Gladstone Commercial Corporation Reports Results for the Third Quarter Ended September 30, 2009
* Reported revenues for the three and nine months ended September
30, 2009 of approximately $10.7 million and $32.0 million, an
increase of 2.2% and 6.1%, respectively, versus the same periods
last year.
* Reported funds from operations ("FFO") for the three and nine
months ended September 30, 2009 of approximately $3.4 million and
$10.1 million, respectively.
MCLEAN, Va., Nov. 4, 2009 (GLOBE NEWSWIRE) -- Gladstone Commercial Corp. (Nasdaq:GOOD) (the "Company") today reported financial results for the quarter ended September 30, 2009. A description of FFO, a non-GAAP (generally accepted accounting principles in the United States) financial measure, is located at the end of this news release. All per share references are to fully-diluted weighted average common shares, unless otherwise noted.
FFO for the three months ended September 30, 2009 was approximately $3.4 million, or $0.39 per share, which remained constant as compared to the same period one year ago. FFO for the nine months ended September 30, 2009 was approximately $10.1 million, or $1.18 per share, which also remained constant as compared to the same period one year ago. The Company's results reflect an increase in rental revenues as a result of acquisitions completed during 2008 that were held for the full period in 2009. The amount of the incentive fee paid to the Company's external adviser, Gladstone Management Corporation (the "Adviser"), increased during the three and nine months ended September 30, 2009, as compared to the three and nine months ended September 30, 2008, as a result of the increase in revenues, coupled with a reduction in the voluntary waiver issued by the Adviser.
Net income available to common stockholders for the three and nine months ended September 30, 2009 was approximately $256,000 and $415,000, or $0.03 per share and $0.05 per share, respectively, compared to approximately $118,000 and $707,000, or $0.01 per share and $0.08 per share, respectively, for the same periods one year ago. A reconciliation of net income, which the Company believes is the most directly comparable GAAP measure to FFO, is set forth below:
For the For the
three months ended nine months ended
September 30, September 30,
------------------------ ------------------------
2009 2008 2009 2009
----------- ----------- ----------- -----------
Net income $ 1,278,990 $ 1,141,559 $ 3,485,506 $ 3,777,707
Less:
Distributions
attributable to
preferred stock (1,023,437) (1,023,437) (3,070,312) (3,070,312)
----------- ----------- ----------- -----------
Net income
available to
common
stockholders 255,553 118,122 415,194 707,395
Add: Real estate
depreciation and
amortization,
including
discontinued
operations 3,284,723 3,262,903 9,885,571 9,435,690
Less: Gain on
sale of real
estate (160,038) -- (160,038) --
----------- ----------- ----------- -----------
FFO available
to common
stockholders $ 3,380,238 $ 3,381,025 $10,140,727 $10,143,085
Weighted
average shares
outstanding
- basic &
diluted 8,563,264 8,565,264 8,563,264 8,565,264
Basic & diluted
net income
per weighted
average
common share $ 0.03 $ 0.01 $ 0.05 $ 0.08
=========== =========== =========== ===========
Basic &
diluted FFO
per weighted
average common
share $ 0.39 $ 0.39 $ 1.18 $ 1.18
=========== =========== =========== ===========
Distributions
declared per
common share $ 0.375 $ 0.375 $ 1.125 $ 1.125
=========== =========== =========== ===========
Percentage of
FFO paid per
common share 95% 95% 95% 95%
=========== =========== =========== ===========
At September 30, 2009, 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 $396.9 million. Currently, all of the Company's properties are fully leased and all of its tenants and its borrower are current and paying as agreed.
The Company does not have any balloon principal payments due under any of its long-term mortgages until 2010, and the only mortgage that matures at that time has three annual extension options through 2013, which the Company currently intends to exercise. The Company's line of credit matures in December 2009 and it currently expects to exercise its option to extend the line of credit through December 2010.
Third quarter highlights, the Company:
* Sold its property located in Norfolk, Virginia for $1.15 million, for a gain on the sale of approximately $160,000 and an exit internal rate of return of 11.37%. The proceeds from the sale were used to pay down borrowings on its line of credit; and * Paid monthly cash distributions of $0.125 per share on the common stock, $0.1614583 per share on the Series A Preferred Stock, and $0.15625 per share on the Series B Preferred Stock, for each of the months of July, August and September 2009.
"We maintained a conservative acquisition pace in past years and executed thorough due diligence processes, and as a result we believe 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 renegotiate existing leases and make capital improvements to certain of our properties, which we believe will add value to our portfolio. We will continue to review potential acquisitions and we are currently exploring alternatives to raise capital to allow us to grow our portfolio."
Subsequent to quarter end, the Company:
. Declared monthly cash distributions of $0.125 per share on the common stock, $0.1614583 per share on the Series A Preferred Stock, and $0.15625 per share on the Series B Preferred Stock, for each of the months of October, November and December 2009.
