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 first quarter
ended March 31, 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 |
|
|
|
|
|
March 31, 2019 |
|
December 31, 2018 |
|
$ Change |
|
% Change |
Operating
Data: |
|
|
|
|
|
|
|
Total operating
revenue |
$ |
28,137 |
|
|
$ |
27,261 |
|
|
$ |
876 |
|
|
3.2 |
% |
Total operating
expenses |
(19,266 |
) |
|
(18,771 |
) |
|
(495 |
) |
|
2.6 |
% |
Other expense, net |
(4,198 |
) |
(1 |
) |
(5,973 |
) |
(2 |
) |
1,775 |
|
|
(29.7 |
)% |
Net income |
$ |
4,673 |
|
|
$ |
2,517 |
|
|
$ |
2,156 |
|
|
85.7 |
% |
Less: Dividends
attributable to preferred stock |
(2,612 |
) |
|
(2,613 |
) |
|
1 |
|
|
— |
% |
Less: Dividends
attributable to senior common stock |
(224 |
) |
|
(231 |
) |
|
7 |
|
|
(3.0 |
)% |
Net income (loss)
available (attributable) to common stockholders and Non-controlling
OP Unitholders |
$ |
1,837 |
|
|
$ |
(327 |
) |
|
$ |
2,164 |
|
|
(661.8 |
)% |
Add: Real estate
depreciation and amortization |
13,010 |
|
|
12,454 |
|
|
556 |
|
|
4.5 |
% |
Less: Gain on sale of real
estate |
(2,952 |
) |
|
(919 |
) |
|
(2,033 |
) |
|
221.2 |
% |
Funds from
operations available to common stockholders and Non-controlling OP
Unitholders - basic |
$ |
11,895 |
|
|
$ |
11,208 |
|
|
$ |
687 |
|
|
6.1 |
% |
Add: Convertible senior
common distributions |
224 |
|
|
231 |
|
|
(7 |
) |
|
(3.0 |
)% |
Funds from
operations available to common stockholders and Non-controlling OP
Unitholders - diluted |
$ |
12,119 |
|
|
$ |
11,439 |
|
|
$ |
680 |
|
|
5.9 |
% |
|
|
|
|
|
|
|
|
Funds from operations
available to common stockholders and Non-controlling OP Unitholders
- basic |
11,895 |
|
|
11,208 |
|
|
687 |
|
|
6.1 |
% |
Add: Write off deferred
financing fees |
283 |
|
|
— |
|
|
283 |
|
|
NM |
|
Add: Acquisition related
expenses |
63 |
|
|
69 |
|
|
(6 |
) |
|
(8.7 |
)% |
Add: Deferred rent write
off |
30 |
|
|
184 |
|
|
(154 |
) |
|
(83.7 |
)% |
Add: Write off shelf
registration statement costs |
18 |
|
|
— |
|
|
18 |
|
|
NM |
|
Add: Deferred rent asset
accelerated amortization |
— |
|
|
165 |
|
|
(165 |
) |
|
(100.0 |
)% |
Less: Lease termination
revenue |
(187 |
) |
|
— |
|
|
(187 |
) |
|
NM |
|
Less: Lease contraction
fee |
(216 |
) |
|
(165 |
) |
|
(51 |
) |
|
30.9 |
% |
Core funds from
operations available to common stockholders and Non-controlling OP
Unitholders - basic |
$ |
11,886 |
|
|
$ |
11,461 |
|
|
$ |
425 |
|
|
3.7 |
% |
Add: Convertible senior
common distributions |
224 |
|
|
231 |
|
|
(7 |
) |
|
(3.0 |
)% |
Core funds from
operations available to common stockholders and Non-controlling OP
Unitholders - diluted |
$ |
12,110 |
|
|
$ |
11,692 |
|
|
$ |
418 |
|
|
3.6 |
% |
|
|
|
|
|
|
|
|
Share and Per
Share Data: |
|
|
|
|
|
|
|
Net income (loss)
available (attributable) to common stockholders and Non-controlling
OP Unitholders - basic and diluted |
0.06 |
|
|
(0.01 |
) |
|
0.07 |
|
|
700.0 |
% |
FFO available to common
stockholders and Non-controlling OP Unitholders - basic |
0.39 |
|
|
0.38 |
|
|
0.01 |
|
|
2.6 |
% |
FFO available to common
stockholders and Non-controlling OP Unitholders - diluted |
0.39 |
|
|
0.38 |
|
|
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 |
0.39 |
|
|
0.39 |
|
|
— |
|
|
— |
% |
Weighted average shares of
common stock and Non-controlling OP Units outstanding - basic |
30,259,807 |
|
|
29,611,130 |
|
|
648,677 |
|
|
2.2 |
% |
Weighted average shares of
common stock and Non-controlling OP Units outstanding -
diluted |
30,981,679 |
|
|
30,335,466 |
|
|
646,213 |
|
|
2.1 |
% |
Cash dividends declared
per common share and Non-controlling OP Unit |
$ |
0.375 |
|
|
$ |
0.375 |
|
|
$ |
— |
|
|
— |
% |
|
|
|
|
|
|
|
|
Financial
Position |
|
|
|
|
|
|
|
Real estate, before
accumulated depreciation |
$ |
953,978 |
|
|
$ |
949,822 |
|
(3 |
) |
$ |
4,156 |
|
|
0.4 |
% |
Total assets |
$ |
935,020 |
|
|
$ |
938,775 |
|
|
$ |
(3,755 |
) |
|
(0.4 |
)% |
Mortgage notes payable,
net, borrowings under revolver, net and borrowings under term loan,
net |
