Please note that the limited information that
follows in this press release is not adequate to make an informed
investment judgment.
Gladstone Commercial Corporation (NASDAQ:GOOD) ("Gladstone
Commercial" or the "Company") today reported financial results for
the fourth quarter and year ended December 31, 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 both the quarterly
financial supplement and the Company’s Annual Report on Form 10-K
which can be retrieved from our website at
www.GladstoneCommercial.com.
Summary Information (dollars in thousands,
except per share data):
|
|
|
|
|
|
|
|
|
As of and for the three months ended |
|
|
|
|
|
|
December 31, 2017 |
|
September 30, 2017 |
|
$ Change |
|
% Change |
Operating
Data: |
|
|
|
|
|
|
|
|
Total operating
revenue |
|
$ |
25,253 |
|
|
$ |
24,365 |
|
|
$ |
888 |
|
|
3.6 |
% |
Total operating
expenses |
|
(20,405 |
) |
(1 |
) |
(15,867 |
) |
|
(4,538 |
) |
|
28.6 |
% |
Other expense, net |
|
(6,311 |
) |
|
(6,115 |
) |
|
(196 |
) |
|
3.2 |
% |
Net (loss) income |
|
$ |
(1,463 |
) |
|
$ |
2,383 |
|
|
$ |
(3,846 |
) |
|
(161.4 |
)% |
Less: Dividends
attributable to preferred stock |
|
(2,560 |
) |
|
(2,520 |
) |
|
(40 |
) |
|
1.6 |
% |
Less: Dividends
attributable to senior common stock |
|
(242 |
) |
|
(247 |
) |
|
5 |
|
|
(2.0 |
)% |
Net loss attributable
to common stockholders |
|
$ |
(4,265 |
) |
|
$ |
(384 |
) |
|
$ |
(3,881 |
) |
|
1,010.7 |
% |
Add: Real estate
depreciation and amortization |
|
12,119 |
|
|
10,829 |
|
|
1,290 |
|
|
11.9 |
% |
Add: Impairment
charge |
|
2,836 |
|
|
— |
|
|
2,836 |
|
|
100.0 |
% |
Less: Gain on sale of
real estate |
|
— |
|
|
(1 |
) |
|
1 |
|
|
(100.0 |
)% |
Funds from
operations available to common stockholders - basic |
|
$ |
10,690 |
|
|
$ |
10,444 |
|
|
$ |
246 |
|
|
2.4 |
% |
Add: Convertible senior
common distributions |
|
242 |
|
|
247 |
|
|
(5 |
) |
|
(2.0 |
)% |
Funds from
operations available to common stockholders - diluted |
|
$ |
10,932 |
|
|
$ |
10,691 |
|
|
$ |
241 |
|
|
2.3 |
% |
|
|
|
|
|
|
|
|
|
Funds from operations
available to common stockholders - basic |
|
$ |
10,690 |
|
|
$ |
10,444 |
|
|
$ |
246 |
|
|
2.4 |
% |
Add: Write-off of
deferred financing fees |
|
95 |
|
|
— |
|
|
95 |
|
|
100.0 |
% |
Core funds from
operations available to common stockholders - basic |
|
$ |
10,785 |
|
|
$ |
10,444 |
|
|
$ |
341 |
|
|
3.3 |
% |
Add: Convertible senior
common distributions |
|
242 |
|
|
247 |
|
|
(5 |
) |
|
(2.0 |
)% |
Core funds from
operations available to common stockholders - diluted |
|
$ |
11,027 |
|
|
$ |
10,691 |
|
|
$ |
336 |
|
|
3.1 |
% |
|
|
|
|
|
|
|
|
|
Share and Per
Share Data: |
|
|
|
|
|
|
|
|
Net loss attributable
to common stockholders - basic and diluted |
|
(0.15 |
) |
|
(0.01 |
) |
|
(0.14 |
) |
|
1,400.0 |
% |
FFO available to common
stockholders - basic |
|
0.38 |
|
|
0.38 |
|
|
— |
|
|
— |
% |
FFO available to common
stockholders - diluted |
|
0.38 |
|
|
0.38 |
|
|
— |
|
|
— |
% |
Core FFO available to
common stockholders - basic |
