Gladstone Commercial Corporation Reports Results for the Fourth Quarter and Year Ended December 31, 2010
- Reported funds from operations ("FFO") for the full year 2010 of approximately $14.1 million, an increase of 4.1% over the prior year.
- Acquired a property in Orange City, Iowa for approximately $12.3 million.
- Issued common stock for net proceeds of approximately $3.4 million.
- Entered into a $50 million senior secured revolving line of credit agreement with Capital One N.A. and Branch Banking and Trust Company as lenders.
MCLEAN, Va., March 8, 2011 /PRNewswire/ -- Gladstone Commercial Corporation (Nasdaq: GOOD) (the "Company") today reported financial results for the quarter and year ended December 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 are to fully-diluted weighted average shares of common stock, unless otherwise noted.
(Logo: https://photos.prnewswire.com/prnh/20101005/GLADSTONECOMMERCIAL )
FFO for the three months ended December 31, 2010 was approximately $3.0 million, or $0.35 per share, which is a 10.1% decrease compared to the same period one year ago. FFO for the year ended December 31, 2010 was approximately $14.1 million, or $1.64 per share, which is a 4.1% increase over the previous year FFO. The decrease in FFO for the quarter was a direct result of approximately $386,000 of due diligence fees incurred related to the property acquisition during the quarter, which the Company was required to expense under new accounting guidance rather than capitalize as it had in years past. In addition, there was a decrease in rental revenues as a result of the mid-year expiration of leases on two properties, coupled with the lost interest income from the payoff of the Company's only mortgage loan in July. Professional fees also increased from the write-off of fees associated with the termination of the Company's continuous private offering of unregistered senior common stock. This was partially offset by a $225,000 credit to the base management fee issued by the Company's Adviser. In addition, interest expense decreased significantly for the quarter because of the over 2% interest rate reduction in connection with the extension of the $48.0 million mortgage loan in September. FFO increased for the year primarily because of the $3.3 million of additional income and prepayment fees the Company received in connection with the early repayment of its mortgage loan receivable.
Commenting on the results of operations, Chip Stelljes, President and Chief Investment Officer, said, "During the quarter, we focused on managing and expanding the portfolio. As previously announced, we were excited to acquire a property during the last quarter, and we continue to actively search for additional properties. We were pleased that we obtained the new line of credit and were able to raise additional equity capital. We remain optimistic about our future and continue to see signs of economic improvement and stabilization in both the equity and debt capital markets. We continue to work to re-tenant our two vacant buildings and are pleased with the overall performance of our portfolio. We look forward to an active 2011 as the commercial real estate market continues to recover."
Net loss to common stockholders for the three months ended December 31, 2010 was approximately $232,000 or $0.03 per share, and net income available to common stockholders for the year ended December 31, 2010 was approximately $814,000, or $0.09 per share, compared to net income available to common stockholders of approximately $94,000 and $509,000, or $0.01 per share and $0.06 per share, respectively, for the same periods one year ago. A reconciliation of FFO for the quarters and years ended December 31, 2010 and 2009 to net income, which the Company believes is the most directly comparable GAAP measure to FFO, and a computation of basic and diluted FFO per weighted average share of common stock and basic and diluted net income per weighted average share of common stock is set forth below:
For the three months ended For the year ended
December 31, December 31,
2010 2009 2010 2009
Net income $ 806,872 $ 1,117,553 $ 4,927,908 $ 4,603,048
Less: Distributions
attributable to
preferred and senior
common stock (1,038,831) (1,023,439) (4,113,800) (4,093,750)
Net (loss) income
available to common
stockholders (231,959) 94,114 814,108 509,298
Add: Real estate
depreciation and
amortization, including
discontinued operations 3,271,403 3,286,133 13,263,814 13,171,703
Less: Gain on sale of
real estate - - - (160,038)
FFO available to common
stockholders $ 3,039,444 $ 3,380,247 $ 14,077,922 $ 13,520,963
Weighted average shares
outstanding - basic 8,637,981 8,563,264 8,576,303 8,563,264
Weighted average shares
outstanding - diluted 8,688,900 8,563,264 8,601,153 8,563,264
Basic (loss) net income
per weighted average
share of common stock $ (0.03) $ 0.01 $ 0.09 $ 0.06
Diluted (loss) net
income per weighted
average share of common
stock $ (0.03) $ 0.01 $ 0.09 $ 0.06
Basic FFO per weighted
average share of common
stock $ 0.35 $ 0.39 $ 1.64 $ 1.58
Diluted FFO per
weighted average share
of common stock $ 0.35 $ 0.39 $ 1.64 $ 1.58
Distributions declared
per share of common
stock $ 0.375 $ 0.375 $ 1.500 $ 1.500
Percentage of FFO paid
per share of common
stock 107% 95% 91% 95%
At December 31, 2010, the Company owned 65 properties totaling approximately 6.8 million square feet for a total net investment of approximately $384.1 million. Currently, 63 of the Company's properties are fully leased, or approximately 97.2% of the portfolio's total square footage and each of these tenants are current and paying in accordance with the terms of their leases.
