Gladstone Commercial Corporation (NASDAQ:GOOD) ("Gladstone
Commercial") today reported financial results for the first quarter
ended March 31, 2018. A description of funds from
operations ("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 are available on
the Investor Relations section of 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, 2018 |
|
December 31, 2017 |
|
$ Change |
|
% Change |
Operating
Data: |
|
|
|
|
|
|
|
|
Total operating
revenue |
|
$ |
26,353 |
|
|
$ |
25,253 |
|
|
$ |
1,100 |
|
|
4.4 |
% |
Total operating
expenses |
|
(17,402 |
) |
|
(20,405 |
) |
(3 |
) |
3,003 |
|
|
(14.7 |
)% |
Other expense, net |
|
(4,346 |
) |
(1 |
) |
(6,311 |
) |
|
1,965 |
|
|
(31.1 |
)% |
Net income (loss) |
|
$ |
4,605 |
|
|
$ |
(1,463 |
) |
|
$ |
6,068 |
|
|
(414.8 |
)% |
Less: Dividends
attributable to preferred stock |
|
(2,582 |
) |
|
(2,560 |
) |
|
(22 |
) |
|
0.9 |
% |
Less: Dividends
attributable to senior common stock |
|
(232 |
) |
|
(242 |
) |
|
10 |
|
|
(4.1 |
)% |
Net income (loss)
available (attributable) to common stockholders |
|
$ |
1,791 |
|
|
$ |
(4,265 |
) |
|
$ |
6,056 |
|
|
(142.0 |
)% |
Add: Real estate
depreciation and amortization |
|
11,586 |
|
|
12,119 |
|
|
(533 |
) |
|
(4.4 |
)% |
Add: Impairment
charge |
|
— |
|
|
2,836 |
|
|
(2,836 |
) |
|
(100.0 |
)% |
Less: Gain on sale of
real estate |
|
(1,844 |
) |
|
— |
|
|
(1,844 |
) |
|
100.0 |
% |
Funds from
operations available to common stockholders - basic |
|
$ |
11,533 |
|
|
$ |
10,690 |
|
|
$ |
843 |
|
|
7.9 |
% |
Add: Convertible senior
common distributions |
|
232 |
|
|
242 |
|
|
(10 |
) |
|
(4.1 |
)% |
Funds from
operations available to common stockholders - diluted |
|
$ |
11,765 |
|
|
$ |
10,932 |
|
|
$ |
833 |
|
|
7.6 |
% |
|
|
|
|
|
|
|
|
|
Funds from operations
available to common stockholders - basic |
|
11,533 |
|
|
10,690 |
|
|
843 |
|
|
7.9 |
% |
Add: Write-off of
deferred financing fees |
|
6 |
|
|
95 |
|
|
(89 |
) |
|
(93.7 |
)% |
Less: Write off of debt
discount |
|
(49 |
) |
|
— |
|
|
(49 |
) |
|
100.0 |
% |
Core funds from
operations available to common stockholders - basic |
|
$ |
11,490 |
|
|
$ |
10,785 |
|
|
$ |
705 |
|
|
6.5 |
% |
Add: Convertible senior
common distributions |
|
232 |
|
|
242 |
|
|
(10 |
) |
|
(4.1 |
)% |
Core funds from
operations available to common stockholders - diluted |
|
$ |
11,722 |
|
|
$ |
11,027 |
|
|
$ |
695 |
|
|
6.3 |
% |
|
|
|
|
|
|
|
|
|
Share and Per
Share Data: |
|
|
|
|
|
|
|
|
Net income (loss)
available (attributable) to common stockholders - basic and
diluted |
|
0.06 |
|
|
(0.15 |
) |
|
0.21 |
|
|
140.0 |
% |
FFO available to common
stockholders - basic |
|
0.41 |
|
|
0.38 |
|
|
0.03 |
|
|
7.9 |
% |
FFO available to common
stockholders - diluted |
|
0.40 |
|
|
0.38 |
|
|
0.02 |
|
|
5.3 |
% |
Core FFO available to
common stockholders - basic |
|
0.40 |
|
|
0.39 |
|
|
0.01 |
|
|
2.6 |
% |
Core FFO available to
common stockholders - diluted |
|
0.40 |
|
|
0.38 |
|
|
0.02 |
|
|
5.3 |
% |
Weighted average shares
of common stock outstanding - basic |
|
28,420,995 |
|
|
27,915,565 |
|
|
505,430 |
|
|
1.8 |
% |
Weighted average shares
of common stock outstanding - diluted |
|
29,165,995 |
|
|
28,669,446 |
|
|
496,549 |
|
|
1.7 |
% |
Cash dividends declared
per common share |
|
$ |
0.375 |
|
|
$ |
0.375 |
|
|
$ |
— |
|
|
— |
% |
|
|
|
|
|
|
|
|
|
Financial
Position |
|
|
|
|
|
|
|
|
Real estate, before
accumulated depreciation |
|
$ |
906,971 |
|
(2 |
) |
$ |
906,850 |
|
(4 |
) |
$ |
121 |
|
|
— |
% |
Total assets |
|
$ |
923,106 |
|
|
$ |
928,454 |
|
|
$ |
(5,348 |
) |
|
(0.6 |
)% |
Mortgage notes payable,
net, borrowings under revolver, net & borrowings under term
loan, net |
|
$ |
544,328 |
|
|
$ |
542,627 |
|
|
$ |
1,701 |
|
|
0.3 |
% |
Total stockholders' and
mezzanine equity |
|
$ |
343,399 |
|
|
$ |
350,230 |
|
|
$ |
(6,831 |
) |
|
(2.0 |
)% |
Properties owned |
|
98 |
|
(2 |
) |
99 |
|
(4 |
) |
(1 |
) |
|
(1.0 |
)% |
Square feet owned |
|
11,413,403 |
|
(2 |
) |
11,452,159 |
|
(4 |
) |
(38,756 |
) |
|
(0.3 |
)% |
Square feet leased |
|
99.1 |
% |
|
98.0 |
% |
|
1.1 |
% |
|
1.1 |
% |
(1) Includes a $1.8 million gain on sale of real estate
from two property sales.(2) Includes one property classified
as held for sale of $2.3 million and 150,000 square feet.(3)
Includes a $2.8 million impairment charge recognized on one of the
two properties held for sale during the three months ended December
31, 2017.(4) Includes two properties classified as held for
sale of $13.0 million and 166,200 square feet.
