Gladstone Commercial Corporation Reports Results for the Fourth Quarter and Year Ended December 31, 2009
MCLEAN, Va., Feb. 24, 2010 (GLOBE NEWSWIRE) --
-- Revenue for the fourth quarter and full year 2009 of approximately $10.6
million and $42.6 million, respectively.
-- Funds from operations ("FFO") for the fourth quarter and full year 2009
of approximately $3.4 million and $13.5 million, respectively and net
income for the fourth quarter and full year 2009 of approximately $1.1
million and $4.6 million, respectively.
-- All properties remain 100% leased and paying as agreed.
Gladstone Commercial Corp. (Nasdaq:GOOD) (the "Company") today reported financial results for the quarter and year ended December 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 December 31, 2009 was approximately $3.4 million, or $0.39 per share, which remained constant as compared to the same period one year ago. FFO for the year ended December 31, 2009 was approximately $13.5 million, or $1.58 per share, which also remained constant as compared to the same period one year ago. The Company's results reflect an increase in rental revenues as a result of acquisitions completed during 2008 that were held for the full period in 2009, partially offset by an increase in legal and other professional fees relating to ongoing lease renegotiations and reviews of legal work with existing tenants, coupled with increased interest expenses due to a larger number of properties which had long-term financing during 2009. The amount of the incentive fee paid to the Company's external adviser, Gladstone Management Corporation (the "Adviser"), increased during the three months and year ended December 31, 2009, as compared to the same periods in 2008, as a result of the increase in revenues, coupled with a reduction in the voluntary waiver issued by the Adviser.
Net income available to common stockholders for the three months and year ended December 31, 2009 was approximately $94,000 and $509,000, or $0.01 per share and $0.06 per share, respectively, compared to approximately $111,000 and $819,000, or $0.01 per share and $0.10 per share, respectively, for the same periods 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 months three months
ended ended Year Ended Year Ended
December 31, December 31, December 31, December 31,
2009 2008 2009 2008
------------ ------------ ------------- -------------
Net income $ 1,117,553 $ 1,135,241 $ 4,603,048 $ 4,912,947
Less: Distributions attributable to preferred stock (1,023,439) (1,023,439) (4,093,750) (4,093,750)
------------ ------------ ------------- -------------
Net income available to common stockholders 94,114 111,802 509,298 819,197
Add: Real estate depreciation and amortization, including
discontinued operations 3,286,133 3,268,961 13,171,703 12,704,641
Less: Gain on sale of real estate -- -- (160,038) --
------------ ------------ ------------- -------------
FFO available to common stockholders $ 3,380,247 $ 3,380,763 $ 13,520,963 $ 13,523,838
Weighted average shares outstanding - basic & diluted 8,563,264 8,564,807 8,563,264 8,565,149
Basic & diluted net income per weighted average common
share $ 0.01 $ 0.01 $ 0.06 $ 0.10
============ ============ ============= =============
Basic & diluted FFO per weighted average common share $ 0.39 $ 0.39 $ 1.58 $ 1.58
============ ============ ============= =============
At December 31, 2009, the Company owned 64 properties totaling approximately 6.3 million square feet, and had one mortgage loan outstanding for a total net investment of approximately $394.8 million. Currently, all of the Company's properties are fully leased and all of its tenants and its borrower are current and paying in accordance with their leases and loan.
The Company has $48.0 million of balloon principal payments due under one of its long-term mortgages in 2010, however the mortgage has three 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's line of credit matures in December 2010 and we intend to negotiate a renewal of the facility or find replacement financing for the line of credit during 2010.
The Company has three leases that expire in 2010, which total approximately 3.4% of total annualized rental income. The Company has been notified that two of the tenants under these leases, totaling approximately 2.6% of total annualized rental income, will not renew. The Company is currently seeking new tenants for these two properties and is hopeful that it will re-lease these properties in the near future.
Highlights of 2009, the Company:
-- Sold its property located in Norfolk, Virginia for $1.15 million, for a
gain on the sale of approximately $160,000 and an exit internal rate of
return of 11.37%. The proceeds from the sale were used to pay down
borrowings on its line of credit;
-- Extended the terms of the lease on its property located in Eatontown,
New Jersey until 2024 and on one of its leases on its property located
in Akron, Ohio until 2015; and
-- Paid monthly cash distributions for the year totaling $1.50 per share on
the common stock, $1.94 per share on the Series A Preferred Stock, and
$1.88 per share on the Series B Preferred Stock during 2009.
Approximately 94% of the common stock distributions paid in 2009 were
deemed a return of capital.
