Exhibit 99.1
Gladstone Commercial Corporation Reports Results for the Second Quarter Ended June 30, 2008
MCLEAN, Va.--(BUSINESS WIRE)--Gladstone Commercial Corp. (NASDAQ:GOOD) (the “Company”) today reported financial results for the quarter ended June 30, 2008. 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.
Net income available to common stockholders for the quarter ended June 30, 2008 was approximately $0.2 million, or $0.02 per share, compared to approximately $0.5 million, or $0.06 per share, for the same period one year ago. Net income available to common stockholders for the six months ended June 30, 2008 was approximately $0.6 million, or $0.07 per share, compared to approximately $1.0 million, or $0.12 per share, for the same period one year ago. Net income results when compared to the same period last year were negatively affected by increased interest expense from the growing number of properties which have long-term financing, coupled with the increase in the outstanding balance on the Company’s line of credit, and were partially offset by the increase in the Company’s portfolio of investments in the past year and the corresponding increase in its revenues. Net income results were also affected by a partial waiver of the incentive fee for the three and six months ended June 30, 2008 of approximately $0.2 million and $0.7 million, respectively, compared to net income results for the three and six months ended June 30, 2007, which included a full waiver of the incentive fee of approximately $0.6 million and $1.2 million, respectively, from the Company’s adviser, Gladstone Management Corporation.
FFO for the quarter ended June 30, 2008 was approximately $3.4 million, or $0.39 per share, compared to approximately $3.2 million, or $0.37 per share, for the same period one year ago, an increase of approximately 6.7%. FFO for the six months ended June 30, 2008 was approximately $6.8 million, or $0.79 per share, compared to approximately $6.0 million or $0.70 per share, for the same period one year ago, an increase of approximately 12.4%. 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 ended June 30, | For the six months ended June 30, | |||||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||
| Net income | $ | 1,219,445 | $ | 1,556,312 | $ | 2,636,148 | $ | 3,086,654 | ||||||||
| Less: Dividends attributable to preferred stock | (1,023,437 | ) | (1,023,437 | ) | (2,046,875 | ) | (2,046,874 | ) | ||||||||
| Net income available to common stockholders | 196,008 | 532,875 | 589,273 | 1,039,780 | ||||||||||||
| Add: Real estate depreciation and amortization | 3,185,017 | 2,636,154 | 6,172,777 | 5,053,966 | ||||||||||||
| Less: Gain on sale of real estate, net of taxes paid | - | - | - | (78,667 | ) | |||||||||||
| FFO available to common stockholders | $ | 3,381,025 | $ | 3,169,029 | $ | 6,762,050 | $ | 6,015,079 | ||||||||
| Weighted average shares outstanding - basic & diluted | 8,565,264 | 8,565,264 | 8,565,264 | 8,565,264 | ||||||||||||
| Basic & diluted net income per weighted average common share | $ | 0.02 | $ | 0.06 | $ | 0.07 | $ | 0.12 | ||||||||
| Basic & diluted FFO per weighted average common share | $ | 0.39 | $ | 0.37 | $ | 0.79 | $ | 0.70 | ||||||||
| Dividends declared per common share | $ | 0.38 | $ | 0.36 | $ | 0.75 | $ | 0.72 | ||||||||
| Percentage of FFO paid per common share | 95 | % | 97 | % | 95 | % | 103 | % | ||||||||
At June 30, 2008, the Company owned 57 properties totaling approximately 6.0 million square feet, and had one mortgage loan outstanding for a total net investment of approximately $396.7 million. Currently, all of the Company’s properties are fully leased and all tenants and its borrower are paying as agreed.
Second quarter highlights:
“Although our second quarter results were positively impacted by the four transactions completed thus far in 2008, we are disappointed by the current pace of acquisitions. Our pipeline continues to be stronger than ever, but because of the instability of the financial markets, transactions are taking longer than expected to close. The credit markets continue to be tumultuous, but given our visibility into current opportunities, we are confident that we will be able to continue to grow our portfolio this year with solid, long-term investments and secure alternative sources of financing. We remain optimistic about the prospects for the remainder of the year,” said Chip Stelljes, President and Chief Investment Officer.
Subsequent to quarter end, the Company:
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, 2008, 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 Wednesday, August 6, 2008 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 September 6, 2008. To hear the replay, please dial (877) 660-6853, access playback account 286 and use ID code 292109.
Gladstone Commercial Corporation is a publicly traded real estate investment trust (“REIT”) 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 Kerry Finnegan at 703-287-5893.
