Exhibit 99.1
Gladstone Commercial Announces Second Quarter Results
MCLEAN, Va.--(BUSINESS WIRE)--Aug. 8, 2006--Gladstone Commercial
Corp.:
-- Reports Net income available to common stockholders of
$368,390 or $0.04 per diluted weighted average common share
-- Reports Funds from Operations ("FFO") of approximately $2.4
million or $0.31 per diluted weighted average common share
-- Acquired two properties for a total investment of
approximately $22.1 million
Gladstone Commercial Corp. (NASDAQ:GOOD) (the "Company") today
reported financial results for the quarter ended June 30, 2006. A
description of Funds from Operations, ("FFO") a relative non-GAAP
("Generally Accepted Accounting Principles in the United States")
financial measure, is located at the end of this news release. All per
share references are fully diluted weighted average common shares,
unless otherwise noted.
Net income available to common stockholders for the quarter ended
June 30, 2006 was $368,390, or $0.04 per share, compared to
$1,149,531, or $0.15 per share, for the same period one year ago. Net
income available to common stockholders for the six months ended June
30, 2006 was $870,746, or $0.11 per share, compared to $1,684,715, or
$0.22 per share for the same period one year ago. Net income results
when compared to the same period last year were affected by increased
interest expense associated with the leveraging of our properties,
coupled with the dividends the Company paid on its preferred stock.
The Company also recognized a net unrealized loss from foreign
currency transactions of approximately $212,000 and $199,000, or $0.03
per share, for the three and six months ended June 30, 2006,
respectively. The unrealized loss was primarily a result of the
valuation of the mortgage notes payable for the two Canadian
properties, due to a decrease in the value of the U.S. dollar relative
to the Canadian dollar by approximately 5% between April 1, 2006, and
June 30, 2006. The Company sold both properties subsequent to the end
of the quarter and the mortgage notes were assumed by the buyer;
therefore, the Company will no longer recognize unrealized gains and
losses from the valuation of the mortgage notes.
FFO for the quarter ended June 30, 2006 was approximately $2.4
million, or $0.31 per share, compared to approximately $1.8 million,
or $0.24 per share, for the same period one year ago. FFO for the six
months ended June 30, 2006 was approximately $4.8 million or $0.61 per
share, compared to approximately $2.9 million or $0.38 per share for
the same period one year ago. A reconciliation of net income, which
the Company believes is the most directly comparable GAAP measure to
FFO, is set forth below:
For the For the
three three For the six For the six
months months months months
ended June ended June ended June ended June
30, 2006 30, 2005 30, 2006 30, 2005
----------- ----------- ----------- -----------
Net income $852,765 $1,149,531 $1,699,565 $1,684,715
Add: Real estate
depreciation and
amortization,
including discontinued
operations 2,081,072 696,977 3,915,819 1,234,733
----------- ----------- ----------- -----------
FFO 2,933,837 1,846,508 5,615,384 2,919,448
Less: Dividends
attributable to
preferred stock (484,375) - (828,819) -
----------- ----------- ----------- -----------
FFO available to common
stockholders 2,449,462 1,846,508 4,786,565 2,919,448
Weighted average shares
outstanding - basic 7,762,503 7,669,802 7,717,501 7,668,409
Weighted average shares
outstanding - diluted 7,911,871 7,692,639 7,858,146 7,715,100
Basic net income per
weighted average
common share $0.05 $0.15 $0.11 $0.22
=========== =========== =========== ===========
Diluted net income per
weighted average
common share $0.04 $0.15 $0.11 $0.22
=========== =========== =========== ===========
Basic FFO per weighted
average common share $0.32 $0.24 $0.62 $0.38
=========== =========== =========== ===========
Diluted FFO per
weighted average
common share $0.31 $0.24 $0.61 $0.38
=========== =========== =========== ===========
Second quarter highlights:
-- Acquired two properties with approximately 240,000 square feet
for an aggregate purchase price of approximately $22.1
million; and
-- Borrowed $14.9 million pursuant to a long-term note payable
collateralized by security interests in five of its
properties, which accrues interest at a rate of 6.58% per
year.