$ |
552,400 |
|
|
$ |
566,059 |
|
|
$ |
(13,659 |
) |
|
(2.4 |
)% |
Total equity and
mezzanine equity |
$ |
343,889 |
|
|
$ |
340,017 |
|
|
$ |
3,872 |
|
|
1.1 |
% |
Properties owned |
102 |
|
|
101 |
|
(3 |
) |
1 |
|
|
1.0 |
% |
Square feet owned |
11,740,721 |
|
|
11,726,996 |
|
(3 |
) |
13,725 |
|
|
0.1 |
% |
Square feet leased |
98.9 |
% |
|
99.1 |
% |
|
(0.2 |
)% |
|
(0.2 |
)% |
(1) Includes a $3.0 million gain on sale, net, from one property
sale.(2) Includes a $0.9 million gain on sale, net from one
property sale.(3) Includes one property classified as held for sale
of $3.2 million and 50,000 square feet.NM - Not Meaningful
First Quarter Activity:
- Acquired properties: Purchased two
fully-occupied industrial properties for $6.3 million with an
aggregate of approximately 60,850 square feet of rental space at a
weighted average cap rate of 8.2%;
- Sold properties: Sold one property as part of
our capital recycling strategy for $6.9 million, resulting in a net
gain of $3.0 million;
- Issued new debt: Borrowed $10.6 million in
fixed rate mortgage debt at a 4.7% interest rate with a 10 year
maturity date;
- Repaid debt: Partially repaid a mortgage
totaling $3.5 million, releasing one of the collateralized
properties;
- Renewed leases: Renewed two leases totaling
130,240 square feet for an additional five years;
- Renewed shelf registration: Renewed our shelf
registration statement to allow us to issue up to $500.0 million of
additional equity;
- Issued stock under ATM program: Issued 700,231
shares of common stock for net proceeds of $14.1 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.
First Quarter 2019 Results: Core FFO available
to common shareholders for the three months ended March 31, 2019,
was $12.1 million, or $0.39 per share, a 3.6% increase when
compared to the three months ended December 31, 2018. Core FFO
increased primarily due to an increase in rental income from a full
quarter of rental income from our fourth quarter 2018 acquisitions,
coupled with rental income from our first quarter 2019
acquisitions.
Net income available to common stockholders and Non-controlling
OP Unitholders for the three months ended March 31, 2019, was $1.8
million, or $0.06 per share, compared to net loss attributable to
common stockholders and Non-controlling OP Unitholders for the
three months ended December 31, 2018, 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, 2019 and December 31,
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 Non-controlling OP Unit
and basic and diluted net income (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:
- Acquired properties: Acquired a two industrial
property portfolio located in a suburb of Orlando, Florida for
$19.2 million, which are fully leased to one tenant on a triple net
lease and acquired an industrial property located in a suburb of
Columbus, Ohio for $3.1 million which is fully leased to one tenant
on a triple net lease;
- Issued stock under ATM programs: Issued
332,709 shares of common stock for net proceeds of $6.8 million;
and
- Declared distributions: Declared monthly cash
distributions for April, May and June 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 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 3.0% 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 1, 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 May 8, 2019. To hear the replay, please dial (855)
859-2056 and use playback conference number 7699878. 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 July 1, 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 April 2019, Gladstone Commercial has paid 172 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 160 consecutive monthly cash distributions on its Series A
Preferred Stock, 151 consecutive monthly cash distributions on its
Series B Preferred Stock and 36 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, 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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