Exhibit 99.1
Gladstone Commercial Corporation Announces First Quarter 2006 Results
Business Editors/Real Estate Writers
MCLEAN, Va.--(BUSINESS WIRE)--May 2, 2006--Gladstone Commercial
Corp. (NASDAQ:GOOD):
-- Reports Net income of $502,356 or $0.06 per diluted weighted
average common share
-- Reports Funds from Operations ("FFO") of $2.3 million or $0.30
per diluted common share
-- Acquired 3 properties for a total investment of $49.0 million
Gladstone Commercial Corp. (NASDAQ:GOOD) (the "Company") today
reported financial results for the first quarter ended March 31, 2006.
A description of Funds from Operations, or "FFO" a non - Generally
Accepted Accounting Principles in the United States ("GAAP") financial
measure, is located at the end of this news release. All per share
references are diluted weighted average common shares, unless
otherwise noted.
Net income for the quarter ended March 31, 2006 was $502,356 or
$0.06 per share, compared to $535,184 or $0.07 per share one year ago.
Net income results for the first quarter of 2006 when compared to the
same period last year, were affected by the implementation of FASB
Interpretation No. 47 "Accounting for Conditional Asset Retirement
Obligations" ("FIN 47"), and Statement of Financial Accounting
Standards ("SFAS") No.123 (Revised 2004) "Share-Based Payment" ("SFAS
No. 123(R)"),and the change in accounting treatment related to SFAS
No. 141, "Business Combinations", an explanation of these items
follows:
FIN No. 47 "Accounting for Conditional Asset Retirement
Obligations"
Asset retirement obligation expense for the three months ended
March 31, 2006 was $55,143, or $0.01 per share, resulting from the
adoption of FIN 47. FIN 47 requires an entity to recognize a liability
for a conditional asset retirement obligation when incurred if the
liability can be reasonably estimated. FIN 47 clarifies that the term
"Conditional Asset Retirement Obligation" refers to a legal obligation
(pursuant to existing laws or by contract) to perform an asset
retirement activity in which the timing or method of settlement are
conditional on a future event that may or may not be within the
control of the entity. FIN 47 also clarifies when an entity would have
sufficient information to reasonably estimate the fair value of an
asset retirement obligation. A liability was not recorded as of
December 31, 2005 as the Company deemed the impact of its initial
estimates immaterial and worked to further refine these estimates. A
liability was accrued for the disposal related to all properties
constructed prior to 1985 which may have asbestos present in the
building.
SFAS No. 123(R),"Share-based Payment"
Stock option compensation expense for the three months ended March
31, 2006 was $46,216, or $0.01 per share. This is the result of the
adoption of the SFAS No. 123(R),"Share-based Payment." SFAS No. 123(R)
replaces SFAS No. 123, "Accounting for Stock-Based Compensation," and
supersedes Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees." Under the modified
prospective approach, stock-based compensation expense was recorded
for the unvested portion of previously issued option awards that
remain outstanding at January 1, 2006 using the same estimate of the
grant date fair value and the same attribution method used to
determine the pro forma disclosure under SFAS No. 123. This is a
non-cash charge to earnings that is not deductible for tax purposes
and does not reduce the funds available for dividends.
SFAS No. 141, "Business Combinations"
The Company accounts for its acquisitions of real estate in
accordance with SFAS No. 141, "Business Combinations", which requires
the purchase price of real estate to be allocated to the acquired
tangible assets and liabilities (consisting of land, building, tenant
improvements and long-term debt) and identified intangible assets and
liabilities, (consisting of the value of above-market and below-market
leases, the value of in-place leases, the value of unamortized lease
origination costs and the value of tenant relationships), based in
each case on their respective fair values. The Company has determined
that five of its properties, which were originally not treated as
business combinations under SFAS No. 141, because there was not an
existing lease in place at the time of acquisition, should have been
treated as business combinations when determining the purchase price
of the real estate. These properties had leases that were put in place
on the date of acquisition and, thus, were implicitly included in the
purchase price and should have been considered as leases in place for
purposes of determining if the acquisitions were business
combinations. As a result, the Company recognized a one time,
additional depreciation expenses of $140,606, or $0.02 per share, for
the three months ended March 31, 2006 in order to make the
depreciation of the five properties consistent with the concepts of
SFAS No. 141.