NON-GAAP FINANCIAL MEASURE
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 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, 2008, 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, the closing of any transaction and the Company’s ability to secure alternative sources of financing. Words such as “may,” “continue,” “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, 2007, as filed with the SEC on February 27, 2008 and the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008, as filed on August 5, 2008 . 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) | ||||||||
| June 30, 2008 | December 31, 2007 | |||||||
| ASSETS | ||||||||
|
Real estate, net of accumulated depreciation of $20,102,084 and $15,738,634, respectively |
$ | 356,463,038 | $ | 324,761,772 | ||||
|
Lease intangibles, net of accumulated amortization of $9,370,270 and $7,560,928, respectively |
30,253,544 | 28,989,556 | ||||||
| Mortgage notes receivable | 10,000,000 | 10,000,000 | ||||||
| Cash and cash equivalents | 1,775,274 | 1,356,408 | ||||||
| Restricted cash | 2,604,830 | 1,914,067 | ||||||
| Funds held in escrow | 1,856,708 | 1,401,695 | ||||||
| Deferred rent receivable | 6,121,058 | 5,094,799 | ||||||
|
Deferred financing costs, net of accumulated amortization of $2,690,249 and $2,184,492, respectively |
3,955,834 | 4,405,129 | ||||||
| Prepaid expenses and other assets | 1,215,463 | 979,263 | ||||||
| TOTAL ASSETS | $ | 414,245,749 | $ | 378,902,689 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| LIABILITIES | ||||||||
| Mortgage notes payable | $ | 201,346,692 | $ | 202,120,471 | ||||
| Short-term loan and borrowings under line of credit | 64,550,000 | 24,400,000 | ||||||
| Deferred rent liability | 3,540,254 | 3,933,035 | ||||||
| Asset retirement obligation liability | 2,120,183 | 1,811,752 | ||||||
| Accounts payable and accrued expenses | 944,723 | 778,949 | ||||||
| Due to adviser | 1,321,987 | 784,301 | ||||||
| Obligation under capital lease | 229,223 | - | ||||||
| Rent received in advance, security deposits and funds held in escrow | 3,519,217 | 2,706,113 | ||||||
| Total Liabilities | 277,572,279 | 236,534,621 | ||||||
| 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, 17,700,000 shares authorized and 8,565,264 shares issued and outstanding |
8,565 | 8,565 | ||||||
| Additional paid in capital | 170,640,979 | 170,640,979 | ||||||
| Notes receivable - employees | (2,629,846 | ) | (2,769,923 | ) | ||||
| Distributions in excess of accumulated earnings | (31,348,378 | ) | (25,513,703 | ) | ||||
| Total Stockholders’ Equity | 136,673,470 | 142,368,068 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 414,245,749 | $ | 378,902,689 | ||||
| Gladstone Commercial Corporation | ||||||||||||||||
| Consolidated Statements of Operations | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
| 2008 | 2007 | 2008 | 2007 | |||||||||||||
| Operating revenues | ||||||||||||||||
| Rental income | $ | 9,922,018 | $ | 7,732,322 | $ | 19,111,483 | $ | 14,810,358 | ||||||||
| Interest income from mortgage notes receivable | 218,805 | 252,778 | 457,102 | 502,778 | ||||||||||||
| Tenant recovery revenue | 84,635 | 94,468 | 170,354 | 150,203 | ||||||||||||
| Total operating revenues | 10,225,458 | 8,079,568 | 19,738,939 | 15,463,339 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Depreciation and amortization | 3,185,017 | 2,636,154 | 6,172,777 | 5,053,966 | ||||||||||||
| Property operating expenses | 203,858 | 218,139 | 445,426 | 392,301 | ||||||||||||
| Base management fee | 419,857 | 471,091 | 851,725 | 953,135 | ||||||||||||
| Incentive fee | 801,832 | 633,805 | 1,506,499 | 1,219,573 | ||||||||||||
| Administration fee | 274,541 | 210,126 | 486,737 | 417,144 | ||||||||||||
| Professional fees | 147,065 | 174,667 | 244,727 | 324,108 | ||||||||||||
| Insurance | 41,797 | 58,697 | 83,594 | 117,332 | ||||||||||||
| Directors fees | 52,251 | 54,250 | 106,500 | 108,500 | ||||||||||||
| Stockholder related expenses | 102,775 | 75,361 | 229,198 | 174,978 | ||||||||||||
| Asset retirement obligation expense | 32,764 | 28,942 | 63,232 | 57,102 | ||||||||||||
| General and administrative | 18,536 | 21,314 | 33,167 | 61,668 | ||||||||||||
| Total operating expenses before credit from Adviser | 5,280,293 | 4,582,546 | 10,223,582 | 8,879,807 | ||||||||||||
| Credit to incentive fee | (173,697 | ) | (633,805 | ) | (736,052 | ) | (1,219,573 | ) | ||||||||
| Total operating expenses | 5,106,596 | 3,948,741 | 9,487,530 | 7,660,234 | ||||||||||||
| Other income (expense) | ||||||||||||||||
