this. We hear this from some of the institutional buyers. They always want to know the number of shares outstanding, so that when they buy $10 million, $20 million, $30 million of our stock. They know that they need to, they'll have enough liquidity when they want to sell. We still do not have enough shares outstanding to give them that confidence. However, as we consistently build our asset base and our equity base. We doubled it and over the last four years, that will help us out a lot. With this growth, we hope to see more buyers coming to the stock and it should hopefully help increase the price and lower the cost of capital. So new investments will be much more accretive to the dividend payout. Want to expand on Bob's comment regarding renewal leasing efforts. We slowed the acquisition pace during 2015, due primarily to market conditions. But we continue to evaluate opportunities in addition, our acquisition team has been augmenting our asset management team during the year, getting all the leases in place and reliving some of the burden that we have, overseeing all of our properties. But they're back on the path now. We continue to have a promising list of potential quality properties interested in acquiring and because of that list of properties, we expect to continue to grow the assets and the portfolio during 2016. With an increase in the portfolio properties, comes greater diversification and we believe that's better for earnings more solid earnings and better by lowering the risk profile to shareholders. We are focusing our efforts on finding good properties and long-term financing to match the long-term leases. So we go long-term on both of those, we're being able to lock in the long-term financing, which is good for us in the future and between 2016 and 2019, they only have 5% of the forecasted rents expiring during that period of time and our debt maturities after 2016 dropped significantly, at the time where we believe interest rates may likely be higher. But we're set up to be, very well over the next several years, much more optimistic today than I have been in a long time about what's going on out there and especially with regard to this company. Much of the industrial base of businesses that rent industrial and commercial properties like our properties remained steady and most of them are paying their rents. So everything is working the way, it should work in this company. There are of course some businesses that are having problems and the economy is still not in great shape. We expect good growth in this REIT during the following years. Well I'm optimistic, that the company will be fine in the future. Bob Cutlip and I'll continue to be very cautious in our acquisitions as we have in past year. We made it through the last recession without cutting the dividend or having a lot of problems from our tenants. So if there's another recession lurking on horizon. I think our portfolio will continue to stand the test against that, period of downturn. In January 2016, the board voted to maintain the monthly distribution of $12.05 per common share for January, February and March an annual run rate of $1.50 per year, very attractive rate for well managed REIT like ours today. We'd now paid 137 consecutive common stock cash distribution, since inception and we went through the recent recession of course without cutting any of those. I think, this is a wonderful track record that you can see in the past and we hope to duplicate, feel very confident. We're going to duplicate in the future. Because the real estate can be depreciated. We're able to shelter the income of the company. The return of capital was about 79% per common stock, dividend in 2015. So this is a very tax-friendly stock. In my opinion, a good one for person accounts that are seeking income because you don't pay taxes on that 79%, until you have to sell the stock. This return of capital is mainly due to the depreciation of real estate assets and other items and that's caused earnings to remain low, after depreciation and that's why we talk about core FFO because it's adding back the real estate depreciation. As you all know out there, depreciation of a building is a bit of a fiction anyways, since at the end of the depreciation period, the building is still standing even though you have zero cost in it. So if you own the stock in a non-retirement account as oppose to having it in, in an IRA or retirement plan. You don't pay any taxes on that part that's sheltered by the depreciation, that is considered return of capital. However, tax man does get his due when the return of capital has to reduce your cost basis on the stock, which may result in a large capital gain in taxes, when the stock is sold. Stock closed yesterday at $13.74 distribution yield now, it is about 10.9%, almost 11%. Stock prices taken a hit as many other REITs with, the threat of rising interest rates, which is causing the investors to flee the bond in high yield marketplace like our stock, but hopefully and our stock price will rebound and stabilize over the next few months, as the uncertainty subsides. Many of the REITs are trading at much lower yield, however than ours. We're at 10.9%. Let me say this again, REIT universe is trading at 5.8% yield and if we were trading at that price, we would have a stock price of about $25 a share. The net-net-net REITs which is what we are, are trading at about 7.28% yield. So if our stock was trading at that yield today, the stock price would be about $20.60 per share. So as you can see there's a lot of room for expansion of our stock-based on other REIT stocks that are comparable to us. I know some of the analyst would say, oh yes, but you're externally managed and you're somewhat more leveraged than other REITs. Well, I don't want to be too contrary here, but I think you should be looking at whether the management team is a good team or not. Not whether they're internally managed or better in, just once I'd like people who make that argument to say, we have a great management team here. Who's performed over the last 10 years. The cost to operate a REIT is not higher, whether you're internally or externally managed. If you've been watching also, the leverage has been going down every quarter recently. We're now at about 50% leverage based on our market capitalization. It's about $1 stock outstanding for $1 debt in the buildings, we own, that's not high leverage when you're talking about buildings that are on long-term leases. The board will vote again in mid-April during our regular schedule quarterly meeting toward declaration of the monthly distributions of April, May and June. We're hopeful that overtime, we can continue to, well I'm hopeful that we can raise the dividend but we'll have to look at that on our quarter-by-quarter basis. Now we'll have some questions from our shareholders and analysts to follow this wonderful REIT. Operator, please come on and help our listeners ask their questions.

