Gladstone Commercial Reports Results for the First Quarter Ended March 31, 2008
-- Completed the acquisition of three properties for a total investment of approximately $33.2 million.
-- Reported funds from operations ("FFO") of approximately $3.4 million, or $0.39 per share, compared to $2.9 million, or $0.34 per share for the first quarter of 2007, an increase of 15%.
MCLEAN, Va.--(BUSINESS WIRE)--
Gladstone Commercial Corp. (NASDAQ:GOOD) (the "Company") today reported financial results for the quarter ended March 31, 2008. 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.
Net income available to common stockholders for the quarter ended March 31, 2008 was $393,265, or $0.05 per share, compared to $506,905, or $0.06 per share, for the same period one year ago. Net income results when compared to the same period last year were affected by interest expense from the increased number of properties which have long-term financing coupled with the results from discontinued operations, partially offset by the increase in our portfolio of investments in the past year and the corresponding increase in our revenues. Net income results for the quarter ended March 31, 2008 include a partial waiver of the incentive fee of approximately $562,000, compared to net income results for the quarter ended March 31, 2007, which included a full waiver of the incentive fee of approximately $586,000, from the Company's Adviser, Gladstone Management Corporation.
FFO for the quarter ended March 31, 2008 was $3,381,025, or $0.39 per share, compared to $2,924,717, or $0.34 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 ended months ended
March 31, March 31,
2008 2007
------------ ------------
Net income $ 1,416,702 $ 1,530,342
Less: Dividends attributable to preferred
stock (1,023,437) (1,023,437)
------------ ------------
Net income available to common stockholders 393,265 506,905
Add: Real estate depreciation and
amortization 2,987,760 2,417,812
------------ ------------
FFO available to common stockholders $ 3,381,025 $ 2,924,717
Weighted average shares outstanding - basic
& diluted 8,565,264 8,565,264
Basic & diluted net income per weighted
average common share $ 0.05 $ 0.06
============ ============
Basic & diluted FFO per weighted average
common share $ 0.39 $ 0.34
============ ============
First quarter highlights:
-- Purchased three properties, which were all fully occupied,
with approximately 390,000 square feet for an aggregate
purchase price of approximately $33.2 million; and
-- Declared monthly cash dividends 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 2008.
"Our first quarter results were positively impacted by the three acquisitions completed during the quarter. Even though the credit markets continue to be tumultuous, we expect that we will be able to continue to grow our portfolio during the remainder of 2008 by securing alternative sources of financing. We remain excited about the opportunities that are currently available in the marketplace and our pipeline remains robust," said Chip Stelljes, President and Chief Investment Officer.
Subsequent to quarter end, the Company:
-- Purchased one fully-occupied property, with approximately
75,000 square feet for an aggregate purchase price of
approximately $3.9 million; and
-- Declared monthly cash dividends 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 2008.
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, 2008, 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 Wednesday, May 7, 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 June 7, 2008. To hear the replay, please dial (877) 660-6853, access playback account 286 and use ID code 282350.
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-Q for the quarter ended March 31, 2008, 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," "continue," "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
(Unaudited)
March 31, December 31,
2008 2007
------------- -------------
ASSETS
Real estate, net of accumulated
depreciation of $17,842,267 and
$15,738,634, respectively $353,335,334 $324,761,772
Lease intangibles, net of accumulated
amortization of $8,445,057 and
$7,560,928, respectively 31,079,739 28,989,556
Mortgage notes receivable 10,000,000 10,000,000
Cash and cash equivalents 1,335,884 1,356,408
Restricted cash 2,409,065 1,914,067
Funds held in escrow 1,538,551 1,401,695
Deferred rent receivable 5,575,368 5,094,799
Deferred financing costs, net of
accumulated amortization of $2,433,815
and $2,184,492, respectively 4,191,740 4,405,129
Prepaid expenses and other assets 1,717,397 979,263
------------- -------------
TOTAL ASSETS $411,183,078 $378,902,689
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Mortgage notes payable $201,736,050 $202,120,471
Short-term loan and borrowings under line
of credit 59,050,000 24,400,000
Deferred rent liability 3,736,644 3,933,035
Asset retirement obligation liability 2,101,655 1,811,752
Accounts payable and accrued expenses 693,112 778,949
Due to adviser 788,428 784,301
Obligation under capital lease 225,067 -
Rent received in advance, security
deposits and funds held in escrow 3,302,629 2,706,113
------------- -------------
Total Liabilities 271,633,585 236,534,621
------------- -------------
