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 first quarter ended March 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 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 |
|
|
|
|
|
|
March 31, 2017 |
|
December 31, 2016 |
|
$ Change |
|
% Change |
Operating
Data: |
|
|
|
|
|
|
|
|
Total operating
revenue |
|
$ |
22,314 |
|
|
$ |
22,009 |
|
|
$ |
305 |
|
|
1.4 |
% |
Total operating
expenses |
|
(17,708 |
) |
(1 |
) |
(13,733 |
) |
|
(3,975 |
) |
|
28.9 |
% |
Other expense, net |
|
(250 |
) |
(2 |
) |
(5,981 |
) |
|
5,731 |
|
|
(95.8 |
)% |
Net income
available |
|
$ |
4,356 |
|
|
$ |
2,295 |
|
|
$ |
2,061 |
|
|
89.8 |
% |
Less: Dividends
attributable to preferred stock |
|
(2,373 |
) |
|
(2,353 |
) |
|
(20 |
) |
|
0.8 |
% |
Less: Dividends
attributable to senior common stock |
|
(248 |
) |
|
(254 |
) |
|
6 |
|
|
(2.4 |
)% |
Net income (loss)
available (attributable) to common stockholders |
|
$ |
1,735 |
|
|
$ |
(312 |
) |
|
$ |
2,047 |
|
|
(656.1 |
)% |
Add: Real estate
depreciation and amortization |
|
9,921 |
|
|
9,720 |
|
|
201 |
|
|
2.1 |
% |
Add: Impairment
charge |
|
3,746 |
|
|
— |
|
|
3,746 |
|
|
100.0 |
% |
Less: Gain on sale of
real estate |
|
(5,906 |
) |
|
(266 |
) |
|
(5,640 |
) |
|
2,120.3 |
% |
Funds from
operations available to common stockholders - basic |
|
$ |
9,496 |
|
|
$ |
9,142 |
|
|
$ |
354 |
|
|
3.9 |
% |
Add: Convertible senior
common distributions |
|
248 |
|
|
254 |
|
|
(6 |
) |
|
(2.4 |
)% |
Funds from
operations available to common stockholders - diluted |
|
$ |
9,744 |
|
|
$ |
9,396 |
|
|
$ |
348 |
|
|
3.7 |
% |
|
|
|
|
|
|
|
|
|
Funds from operations
available to common stockholders - basic |
|
9,496 |
|
|
9,142 |
|
|
354 |
|
|
3.9 |
% |
Add: Acquisition
related expenses |
|
— |
|
|
(14 |
) |
|
14 |
|
|
(100.0 |
)% |
Core funds from
operations available to common stockholders - basic |
|
$ |
9,496 |
|
|
$ |
9,128 |
|
|
$ |
368 |
|
|
4.0 |
% |
Add: Convertible senior
common distributions |
|
248 |
|
|
254 |
|
|
(6 |
) |
|
(2.4 |
)% |
Core funds from
operations available to common stockholders - diluted |
|
$ |
9,744 |
|
|
$ |
9,382 |
|
|
$ |
362 |
|
|
3.9 |
% |
|
|
|
|
|
|
|
|
|
Share and Per
Share Data: |
|
|
|
|
|
|
|
|
Net income (loss)
available (attributable) to common stockholders - basic and
diluted |
|
0.07 |
|
|
(0.01 |
) |
|
0.08 |
|
|
800.0 |
% |
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 |
|
0.38 |
|
|
0.38 |
|
|
— |
|
|
— |
% |
Core FFO available to
common stockholders - diluted |
|
0.38 |
|
|
0.38 |
|
|
— |
|
|
— |
% |
Weighted average shares
of common stock outstanding - basic |
|
24,963,926 |
|
|
24,024,280 |
|
|
939,646 |
|
|
3.9 |
% |
Weighted average shares
of common stock outstanding - diluted |
|
25,762,314 |
|
|
24,824,397 |
|
|
937,917 |
|
|
3.8 |
% |
Cash dividends declared
per common share |
|
$ |
0.375 |
|
|
$ |
0.375 |
|
|
$ |
— |
|
|
— |
% |
|
|
|
|
|
|
|
|
|
Financial
Position |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate, before
accumulated depreciation |
|
$ |
825,027 |
|
(3 |
) |
$ |
833,203 |
|
(4 |
) |
$ |
(8,176 |
) |
|
(1.0 |
)% |
Total assets |
|
$ |
832,977 |
|
|
$ |
851,742 |
|
|
$ |
(18,765 |
) |
|
(2.2 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage notes payable,
net, borrowings under revolver, net & borrowings under term
loan, net |
|
$ |
496,268 |
|
|
$ |
509,395 |
|
|
$ |
(13,127 |
) |
|
(2.6 |
)% |
Total stockholders' and
mezzanine equity |
|
$ |
307,569 |
|
|
$ |
310,620 |
|
|
$ |
(3,051 |
) |
|
(1.0 |
)% |
Properties owned |
|
95 |
|
(3 |
) |
96 |
|
(4 |
) |
(1 |
) |
|
(1.0 |
)% |
Square feet owned |
|
10,916,338 |
|
(3 |
) |
11,099,338 |
|
(4 |
) |
(183,000 |
) |
|
(1.6 |
)% |
Square feet leased |
|
97.9 |
% |
|
97.9 |
% |
|
— |
% |
|
— |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes a $3.7 million impairment charge recognized on
two held and used properties. |
(2) Includes a $5.9 million gain on sale of real
estate. |
(3) Includes one property classified as held for sale of
$3.1 million and 51,155 square feet. |
(4) Includes two properties classified as held for sale of
$11.5 million and 234,155 square feet. |
|
First Quarter Activity:
- Sold property: Sold one property located in
Franklin, New Jersey for $12.8 million, resulting in a gain on sale
