Gladstone Commercial Corporation Reports Results for the Second Quarter Ended June 30, 2009
-- Reported revenues for the three and six months ended June 30,
2009 of approximately $10.7 million and $21.3 million, an
increase of 4.4% and 8.2%, respectively, versus the same
periods last year.
-- Reported funds from operations ("FFO") for the three and six
months ended June 30, 2009 of approximately $3.4 million and
$6.8 million, respectively.
MCLEAN, Va., July 30, 2009 (GLOBE NEWSWIRE) -- Gladstone Commercial Corp. (Nasdaq:GOOD) (the "Company") today reported financial results for the quarter ended June 30, 2009. 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 news release. All per share references are to fully-diluted weighted average common shares, unless otherwise noted.
FFO for the three months ended June 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 six months ended June 30, 2009 was approximately $6.8 million, or $0.79 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 six months ended June 30, 2009, as compared to the three and six months ended June 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 six months ended June 30, 2009 was approximately $93,000 and $160,000, or $0.01 per share and $0.02 per share, respectively, compared to approximately $196,000 and $589,000, or $0.02 per share and $0.07 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 three months For the six months
ended June 30, ended June 30,
------------------------ ------------------------
2009 2008 2009 2008
----------- ----------- ----------- -----------
Net income $ 1,116,936 $ 1,219,445 $ 2,206,505 $ 2,636,148
Less: Distri-
butions
attributable
to preferred
stock (1,023,437) (1,023,437) (2,046,875) (2,046,875)
----------- ----------- ----------- -----------
Net income
available to
common
stockholders 93,499 196,008 159,630 589,273
Add: Real estate
depreciation
and amortization,
including
discontinued
operations 3,286,743 3,185,017 6,600,853 6,172,777
----------- ----------- ----------- -----------
FFO available to
common
stockholders $ 3,380,242 $ 3,381,025 $ 6,760,483 $ 6,762,050
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 $ 0.01 $ 0.02 $ 0.02 $ 0.07
=========== =========== =========== ===========
Basic & diluted
FFO per weighted
average common
share $ 0.39 $ 0.39 $ 0.79 $ 0.79
=========== =========== =========== ===========
Distributions
declared per
common share $ 0.375 $ 0.375 $ 0.750 $ 0.750
=========== =========== =========== ===========
Percentage of
FFO paid per
common share 95% 95% 95% 95%
=========== =========== =========== ===========
The weighted average yield on the Company's portfolio as of June 30, 2009 was 9.68% as compared to 9.47% as of June 30, 2008. At June 30, 2009, the Company owned 65 properties totaling approximately 6.3 million square feet, and had one mortgage loan outstanding for a total net investment of approximately $400.2 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.
Second quarter highlights:
-- Extended the terms on two leases for additional periods
(one for six months and one for fifteen years);
-- Reduced the total commitment under its line of credit from
$95.0 million to $50.0 million, in exchange for modifications
to certain terms under the credit agreement; 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 April, May and June 2009.
"Our results continue to demonstrate our portfolio's strength as all of our properties are 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 build the value of our existing portfolio of properties by reviewing and renegotiating existing leases and making capital improvements to certain of our properties. We will continue to review potential acquisitions and we are currently exploring alternatives to raise debt and equity so we can continue to grow our portfolio. We hope to be in a position where we can pay out the entire incentive fee and maintain our distributions to stockholders by the end of the year, which will allow us to grow our FFO."
Subsequent to quarter end, 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 its line of credit; and
-- 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 July, August and September 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 June 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 Friday, July 31, 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 August 31, 2009. To hear the replay, please dial (877) 660-6853, access playback account 286 and use ID code 328283.
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.
For further information, contact Kerry Finnegan at 703-287-5893.
