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 third quarter ended September 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 |
|
|
|
|
|
|
September 30, 2016 |
|
June 30, 2016 |
|
$ Change |
|
% Change |
Operating
Data: |
|
|
|
|
|
|
|
|
Total operating
revenue |
|
$ |
21,589 |
|
|
$ |
21,247 |
|
|
$ |
342 |
|
|
1.6 |
% |
Total operating
expenses |
|
(15,172 |
) |
|
(1 |
) |
(13,433 |
) |
|
(3 |
) |
(1,739 |
) |
|
12.9 |
% |
Other expense, net |
|
(6,490 |
) |
|
(6,931 |
) |
|
(4 |
) |
441 |
|
|
(6.4 |
)% |
Net (loss) income |
|
$ |
(73 |
) |
|
$ |
883 |
|
|
$ |
(956 |
) |
|
(108.3 |
)% |
Less: Dividends
attributable to preferred stock |
|
(2,002 |
) |
|
(1,263 |
) |
|
(739 |
) |
|
58.5 |
% |
Less: Dividends
attributable to senior common stock |
|
(254 |
) |
|
(251 |
) |
|
(3 |
) |
|
1.2 |
% |
Net loss attributable to
common stockholders |
|
$ |
(2,329 |
) |
|
$ |
(631 |
) |
|
$ |
(1,698 |
) |
|
269.1 |
% |
Add: Real estate
depreciation and amortization |
|
9,459 |
|
|
9,205 |
|
|
254 |
|
|
2.8 |
% |
Add: Impairment
charge |
|
1,786 |
|
|
187 |
|
|
1,599 |
|
|
855.1 |
% |
Funds from
operations available to common stockholders - basic |
|
$ |
8,916 |
|
|
$ |
8,761 |
|
|
$ |
155 |
|
|
1.8 |
% |
Add: Convertible senior
common distributions |
|
254 |
|
|
251 |
|
|
3 |
|
|
1.2 |
% |
Funds from
operations available to common stockholders - diluted |
|
$ |
9,170 |
|
|
$ |
9,012 |
|
|
$ |
158 |
|
|
1.8 |
% |
|
|
|
|
|
|
|
|
|
Funds from operations
available to common stockholders - basic |
|
$ |
8,916 |
|
|
$ |
8,761 |
|
|
$ |
155 |
|
|
1.8 |
% |
Add: Acquisition related
expenses |
|
149 |
|
|
117 |
|
|
32 |
|
|
27.4 |
% |
Add: Write-off of offering
costs |
|
58 |
|
|
140 |
|
|
(82 |
) |
|
(58.6 |
)% |
Core funds from
operations available to common stockholders - basic |
|
$ |
9,123 |
|
|
$ |
9,018 |
|
|
$ |
105 |
|
|
1.2 |
% |
Add: Convertible senior
common distributions |
|
254 |
|
|
251 |
|
|
3 |
|
|
1.2 |
% |
Core funds from
operations available to common stockholders - diluted |
|
$ |
9,377 |
|
|
$ |
9,269 |
|
|
$ |
108 |
|
|
1.2 |
% |
|
|
|
|
|
|
|
|
|
Share and Per
Share Data: |
|
|
|
|
|
|
|
|
Net loss attributable to
common stockholders - basic & diluted |
|
(0.10 |
) |
|
(0.03 |
) |
|
(0.07 |
) |
|
233.3 |
% |
FFO available to common
stockholders - basic |
|
0.38 |
|
|
0.39 |
|
|
(0.01 |
) |
|
(2.6 |
)% |
FFO available to common
stockholders - diluted |
|
0.38 |
|
|
0.38 |
|
|
— |
|
|
— |
% |
Core FFO available to
common stockholders - basic |
|
0.39 |
|
|
0.40 |
|
|
(0.01 |
) |
|
(2.5 |
)% |
Core FFO available to
common stockholders - diluted |
|
0.39 |
|
|
0.39 |
|
|
— |
|
|
— |
% |
Weighted average shares of
common stock outstanding - basic |
|
23,509,054 |
|
|
22,684,391 |
|
|
824,663 |
|
|
3.6 |
% |
Weighted average shares of
common stock outstanding - diluted |
|
24,309,170 |
|
|
23,484,507 |
|
|
824,663 |
|
|
3.5 |
% |
Cash dividends declared
per common share |
|
$ |
0.375 |
|
|
$ |
0.375 |
|
|
$ |
— |
|
|
— |
% |
|
|
|
|
|
|
|
|
|
Financial
Position |
|
|
|
|
|
|
|
|
Real estate, before
accumulated depreciation |
|
$ |
812,166 |
|
|
(2 |
) |
$ |
794,824 |
|
|
(5 |
) |
$ |
17,342 |
|
|
2.2 |
% |
Total assets |
|
$ |
838,643 |
|
|
$ |
818,285 |
|
|
$ |
20,358 |
|
|
2.5 |
% |
Mortgage notes payable,
term preferred stock, term loan facility & line of credit,
net |
|
$ |
516,186 |
|
|
$ |
540,144 |
|
|
$ |
(23,958 |
) |
|
(4.4 |
)% |
Total stockholders' and
mezzanine equity |
|
$ |
293,128 |
|
|
$ |
252,087 |
|
|
$ |
41,041 |
|
|
16.3 |
% |
Properties owned |
|
97 |
|
|
(2 |
) |
99 |
|
|
(5 |
) |
(2 |
) |
|
(2.0 |
)% |
Square feet owned |
|
11,048,844 |
|
|
(2 |
) |
11,083,700 |
|
|
(5 |
) |
(34,856 |
) |
|
(0.3 |
)% |
Square feet leased |
|
97.7 |
% |
|
98.5 |
% |
|
(0.8 |
)% |
|
(0.8 |
)% |
(1) Includes a $1.8 million
impairment charge recognized on two of our five held for sale
properties during the three months ended September 30, 2016. |
(2) Includes five properties
classified as held for sale of $15.1 million and 325,875 square
feet. |
(3) Includes a $0.2 million
impairment charge recognized on one of our four held for sale
properties during the three months ended June 30, 2016. |
(4) Includes $0.3 million in legal
settlement income, as well as $0.1 million in write-offs on
offering costs attributable to Series C Preferred Shares during the
three months ended June 30, 2016. |
(5) Includes four properties
classified as held for sale of $4.6 million and 184,000 square
feet. |
|
Third Quarter Activity:
- Acquired property: Purchased one
fully-occupied property consisting of 119,000 square feet for $23.9
million at a cap rate of 8.3%;
- Sold property: Sold two properties located in