"We maintained a conservative acquisition pace in past years and executed thorough due diligence processes, and as a result we are benefiting today, as all of our properties remain 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 review and consider extensions of some existing leases in cases where we believe a modification will add value for our stockholders. We are also selectively making capital improvements to certain of our properties. During 2009, we remained on the sidelines, preferring to avoid the market's unprecedented economic headwinds to focus on adding value to our existing portfolio. Our patience has paid off as we are seeing improved pricing returning to certain markets. We are currently reviewing several potential acquisitions and are considering raising additional equity and mortgage debt during 2010 to grow our portfolio."
Subsequent to quarter end, the Company:
Declared monthly cash 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 January, February and March 2010.
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, 2009, 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 25, 2010 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 25, 2010. To hear the replay, please dial (877) 660-6853, access playback account 286 and use ID code 342047.
The live audio broadcast of Gladstone Commercial's quarterly conference call will be available online at www.GladstoneCommercial.com and www.investorcalendar.com. The event will be archived and available for replay on the Company's website through May 25, 2010.
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 Investor Relations at 703-287-5839.
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-K for the year ended December 31, 2009, as filed with the SEC today.
The statements in this press release regarding the Company's ability to renew its line of credit or obtain replacement financing for the line of credit, the extension of the maturity of any of its long-term mortgages, future growth in the Company's portfolio and FFO, plans to renegotiate leases and make capital improvements to certain of the Company's properties, and the Company's ability to raise 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, among others, the results of appraisals of its properties at the time of extension of its line of credit, its ability to raise capital, the duration of, or further downturns in, the current economic environment, the performance of its 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, 2009, as filed with the SEC on February 24, 2010. 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, December 31,
2009 2008
-------------- --------------
ASSETS
Real estate, at cost $ 390,753,892 $ 390,562,138
Less: accumulated depreciation 34,111,952 24,757,576
-------------- --------------
Total real estate, net 356,641,940 365,804,562
Lease intangibles, net 28,177,461 31,533,843
Mortgage note receivable 10,000,000 10,000,000
Cash and cash equivalents 3,096,598 4,503,578
Restricted cash 2,633,538 2,677,561
Funds held in escrow 2,487,680 2,150,919
Deferred rent receivable 8,975,196 7,228,811
Deferred financing costs, net 3,136,055 4,383,446
Due from adviser -- 108,898
Prepaid expenses and other
assets 1,716,905 707,167
-------------- --------------
TOTAL ASSETS $ 416,865,373 $ 429,098,785
============== ==============
LIABILITIES AND STOCKHOLDERS'
EQUITY
LIABILITIES
Mortgage notes payable $ 252,761,651 $ 255,111,173
Short-term loan and borrowings
under line of credit 33,200,000 31,500,000
Deferred rent liability 3,213,195 3,147,472
Asset retirement obligation
liability 2,305,644 2,190,192
Accounts payable and accrued
expenses 2,086,741 2,673,787
Due to adviser 1,213,640 --
Obligation under capital lease 247,686 235,378
Rent received in advance,
security deposits and funds
held in escrow 3,386,274 3,745,523
-------------- --------------
Total Liabilities 298,414,831 298,603,525
-------------- --------------
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,
47,700,000 shares authorized
and 8,563,264
shares issued and outstanding 8,563 8,563
Additional paid in capital 170,622,581 170,622,581
Notes receivable - employees (2,304,999) (2,595,886)
Distributions in excess of
accumulated earnings (49,877,753) (37,542,148)
-------------- --------------
Total Stockholders' Equity 118,450,542 130,495,260
-------------- --------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 416,865,373 $ 429,098,785
============== ==============
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, June 30, March 31,
2009 2009 2009 2009
------------- ------------- ------------- -------------
Operating revenues
Rental income $ 10,363,559 $ 10,383,002 $ 10,379,172 $ 10,388,244
Interest income from mortgage
notes receivable 191,667 191,667 189,583 187,500
Tenant recovery revenue 86,952 82,425 82,734 82,432
------------- ------------- ------------- -------------
Total operating revenues 10,642,178 10,657,094 10,651,489 10,658,176
------------- ------------- ------------- -------------
Operating expenses
Depreciation and amortization 3,286,133 3,284,723 3,282,629 3,307,802
