EXHIBIT 99.1
Gladstone Commercial Announces 2006 Year-End Results
-- Reports net income available to common stockholders of
approximately $2.2 million or $0.27 per diluted weighted
average common share
-- Reports funds from operations ("FFO") of approximately $9.4
million or $1.18 per diluted weighted average common share
-- Purchased nine properties for a total investment of
approximately $78.5 million
-- Sold two properties for a net gain on sale after taxes of
approximately $1.1 million or $0.14 per diluted weighted
average common share
-- Acquired one property in satisfaction of a mortgage loan for
approximately $11.3 million
MCLEAN, Va.--(BUSINESS WIRE)--Feb. 27, 2007--Gladstone Commercial
Corp. (NASDAQ:GOOD) (the "Company") today reported financial results
for the year ended December 31, 2006. A description of 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 year ended
December 31, 2006 was $2,185,938, or $0.27 per share, compared to
$3,601,945, or $0.47 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 the Company's properties, stock option expense associated with the
amendment of options granted under the Company's 2003 Equity Incentive
Plan, as amended (the "2003 Plan"), the write-off of deferred
financing fees related to the termination of the line of credit with
Branch Banking & Trust ("BB&T"), and dividends paid on the Company's
preferred stock, partially offset by the gain on the sale of the two
Canadian properties in July.
FFO for the year ended December 31, 2006 was $9,428,822, or $1.18
per share, compared to $7,253,064, or $0.94 per share, for the same
period one year ago. FFO for the quarter ended December 31, 2006 was
$2,293,178, or $0.28 per share, compared to $2,326,026, or $0.30 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 three For the three For the year For the year
months ended months ended ended ended
December 31, December 31, December 31, December 31,
2006 2005 2006 2005
------------- ------------- ------------- -------------
Net income $895,853 $1,049,819 $4,372,828 $3,601,945
Less:
Dividends
attributable
to preferred
stock (873,696) - (2,186,890) -
------------- ------------- ------------- -------------
Net income
available to
common
stockholders 22,157 1,049,819 2,185,938 3,601,945
------------- ------------- ------------- -------------
Add: Real
estate
depreciation
and
amortization,
including
discontinued
operations 2,271,021 1,276,207 8,349,474 3,651,119
Less: Gain on
sale of real
estate, net
of taxes paid - - (1,106,590) -
------------- ------------- ------------- -------------
FFO available
to common
stockholders $2,293,178 $2,326,026 $9,428,822 $7,253,064
Weighted
average
shares
outstanding -
basic 8,052,148 7,672,000 7,827,781 7,670,219
Weighted
average
shares
outstanding -
diluted 8,196,605 7,737,297 7,986,690 7,723,220
Basic net
income per
weighted
average
common share $0.00 $0.14 $0.28 $0.47
============= ============= ============= =============
Diluted net
income per
weighted
average
common share $0.00 $0.14 $0.27 $0.47
============= ============= ============= =============
Basic FFO per
weighted
average
common share $0.28 $0.30 $1.20 $0.95
============= ============= ============= =============
Diluted FFO
per weighted
average
common share $0.28 $0.30 $1.18 $0.94
============= ============= ============= =============
Year-end highlights:
-- Purchased nine properties with an aggregate of approximately
979,000 square feet for an aggregate purchase price of
approximately $78.5 million;
-- Sold two properties for a net gain on sale after taxes of
approximately $1.1 million; and
-- Acquired one property in satisfaction of the mortgage loan on
the Sterling Heights, Michigan property for approximately
$11.3 million.
In August 2006, the Company ceased accruing revenues on its
mortgage loan secured by an industrial property in Sterling Heights,
Michigan, placed the borrower in default and began pursuing available
remedies under its mortgage, including instituting foreclosure
proceedings on the property. At the foreclosure sale on September 22,
2006, the Company was the successful bidder. The Company recorded the
real estate asset at approximately $11.3 million, which equaled the
outstanding principal balance and accrued, non-default interest due
under the mortgage loan to the Company. On October 20, 2006, the
Company executed a lease with a new tenant for the property, with a
term of ten years. The lease provides for annual rents of
approximately $1.1 million in 2007, with prescribed escalations
thereafter. The Company also pursued its deficiency relating to
default interest, expenses and prepayment fees of approximately
$650,000 against the borrower and its affiliated tenant who had filed
for bankruptcy protection and collected approximately $655,000 from
the tenant and borrower in October 2006.
On August 31, 2006, all the holders of outstanding stock options
accepted the Company's offer to amend their stock options and
accelerate the expiration date of the outstanding options to December
31, 2006. All outstanding stock options were exercised before December
31, 2006. The acceptance of the offer allowed the Company to enter
into an amended and restated investment advisory agreement (the
"Amended Advisory Agreement") with the Company's external investment
adviser, Gladstone Management Corporation (the "Adviser"), and an
administration agreement (the "Administration Agreement") between the
Company and Gladstone Administration, LLC, a wholly-owned subsidiary
of the Adviser. The Company terminated the 2003 Plan on December 31,
2006. Upon termination of the 2003 Plan, the Company implemented the
Amended Advisory Agreement and Administration Agreement effective on
January 1, 2007.
On December 29, 2006, the Company entered into a $75 million
senior revolving credit agreement with a syndicate of banks led by
KeyBank National Association, which matures on December 29, 2009 with
an option to extend for an additional year. The new revolving credit
facility replaces a previous facility led by BB&T, which was
terminated upon the closing of the new line.
