Gladstone Commercial Corporation (NASDAQ: GOOD) ("Gladstone
Commercial") today reported financial results for the second
quarter ended June 30, 2019. 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 |
|
|
|
|
|
June 30, 2019 |
|
March 31, 2019 |
|
$ Change |
|
% Change |
Operating
Data: |
|
|
|
|
|
|
|
Total operating revenue |
$ |
28,197 |
|
|
$ |
28,137 |
|
|
$ |
60 |
|
|
0.2 |
% |
Total operating expenses |
(19,058 |
) |
|
(19,266 |
) |
|
208 |
|
|
(1.1 |
)% |
Other expense, net |
(6,934 |
) |
|
(4,198 |
) |
(1 |
) |
(2,736 |
) |
|
65.2 |
% |
Net income |
$ |
2,205 |
|
|
$ |
4,673 |
|
|
$ |
(2,468 |
) |
|
(52.8 |
)% |
Less: Dividends attributable to
preferred stock |
(2,612 |
) |
|
(2,612 |
) |
|
— |
|
|
— |
% |
Less: Dividends attributable to
senior common stock |
(225 |
) |
|
(224 |
) |
|
(1 |
) |
|
0.4 |
% |
Net (loss) income (attributable)
available to common stockholders and Non-controlling OP
Unitholders |
$ |
(632 |
) |
|
$ |
1,837 |
|
|
$ |
(2,469 |
) |
|
(134.4 |
)% |
Add: Real estate depreciation and
amortization |
12,622 |
|
|
13,010 |
|
|
(388 |
) |
|
(3.0 |
)% |
Less: Gain on sale of real
estate |
— |
|
|
(2,952 |
) |
|
2,952 |
|
|
NM |
|
Funds from operations
available to common stockholders and Non-controlling OP Unitholders
- basic |
$ |
11,990 |
|
|
$ |
11,895 |
|
|
$ |
95 |
|
|
0.8 |
% |
Add: Convertible senior common
distributions |
225 |
|
|
224 |
|
|
1 |
|
|
0.4 |
% |
Funds from operations
available to common stockholders and Non-controlling OP Unitholders
- diluted |
$ |
12,215 |
|
|
$ |
12,119 |
|
|
$ |
96 |
|
|
0.8 |
% |
|
|
|
|
|
|
|
|
Funds from operations available
to common stockholders and Non-controlling OP Unitholders -
basic |
11,990 |
|
|
11,895 |
|
|
95 |
|
|
0.8 |
% |
Add: Write off deferred financing
fees |
— |
|
|
283 |
|
|
(283 |
) |
|
NM |
|
Add: Acquisition related
expenses |
65 |
|
|
63 |
|
|
2 |
|
|
3.2 |
% |
Add: Deferred rent write off |
— |
|
|
30 |
|
|
(30 |
) |
|
NM |
|
Add: Write off shelf registration
statement costs |
— |
|
|
18 |
|
|
(18 |
) |
|
NM |
|
Add: Asset retirement obligation
expense |
32 |
|
|
31 |
|
|
1 |
|
|
3.2 |
% |
Less: Lease termination
revenue |
(12 |
) |
|
(187 |
) |
|
175 |
|
|
(93.6 |
)% |
Less: Lease contraction fee |
(57 |
) |
|
(216 |
) |
|
159 |
|
|
(73.6 |
)% |
Core funds from
operations available to common stockholders and Non-controlling OP
Unitholders - basic |
$ |
12,018 |
|
|
$ |
11,917 |
|
|
$ |
101 |
|
|
0.8 |
% |
Add: Convertible senior common
distributions |
225 |
|
|
224 |
|
|
1 |
|
|
0.4 |
% |
Core funds from
operations available to common stockholders and Non-controlling OP
Unitholders - diluted |
$ |
12,243 |
|
|
$ |
12,141 |
|
|
$ |
102 |
|
|
0.8 |
% |
|
|
|
|
|
|
|
|
Share and Per Share
Data: |
|
|
|
|
|
|
|
Net (loss) income (attributable)
available to common stockholders and Non-controlling OP Unitholders
- basic and diluted |
(0.02 |
) |
|
0.06 |
|
|
(0.08 |
) |
|
133.3 |
% |
FFO available to common
stockholders and Non-controlling OP Unitholders - basic |
0.38 |
|
|
0.39 |
|
|
(0.01 |
) |
|
(2.6 |
)% |
FFO available to common
stockholders and Non-controlling OP Unitholders - diluted |
0.38 |
|
|
0.39 |
|
|
(0.01 |
) |
|
(2.6 |
)% |
Core FFO available to common
stockholders and Non-controlling OP Unitholders - basic |
0.39 |
|
|
0.39 |
|
|
— |
|
|
— |
% |
Core FFO available to common
stockholders and Non-controlling OP Unitholders - diluted |
0.38 |
|
|
0.39 |
|
|
(0.01 |
) |
|
(2.6 |
)% |
Weighted average shares of common
stock and Non-controlling OP Units outstanding - basic |
31,192,676 |
|
|
30,259,807 |
|
|
932,869 |
|
|
3.1 |
% |
Weighted average shares of common
stock and Non-controlling OP Units outstanding - diluted |
31,911,446 |
|
|
30,981,679 |
|
|
929,767 |
|
|
3.0 |
% |
Cash dividends declared per
common share and Non-controlling OP Unit |
$ |
0.375 |
|
|
$ |
0.375 |
|
|
$ |
— |
|
|
— |
% |
|
|
|
|
|
|
|
|
Financial
Position |
|
|
|
|
|
|
|
Real estate, before
accumulated depreciation |
$ |
989,036 |
|
|
$ |
953,978 |
|
|
$ |
35,058 |
|
|
3.7 |
% |
Total assets |
$ |
969,787 |
|
|
$ |
935,020 |
|
|
$ |
34,767 |
|
|
3.7 |
% |
Mortgage notes payable, net,
borrowings under revolver, net and borrowings under term loan,
net |
$ |
576,770 |
|
|
$ |
552,400 |
|
|
$ |
24,370 |
|
|
4.4 |
% |
Total equity and mezzanine
equity |
$ |
349,683 |
|
|
$ |
343,889 |
|
|
$ |
5,794 |
|
|
1.7 |
% |
Properties owned |
106 |
|
|
102 |
|
|
4 |
|
|
3.9 |
% |
Square feet owned |
12,853,836 |
|
|
11,740,721 |
|
|
1,113,115 |
|
|
9.5 |
% |
Square feet leased |
98.8 |
% |
|
98.9 |
% |
|
(0.1 |
)% |
|
(0.1 |
)% |
(1) Includes a $0.9 million gain on sale, net from one
property sale. |
NM - Not Meaningful |
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter Activity:
• Acquired properties: Purchased four
fully-occupied industrial properties for $40.2 million, with an
