Gladstone Commercial Announces Second 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 $3.2 million, or $0.37 per diluted weighted average common share
-- Purchased one property for a total investment of approximately $11.2 million
MCLEAN, Va.--(BUSINESS WIRE)--
Gladstone Commercial Corp. (NASDAQ:GOOD) (the "Company") today reported financial results for the quarter ended June 30, 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 June 30, 2007 was $532,875, or $0.06 per share, compared to $368,390, or $0.04 per share, for the same period one year ago, an increase of 45%. Net income available to common stockholders for the six months ended June 30, 2007 was $1,039,780, or $0.12 per share, compared to $870,746, or $0.11 per share, for the same period one year ago, an increase of 19%. Net income results when compared to the same period last year were affected by increased revenues related to the acquisition of 10 properties since June 30, 2006, partially offset by increased expenses attributable to the 10 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 three and six months ended June 30, 2007 include a full waiver of the incentive fee, approximately $1.2 million for the six month period, from the Company's Adviser, Gladstone Management Corporation.
FFO for the quarter ended June 30, 2007 was approximately $3.2 million, or $0.37 per share, compared to approximately $2.4 million, or $0.31 per share, for the same period one year ago, an increase of 29%. FFO for the six months ended June 30, 2007 was approximately $6.1 million, or $0.71 per share, compared to approximately $4.8 million, or $0.61 per share, for the same period one year ago, an increase of 27%. 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,
----------------------- -----------------------
2007 2006 2007 2006
----------- ----------- ----------- -----------
Net income $1,556,312 $852,765 $3,086,654 $1,699,565
Less: Dividends
attributable to
preferred stock (1,023,437) (484,375) (2,046,874) (828,819)
----------- ----------- ----------- -----------
Net income available to
common stockholders $532,875 $368,390 $1,039,780 $870,746
Add: Real estate
depreciation and
amortization,
including discontinued
operations 2,636,154 2,081,072 5,053,966 3,915,819
----------- ----------- ----------- -----------
FFO available to common
stockholders $3,169,029 $2,449,462 $6,093,746 $4,786,565
Weighted average shares
outstanding - basic 8,565,264 7,762,503 8,565,264 7,717,501
Weighted average shares
outstanding - diluted 8,565,264 7,911,871 8,565,264 7,858,146
Basic net income per
weighted average
common share $0.06 $0.05 $0.12 $0.11
=========== =========== =========== ===========
Diluted net income per
weighted average
common share $0.06 $0.04 $0.12 $0.11
=========== =========== =========== ===========
Basic FFO per weighted
average common share $0.37 $0.32 $0.71 $0.62
=========== =========== =========== ===========
Diluted FFO per
weighted average
common share $0.37 $0.31 $0.71 $0.61
=========== =========== =========== ===========
Second quarter highlights:
-- Purchased one property with approximately 102,000 square feet
for approximately $11.2 million; and
-- Borrowed approximately $14.2 million pursuant to a long-term
note payable collateralized by security interests in three
properties, which accrues interest at a rate of 6.11% per
year.
"Our results were positively impacted by the five acquisitions completed in 2007, and we expect our earnings to continue grow throughout the remainder of 2007. We are excited about the opportunities that are currently available in the marketplace and our pipeline remains very strong," said Chip Stelljes, President and Chief Investment Officer.
Subsequent to quarter end, the Company:
-- Purchased one property with approximately 21,000 square feet
for approximately $6.8 million; 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 July, August and September 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 June 30, 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, August 1, 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 September 1, 2007. To hear the replay, please dial (877) 660-6853, access playback account 286 and use ID code 249134.