Property operating expenses 227,986 219,537 230,785 236,812
Due diligence expense 24,141 -- 6,886 9,547
Base management fee 328,361 342,743 357,650 372,648
Incentive fee 804,689 835,003 812,653 786,289
Administration fee 241,059 293,075 257,207 224,354
Professional fees 183,035 105,368 125,965 235,198
Insurance 56,122 50,757 48,125 48,678
Directors fees 49,335 49,459 50,386 49,702
Stockholder related expenses 31,354 32,914 88,245 83,647
Asset retirement obligation
expense 36,646 36,060 35,476 34,907
General and administrative 17,241 19,643 15,453 10,549
------------- ------------- ------------- -------------
Total operating expenses
before credit from Adviser 5,286,102 5,269,282 5,311,460 5,400,133
------------- ------------- ------------- -------------
Credit to incentive fee (161,480) (200,264) (129,623) (235,081)
------------- ------------- ------------- -------------
Total operating expenses 5,124,622 5,069,018 5,181,837 5,165,052
------------- ------------- ------------- -------------
Other expense
Interest income from temporary
investments 2,759 524 184 17,281
Interest income - employee
loans 46,472 48,130 48,862 48,886
Other income 1,658 -- 11,320 --
Interest expense (4,451,130) (4,521,848) (4,433,998) (4,487,560)
------------- ------------- ------------- -------------
Total other expense (4,400,241) (4,473,194) (4,373,632) (4,421,393)
------------- ------------- ------------- -------------
Income from continuing
operations 1,117,315 1,114,882 1,096,020 1,071,731
------------- ------------- ------------- -------------
Discontinued operations
Income from discontinued
operations 238 4,070 20,916 17,838
Gain on sale of real estate -- 160,038 -- --
------------- ------------- ------------- -------------
Total discontinued operations 238 164,108 20,916 17,838
Net income 1,117,553 1,278,990 1,116,936 1,089,569
------------- ------------- ------------- -------------
Distributions attributable to
preferred stock (1,023,439) (1,023,437) (1,023,437) (1,023,437)
------------- ------------- ------------- -------------
Net income available to common
stockholders $ 94,114 $ 255,553 $ 93,499 $ 66,132
============= ============= ============= =============
Earnings per weighted average
common share - basic & diluted
Income from continuing
operations (net of
distributions attributable
to preferred stock) $ 0.01 $ 0.01 $ 0.01 $ 0.01
Discontinued operations 0.00 0.02 0.00 0.00
------------- ------------- ------------- -------------
Net income available to
common stockholders $ 0.01 $ 0.03 $ 0.01 $ 0.01
============= ============= ============= =============
Weighted average shares
outstanding
Basic & Diluted 8,563,264 8,563,264 8,563,264 8,563,264
============= ============= ============= =============
Gladstone Commercial Corporation
Consolidated Statements of Operations
For the year ended December 31,
-------------------------------------------
2009 2008 2007
------------- ------------- -------------
Operating revenues
Rental income $ 41,513,977 $ 39,572,287 $ 31,365,796
Interest income from mortgage
note receivable 760,417 898,573 1,013,889
Tenant recovery revenue 334,543 336,637 310,353
------------- ------------- -------------
Total operating revenues 42,608,937 40,807,497 32,690,038
------------- ------------- -------------
Operating expenses
Depreciation and amortization 13,161,287 12,679,437 10,503,258
Property operating expenses 915,120 875,850 798,939
Due diligence expense 40,574 1,176,379 20,968
Base management fee 1,401,402 1,637,851 1,858,120
Incentive fee 3,238,634 2,831,722 2,564,365
Administration fee 1,015,695 954,635 837,898
Professional fees 649,566 521,410 625,349
Insurance 203,682 173,414 214,141
Directors fees 198,882 216,851 229,000
Stockholder related expenses 236,160 298,384 244,629
Asset retirement obligation
expense 143,089 131,472 114,821
General and administrative 62,886 63,263 101,539
------------- ------------- -------------
Total operating expenses
before credit from Adviser 21,266,977 21,560,668 18,113,027
------------- ------------- -------------
Credit to incentive fee (726,448) (2,196,945) (2,321,597)
------------- ------------- -------------
Total operating expenses 20,540,529 19,363,723 15,791,430
------------- ------------- -------------
Other income (expense)
Interest income from temporary
investments 20,748 21,844 354,249
Interest income - employee
loans 192,350 202,097 222,051
Other income 12,978 63,993 47,847
Interest expense (17,894,536) (16,858,687) (11,564,541)
------------- ------------- -------------
Total other expense (17,668,460) (16,570,753) (10,940,394)
------------- ------------- -------------
Income from continuing
operations 4,399,948 4,873,021 5,958,214
------------- ------------- -------------
Discontinued operations
Income from discontinued
operations 43,062 39,926 69,989
Net realized income from
foreign currency transactions -- -- 33,359
Gain on sale of real estate 160,038 -- --
Taxes refunded on sale of real
estate -- -- 78,667
------------- ------------- -------------
Total discontinued operations 203,100 39,926 182,015
------------- ------------- -------------
Net income 4,603,048 4,912,947 6,140,229