aggregate of approximately 1.1 million square feet of rental space,
at a weighted average cap rate of 8.3%;• Issued new
debt: Borrowed $8.9 million in fixed rate mortgage debt at
a 4.35% interest rate, with a 5 year maturity date;•
Refinanced debt: Refinanced $21.5 million of
maturing fixed rate mortgage debt with a 4.23% interest rate with
$21.6 million of new five-year swapped to fixed rate mortgage debt
with a 3.42% interest rate;• Extended debt:
Extended the maturity date on an $8.6 million mortgage from April
2019 to April 2022;• Leased vacant space: Executed
three leases totaling 33,011 square feet of previously vacant space
for terms ranging from 5 to 11.5 years;• Issued stock under
ATM program: Issued 917,450 shares of common stock for net
proceeds of $19.2 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, $0.46875 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.
Second Quarter 2019 Results: Core FFO available
to common shareholders and Non-controlling OP Unitholders for the
three months ended June 30, 2019, was $12.2 million, or $0.38 per
share, a 0.8% increase when compared to the three months ended
March 31, 2019. Core FFO increased primarily due to an
increase in rental income from a full quarter of rental income from
our first quarter 2019 acquisitions, coupled with rental income
from our four second quarter 2019 acquisitions.
Net loss attributable to common stockholders and Non-controlling
OP Unitholders for the three months ended June 30, 2019, was $0.6
million, or $(0.02) per share, compared to net income available to
common stockholders and Non-controlling OP Unitholders for the
three months ended March 31, 2019, of $1.8 million, or $0.06
per share. A reconciliation of Core FFO to net (loss) income for
the three months ended June 30, 2019 and March 31, 2019, 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 Non-controlling OP Unit and basic
and diluted net (loss) income per weighted average share of common
stock and Non-controlling OP Unit is set forth in the Summary
Information table above.
Subsequent to the end of the quarter:
• Acquired properties: Acquired an industrial
property located in Denton, Texas for $6.5 million, which is fully
leased to one tenant on a triple net lease;• Amended,
extended and upsized credit facility: Increased our term
loan from $75.0 million to $160.0 million and increased our
revolver from $85.0 million to $100.0 million, while extending the
maturity date of our term loan for five years and extending the
maturity date of our revolver for four years. The LIBOR-based
interest rate was reduced by 10 basis points;• Issued stock
under ATM programs: Issued 124,200 shares of common stock
for net proceeds of $2.6 million; and• Declared
distributions: Declared monthly cash distributions for
July, August and September 2019 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 consistent
performance and stabilized revenues from our high same store
property occupancy, accretive real estate investments made during
2018 and 2019, 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 one non-core asset so far during 2019, recognizing a net
capital gain of $3.0 million. We will continue to opportunistically
sell non-core assets and redeploy the proceeds into stronger target
growth markets. Our pipeline of acquisition opportunities has grown
in recent months, with the pipeline and our year-to-date closings
favoring industrial properties. We anticipate our robust pipeline
will result in successful acquisitions during the remainder of 2019
and beyond. We are extremely pleased with our solid performance
over the last several years including same store cash rents
increasing by approximately 2%. 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 2.3% 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 July 31, 2019, 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 August 7, 2019. To hear the replay, please dial (855)
859-2056 and use playback conference number 7297256. The live audio
broadcast of the quarterly conference call will also be available
on our website, www.GladstoneCommercial.com, and will also be
archived and available for replay through September 30, 2019.
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 July 2019, Gladstone Commercial has paid 175 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 163 consecutive monthly cash distributions on its Series A
Preferred Stock, 154 consecutive monthly cash distributions on its
Series B Preferred Stock and 39 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 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.gladstonecompanies.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, 2018, as filed with the SEC on
February 13, 2019, 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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