Gladstone Commercial Corporation Reports Results for its First Quarter Ended March 31, 2010
MCLEAN, Va., May 3, 2010 (GLOBE NEWSWIRE) --
-- Funds from operations ("FFO") of approximately $3.4 million and net
income of approximately $1.1 million
-- All properties remain 100% leased and paying as agreed
Gladstone Commercial Corporation (Nasdaq:GOOD) (the "Company") today reported financial results for its first quarter ended March 31, 2010. A description of FFO, a relative non-GAAP (generally accepted accounting principles in the United States) financial measure, is located at the end of this earnings release. All per share references herein are to fully-diluted weighted average shares of common stock, unless otherwise noted.
FFO for the three months ended March 31, 2010 was approximately $3.4 million, or $0.40 per share, which remained constant as compared to the same period one year ago. Additionally, net income for the first quarter of 2010 was approximately $1.1 million which was consistent with the same period one year ago. The Company's results reflect a decrease in our professional fees, stockholder related expenses and interest expense. Professional fees decreased because of a reduction in legal fees incurred this quarter. The Company incurred higher legal fees during the three months ended March 31, 2009 related to lease renegotiations and reviews of legal documents with our existing tenants. Stockholder related expenses also decreased significantly during the quarter due to a reduction in costs incurred for the printing and filing of our 2010 proxy statement and annual report. Interest expense also decreased due to the decrease in the London Interbank Offered Rate ("LIBOR") from the first quarter of 2009, which reduced our interest expense under our line of credit, coupled with reduced interest expense on our long-term financings from amortizing principal payments made during 2009 and 2010.
Net income available to common stockholders for the three months ended March 31, 2010 was approximately $63,000, or $0.01 per share, as compared to approximately $66,000, or $0.01 per share, for the same period one year ago. A reconciliation of FFO to net income, the metric which the Company believes is the most directly comparable GAAP measure to FFO, is set forth below:
For the three months ended
March 31,
--------------------------
2010 2009
------------ ------------
Net income $ 1,086,333 $ 1,089,569
Less: Distributions attributable to preferred stock (1,023,438) (1,023,437)
------------ ------------
Net income available to common stockholders 62,895 66,132
Add: Real estate depreciation and amortization,
including
discontinued operations 3,321,871 3,314,100
------------ ------------
FFO available to common stockholders $ 3,384,766 $ 3,380,232
Weighted average shares outstanding - basic & diluted 8,558,664 8,563,264
Basic & diluted net income per weighted average share
of
common stock $ 0.01 $ 0.01
============ ============
Basic & diluted FFO per weighted average share of
common stock $ 0.40 $ 0.39
============ ============
Distributions declared per share of common stock $ 0.375 $ 0.375
============ ============
Percentage of FFO paid per share of common stock 95% 95%
============ ============
At March 31, 2010, the Company owned 64 properties totaling approximately 6.3 million square feet and had one mortgage loan outstanding for a total net investment of approximately $391.8 million. Currently, all of the Company's properties are fully leased and each of its tenants and its borrower are current and paying in accordance with their leases and loan, respectively.
The Company has three leases that expire in 2010, which total approximately 3.4% of total annualized rental income. Two of these tenants, whose leases total approximately 2.6% of the Company's total annualized rental income, have notified the Company that they will not renew their leases. The Company is seeking new tenants for these two properties while concurrently researching alternative uses for these two properties and is hopeful that it will re-lease these properties in the near future.
The Company has $48.0 million of balloon principal payments due under one of its long-term mortgages in 2010; however, the mortgage has three annual extension options through 2013, which the Company currently intends to exercise. The Company has no other balloon principal payments due under any of its mortgages until 2013.
The Company's line of credit matures in December 2010, and it is currently in discussions with lenders to renew the existing facility or find replacement financing for the line of credit this year.
During the first quarter, the Company paid monthly cash distributions for the quarter totaling $0.375 per share on the common stock, $0.4843749 per share on the Series A Preferred Stock, and $0.46875 per share on the Series B Preferred Stock.