"Our second quarter results were negatively affected by a net
unrealized loss from foreign currency transactions of approximately
$212,000, or $0.03 per diluted share, resulting in reporting net
income of $0.04 per diluted share. Subsequent to quarter end, we sold
our two Canadian properties with the gain to be recognized in our
third quarter results," said Chip Stelljes, Executive Vice President
and Chief Investment Officer. "We believe this property disposition,
along with the acquisition of two properties in the second quarter,
will benefit our shareholders over the long-term and will result in a
stronger and more focused portfolio."
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 July, August and
September 2006;
-- Declared monthly cash dividends on Series A preferred stock of
$0.1614583 per share for the months of July, August and
September 2006;
-- Acquired one 12,000 square foot office building for
approximately $2.8 million; and
-- Sold its two Canadian properties for approximately $6.9
million, for a gain of approximately $1.7 million. The Company
paid approximately $360,000 in taxes related to the gain on
the sale and the mortgages associated with the Canadian
properties were assumed by the buyer.
Also subsequent to June 30, 2006, the Company's Board of Directors
approved an offer to the executive officers and directors of the
Company and the employees of the Company's external investment
adviser, Gladstone Management Corporation, who hold stock options (the
"Optionees"), to amend the terms of all outstanding stock options
under the Company's 2003 Equity Incentive Plan (the "Options") to
accelerate the contractual expiration date of the Options to December
31, 2006. The offer is conditioned upon the acceptance by all of the
Optionees, so that if the offer is accepted, 100% of the outstanding
Options will be amended to expire on December 31, 2006. The offer to
amend the Options is currently scheduled to expire at 5:00 p.m.,
Eastern Time, on August 31, 2006. If the offer is accepted by 100% of
the Optionees, then, effective January 1, 2007, the Company will
implement the amended and restated investment advisory agreement with
Gladstone Management and the administration agreement with Gladstone
Administration, LLC, as approved by the Company's stockholders on May
24, 2006. The Company filed a Schedule TO and related documentation
regarding the offer with the Securities and Exchange Commission on
July 12, 2006. The Company's Board of Directors also accelerated in
full the vesting of all outstanding unvested options effective July
11, 2006.
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 June 30, 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, August 9, 2006
at 9:30 a.m. ET to discuss its earnings results. Please call (877)
407-8031 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 September 9, 2006. To hear the
replay, please dial (877) 660-6853, access playback account 286 and
use ID code 210295.
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 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 June 30, 2006, as filed with the Securities and Exchange
Commission 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, and the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
2006, as filed with the Securities and Exchange Commission today. 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)
June 30, December 31,
2006 2005
------------- -------------
ASSETS
Real estate, net of accumulated
depreciation of $5,722,987 and $3,408,878
respectively $219,373,127 $161,634,761
Lease intangibles, net of accumulated
amortization of $2,614,455 and
$1,221,413, respectively 24,535,650 13,947,484
Real estate and related assets held for
sale, net 5,458,407 -
Mortgage notes receivable 20,981,073 21,025,815
Cash and cash equivalents 931,560 1,740,159
Restricted cash 2,386,510 1,974,436
Funds held in escrow 1,697,031 1,041,292
Interest receivable - mortgage note 67,140 70,749
Interest receivable - employees 28,589 -
Deferred rent receivable 3,111,718 2,590,617
Deferred financing costs, net of
accumulated amortization of $549,399 and
$260,099, respectively 3,037,719 1,811,017
Prepaid expenses 196,852 385,043
