Gladstone Commercial Corporation (Nasdaq: GOOD) ("Gladstone
Commercial") today reported financial results for the first quarter
ended March 31, 2020. A description of funds from
operations, or FFO, FFO as adjusted for comparability, and Core
FFO, all three 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 and
Non-controlling OP Units, unless otherwise noted. For further
detail, please also refer to both 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, 2020 |
|
December 31, 2019 |
|
$ Change |
|
% Change |
Operating
Data: |
|
|
|
|
|
|
|
Total operating revenue |
$ |
33,619 |
|
|
$ |
29,386 |
|
|
$ |
4,233 |
|
|
14.4 |
% |
Total operating expenses |
(24,092 |
) |
|
(22,462 |
) |
(1) |
(1,630 |
) |
|
7.3 |
% |
Other expense, net |
(7,269 |
) |
|
(6,452 |
) |
|
(817 |
) |
|
12.7 |
% |
Net income |
$ |
2,258 |
|
|
$ |
472 |
|
|
$ |
1,786 |
|
|
378.4 |
% |
Less: Dividends attributable to
preferred stock |
(2,678 |
) |
|
(2,986 |
) |
|
308 |
|
|
(10.3 |
)% |
Less: Series A and B Preferred
Stock offering costs write off |
— |
|
|
(2,674 |
) |
|
2,674 |
|
|
(100.0 |
)% |
Less: Dividends attributable to
senior common stock |
(208 |
) |
|
(217 |
) |
|
9 |
|
|
(4.1 |
)% |
Net loss attributable to common
stockholders and Non-controlling OP Unitholders |
$ |
(628 |
) |
|
$ |
(5,405 |
) |
|
$ |
4,777 |
|
|
(88.4 |
)% |
Add: Real estate depreciation and
amortization |
14,096 |
|
|
13,428 |
|
|
668 |
|
|
5.0 |
% |
Add: Impairment charge |
— |
|
|
1,813 |
|
|
(1,813 |
) |
|
(100.0 |
)% |
Add: Loss on sale of real
estate |
12 |
|
|
— |
|
|
12 |
|
|
100.0 |
% |
Funds from operations
available to common stockholders and Non-controlling OP Unitholders
- basic |
$ |
13,480 |
|
|
$ |
9,836 |
|
|
$ |
3,644 |
|
|
37.0 |
% |
Add: Convertible senior common
distributions |
208 |
|
|
217 |
|
|
(9 |
) |
|
(4.1 |
)% |
Funds from operations
available to common stockholders and Non-controlling OP Unitholders
- diluted |
$ |
13,688 |
|
|
$ |
10,053 |
|
|
$ |
3,635 |
|
|
36.2 |
% |
Add: Series A and B preferred
stock offering costs write off |
— |
|
|
2,674 |
|
|
(2,674 |
) |
|
(100.0 |
)% |
Funds from operations
available to common stockholders and Non-controlling OP Unitholders
- diluted, as adjusted for comparability |
$ |
13,688 |
|
|
$ |
12,727 |
|
|
$ |
961 |
|
|
7.6 |
% |
|
|
|
|
|
|
|
|
Funds from operations available
to common stockholders and Non-controlling OP Unitholders -
basic |
13,480 |
|
|
9,836 |
|
|
3,644 |
|
|
37.0 |
% |
Add: Acquisition related
expenses |
7 |
|
|
204 |
|
|
(197 |
) |
|
(96.6 |
)% |
Add: Prepaid ATM cost write
off |
— |
|
|
82 |
|
|
(82 |
) |
|
(100.0 |
)% |
Add: PACE financing amortization,
net |
31 |
|
|
— |
|
|
31 |
|
|
100.0 |
% |
Add: Asset retirement obligation
expense |
41 |
|
|
42 |
|
|
(1 |
) |
|
(2.4 |
)% |
Add: Bad debt write off |
— |
|
|
152 |
|
|
(152 |
) |
|
(100.0 |
)% |
Add: Series A and B preferred
stock offering costs write off |
— |
|
|
2,674 |
|
|
(2,674 |
) |
|
(100.0 |
)% |
Core funds from
operations available to common stockholders and Non-controlling OP
Unitholders - basic |
$ |
13,559 |
|
|
$ |
12,990 |
|
|
$ |
569 |
|
|
4.4 |
% |
Add: Convertible senior common
distributions |
208 |
|
|
217 |
|
|
(9 |
) |
|
(4.1 |
)% |
Core funds from
operations available to common stockholders and Non-controlling OP
Unitholders - diluted |
$ |
13,767 |
|
|
$ |
13,207 |
|
|
$ |
560 |
|
|
4.2 |
% |
|
|
|
|
|
|
|
|
Share and Per Share
Data: |
|
|
|
|
|
|
|
Net loss attributable to common
