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") today reported financial results for the third quarter
ended September 30, 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 |
|
|
|
|
|
|
September 30, 2018 |
|
June 30, 2018 |
|
$ Change |
|
% Change |
Operating
Data: |
|
|
|
|
|
|
|
|
Total operating
revenue |
|
$ |
26,591 |
|
|
$ |
26,593 |
|
|
$ |
(2 |
) |
|
— |
% |
Total operating
expenses |
|
(17,422 |
) |
|
(17,542 |
) |
|
120 |
|
|
(0.7 |
)% |
Other expense, net |
|
(6,492 |
) |
|
(6,526 |
) |
|
34 |
|
|
(0.5 |
)% |
Net income |
|
$ |
2,677 |
|
|
$ |
2,525 |
|
|
$ |
152 |
|
|
6.0 |
% |
Less: Dividends
attributable to preferred stock |
|
(2,612 |
) |
|
(2,609 |
) |
|
(3 |
) |
|
0.1 |
% |
Less: Dividends
attributable to senior common stock |
|
(235 |
) |
|
(233 |
) |
|
(2 |
) |
|
0.9 |
% |
Net loss attributable
to common stockholders |
|
$ |
(170 |
) |
|
$ |
(317 |
) |
|
$ |
147 |
|
|
(46.4 |
)% |
Add: Real estate
depreciation and amortization |
|
11,807 |
|
|
11,773 |
|
|
34 |
|
|
0.3 |
% |
Funds from
operations available to common stockholders - basic |
|
$ |
11,637 |
|
|
$ |
11,456 |
|
|
$ |
181 |
|
|
1.6 |
% |
Add: Convertible senior
common distributions |
|
235 |
|
|
233 |
|
|
2 |
|
|
0.9 |
% |
Funds from
operations available to common stockholders - diluted |
|
$ |
11,872 |
|
|
$ |
11,689 |
|
|
$ |
183 |
|
|
1.6 |
% |
|
|
|
|
|
|
|
|
|
Funds from operations
available to common stockholders - basic |
|
11,637 |
|
|
11,456 |
|
|
181 |
|
|
1.6 |
% |
Add: Acquisition
related expenses |
|
19 |
|
|
67 |
|
|
(48 |
) |
|
(71.6 |
)% |
Core funds from
operations available to common stockholders - basic |
|
$ |
11,656 |
|
|
$ |
11,523 |
|
|
$ |
133 |
|
|
1.2 |
% |
Add: Convertible senior
common distributions |
|
235 |
|
|
233 |
|
|
2 |
|
|
0.9 |
% |
Core funds from
operations available to common stockholders - diluted |
|
$ |
11,891 |
|
|
$ |
11,756 |
|
|
$ |
135 |
|
|
1.1 |
% |
|
|
|
|
|
|
|
|
|
Share and Per
Share Data: |
|
|
|
|
|
|
|
|
Net loss attributable
available to common stockholders - basic and diluted |
|
(0.01 |
) |
|
(0.01 |
) |
|
— |
|
|
— |
% |
FFO available to common
stockholders - basic |
|
0.40 |
|
|
0.40 |
|
|
— |
|
|
— |
% |
FFO available to common
stockholders - diluted |
|
0.40 |
|
|
0.40 |
|
|
— |
|
|
— |
% |
Core FFO available to
common stockholders - basic |
|
0.41 |
|
|
0.41 |
|
|
— |
|
|
— |
% |
Core FFO available to
common stockholders - diluted |
|
0.40 |
|
|
0.40 |
|
|
— |
|
|
— |
% |
Weighted average shares
of common stock outstanding - basic |
|
28,734,380 |
|
|
28,437,852 |
|
|
296,528 |
|
|
1.0 |
% |
Weighted average shares
of common stock outstanding - diluted |
|
29,472,132 |
|
|
29,182,179 |
|
|
289,953 |
|
|
1.0 |
% |
Cash dividends declared
per common share |
|
$ |
0.375 |
|
|
$ |
0.375 |
|
|
$ |
— |
|
|
— |
% |
|
|
|
|
|
|
|
|
|
Financial
Position |
|
|
|
|
|
|
|
|
Real estate, before
accumulated depreciation |
|
$ |
915,764 |
|
(1 |
) |
$ |
907,636 |
|
(1 |
) |
$ |
8,128 |
|
|
0.9 |
% |
Total assets |
|
$ |
904,175 |
|
|
$ |
912,008 |
|
|
$ |
(7,833 |
) |
|
(0.9 |
)% |
Mortgage notes payable,
net, borrowings under revolver, net & borrowings under term
loan, net |
|
$ |
542,084 |
|
|
$ |
542,461 |
|
|
$ |
(377 |
) |
|
(0.1 |
)% |
Total stockholders' and
mezzanine equity |
|
$ |
332,722 |
|
|
$ |
336,814 |
|
|
$ |
(4,092 |
) |
|
(1.2 |
)% |
Properties owned |
|
99 |
|
(1 |
) |
98 |
|
(1 |
) |
1 |
|
|
1.0 |
% |
Square feet owned |
|
11,571,213 |
|
(1 |
) |
11,413,403 |
|
(1 |
) |
157,810 |
|
|
1.4 |
% |
Square feet leased |
|
99.1 |
% |
|
99.1 |
% |
|
— |
% |
|
— |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Includes one property classified as held for sale of $2.3 million,
which totals 150,000 square feet. |
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter Activity:
- Acquired property: Acquired an $8.5 million
industrial property located in Columbus, Ohio, which is 100% leased
to one tenant for 15 years;
- Expanded property: Acquired additional land in
connection with the current expansion of the parking facilities for
one of our Springfield, Missouri tenants;
- Extended mortgage debt maturity date: Extended
the maturity date on one variable rate mortgage note totaling $4.0