FFO for the first quarter ended March 31, 2006 was $2,337,096 or
$0.30 per share, compared to $1,072,939 or $0.14 per share for the
same period one year ago. A reconciliation of net income, which we
believe is the most directly comparable GAAP measure, to FFO is set
forth below:
For the three For the three
months ended months ended
March 31, March 31,
2006 2005
------------- -------------
Net income $ 846,800 $ 535,184
Add: Real estate depreciation and
amortization 1,834,740 537,755
------------- -------------
FFO 2,681,540 1,072,939
Less: Dividends attributable to
preferred stock (344,444) -
------------- -------------
FFO available to common stockholders 2,337,096 1,072,939
Weighted average shares outstanding -
basic 7,672,000 7,667,000
Weighted average shares outstanding -
diluted 7,821,658 7,733,335
Basic net income per weighted average
common share $ 0.07 $ 0.07
============= =============
Diluted net income per weighted average
common share $ 0.06 $ 0.07
============= =============
Basic FFO per weighted average common
share $ 0.30 $ 0.14
============= =============
Diluted FFO per weighted average common
share $ 0.30 $ 0.14
============= =============
First quarter highlights:
-- Acquired 3 properties with 617,802 square feet for an
aggregate purchase price of approximately $49.0 million;
-- Assumed 2 mortgage notes for approximately $30.0 million;
-- Borrowed $17.0 million pursuant to a long-term note payable
collateralized by security interests in 3 of its properties,
which accrues interest at a rate of 5.92% per year; and
-- Completed a public offering of 1,000,000 shares of a 7.75%
Series A Cumulative Redeemable Preferred Stock, at a price of
$25.00 per share, under the Company's shelf registration
statement on Form S-3, and pursuant to the terms set forth in
the Company's prospectus dated October 24, 2005, as
supplemented by the prospectus supplement dated January 18,
2006. Net proceeds of the offering, after underwriting
discounts and offering expenses, were approximately $23.7
million, which were used to repay outstanding indebtedness
under the Company's line of credit. The offering of preferred
stock closed on January 26, 2006, and the stock is traded on
the Nasdaq National Market under the trading symbol "GOODP".
Subsequent to quarter end, the Company:
-- Declared monthly cash dividends on common stock of $0.12 per
common share for each of the months of April, May and June of
2006;
-- Declared monthly cash dividends on Series A preferred stock of
$0.1614583 per share for the months of April, May and June
2006; and
-- Borrowed $14.9 million pursuant to a long-term note payable
collateralized by security interests in 5 of its properties,
which accrues interest at a rate of 6.58% per year.
"The $25 million raised in January through our Series A preferred
stock offering enabled us to continue our portfolio growth with the
acquisition of three properties during the first quarter," said Chip
Stelljes, Executive Vice President and Chief Investment Officer.
"However, the first quarter earnings results were affected by the
implementation of two accounting pronouncements and the change in
accounting treatment of another item. We anticipate that these
accounting treatment changes will not hinder our full year 2006
earnings performance."
The financial statements attached below are without footnotes so
readers should obtain and carefully review the Company's Form 10-Q for
the quarter ended March 31, 2006, including the footnotes to the
financial statements contained therein. The Company has filed the Form
10-Q today with the SEC and the Form 10-Q can be retrieved from the
SEC website at www.SEC.gov or our website at
www.GladstoneCommercial.com.
The Company will hold a conference call Wednesday, May 3, 2006 at
9:30 am EDT to discuss first quarter earnings. Please call (877)
407-9205 to enter the conference. An operator will monitor the call
and set a queue for the questions.
The conference call replay will be available two hours after the
call and will be available through June 2, 2006. To hear the replay,
please dial (877) 660-6853, access playback account 286 and use ID
code 199316.
Gladstone Commercial Corporation is a publicly traded real estate
investment trust that focuses on investing in and owning triple-net
leased industrial and commercial real estate properties and
selectively making long-term mortgage loans. Additional information
can be found at www.GladstoneCommercial.com.
For further information, contact our Investor Relations Manager,
Kelly Sargent at 703-287-5835.
NON-GAAP FINANCIAL MEASURES
Funds from Operations
The National Association of Real Estate Investment Trusts (NAREIT)
developed FFO, as a relative non-GAAP (Generally Accepted Accounting
Principles) 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, 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 (which, unlike FFO, generally reflects all cash
effects of transactions and other events in the determination of net
income), and should not be considered an alternative to net income as
an indication of the Company's performance or to cash flow from
operations as a measure of liquidity or ability to make distributions.
