Gladstone Commercial Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Real Estate and Intangible Assets (Tables)

Real Estate and Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2016

Components of Investments in Real Estate

The following table sets forth the components of our investments in real estate as of March 31, 2016 and December 31, 2015 (dollars in thousands):


	March 31, 2016⁽¹⁾			December 31, 2015⁽²⁾
Real estate:
Land	$	96,884		$	97,117
Building		632,609			635,728
Tenant improvements		47,508			47,532
Accumulated depreciation		(117,162	)		(112,243	)

Real estate, net	$	659,839		$	668,134

⁽¹⁾	Does not include real estate held for sale as of March 31, 2016.

⁽²⁾	Does not include real estate held for sale as of December 31, 2015.

Pro-Forma Condensed Consolidated Statements of Operations

The following table reflects pro-forma consolidated statements of operations as if the properties acquired during the three months ended March 31, 2016 and the twelve months ended December 31, 2015, respectively, were acquired as of January 1, 2015. We did not complete any acquisitions during the three months ended March 31, 2016, and pro-forma net loss is identical to the income statement for the same period. The pro-forma earnings for the three months ended March 31, 2014 were adjusted to assume that the acquisition-related costs were incurred as of the previous period (dollars in thousands, except per share amounts):


	For the three months ended March 31, (unaudited)
	2016			2015
Operating Data:
Total operating revenue	$	21,527		$	21,389
Total operating expenses		(13,257	)		(12,664	)

Other expenses		(7,417	)		(7,856	)

Net income		853	(1)		869
Dividends attributable to preferred and senior common stock		(1,279	)		(1,247	)

Net loss attributable to common stockholders	$	(426	)	$	(378	)

Share and Per Share Data:

Basic and diluted loss per share of common stock - pro forma	$	(0.02	)	$	(0.02	)
Basic and diluted loss per share of common stock - actual	$	(0.02	)	$	(0.03	)
Weighted average shares outstanding-basic and diluted		22,545,285			20,210,975

(1)	Includes a $0.04 million impairment charge recognized on our Dayton, Ohio property during the three months ended March 31, 2016.

Summary of Lease on Property

During the three months ended March 31, 2016, we executed a lease on one property, which is summarized below (dollars in thousands):


Location	Lease Commencement Date	Square Footage (unaudited)			Lease Term	Renewal Options	Annualized GAAP Rent		Tenant Improvement		Leasing Commissions
Bolingbrook, IL	7/1/2016		13,816	(1)	7.2 Years	1 (5 year)	$	70	$	69	$	28

(1)	Tenant’s lease is for 24.9% of the building. The building is now 62.7% leased.

During the three months ended March 31, 2015, we amended four of our leases, which are summarized below (dollars in thousands):


Location	New Lease Effective Date	Square Footage (unaudited)			New Lease Term	Renewal Options	Annualized GAAP Rent		Tenant Improvement		Leasing Commissions
Indianapolis, IN	1/1/2015		3,546		8.3 Years	N/A	$	64	$	64	$	28
Indianapolis, IN	2/1/2015		8,275		3.0 Years	N/A		124		—		—
Raleigh, NC	2/1/2015		58,926		5.5 Years	2 (5 year)		711		—		144
Raleigh, NC	2/1/2015		21,300	(1)	5.5 Years	2 (5 year)		239		100		32

			92,047				$	1,138	$	164	$	204

(1)	Tenant’s lease is for 18.3% of the building. The building is now 93.2% leased.

Summary of Properties Acquired

During the three months ended March 31, 2015, we acquired two properties, which are summarized below (dollars in thousands):


Location	Acquisition Date	Square Footage (unaudited)		Lease Term	Renewal Options	Total Purchase Price		Acquisition Expenses		Annualized GAAP Rent		Debt Issued
Richardson, TX⁽¹⁾	3/6/2015		155,984	9.5 Years	2 (5 years each)	$	24,700	$	112	$	2,708	$	14,573

Birmingham, AL	3/20/2015		30,850	8.5 Years	1 (5 years)		3,648		76		333		N/A

Total			186,834			$	28,348	$	188	$	3,041	$	14,573

⁽¹⁾	The tenant occupying this property is subject to a gross lease.

Fair Value of Acquired Assets and Liabilities Assumed

In accordance with ASC 805, we determined the fair value of the acquired assets and assumed liabilities related to the two properties acquired during the three months ended March 31, 2015, as follows (dollars in thousands):


	Land		Building		Tenant Improvements		In-place Leases		Leasing Costs		Customer Relationships		Above Market Leases		Total Purchase Price
Richardson, TX	$	2,728	$	12,591	$	2,781	$	2,060	$	1,804	$	1,929	$	807	$	24,700
Birmingham, AL		650		1,683		351		458		146		360		—		3,648

	$	3,378	$	14,274	$	3,132	$	2,518	$	1,950	$	2,289	$	807	$	28,348

Schedule of Revenue and Earnings Recognized on Properties Acquired

Below is a summary of the total revenue and earnings recognized on the two properties acquired during the three months ended March 31, 2015 (dollars in thousands):


		For the three months ended March 31,
		2015
Location	Acquisition Date	Rental Revenue		Earnings ⁽¹⁾
Richardson, TX	3/6/2015	$	182	$	51
Birmingham, AL	3/20/2015		11		4

		$	193	$	55

⁽¹⁾	Earnings is calculated as net income exclusive of both interest expense and acquisition related costs that are required to be expensed under ASC 805.

Carrying Value of Intangible Assets and Accumulated Amortization

The following table summarizes the carrying value of intangible assets, liabilities and the accumulated amortization for each intangible asset and liability class as of March 31, 2016 and December 31, 2015 respectively (in thousands):


	March 31, 2016 ⁽¹⁾						December 31, 2015 ⁽²⁾
	Lease Intangibles			Accumulated Amortization			Lease Intangibles			Accumulated Amortization
In-place leases	$	65,882		$	(23,941	)	$	66,244		$	(22,679	)
Leasing costs		44,415			(15,760	)		44,360			(14,774	)
Customer relationships		46,468			(15,493	)		46,485			(14,722	)

	$	156,765		$	(55,194	)	$	157,089		$	(52,175	)


	Deferred Rent Receivable/(Liability)			Accumulated (Amortization)/Accretion			Deferred Rent Receivable/(Liability)			Accumulated (Amortization)/Accretion
Above market leases	$	10,176		$	(6,936	)	$	10,176		$	(6,818	)
Below market leases and deferred revenue		(17,273	)		8,110			(17,951	)		8,294

	$	(7,097	)	$	1,174		$	(7,775	)	$	1,476

⁽¹⁾	Does not include real estate held for sale as of March 31, 2016.

⁽²⁾	Does not include real estate held for sale as of December 31, 2015.