"We maintained a conservative acquisition pace in past years and conducted thorough due diligence processes, and, as a result, we are benefiting today as all of our properties remain fully leased and all of our tenants and borrower are current and paying as agreed," said Chip Stelljes, President and Chief Investment Officer. "We continue to review and consider extensions of some existing leases in cases where we believe a modification will add value for our stockholders. We are also selectively making capital improvements to certain of our properties. During 2009, we remained on the sidelines, preferring to avoid the market's unprecedented economic headwinds to focus on adding value to our existing portfolio. Our patience has paid off as we are seeing improved pricing returning to certain markets. We are currently reviewing several potential acquisitions and are hopeful that we will be able to raise additional equity and mortgage debt during 2010 to grow our portfolio."
Subsequent to March 31, 2010, the Company:
-- Issued 2,060 shares of senior common stock at a gross price per share of
$15.00 in the first closing of its previously announced continuous
private offering of up to 3,333,333 shares of senior common stock. Net
proceeds from the first closing, after selling commissions and the
dealer manager fee, were $27,675.
-- Declared monthly cash distributions of $0.125 per share on the common
stock, $0.1614583 per share on the Series A Preferred Stock, $0.15625
per share on the Series B Preferred Stock, and $0.0875 per share on the
Senior Common Stock for each of the months of April, May and June 2010.
The financial statements attached below are without footnotes so readers should obtain and carefully review the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, including the footnotes to the financial statements contained therein. The Company has filed the Form 10-Q today with the Securities and Exchange Commission ("SEC") and the Form 10-Q can be retrieved from the SEC's website at www.sec.gov or the Company's website at www.GladstoneCommercial.com.
The Company will hold a conference call on Tuesday, May 4, 2010 at 8:30 a.m. EDT to discuss its earnings results. Please call (877) 407-8031 to enter the conference. An operator will monitor the call and set a queue for questions.
The conference call replay will be available two hours after the call and will be available through June 4, 2010. To hear the replay, please dial (877) 660-6853, access playback account 286 and use ID code 349211.
The live audio broadcast of the Company's quarterly conference call will be available online at www.GladstoneCommercial.com and www.investorcalendar.com. The event will be archived and available for replay on the Company's website through August 2, 2010.
Gladstone Commercial Corporation is a publicly-traded real estate investment trust ("REIT") that focuses on investing in and owning triple-net leased industrial and commercial real estate properties and selectively making long-term mortgage loans. Additional information can be found at www.GladstoneCommercial.com or by contacting Investor Relations at (703) 287-5839.
NON-GAAP FINANCIAL MEASURE - FFO
The National Association of Real Estate Investment Trusts ("NAREIT") developed FFO as a relative non-GAAP supplemental measure of operating performance of an equity REIT in order to recognize that income-producing real estate historically has not depreciated on the basis determined under GAAP. FFO, as defined by NAREIT, is net income (computed in accordance with GAAP), excluding gains (or losses) from sales of property, plus depreciation and amortization of real estate assets, and after adjustments for unconsolidated partnerships and joint ventures. FFO does not represent cash flows from operating activities determined in accordance with GAAP and should not be considered an alternative to net income as an indication of the Company's performance or to cash flow from operations as a measure of liquidity or ability to make distributions. The Company believes that FFO per share provides investors with a further context for evaluating the Company's financial performance and as a supplemental measure to compare the Company to other REITs; however, comparisons of the Company's FFO to the FFO of other REITs may not necessarily be meaningful due to potential differences in the application of the NAREIT definition used by such other REITs. To learn more about FFO, please refer to the Form 10-Q for the quarter ended March 31, 2010, as filed with the SEC today.
The statements in this press release regarding the Company's ability to renew its line of credit or obtain replacement financing for the line of credit, the extension of the maturity of any of its long-term mortgages, future growth in the Company's portfolio and FFO, plans to renegotiate leases and make capital improvements to certain of the Company's properties, and the Company's ability to raise capital are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements inherently involve certain risks and uncertainties, although they are based on the Company's current plans that are believed to be reasonable as of the date of this press release. Factors that may cause actual results to differ materially from these forward-looking statements include, among others, the results of appraisals of its properties at the time of extension of its line of credit, its ability to raise capital, the duration of, or further downturns in, the current economic environment, the performance of its tenants and borrower and significant changes in interest rates. Additional factors that could cause actual results to differ materially from those stated or implied by the Company's forward-looking statements are disclosed under the caption "Risk factors" of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2009, as filed with the SEC on February 24, 2010, and our Quarterly Report on Form 10-Q, as filed with the SEC on May 3, 2010. The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. 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.
