Gladstone Commercial Corporation Reports Results for the First Quarter Ended March 31, 2009
Reported revenues for the first quarter of approximately $10.7 million, an increase of 12.3% versus the same period last year. Reported funds from operations ("FFO") for the first quarter of approximately $3.4 million. All tenants and its borrower are current and paying as agreed and all properties are fully leased.
MCLEAN, Va.--(BUSINESS WIRE)-- Gladstone Commercial Corp. (NASDAQ: GOOD) (the "Company") today reported financial results for the quarter ended March 31, 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 March 31, 2009 was approximately $3.4 million, or $0.39 per share, which remained flat as compared to the same period one year ago. Our results were affected by the increase in rental revenues as compared to the same period last year. This increase was a result of acquisitions completed during 2008 that were held for the full first quarter in 2009. This increase in revenues caused the amount of the incentive fee paid to the Company's external adviser, Gladstone Management (the "Adviser") to increase during the first quarter of 2009 through a reduction in the voluntary waiver issued by the Adviser. For the three months ended March 31, 2009 and 2008, the Company recorded an incentive fee of approximately $786,000 and $705,000, partially offset by a credit related to an unconditional and irrevocable voluntary waiver issued by the Adviser of approximately $235,000 and $562,000, for a net incentive fee for the three months ended March 31, 2009 and 2008 of approximately $551,000 and $143,000, respectively.
Net income available to common stockholders for the quarter ended March 31, 2009 was approximately $66,000, or $0.01 per share, compared to approximately $393,000, or $0.05 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, 2009 March 31, 2008
Net income $ 1,089,569 $ 1,416,702
Less: Distributions attributable to preferred (1,023,437 ) (1,023,437 )
stock
Net income available to common stockholders 66,132 393,265
Add: Real estate depreciation and amortization 3,314,100 2,987,760
FFO available to common stockholders $ 3,380,232 $ 3,381,025
Weighted average shares outstanding - basic & 8,563,264 8,565,264
diluted
Basic & diluted net income per weighted average $ 0.01 $ 0.05
common share
Basic & diluted FFO per weighted average common $ 0.39 $ 0.39
share
Distributions declared per common share $ 0.375 $ 0.375
Percentage of FFO paid per common share 95 % 95 %
The weighted average yield on the Company's portfolio as of March 31, 2009 was 9.68% as compared to 9.43% as of March 31, 2008. At March 31, 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 $404.1 million. Currently, all of the Company's properties are fully leased and all of its tenants and its borrower are 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 will likely 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.
During the first quarter, the Company repaid its $20.0 million short-term loan with KeyBank National Association in March 2009, which was originally set to mature in June 2009, with proceeds from borrowings under its line of credit.
"Our results demonstrate our current 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 intend to continue our strategy of making conservative investments in properties with existing financing that we believe will weather the current recession and that are likely to produce attractive long-term returns for our stockholders. 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 maintained monthly 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.
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, 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 Tuesday, May 5, 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 June 5, 2009. To hear the replay, please dial (877) 660-6853, access playback account 286 and use ID code 320566.
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 March 31, 2009, as filed with the SEC today.
The statements in this press release regarding the extension of the Company's line of credit and any of its long-term mortgages, future growth in the Company's portfolio and FFO, the Company's ability to further access its line of credit and to weather the current economic environment, 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 include, among others, the results of appraisals of our properties at the time of extension of our line of credit, our ability to raise capital, the duration of, or further downturns in, the current economic environment, the performance of our 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 Securities and Exchange Commission ("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)
March 31, 2009 December 31, 2008
ASSETS
Real estate, at cost $ 390,616,450 $ 390,562,138
Less: accumulated depreciation 27,127,861 24,757,576
Total real estate, net 363,488,589 365,804,562
Lease intangibles, net 30,590,024 31,533,843
Mortgage notes receivable 10,000,000 10,000,000
Cash and cash equivalents 2,473,850 4,503,578
Restricted cash 3,780,463 2,677,561
Funds held in escrow 2,349,456 2,150,919
Deferred rent receivable 7,728,226 7,228,811
Deferred financing costs, net 4,061,813 4,383,446
Due from adviser - 108,898
Prepaid expenses and other assets 524,385 707,167
TOTAL ASSETS $ 424,996,806 $ 429,098,785