[Operator Instructions] our first question comes from John Roberts with Hilliard Lyons. Your line is open.

Given the current share of price, obviously you're not going to issue any equity. Do you think, is that going to potentially constrain your ability to make acquisitions in a near term, do you think?

Well, it would, but John we're probably going to be able to raise more debt and hopefully, maybe even sell some preferred stock. We've considered both of those alternatives and are currently looking at it. So my guess is, during this year. We'll be using that more than the common stock, that's the plan right now.

Okay, would that be a convertible, do you think or a straight preferred?

We really haven't locked in on that yet. We're thinking about doing some straight preferred, if the price is right. We're working on that now, so little early to make any announcements.

Okay, thanks. David.

Our next question comes from Rob Stevenson with Janney. Your line is open.

Just a follow-up on that last question. I mean, where do you guys think that you can price preferred today?

Probably between 6.8% and 7.2% would be the range.

Okay, does that lead you to, in addition to possibly issuing preferred to fund future acquisitions. Does that have you at least one of your existing tranches of the preferred is, at an interest rate above that. I mean, are you thinking also about taking gotten refinancing, that one is well to give you a little bit extra cushion?

No, we haven't talked about that at all. We just want to add some additional preferred as you know next year, we have some of our preferred coming due and we'll have to pay that off. So the term preferred would probably replace with additional term preferred or some other form of preferred. But for us in that range, as you probably know we're not at a big buyer buildings that have tenants in it that are rated. And rated tenants mean that, the cap rate or the rate of return that you can get or historically very low today. So for us because we're able to underwrite, unrated tenants as you know we have teams here that do nothing but lend money to small and mid-sized businesses and doing buyouts to small businesses. So we understand that marketplace and because we understand that marketplace, we're able to do transactions in that area of - each of the companies that we're looking at are underwritten, as if we were going to make a loan or buy them. So that we get this long-term history that we have, of not having tenants fail on us. We continue to use that ability to pick good tenants and when you pick a good tenant and put them in for 10 years, when they stay for 10 years and you're able to leverage that, as we have been in the past. The spreads they are superior to the people who are buying the rated tenants and trying to finance those. So we'll be like, we're in a sweet spot with regard to what we do, we picked out some cities. We're now doubling and tripling down in some of those cities in terms of getting our teams together. We've cut our management team into teams that are related to areas of the country. So all of this is coming together as a very nice operation. So we think, using preferred at this point in time is probably the best way to pay for half of the buildings and the other half can be paid for by borrowing a long-term mortgages. So it's a good fit for us right now, Rob.

Okay, thanks guys.

Our next question comes from John Massocca with Ladenburg Thalmann. Your line is open.

You have no lease on 2016, how do you think your capital improvements and kind of leasing commissions are going to trend, this year?

Bob, Danielle?

Let me address it initially, we will have overhang through the first let's say six to eight months and then really, it tails off quite a bit because we're finishing up to 2015 and doing the 2016, during the first six months. So we'll have CapEx for commissions and for tenant improvements during that period, but as I said and Danielle confirms for me. The latter half of the year, we tail off and then of course. In 2017, I think we're already looking at our renewals at that point, we have very few as you know based on the expected expiration. So we're pretty confident that it's going to drop over the next six to eight months quite a bit.

Okay, but over the first kind of six months of this year, it will probably be maybe similar to what it was in four quarter of 2015 or?

Just to pipe in a little bit there. I think Bob was talking on a cash basis. We've accrued a lot of that TI and leasing commissions at the end of the year. We have to pay some of it out. In the first quarter, if you look at our cash flow statement. I think there was like $4.5 million that we have accrued, that yet to pay. So some of it is already baked in to our financial statements at the end of the year. We will have a little bit of additional.

John, it's not significant. It's not going undo the apple cart someway. It's relatively light.

Understood and then, for your dispositions, you guys did in the fourth quarter. Do you guys have a cap rate or even just a cap rate range for what do you sold those at?

I don't have that with me, but we can get that to you. I do know that, we sold them for $6.9 million and made $1.5 million, so a very good profit for us. But remember, these properties when we bought them, we bought them at a very high cap rate. Two of the properties are truck service maintenance faculties for Cummins and of course, they bought them from us. And then the other one is a, they've been industrial facility in the suburb of Columbus, Ohio and the existing tenant who is the subtenant in the building, bought that from us. So, we feel very good about it. But I will guarantee you, those cap rates are not going to be in the six's and seven's, but I think we bought them with double-digit cap rates, but we'll confirm that number to you.