The Company believes that FFO per share provides investors with a
further context for evaluating the Company's financial performance and
as a supplemental measure to compare the Company to other REITs;
however, comparisons of the Company's 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.
To learn more about FFO please refer to the Form 10-Q for the
quarter ended March 31, 2006, as filed with the Securities and
Exchange Commission ("SEC") today.
This press release may include statements that may constitute
"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, including statements with regard to
the future performance of the Company and the closing of any
transaction. Words such as "may," "will," "believes," "anticipates,"
"intends," "expects," "projects," "estimates" and "future" or similar
expressions are intended to identify forward-looking statements. These
forward-looking statements inherently involve certain risks and
uncertainties, although they are based on the Company's current plans,
expectations and beliefs that are believed to be reasonable as of the
date of this press release. Factors that may cause the Company's
actual results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity,
performance or achievements expressed or implied by such
forward-looking statements include, among others, those factors listed
under the caption "Risk Factors" of the Company's Annual Report on
Form 10-K for the year ended, December 31, 2005, as filed with the
Securities and Exchange Commission on February 28, 2006. The risk
factors set forth in the Form 10-K under the caption "Risk Factors"
are specifically incorporated by references into this press release.
All forward-looking statements are based on current plans,
expectations and beliefs and speak only as of the date of such
statements. The Company undertakes no obligation to publicly update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
Gladstone Commercial Corporation
Consolidated Balance Sheets
(unaudited)
March 31, December 31,
2006 2005
------------- -------------
ASSETS
Real estate, net of accumulated
depreciation of $4,562,992 and
$3,408,878, respectively $204,739,533 $161,634,761
Lease intangibles, net of accumulated
amortization of $1,902,039 and
$1,221,413, respectively 22,593,292 13,947,484
Mortgage notes receivable 21,000,455 21,025,815
Cash and cash equivalents 1,280,038 1,740,159
Restricted cash 1,935,741 1,974,436
Funds held in escrow 1,730,346 1,041,292
Interest receivable - mortgage note 70,586 70,749
Interest receivable - employees 5,548 -
Deferred rent receivable 2,751,382 2,590,617
Deferred financing costs, net of
accumulated amortization of $381,970
and $260,099, respectively 2,762,706 1,811,017
Prepaid expenses 471,160 385,043
Deposits on real estate 200,000 600,000
Accounts receivable 266,312 225,581
------------- -------------
TOTAL ASSETS $259,807,099 $207,046,954
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Mortgage notes payable $108,558,267 $ 61,558,961
Borrowings under line of credit 22,260,000 43,560,000
Deferred rent liability 3,698,616 -
Asset retirement obligation liability 1,428,964 -
Accounts payable and accrued expenses 743,560 493,002
Due to adviser 196,148 164,155
Rent received in advance, security
deposits and funds held in escrow 2,488,362 2,322,300
------------- -------------
Total Liabilities 139,373,917 108,098,418
------------- -------------
STOCKHOLDERS' EQUITY
Redeemable preferred stock, $0.001 par
value; $25 liquidation preference;
1,150,000 shares authorized and
1,000,000 shares issued and outstanding
at March 31, 2006 1,000 -
Common stock, $0.001 par value,
18,850,000 shares authorized and
7,672,000 shares issued and outstanding
at both December 31, 2005 and March 31,
2006 7,672 7,672
Additional paid in capital 129,245,756 105,502,544
Notes receivable - employees (432,282) (432,282)
Distributions in excess of accumulated
earnings (8,388,964) (6,129,398)
------------- -------------
Total Stockholders' Equity 120,433,182 98,948,536
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $259,807,099 $207,046,954
============= =============
Gladstone Commercial Corporation
Consolidated Statements of Operations
(unaudited)
For the three For the three
months ended months ended
March 31, March 31,
2006 2005
------------- -------------
Operating revenues
Rental income $ 5,021,485 $ 1,847,007
Interest income from mortgage notes
receivable 552,913 295,583
Tenant recovery revenue 5,623 2,043
------------- -------------
Total operating revenues 5,580,021 2,144,633
------------- -------------
Operating expenses
Depreciation and amortization 1,834,740 537,755
Management advisory fee 652,742 471,861