stockholders and Non-controlling OP Unitholders - basic and
diluted |
(0.02 |
) |
|
(0.18 |
) |
|
0.16 |
|
|
88.9 |
% |
FFO available to common
stockholders and Non-controlling OP Unitholders - basic |
0.39 |
|
|
0.30 |
|
|
0.09 |
|
|
30.0 |
% |
FFO available to common
stockholders and Non-controlling OP Unitholders - diluted |
0.39 |
|
|
0.30 |
|
|
0.09 |
|
|
30.0 |
% |
FFO available to common
stockholders and Non-controlling OP Unitholders - diluted, as
adjusted for comparability |
0.39 |
|
|
0.39 |
|
|
— |
|
|
— |
% |
Core FFO available to common
stockholders and Non-controlling OP Unitholders - basic |
0.40 |
|
|
0.40 |
|
|
— |
|
|
— |
% |
Core FFO available to common
stockholders and Non-controlling OP Unitholders - diluted |
0.40 |
|
|
0.40 |
|
|
— |
|
|
— |
% |
Weighted average shares of common
stock and Non-controlling OP Units outstanding - basic |
34,136,179 |
|
|
32,332,144 |
|
|
1,804,035 |
|
|
5.6 |
% |
Weighted average shares of common
stock and Non-controlling OP Units outstanding - diluted |
34,791,121 |
|
|
33,006,755 |
|
|
1,784,366 |
|
|
5.4 |
% |
Cash dividends declared per
common share and Non-controlling OP Unit |
$ |
0.37545 |
|
|
$ |
0.37500 |
|
|
$ |
— |
|
|
0.1 |
% |
|
|
|
|
|
|
|
|
Financial
Position |
|
|
|
|
|
|
|
Real estate, before accumulated depreciation |
$ |
1,123,644 |
|
|
$ |
1,064,389 |
|
(2) |
$ |
59,255 |
|
|
5.6 |
% |
Total assets |
$ |
1,098,825 |
|
|
$ |
1,039,508 |
|
|
$ |
59,317 |
|
|
5.7 |
% |
Mortgage notes payable, net,
borrowings under revolver, net and borrowings under term loan,
net |
$ |
666,194 |
|
|
$ |
626,594 |
|
|
$ |
39,600 |
|
|
6.3 |
% |
Total equity and mezzanine
equity |
$ |
375,657 |
|
|
$ |
363,190 |
|
|
$ |
12,467 |
|
|
3.4 |
% |
Properties owned |
122 |
|
|
118 |
|
(2) |
4 |
|
|
3.4 |
% |
Square feet owned |
15,067,996 |
|
|
14,242,008 |
|
(2) |
825,988 |
|
|
5.8 |
% |
Square feet leased |
96.6 |
% |
|
97.0 |
% |
|
(0.4 |
)% |
|
(0.4 |
)% |
(1) |
Includes a $1.8 million impairment charge recognized on one
property during the three months ended December 31, 2019. |
(2) |
Includes one property classified as held for sale of $7.4 million
and 64,500 square feet. |
|
|
First Quarter Activity:
- Acquired properties: Purchased five
fully-occupied industrial properties for $71.7 million, with
approximately 0.9 million square feet of total rental space, at a
weighted average cap rate of 7.2%;
- Sold properties: Sold one property as part of
our capital recycling strategy for $4.1 million, resulting in a net
loss of $0.01 million;
- Issued new debt: Borrowed $35.9 million in
fixed rate and swapped to fixed rate mortgage debt at a weighted
average interest rate of 3.22% with maturity dates ranging from
February 1, 2030 to March 9, 2030;
- Renewed leases: Renewed three leases totaling
232,600 square feet with remaining lease terms ranging from 6.4 to
8.2 years;
- Issued stock under ATM program: Issued
1,316,700 shares of common stock for net proceeds of $27.9
million;
- Introduced new preferred stock: Filed a
prospectus supplement to issue up to 20,000,000 shares of newly
designated 6.00% Series F Cumulative Redeemable Preferred Stock,
with another 6,000,000 available for dividend reinvestment;
and
- Paid distributions: Paid monthly cash
distributions for the quarter totaling $0.37545 per share on our
common stock, $0.4374999 per share on our Series D Preferred Stock,
$0.414063 per share on our Series E Preferred Stock, and $0.2625
per share on our senior common stock.
