Gladstone Commercial Reports Results for the Fourth Quarter and Year Ended December 31, 2007
-- During the fourth quarter 2007 completed 1 acquisition of 6 properties, for $19.5 million and during the full year 2007 completed 10 acquisitions of 15 properties for an aggregate investment of approximately $104.2 million.
-- Reported fourth quarter 2007 funds from operations ("FFO") of approximately $3.2 million, or $0.38 per share, compared to $2.3 million, or $0.28 per share, for the fourth quarter 2006, an increase of 36%.
-- Reported full year 2007 FFO of approximately $12.5 million, or $1.46 per share, compared to $9.4 million, or $1.18 per share, for the full year 2006, an increase of 24%.
MCLEAN, Va.--(BUSINESS WIRE)--
Gladstone Commercial Corp. (NASDAQ:GOOD) (the "Company") today reported financial results for the quarter and year ended December 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 the narrative portion of this news release. All per share references are to fully-diluted weighted average common shares, unless otherwise noted. For the year ended December 31, 2007, there were no options outstanding to dilute outstanding shares.
Net income available to common stockholders for the quarter ended December 31, 2007 increased approximately 1,100% per share to $439,675, or $0.052 per share, compared to $22,157, or $0.004 per share, for the same period one year ago.
Net income available to common stockholders for the year ended December 31, 2007 decreased approximately 11% per share to $2,046,479, or $0.24 per share, compared to $2,185,938, or $0.27 per share, for the same period one year ago. Net income results when compared to the same period last year were affected by increased expenses attributable to the acquisition of 14 properties and 1 leasehold interest during 2007, interest expense associated with leveraging the Company's properties, dividends paid on the Company's preferred stock and the gain on the sale of the Company's two Canadian properties in July 2006, partially offset by increased revenues related to the 15 acquisitions. The per share numbers were impacted by the dilution of shares in 2006 related to the termination of the Company's stock option plan and the corresponding exercise of stock options, which increased its outstanding shares by approximately 890,000 in 2006.
FFO for the quarter ended December 31, 2007 increased approximately 36% per share to $3.2 million, or $0.38 per share, compared to $2.3 million, or $0.28 per share, for the same period one year ago.
FFO for the year ended December 31, 2007 increased approximately
24% per share to $12.5 million, or $1.46 per share, compared to
approximately $9.4 million, or $1.18 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 For the
three three
months months For the year For the year
ended ended ended ended
December December December December
31, 2007 31, 2006 31, 2007 31, 2006
------------ ----------- ------------ ------------
Net income $ 1,463,113 $ 895,844 $ 6,140,229 $ 4,372,828
Less: Dividends
attributable to
preferred stock (1,023,438) (873,696) (4,093,750) (2,186,890)
------------ ----------- ------------ ------------
Net income
available to
common
stockholders 439,675 22,148 2,046,479 2,185,938
------------ ----------- ------------ ------------
Add: Real estate
depreciation and
amortization,
including
discontinued
operations 2,806,109 2,271,021 10,528,458 8,349,474
Less: Gain on sale
of real estate,
net of taxes paid - - (78,667) (1,106,590)
------------ ----------- ------------ ------------
FFO available to
common
stockholders $ 3,245,784 $2,293,169 $12,496,270 $ 9,428,822
Weighted average
shares outstanding
- basic 8,565,264 8,052,148 8,565,264 7,827,781
Weighted average
shares outstanding
- diluted 8,565,264 8,196,605 8,565,264 7,986,690
Basic net income
per weighted
average common
share $ 0.05 $ 0.00 $ 0.24 $ 0.28
============ =========== ============ ============
Diluted net income
per weighted
average common
share $ 0.05 $ 0.00 $ 0.24 $ 0.27
============ =========== ============ ============
Basic FFO per
weighted average
common share $ 0.38 $ 0.28 $ 1.46 $ 1.20
============ =========== ============ ============
Diluted FFO per
weighted average
common share $ 0.38 $ 0.28 $ 1.46 $ 1.18
============ =========== ============ ============
For the year-ended December 31, 2007, the Company reported the following activity:
-- Purchased 14 properties and 1 leasehold interest, which were
all fully occupied, with approximately 930,000 square feet for
an aggregate of approximately $104.2 million;
-- Borrowed approximately $48.5 million, collateralized by
security interests in 10 of its properties;
-- Increased the availability under its line of credit from $75.0
million to $95.0 million; and
-- Closed a one-year term loan with Key Bank National Association
for $20.0 million.
