Gladstone Commercial Announces First Quarter 2007 Results
-- Reports net income available to common stockholders of approximately $0.5 million, or $0.06 per diluted weighted average common share
-- Reports funds from operations ("FFO") of approximately $2.9 million, or $0.34 per diluted weighted average common share
-- Purchased three properties and one leasehold interest for a total investment of approximately $41.8 million
MCLEAN, Va.--(BUSINESS WIRE)--
Gladstone Commercial Corp. (NASDAQ:GOOD) (the "Company") today reported financial results for the quarter ended March 31, 2007. 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 fully diluted weighted average common shares, unless otherwise noted.
Net income available to common stockholders for the quarter ended March 31, 2007 was $506,905, or $0.06 per share, compared to $502,356, or $0.06 per share, for the same period one year ago. Net income results when compared to the same period last year were affected by increased revenues related to the acquisition of 11 properties since March 31, 2006, partially offset by increased expenses attributable to the 11 properties, interest expense associated with the leveraging of the Company's properties and dividends paid on the Company's preferred stock. Net income results for the quarter ended March 31, 2007 include a full waiver of the incentive fee, approximately $586,000, from the Company's Adviser, Gladstone Management Corporation.
FFO for the quarter ended March 31, 2007 was $2,924,717, or $0.34 per share, compared to $2,337,096, or $0.30 per share, for the same period 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 For the three
months ended months ended
March 31, 2007 March 31, 2006
--------------------------------
Net income $1,530,342 $846,800
Less: Dividends attributable to
preferred stock (1,023,437) (344,444)
---------------- ---------------
Net income available to common
stockholders $506,905 $502,356
Add: Real estate depreciation and
amortization, including discontinued
operations 2,417,812 1,834,740
---------------- ---------------
FFO available to common stockholders $2,924,717 $2,337,096
Weighted average shares outstanding -
basic 8,565,264 7,672,000
Weighted average shares outstanding -
diluted 8,565,264 7,821,658
Basic net income per weighted average
common share $0.06 $0.07
================ ===============
Diluted net income per weighted
average common share $0.06 $0.06
================ ===============
Basic FFO per weighted average common
share $0.34 $0.30
================ ===============
Diluted FFO per weighted average
common share $0.34 $0.30
================ ===============
First quarter highlights:
-- Purchased three properties and one leasehold interest with an
aggregate of approximately 546,000 square feet for an
aggregate purchase price of approximately $41.8 million;
-- Borrowed $13.8 million pursuant to a long-term note payable
collateralized by security interests in 3 properties, which
accrues interest at a rate of 6.0% per year;
-- Implemented the amended advisory agreement with its Adviser
and an administration agreement with its Administrator,
Gladstone Administration; and
-- Declared monthly cash dividends of $0.12 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 January, February and March 2007.
"Our first quarter results were positively impacted by the four acquisitions completed during the quarter. With the termination of our stock option plan, the implementation of our amended advisory agreement, and the number of acquisitions we currently have in our pipeline, we believe that our earnings in 2007 can grow significantly," said Chip Stelljes, Executive Vice President and Chief Investment Officer.
Subsequent to quarter end, the Company:
-- Declared monthly cash dividends of $0.12 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 2007.
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 March 31, 2007, 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 Wednesday, May 2, 2007 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 June 2, 2007. To hear the replay, please dial (877) 660-6853, access playback account 286 and use ID code 239213.
Gladstone Commercial Corporation is a publicly traded real estate investment trust that focuses on investing in and owning triple-net leased industrial, commercial and retail real estate properties and selectively making long-term mortgage loans. Additional information can be found at www.GladstoneCommercial.com.
For further information, contact Robert Johnson at 703-287-5835.
NON-GAAP FINANCIAL MEASURES
Funds from Operations
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 (which, unlike FFO, generally reflects all cash effects of transactions and other events in the determination of net income), 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, 2007, as filed with the SEC today.