of $5.9 million;
- Commenced new leases: Commenced leases in two
properties located in Minneapolis and Chicago bringing these
properties to full occupancy;
- Repaid debt: Repaid $27.2 million in fixed
rate mortgage debt maturing on six properties at a weighted average
interest rate of 6.1% with cash on hand and borrowings from our
line of credit and repaid $8.2 million of variable rate mortgage
debt on one property using proceeds from the Franklin, New Jersey
property sale;
- Issued Stock under ATM Programs: Issued
119,356 shares of common stock for net proceeds of $2.4 million,
and 89,835 shares of our Series D Preferred Stock for net proceeds
of $2.2 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.
First Quarter 2016 Results: Core FFO available
to common shareholders for the three months ended March 31, 2017,
was $9.7 million, or $0.38 per share, a 3.9% increase when compared
to the three months ended December 31, 2016. Core FFO increased
primarily due to an increase in rental income from our December
2016 acquisition, lower net property operating expenses from
leasing vacant space, and decreased interest expense from repaying
maturing mortgages using cash on hand and funds from our revolving
credit facility which has a lower interest rate than our maturing
debt.
Net income available to common stockholders for the three months
ended March 31, 2017, was $1.7 million, or 0.07 per share, compared
to net loss attributable to common stockholders for the three
months ended December 31, 2016, of $(0.3) million, or $(0.01) per
share. A reconciliation of Core FFO to net income (loss) for the
three months ended March 31, 2017 and December 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:
- Expanded property: Continued construction on
our Vance, Alabama property to fund a $7.0 million property
expansion that will add 75,000 square feet to this property. This
lease resets to a 10-year term upon completion;
- Sold property: Sold one property located in
Hazelwood, Missouri for $2.1 million;
- Issued Stock under ATM Programs: Issued
188,697 shares of common stock for net proceeds of $4.2 million and
68,999 shares of our Series D Preferred Stock for net proceeds of
$1.7 million; and
- Declared distributions: Declared monthly cash
distributions for April, May and June 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.
Comments from Gladstone Commercial’s President, Bob
Cutlip: "Our financial results reflect continued quality
and stabilized revenues from our highly occupied same store
properties and the real estate investments made during 2016, our
ability to lease previously vacant space, and our deleveraging and
capital recycling programs. We have taken great efforts to reduce
outstanding mortgage debt through cost effective re-financings, and
have successfully repaid $35.4 million of mortgage debt this
quarter, which has reduced our quarter over quarter interest
expense, as well as reduced our leverage. 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 delever our portfolio, and acquire properties in our target
growth markets. We have successfully exited two non-core assets so
far during 2017, recognizing a net capital gain of $5.8 million,
and we will continue to opportunistically sell non-core assets and
redeploy the proceeds into stronger target growth markets. 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 through year end 2019, as
we only have 4.0% 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 Wednesday May 3, 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 June 3, 2017. To hear the replay, please dial (855)
859-2056 and use playback conference number 56207121. 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 July 3,
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 April 2017, Gladstone
Commercial has paid 147 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 135 consecutive monthly
cash distributions on its Series A Preferred Stock, 126 consecutive
monthly cash distributions on its Series B Preferred Stock and 11
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 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, 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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