First Quarter 2020 Results: Core FFO available
to common shareholders and Non-controlling OP Unitholders for the
three months ended March 31, 2020, was $13.8 million, or $0.40 per
share, a 4.2% increase when compared to the three months ended
December 31, 2019. Core FFO increased primarily due to an
increase in rental income from a full quarter of rental income from
our fourth quarter 2019 acquisitions, partially offset by an
increase in interest expense from the debt borrowed for the fourth
quarter 2019 acquisitions.
Net loss attributable to common stockholders and Non-controlling
OP Unitholders for the three months ended March 31, 2020 and the
three months ended December 31, 2019, was $0.6 million and
$5.4 million, or $(0.02) and $(0.18) per share, respectively. A
reconciliation of Core FFO to net loss for the three months ended
March 31, 2020 and December 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 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:
- Repaid debt: Repaid $5.9 million in fixed rate
mortgage debt with an interest rate of 6.00% and repaid $12.1
million of variable rate mortgage debt at a weighted average rate
of LIBOR plus 2.25%, for which we had an interest rate cap
agreement; and
- Declared distributions: Declared monthly cash
distributions for April, May and June 2020 totaling $0.37545 per
share on our common stock, $0.4374999 per share on our Series D
Preferred Stock, $0.414063 per share on our Series E Preferred
Stock, $0.375 per share on our Series F 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 tremendous same store
property occupancy and rent growth, accretive real estate
investments made during 2019 and the first quarter 2020, and our
ability to renew tenants as well as our deleveraging and capital
recycling programs. We had an outstanding start to 2020, by
investing $71.7 million in five industrial assets in our target
markets at accretive cap rates, building off the momentum of the
fourth quarter 2019 where we invested $62.4 million in nine
industrial assets. 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 2020, recognizing a net capital loss of $0.01 million.
We will continue to opportunistically sell non-core assets and
redeploy the proceeds into stronger target growth markets. While we
expect to face challenges due to the COVID-19 pandemic, we feel
strongly in our tenant credit underwriting, and we have collected
over 98% of April rents. We anticipate our tenants will
successfully navigate the current economic climate and will be able
to continue operating successfully when operating restrictions are
lifted and economic normalcy improves. We are in good standing on
our Credit Facility and expect to have access to the debt and
equity markets, as necessary, for added liquidity. We are extremely
pleased with our solid performance over the last several years. We
believe our same store rents, which have increased by 2% annually
in recent years, should be stable and rising as we continue our
growth. We will continue to primarily focus on investing in our
target markets with an emphasis on industrial properties and
actively managing our portfolio. We are looking forward to
continued growth and success for our shareholders."
Conference Call: Gladstone Commercial will hold
a conference call on Wednesday April 29, 2020, 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 6, 2020. To hear the replay, please dial (855)
859-2056 and use playback conference number 6585267. 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 June 29, 2020.
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 March 2020, Gladstone Commercial has paid 183 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
47 consecutive monthly cash distributions on its Series D Preferred
Stock and six consecutive monthly cash distributions on its Series
E 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.
FFO as adjusted for comparability: FFO as
adjusted for comparability 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 non-recurring expense adjustments related to the write off of
offering costs pertaining to redeemed securities. Although the
Company's calculation of FFO as adjusted for comparability 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, FFO
as adjusted for comparability should be considered a supplement to
net income computed in accordance with GAAP as a measure of our
performance.
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, FFO ad adjusted for comparability, 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, 2019, as filed with the SEC on
February 12, 2020, 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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