Gladstone Commercial Corporation (NASDAQ:GOOD) ("Gladstone
Commercial") today reported financial results for the second
quarter ended June 30, 2017. 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. For further detail, please
also refer to Gladstone Commercial's quarterly financial supplement
and Quarterly Report on Form 10-Q, each of which can be retrieved
at www.GladstoneCommercial.com.
Summary Information (dollars in thousands,
except share and per share data):
|
|
|
As of and for the three months ended |
|
|
|
|
|
|
June 30, 2017 |
|
March 31, 2017 |
|
$ Change |
|
% Change |
Operating
Data: |
|
|
|
|
|
|
|
|
Total operating
revenue |
|
$ |
22,867 |
|
|
$ |
22,314 |
|
|
$ |
553 |
|
|
2.5 |
% |
Total operating
expenses |
|
(14,357 |
) |
(1 |
) |
(17,708 |
) |
(3 |
) |
3,351 |
|
|
(18.9 |
)% |
Other expense, net |
|
(7,849 |
) |
(2 |
) |
(250 |
) |
(4 |
) |
(7,599 |
) |
|
3,039.6 |
% |
Net income
available |
|
$ |
661 |
|
|
$ |
4,356 |
|
|
$ |
(3,695 |
) |
|
(84.8 |
)% |
Less: Dividends
attributable to preferred stock |
|
(2,437 |
) |
|
(2,373 |
) |
|
(64 |
) |
|
2.7 |
% |
Less: Dividends
attributable to senior common stock |
|
(249 |
) |
|
(248 |
) |
|
(1 |
) |
|
0.4 |
% |
Net (loss) income
(attributable) available to common stockholders |
|
$ |
(2,025 |
) |
|
$ |
1,735 |
|
|
$ |
(3,760 |
) |
|
(216.7 |
)% |
Add: Real estate
depreciation and amortization |
|
9,926 |
|
|
9,921 |
|
|
5 |
|
|
0.1 |
% |
Add: Impairment
charge |
|
253 |
|
|
3,746 |
|
|
(3,493 |
) |
|
(93.2 |
)% |
Add: Loss on sale of
real estate |
|
1,914 |
|
|
— |
|
|
1,914 |
|
|
100.0 |
% |
Less: Gain on sale of
real estate |
|
— |
|
|
(5,906 |
) |
|
5,906 |
|
|
(100.0 |
)% |
Funds from
operations available to common stockholders - basic |
|
$ |
10,068 |
|
|
$ |
9,496 |
|
|
$ |
572 |
|
|
6.0 |
% |
Add: Convertible senior
common distributions |
|
249 |
|
|
248 |
|
|
1 |
|
|
0.4 |
% |
Funds from
operations available to common stockholders - diluted |
|
$ |
10,317 |
|
|
$ |
9,744 |
|
|
$ |
573 |
|
|
5.9 |
% |
|
|
|
|
|
|
|
|
|
Funds from operations
available to common stockholders - basic |
|
10,068 |
|
|
9,496 |
|
|
572 |
|
|
6.0 |
% |
Less: Lease termination
fee |
|
(550 |
) |
|
— |
|
|
(550 |
) |
|
100.0 |
% |
Core funds from
operations available to common stockholders - basic |
|
$ |
9,518 |
|
|
$ |
9,496 |
|
|
$ |
22 |
|
|
0.2 |
% |
Add: Convertible senior
common distributions |
|
249 |
|
|
248 |
|
|
1 |
|
|
0.4 |
% |
Core funds from
operations available to common stockholders - diluted |
|
$ |
9,767 |
|
|
$ |
9,744 |
|
|
$ |
23 |
|
|
0.2 |
% |
|
|
|
|
|
|
|
|
|
Share and Per
Share Data: |
|
|
|
|
|
|
|
|
Net (loss) income
(attributable) available to common stockholders - basic and
diluted |
|
(0.08 |
) |
|
0.07 |
|
|
(0.15 |
) |
|
(214.3 |
)% |
FFO available to common
stockholders - basic |
|
0.40 |
|
|
0.38 |
|
|
0.02 |
|
|
5.3 |
% |
FFO available to common
stockholders - diluted |
|
0.40 |
|
|
0.38 |
|
|
0.02 |
|
|
5.3 |
% |
Core FFO available to
common stockholders - basic |
|
0.38 |
|
|
0.38 |
|
|
— |
|
|
— |
% |
Core FFO available to
common stockholders - diluted |
|
0.37 |
|
|
0.38 |
|
|
(0.01 |
) |
|
(2.6 |
)% |
Weighted average shares
of common stock outstanding - basic |
|
25,276,824 |
|
|
24,963,926 |
|
|
312,898 |
|
|
1.3 |
% |
Weighted average shares
of common stock outstanding - diluted |
|
26,060,060 |
|
|
25,762,314 |
|
|
297,746 |
|
|
1.2 |
% |
Cash dividends declared
per common share |
|
$ |
0.375 |
|
|
$ |
0.375 |
|
|
$ |
— |
|
|
— |
% |
|
|
|
|
|
|
|
|
|
Financial
Position |
|
|
|
|
|
|
|
|
Real estate, before
accumulated depreciation |
|
$ |
825,651 |
|
(5 |
) |
$ |
825,027 |
|
(6 |
) |
$ |
624 |
|
|