The Company has $48.0 million of balloon principal payments due under one of its long-term mortgages in 2011; however, the mortgage has two remaining 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 has no leases that expire in 2011; however, two leases expired during 2010. The Company is currently seeking new tenants for these two properties. Furthermore, one of the Company's tenants located in Hazelwood, Missouri rejected its lease with the Company as part of the tenant's bankruptcy proceedings. The Company's lease with this tenant was originally scheduled to expire in January 2012. Rental income from this tenant is less than 1% of the Company's total annualized rental income. The Company is taking the appropriate action to re-tenant the property.
Highlights of 2010, the Company:
-- Received full early repayment on its $10.0 million mortgage loan and
additional income and prepayment fees of $3.3 million, for total
proceeds of $13.3 million;
-- Acquired a 487,121 square foot property in Orange City, Iowa for $12.3
million. The property is leased to Staples Contract & Commercial, Inc.;
-- Entered into a $50 million senior secured revolving line of credit
agreement with Capital One N.A. and Branch Banking and Trust Company as
lenders. The agreement has a three year term with a stated interest rate
equal to LIBOR, plus an applicable margin of up to three hundred basis
points;
-- Exercised a one-year renewal option on its $48.0 million mortgage loan
on September 30, 2010 to extend the maturity date until September 30,
2011;
-- Issued 192,365 shares of common stock at an average price per share of
$18.17 under its Open Market Sales Agreement with Jefferies & Company,
Inc. for net proceeds of approximately $3.4 million;
-- Extended the terms of the lease of its property located in Grand Rapids,
Michigan until 2025, on the lease of its property located in Toledo,
Ohio until 2020 and on the lease of its property located in Fridley,
Minnesota until 2020; and
-- Paid monthly distributions for the year totaling $1.50 per share on the
common stock, $1.94 per share on the Series A Preferred Stock, $1.88 per
share on the Series B Preferred Stock, and $0.60 per share on the Senior
Common Stock. Approximately 84% of the common stock distributions paid
in 2010 were deemed a return of capital.
Subsequent to year end, the Company:
-- Issued 833,750 shares of common stock through an underwritten public
offering for net proceeds of approximately $14.3 million, after
deducting underwriting discounts and other offering expenses;
-- Extended the lease with one tenant occupying five of its properties in
Georgia until 2031; and
-- 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 $0.085 per share on the
Senior Common Stock, for each of the months of January, February and
March 2011.
The financial statements attached below are without footnotes so readers should obtain and carefully review the Company's Annual Report on Form 10-K (the "Form 10-K") for the year ended December 31, 2010, including the footnotes to the financial statements contained therein. The Company filed the Form 10-K today with the Securities and Exchange Commission ("SEC") and the Form 10-K 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, March 9, 2011 at 8:30 a.m. ET to discuss its earnings results. Please call (800) 860-2442 to enter the conference. An operator will monitor the call and set a queue for the questions.
The conference call replay will be available one hour after the call and will be accessible through April 8, 2011. To hear the replay, please dial (877) 344-7529 and use conference number 447116.
The live audio broadcast of Gladstone Commercial's quarterly conference call will be available online at www.GladstoneCommercial.com. The event will be archived and available for replay on the Company's website through May 8, 2011.
Gladstone Commercial Corporation is a publicly-traded real estate investment trust that focuses on investing in and owning triple-net leased industrial and commercial real estate properties and selectively making long-term mortgage loans. Information on the business activities of all the Gladstone Funds can be found at www.gladstonecompanies.com.