------------- ------------- -------------
Distributions attributable to
preferred stock (4,093,750) (4,093,750) (4,093,750)
------------- ------------- -------------
Net income available to common
stockholders $ 509,298 $ 819,197 $ 2,046,479
============= ============= =============
Earnings per weighted average
common share - basic & diluted
Income from continuing
operations (net of
distributions attributable to
preferred stock) $ 0.04 $ 0.09 $ 0.22
Discontinued operations 0.02 0.01 0.02
------------- ------------- -------------
Net income available to common
stockholders $ 0.06 $ 0.10 $ 0.24
============= ============= =============
Weighted average shares
outstanding- basic & diluted 8,563,264 8,565,149 8,565,264
============= ============= =============
Gladstone Commercial Corporation
Consolidated Statements of Cash Flows
For the year ended December 31,
--------------------------------------------
2009 2008 2007
------------- ------------- --------------
Cash flows from operating activities:
Net income $ 4,603,048 $ 4,912,947 $ 6,140,229
Adjustments to reconcile net income to net
cash
provided by operating activities:
Depreciation and amortization, including
discontinued operations 13,171,703 12,704,641 10,528,458
Amortization of deferred financing costs 1,491,389 1,283,956 717,195
Amortization of deferred rent asset and
liability, net (532,068) (532,066) (532,068)
Accretion of obligation under capital lease 12,309 10,311 --
Asset retirement obligation expense,
including discontinued operations 143,550 133,244 116,478
Gain on sale of real estate (160,038) -- --
(Increase) decrease in prepaid expenses and
other assets (959,738) 172,096 64,990
Increase in deferred rent receivable and
deferred rent liability, net (1,177,167) (2,387,509) (1,741,016)
Increase in accounts payable, accrued
expenses, and amount due adviser 735,492 1,001,639 625,398
(Decrease) increase in rent received in
advance (315,223) 275,916 176,145
------------- ------------- --------------
Net cash provided by operating activities 17,013,257 17,575,175 16,095,809
------------- ------------- --------------
Cash flows from investing activities:
Real estate investments (1,139,711) (49,359,852) (105,599,587)
Leasing commissions paid (441,745) -- --
Proceeds from sale of real estate 1,089,269 -- --
Receipts from lenders for reserves held in
escrow 1,465,133 874,227 1,603,309
Payments to lenders for reserves held in
escrow (1,801,894) (1,623,452) (1,369,186)
Decrease (increase) in restricted cash 44,023 (763,494) (688,905)
Deposits on future acquisitions (250,000) (1,650,000) (2,110,000)
Deposits refunded or applied against real
estate investments 200,000 1,750,000 2,110,000
------------- ------------- --------------
Net cash used in investing activities (834,925) (50,772,571) (106,054,369)
------------- ------------- --------------
Cash flows from financing activities:
Borrowings under mortgage notes payable -- 48,015,000 48,521,690
Principal repayments on mortgage notes
payable (2,349,522) (1,485,901) (895,657)
Principal repayments on employee notes
receivable 290,887 155,637 431,399
Borrowings from line of credit 57,600,000 76,900,000 65,500,000
Repayments on line of credit (35,900,000) (69,800,000) (41,100,000)
Repayment of short-term loan (20,000,000) -- --
Receipts from tenants for reserves 4,454,102 2,391,360 2,023,019
Payments to tenants from reserves (4,526,409) (2,159,671) (1,710,685)
Increase in security deposits 28,282 531,806 376,572
Payments for deferred financing costs (243,999) (1,262,273) (1,409,320)
Distributions paid for common and preferred (16,938,653) (16,941,392) (16,427,736)
------------- ------------- --------------
Net cash (used in) provided by financing
activities (17,585,312) 36,344,566 55,309,282
------------- ------------- --------------
Net (decrease) increase in cash and cash
equivalents (1,406,980) 3,147,170 (34,649,278)
Cash and cash equivalents, beginning of year 4,503,578 1,356,408 36,005,686
------------- ------------- --------------
Cash and cash equivalents, end of year $ 3,096,598 $ 4,503,578 $ 1,356,408
============= ============= ==============
Cash paid during year for interest $ 16,558,955 $ 14,337,944 $ 10,693,440
------------- ------------- --------------
NON-CASH OPERATING, INVESTING AND FINANCING
INFORMATION
Additions to real estate included in accounts
payable, accrued expenses, and amount due
adviser $ -- $ -- $ 81,400
------------- ------------- --------------
Increase in asset retirement obligation $ -- $ 245,196 $ 180,458
------------- ------------- --------------
Fixed rate debt assumed in connection with
acquisitions $ -- $ 6,461,603 $ 4,506,689
------------- ------------- --------------
Obligation under capital lease $ -- $ 225,068 $ --
------------- ------------- --------------
Forfeiture of common stock in satisfaction of
employee note receivable $ -- $ 18,400 $ --
------------- ------------- --------------
Reclassificaton of principal on employee note $ 245,000 $ -- $ --
------------- ------------- --------------
CONTACT: Gladstone Commercial Corporation
Investor Relations
703-287-5839
Released February 24, 2010