This press release may include statements that may constitute "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, including statements with regard to the future performance of the Company and the closing of any transaction. Words such as "may," "will," "believes," "anticipates," "intends," "expects," "projects," "estimates" and "future" or similar expressions are intended to identify forward-looking statements. These forward-looking statements inherently involve certain risks and uncertainties, although they are based on the Company's current plans, expectations and beliefs that are believed to be reasonable as of the date of this press release. Factors that may cause the Company's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements include, among others, those factors listed under the caption "Risk Factors" of the Company's Annual Report on Form 10-K for the year ended, December 31, 2006, as filed with the SEC on February 27, 2007, and the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2007, as filed today. The risk factors set forth in the Form 10-K and Form 10-Q under the caption "Risk Factors" are specifically incorporated by reference into this press release. All forward-looking statements are based on current plans, expectations and beliefs and speak only as of the date of such statements. 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)
March 31, December 31,
2007 2006
------------- -------------
ASSETS
Real estate, net of accumulated
depreciation of $10,189,209 and
$8,595,419, respectively $272,001,341 $235,118,123
Lease intangibles, net of accumulated
amortization of $4,999,702 and
$4,175,685, respectively 25,958,470 23,416,696
Mortgage notes receivable 10,000,000 10,000,000
Cash and cash equivalents 7,086,594 36,005,686
Restricted cash 1,354,961 1,225,162
Funds held in escrow 1,633,184 1,635,819
Interest receivable - mortgage note 86,111 -
Interest receivable - employees 60,422 43,716
Deferred rent receivable 3,914,132 3,607,279
Deferred financing costs, net of
accumulated amortization of $1,631,759
and $1,467,297, respectively 3,927,288 3,713,004
Prepaid expenses 337,777 521,290
Deposits on real estate 450,000 300,000
Accounts receivable 379,055 179,247
------------- -------------
TOTAL ASSETS $327,189,335 $315,766,022
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Mortgage notes payable $168,074,478 $154,494,438
Deferred rent liability 4,522,208 4,718,599
Asset retirement obligation liability 1,723,437 1,631,294
Accounts payable and accrued expenses 457,332 673,410
Due to adviser 689,062 183,042
Rent received in advance, security
deposits and funds held in escrow 2,050,220 1,841,063
------------- -------------
Total Liabilities 177,516,737 163,541,846
------------- -------------
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,
respectively 2,150 2,150
Common stock, $0.001 par value, 17,700,000
shares authorized and 8,565,264 shares
issued and outstanding, respectively 8,565 8,565
Additional paid in capital 170,640,979 170,640,979
Notes receivable - employees (3,176,310) (3,201,322)
Distributions in excess of accumulated
earnings (17,802,786) (15,226,196)
------------- -------------
Total Stockholders' Equity 149,672,598 152,224,176
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $327,189,335 $315,766,022
============= =============
Gladstone Commercial Corporation
Consolidated Statements of Operations
(Unaudited)
For the three months
ended March 31,
-----------------------
2007 2006
----------- -----------
Operating revenues
Rental income $7,078,036 $4,867,075
Interest income from mortgage notes
receivable 250,000 552,913
Tenant recovery revenue 55,735 5,623
----------- -----------
Total operating revenues 7,383,771 5,425,611
----------- -----------
Operating expenses
Depreciation and amortization 2,417,812 1,799,201
Base management fee 482,044 652,742
Administration fee 207,018 -
Incentive fee 585,768 -
Professional fees 149,431 198,459
Taxes and licenses 15,007 50,894
Insurance 146,252 82,998
General and administrative 111,902 47,817
Directors fees 54,250 33,500
Stockholder related expenses 99,617 64,469
Asset retirement obligation expense 28,160 46,702
Stock option compensation expense - 46,216
----------- -----------
Total operating expenses before credit
from Adviser 4,297,261 3,022,998
----------- -----------
Credit to incentive fee (585,768) -
----------- -----------
Total expenses net of credit to
incentive fee 3,711,493 3,022,998
----------- -----------
Other income (expense)
Interest income from temporary investments 229,016 7,373