Deposits on real estate - 600,000
Accounts receivable 105,395 225,581
------------- -------------
TOTAL ASSETS $281,910,771 $207,046,954
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Mortgage notes payable $118,690,395 $61,558,961
Mortgage notes payable related to assets
held for sale 4,797,876 -
Borrowings under line of credit 29,660,000 43,560,000
Deferred rent liability 5,111,381 -
Asset retirement obligation liability 1,419,559 -
Accounts payable and accrued expenses 437,693 389,792
Accounts payable and other liabilities
related to assets held for sale 198,381 103,210
Due to adviser 177,459 164,155
Rent received in advance, security
deposits and funds held in escrow 2,897,781 2,322,300
------------- -------------
Total Liabilities 163,390,525 108,098,418
------------- -------------
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 June 30,
2006 1,000 -
Common stock, $0.001 par value, 18,850,000
shares authorized and 7,816,972 and
7,672,000 shares issued and outstanding,
respectively 7,817 7,672
Additional paid in capital 131,590,977 105,502,544
Notes receivable - employees (2,259,036) (432,282)
Distributions in excess of accumulated
earnings (10,820,512) (6,129,398)
------------- -------------
Total Stockholders' Equity 118,520,246 98,948,536
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $281,910,771 $207,046,954
============= =============
Gladstone Commercial Corporation
Consolidated Statements of Operations
(unaudited)
For the three months For the six months
ended ended
June 30, June 30, June 30, June 30,
2006 2005 2006 2005
----------- ----------- ------------ -----------
Operating revenues
Rental income $6,027,830 $2,092,231 $10,894,906 $3,795,831
Interest income from
mortgage notes
receivable 558,434 501,645 1,111,346 797,228
Tenant recovery
revenue 43,798 37,300 49,420 41,600
----------- ----------- ------------ -----------
Total
operating
revenues 6,630,062 2,631,176 12,055,672 4,634,659
----------- ----------- ------------ -----------
Operating expenses
Depreciation and
amortization 2,064,312 664,467 3,863,519 1,169,762
Management advisory
fee 719,392 483,794 1,372,134 955,655
Professional fees 232,960 11,201 431,418 340,886
Taxes and licenses 39,069 24,450 89,963 151,396
Insurance 102,845 67,021 185,842 137,404
General and
administrative 306,698 95,411 452,485 229,750
Asset retirement
obligation expense 24,940 - 71,641 -
Stock option
compensation
expense 33,602 - 79,818 -
----------- ----------- ------------ -----------
Total
operating
expenses 3,523,818 1,346,344 6,546,820 2,984,853
----------- ----------- ------------ -----------
Other income (expense)
Interest income from
temporary
investments 4,057 13,192 11,431 107,713
Interest income -
employee loans 28,589 5,236 34,137 9,921
Other income 10,400 - 10,400 -
Interest expense (2,155,968) (254,803) (3,774,536) (291,022)
----------- ----------- ------------ -----------
Total other
expense (2,112,922) (236,375) (3,718,568) (173,388)
----------- ----------- ------------ -----------
Income from
continuing operations 993,322 1,048,457 1,790,284 1,476,418
----------- ----------- ------------ -----------
Discontinued
operations
Income from
discontinued
operations 71,215 103,784 109,253 211,099
Net realized gain
(loss) from foreign
currency
transactions 167 (2,590) (649) (2,937)
Net unrealized
(loss) gain from
foreign currency
transactions (211,939) (120) (199,323) 135
----------- ----------- ------------ -----------
Total
discontinued
operations (140,557) 101,074 (90,719) 208,297
----------- ----------- ------------ -----------
Net income 852,765 1,149,531 1,699,565 1,684,715
----------- ----------- ------------ -----------
Dividends attributable
to preferred stock (484,375) - (828,819) -
----------- ----------- ------------ -----------
Net income available
to common
stockholders $368,390 $1,149,531 $870,746 $1,684,715
=========== =========== ============ ===========
Earnings per weighted
average common share
- basic
Income from
continuing
operations
(net of
dividends
attributable
to preferred
stock) $0.07 $0.14 $0.12 $0.19
Discontinued
operations (0.02) 0.01 (0.01) 0.03
----------- ----------- ------------ -----------
Net income
available to
common
