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| Equity |
EQUITY
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. Any shares of Series B Preferred Stock (as defined below) shall have the status of authorized but unissued shares of capital stock.
Stockholders’ Equity
As of December 31, 2018, there were 6,500,000 shares of Series B Preferred Stock (as defined below), par value $0.001 per share, authorized, with 1,144,393 shares issued and 1,144,393 shares outstanding worth an aggregate liquidation value of approximately $28.6 million; and 91,500,000 shares of common stock, par value $0.001 per share, authorized, with 17,891,340 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 December 31, 2018 and 2017, we owned approximately 96.9% 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.
Information related to OP Units tendered for redemption during the years ended December 31, 2018 and 2017 is provided in the table below (dollars in thousands, except per-unit amounts):
See Note 11, “Subsequent Events—OP Unit Redemptions” for redemptions of OP Units subsequent to December 31, 2018.
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 OP Units and the Company elects to satisfy that redemption through the issuance of common stock, 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 December 31, 2018 and 2017, there were 570,879 and 1,008,105 OP Units held by non-controlling limited partners outstanding, respectively. As of December 31, 2018, all of the 570,879 OP Units were eligible to be tendered for redemption. See Note 11, “Subsequent Events—OP Unit Redemptions” for redemptions of OP Units subsequent to December 31, 2018.
Registration Statement
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. Through December 31, 2018, we have issued a total of 5,396,030 shares of common stock (excluding 644,686 shares of common stock issued in exchange for certain OP Units that were tendered for redemption) for gross proceeds of approximately $67.5 million and 1,144,393 shares of Series B Preferred Stock (as defined below) for gross proceeds of approximately $28.1 million under the 2017 Registration Statement. See Note 11, “Subsequent Events” for equity issuances completed subsequent to December 31, 2018.
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 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 revised and 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 Note 6, “Related-Party Transactions—Gladstone Securities—Dealer-Manager Agreement,” 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.
During the year ended December 31, 2018, we sold 1,144,393 shares of the Series B Preferred Stock for gross proceeds of approximately $28.1 million and net proceeds (after deducting selling commissions and dealer-manager fees borne by us) of approximately $25.7 million. As of December 31, 2018, excluding selling commissions and dealer-manager fees, we have incurred approximately $766,000 of total costs related to this offering, which are initially recorded as deferred offering costs (included within Other assets, net on the accompanying 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 11, “Subsequent Events,” for sales of Series B Preferred Stock completed subsequent to December 31, 2018.
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.
Common Stock
Secondary Offerings
During the year ended December 31, 2018, we completed two overnight public offerings of our common stock. In March 2018, we issued a total of 1,265,000 shares (including the over-allotment option) at a public offering price of $12.15 per share, resulting in total gross proceeds of approximately $15.4 million and net proceeds (after deducting underwriting discounts and direct offering costs borne by us) of approximately $14.6 million. In December 2018, we issued 1,450,000 shares at a public offering price of $12.55 per share, resulting in gross proceeds of approximately $18.2 million and net proceeds (after deducting underwriting discounts and offering expenses borne by us) of approximately $17.3 million.
At-the-Market Program
On August 7, 2015, we entered into equity distribution agreements (commonly referred to as “at-the-market agreements” or our “Sales Agreements”), as amended from time to time, 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 year ended December 31, 2018, we issued and sold 986,955 shares of our common stock at an average sales price of $12.95 per share under the ATM Program for gross proceeds of approximately $12.8 million and net proceeds of approximately $12.6 million. Through December 31, 2018, we have issued and sold a total of 1,595,591 shares of our common stock at an average sales price of $12.87 per share for gross proceeds of approximately $20.5 million and net proceeds of approximately $20.2 million.
Distributions
The per-share distributions to preferred and common stockholders declared by our Board of Directors and paid by us during the years ended December 31, 2018 and 2017 are reflected in the table below.
For federal income tax characterization purposes, distributions paid to stockholders may be characterized as ordinary income, capital gains, return of capital, or a combination thereof. The characterization of distributions on our preferred and common stock during each of the years ended December 31, 2018 and 2017 is reflected in the following table:
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