"We are proud of the fact that we were able to complete 15 acquisitions during the year, which was a 33% increase over the aggregate total investment of our 2006 acquisitions, despite the upheaval in the credit markets. Even though the credit markets are currently very tumultuous, we are confident that we will be able to continue to grow our portfolio during 2008 by securing alternative sources of financing. We remain excited about the opportunities that are currently available in the marketplace and our pipeline remains healthy," said Chip Stelljes, President and Chief Investment Officer.
Subsequent to year end, the Company:
-- Purchased two, fully occupied, properties with approximately
117,000 square feet for an aggregate of approximately $17.8
million; and
-- Increased the monthly cash dividends on the common stock to
$0.125 per share, declared a dividend of $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 of 2008.
The financial statements attached below are without footnotes so readers should obtain and carefully review the Company's Form 10-K for the year ended December 31, 2007, including the footnotes to the financial statements contained therein. The Company has 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 Thursday, February 28, 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 March 28, 2008. To hear the replay, please dial (877) 660-6853, access playback account 286 and use ID code 273773.
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-K for the year ended December 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, the closing of any transaction and the Company's ability to secure alternative sources of financing. 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, 2007, as filed with the SEC on February 27, 2008. The risk factors set forth in the Form 10-K 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
December 31, December 31,
2007 2006
------------- -------------
ASSETS
Real estate, net of accumulated
depreciation of $15,738,634 and
$8,595,419, respectively $324,761,772 $235,118,123
Lease intangibles, net of accumulated
amortization of $7,560,928 and
$4,175,685, respectively 28,989,556 23,416,696
Mortgage notes receivable 10,000,000 10,000,000
Cash and cash equivalents 1,356,408 36,005,686
Restricted cash 1,914,067 1,225,162
Funds held in escrow 1,401,695 1,635,819
Interest receivable - mortgage note 86,111 -
Interest receivable - employees 39,280 43,716
Deferred rent receivable 5,094,799 3,607,279
Deferred financing costs, net of
accumulated amortization of $2,184,492
and $1,467,297, respectively 4,405,129 3,713,004
Prepaid expenses 522,348 521,290
Deposits on real estate 300,000 300,000
Accounts receivable 31,524 179,247
------------- -------------
TOTAL ASSETS $378,902,689 $315,766,022
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Mortgage notes payable $202,120,471 $154,494,438
Short-term loan and borrowings under line
of credit 24,400,000 -
Deferred rent liability 3,933,035 4,718,599
Asset retirement obligation liability 1,811,752 1,631,294
Accounts payable and accrued expenses 778,949 673,410
Due to adviser 784,301 183,042
Rent received in advance, security
deposits and funds held in escrow 2,706,113 1,841,063
------------- -------------
Total Liabilities 236,534,621 163,541,846
------------- -------------
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 (2,769,923) (3,201,322)
Distributions in excess of accumulated
earnings (25,513,703) (15,226,196)
------------- -------------
Total Stockholders' Equity 142,368,068 152,224,176
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $378,902,689 $315,766,022
============= =============
Gladstone Commercial Corporation
Consolidated Statements of Operations
For the For the
three three For the For the
months months three three
ended ended months months
December September ended June ended March
31, 2007 30, 2007 30, 2007 31, 2007
------------ ------------ ------------ ------------
Operating revenues
Rental income $ 8,634,634 $ 8,024,305 $ 7,732,322 $ 7,078,036