0.1 |
% |
Total assets |
|
$ |
831,573 |
|
|
$ |
832,977 |
|
|
$ |
(1,404 |
) |
|
(0.2 |
)% |
Mortgage notes payable,
net, borrowings under revolver, net & borrowings under term
loan, net |
|
$ |
484,781 |
|
|
$ |
496,268 |
|
|
$ |
(11,487 |
) |
|
(2.3 |
)% |
Total stockholders' and
mezzanine equity |
|
$ |
316,416 |
|
|
$ |
307,569 |
|
|
$ |
8,847 |
|
|
2.9 |
% |
Properties owned |
|
94 |
|
(5 |
) |
95 |
|
(6 |
) |
(1 |
) |
|
(1.1 |
)% |
Square feet owned |
|
10,651,899 |
|
(5 |
) |
10,916,338 |
|
(6 |
) |
(264,439 |
) |
|
(2.4 |
)% |
Square feet leased |
|
96.9 |
% |
|
97.9 |
% |
|
(1.0 |
)% |
|
(1.0 |
)% |
(1) Includes a $0.3 million impairment charge recognized on
one property held for sale. |
(2) Includes a $1.9 million loss on sale of real estate from
two property sales. |
(3) Includes a $3.7 million impairment charge on two
properties. |
(4) Includes a $5.9 million gain on sale of real estate from
one property sale. |
(5) Includes one property classified as held for sale of $6.6
million and 86,308 square feet. |
(6) Includes one property classified as held for sale of $3.1
million and 51,155 square feet. |
Second Quarter Activity:
• Acquired property: Acquired a $15.5 million
office property located in Conshohocken, Pennsylvania, which is
100% leased to one tenant for the next 8.5 years;• Sold
properties: Sold two properties located in Concord
Township, Ohio and Hazelwood, Missouri, for gross proceeds of $13.6
million, including a lease termination fee of $550,000;•
Expanded property: Completed construction of a
75,000 square foot expansion at our Vance, Alabama property;•
Renewed lease: Executed an 5 year, 10-month lease
extension through September 2028 with the anchor tenant at our
Allen, Texas office center, which occupies approximately 73% of the
property;• Issued new debt: Issued $6.7 million in
new variable rate mortgage debt collateralized by two properties at
an interest rate of one month LIBOR plus a spread of 2.75% and
executed an interest rate cap on one month LIBOR;•
Assumed debt: Assumed $11.2
million in mortgage debt, in connection with the Conshohocken,
Pennsylvania acquisition, with a 3.55% fixed interest rate;•
Issued Stock under ATM programs: Issued 735,882
shares of common stock for net proceeds of $15.6 million, and
185,359 shares of our Series D Preferred Stock for net proceeds of
$4.7 million; and• Paid distributions: Paid
monthly cash distributions for the quarter totaling $0.375 per
share on our common stock, $0.4843749 per share on our Series A
Preferred Stock, $0.4688 per share on our Series B Preferred Stock,
$0.4375 per share on our Series D Preferred Stock, and $0.2625 per
share on our senior common stock.
Second Quarter 2017 Results: Core FFO available
to common shareholders for the three months ended June 30, 2017,
was $9.8 million, or $0.37 per share, a 0.2% increase when compared
to the three months ended March 31, 2017. Core FFO increased
primarily due to an increase in rental income from our June 2017
acquisition and decreased interest expense from reducing the
balance outstanding on our revolving credit facility.
Net loss attributable to common stockholders for the three
months ended June 30, 2017, was $2.0 million, or $0.08 per share,
compared to net income available to common stockholders for the
three months ended March 31, 2017, of $1.7 million, or $0.07 per
share. A reconciliation of Core FFO to net (loss) income for the
three months ended June 30, 2017 and March 31, 2017, which we
believe 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 (loss)
income per weighted average share of common stock is set forth in
the Summary Information table above.