For Investor Relations inquiries related to any of the monthly dividend paying Gladstone Funds, please visit www.gladstone.com.
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 an additional 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 Company's Form 10-K for the year ended December 31, 2010, as filed with the SEC today.
The statements in this press release regarding the Company's ability, plans or intentions to re-tenant its unoccupied properties, extend the respective maturity dates of its long-term mortgages, grow its portfolio and FFO, renegotiate leases and make capital improvements to certain of its properties and raise additional 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, but are not limited to, its ability to raise additional capital, the duration of, or further downturns in, the current economic environment, the performance of its tenants 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, 2010, as filed with the SEC on March 8, 2011. 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
December 31, 2010 December 31, 2009
ASSETS
Real estate, at cost $ 401,016,940 $ 390,753,892
Less: accumulated depreciation 43,659,456 34,111,952
Total real estate, net 357,357,484 356,641,940
Lease intangibles, net 26,746,992 28,177,461
Mortgage note receivable - 10,000,000
Cash and cash equivalents 7,061,504 3,096,598
Restricted cash 2,288,410 2,633,538
Funds held in escrow 2,621,091 2,487,680
Deferred rent receivable 10,373,508 8,975,196
Deferred financing costs, net 3,325,740 3,136,055
Other assets 833,873 1,716,905
TOTAL ASSETS $ 410,608,602 $ 416,865,373
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Mortgage notes payable $ 260,869,463 $ 252,761,651
Borrowings under line of credit 27,000,000 33,200,000
Deferred rent liability 2,276,033 3,213,195
Asset retirement obligation liability 3,062,768 2,305,644
Accounts payable and accrued expenses 2,682,915 2,086,741
Due to Adviser 965,373 1,213,640
Other liabilities 2,377,743 3,633,960
Total Liabilities 299,234,295 298,414,831
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 December
31, 2010 and 2009, respectively 2,150 2,150
Senior common stock, $0.001 par value;
7,500,000 shares authorized and
59,057 and 0 shares issued and outstanding
at December 31, 2010 and 2009,
respectively 59 -
Common stock, $0.001 par value, 40,200,000
shares authorized and
8,724,613 and 8,563,264 shares issued and
outstanding at December 31, 2010 and 2009,
respectively 8,725 8,563
Additional paid in capital 174,260,531 170,622,581
Notes receivable - employees (963,433) (2,304,999)
Distributions in excess of accumulated
earnings (61,933,725) (49,877,753)
Total Stockholders’ Equity 111,374,307 118,450,542
TOTAL LIABILITIES AND STOCKHOLDERS’
EQUITY $ 410,608,602 $ 416,865,373
Gladstone Commercial Corporation
Consolidated Statements of Operations
For the three For the three For the three For the three
months ended months ended months ended months ended
December 31, September 30,
2010 2010 June 30, 2010 March 30, 2010
Operating
revenues
Rental income $ 10,146,240 $ 10,209,211 $ 10,409,519 $ 10,415,066
Interest income
from mortgage
note receivable - 43,750 189,583 187,500
Tenant recovery
revenue 81,054 81,452 82,285 82,410
Total operating
revenues 10,227,294 10,334,413 10,681,387 10,684,976
Operating
expenses
Depreciation and
amortization 3,271,403 3,280,048 3,390,492 3,321,871
Property
operating
expenses 234,701 262,686 229,733 244,354
Due diligence
expense 389,900 - - 21,876
Base management
fee 291,619 298,393 296,141 312,564
Incentive fee 734,460 1,070,145 829,264 846,192
Administration
fee 255,232 356,856 219,119 231,884
Professional
fees 370,428 1,822,683 201,801 175,610
Insurance
expense 47,046 53,219 56,513 56,325
Directors' fees 43,759 54,533 49,025 49,418
General and
administrative 109,814 83,656 134,186 100,292
Total operating
expenses before
credits from
Adviser 5,748,362 7,282,219 5,406,274 5,360,386
Credit to base
management fee (225,000)
Credit to
incentive fee (101,596) - (56,073) -
Total operating