million from September 2018 to September 2019 and extended the
maturity date on one $3.6 million fixed rate mortgage note from
November 2018 to November 2021;
- Issued new debt: Borrowed $4.7 million in
mortgage debt that was simultaneously swapped to an all-in fixed
interest rate of 5.32% for a 10 year term;
- Issued stock under ATM programs: Issued
341,239 shares of common stock for net proceeds of $6.6 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, $0.4375 per
share on our Series D Preferred Stock, and $0.2625 per share on our
senior common stock.
Third Quarter 2018 Results: Core FFO available
to common stockholders for the three months ended September 30,
2018, was $11.9 million, or $0.40 per share, a 1.1% increase when
compared to the three months ended June 30, 2018. Core FFO
increased primarily due to a decrease in property operating
expenses, coupled with an increase in rental income from our third
quarter property acquisition, partially offset by an increase in
general and administrative expenses.
Net loss attributable to common stockholders for the three
months ended September 30, 2018, was $0.2 million, or $0.01 per
share, compared to net loss attributable to common stockholders for
the three months ended June 30, 2018, of $0.3 million, or
$0.01 per share. A reconciliation of Core FFO to net loss for the
three months ended September 30, 2018 and June 30, 2018,
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:
- Acquired Properties: Acquired a $21.3 million,
two property industrial portfolio located in Detroit, Michigan,
which is 100% leased to two tenants with a weighted average lease
term of 10.5 years. This acquisition was funded with $0.8 million
cash on hand, the assumption of a $6.9 million mortgage, and the
issuance of units of limited partnership interests in Gladstone
Commercial Limited Partnership;
- Renewed lease: Executed a lease extension
through March 31, 2025 with the tenant at our 60,000 square foot
property located in Hickory, North Carolina;
- Issued stock under ATM programs: Issued 61,045
shares of common stock for net proceeds of $1.1 million; and
- Declared distributions: Declared monthly cash
distributions for October, November and December 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 high same store
property occupancy and the real estate investments made during 2017
and 2018, our ability to lease previously vacant space, and our
deleveraging and capital recycling programs. Our third quarter Core
FFO per share results of $0.40, combined with our first and second
quarter performance, reflects a 6.5% increase in per share Core FFO
as compared to the same period of 2017. 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 during the first nine months of 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. We have acquired a strong industrial asset in
Columbus, Ohio for $8.5 million, which we expect will provide us
with incremental rental income over the 15 year lease. Our pipeline
of acquisition opportunities has grown in recent months, with the
pipeline favoring industrial properties. We anticipate our robust
pipeline will result in successful acquisitions during the fourth
quarter of 2018. 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 3.3% of forecasted rental income expiring through
2019. We are looking forward to continued growth and success for
our stockholders."
Conference Call: Gladstone Commercial will hold
a conference call on Wednesday October 31, 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 November 7, 2018. To hear the replay,
please dial (855) 859-2056 and use playback conference number
1485499. 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 December
31, 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 October 2018, Gladstone Commercial has paid 165 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 153 consecutive monthly cash distributions on its Series A
Preferred Stock, 144 consecutive monthly cash distributions on its
Series B Preferred Stock and 29 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.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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