stockholders $0.05 $0.15 $0.11 $0.22
=========== =========== ============ ===========
Earnings per weighted
average common share
- diluted
Income from
continuing
operations
(net of
dividends
attributable
to preferred
stock) $0.06 $0.14 $0.12 $0.19
Discontinued
operations (0.02) 0.01 (0.01) 0.03
----------- ----------- ------------ -----------
Net income
available to
common
stockholders $0.04 $0.15 $0.11 $0.22
=========== =========== ============ ===========
Weighted average
shares outstanding
Basic 7,762,503 7,669,802 7,717,501 7,668,409
=========== =========== ============ ===========
Diluted 7,911,871 7,692,639 7,858,146 7,715,100
=========== =========== ============ ===========
Gladstone Commercial Corporation
Consolidated Statements of Cash Flows
(unaudited)
For the six For the six
months months
ended June ended June
30, 2006 30, 2005
------------ ------------
Cash flows from operating activities:
Net income $1,699,565 $1,684,715
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization, including
discontinued operations 3,915,819 1,234,731
Amortization of deferred financing
costs, including discontinued
operations 289,300 74,836
Amortization of deferred rent asset 126,748 93,385
Amortization of deferred rent liability (303,478) -
Asset retirement obligation expense,
including discontinued operations 81,573 -
Stock compensation 79,818 -
Unrealized loss (gain) from foreign
currency transactions 199,323 (135)
Changes in assets and liabilities:
Decrease (increase) in mortgage interest
receivable 3,609 (2,824)
Increase in employee interest receivable (28,589) (444)
Decrease in prepaid expenses 177,168 69,008
Decrease in other assets 120,186 59,515
Increase in deferred rent receivable (720,712) (206,111)
Increase in accounts payable and accrued
expenses 52,302 112,530
Increase (decrease) in due to adviser 13,304 (5,060)
Increase (decrease) in rent received in
advance and security deposits 725,907 (435,228)
Payments to lenders for operating
reserves held in escrow (1,452,201) -
Increase in operating reserves from
tenants 892,137 -
------------ ------------
Net cash provided by operating
activities 5,871,779 2,678,918
------------ ------------
Cash flows from investing activities:
Real estate investments (40,506,626) (41,116,911)
Issuance of mortgage note receivable - (10,000,000)
Principal repayments on mortgage notes
receivable 44,742 42,856
Increase in restricted cash (412,074) -
Receipts from tenants for capital
reserves 435,633 -
Payments to tenants from capital reserves (234,518) -
Payments to lenders for capital reserves
held in escrow (755,350) -
Receipts from lenders for capital
reserves held in escrow 308,135 -
Deposits on future acquisitions (500,000) (550,000)
Deposits applied against real estate
investments 1,100,000 -
------------ ------------
Net cash used in investing
activities (40,520,058) (51,624,055)
------------ ------------
Cash flows from financing activities:
Proceeds from share issuance 25,485,010 -
Offering costs (1,302,004) -
Borrowings under mortgage note payable 31,900,000 3,150,000
Principal repayments on mortgage note
payable (302,410) (12,471)
Borrowings from line of credit 60,000,400 22,010,000
Repayments on line of credit (73,900,400) -
Principal repayments on employee loans - 16,211
Payments for deferred financing costs (1,650,237) (1,015,176)
Dividends paid for common and preferred (6,390,679) (4,140,980)
------------ ------------
Net cash provided by financing
activities 33,839,680 20,007,584
------------ ------------
Net decrease in cash and cash equivalents (808,599) (28,937,553)
Cash and cash equivalents, beginning of
period 1,740,159 29,153,987
------------ ------------
Cash and cash equivalents, end of period $931,560 $216,434
============ ============
NON-CASH INVESTING ACTIVITIES
Increase in asset retirement obligation $1,510,330 $-
------------ ------------
NON-CASH FINANCING ACTIVITIES
Fixed rate debt assumed in connection with
acquisitions $30,129,654 $-
------------ ------------
Notes receivable issued in exchange for
common stock associated with the exercise
of employee stock options $1,826,754 $75,000
------------ ------------
CONTACT: Gladstone Commercial Corporation
Kelly Sargent, 703-287-5835