Subsequent to the end of the quarter:
• Acquired properties: Acquired a $26.4 million
industrial property located in Philadelphia, Pennsylvania, which is
100% leased to one tenant for the next 15.4 years, and acquired a
$51.4 million, three building office complex in Orlando, Florida
which is 100% leased to six tenants with a weighted average lease
term of 8.7 years;• Renewed lease: Executed a 10
year lease extension through July 2031 with the tenant at our
223,275 square foot Pocono, Pennsylvania industrial facility, which
maintains the property's 100% occupancy;• Issued common
stock from overnight offering: Issued 1,322,500 shares of
common stock through an overnight offering and subsequent
underwriters' exercise of the overallotment option, raising net
proceeds of $26.1 million;• Issued Stock under ATM
programs: Issued 561,351 shares of common stock for net
proceeds of $11.9 million and 64,236 shares of our Series D
Preferred Stock for net proceeds of $1.6 million; and•
Declared distributions: Declared monthly cash
distributions for July, August and September 2017 totaling $0.375
per share on our common stock, $0.4843749 per share on our Series A
Preferred Stock, $0.46875 per share on our Series B Preferred
Stock, $0.4375 per share on our Series D Preferred Stock, and
$0.2625 per share on our senior common stock. Previously on
July 11, 2017, Gladstone Commercial announced an ex-dividend date
of September 18, 2017 for the September 2017 distribution and
dividends. As an update to Gladstone Commercial's previous
announcement, Gladstone Commercial notes that the ex-dividend date
for the September 2017 distribution and dividends is September 19,
2017.
Comments from Gladstone Commercial’s President, Bob
Cutlip: "Our financial results reflect consistent
performance and stabilized revenues from our highly occupied same
store properties and the real estate investments made during 2016
and 2017, our ability to lease previously vacant space, and our
deleveraging and capital recycling programs. We have continued our
capital recycling program, whereby we have sold non-core assets
located outside of our target growth markets and used the proceeds
to de-lever our portfolio as well as acquire properties in our
target growth markets. We have successfully exited three non-core
assets so far during 2017, recognizing a net capital gain of $4.0
million, and we will continue to opportunistically sell non-core
assets and redeploy the proceeds into stronger target growth
markets. Year to date, we have invested $93.3 million into the
strong markets of Philadelphia and Orlando, and will continue to
invest in our target growth markets. We are extremely pleased with
our solid performance over the last several years, and we believe
our same store rents should be stable and growing through year end
2019, and we will be focused on investing in new properties as we
only have 3.8% of forecasted rental income expiring during that
entire time-frame. We are looking forward to continued growth and
success for our
shareholders."
Conference Call: Gladstone Commercial will hold
a conference call on Tuesday August 1, 2017, 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 questions. A conference call replay will be
available beginning one hour after the call and will be accessible
through September 1, 2017. To hear the replay, please dial
(855) 859-2056 and use playback conference number 54350076. The
live audio broadcast of the company’s quarterly conference call
will also be available on our website, www.GladstoneCommercial.com,
and will also be archived and available for replay through October
1, 2017.
About Gladstone Commercial: Gladstone
Commercial Corporation is a real estate investment trust that
invests in net leased industrial, office and medical real property
and selectively makes long-term industrial and commercial mortgage
loans. Including payments through July 2017, Gladstone
Commercial has paid 150 consecutive monthly cash distributions on
its common stock. Prior to paying distributions on a monthly
basis, Gladstone Commercial paid 5 consecutive quarterly cash
distributions. The company has also paid 138 consecutive monthly
cash distributions on its Series A Preferred Stock, 129 consecutive
monthly cash distributions on its Series B Preferred Stock and 14
consecutive monthly cash distributions on its Series D Preferred
Stock. Gladstone Commercial has never skipped, reduced or deferred
a distribution since its inception in 2003. Further
information can be found at www.GladstoneCommercial.com.
About the Gladstone Companies: Information on
the business activities of all the Gladstone family of funds can be
found at www.gladstonecompanies.com.
Investor Relations: For
Investor Relations inquiries related to any of the monthly
distribution-paying Gladstone family of 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.
Gladstone Commercial 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 Gladstone
Commercial’s operating portfolio and affect the comparability of
the company’s period-over-period performance. These items include
the adjustment for gains or losses from early extinguishment of
debt and any other non-recurring expense adjustments.
Although Gladstone Commercial’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.
Gladstone Commercial’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 forecasted
stability of Gladstone Commercial’s income, its ability, plans or
prospects to re-lease its unoccupied properties, and grow its
portfolio 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 Gladstone Commercial’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, Gladstone Commercial’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, 2016, as filed with the SEC on
February 15, 2017. Gladstone Commercial cautions readers not to
place undue reliance on any such forward-looking statements, which
speak only as of the date made. Gladstone Commercial 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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