Interest income - employee loans 60,422 5,548
Other income 8,414 -
Interest expense (2,514,461) (1,618,571)
----------- -----------
Total other expense (2,216,609) (1,605,650)
----------- -----------
Income from continuing operations 1,455,669 796,963
----------- -----------
Discontinued operations
(Loss) income from discontinued operations (4,001) 38,038
Net realized income (loss) from foreign
currency transactions 7 (816)
Net unrealized gain from foreign currency
transactions - 12,615
Taxes on sale of real estate 78,667 -
----------- -----------
Total discontinued operations 74,673 49,837
----------- -----------
Net income 1,530,342 846,800
----------- -----------
Dividends attributable to preferred stock (1,023,437) (344,444)
----------- -----------
Net income available to common stockholders $506,905 $502,356
=========== ===========
Earnings per weighted average common share -
basic
Income from continuing operations (net
of dividends attributable to preferred
stock) $0.05 $0.06
Discontinued operations 0.01 0.01
----------- -----------
Net income available to common
stockholders $0.06 $0.07
=========== ===========
Earnings per weighted average common share -
diluted
Income from continuing operations (net
of dividends attributable to preferred
stock) $0.05 $0.06
Discontinued operations 0.01 0.00
----------- -----------
Net income available to common
stockholders $0.06 $0.06
=========== ===========
Weighted average shares outstanding
Basic 8,565,264 7,672,000
=========== ===========
Diluted 8,565,264 7,821,658
=========== ===========
Gladstone Commercial Corporation
Consolidated Statements of Cash Flows
(Unaudited)
For the three months
ended March 31,
-------------------------
2007 2006
------------ ------------
Cash flows from operating activities:
Net income $1,530,342 $846,800
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization, including
discontinued operations 2,417,812 1,834,740
Amortization of deferred financing
costs, including discontinued
operations 164,462 121,871
Amortization of deferred rent asset 63,374 63,374
Amortization of deferred rent liability (196,391) (80,290)
Asset retirement obligation expense,
including discontinued operations 28,160 55,143
Increase in deferred rent receivable (370,227) (224,386)
Stock compensation - 46,216
Increase in mortgage notes payable due
to change in value of foreign currency - (12,615)
(Increase) decrease in mortgage interest
receivable (86,111) 163
Increase in employee interest receivable (16,706) (5,548)
Increase in prepaid expenses and other
assets (16,295) (126,847)
Increase in accounts payable, accrued
expenses, and amount due adviser 289,942 282,551
Increase in rent received in advance 79,357 204,757
------------ ------------
Net cash provided by operating
activities 3,887,719 3,005,929
------------ ------------
Cash flows from investing activities:
Real estate investments (41,778,821) (18,302,939)
Principal repayments on mortgage notes
receivable - 25,360
Net payments to lenders for reserves held
in escrow (214,107) (1,251,385)
(Increase) decrease in restricted cash (129,799) 38,695
Deposits on future acquisitions (610,000) (350,000)
Deposits applied against real estate
investments 460,000 750,000
------------ ------------
Net cash used in investing
activities (42,272,727) (19,090,269)
------------ ------------
Cash flows from financing activities:
Proceeds from share issuance - 25,000,000
Offering costs - (1,302,006)
Borrowings under mortgage notes payable 13,775,000 17,000,000
Principal repayments on mortgage notes
payable (194,961) (117,486)
Borrowings from line of credit - 35,200,000
Repayments on line of credit - (56,500,000)
Increase in reserves from tenants 346,542 523,636
Principal repayments on employee loans 25,012 -
Payments for deferred financing costs (378,745) (1,073,561)
Dividends paid for common and preferred (4,106,932) (3,106,364)
------------ ------------
Net cash provided by financing
activities 9,465,916 15,624,219
------------ ------------
Net decrease in cash and cash equivalents (28,919,092) (460,121)
Cash and cash equivalents, beginning of
period 36,005,686 1,740,159
------------ ------------
Cash and cash equivalents, end of period $7,086,594 $1,280,038
============ ============
NON-CASH INVESTING ACTIVITIES
Increase in asset retirement obligation $92,143 $1,373,820
------------ ------------
NON-CASH FINANCING ACTIVITIES
Fixed rate debt assumed in connection with
acquisitions $- $30,129,654
------------ ------------
Source: Gladstone Commercial Corp.
Released May 1, 2007