expenses 5,421,766 7,282,219 5,350,201 5,360,386
Other income
(expense)
Interest income
from temporary
investments 7,543 114 113 265
Interest income
- employee loans 28,650 36,557 42,574 43,101
Other income 14 3,309,887 5,013 3,316
Interest expense (4,034,863) (4,370,500) (4,372,435) (4,284,939)
Total other
expense (3,998,656) (1,023,942) (4,324,735) (4,238,257)
Net income 806,872 2,028,252 1,006,451 1,086,333
Distributions
attributable to
preferred stock (1,023,438) (1,023,437) (1,023,437) (1,023,438)
Distributions
attributable to
senior common
stock (15,393) (4,282) (375) -
Net income
available to
common
stockholders $ (231,959) $ 1,000,533 $ (17,361) $ 62,895
Earnings per
weighted average
share of common
stock - basic
Income from
continuing
operations (net
of distributions
attributable to
preferred stock) $ (0.03) $ 0.12 $ - $ 0.01
Discontinued
operations - - - -
Net income
available to
common
stockholders $ (0.03) $ 0.12 $ - $ 0.01
Earnings per
weighted average
share of common
stock - diluted
Income from
continuing
operations (net
of dividends
attributable to
preferred stock) $ (0.03) $ 0.12 $ - $ 0.01
Discontinued
operations - - - -
Net income
available to
common
stockholders $ (0.03) $ 0.12 $ - $ 0.01
Weighted average
shares of common
stock
outstanding -
basic 8,637,981 8,562,777 8,545,264 8,558,664
Weighted average
shares of common
stock
outstanding-
diluted 8,688,900 8,577,173 8,546,529 8,558,664
Earnings per
weighted average
share of senior
common stock $ 0.30 $ 0.26 $ 0.26 $ -
Weighted average
shares of senior
common stock
outstanding -
basic 50,919 16,286 1,435 0
Gladstone Commercial Corporation
Consolidated Statements of Operations
For the year ended December 31,
2010 2009 2008
Operating revenues
Rental income $ 41,180,036 $ 41,513,977 $ 39,572,287
Interest income from mortgage note
receivable 420,833 760,417 898,573
Tenant recovery revenue 327,201 334,543 336,637
Total operating revenues 41,928,070 42,608,937 40,807,497
Operating expenses
Depreciation and amortization 13,263,814 13,161,287 12,679,437
Property operating expenses 971,474 915,120 875,850
Due diligence expense 411,776 40,574 1,176,379
Base management fee 1,198,717 1,401,402 1,637,851
Incentive fee 3,480,061 3,238,634 2,831,722
Administration fee 1,063,091 1,015,695 954,635
Professional fees 2,570,522 649,566 521,410
Insurance expense 213,103 203,682 173,414
Directors' fees 196,735 198,882 216,851
General and administrative 427,948 442,135 493,119
Total operating expenses before
credits from Adviser 23,797,241 21,266,977 21,560,668
Credit to base management fee (225,000) - -
Credit to incentive fee (157,669) (726,448) (2,196,945)
Total operating expenses 23,414,572 20,540,529 19,363,723
Other income (expense)
Interest income from temporary
investments 8,035 20,748 21,844
Interest income - employee loans 150,882 192,350 202,097
Other income 3,318,230 12,978 63,993
Interest expense (17,062,737) (17,894,536) (16,858,687)
Total other expense (13,585,590) (17,668,460) (16,570,753)
Income from continuing operations 4,927,908 4,399,948 4,873,021
Discontinued operations
Income from discontinued operations - 43,062 39,926
Gain on sale of real estate - 160,038 -
Total discontinued operations - 203,100 39,926
Net income 4,927,908 4,603,048 4,912,947
Distributions attributable to
preferred stock (4,093,750) (4,093,750) (4,093,750)
Distributions attributable to senior
common stock (20,050) - -
Net income available to common
stockholders $ 814,108 $ 509,298 $ 819,197
Earnings per weighted average share of
common stock - basic
Income from continuing operations (net
of distributions attributable to
preferred stock) $ 0.09 $ 0.04 $ 0.09
Discontinued operations - 0.02 0.01
Net income available to common
stockholders $ 0.09 $ 0.06 $ 0.10
Earnings per weighted average share of
common stock - diluted
Income from continuing operations (net
of dividends attributable to preferred
stock) $ 0.09 $ 0.04 $ 0.09
Discontinued operations - 0.02 0.01
Net income available to common
stockholders $ 0.09 $ 0.06 $ 0.10