The financial statements attached below are without footnotes so readers should obtain and carefully review the Company's Form 10-Q for the quarter ended September 30, 2009, 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 Thursday, November 5, 2009 at 8:30 a.m. ET 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 the questions.
The conference call replay will be available two hours after the call and will be available through December 5, 2009. To hear the replay, please dial (877) 660-6853, access playback account 286 and use ID code 334847.
The live audio broadcast of Gladstone Commercial'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 February 5, 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.
NON-GAAP FINANCIAL MEASURE - FFO
The National Association of Real Estate Investment Trusts ("NAREIT") developed FFO as a 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 September 30, 2009, as filed with the SEC today.
The statements in this press release regarding the extension of the maturity of the Company's line of credit and 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 Form 10-K for the fiscal year ended December 31, 2008, as filed with the SEC on February 25, 2009 and the Company's Form 10-Q for the quarter ended September 30, 2009 as filed with the SEC on November 4, 2009. 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)
September 30, December 31,
2009 2008
------------- -------------
ASSETS
Real estate, at cost $ 389,699,961 $ 390,562,138
Less: accumulated depreciation 31,754,201 24,757,576
------------- -------------
Total real estate, net 357,945,760 365,804,562
Lease intangibles, net 28,962,361 31,533,843
Mortgage note receivable 10,000,000 10,000,000
Cash and cash equivalents 2,787,398 4,503,578
Restricted cash 3,049,099 2,677,561
Funds held in escrow 2,697,354 2,150,919
Deferred rent receivable 8,574,415 7,228,811
Deferred financing costs, net 3,344,509 4,383,446
Due from adviser -- 108,898
Prepaid expenses and other assets 920,787 707,167
------------- -------------
TOTAL ASSETS $ 418,281,683 $ 429,098,785
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Mortgage notes payable $ 253,372,911 $ 255,111,173
Short-term loan and borrowings
under line of credit 31,800,000 31,500,000
Deferred rent liability 2,558,299 3,147,472
Asset retirement obligation liability 2,268,997 2,190,192
Accounts payable and accrued expenses 1,417,884 2,673,787
Due to adviser 1,271,766 --
Obligation under capital lease 244,609 235,378
Rent received in advance,
security deposits and funds
held in escrow 4,026,157 3,745,523
------------- -------------
Total Liabilities 296,960,623 298,603,525
------------- -------------
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 2,150 2,150
Common stock, $0.001 par value,
47,700,000 shares authorized
and 8,563,264 shares
issued and outstanding 8,563 8,563
Additional paid in capital 170,622,581 170,622,581
Notes receivable - employees (2,551,601) (2,595,886)
Distributions in excess
of accumulated earnings (46,760,633) (37,542,148)
------------- -------------
Total Stockholders' Equity 121,321,060 130,495,260
------------- -------------
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY $ 418,281,683 $ 429,098,785
============= =============
Gladstone Commercial Corporation
Consolidated Statements of Operations
(unaudited)
For the For the
three months ended nine months ended
September 30, September 30,
------------------------ ------------------------
2009 2008 2009 2008
----------- ----------- ----------- -----------
Operating
revenues
Rental income $10,383,002 $10,131,678 $31,150,423 $29,191,410
Interest income
from mortgage
note receivable 191,667 216,446 568,750 673,548
Tenant recovery
revenue 82,425 83,144 247,593 253,495
----------- ----------- ----------- -----------
Total
operating
revenues 10,657,094 10,431,268 31,966,766 30,118,453
----------- ----------- ----------- -----------
Operating
expenses
Depreciation and
amortization 3,284,723 3,256,602 9,875,156 9,416,786
Property
operating
expenses 219,537 222,647 687,129 665,103
Due diligence
expense -- 2,158 16,433 4,282
Base
management fee 342,743 404,108 1,073,041 1,255,833
Incentive fee 835,003 793,787 2,433,945 2,300,286
Administration
fee 293,075 238,241 774,636 724,978
Professional
fees 105,368 117,857 466,529 362,584
Insurance 50,757 43,354 147,561 126,947
Directors fees 49,459 54,702 149,547 161,202
Stockholder
related
expenses 32,914 42,232 204,806 271,430
Asset
retirement
obligation
expense 36,060 34,711 106,441 97,077
General and
administrative 19,643 10,079 45,647 40,582
----------- ----------- ----------- -----------
Total
operating
expenses
before credit
from Adviser 5,269,282 5,220,478 15,980,871 15,427,090
----------- ----------- ----------- -----------
Credit to
incentive fee (200,264) (205,876) (564,968) (941,928)
----------- ----------- ----------- -----------