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 June 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, the Company's ability to raise debt and equity capital, and the Company's ability to pay out the full incentive fee and to maintain distributions to stockholders 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. 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)
June 30, 2009 December 31, 2008
------------------- ------------------
ASSETS
Real estate, at cost $ 389,668,739 $ 390,562,138
Less: accumulated
depreciation 29,397,701 24,757,576
------------------- ------------------
Total real estate, net 360,271,038 365,804,562
Lease intangibles, net 29,890,585 31,533,843
Real estate and related
assets held for sale, net 956,916 --
Mortgage note receivable 10,000,000 10,000,000
Cash and cash equivalents 2,920,611 4,503,578
Restricted cash 3,345,712 2,677,561
Funds held in escrow 2,296,773 2,150,919
Deferred rent receivable 8,156,144 7,228,811
Deferred financing costs,
net 3,763,181 4,383,446
Due from adviser -- 108,898
Prepaid expenses and other
assets 644,822 707,167
------------------- ------------------
TOTAL ASSETS $ 422,245,782 $ 429,098,785
=================== ==================
LIABILITIES AND STOCKHOLDERS'
EQUITY
LIABILITIES
Mortgage notes payable $ 253,950,925 $ 255,111,173
Short-term loan and
borrowings under line of
credit 31,800,000 31,500,000
Deferred rent liability 2,754,690 3,147,472
Asset retirement obligation
liability 2,232,940 2,190,192
Accounts payable and
accrued expenses 1,495,284 2,673,787
Other liabilities related
to assets held for sale 36,348 --
Due to adviser 1,299,850 --
Obligation under capital
lease 241,532 235,378
Rent received in advance,
security deposits and
funds held in escrow 4,194,849 3,745,523
------------------- ------------------
Total Liabilities 298,006,418 298,603,525
------------------- ------------------
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 (2,588,965) (2,595,886)
Distributions in excess of
accumulated earnings (43,804,965) (37,542,148)
------------------- ------------------
Total Stockholders' Equity 124,239,364 130,495,260
------------------- ------------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 422,245,782 $ 429,098,785
=================== ==================
Gladstone Commercial Corporation
Consolidated Statements of Operations
(unaudited)
For the three months For the six months
ended June 30, ended June 30,
------------------------ ------------------------
2009 2008 2009 2008
----------- ----------- ----------- -----------
Operating revenues
Rental income $10,379,172 $ 9,896,143 $20,767,420 $19,059,732
Interest income
from mortgage
note receivable 189,583 218,805 377,083 457,102
Tenant recovery
revenue 82,734 84,635 165,167 170,354
----------- ----------- ----------- -----------
Total operating
revenues 10,651,489 10,199,583 21,309,670 19,687,188
----------- ----------- ----------- -----------
Operating expenses
Depreciation and
amortization 3,282,629 3,178,718 6,590,438 6,160,187
Property opera-
ting expenses 230,785 203,405 467,595 442,459
Due diligence
expense 6,886 40 16,433 2,125
Base management
fee 357,650 419,857 730,298 851,725
Incentive fee 812,653 801,832 1,598,942 1,506,499
Administration
fee 257,207 274,541 481,561 486,737
Professional
fees 125,965 147,065 361,161 244,727
Insurance 48,125 41,797 96,804 83,594
Directors fees 50,386 52,251 100,088 106,500
Stockholder
related
expenses 88,245 102,775 171,892 229,198
Asset retirement
obligation
expense 35,476 32,325 70,384 62,361
General and
administrative 15,453 18,326 26,005 30,506
----------- ----------- ----------- -----------
Total operating
expenses
before credit
from Adviser 5,311,460 5,272,932 10,711,601 10,206,618
----------- ----------- ----------- -----------
Credit to
incentive fee (129,623) (173,697) (364,704) (736,052)
----------- ----------- ----------- -----------
Total
operating
expenses 5,181,837 5,099,235 10,346,897 9,470,566
----------- ----------- ----------- -----------
Other income
(expense)
Interest income
from temporary
investments 184 6,689 17,465 16,237
Interest income
- employee