|
0.39 |
|
|
0.38 |
|
|
0.01 |
|
|
2.6 |
% |
Core FFO available to
common stockholders - diluted |
|
0.38 |
|
|
0.38 |
|
|
— |
|
|
— |
% |
Weighted average shares
of common stock outstanding - basic |
|
27,915,565 |
|
|
27,234,569 |
|
|
680,996 |
|
|
2.5 |
% |
Weighted average shares
of common stock outstanding - diluted |
|
28,669,446 |
|
|
28,008,122 |
|
|
661,324 |
|
|
2.4 |
% |
Cash dividends declared
per common share |
|
$ |
0.375 |
|
|
$ |
0.375 |
|
|
$ |
— |
|
|
— |
% |
|
|
|
|
|
|
|
|
|
Financial
Position |
|
|
|
|
|
|
|
|
Real estate, before
accumulated depreciation |
|
$ |
906,850 |
|
(2 |
) |
$ |
880,614 |
|
|
$ |
26,236 |
|
|
3.0 |
% |
Total assets |
|
$ |
928,454 |
|
|
$ |
904,851 |
|
|
$ |
23,603 |
|
|
2.6 |
% |
Mortgage notes payable,
net, borrowings under revolver, net & borrowings under term
loan, net |
|
$ |
542,627 |
|
|
$ |
518,877 |
|
|
$ |
23,750 |
|
|
4.6 |
% |
Total stockholders' and
mezzanine equity |
|
$ |
350,230 |
|
|
$ |
349,010 |
|
|
$ |
1,220 |
|
|
0.3 |
% |
Properties owned |
|
99 |
|
(2 |
) |
97 |
|
|
2 |
|
|
2.1 |
% |
Square feet owned |
|
11,452,159 |
|
(2 |
) |
11,247,044 |
|
|
205,115 |
|
|
1.8 |
% |
Square feet leased |
|
98.0 |
% |
|
97.9 |
% |
|
0.1 |
% |
|
0.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Includes a
$2.8 million impairment charge recognized on one of our two
properties held for sale during the three months ended December 31,
2017. |
(2) |
Includes
two properties classified as held for sale of $13.0 million and
166,200 square feet in the aggregate. |
|
|
|
|
|
|
|
|
|
|
|
As of and for the year ended |
|
|
|
|
|
|
December 31, 2017 |
|
December 31, 2016 |
|
$ Change |
|
% Change |
Operating
Data: |
|
|
|
|
|
|
|
|
Total operating
revenue |
|
$ |
94,799 |
|
|
$ |
86,372 |
|
|
$ |
8,427 |
|
|
9.8 |
% |
Total operating
expenses |
|
(68,337 |
) |
(1 |
) |
(55,595 |
) |
(3 |
) |
(12,742 |
) |
|
22.9 |
% |
Other expense, net |
|
(20,525 |
) |
|
(26,819 |
) |
|
6,294 |
|
|
(23.5 |
)% |
Net income |
|
$ |
5,937 |
|
|
$ |
3,958 |
|
|
$ |
1,979 |
|
|
50.0 |
% |
Less: Dividends
attributable to preferred stock |
|
(9,890 |
) |
|
(6,645 |
) |
|
(3,245 |
) |
|
48.8 |
% |
Less: Dividends
attributable to senior common stock |
|
(986 |
) |
|
(1,011 |
) |
|
25 |
|
|
(2.5 |
)% |
Net loss attributable
to common stockholders |
|
$ |
(4,939 |
) |
|
$ |
(3,698 |
) |
|
$ |
(1,241 |
) |
|
33.6 |
% |
Add: Real estate
depreciation and amortization |
|
42,795 |
|
|
37,517 |
|
|
5,278 |
|
|
14.1 |
% |
Add: Impairment
charge |
|
6,835 |
|
|
2,016 |
|
|
4,819 |
|
|
239.0 |
% |
Less: Gain on sale of
real estate |
|
(3,993 |
) |
|
(242 |
) |
|
(3,751 |
) |
|
1,550.0 |
% |
Funds from
operations available to common stockholders - basic |
|
$ |
40,698 |
|
|
$ |
35,593 |
|
|
$ |
5,105 |
|
|
14.3 |
% |
Add: Convertible senior
common distributions |
|
986 |
|
|
1,011 |
|
|
(25 |
) |
|
(2.5 |
)% |
Funds from
operations available to common stockholders - diluted |
|
$ |
41,684 |
|
|
$ |
36,604 |
|
|
$ |
5,080 |
|
|
13.9 |
% |
|
|
|
|
