Gladstone Commercial Corporation (Nasdaq:GOOD), or the Company,
today reported financial results for the second quarter ended June
30, 2014. A description of funds from operations, or FFO, and Core
FFO, both non-GAAP (generally accepted accounting principles in the
United States) financial measures, are located at the end of this
press release. All per share references are to fully-diluted
weighted average shares of common stock, unless otherwise noted.
Please read the Company's Quarterly Report on Form 10-Q, filed
today with the U.S. Securities and Exchange Commission, or the SEC,
which can be retrieved from the SEC's website at www.sec.gov or
from the Company's website at www.GladstoneCommercial.com.
Summary Information (dollars in thousands,
except per share data):
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As of and for the three months ended
June 30, 2014 |
As of and for the three months ended
March 31, 2014 |
Change |
% Change |
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Operating Data: |
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Total operating revenue |
$ 18,390 |
$ 17,136 |
$ 1,254 |
7.3% |
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Total operating expenses |
(11,243) |
(23,736) |
12,493 |
-52.6% |
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Other expense |
(5,928) |
(6,914) |
986 |
-14.3% |
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Net income (loss) |
$ 1,219 |
$ (13,514) |
$ 14,733 |
-109.0% |
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Dividends attributable to preferred
stock |
(1,023) |
(1,023) |
-- |
0.0% |
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Dividends attributable to senior common
stock |
(110) |
(100) |
(10) |
10.0% |
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Net income (loss) available (attributable) to
common stockholders |
$ 86 |
$ (14,637) |
$ 14,723 |
-100.6% |
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Real estate depreciation and
amortization |
6,871 |
6,720 |
151 |
2.2% |
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Impairment charge |
-- |
13,958 |
(13,958) |
NM |
(2) |
Gain on sale of real estate |
(1,240) |
-- |
(1,240) |
NM |
(2) |
Funds from operations available to common
stockholders |
$ 5,717 |
$ 6,041 |
$ (324) |
-5.4% |
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Acquisition related expenses |
859 |
110 |
749 |
680.9% |
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Core funds from operations available to
common stockholders |
$ 6,576 |
$ 6,151 |
$ 425 |
6.9% |
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Share and Per Share
Data: |
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Net income (loss) available (attributable) to
common stockholders - basic and diluted |
$ 0.01 |
$ (0.93) |
$ 0.94 |
-101.1% |
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FFO available to common stockholders -
basic |
$ 0.35 |
$ 0.38 |
$ (0.03) |
-7.9% |
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FFO available to common stockholders -
diluted |
$ 0.34 |
$ 0.38 |
$ (0.04) |
-10.5% |
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Core FFO available to common stockholders -
basic |
$ 0.40 |
$ 0.39 |
$ 0.01 |
2.6% |
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Core FFO available to common stockholders -
diluted |
$ 0.39 |
$ 0.38 |
$ 0.01 |
2.6% |
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Weighted average shares
outstanding-basic |
16,547,793 |
15,746,714 |
801,079 |
5.1% |
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Weighted average shares
outstanding-diluted |
16,894,973 |
16,063,693 |
831,280 |
5.2% |
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Cash dividends declared per common share |
$ 0.375 |
$ 0.375 |
$ -- |
0.0% |
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Financial Position: |
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Real estate, before accumulated
depreciation |
$ 684,001 |
$ 627,993 |
$ 56,008 |
8.9% |
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Total assets |
$ 735,530 |
$ 678,882 |
$ 56,648 |
8.3% |
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Mortgage notes payable, term preferred stock
and borrowings under the line of credit |
$ 520,387 |
$ 489,447 |
$ 30,940 |
6.3% |
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Total stockholders' equity |
$ 190,550 |
$ 169,850 |
$ 20,700 |
12.2% |
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Properties owned |
92 |
89 |
3 |
3.4% |
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Square feet owned |
9,919,528 |
9,298,288 |
621,240 |
6.7% |
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Square feet leased |
97.0% |
96.8% |
0.2% |
0.2% |
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(1) Does not include real estate held
for sale as of March 31, 2014. |
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(2) NM = Not meaningful |
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Second Quarter Activity:
- Acquired and Developed
Properties: Invested a total of $66.9 million at a
weighted average cap rate of 9.1%. Acquired 4 properties consisting
of 1.2 million square feet for an aggregate purchase price of $64.9
million at a weighted average cap rate of 9.1%. Ongoing development
includes the $5.5 million commitment for a 150,000 square foot
expansion of an existing property, of which $2.0 million was
expended during the quarter at an average cap rate of 9.8%;
- Sold Property: Sold property located in
Sterling Heights, Michigan for $11.4 million, resulting in a gain
of $1.2 million;
- Assumed and Issued Debt: Assumed or
issued mortgage debt for $31.4 million, which is collateralized by
3 properties acquired this quarter at a weighted average fixed
interest rate of 4.6%;
- Issued Common Stock: Issued 1,610,000 shares
of common stock through an overnight offering, resulting in net
proceeds of $26.0 million;
- Extended Leases: Extended the term of 2
leases that were set to expire in 2015; and
- Paid Distributions: Paid monthly cash
distributions for the quarter totaling $0.375 per share on the
common stock, $0.4843749 per share on the Series A Preferred Stock,
$0.46875 per share on the Series B Preferred Stock, $0.4453125 per
share on the Series C Term Preferred Stock and $0.2625 per share on
the senior common stock.
