Gladstone Commercial Corporation (NASDAQ:GOOD) today reported
financial results for the second quarter ended June 30,
2016. 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 Quarterly
Report on Form 10-Q which can be retrieved from our website 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, 2016 |
|
March 31, 2016 |
|
$ Change |
|
% Change |
|
Operating
Data: |
|
|
|
|
|
|
|
|
|
Total operating
revenue |
|
$ |
21,247 |
|
|
$ |
21,527 |
|
|
$ |
(280 |
) |
|
|
(1.3 |
)% |
|
Total operating
expenses |
|
|
(13,433 |
) |
|
(1 |
) |
|
(13,257 |
) |
|
(3 |
) |
|
(176 |
) |
|
|
1.3 |
% |
|
Other expense |
|
|
(6,931 |
) |
|
(2 |
) |
|
(7,417 |
) |
|
|
486 |
|
|
|
(6.6 |
)% |
|
Net income |
|
$ |
883 |
|
|
$ |
853 |
|
|
$ |
30 |
|
|
|
3.5 |
% |
|
Less: Dividends
attributable to preferred stock |
|
|
(1,263 |
) |
|
|
(1,027 |
) |
|
|
(236 |
) |
|
|
23.0 |
% |
|
Less: Dividends
attributable to senior common stock |
|
|
(251 |
) |
|
|
(252 |
) |
|
|
1 |
|
|
|
(0.4 |
)% |
|
Net loss attributable to
common stockholders |
|
$ |
(631 |
) |
|
$ |
(426 |
) |
|
$ |
(205 |
) |
|
|
48.1 |
% |
|
Add: Real estate
depreciation and amortization |
|
|
9,205 |
|
|
|
9,133 |
|
|
|
72 |
|
|
|
0.8 |
% |
|
Add: Impairment
charge |
|
|
187 |
|
|
|
43 |
|
|
|
144 |
|
|
|
334.9 |
% |
|
Funds from
operations available to common stockholders - basic |
|
$ |
8,761 |
|
|
$ |
8,750 |
|
|
$ |
11 |
|
|
|
0.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add: Convertible senior
common distributions |
|
|
251 |
|
|
|
252 |
|
|
|
(1 |
) |
|
|
(0.4 |
)% |
|
Funds from
operations available to common stockholders - diluted |
|
$ |
9,012 |
|
|
$ |
9,002 |
|
|
$ |
10 |
|
|
|
0.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds from operations
available to common stockholders - basic |
|
$ |
8,761 |
|
|
$ |
8,750 |
|
|
$ |
11 |
|
|
|
0.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add: Acquisition related
expenses |
|
|
117 |
|
|
|
9 |
|
|
|
108 |
|
|
|
1,200.0 |
% |
|
Add: Write-off of offering
costs |
|
|
140 |
|
|
|
65 |
|
|
|
75 |
|
|
|
115.4 |
% |
|
Core funds from
operations available to common stockholders - basic |
|
$ |
9,018 |
|
|
$ |
8,824 |
|
|
$ |
194 |
|
|
|
2.2 |
% |
|
Add: Convertible senior
common distributions |
|
|
251 |
|
|
|
252 |
|
|
|
(1 |
) |
|
|
(0.4 |
)% |
|
Core funds from
operations available to common stockholders - diluted |
|
$ |
9,269 |
|
|
$ |
9,076 |
|
|
$ |
193 |
|
|
|
2.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
Share and Per
Share Data: |
|
|
|
|
|
|
|
|
|
Net loss attributable to
common stockholders - basic & diluted |
|
|
(0.03 |
) |
|
|
(0.02 |
) |
|
|
(0.01 |
) |
|
|
50.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFO available to common
stockholders - basic |
|
|
0.39 |
|
|
|
0.39 |
|
|
|
— |
|
|
|
— |
% |
|
FFO available to common
stockholders - diluted |
|
|
0.38 |
|
|
|
0.39 |
|
|
|
(0.01 |
) |
|
|
(2.6 |
)% |
|
Core FFO available to
common stockholders - basic |
|
|
0.40 |
|
|
|
0.39 |
|
|
|
0.01 |
|
|
|
2.6 |
% |
|
Core FFO available to
common stockholders - diluted |
|
|
0.39 |
|
|
|
0.39 |
|
|
|
— |
|
|
|
— |
% |
|
Weighted average shares of
common stock outstanding - basic |
|
|
22,684,391 |
|
|
|
22,545,285 |
|
|
|
139,106 |
|
|
|
0.6 |
% |
|
Weighted average shares of
common stock outstanding - diluted |
|
|
23,484,507 |
|
|
|
23,345,402 |
|
|
|
139,105 |
|
|
|
0.6 |
% |
|
Cash dividends declared
per common share |
|
$ |
0.375 |
|
|
$ |
0.375 |
|
|
$ |
— |
|
|
|
— |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Position |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate, before