Interest income
from mortgage
notes receivable 255,556 255,555 252,778 250,000
Tenant recovery
revenue 79,502 80,648 94,468 55,735
------------ ------------ ------------ ------------
Total operating
revenues 8,969,692 8,360,508 8,079,568 7,383,771
------------ ------------ ------------ ------------
Operating expenses
Depreciation and
amortization 2,806,109 2,668,383 2,636,154 2,417,812
Property
operating
expenses 224,517 204,972 215,483 176,818
Base management
fee 445,783 459,202 471,091 482,044
Incentive fee 667,688 677,104 633,805 585,768
Administration
fee 244,902 175,852 210,126 207,018
Professional fees 182,870 118,371 174,677 149,431
Insurance 42,866 53,943 58,697 58,635
Directors fees 54,250 66,250 54,250 54,250
Stockholder
related expenses 28,660 40,991 75,361 99,617
Asset retirement
obligation
expense 29,936 29,440 28,942 28,160
General and
administrative 23,881 17,452 23,960 37,706
------------ ------------ ------------ ------------
Total operating
expenses before
credit from
Adviser 4,751,462 4,511,960 4,582,546 4,297,259
------------ ------------ ------------ ------------
Credit to
incentive fee (575,033) (526,991) (633,805) (585,768)
------------ ------------ ------------ ------------
Total operating
expenses 4,176,429 3,984,969 3,948,741 3,711,491
------------ ------------ ------------ ------------
Other income
(expense)
Interest income
from temporary
investments 28,859 33,105 63,269 229,016
Interest income -
employee loans 52,443 52,728 56,458 60,422
Other income 19,720 9,896 9,817 8,414
Interest expense (3,427,198) (2,920,270) (2,702,612) (2,514,461)
------------ ------------ ------------ ------------
Total other
income
(expense) (3,326,176) (2,824,541) (2,573,068) (2,216,609)
------------ ------------ ------------ ------------
Income from
continuing
operations 1,467,087 1,550,998 1,557,759 1,455,671
------------ ------------ ------------ ------------
Discontinued
operations
Income from
discontinued
operations (3,783) 5,975 (1,503) (4,001)
Net realized
(loss) gain from
foreign currency
transactions (191) 33,487 56 7
Gain on sale of
real estate - - - -
Taxes on sale of
real estate - - - 78,667
------------ ------------ ------------ ------------
Total
discontinued
operations (3,974) 39,462 (1,447) 74,673
------------ ------------ ------------ ------------
Net income 1,463,113 1,590,460 1,556,312 1,530,344
------------ ------------ ------------ ------------
Dividends
attributable to
preferred stock (1,023,438) (1,023,438) (1,023,437) (1,023,437)
------------ ------------ ------------ ------------
Net income
available to
common
stockholders $ 439,675 $ 567,022 $ 532,875 $ 506,907
============ ============ ============ ============
Earnings per
weighted average
common share -
basic
Income from
continuing
operations (net
of dividends
attributable to
preferred stock) $ 0.05 $ 0.07 $ 0.06 $ 0.05
Discontinued
operations 0.00 0.00 0.00 0.01
------------ ------------ ------------ ------------
Net income
available to
common
stockholders $ 0.05 $ 0.07 $ 0.06 $ 0.06
============ ============ ============ ============
Earnings per
weighted average
common share -
diluted
Income from
continuing
operations (net
of dividends
attributable to
preferred stock) $ 0.05 $ 0.07 $ 0.06 $ 0.05
Discontinued
operations 0.00 0.00 0.00 0.01
------------ ------------ ------------ ------------
Net income
available to
common
stockholders $ 0.05 $ 0.07 $ 0.06 $ 0.06
============ ============ ============ ============
Weighted average
shares
outstanding
Basic 8,565,264 8,565,264 8,565,264 8,565,264
============ ============ ============ ============
Diluted 8,565,264 8,565,264 8,565,264 8,565,264
============ ============ ============ ============
Gladstone Commercial Corporation
Consolidated Statements of Operations
For the year ended December 31,
---------------------------------------
2007 2006 2005
------------- ------------ ------------
Operating revenues
Rental income $ 31,469,297 $23,964,035 $10,853,903
Interest income from mortgage
notes receivable 1,013,889 1,845,231 1,915,795