Great, no problem and then. Bit more on the balance sheet side. With regards to term loan, is there any interest in swapping that out? I know, most of your floating, all of your floating rate mortgage debt is capped with volatility maybe in the interest rate markets. I mean, is there any interest in swapping out a term loan in what spread do you think you can get in the markets today.

I don't know the term loan is something we've been trying to do for a long time. As you know, we've got mortgages at long-term and then we've got our revolving line of credit and it was very nice to put up, a piece of debt in there, but we'll look at that. I don't know what the penalties are for paying that off, do you remember?

Are you talking about the $25 million term loan, we just put in place or term preferred stock?

The $25 million term loan, you put in place.

I don't think we have any plans to put that out this year because again, we just put in place that's got pretty solid price [indiscernible].

I was talking about swapping it out, so the interest rate was essentially fixed.

Oh, I see.

We can buy a cap.

Yes, we can buy a cap, we haven't had discussions on that internally right now.

Okay, all right. That's it from me. Thanks very much, everyone.

[Operator Instructions] our next question comes from Larry Raiman with LDR Capital. Your line is open.

Question for you on the core portfolio. I didn't go through the full filing yet, I just read your earnings release. Could you describe what the, quarterly same property, same store income was year-over-year and then maybe you could describe it for the full year, with the same property income and then maybe you could, maybe you set as a launch pad to say, based on your anticipation, given your lease structure, with the organic growth in the same property portfolio looks like over the course of the next 12 months.

Organic growth is going to be relatively small because of fixed rate pump [ph] up maybe 2% or 3% at the most in the core. So there's not much growth in that. The way we've been making a lot more money is by refinancing some of the mortgage that are coming due or when they can be and of course to mention the 1.8 savings last year. I suspect that this year will be very strong in savings there. So the growth will come from refinancing not redoing leases. When we do have a lease, we get a chance to increase the rate but we don't have that many, it's a blessing and a curse. We don't have that many coming due to [indiscernible], so there is not opportunities to renegotiate, but there is some built-in growth. I don't know what that is, Danielle, do you?

I mean, just to follow-up in your question, we had close to $81 million of rental income this year and over 95% of that is basically on our same-store property. So on our existing properties or properties we've acquired. Some of that additional, I can refer you Page 54 of our 10-K because we actually have table that breaks all of this out. Less than 2% of that is from our vacant properties. So we anticipate our same store revenue to be stable again in 2016, since we've renewed all of our 2016 leases.

Sure and do you straight line any stipulated rent increases and I presume, that's in there as well.

That's correct.

Okay, good. one another maybe just observation would be, I know you mentioned the quality of the management team, but certainly the structure of getting an outsider advice [ph] does turn up some investors and I know that, you've listened to them and change your advisory fee, the very recent past, but was their disclosure with regard to the analysis that, you may mention that we wanted to bring the cost of that structure in line kind of with the market and be more cognizant of existing investors. Was disclosure of that analysis made public to show similarly sized companies and their overhead cost and here we are, so you're not paying any more dollar-for-dollar? Is that [indiscernible]?

No, we didn't do that. There are maybe 10 externally managed REITs and only three or four of them are sort in our area. So we pretty much took their agreements and analyze them in terms of what it would do for us and felt like, that was a good marker, but we didn't go out and say, here is a research paper you can review. Trying to get data from those that are internally managed and compared them to ours. Is very difficult, since the internal managed groups don't really publish exactly what it would be like if it was externally managed. So it's hard to pull out all the cost and expenses. They're summarized to such a level that you can't get too the pieces that we pay to our management company. So there is no way to get that number out. I've guessed several times in talking to people and trying to piece those numbers out, that there is not a lot of difference between what the internal manager is paying, what the external manager pays.

Understood, so has there been any discussion about potentially internalizing, just while the management team can still be involved, with changing with the optics and maybe that would kind of bring in a new constituency of shareholders, as you want to grow the company and broaden out that base.

I think it will be hard to do that at this point in time. You need to be larger, we've considered that a couple of times and just felt like that, we would lose so much in terms of external versus internal because we have the sharing arrangement of legal and accounting and different. So it's very hard to be able to externalize that and internalize that. So we haven't gotten to that point, maybe one day but not today.

Great, thank you very much. Nice job and keep it up.

I'm showing no further questions. I will now turn the call back over to David Gladstone for closing remarks.

Okay, thank you all for calling in. we appreciate the questions and hope they're more of those, next time. We'll see you at the end of next quarter. That's the end of this call.

Thank you, ladies and gentlemen. That does conclude today's conference. You may all disconnect and everyone have a great day.