Gladstone Commercial Announces Third Quarter 2007 Results
-- Reports net income available to common stockholders of approximately $0.6 million, or $0.07 per diluted weighted average common share
-- Reports funds from operations ("FFO") of approximately $3.2 million, or $0.38 per diluted weighted average common share
-- Purchased four properties for a total investment of approximately $31.7 million
MCLEAN, Va.--(BUSINESS WIRE)--
Gladstone Commercial Corp. (NASDAQ:GOOD) (the "Company") today reported financial results for the quarter ended September 30, 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 this news release. All per share references are fully diluted weighted average common shares, unless otherwise noted.
Net income available to common stockholders for the quarter ended September 30, 2007 was $567,022, or $0.07 per share, compared to $1,293,044, or $0.16 per share, for the same period one year ago, a decrease of 56%. Net income available to common stockholders for the nine months ended September 30, 2007 was $1,606,803, or $0.19 per share, compared to $2,163,784, or $0.27 per share, for the same period one year ago, a decrease of 26%. Net income results when compared to the same period last year were affected by increased expenses attributable to the acquisition of nine properties since September 30, 2006, 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 two Canadian properties in July 2006, partially offset by increased revenues related to the acquisition of the nine properties.
FFO for the quarter ended September 30, 2007 was approximately $3.2 million, or $0.38 per share, compared to approximately $2.3 million, or $0.29 per share, for the same period one year ago, an increase of approximately 38%. FFO for the nine months ended September 30, 2007 was approximately $9.3 million, or $1.08 per share, compared to approximately $7.1 million, or $0.90 per share, for the same period one year ago, an increase of approximately 30%. 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 months For the nine months
ended September 30, ended September 30,
-----------------------------------------------
2007 2006 2007 2006
----------- ----------- ----------- -----------
Net income $1,590,460 $1,777,419 $4,677,115 $3,476,978
Less: Dividends
attributable to
preferred stock (1,023,438) (484,375) (3,070,312) (1,313,194)
----------- ----------- ----------- -----------
Net income available
to common
stockholders $567,022 $1,293,044 $1,606,803 $2,163,784
Add: Real estate
depreciation and
amortization,
including
discontinued
operations 2,668,383 2,162,640 7,722,349 6,078,450
Less: Gain on sale of
real estate, net of
taxes paid - (1,106,590) (78,667) (1,106,590)
----------- ----------- ----------- -----------
FFO available to
common stockholders $3,235,405 $2,349,094 $9,250,485 $7,135,644
Weighted average
shares outstanding -
basic 8,565,264 7,820,376 8,565,264 7,752,170
Weighted average
shares outstanding -
diluted 8,565,264 7,981,071 8,565,264 7,896,860
Basic net income per
weighted average
common share $0.07 $0.16 $0.19 $0.28
=========== =========== =========== ===========
Diluted net income per
weighted average
common share $0.07 $0.16 $0.19 $0.27
=========== =========== =========== ===========
Basic FFO per weighted
average common share $0.38 $0.30 $1.08 $0.92
=========== =========== =========== ===========
Diluted FFO per
weighted average
common share $0.38 $0.29 $1.08 $0.90
=========== =========== =========== ===========
Third quarter highlights:
-- Purchased four fully occupied properties with approximately
212,000 square feet for approximately $31.7 million; and
-- Assumed a mortgage note in connection with an acquisition for
approximately $4.5 million.
"Our results were positively impacted by the four acquisitions completed during the quarter. Approximately $19.1 million of these acquisitions were purchased during the last week of the quarter, thus we expect our earnings to continue to grow for the remainder of the year as we will realize the full benefit of holding these acquisitions for the entire fourth quarter. We are excited about the opportunities that are currently available in the marketplace and our pipeline remains very strong," said Chip Stelljes, President and Chief Investment Officer.
Subsequent to quarter end, the Company:
-- Borrowed $16.0 million pursuant to a long-term mortgage note
payable collateralized by security interests in three
properties, which accrues interest at a rate of 6.63% per
year; and
-- Declared monthly cash dividends of $0.12 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 October, November and December 2007.
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 September 30, 2007, 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 Wednesday, October 31, 2007 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 November 30, 2007. To hear the replay, please dial (877) 660-6853, access playback account 286 and use ID code 258980.
Gladstone Commercial Corporation is a publicly traded real estate investment trust 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 Investor Relations at 703-287-5835.