Gladstone Commercial Corporation
Consolidated Balance Sheets
(unaudited)
December 31,
March 31, 2010 2009
-------------- --------------
ASSETS
Real estate, at cost $ 391,095,912 $ 390,753,892
Less: accumulated depreciation 36,502,598 34,111,952
-------------- --------------
Total real estate, net 354,593,314 356,641,940
Lease intangibles, net 27,250,453 28,177,461
Mortgage note receivable 10,000,000 10,000,000
Cash and cash equivalents 3,327,368 3,096,598
Restricted cash 2,957,263 2,633,538
Funds held in escrow 2,565,860 2,487,680
Deferred rent receivable 9,358,748 8,975,196
Deferred financing costs, net 2,913,702 3,136,055
Prepaid expenses and other assets 1,653,392 1,716,905
-------------- --------------
TOTAL ASSETS $ 414,620,100 $ 416,865,373
============== ==============
LIABILITIES AND STOCKHOLDERS'
EQUITY
LIABILITIES
Mortgage notes payable $ 252,117,127 $ 252,761,651
Short-term loan and borrowings
under line of credit 34,900,000 33,200,000
Deferred rent liability 2,970,159 3,213,195
Asset retirement obligation
liability 2,342,891 2,305,644
Accounts payable and accrued
expenses 1,618,406 2,086,741
Due to adviser 1,394,007 1,213,640
Obligation under capital lease 250,764 247,686
Rent received in advance,
security deposits and funds held
in escrow 3,922,738 3,386,274
-------------- --------------
Total Liabilities 299,516,092 298,414,831
-------------- --------------
STOCKHOLDERS' EQUITY
Redeemable preferred stock,
$0.001 par value; $25
liquidation preference;
2,300,000 shares authorized and
2,150,000 shares issued and
outstanding at
March 31, 2010 and December 31,
2009, respectively 2,150 2,150
Common stock, $0.001 par value,
47,700,000 shares authorized and
8,545,264 and 8,563,264 shares
issued and outstanding at March
31, 2010 and
December 31, 2009, respectively 8,545 8,563
Additional paid in capital 170,378,699 170,622,581
Notes receivable - employees (2,261,555) (2,304,999)
Distributions in excess of
accumulated earnings (53,023,831) (49,877,753)
-------------- --------------
Total Stockholders' Equity 115,104,008 118,450,542
-------------- --------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 414,620,100 $ 416,865,373
============== ==============
Gladstone Commercial Corporation
Consolidated Statements of Operations
(unaudited)
For the three months ended
March 31,
----------------------------
2010 2009
------------- -------------
Operating revenues
Rental income $ 10,415,066 $ 10,388,244
Interest income from mortgage
note receivable 187,500 187,500
Tenant recovery revenue 82,410 82,432
------------- -------------
Total operating revenues 10,684,976 10,658,176
------------- -------------
Operating expenses
Depreciation and amortization 3,321,871 3,307,802
Property operating expenses 244,354 236,812
Due diligence expense 21,876 9,547
Base management fee 312,564 372,648
Incentive fee 846,192 786,289
Administration fee 231,884 224,354
Professional fees 175,610 235,198
Insurance expense 56,325 48,678
Directors' fees 49,418 49,702
Stockholder-related expenses 45,216 83,647
Asset retirement obligation
expense 37,247 34,907
General and administrative 17,829 10,549
------------- -------------
Total operating expenses
before credit from Adviser 5,360,386 5,400,133
------------- -------------
Credit to incentive fee -- (235,081)
------------- -------------
Total operating expenses 5,360,386 5,165,052
------------- -------------
Other income (expense)
Interest income from
temporary investments 265 17,281
Interest income - employee
loans 43,101 48,886
Other income 3,316 --
Interest expense (4,284,939) (4,487,560)
------------- -------------
Total other expense (4,238,257) (4,421,393)
------------- -------------
Income from continuing
operations 1,086,333 1,071,731
------------- -------------
Discontinued operations