|
|
|
|
|
Funds from operations
available to common stockholders - basic |
|
$ |
40,698 |
|
|
$ |
35,593 |
|
|
$ |
5,105 |
|
|
14.3 |
% |
Add: Acquisition
related expenses |
|
— |
|
|
261 |
|
|
(261 |
) |
|
(100.0 |
)% |
Add: Write-off of
deferred financing fees |
|
95 |
|
|
— |
|
|
95 |
|
|
100.0 |
% |
Add: Write-off of
offering costs |
|
— |
|
|
263 |
|
|
(263 |
) |
|
(100.0 |
)% |
Less: Lease termination
fee |
|
(550 |
) |
|
— |
|
|
(550 |
) |
|
100.0 |
% |
Core funds from
operations available to common stockholders - basic |
|
$ |
40,243 |
|
|
$ |
36,117 |
|
|
$ |
4,126 |
|
|
11.4 |
% |
Add: Convertible senior
common distributions |
|
986 |
|
|
1,011 |
|
|
(25 |
) |
|
(2.5 |
)% |
Core funds from
operations available to common stockholders - diluted |
|
$ |
41,229 |
|
|
$ |
37,128 |
|
|
$ |
4,101 |
|
|
11.0 |
% |
|
|
|
|
|
|
|
|
|
Share and Per
Share Data: |
|
|
|
|
|
|
|
|
Net loss attributable
to common stockholders - basic & diluted |
|
(0.19 |
) |
|
(0.16 |
) |
|
(0.03 |
) |
|
18.8 |
% |
FFO available to common
stockholders - basic |
|
1.54 |
|
|
1.53 |
|
|
0.01 |
|
|
0.7 |
% |
FFO available to common
stockholders - diluted |
|
1.54 |
|
|
1.53 |
|
|
0.01 |
|
|
0.7 |
% |
Core FFO available to
common stockholders - basic |
|
1.53 |
|
|
1.56 |
|
|
(0.03 |
) |
|
(1.9 |
)% |
Core FFO available to
common stockholders - diluted |
|
1.52 |
|
|
1.55 |
|
|
(0.03 |
) |
|
(1.9 |
)% |
Weighted average shares
of common stock outstanding - basic |
|
26,358,237 |
|
|
23,193,962 |
|
|
3,164,275 |
|
|
13.6 |
% |
Weighted average shares
of common stock outstanding - diluted |
|
27,112,118 |
|
|
23,994,078 |
|
|
3,118,040 |
|
|
13.0 |
% |
Cash dividends declared
per common share |
|
$ |
1.50 |
|
|
$ |
1.50 |
|
|
$ |
— |
|
|
— |
% |
|
|
|
|
|
|
|
|
|
Financial
Position |
|
|
|
|
|
|
|
|
Real estate, before
accumulated depreciation |
|
$ |
906,850 |
|
(2 |
) |
$ |
833,203 |
|
(4 |
) |
$ |
73,647 |
|
|
8.8 |
% |
Total assets |
|
$ |
928,454 |
|
|
$ |
851,742 |
|
|
$ |
76,712 |
|
|
9.0 |
% |
Mortgage notes payable,
term preferred stock, term loan facility & line of credit,
net |
|
$ |
542,627 |
|
|
$ |
509,395 |
|
|
$ |
33,232 |
|
|
6.5 |
% |
Total stockholders' and
mezzanine equity |
|
$ |
350,230 |
|
|
$ |
310,620 |
|
|
$ |
39,610 |
|
|
12.8 |
% |
Properties owned |
|
99 |
|
(2 |
) |
96 |
|
(4 |
) |
3 |
|
|
3.1 |
% |
Square feet owned |
|
11,452,159 |
|
(2 |
) |
11,099,338 |
|
(4 |
) |
352,821 |
|
|
3.2 |
% |
Square feet leased |
|
98.0 |
% |
|
97.9 |
% |
|
0.1 |
% |
|
0.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Includes a
$6.8 million impairment charge recognized on three of our
properties during the year ended December 31, 2017. |
(2) |
Includes
two properties classified as held for sale of $13.0 million and
166,200 square feet in the aggregate. |
(3) |
Includes a
$2.0 million impairment charge recognized on seven of our
properties during the year ended December 31, 2016. |
(4) |
Includes
two properties classified as held for sale of $11.5 million and
