|6 Months Ended|
Jun. 30, 2018
Amendment to Articles of Incorporation
On January 10, 2018, we filed with the Maryland Department of Assessments and Taxation Articles Supplementary to reclassify and designate 6,500,000 shares of our authorized and unissued shares of capital stock as shares of Series B Preferred Stock (as defined below). The reclassification decreased the number of shares classified as common stock from 98,000,000 shares immediately prior to the reclassification to 91,500,000 shares immediately after the reclassification.
As of June 30, 2018, there were 6,500,000 shares of Series B Preferred Stock (as defined below), par value $0.001 per share, authorized, with 20,280 shares issued and outstanding worth an aggregate liquidation value of $507,000; and 91,500,000 shares of common stock, par value $0.001 per share, authorized, with 16,023,872 shares issued and outstanding. As of December 31, 2017, there were 98,000,000 shares of common stock, par value $0.001 per share, authorized, with 13,791,574 shares issued and outstanding.
Non-Controlling Interests in Operating Partnership
We consolidate our Operating Partnership, which is a majority-owned partnership. As of June 30, 2018, and December 31, 2017, we owned approximately 95.7% and 93.2%, respectively, of the outstanding OP Units.
On or after 12 months after becoming a holder of OP Units, each limited partner, other than the Company, has the right, subject to the terms and conditions set forth in the partnership agreement of the Operating Partnership, to require the Operating Partnership to redeem all or a portion of such units in exchange for cash or, at the Company’s option, shares of our common stock on a one-for-one basis. The cash redemption per OP Unit would be based on the market price of our common stock at the time of redemption. A limited partner will not be entitled to exercise redemption rights if the delivery of common stock to the redeeming limited partner would breach restrictions on the ownership of common stock imposed under our charter and other limitations thereof.
On January 16, 2018, 37,500 OP Units were tendered for redemption, and on January 17, 2018, we issued 7,700 shares of common stock in exchange for 7,700 OP Units, and we satisfied the redemption of the remaining 29,800 OP Units with a cash payment of approximately $400,000 (approximately $13.42 per OP Unit). On May 4, 2018, 19,230 OP Units were tendered for redemption, and on May 11, 2018, we issued 9,615 shares of common stock in exchange for 9,615 OP Units, and we satisfied the redemption of the remaining 9,615 OP Units with a cash payment of approximately $121,000 (approximately $12.54 per OP Unit). On June 12, 2018, 233,952 OP Units were tendered for redemption, and on June 13, 2018, we issued 233,952 shares of common stock in exchange for 233,952 OP Units. For OP Unit redemptions subsequent to June 30, 2018, see Note 10, “Subsequent Events.”
Regardless of the rights described above, the Operating Partnership will not have an obligation to issue cash to a unitholder upon a redemption request if the Company elects to redeem the OP Units for shares of its common stock. When a non-Company unitholder redeems an OP Unit, non-controlling interest in the Operating Partnership is reduced, and stockholders’ equity is increased.
The Operating Partnership is required to make distributions on each OP Unit in the same amount as those paid on each share of the Company’s common stock, with the distributions on the OP Units held by the Company being utilized to make distributions to the Company’s common stockholders.
As of June 30, 2018, and December 31, 2017, there were 717,423 and 1,008,105 OP Units held by non-controlling limited partners outstanding, respectively. As of June 30, 2018, all of the outstanding 717,423 OP Units were eligible to be tendered for redemption.
On March 30, 2017, we filed a universal registration statement on Form S-3 (File No. 333-217042) with the SEC (the “2017 Registration Statement”) to replace our previous registration statement, which expired on April 1, 2017. The 2017 Registration Statement, which was declared effective by the SEC on April 12, 2017, permits us to issue up to an aggregate of $300.0 million in securities, consisting of common stock, preferred stock, warrants, debt securities, depository shares, subscription rights, and units, including through separate, concurrent offerings of two or more of such securities. As of June 30, 2018, we have issued a total of 3,675,106 shares of common stock (excluding 544,686 shares of common stock issued in exchange for certain OP Units that were tendered for redemption) for gross proceeds of approximately $45.8 million, and 20,280 shares of Series B Preferred Stock (as defined below) for gross proceeds of approximately $507,000 under the 2017 Registration Statement.