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 Investor Relations 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 June 30, 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 on May 1, 2007. 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, 2007 December 31, 2006
----------------- -----------------
ASSETS
Real estate, net of accumulated
depreciation of $11,947,461 and
$8,595,419, respectively $280,541,611 $235,118,123
Lease intangibles, net of
accumulated amortization of
$5,877,604 and $4,175,685,
respectively 26,038,291 23,416,696
Mortgage notes receivable 10,000,000 10,000,000
Cash and cash equivalents 9,681,885 36,005,686
Restricted cash 1,469,750 1,225,162
Funds held in escrow 1,789,814 1,635,819
Interest receivable - mortgage
note 83,333 -
Interest receivable - employees 52,735 43,716
Deferred rent receivable 4,277,061 3,607,279
Deferred financing costs, net of
accumulated amortization of
$1,800,471 and $1,467,297,
respectively 4,067,858 3,713,004
Prepaid expenses 456,354 521,290
Deposits on real estate 300,000 300,000
Accounts receivable 387,747 179,247
----------------- -----------------
TOTAL ASSETS $339,146,439 $315,766,022
================= =================
LIABILITIES AND STOCKHOLDERS'
EQUITY
LIABILITIES
Mortgage notes payable $182,124,367 $154,494,438
Deferred rent liability 4,325,817 4,718,599
Asset retirement obligation
liability 1,752,378 1,631,294
Accounts payable and accrued
expenses 588,581 673,410
Due to adviser 682,481 183,042
Rent received in advance, security
deposits and funds held in escrow 2,175,708 1,841,063
----------------- -----------------
Total Liabilities 191,649,332 163,541,846
----------------- -----------------
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 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 (2,801,180) (3,201,322)
Distributions in excess of
accumulated earnings (20,353,407) (15,226,196)
----------------- -----------------
Total Stockholders' Equity 147,497,107 152,224,176
----------------- -----------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $339,146,439 $315,766,022
================= =================
Gladstone Commercial Corporation
Consolidated Statements of Operations
(Unaudited)
For the three months For the six months
ended June 30, ended June 30,
----------------------- -------------------------
2007 2006 2007 2006
----------- ----------- ------------ ------------
Operating revenues
Rental income $7,732,322 $6,027,830 $14,810,358 $10,894,906
Interest income
from mortgage
notes receivable 252,778 558,434 502,778 1,111,346
Tenant recovery
revenue 94,468 43,798 150,203 49,420
----------- ----------- ------------ ------------
Total operating
revenues 8,079,568 6,630,062 15,463,339 12,055,672
----------- ----------- ------------ ------------
Operating expenses
Depreciation and
amortization 2,636,154 2,064,312 5,053,966 3,863,519
Base management fee 471,091 719,392 953,135 1,372,134
Administration fee 210,126 - 417,144 -
Incentive fee 633,805 - 1,219,573 -
Professional fees 174,677 232,960 324,108 431,418
Taxes and licenses 50,178 39,069 65,185 89,963
Insurance 114,556 102,845 260,808 185,842
General and
administrative 133,406 95,602 245,308 143,420
Directors fees 54,250 27,500 108,500 61,000
Stockholder related
expenses 75,361 183,596 174,978 248,065
Asset retirement
obligation expense 28,942 24,940 57,102 71,641
Stock option
compensation
expense - 33,602 - 79,818
----------- ----------- ------------ ------------
Total operating
expenses before
credit from
Adviser 4,582,546 3,523,818 8,879,807 6,546,820
----------- ----------- ------------ ------------
Credit to incentive
fee (633,805) - (1,219,573) -
----------- ----------- ------------ ------------
Total
operating
expenses 3,948,741 3,523,818 7,660,234 6,546,820
----------- ----------- ------------ ------------
Other income
(expense)
Interest income
from temporary
investments 63,269 4,057 292,285 11,431
Interest income -
employee loans 56,458 28,589 116,880 34,137
Other income 9,817 10,400 18,231 10,400
Interest expense (2,702,612) (2,155,968) (5,217,073) (3,774,536)
----------- ----------- ------------ ------------
Total other
expense (2,573,068) (2,112,922) (4,789,677) (3,718,568)
----------- ----------- ------------ ------------
Income from
continuing
operations 1,557,759 993,322 3,013,428 1,790,284
----------- ----------- ------------ ------------
Discontinued
operations
(Loss) income from
discontinued
operations (1,503) 71,215 (5,504) 109,253
Net realized income
(loss) from
foreign currency
transactions 56 167 63 (649)
Net unrealized loss
from foreign
currency
transactions - (211,939) - (199,323)
Taxes paid on sale
of real estate - - 78,667 -
----------- ----------- ------------ ------------
Total
discontinued