234,155 square feet in the aggregate. |
Highlights of Fiscal Year 2017:
- Acquired properties: Purchased seven
fully-occupied properties, comprised of an aggregate of
approximately 0.9 million square feet of rental space, for $132.2
million, at a weighted average cap rate of 8.1%;
- Sold properties: Sold four properties located
in our non-core markets as part of our capital recycling strategy
for $30.3 million, resulting in a net gain of $4.0 million;
- Expanded property: Completed construction of a
75,000 square foot expansion at our Vance, Alabama property for
$6.7 million. At completion, the lease was reset to a 10 year term
at an average cap rate of 10.4%;
- Issued new debt: Borrowed $43.7 million in
fixed rate mortgage debt at a weighted average interest rate of
3.8% for 10 year terms and borrowed $7.5 million in variable rate
mortgage debt, at an interest rate equal to one month LIBOR plus a
spread ranging from 2.50% to 2.75% for terms ranging from three to
four years. We entered into an interest rate cap agreement on $6.7
million of the variable rate debt;
- Assumed debt: Assumed $11.2 million in
mortgage debt in connection with our Conshohocken, Pennsylvania
acquisition, with a 3.5% fixed interest rate and a nine year
term;
- Repaid debt: Repaid $41.1 million in fixed
rate mortgage debt with a weighted average interest rate of 6.2%
with cash on hand and borrowings from our line of credit and repaid
$8.2 million of variable rate mortgage debt at a rate of LIBOR plus
2.5%, for which we had an interest rate cap agreement;
- Amended credit facility agreement: Amended our
credit facility to increase the term loan portion from $25.0
million to $75.0 million, decreased interest rate spreads by 25
basis points at all leverage tiers, extended the maturity date of
the revolver portion to October 2021, and extended the maturity
date of the term loan portion to October 2022. We entered into
interest rate cap agreements on the Term Loan;
- Leased vacant space: Leased 0.02 million of
previously vacant space with lease terms ranging from five to 10
years at three of our properties, resulting in full occupancy;
- Renewed and modified leases: Renewed or
modified six leases for a total of 865,507 square feet for terms
ranging from one to 11 years;
- Issued common stock through overnight
offering: Issued 1,322,500 shares of our common stock
through an overnight offering and subsequent underwriters' exercise
of the overallotment option, raising net proceeds of $25.9
million;
- Issued stock under ATM Programs: Issued
2,132,523 shares of common stock for net proceeds of $45.5 million
and 504,395 shares of our Series D Preferred Stock for net proceeds
of $12.7 million; and
- Paid distributions: Paid monthly cash
distributions for the year totaling $1.50 per share on our common
stock, $1.9374996 per share on our Series A Preferred Stock, $1.875
per share on our Series B Preferred Stock, $1.75 per share on our
Series D Preferred Stock, and $1.05 per share on our senior common
stock.