2018 Equity Issuances
Series B Preferred Stock
On January 10, 2018, we filed a prospectus supplement with the SEC for a continuous public offering of 6.00% Series B Cumulative Redeemable Preferred Stock, which offering was terminated on May 31, 2018, with no shares being sold. On May 31, 2018, we filed a new prospectus supplement with the SEC for a continuous public offering of up to 6,000,000 shares (the “Primary Offering”) of our newly-designated 6.00% Series B Cumulative Redeemable Preferred Stock (the “Series B Preferred Stock”) at an offering price of $25.00 per share for gross proceeds of up to $150.0 million and net proceeds, after deducting dealer-manager fees, selling commissions, and estimated expenses of the offering payable by us, of up to approximately $131.3 million, assuming all shares of the Series B Preferred Stock are sold in the Primary Offering. The Series B Preferred Stock is being offered on a continuous, “reasonable best efforts” basis by Gladstone Securities, the dealer-manager for the Primary Offering. See “Gladstone Securities—Dealer-Manager Agreement” in Note 6, “Related Party Transactions,” for a discussion of the fees and commissions to be paid to Gladstone Securities in connection with the offering of the Series B Preferred Stock.
The offering of the Series B Preferred Stock will terminate on the date (the “Termination Date”) that is the earlier of either June 1, 2023 (unless terminated earlier or extended by our Board of Directors), or the date on which all 6,000,000 shares offered in the Primary Offering are sold.
There is currently no public market for shares of the Series B Preferred Stock; however, we intend to apply to list the Series B Preferred Stock on Nasdaq or another national securities exchange within one calendar year after the offering’s Termination Date, though there can be no assurance that a listing will be achieved in such timeframe, or at all.
During the three months ended June 30, 2018, we completed the sale of 20,280 shares of the Series B Preferred Stock for gross proceeds of approximately $507,000 and net proceeds (net of certain discounts and after deducting dealer-manager fees and selling commissions borne by us) of approximately $456,000. No sales of the Series B Preferred Stock had been made prior to the three months ended June 30, 2018. As of June 30, 2018, excluding certain discounts, dealer-manager fees, and selling commissions, we have incurred approximately $393,000 of total costs related to this offering, which are initially recorded as deferred offering costs (included within Other assets, net on the accompanying Condensed Consolidated Balance Sheet) and are applied against the gross proceeds received from the offering through additional paid-in capital as shares of the Series B Preferred Stock are sold. See Note 10, “Subsequent Events,” for sales of Series B Preferred Stock completed subsequent to June 30, 2018.
On March 27, 2018, we completed a public offering of 1,100,000 shares of our common stock at a public offering price of $12.15 per share (the “March 2018 Offering”). The March 2018 Offering settled on March 29, 2018, and resulted in gross proceeds of approximately $13.4 million and net proceeds (after deducting underwriting discounts and direct offering expenses borne by us) of approximately $12.7 million. On April 4, 2018, the underwriters exercised the over-allotment option in connection with the March 2018 Offering, and, as a result, we issued an additional 165,000 shares. The over-allotment settled on April 9, 2018, and resulted in gross proceeds of approximately $2.0 million and net proceeds (after deducting underwriting discounts and direct offering expenses borne by us) of approximately $1.9 million. We used the proceeds received from this offering to repay existing indebtedness and for other general corporate purposes.
On August 7, 2015, we entered into equity distribution agreements (commonly referred to as “at-the-market agreements,” or our “Sales Agreements”) with Cantor Fitzgerald & Co. and Ladenburg Thalmann & Co., Inc. (each a “Sales Agent”), under which we may issue and sell, from time to time and through the Sales Agents, shares of our common stock having an aggregate offering price of up to $30.0 million (the “ATM Program”). During the six months ended June 30, 2018, we issued and sold 716,031 shares of our common stock at an average sales price of $12.90 per share under the ATM Program for gross proceeds of approximately $9.2 million and net proceeds of approximately $9.1 million. Through June 30, 2018, we have issued and sold a total of 1,324,667 shares of our common stock at an average sales price of $12.83 per share for gross proceeds of approximately $17.0 million and net proceeds of approximately $16.7 million.
The distributions to preferred and common stockholders declared by our Board of Directors and paid by us (except as noted) during the six months ended June 30, 2018 and 2017 are reflected in the table below.
No definition available.
The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.
Reference 1: http://www.xbrl.org/2003/role/presentationRef