Rock Falls, Illinois and one property located in Angola, Indiana
for $3.0 million;
- Issued debt: Issued $18.1 million in mortgage
debt collateralized by two properties at a weighted average
interest rate of 4.0%;
- Repaid debt: Repaid $12.7 million in mortgage
debt maturing on three properties at an interest rate of 5.76% with
borrowings under our line of credit and cash on hand;
- Leased vacant space: Executed a 7-year lease
for 21,000 square feet in our Bolingbrook, Illinois property,
bringing this property to 100% occupancy;
- Renewed leases: Executed a 3-year lease
renewal with the tenant at our Richmond, Virginia property, a
1-year lease renewal with the tenant at our South Hadley,
Massachusetts property, and a 1-year lease renewal with one of the
tenants in our Maple Heights, Ohio property;
- Issued preferred stock: Issued 1,230,000
shares of our 7.00% Series D Preferred Stock in a registered direct
placement, raising net proceeds of $29.7 million;
- Issued Stock under ATM Programs: Issued
617,549 shares of common stock for net proceeds of $10.5 million,
and 481,884 shares of our 7.00% Series D Preferred Stock for net
proceeds of $12.0 million;
- Redeemed Series C Term Preferred Stock:
Redeemed all $13.5 million of our remaining issued and outstanding
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,
$0.4688 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. Paid prorated cash distributions up to and
including the date of redemption totaling $0.2424 per share on our
Series C Term Preferred Stock.
Third Quarter 2016 Results: Core FFO available
to common shareholders for the three months ended September 30,
2016, was $9.4 million, or $0.39 per share, a 1.2% increase when
compared to the three months ended June 30, 2016. Core FFO
increased primarily due to an increase in rental income from 2016
acquisitions and re-leased vacant space, lower net property
operating expenses from increased occupancy, decreased interest
expense from refinancing mortgages at lower interest rates, and
fully redeeming the Series C Term Preferred Stock.
Net loss attributable to common stockholders for the three
months ended September 30, 2016, was $(2.3) million, or $(0.10) per
share, compared to net loss attributable to common stockholders for
the three months ended June 30, 2016, of $(0.6) million, or $(0.03)
per share. A reconciliation of Core FFO to net loss for the three
months ended September 30, 2016 and June 30, 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:
- Expanded property: Executed a lease amendment
with the tenant at our Vance, Alabama property to fund a $7.0
million property expansion that will add 75,000 square feet to this
property along with a new 10-year lease;
- Renewed lease: Executed a 5-year lease renewal
with the tenant at our Wichita, Kansas property;
- Issued Stock under ATM Programs: Issued
147,150 shares of common stock for net proceeds of $2.6 million and
137,718 shares of our 7.00% Series D Preferred Stock for net
proceeds of $3.4 million; and
- Declared distributions: Declared monthly cash
distributions for October, November and December 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.
Comments from Gladstone Commercial’s President, Bob
Cutlip: “Our financial results reflect stabilized revenues
from our real estate investments made this year and our ability to
lease previously vacant space. We continue to refinance maturing
mortgage debt, and we have successfully negotiated lower interest
rates, which has resulted in interest cost savings for the
portfolio. We issued our Series D Preferred Stock to fully redeem
our maturing Term Preferred Stock, 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 three years, as we only have 4.5% of
forecasted rental income expiring through 2019. We are looking
forward to continued success."
Conference Call: Gladstone Commercial will hold
a conference call on Tuesday November 1, 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 questions. A conference call replay will be
available beginning one hour after the call and will be accessible
through December 1, 2016. To hear the replay, please dial
(855) 859-2056 and use playback conference number 46674770. 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 January
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 September 2016, Gladstone
Commercial has paid 141 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 129 consecutive monthly
cash distributions on its Series A Preferred Stock, 120 consecutive
monthly cash distributions on its Series B Preferred Stock and 5
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, 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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