accumulated depreciation |
|
$ |
794,824 |
|
|
(4 |
) |
$ |
782,558 |
|
|
(5 |
) |
$ |
12,266 |
|
|
|
1.6 |
% |
|
Total assets |
|
$ |
818,285 |
|
|
$ |
811,461 |
|
|
$ |
6,824 |
|
|
|
0.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage notes payable,
term preferred stock, term loan facility & line of credit,
net |
|
$ |
540,144 |
|
|
$ |
556,204 |
|
|
$ |
(16,060 |
) |
|
|
(2.9 |
)% |
|
Total stockholders' and
mezzanine equity |
|
$ |
252,087 |
|
|
$ |
227,558 |
|
|
$ |
24,529 |
|
|
|
10.8 |
% |
|
Properties owned |
|
|
99 |
|
|
(4 |
) |
|
99 |
|
|
(5 |
) |
|
— |
|
|
|
— |
% |
|
Square feet owned |
|
|
11,083,700 |
|
|
(4 |
) |
|
11,039,454 |
|
|
(5 |
) |
|
44,246 |
|
|
|
0.4 |
% |
|
Square feet leased |
|
|
98.5 |
% |
|
|
97.5 |
% |
|
|
1.0 |
% |
|
|
1.0 |
% |
|
|
(1)
Includes a $0.2 million impairment charge recognized on our four
held for sale properties during the three months ended June 30,
2016. |
(2)
Includes $0.3 million in legal settlement income, as well as a $0.1
million in write offs on offering costs attributable to Series C
Preferred Shares. |
(3) Includes a $0.04 million impairment charge recognized on
our Dayton, Ohio property during the three months ended March 31,
2016. This property was subsequently sold during the 3 months ended
June 30, 2016. |
(4)
Includes four properties classified as held for sale of $4.6
million and 184,000 square feet. |
(5)
Includes four properties classified as held for sale of $5.6
million and 214,000 square feet. |
|
Second Quarter Activity:
• Acquired property: Purchased one
fully-occupied property consisting of 107,000 square feet for $17.0
million at a cap rate of 8.4%;• Sold property:
Sold our fully-vacant property in Dayton, Ohio for $0.2 million;•
Issued debt: Issued $9.9 million in mortgage debt
collateralized by one property acquired this quarter at a fixed
interest rate of 4.684%;• Refinanced debt:
Refinanced $3.7 million in mortgage debt maturing on one property,
with a previous interest rate of 6.25%, with $9.5 million of new
mortgage debt on this property and two other previously unsecured
properties at a new interest rate of 3.2%;• Repaid
debt: Repaid $22.5 million in mortgage debt maturing on
four properties at a weighted average interest rate of 6.34% with
borrowings under our line of credit and cash on hand;•
Leased vacant space: Executed a 5-year lease for
40,000 square feet in our Maple Heights, Ohio property and executed
a 5-year lease for 13,000 square feet in our Burnsville, Minnesota
property;• Issued preferred stock: Issued
1,043,725 shares of our newly created 7.00% Series D Preferred
Stock raising net proceeds of $25.3 million;• Entered into
new preferred ATM Program: Entered into a $50.0 million
ATM program for our 7.00% Series D Preferred Stock with Cantor
Fitzgerald;• Issued Stock under ATM Programs:
Issued 433,000 shares of common stock for net proceeds of $7.2
million, 40,000 shares of our 7.5% Series B Preferred Stock for net
proceeds of $1.0 million and 20,000 shares of our 7.00% Series D
Preferred Stock for net proceeds of $0.5 million;•
Partially redeemed Series C Term Preferred Stock:
Redeemed $25.0 million of our 7.125% Series C Term Preferred Stock
that was originally set to mature in January 2017; 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,
$0.46875 per share on our Series B Preferred Stock, $0.4453125 per
share on our Series C Term Preferred Stock, and $0.2625 per share
on our senior common stock. Paid prorated cash distributions
totaling $0.178763 per share on our Series D Preferred Stock.