Tenant recovery revenue 310,353 136,280 111,808
------------- ------------ ------------
Total operating revenues 32,793,539 25,945,546 12,881,506
------------- ------------ ------------
Operating expenses
Depreciation and amortization 10,528,458 8,297,174 3,521,128
Property operating expenses 821,790 645,792 406,277
Base management fee 1,858,120 2,902,053 2,118,040
Incentive fee 2,564,365 - -
Administration fee 837,898 - -
Professional fees 625,349 953,066 563,205
Insurance 214,141 211,562 196,657
Directors fees 229,000 140,000 96,219
Stockholder related expenses 244,629 311,049 215,907
Asset retirement obligation
expense 116,478 129,142 -
General and administrative 102,999 82,847 67,607
Stock option compensation
expense - 394,411 -
------------- ------------ ------------
Total operating expenses
before credit from Adviser 18,143,227 14,067,096 7,185,040
------------- ------------ ------------
Credit to incentive fee (2,321,597) - -
------------- ------------ ------------
Total operating expenses 15,821,630 14,067,096 7,185,040
------------- ------------ ------------
Other income (expense)
Interest income from
temporary investments 354,249 76,772 126,826
Interest income - employee
loans 222,051 125,788 21,041
Other income 47,847 380,915 -
Interest expense (11,564,541) (9,104,894) (2,333,376)
------------- ------------ ------------
Total other expense (10,940,394) (8,521,419) (2,185,509)
------------- ------------ ------------
Income from continuing
operations 6,031,515 3,357,031 3,510,957
------------- ------------ ------------
Discontinued operations
(Loss) income from
discontinued operations (3,312) 112,145 309,545
Net realized income (loss)
from foreign currency
transactions 33,359 (202,938) (6,278)
Net unrealized loss from
foreign currency
transactions - - (212,279)
Gain on sale of real estate - 1,422,026 -
Taxes refunded (paid) on sale
of real estate 78,667 (315,436) -
------------- ------------ ------------
Total discontinued
operations 108,714 1,015,797 90,988
------------- ------------ ------------
Net income 6,140,229 4,372,828 3,601,945
------------- ------------ ------------
Dividends attributable to
preferred stock (4,093,750) (2,186,890) -
------------- ------------ ------------
Net income available to common
stockholders $ 2,046,479 $ 2,185,938 $ 3,601,945
============= ============ ============
Earnings per weighted average
common share - basic
Income from continuing
operations (net of dividends
attributable to preferred
stock) $ 0.23 $ 0.15 $ 0.46
Discontinued operations 0.01 0.13 0.01
------------- ------------ ------------
Net income available to
common stockholders $ 0.24 $ 0.28 $ 0.47
============= ============ ============
Earnings per weighted average
common share - diluted
Income from continuing
operations (net of dividends
attributable to preferred
stock) $ 0.23 $ 0.14 $ 0.46
Discontinued operations 0.01 0.13 0.01
------------- ------------ ------------
Net income available to
common stockholders $ 0.24 $ 0.27 $ 0.47
============= ============ ============
Weighted average shares
outstanding
Basic 8,565,264 7,827,781 7,670,219
============= ============ ============
Diluted 8,565,264 7,986,690 7,723,220
============= ============ ============
Gladstone Commercial Corporation
Consolidated Statements of Cash Flows
For the year ended December 31,
--------------------------------------------
2007 2006 2005
-------------- -------------- --------------
Cash flows from operating
activities:
Net income $ 6,140,229 $ 4,372,828 $ 3,601,945
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization,
including discontinued
operations 10,528,458 8,349,474 3,651,119
Amortization of
deferred financing
costs, including
discontinued
operations 717,195 1,207,198 260,099
Amortization of
deferred rent asset 253,496 253,496 178,070
Amortization of
deferred rent
liability (785,564) (696,261) -
Asset retirement
obligation expense,
including discontinued
operations 116,478 139,074 -
Stock compensation - 394,411 -
Increase in mortgage