Fourth Quarter 2017 Results: Core FFO available
to common shareholders for the quarter ended December 31, 2017
was $11.0 million, a 3.1% increase when compared to the quarter
ended September 30, 2017, equaling $0.38 per share. Core FFO
increased primarily due to an increase in rental income from new
acquisitions. This was partially offset by an increase in net
property operating expenses and increased interest expense due to
property acquisition indebtedness and rising one-month LIBOR
rates.
Fiscal Year 2017 Results: Core FFO available to
common stockholders for the year ended December 31, 2017, was
$41.2 million, an 11.0% increase when compared to the year ended
December 31, 2016, equaling $1.52 per share. Core FFO
increased primarily due to the increase in rental income from 2017
acquisitions and re-leased vacant space, partially offset by an
increase in preferred stock dividends.
Net loss attributable to common stockholders for the three
months and year ended December 31, 2017 was $4.3 million and
$4.9 million, or $0.15 and $0.19 per share, respectively, compared
to net loss attributable to common stockholders for the three
months ended September 30, 2017 and year ended December 31,
2016 of $0.4 million and $3.7 million, or $0.01 and $0.16 per
share, respectively. A reconciliation of Core FFO to net loss for
the three months ended December 31, 2017 and
September 30, 2017 and the years ended December 31, 2017
and 2016, 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 income per weighted average share of common stock is
set forth in the Summary Information table above.
Subsequent to the end of the quarter:
- Repaid debt: Repaid $6.7 million of
mortgage debt on one property with a variable rate of LIBOR plus
2.25%, for which we have an interest rate cap agreement; and
- Declared distributions: Declared monthly cash
distributions for January, February and March 2018 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, $0.4374999 per share on our Series D Preferred Stock and
$0.2625 per share on our senior common stock.
Comments from Gladstone Commercial’s President, Bob
Cutlip: “Our financial results reflect continuing
stabilized and growing 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 capital
recycling program. 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
successfully exited four non-core assets 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. During 2017, we invested
$132.2 million into certain of our target markets of Philadelphia,
Orlando, Salt Lake City, and Columbus at a weighted average cap
rate of 8.1%. We also completed a $6.7 million expansion of an
industrial facility adjacent to an auto assembly plant in Vance,
Alabama and extended the lease of the 245,000 square foot property
by ten years. 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. We will
continue to focus on investing in our target markets, as we only
have 3.2% of forecasted rental income expiring through the end of
2019. We are looking forward to continued growth and success for
our
shareholders."
Conference Call: Gladstone Commercial will hold
a conference call on Thursday, February 15, 2018, at 8:30 a.m. EST
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 February 22, 2018. To hear the replay,
please dial (855) 859-2056 and use playback conference number
54355640. 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 April 15, 2018.
About Gladstone Commercial: Gladstone
Commercial Corporation is a real estate investment trust focused on
acquiring, owning, and operating net leased industrial and office
properties across the United States. Including payments
through January 2018, Gladstone Commercial has paid 156 consecutive
monthly cash distributions on its common stock. Prior to
paying distributions on a monthly basis, Gladstone Commercial paid
five consecutive quarterly cash distributions. The company has also
paid 144 consecutive monthly cash distributions on its Series A
Preferred Stock, 135 consecutive monthly cash distributions on its
Series B Preferred Stock and 20 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. 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 the
adjustment for acquisition related expenses, gains or losses from
early extinguishment of debt and any other non-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 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, 2017, as filed with the SEC on
February 14, 2018. 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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