| Interest income from temporary investments | 6,689 | 63,269 | 16,237 | 292,285 | ||||||||||||
| Interest income - employee loans | 50,852 | 56,458 | 102,996 | 116,880 | ||||||||||||
| Other income | 39,697 | 9,817 | 48,993 | 18,231 | ||||||||||||
| Interest expense | (3,996,249 | ) | (2,702,612 | ) | (7,749,853 | ) | (5,217,073 | ) | ||||||||
| Total other expense | (3,899,011 | ) | (2,573,068 | ) | (7,581,627 | ) | (4,789,677 | ) | ||||||||
| Income from continuing operations | 1,219,851 | 1,557,759 | 2,669,782 | 3,013,428 | ||||||||||||
| Discontinued operations | ||||||||||||||||
| Loss from discontinued operations | (406 | ) | (1,503 | ) | (33,634 | ) | (5,504 | ) | ||||||||
| Net realized income from foreign currency transactions | - | 56 | - | 63 | ||||||||||||
| Taxes refunded on sale of real estate | - | - | - | 78,667 | ||||||||||||
| Total discontinued operations | (406 | ) | (1,447 | ) | (33,634 | ) | 73,226 | |||||||||
| Net income | 1,219,445 | 1,556,312 | 2,636,148 | 3,086,654 | ||||||||||||
| Dividends attributable to preferred stock | (1,023,437 | ) | (1,023,437 | ) | (2,046,875 | ) | (2,046,874 | ) | ||||||||
| Net income available to common stockholders | $ | 196,008 | $ | 532,875 | $ | 589,273 | $ | 1,039,780 | ||||||||
| Earnings per weighted average common share - basic & diluted | ||||||||||||||||
| Income from continuing operations (net of dividends attributable to preferred stock) | $ | 0.02 | $ | 0.06 | $ | 0.07 | $ | 0.11 | ||||||||
| Discontinued operations | 0.00 | 0.00 | 0.00 | 0.01 | ||||||||||||
| Net income available to common stockholders | $ | 0.02 | $ | 0.06 | $ | 0.07 | $ | 0.12 | ||||||||
| Weighted average shares outstanding- basic & diluted | 8,565,264 | 8,565,264 | 8,565,264 | 8,565,264 | ||||||||||||
| Gladstone Commercial Corporation | ||||||||
| Consolidated Statements of Cash Flows | ||||||||
| (Unaudited) | ||||||||
| For the six months ended June 30, | ||||||||
| 2008 | 2007 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | 2,636,148 | $ | 3,086,654 | ||||
|
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization | 6,172,777 | 5,053,966 | ||||||
| Amortization of deferred financing costs | 505,757 | 333,174 | ||||||
| Amortization of deferred rent asset and liability | (266,034 | ) | (266,034 | ) | ||||
| Accretion of obligation under capital lease | 4,156 | - | ||||||
| Asset retirement obligation expense | 63,232 | 57,102 | ||||||
| Increase in prepaid expenses and other assets | (286,200 | ) | (235,916 | ) | ||||
| Increase in deferred rent receivable | (1,153,008 | ) | (796,530 | ) | ||||
| Increase in accounts payable, accrued expenses, and amount due adviser | 703,460 | 414,610 | ||||||
| Increase in rent received in advance | 122,341 | 90,057 | ||||||
| Net cash provided by operating activities | 8,502,629 | 7,737,083 | ||||||
| Cash flows from investing activities: | ||||||||
| Real estate investments | (38,667,763 | ) | (53,035,069 | ) | ||||
| Net payments to lenders for reserves held in escrow | (1,211,600 | ) | (868,679 | ) | ||||
| Increase in restricted cash | (690,763 | ) | (244,588 | ) | ||||
| Deposits on future acquisitions | (1,650,000 | ) | (810,000 | ) | ||||
| Deposits applied against real estate investments | 1,700,000 | 810,000 | ||||||
| Net cash used in investing activities | (40,520,126 | ) | (54,148,336 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Borrowings under mortgage notes payable | - | 28,015,000 | ||||||
| Principal repayments on mortgage notes payable | (773,779 | ) | (385,070 | ) | ||||
| Principal repayments on employee notes receivable from sale of common stock | 140,077 | 400,142 | ||||||
| Borrowings from line of credit | 45,150,000 | 4,200,000 | ||||||
| Repayments on line of credit | (5,000,000 | ) | (4,200,000 | ) | ||||
| Increase in reserves from tenants | 1,035,544 | 818,745 | ||||||
| Increase in security deposits | 411,806 | 140,525 | ||||||
| Payments for deferred financing costs | (56,462 | ) | (688,025 | ) | ||||
| Dividends paid for common and preferred | (8,470,823 | ) | (8,213,865 | ) | ||||
| Net cash provided by financing activities | 32,436,363 | 20,087,452 | ||||||
| Net increase (decrease) in cash and cash equivalents | 418,866 | (26,323,801 | ) | |||||
| Cash and cash equivalents, beginning of period | 1,356,408 | 36,005,686 | ||||||
| Cash and cash equivalents, end of period | $ | 1,775,274 | $ | 9,681,885 | ||||
| NON-CASH INVESTING ACTIVITIES | ||||||||
| Increase in asset retirement obligation | $ | 245,199 | $ | 121,084 | ||||
CONTACT:
Gladstone Commercial Corp.
Kerry Finnegan, 703-287-5893