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 (2,769,791) (2,769,923)
Distributions in excess of accumulated
earnings (28,332,410) (25,513,703)
------------- -------------
Total Stockholders' Equity 139,549,493 142,368,068
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $411,183,078 $378,902,689
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Gladstone Commercial Corporation
Consolidated Statements of Operations
(Unaudited)
For the three months
ended March 31,
-------------------------
2008 2007
------------ ------------
Operating revenues
Rental income $ 9,189,465 $ 7,078,036
Interest income from mortgage notes
receivable 238,297 250,000
Tenant recovery revenue 85,719 55,735
------------ ------------
Total operating revenues 9,513,481 7,383,771
------------ ------------
Operating expenses
Depreciation and amortization 2,987,760 2,417,812
Property operating expenses 241,568 174,176
Base management fee 431,868 482,044
Incentive fee 704,667 585,768
Administration fee 212,196 207,018
Professional fees 97,662 149,431
Insurance 41,797 58,634
Directors fees 54,250 54,250
Stockholder related expenses 126,423 99,617
Asset retirement obligation expense 30,468 28,160
General and administrative 14,631 40,351
------------ ------------
Total operating expenses before credit
from Adviser 4,943,290 4,297,261
------------ ------------
Credit to incentive fee (562,355) (585,768)
------------ ------------
Total operating expenses 4,380,935 3,711,493
------------ ------------
Other income (expense)
Interest income from temporary
investments 9,548 229,016
Interest income - employee loans 52,144 60,422
Other income 9,296 8,414
Interest expense (3,753,604) (2,514,461)
------------ ------------
Total other expense (3,682,616) (2,216,609)
------------ ------------
Income from continuing operations 1,449,930 1,455,669
------------ ------------
Discontinued operations
Loss from discontinued operations (33,228) (4,001)
Net realized income from foreign
currency transactions - 7
Taxes refunded on sale of real estate - 78,667
------------ ------------
Total discontinued operations (33,228) 74,673
------------ ------------
Net income 1,416,702 1,530,342
------------ ------------
Dividends attributable to preferred stock (1,023,437) (1,023,437)
------------ ------------
Net income available to common stockholders $ 393,265 $ 506,905
============ ============
Earnings per weighted average common share -
basic & diluted
Income from continuing operations (net
of dividends attributable to preferred
stock) $ 0.05 $ 0.05
Discontinued operations 0.00 0.01
------------ ------------
Net income available to common
stockholders $ 0.05 $ 0.06
============ ============
Weighted average shares outstanding-
basic & diluted 8,565,264 8,565,264
============ ============
Gladstone Commercial Corporation
Consolidated Statements of Cash Flows
(Unaudited)
For the three months ended
March 31,
---------------------------
2008 2007
------------- -------------
Cash flows from operating activities:
Net income $ 1,416,702 $ 1,530,342
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,987,760 2,417,812
Amortization of deferred financing costs 249,323 164,462
Amortization of deferred rent asset and
liability (133,017) (133,017)
Asset retirement obligation expense 30,468 28,160
Increase in prepaid expenses and other
assets (76,011) (119,112)
Increase in deferred rent receivable (543,943) (370,227)
(Decrease) increase in accounts payable,
accrued expenses, and amount due
adviser (81,710) 289,942
Increase in rent received in advance 101,518 79,357
------------- -------------
Net cash provided by operating
activities 3,951,090 3,887,719
------------- -------------
Cash flows from investing activities:
Real estate investments (33,167,003) (41,778,821)
Increase in funds held in escrow
related to acquisition (762,123) -
Net payments to lenders for reserves
held in escrow (547,624) (214,107)
Increase in restricted cash (494,998) (129,799)
Deposits on future acquisitions (1,300,000) (610,000)
Deposits applied against real estate
investments 1,400,000 460,000
------------- -------------
Net cash used in investing activities (34,871,748) (42,272,727)
------------- -------------
Cash flows from financing activities:
Borrowings under mortgage notes payable - 13,775,000
Principal repayments on mortgage notes
payable (384,421) (194,961)
Principal repayments on employee notes
receivable from sale of common stock 132 25,012
Borrowings from line of credit 36,150,000 -
Repayments on line of credit (1,500,000) -
Increase in reserves from tenants 548,856 346,542
Increase in security deposits 356,910 -
Payments for deferred financing costs (35,934) (378,745)
Dividends paid for common and preferred (4,235,409) (4,106,932)
------------- -------------
Net cash provided by financing
activities 30,900,134 9,465,916
------------- -------------
Net decrease in cash and cash equivalents (20,524) (28,919,092)
Cash and cash equivalents, beginning of
period 1,356,408 36,005,686
------------- -------------
Cash and cash equivalents, end of period $ 1,335,884 $ 7,086,594
============= =============
NON-CASH INVESTING ACTIVITIES
Increase in asset retirement obligation $ 259,435 $ 92,143
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Source: Gladstone Commercial Corp.
Released May 6, 2008