loans 48,862 50,852 97,748 102,996
Other income 11,320 39,697 11,320 48,993
Interest expense (4,433,998) (3,996,453) (8,921,555) (7,752,501)
----------- ----------- ----------- -----------
Total other
expense (4,373,632) (3,899,215) (8,795,022) (7,584,275)
----------- ----------- ----------- -----------
Income from
continuing
operations 1,096,020 1,201,133 2,167,751 2,632,347
----------- ----------- ----------- -----------
Discontinued
operations
Income from
discontinued
operations 20,916 18,312 38,754 3,801
----------- ----------- ----------- -----------
Total
discontinued
operations 20,916 18,312 38,754 3,801
----------- ----------- ----------- -----------
Net income 1,116,936 1,219,445 2,206,505 2,636,148
----------- ----------- ----------- -----------
Distributions
attributable to
preferred stock (1,023,437) (1,023,437) (2,046,875) (2,046,875)
----------- ----------- ----------- -----------
Net income
available to
common
stockholders $ 93,499 $ 196,008 $ 159,630 $ 589,273
=========== =========== =========== ===========
Earnings per
weighted average
common share -
basic & diluted
Income from
continuing
operations
(net of
distributions
attributable
to preferred
stock) $ 0.01 $ 0.02 $ 0.02 $ 0.07
Discontinued
operations 0.00 0.00 0.00 0.00
----------- ----------- ----------- -----------
Net income
available to
common
stockholders $ 0.01 $ 0.02 $ 0.02 $ 0.07
=========== =========== =========== ===========
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 six months
ended June 30,
--------------------------
2009 2008
----------- -----------
Cash flows from operating activities:
Net income $ 2,206,505 $ 2,636,148
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization,
including discontinued operations 6,600,853 6,172,777
Amortization of deferred financing
costs 723,828 505,757
Amortization of deferred rent
asset and liability (266,035) (266,034)
Accretion of obligation under
capital lease 6,154 4,156
Asset retirement obligation
expense, including discontinued
operations 70,845 63,232
Increase in prepaid expenses and
other assets (137,854) (286,200)
Increase in deferred rent
receivable (1,082,278) (1,153,008)
Increase in accounts payable,
accrued expenses, and amount due
adviser 230,245 703,460
(Decrease) increase in rent
received in advance (210,575) 122,341
----------- -----------
Net cash provided by operating
activities 8,141,688 8,502,629
----------- -----------
Cash flows from investing activities:
Real estate investments (54,319) (38,667,763)
Leasing commissions paid (298,270) --
Receipts from lenders for reserves
held in escrow 773,187 259,538
Payments to lenders for reserves
held in escrow (919,041) (714,551)
Increase in restricted cash (668,151) (690,763)
Deposits on future acquisitions -- (1,650,000)
Deposits refunded or applied against
real estate investments 200,000 1,700,000
----------- -----------
Net cash used in investing
activities (966,594) (39,763,539)
----------- -----------
Cash flows from financing activities:
Principal repayments on mortgage
notes payable (1,160,248) (773,779)
Principal repayments on employee
notes receivable 6,921 140,077
Borrowings from line of credit 39,300,000 45,150,000
Repayments on line of credit (19,000,000) (5,000,000)
Repayment of short-term loan (20,000,000) --
Receipts from tenants for reserves 1,996,723 1,119,390
Payments to tenants from reserves (1,339,968) (840,433)
Increase in security deposits 11,396 411,806
Payments for deferred financing
costs (103,563) (56,462)
Distributions paid for common and
preferred (8,469,322) (8,470,823)
----------- -----------
Net cash (used in) provided by
financing activities (8,758,061) 31,679,776
----------- -----------
Net (decrease) increase in cash and
cash equivalents (1,582,967) 418,866
Cash and cash equivalents, beginning
of period 4,503,578 1,356,408
----------- -----------
Cash and cash equivalents, end of
period $ 2,920,611 $ 1,775,274
=========== ===========
NON-CASH INVESTING ACTIVITIES
Increase in asset retirement
obligation $ -- $ 245,199
----------- -----------
CONTACT: Gladstone Commercial Corp.
Kerry Finnegan
703-287-5893
Released July 30, 2009