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 (which, unlike FFO, generally reflects all cash effects of transactions and other events in the determination of net income), 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 September 30, 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 and the closing of any transaction. 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, 2006, as filed with the SEC on February 27, 2007, and the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2007, as filed on May 1, 2007. The risk factors set forth in the Form 10-K and Form 10-Q 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)
September 30, December 31,
2007 2006
------------- -------------
ASSETS
Real estate, net of accumulated
depreciation of $13,771,428 and
$8,595,419, respectively $309,420,504 $235,118,123
Lease intangibles, net of accumulated
amortization of $6,722,025 and
$4,175,685, respectively 27,607,486 23,416,696
Mortgage notes receivable 10,000,000 10,000,000
Cash and cash equivalents 1,824,794 36,005,686
Restricted cash 1,500,858 1,225,162
Funds held in escrow 1,638,520 1,635,819
Interest receivable - mortgage note 83,333 -
Interest receivable - employees 52,728 43,716
Deferred rent receivable 4,664,502 3,607,279
Deferred financing costs, net of
accumulated amortization of $1,977,287
and $1,467,297, respectively 3,973,775 3,713,004
Prepaid expenses 547,500 521,290
Deposits on real estate - 300,000
Accounts receivable 31,877 179,247
------------- -------------
TOTAL ASSETS $361,345,877 $315,766,022
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Mortgage notes payable $186,416,801 $154,494,438
Borrowings under line of credit 20,000,000 -
Deferred rent liability 4,129,426 4,718,599
Asset retirement obligation liability 1,781,817 1,631,294
Accounts payable and accrued expenses 993,915 673,410
Due to adviser 788,533 183,042
Rent received in advance, security
deposits and funds held in escrow 2,254,293 1,841,063
------------- -------------
Total Liabilities 216,364,785 163,541,846
------------- -------------
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 (2,800,724) (3,201,322)
Distributions in excess of accumulated
earnings (22,869,878) (15,226,196)
------------- -------------
Total Stockholders' Equity 144,981,092 152,224,176
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $361,345,877 $315,766,022
============= =============
Gladstone Commercial Corporation
Consolidated Statements of Operations
(Unaudited)
For the three months For the nine months ended
ended September 30, September 30,
----------------------- -------------------------
2007 2006 2007 2006
----------- ----------- ------------ ------------
Operating revenues
Rental income $8,024,305 $6,214,295 $22,834,663 $17,109,203
Interest income
from mortgage
notes receivable 255,555 478,329 758,333 1,589,675
Tenant recovery
revenue 80,648 43,352 230,851 92,772
----------- ----------- ------------ ------------
Total operating
revenues 8,360,508 6,735,976 23,823,847 18,791,650
----------- ----------- ------------ ------------
Operating expenses
Depreciation and
amortization 2,668,383 2,162,640 7,722,349 6,026,150
Property operating
expenses 204,972 145,058 597,273 435,495
Base management
fee 459,202 656,916 1,412,337 2,029,050
Incentive fee 677,104 - 1,896,677 -
Administration fee 175,852 - 592,996 -
Professional fees 118,371 167,353 442,479 598,771
Insurance 53,943 54,662 171,275 154,868
Directors fees 66,250 33,500 174,750 94,500
Stockholder
related expenses 40,991 34,414 215,969 282,478
Asset retirement
obligation
expense 29,440 30,619 86,542 102,263
General and
administrative 17,452 20,394 79,119 48,991
Stock option
compensation
expense - 314,593 - 394,411
----------- ----------- ------------ ------------
Total operating
expenses before
credit from
Adviser 4,511,960 3,620,149 13,391,766 10,166,977
----------- ----------- ------------ ------------
Credit to
incentive fee (526,991) - (1,746,564) -
----------- ----------- ------------ ------------
Total
operating
expenses 3,984,969 3,620,149 11,645,202 10,166,977
----------- ----------- ------------ ------------
Other income
(expense)
Interest income
from temporary
investments 33,105 2,006 325,390 13,437
Interest income -
employee loans 52,728 41,346 169,608 75,483
Other income 9,896 - 28,127 10,400
Interest expense (2,920,270) (2,494,221) (8,137,343) (6,268,757)
----------- ----------- ------------ ------------
Total other
expense (2,824,541) (2,450,869) (7,614,218) (6,169,437)
----------- ----------- ------------ ------------
Income from
continuing
operations 1,550,998 664,958 4,564,427 2,455,236
----------- ----------- ------------ ------------
Discontinued
operations
Income from
discontinued
operations 5,975 6,915 471 116,169
Net realized
income (loss)
from foreign
currency
transactions 33,487 (1,044) 33,550 (201,017)
Gain on sale of
real estate - 1,422,026 - 1,422,026
Taxes (paid)
refunded on sale