Total
operating
expenses 5,069,018 5,014,602 15,415,903 14,485,162
----------- ----------- ----------- -----------
Other income
(expense)
Interest income
from temporary
investments 524 4,559 17,989 20,796
Interest
income -
employee loans 48,130 49,624 145,878 152,620
Other income -- 7,500 11,320 56,493
Interest
expense (4,521,848) (4,354,381) (13,443,405) (12,106,885)
----------- ----------- ----------- -----------
Total other
expense (4,473,194) (4,292,698) (13,268,218) (11,876,976)
----------- ----------- ----------- -----------
Income from
continuing
operations 1,114,882 1,123,968 3,282,645 3,756,315
----------- ----------- ----------- -----------
Discontinued
operations
Income from
discontinued
operations 4,070 17,591 42,823 21,392
Gain on sale
of real estate 160,038 -- 160,038 --
----------- ----------- ----------- -----------
Total
discontinued
operations 164,108 17,591 202,861 21,392
----------- ----------- ----------- -----------
Net income 1,278,990 1,141,559 3,485,506 3,777,707
----------- ----------- ----------- -----------
Distributions
attributable to
preferred stock (1,023,437) (1,023,437) (3,070,312) (3,070,312)
----------- ----------- ----------- -----------
Net income
available to
common
stockholders $ 255,553 $ 118,122 $ 415,194 $ 707,395
=========== =========== =========== ===========
Earnings per
weighted average
common share -
basic & diluted
Income from
continuing
operations
(net of
distributions
attributable
to preferred
stock) $ 0.01 $ 0.01 $ 0.03 $ 0.08
Discontinued
operations 0.02 0.00 0.02 0.00
----------- ----------- ----------- -----------
Net income
available to
common
stockholders $ 0.03 $ 0.01 $ 0.05 $ 0.08
=========== =========== =========== ===========
Weighted
average shares
outstanding-
basic & diluted 8,563,264 8,565,264 8,563,264 8,565,264
=========== =========== =========== ===========
Gladstone Commercial Corporation
Consolidated Statements of Cash Flows
(unaudited)
For the nine months ended
September 30,
--------------------------
2009 2008
------------ ------------
Cash flows from operating activities:
Net income $ 3,485,506 $ 3,777,707
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization, including
discontinued operations 9,885,571 9,435,690
Amortization of deferred financing costs 1,144,991 806,075
Amortization of deferred rent asset
and liability (399,052) (399,049)
Accretion of obligation under
capital lease 9,232 7,234
Asset retirement obligation expense,
including discontinued operations 106,902 98,394
Gain on sale of real estate (160,038) --
Increase in prepaid expenses
and other assets (413,620) (110,382)
Increase in deferred rent receivable (1,564,298) (1,763,153)
Increase in accounts payable, accrued
expenses, and amount due adviser 124,761 182,694
(Decrease) increase in rent received
in advance (90,904) 171,191
------------ ------------
Net cash provided by
operating activities 12,129,051 12,206,401
------------ ------------
Cash flows from investing activities:
Real estate investments (85,534) (48,935,032)
Leasing commissions paid (298,270) --
Proceeds from sale of real estate 1,089,031 --
Receipts from lenders for reserves
held in escrow 853,264 630,033
Payments to lenders for reserves
held in escrow (1,399,699) (1,216,896)
Increase in restricted cash (371,538) (723,464)
Deposits on future acquisitions -- (1,650,000)
Deposits refunded or applied against
real estate investments 200,000 1,750,000
------------ ------------
Net cash used in investing activities (12,746) (50,145,359)
------------ ------------
Cash flows from financing activities:
Borrowings under mortgage notes payable -- 48,015,000
Principal repayments on mortgage
notes payable (1,738,262) (1,171,849)
Principal repayments on employee
notes receivable 44,285 140,077
Borrowings from line of credit 49,700,000 62,600,000
Repayments on line of credit (29,400,000) (56,800,000)
Repayment of short-term loan (20,000,000) --
Receipts from tenants for reserves 2,541,657 1,746,804
Payments to tenants from reserves (2,197,535) (1,555,146)
Increase in security deposits 27,415 531,806
Payments for deferred financing costs (106,054) (1,153,228)
Distributions paid for common
and preferred (12,703,991) (12,706,239)
------------ ------------
Net cash (used in) provided by
financing activities (13,832,485) 39,647,225
------------ ------------
Net (decrease) increase in cash
and cash equivalents (1,716,180) 1,708,267
Cash and cash equivalents,
beginning of period 4,503,578 1,356,408
------------ ------------
Cash and cash equivalents, end of period $ 2,787,398 $ 3,064,675
============ ============
NON-CASH INVESTING ACTIVITIES
Increase in asset retirement obligation $ -- $ 245,195
------------ ------------
Fixed rate debt assumed in
connection with acquisitions $ -- $ 6,461,603
------------ ------------
CONTACT: Gladstone Commercial Corporation
Investor Relations
703-287-5839
Released November 4, 2009