operations (1,447) (140,557) 73,226 (90,719)
----------- ----------- ------------ ------------
Net income 1,556,312 852,765 3,086,654 1,699,565
----------- ----------- ------------ ------------
Dividends
attributable to
preferred stock (1,023,437) (484,375) (2,046,874) (828,819)
----------- ----------- ------------ ------------
Net income available
to common
stockholders $532,875 $368,390 $1,039,780 $870,746
=========== =========== ============ ============
Earnings per weighted
average common share
- basic
Income from
continuing
operations (net
of dividends
attributable to
preferred
stock) $0.06 $0.07 $0.11 $0.12
Discontinued
operations - (0.02) 0.01 (0.01)
----------- ----------- ------------ ------------
Net income
available to
common
stockholders $0.06 $0.05 $0.12 $0.11
=========== =========== ============ ============
Earnings per weighted
average common share
- diluted
Income from
continuing
operations (net
of dividends
attributable to
preferred
stock) $0.06 $0.06 $0.11 $0.12
Discontinued
operations - (0.02) 0.01 (0.01)
----------- ----------- ------------ ------------
Net income
available to
common
stockholders $0.06 $0.04 $0.12 $0.11
=========== =========== ============ ============
Weighted average
shares outstanding
Basic 8,565,264 7,762,503 8,565,264 7,717,501
=========== =========== ============ ============
Diluted 8,565,264 7,911,871 8,565,264 7,858,146
=========== =========== ============ ============
Gladstone Commercial Corporation
Consolidated Statements of Cash Flows
(Unaudited)
For the six months ended June 30,
---------------------------------
2007 2006
---------------- ----------------
Cash flows from operating
activities:
Net income $3,086,654 $1,699,565
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization,
including discontinued
operations 5,053,966 3,915,819
Amortization of deferred
financing costs, including
discontinued operations 333,174 289,300
Amortization of deferred rent
asset 126,748 126,748
Amortization of deferred rent
liability (392,782) (303,478)
Asset retirement obligation
expense, including discontinued
operations 57,102 81,573
Increase in deferred rent
receivable (796,530) (720,712)
Stock compensation - 79,818
Increase in mortgage notes
payable due to change in value
of foreign currency - 199,323
(Increase) decrease in mortgage
interest receivable (83,333) 3,609
Increase in employee interest
receivable (9,019) (28,589)
(Increase) decrease in prepaid
expenses and other assets (143,564) 297,354
Increase in accounts payable,
accrued expenses, and amount
due adviser 414,610 65,606
Increase in rent received in
advance 90,057 163,407
---------------- ----------------
Net cash provided by
operating activities 7,737,083 5,869,343
---------------- ----------------
Cash flows from investing
activities:
Real estate investments (53,035,069) (40,506,626)
Principal repayments on mortgage
notes receivable - 44,742
Principal repayments on employee
loans 400,142 -
Net payments to lenders for
reserves held in escrow (868,679) (1,899,416)
Increase in restricted cash (244,588) (412,074)
Deposits on future acquisitions (810,000) (500,000)
Deposits applied against real
estate investments 810,000 1,100,000
---------------- ----------------
Net cash used in
investing activities (53,748,194) (42,173,374)
---------------- ----------------
Cash flows from financing
activities:
Proceeds from share issuance - 25,485,010
Offering costs - (1,302,004)
Borrowings under mortgage notes
payable 28,015,000 31,900,000
Principal repayments on mortgage
notes payable (385,070) (302,410)
Borrowings from line of credit 4,200,000 60,000,400
Repayments on line of credit (4,200,000) (73,900,400)
Increase in reserves from tenants 818,745 1,093,252
Increase in security deposits 140,525 562,500
Payments for deferred financing
costs (688,025) (1,650,237)
Dividends paid for common and
preferred (8,213,865) (6,390,679)
---------------- ----------------
Net cash provided by
financing activities 19,687,310 35,495,432
---------------- ----------------
Net decrease in cash and cash
equivalents (26,323,801) (808,599)
Cash and cash equivalents, beginning
of period 36,005,686 1,740,159
---------------- ----------------
Cash and cash equivalents, end of
period $9,681,885 $931,560
================ ================
NON-CASH INVESTING ACTIVITIES
Increase in asset retirement
obligation $121,084 $1,510,330
---------------- ----------------
NON-CASH FINANCING ACTIVITIES
Fixed rate debt assumed in
connection with acquisitions $- $30,129,654
---------------- ----------------
Notes receivable issued in exchange
for common stock associated with
the exercise of employee stock
options $- $1,826,754
---------------- ----------------
Source: Gladstone Commercial Corp.
Released July 31, 2007