Income from discontinued
operations -- 17,838
------------- -------------
Total discontinued
operations -- 17,838
------------- -------------
Net income 1,086,333 1,089,569
------------- -------------
Distributions attributable to
preferred stock (1,023,438) (1,023,437)
------------- -------------
Net income available to common
stockholders $ 62,895 $ 66,132
============= =============
Earnings per weighted average
common share - basic &
diluted
Income from continuing
operations (net of
distributions attributable
to preferred stock) $ 0.01 $ 0.01
Discontinued operations 0.00 0.00
------------- -------------
Net income available to
common stockholders $ 0.01 $ 0.01
============= =============
Weighted average shares
outstanding- basic &
diluted 8,558,664 8,563,264
============= =============
Gladstone Commercial Corporation
Consolidated Statements of Cash Flows
(unaudited)
For the three months ended
March 31,
---------------------------
2010 2009
------------ -------------
Cash flows from operating activities:
Net income $ 1,086,333 $ 1,089,569
Adjustments to reconcile net income to net
cash
provided by operating activities:
Depreciation and amortization, including
discontinued operations 3,321,871 3,314,100
Amortization of deferred financing costs 272,353 375,194
Amortization of deferred rent asset and
liability, net (179,662) (133,017)
Accretion of obligation under capital
lease 3,078 3,077
Asset retirement obligation expense,
including discontinued operations 37,247 35,367
Increase in prepaid expenses and other
assets (430,387) (17,218)
Increase in deferred rent receivable (446,926) (562,789)
(Decrease) increase in accounts payable,
accrued expenses, and amount
due adviser (287,968) 113,028
Increase (decrease) in rent received in
advance 212,739 (120,758)
------------ -------------
Net cash provided by operating
activities 3,588,678 4,096,553
------------ -------------
Cash flows from investing activities:
Real estate investments (342,020) (54,308)
Leasing commissions paid (4,217) --
Receipts from lenders for reserves held
in escrow 404,462 272,818
Payments to lenders for reserves held in
escrow (482,642) (471,355)
Increase in restricted cash (323,725) (1,102,902)
Deposits refunded 250,000 200,000
------------ -------------
Net cash used in investing activities (498,142) (1,155,747)
------------ -------------
Cash flows from financing activities:
Principal repayments on mortgage notes
payable (644,524) (590,881)
Principal repayments on employee notes
receivable 43,444 5,671
Borrowings from line of credit 4,200,000 28,000,000
Repayments on line of credit (2,500,000) (9,200,000)
Repayment of short-term loan -- (20,000,000)
Receipts from tenants for reserves 525,330 1,471,309
Payments to tenants from reserves (202,354) (378,940)
Increase in security deposits 749 10,533
Payments for deferred financing costs (50,000) (53,561)
Distributions paid for common and
preferred (4,232,411) (4,234,665)
------------ -------------
Net cash used in financing activities (2,859,766) (4,970,534)
------------ -------------
Net increase (decrease) in cash and cash
equivalents 230,770 (2,029,728)
Cash and cash equivalents, beginning of
period 3,096,598 4,503,578
------------ -------------
Cash and cash equivalents, end of period $ 3,327,368 $ 2,473,850
============ =============
NON-CASH OPERATING, INVESTING AND FINANCING
INFORMATION
Increase in asset retirement obligation $ -- $ 245,196
------------ -------------
Fixed rate debt assumed in connection with
acquisitions $ -- $ 6,461,603
------------ -------------
Forfeiture of common stock in satisfaction
of employee note receivable $ 243,900 $ --
------------ -------------
CONTACT: Gladstone Commercial Corporation
Investor Relations
(703) 287-5839
www.GladstoneCommercial.com
Released May 3, 2010