First Quarter Activity:
- Acquired property: Acquired a $14.3 million
industrial property located in Vance, Alabama, which is 100% leased
to one tenant for 9.8 years;
- Sold properties: Sold one fully vacant
property located in Tewksbury, Massachusetts, for gross proceeds of
$5.5 million, and one property located in Arlington, Texas for
gross proceeds of $5.6 million;
- Leased vacant space: Executed a lease with an
existing tenant in our Maple Heights, Ohio building for 34,000
square feet, contributing to our overall portfolio occupancy of
99.1%;
- Issued new debt: Issued $9.4 million in new
five-year mortgage debt collateralized by a Columbus, Ohio
property, which was simultaneously swapped to a fixed interest rate
of 4.58%;
- Repaid mortgage debt: Repaid $9.4 million in
maturing fixed rate mortgage debt with an interest rate of 5.75%
and paid down $6.7 million in maturing variable rate mortgage debt
with an interest rate of LIBOR + 2.25% utilizing cash on hand and
borrowings from our line of credit;
- Issued stock under ATM programs: Issued 31,011
shares of common stock for net proceeds of $0.6 million and 37,578
shares of our Series D Preferred Stock for net proceeds of $0.9
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 2018 Results: Core FFO available
to common shareholders for the three months ended March 31, 2018,
was $11.7 million, or $0.40 per share, a 6.3% increase when
compared to the three months ended December 31, 2017. Core FFO
increased primarily due to an increase in rental income from our
2017 and 2018 acquisitions.
Net income available to common stockholders for the three months
ended March 31, 2018, was $1.8 million, or $0.06 per share,
compared to net loss attributable to common stockholders for the
three months ended December 31, 2017, of $4.3 million, or
$0.15 per share. A reconciliation of Core FFO to net loss for the
three months ended March 31, 2018 and December 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 per weighted average share of common stock is set forth in the
Summary Information table above.
Subsequent to the end of the quarter:
- Extended mortgage debt maturity date: Extended
the maturity date on two variable rate mortgage notes totaling
$13.0 million from July 2018 to July 2020;
- Issued stock under ATM programs: Issued 38,708
shares of Series D Preferred Stock for net proceeds of $1.0
million; and
- Declared distributions: Declared monthly cash
distributions for April, May and June 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, $0.4375 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 consistent
performance and stabilized revenues from our highly occupied same
store properties and the real estate investments made during 2017
and 2018, 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 and
used the proceeds to de-lever our portfolio as well as acquire
properties in our target growth markets. We have successfully
exited two non-core assets so far during 2018, including our only
fully vacant asset, recognizing a net capital gain of $1.8 million.
We will continue to opportunistically sell non-core assets and
redeploy the proceeds into stronger target growth markets. Year to
date, we have invested $14.3 million in an industrial property near
the Mercedes-Benz assembly plant in Alabama. We are extremely
pleased with our solid performance over the last several years, and
we believe our same store rents should be stable and rising as we
continue our growth. We will continue to primarily focus on
investing in new properties as we only have 3.4% of forecasted
rental income expiring through 2019. We are looking forward to
continued growth and success for our
shareholders."
Conference Call: Gladstone Commercial will hold
a conference call on Wednesday May 2, 2018, 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 May 9, 2018. To hear the replay, please dial (855)
859-2056 and use playback conference number 54359302. 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 2,
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 April 2018, Gladstone Commercial has paid 159 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 147 consecutive monthly cash distributions on its Series A
Preferred Stock, 138 consecutive monthly cash distributions on its
Series B Preferred Stock and 23 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, 2017, as filed with the SEC on
February 14, 2018, and other reports filed with the SEC. 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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