Q2 2014 Results: Core FFO available to common
stockholders for the three months ended June 30, 2014, was $6.6
million, or $0.39 per share, a 2.6% increase when compared to the
three months ended March 31, 2014. Core FFO increased primarily due
to the increase in operating revenues derived from the four
properties acquired this quarter coupled with a full quarter of
earnings from the two properties acquired during the first quarter
of 2014, which was partially offset by a slight increase in
interest expense, general and administrative expenses and our base
management fee.
Net income available to common stockholders for the three months
ended June 30, 2014, was $0.09 million, or $0.01 per share,
compared to net loss attributable to common stockholders for the
three months ended March 31, 2014, of $14.6 million, or $0.93 per
share. A reconciliation of Core FFO to net income (loss) for the
three months ended June 30, 2014 and March 31, 2014, which the
Company believes is the most directly comparable GAAP measure to
Core FFO, and a computation of basic and diluted Core FFO per
weighted average share of common stock and basic and diluted net
income per weighted average share of common stock is set forth in
the Summary Information table above.
Comments from the Company's President, Bob
Cutlip: "Our financial results for the quarter reflect an
increase in revenues from our real estate investments made during
the past two quarters. We have consistently increased our total
assets for 11 consecutive quarters. We also sold a non-core
asset during the quarter at a nice profit. Additionally, we
have a very strong pipeline today and expect to close several
additional deals during the remainder of 2014. We also continue to
focus on our portfolio, working with our existing tenants to extend
leases scheduled to expire in 2015 and to re-lease our space that
remains vacant. We are looking forward to an active 2014."
Subsequent to the end of the quarter:
- Acquired Property: Purchased a 124,800 square
foot office property for $8.3 million at an average cap rate of
9.3%;
- Issued Loan: Issued a $5.6 million
construction loan for a build-to-suit property, at a fixed interest
rate of 9.0%; and
- Declared Distributions: Declared monthly cash
distributions for July, August and September 2014 totaling $0.375
per share on the common stock, $0.4843749 per share on the Series A
Preferred Stock, $0.46875 per share on the Series B Preferred
Stock, $0.4453125 per share on the Series C Term Preferred Stock
and $0.2625 per share on the senior common stock.
Conference Call: The Company will hold a
conference call on Wednesday, July 30, 2014, at 8:30 a.m. EDT to
discuss its earnings results. Please call (888) 734-0328 to
enter the conference call. An operator will monitor the call and
set a queue for any questions. A conference call replay will be
available beginning one hour after the call and will be accessible
through August 30, 2014. To hear the replay, please dial (855)
859-2056 and use conference number 61572701. The live audio
broadcast of the Company's quarterly conference call will also be
available online at the Company's website,
www.GladstoneCommercial.com. The event will also be archived
and available for replay on the Company's website through September
30, 2014.
About Gladstone Commercial: Gladstone
Commercial Corporation is a real estate investment trust that
invests in and owns net leased industrial, commercial and retail
real property and selectively makes long-term industrial and
commercial mortgage loans. Including payments through July
2014, the Company has paid 114 consecutive monthly cash
distributions on its common stock. Prior to paying
distributions on a monthly basis, the Company paid 5 consecutive
quarterly cash distributions. The Company has also paid 102
consecutive monthly cash distributions on its Series A Preferred
Stock, 93 consecutive monthly cash distributions on its Series B
Preferred Stock, 29 consecutive monthly cash distributions on its
Series C Term Preferred Stock and 51 consecutive monthly cash
distributions on its senior common stock. The Company has
never skipped, reduced or deferred a distribution since inception,
over 11 years ago. Further information on the Company can be found
at www.gladstonecommercial.com.
About the Gladstone Companies: Information on
the business activities of all the Gladstone funds can be found at
www.gladstonecompanies.com.
Investor Relations: For Investor Relations
inquiries related to any of the monthly dividend paying Gladstone
funds, please visit www.gladstone.com.
Non-GAAP Financial Measures:
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 and
impairment losses on 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 its 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 an
additional context for evaluating its financial performance and as
a supplemental measure to compare it to other REITs; however,
comparisons of its 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.
Core FFO: Core FFO is FFO adjusted for certain
items that are not indicative of the results provided by the
Company's operating portfolio and affect the comparability of the
Company's period-over-period performance. These items include, but
are not limited to the adjustment for property acquisitions costs,
loss from early extinguishment of debt and any other
non-corenon-recurring expense adjustments. Although the
Company's calculation of Core FFO differs from NAREIT's definition
of FFO and may not be comparable to that of other REITs, the
Company believes it is a meaningful supplemental measure of its
operating performance. Accordingly, Core FFO should be
considered a supplement to net income computed in accordance with
GAAP as a measure of our performance.
The Company's presentation of FFO, as defined by NAREIT, or
presentation of Core 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
its performance or to cash flow from operations as a measure of
liquidity or ability to make distributions.
The statements in this press release regarding the Company's
ability, plans or prospects to re-lease its unoccupied properties,
grow its portfolio, and negotiate to extend leases 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, but are
not limited to, the Company's ability to raise additional capital;
availability and terms of capital and financing, both to fund its
operations and to refinance its indebtedness as it matures;
downturns in the current economic environment; the performance of
its tenants; the impact of competition on its efforts to renew
existing leases or re-lease space; and significant changes in
interest rates. Additional factors that could cause actual results
to differ materially from those stated or implied by its
forward-looking statements are disclosed under the caption "Risk
factors" of its Form 10-K for the fiscal year ended December 31,
2013, as filed with the SEC on February 18, 2014. 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, except as required by
law.
CONTACT: Gladstone Commercial Corporation, +1-703-287-5893
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