Weighted average shares of common
stock outstanding - basic 8,576,303 8,563,264 8,565,149
Weighted average shares of common
stock outstanding- diluted 8,601,153 8,563,264 8,565,149
Earnings per weighted average share of
senior common stock $ 0.81 $ - $ -
Weighted average shares of senior
common stock outstanding - basic 24,850 0 0
Gladstone Commercial Corporation
Consolidated Statements of Cash Flows
For the year ended December 31,
2010 2009 2008
Cash flows from operating activities:
Net income $ 4,927,908 $ 4,603,048 $ 4,912,947
Adjustments to reconcile net income to
net cash
provided by operating activities:
Depreciation and amortization,
including discontinued operations 13,263,814 13,171,703 12,704,641
Amortization of deferred financing
costs 1,002,428 1,491,389 1,283,956
Amortization of deferred rent asset
and liability, net (683,666) (532,068) (532,066)
Amortization of discount on assumed
debt 11,301 - -
Asset retirement obligation expense,
including discontinued operations 143,060 143,550 133,244
Gain on sale of real estate - (160,038) -
Decrease (increase) in other assets 389,133 (959,738) 172,096
Increase in deferred rent receivable (1,651,809) (1,177,167) (2,387,509)
Increase in accounts payable, accrued
expenses, and amount due Adviser 347,908 735,492 1,001,639
Increase (decrease) in other
liabilities 363,366 (302,914) 286,227
Net cash provided by operating
activities 18,113,443 17,013,257 17,575,175
Cash flows from investing activities:
Real estate investments (2,418,534) (1,139,711) (49,359,852)
Leasing commissions paid (7,044) (441,745) -
Proceeds from sale of real estate - 1,089,269 -
Principal repayments on mortgage notes
receivable 10,000,000 - -
Receipts from lenders for reserves
held in escrow 1,617,933 1,465,133 874,227
Payments to lenders for reserves held
in escrow (1,751,344) (1,801,894) (1,623,452)
Decrease (increase) in restricted cash 345,128 44,023 (763,494)
Deposits on future acquisitions - (250,000) (1,650,000)
Deposits refunded 250,000 200,000 1,750,000
Net cash provided by (used in)
investing activities 8,036,139 (834,925) (50,772,571)
Cash flows from financing activities:
Proceeds from issuance of common and
senior common stock 4,126,690 - -
Offering costs (248,829) - -
Borrowings under mortgage notes
payable - - 48,015,000
Principal repayments on mortgage notes
payable (2,687,192) (2,349,522) (1,485,901)
Principal repayments on employee notes
receivable 1,341,566 290,887 155,637
Borrowings from line of credit 32,794,746 57,600,000 76,900,000
Repayments on line of credit (38,994,746) (35,900,000) (69,800,000)
Repayment of short-term loan - (20,000,000) -
Receipts from tenants for reserves 2,154,699 4,454,102 2,391,360
Payments to tenants from reserves (2,130,232) (4,526,409) (2,159,671)
(Decrease) increase in security
deposits (369,595) 28,282 531,806
Payments for deferred financing costs (1,192,113) (243,999) (1,262,273)
Distributions paid for common and
preferred (16,979,670) (16,938,653) (16,941,392)
Net cash (used in) provided by
financing activities (22,184,676) (17,585,312) 36,344,566
Net increase (decrease) in cash and
cash equivalents 3,964,906 (1,406,980) 3,147,170
Cash and cash equivalents, beginning
of year 3,096,598 4,503,578 1,356,408
Cash and cash equivalents, end of year $ 7,061,504 $ 3,096,598 $ 4,503,578
Cash paid during period for interest $ 17,969,864 $ 16,558,955 $ 14,337,944
NON-CASH OPERATING, INVESTING AND
FINANCING INFORMATION
Increase in asset retirement
obligation $ 614,064 $ - $ 245,196
Fixed rate debt assumed in connection
with acquisitions $ 10,795,004 $ - $ 6,461,603
Obligation under capital lease $ - $ - $ 225,068
Forfeiture of common stock in
satisfaction of employee note
receivable $ 243,900 $ - $ 18,400
Senior common dividend issued in the
dividend reinvestment program $ 4,210 $ - $ -
Reclassification of principal on
employee note (Refer to Note 8) $ - $ 245,000 $ -
Leasing commissions included in
accounts payable $ 457,939 $ - $ -
SOURCE Gladstone Commercial Corporation
Released March 8, 2011