notes payable due to
change in value of
foreign currency - 202,066 209,395
Value of building
acquired in excess of
mortgage note
satisfied, applied to
interest income - (335,701) -
Gain on sale of real
estate - (1,422,026) -
(Increase) decrease in
mortgage interest
receivable (86,111) 70,749 (5,954)
Decrease (increase) in
employee interest
receivable 4,436 (43,716) 4,792
Increase in deferred
rent receivable (1,741,016) (1,270,159) (562,133)
Decrease (increase) in
prepaid expenses and
other assets 146,665 (89,913) (425,120)
Increase in accounts
payable, accrued
expenses, and amount
due adviser 625,398 196,294 359,537
Increase in rent
received in advance 176,145 268,037 133,798
-------------- -------------- --------------
Net cash provided by
operating activities 16,095,809 11,595,851 7,405,548
-------------- -------------- --------------
Cash flows from investing
activities:
Real estate investments (105,599,587) (48,339,307) (117,531,731)
Proceeds from sales of
real estate - 2,102,567 -
Issuance of mortgage
note receivable - - (10,000,000)
Principal repayments on
mortgage notes
receivable - 44,742 81,902
Net payments to lenders
for reserves held in
escrow (1,338,904) (3,346,216) (1,041,292)
(Decrease) increase in
restricted cash (688,905) 749,274 (513,761)
Deposits on future
acquisitions (2,110,000) (900,000) (2,686,000)
Deposits applied against
real estate investments 2,110,000 1,200,000 1,986,000
Refunds of deposits on
real estate - - 150,000
-------------- -------------- --------------
Net cash used in
investing activities (107,627,396) (48,488,940) (129,554,882)
-------------- -------------- --------------
Cash flows from financing
activities:
Proceeds from share
issuance - 65,089,026 -
Redemption of shares for
payment of taxes - (457,634) -
Offering costs - (2,654,279) -
Borrowings under
mortgage notes payable 48,521,690 68,055,000 61,419,179
Principal repayments on
mortgage notes payable (895,657) (604,318) (70,479)
Principal repayments on
employee notes
receivable from sale of
common stock 431,399 914 17,718
Borrowings from short-
term loan and line of
credit 65,500,000 71,400,400 85,460,000
Repayments on line of
credit (41,100,000) (114,960,400) (41,900,000)
Increase in reserves
from tenants 1,885,361 1,574,464 158,646
Increase in security
deposits 376,572 427,951 355,115
Payments for deferred
financing costs (1,409,320) (3,242,881) (2,021,115)
Dividends paid for
common and preferred (16,427,736) (13,469,627) (8,283,860)
-------------- -------------- --------------
Net cash provided by
financing activities 56,882,309 71,158,616 95,135,204
-------------- -------------- --------------
Net (decrease) increase
in cash and cash
equivalents (34,649,278) 34,265,527 (27,014,130)
Cash and cash
equivalents, beginning
of period 36,005,686 1,740,159 28,754,289
-------------- -------------- --------------
Cash and cash
equivalents, end of
period $ 1,356,408 $ 36,005,686 $ 1,740,159
============== ============== ==============
Cash paid during period
for interest $ 10,693,440 $ 8,045,342 $ 2,014,236
-------------- -------------- --------------
NON-CASH INVESTING
ACTIVITIES
Increase in asset
retirement obligation $ 180,458 $ 1,631,294 $ -
-------------- -------------- --------------
Additions to real estate
included in accounts
payable, accrued
expenses, and amount due
adviser $ 81,400 $ - $ -
-------------- -------------- --------------
NON-CASH FINANCING
ACTIVITIES
Fixed rate debt assumed
in connection with
acquisitions $ 4,506,689 $ 30,129,654 $ -
-------------- -------------- --------------
Assumption of mortgage
notes payable by buyer $ - $ 4,846,925 $ -
-------------- -------------- --------------
Notes receivable issued
in exchange for common
stock associated with
the exercise of employee
stock options $ - $ 2,769,954 $ 75,000
-------------- -------------- --------------
Acquisition of building
in satisfaction of
mortgage note receivable $ - $ 11,316,774 $ -
-------------- -------------- --------------
Source: Gladstone Commercial Corp.
Released February 27, 2008