of real estate - (315,436) 78,667 (315,436)
----------- ----------- ------------ ------------
Total
discontinued
operations 39,462 1,112,461 112,688 1,021,742
----------- ----------- ------------ ------------
Net income 1,590,460 1,777,419 4,677,115 3,476,978
----------- ----------- ------------ ------------
Dividends
attributable to
preferred stock (1,023,438) (484,375) (3,070,312) (1,313,194)
----------- ----------- ------------ ------------
Net income available
to common
stockholders $567,022 $1,293,044 $1,606,803 $2,163,784
=========== =========== ============ ============
Earnings per
weighted average
common share -
basic
Income from
continuing
operations (net
of dividends
attributable to
preferred
stock) $0.07 $0.02 $0.18 $0.15
Discontinued
operations - 0.14 0.01 0.13
----------- ----------- ------------ ------------
Net income
available to
common
stockholders $0.07 $0.16 $0.19 $0.28
=========== =========== ============ ============
Earnings per
weighted average
common share -
diluted
Income from
continuing
operations (net
of dividends
attributable to
preferred
stock) $0.07 $0.02 $0.18 $0.14
Discontinued
operations - 0.14 0.01 0.13
----------- ----------- ------------ ------------
Net income
available to
common
stockholders $0.07 $0.16 $0.19 $0.27
=========== =========== ============ ============
Weighted average
shares outstanding
Basic 8,565,264 7,820,376 8,565,264 7,752,170
=========== =========== ============ ============
Diluted 8,565,264 7,981,071 8,565,264 7,896,860
=========== =========== ============ ============
Gladstone Commercial Corporation
Consolidated Statements of Cash Flows
(Unaudited)
For the nine months ended
September 30,
-------------------------
2007 2006
------------ ------------
Cash flows from operating activities:
Net income $4,677,115 $3,476,978
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization, including
discontinued operations 7,722,349 6,078,450
Amortization of deferred financing
costs, including discontinued
operations 509,990 464,941
Amortization of deferred rent asset 190,122 190,123
Amortization of deferred rent liability (589,173) (499,870)
Asset retirement obligation expense,
including discontinued operations 86,542 112,195
Stock compensation - 394,411
Increase in mortgage notes payable due
to change in value of foreign currency - 202,065
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 (83,333) 70,749
Increase in employee interest receivable (9,012) (41,346)
Increase in deferred rent receivable (1,247,345) (941,903)
Decrease (increase) in prepaid expenses
and other assets 121,160 (49,645)
Increase in accounts payable, accrued
expenses, and amount due adviser 516,996 248,449
Increase in rent received in advance 137,534 53,097
------------ ------------
Net cash provided by operating
activities 12,032,945 8,000,967
------------ ------------
Cash flows from investing activities:
Real estate investments (85,742,539) (48,311,928)
Proceeds from sales of real estate - 2,106,112
Principal repayments on mortgage notes
receivable - 44,742
Net payments to lenders for reserves held
in escrow (1,186,448) (2,537,541)
Increase (decrease) in restricted cash (275,696) 329,547
Deposits on future acquisitions (1,310,000) (600,000)
Deposits applied against real estate
investments 1,610,000 1,200,000
------------ ------------
Net cash used in investing
activities (86,904,683) (47,769,068)
------------ ------------
Cash flows from financing activities:
Proceeds from share issuance - 26,034,648
Offering costs - (1,308,496)
Borrowings under mortgage notes payable 32,521,691 31,900,000
Principal repayments on mortgage notes
payable (599,328) (427,506)
Principal repayments on employee notes
receivable from sale of common stock 400,598 -
Borrowings from line of credit 24,200,000 70,400,400
Repayments on line of credit (4,200,000) (78,300,400)
Increase in reserves from tenants 1,318,918 1,315,516
Increase in security deposits 140,525 419,070
Payments for deferred financing costs (770,761) (1,699,798)
Dividends paid for common and preferred (12,320,797) (9,690,708)
------------ ------------
Net cash provided by financing
activities 40,690,846 38,642,726
------------ ------------
Net decrease in cash and cash equivalents (34,180,892) (1,125,375)
Cash and cash equivalents, beginning of
period 36,005,686 1,740,159
------------ ------------
Cash and cash equivalents, end of period $1,824,794 $614,784
============ ============
NON-CASH INVESTING ACTIVITIES
Increase in asset retirement obligation $150,523 $1,604,416
------------ ------------
Additions to real estate included in
accounts payable, accrued expenses, and
amount due adviser $409,000 $-
------------ ------------
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 $- $1,826,754
Acquisition of building in satisfaction of
mortgage note receivable $- $11,316,774
------------ ------------
Source: Gladstone Commercial Corp.
Released October 30, 2007