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Mortgage notes payable $ 254,520,292 $ 255,111,173
Short-term loan and borrowings under line of 30,300,000 31,500,000
credit
Deferred rent liability 2,951,081 3,147,472
Asset retirement obligation liability 2,225,559 2,190,192
Accounts payable and accrued expenses 1,528,245 2,673,787
Due to adviser 1,149,672 -
Obligation under capital lease 238,455 235,378
Rent received in advance, security deposits 4,727,667 3,745,523
and funds held in escrow
Total Liabilities 297,640,971 298,603,525
STOCKHOLDERS' EQUITY
Redeemable preferred stock, $0.001 par
value; $25 liquidation preference; 2,300,000 2,150 2,150
shares authorized and 2,150,000 shares
issued and outstanding
Common stock, $0.001 par value, 47,700,000
shares authorized and 8,563,264 shares 8,563 8,563
issued and outstanding
Additional paid in capital 170,622,581 170,622,581
Notes receivable - employees (2,590,215 ) (2,595,886 )
Distributions in excess of accumulated (40,687,244 ) (37,542,148 )
earnings
Total Stockholders' Equity 127,355,835 130,495,260
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 424,996,806 $ 429,098,785
Gladstone Commercial Corporation
Consolidated Statements of Operations
(unaudited)
For the three months ended March 31,
2009 2008
Operating revenues
Rental income $ 10,414,120 $ 9,189,465
Interest income from mortgage notes 187,500 238,297
receivable
Tenant recovery revenue 82,434 85,719
Total operating revenues 10,684,054 9,513,481
Operating expenses
Depreciation and amortization 3,314,100 2,987,760
Property operating expenses 237,156 239,483
Due diligence expense 9,547 2,085
Base management fee 372,648 431,868
Incentive fee 786,289 704,667
Administration fee 224,354 212,196
Professional fees 235,198 97,662
Insurance 48,678 41,797
Directors fees 49,702 54,250
Stockholder related expenses 83,647 126,423
Asset retirement obligation expense 35,367 30,468
General and administrative 11,487 14,631
Total operating expenses before credit 5,408,173 4,943,290
from Adviser
Credit to incentive fee (235,081 ) (562,355 )
Total operating expenses 5,173,092 4,380,935
Other income (expense)
Interest income from temporary investments 17,281 9,548
Interest income - employee loans 48,886 52,144
Other income - 9,296
Interest expense (4,487,560 ) (3,753,604 )
Total other expense (4,421,393 ) (3,682,616 )
Income from continuing operations 1,089,569 1,449,930
Discontinued operations
Loss from discontinued operations - (33,228 )
Total discontinued operations - (33,228 )
Net income 1,089,569 1,416,702
Distributions attributable to preferred (1,023,437 ) (1,023,437 )
stock
Net income available to common $ 66,132 $ 393,265
stockholders
Earnings per weighted average common share
- basic & diluted
Income from continuing operations (net of
distributions attributable to preferred $ 0.01 $ 0.05
stock)
Discontinued operations 0.00 0.00
Net income available to common $ 0.01 $ 0.05
stockholders
Weighted average shares outstanding- basic 8,563,264 8,565,264
& diluted
Gladstone Commercial Corporation
Consolidated Statements of Cash Flows
(unaudited)
For the three months ended March 31,
2009 2008
Cash flows from operating activities:
Net income $ 1,089,569 $ 1,416,702
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,314,100 2,987,760
Amortization of deferred financing costs 375,194 249,323
Amortization of deferred rent asset and (133,017 ) (133,017 )
liability
Accretion of obligation under capital 3,077 -
lease
Asset retirement obligation expense 35,367 30,468
Increase in prepaid expenses and other (17,218 ) (76,011 )
assets
Increase in deferred rent receivable (562,789 ) (543,943 )
Increase (decrease) in accounts payable, 113,028 (81,710 )
accrued expenses, and amount due adviser
(Decrease) increase in rent received in (120,758 ) 101,518
advance
Net cash provided by operating activities 4,096,553 3,951,090
Cash flows from investing activities:
Real estate investments (54,308 ) (33,167,003 )
Increase in funds held in escrow related - (762,123 )
to acquisition
Receipts from lenders for reserves held in 272,818 215,325
escrow
Payments to lenders for reserves held in (471,355 ) (352,180 )
escrow
Increase in restricted cash (1,102,902 ) (494,998 )
Deposits on future acquisitions - (1,300,000 )
Deposits refunded or applied against real 200,000 1,400,000
estate investments
Net cash used in investing activities (1,155,747 ) (34,460,979 )
Cash flows from financing activities:
Principal repayments on mortgage notes (590,881 ) (384,421 )
payable
Principal repayments on employee notes 5,671 132
receivable
Borrowings from line of credit 28,000,000 36,150,000
Repayments on line of credit (9,200,000 ) (1,500,000 )
Repayment of short-term loan (20,000,000 ) -
Receipts from tenants for reserves 1,471,309 573,189
Payments to tenants from reserves (378,940 ) (435,102 )
Increase in security deposits 10,533 356,910
Payments for deferred financing costs (53,561 ) (35,934 )
Distributions paid for common and (4,234,665 ) (4,235,409 )
preferred
Net cash (used in) provided by financing (4,970,534 ) 30,489,365
activities
Net decrease in cash and cash equivalents (2,029,728 ) (20,524 )
Cash and cash equivalents, beginning of 4,503,578 1,356,408
period
Cash and cash equivalents, end of period $ 2,473,850 $ 1,335,884
NON-CASH INVESTING ACTIVITIES
Increase in asset retirement obligation $ - $ 259,435
Source: Gladstone Commercial Corp.
Released May 4, 2009