Professional fees 202,936 331,244
Taxes and licenses 54,259 128,273
Insurance 82,999 70,383
General and administrative 145,958 132,828
Asset retirement obligation expense 55,143 -
Stock option compensation expense 46,216 -
------------- -------------
Total operating expenses 3,074,993 1,672,344
------------- -------------
Other income (expense)
Interest income from temporary
investments 7,373 94,521
Interest income - employee loans 5,548 4,685
Interest expense (1,682,948) (36,219)
------------- -------------
Income before realized and
unrealized losses 835,001 535,276
------------- -------------
Realized and unrealized loss from
foreign currency
Net realized loss from foreign
currency transactions (816) (347)
Net unrealized gain from foreign
currency transactions 12,615 255
------------- -------------
Total net realized and unrealized
gain (loss) from foreign currency 11,799 (92)
------------- -------------
Net income 846,800 535,184
Dividends attributable to preferred
stock (344,444) -
------------- -------------
Net income available to common
stockholders $ 502,356 $ 535,184
============= =============
Earnings per weighted average common
share
Basic $ 0.07 $ 0.07
============= =============
Diluted $ 0.06 $ 0.07
============= =============
Weighted average shares outstanding
Basic 7,672,000 7,667,000
============= =============
Diluted 7,821,658 7,733,335
============= =============
Gladstone Commercial Corporation
Consolidated Statements of Cash Flows
(unaudited)
For the three For the three
months ended months ended
March 31, March 31,
2006 2005
------------- -------------
Cash flows from operating activities:
Net income $ 846,800 $ 535,184
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 1,834,740 537,755
Amortization of deferred financing
costs 121,871 16,246
Amortization of deferred rent asset 63,374 6,136
Amortization of deferred rent
liability (80,290) -
Asset retirement obligation expense 55,143 -
Stock compensation 46,216 -
Unrealized gain from foreign currency
transactions (12,615) (255)
Changes in assets and liabilities:
Decrease (increase) in mortgage
interest receivable 163 (6,314)
(Increase) decrease in employee
interest receivable (5,548) 107
Increase in prepaid expenses (86,117) (32,341)
(Increase) decrease in other assets (40,730) 48,170
Increase in deferred rent receivable (224,386) (97,244)
Increase in accounts payable and
accrued expenses 250,558 249,075
Increase in due to Adviser 31,993 13,367
Increase in rent received in advance
and security deposits 204,757 75,098
Payments to lenders for operating
reserves held in escrow (872,926) -
Increase in operating reserves from
tenants 451,969 -
------------- -------------
Net cash provided by operating
activities 2,584,972 1,344,984
------------- -------------
Cash flows from investing activities:
Real estate investments (18,302,939) (12,485,610)
Decrease in restricted cash 38,695 -
Receipts from tenants for capital
reserves 301,808 -
Payments to tenants from capital
reserves (230,141) -
Payments to lenders for capital
reserves held in escrow (414,360) -
Receipts from lenders for capital
reserves held in escrow 35,901 -
Deposits on future acquisitions (350,000) (550,000)
Deposits applied against real estate
investments 750,000 350,000
Principal repayments on mortgage
loans 25,360 25,786
------------- -------------
Net cash used in investing
activities (18,145,676) (12,659,824)
------------- -------------
Cash flows from financing activities:
Proceeds from share issuance 25,000,000 -
Offering costs (1,302,006) -
Borrowings under mortgage note
payable 17,000,000 3,150,000
Principal repayments on mortgage note
payable (117,486) -
Borrowings from line of credit 35,200,000 -
Repayments on line of credit (56,500,000) -
Principal repayments on employee
loans - 208
Payments for deferred financing costs (1,073,561) (629,380)
Dividends paid for common and
preferred (3,106,364) (2,300,100)
------------- -------------
Net cash provided by financing
activities 15,100,583 220,728
------------- -------------
Net decrease in cash and cash
equivalents (460,121) (11,094,112)
Cash and cash equivalents, beginning of
period 1,740,159 29,153,987
------------- -------------
Cash and cash equivalents, end of period $ 1,280,038 $ 18,059,875
============= =============
Cash paid during period for interest $ 1,545,821 $ 8,862
------------- -------------
NON-CASH INVESTING ACTIVITIES
Increase in asset retirement obligation $ 1,373,820 $ -
------------- -------------
NON-CASH FINANCING ACTIVITIES
Fixed rate debt assumed in connection
with acquisitions $ 30,129,654 $ -
------------- -------------
CONTACT: Gladstone Commercial Corp.
Kelly Sargent, 703-287-5835