Second Quarter 2016 Results: Core FFO available
to common shareholders for the three months ended June 30, 2016,
was $9.3 million, or $0.39 per share, a 2.1% increase when compared
to the three months ended March 31, 2016. Core FFO increased
primarily due to an increase in rental income from re-leasing
vacant space coupled with lower property operating expenses from
increased occupancy and decreased interest expense resulting from
refinancing mortgages at lower interest rates.
Net loss attributable to common stockholders for the three
months ended June 30, 2016, was $(0.6) million, or $(0.03) per
share, respectively, compared to net loss attributable to common
stockholders for the three months ended March 31, 2016, of $(0.4)
million, or $(0.02) per share. A reconciliation of Core FFO to net
loss for the three months ended June 30, 2016 and March 31,
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:
• Announced Series C Term Preferred Stock
redemption: Announced that we intend to redeem the
remaining $13.5 million of our outstanding Series C Term Preferred
Stock on August 19, 2016;• Issued Stock under ATM
Programs: Issued 600,000 shares of common stock for net
proceeds of $10.2 million and 204,000 shares of our 7.00% Series D
Preferred Stock for net proceeds of $5.1 million; and•
Declared distributions: Declared monthly cash
distributions for July, August and September 2016 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. We also declared
dividends for July of $0.1484375 per share on our Series C Term
Preferred Stock.
Comments from Gladstone Commercial’s President, Bob
Cutlip: “Our financial results reflect stabilized revenues
from our real estate investments made during the past 15 months and
our ability to lease previously vacant space and dispose of a
non-core property with limited re-leasing prospects. We have
continued to refinance maturing mortgage debt, and we have
successfully negotiated lower interest rates over the past 12
months, which has resulted in interest cost savings for the
portfolio. We successfully issued our Series D Preferred Stock to
refinance our maturing Term Preferred Stock and launched the
accompanying Series D Preferred Stock ATM program, which will
bolster our capital strategy with a reduced cost of capital. We are
extremely pleased with our activity, high occupancy, and
consistency over the last several years, and we believe our same
store rents should be stable and growing over the next four years,
as we only have 4% of forecasted rental income expiring through
2019. We are looking forward to continued success in 2016."
Conference Call: Gladstone Commercial will hold
a conference call on Tuesday, July 26, 2016, 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 26, 2016. To hear the replay, please dial
(855) 859-2056 and use playback conference number 29246154.
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
September 26, 2016.
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 June 2016, Gladstone
Commercial has paid 138 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 126 consecutive monthly
cash distributions on its Series A Preferred Stock, 117 consecutive
monthly cash distributions on its Series B Preferred Stock and 53
consecutive monthly cash distributions on its Series C Term
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, 2015, as filed with the SEC on
February 17, 2016. 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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