"Our year end results were affected by several non-recurring
items, including stock option expense associated with the amendment of
options granted under the 2003 Plan and the write-off of deferred
financing fees related to the termination of the line of credit with
BB&T totaling approximately $985,000 or $0.12 per share," said Chip
Stelljes, Executive Vice President and Chief Investment Officer.
"These non-recurring expenses were positively offset by the nine
properties acquired during the year, along with the sale of the two
Canadian properties. We also signed a ten year lease with a new tenant
for our Sterling Heights, Michigan property, allowing us to create an
income producing asset from the previously defaulted mortgage loan on
the property. We believe the property dispositions, the successful
leasing of the Michigan property, along with the acquisition of nine
properties during the year will benefit our shareholders over the long
term and will result in a stronger and more focused portfolio in
2007."
Subsequent to year end, the Company:
-- Declared monthly cash dividends on common stock of $0.12 per
common share for each of the months of January, February and
March 2007;
-- Declared monthly cash dividends on Series A Cumulative
Redeemable Preferred Stock of $0.1614583 per share for the
months of January, February and March 2007;
-- Declared monthly cash dividends on Series B Cumulative
Redeemable Preferred Stock of $0.15625 per share for the
months of January, February and March 2007; and
-- Acquired two properties with an aggregate of 175,500 square
feet for a purchase price of approximately $15.7 million.
The financial statements attached below are without footnotes so
readers should obtain and carefully review the Company's Form 10-K for
the year ended December 31, 2006, including the footnotes to the
financial statements contained therein. The Company has filed the Form
10-K today with the SEC and the Form 10-K can be retrieved from the
SEC's website at www.sec.gov or the Company's website at
www.GladstoneCommercial.com.
The Company will hold a conference call Wednesday, February 28,
2007 at 8:30 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 March 28, 2007. To hear the replay,
please dial (877) 660-6853, access playback account 286 and use ID
code 230522.
Gladstone Commercial Corporation is a publicly traded real estate
investment trust that focuses on investing in and owning triple-net
leased industrial, commercial and retail real estate properties and
selectively making long-term mortgage loans. Additional information
can be found at www.GladstoneCommercial.com.
For further information, contact Investor Relations 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-K for the year
ended December 31, 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, 2006, as filed with the
Securities and Exchange Commission on February 27, 2007. The risk
factors set forth in the Form 10-K for the year ended December 31,
2006 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
December 31, December 31,
2006 2005
------------- -------------
ASSETS
Real estate, net of accumulated
depreciation of $8,595,419 and
$3,408,878, respectively $235,118,123 $161,634,761
Lease intangibles, net of accumulated
amortization of $4,175,685 and
$1,221,413, respectively 23,416,696 13,947,484
Mortgage notes receivable 10,000,000 21,025,815
Cash and cash equivalents 36,005,686 1,740,159
Restricted cash 1,225,162 1,974,436
Funds held in escrow 1,635,819 1,041,292
Interest receivable - mortgage note - 70,749
Interest receivable - employees 43,716 -
Deferred rent receivable 3,607,279 2,590,617
Deferred financing costs, net of
accumulated amortization of $1,467,297
and $260,099, respectively 3,713,004 1,811,017
Prepaid expenses 521,290 385,043
Deposits on real estate 300,000 600,000
Accounts receivable 179,247 225,581
------------- -------------
TOTAL ASSETS $315,766,022 $207,046,954
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Mortgage notes payable $154,494,438 $61,558,961
Borrowings under line of credit - 43,560,000
Deferred rent liability 4,718,599 -
Asset retirement obligation liability 1,631,294 -
Accounts payable and accrued expenses 673,410 493,002
Due to adviser 183,042 164,155
Rent received in advance, security
deposits and funds held in escrow 1,841,063 2,322,300
------------- -------------
Total Liabilities 163,541,846 108,098,418
------------- -------------
STOCKHOLDERS' EQUITY
Redeemable preferred stock, $0.001 par
value; $25 liquidation preference;
2,300,000 shares authorized and 2,150,000
shares issued and outstanding at December
31, 2006 2,150 -
Common stock, $0.001 par value, 17,700,000
shares authorized and 8,565,264 and
7,672,000 shares issued and outstanding,
respectively 8,565 7,672
Additional paid in capital 170,640,979 105,502,544
Notes receivable - employees (3,201,322) (432,282)
Distributions in excess of accumulated
earnings (15,226,196) (6,129,398)
------------- -------------
Total Stockholders' Equity 152,224,176 98,948,536
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $315,766,022 $207,046,954
============= =============
Gladstone Commercial Corporation
Consolidated Statements of Operations
For the year ended December 31,
--------------------------------------
2006 2005 2004
------------ ------------ ------------
Operating revenues
Rental income $23,964,035 $10,853,903 $3,210,142
Interest income from mortgage
notes receivable 1,845,231 1,915,795 981,187
Tenant recovery revenue 136,280 111,808 -
------------ ------------ ------------
Total operating revenues 25,945,546 12,881,506 4,191,329
------------ ------------ ------------
Operating expenses
Depreciation and amortization 8,297,174 3,521,128 946,971
Management advisory fee 2,902,053 2,118,040 1,187,776
Professional fees 953,066 563,205 448,969
Taxes and licenses 193,032 242,803 13,603
Insurance 417,909 274,166 250,816
General and administrative 469,260 249,791 276,192
Shareholder related expenses 311,049 215,907 152,408
Asset retirement obligation
expense 129,142 - -
Stock option compensation
expense 394,411 - -
------------ ------------ ------------
Total operating expenses 14,067,096 7,185,040 3,276,735
------------ ------------ ------------
Other income (expense)
Interest income from
temporary investments 76,772 126,826 608,617
Interest income - employee
loans 125,788 21,041 6,042
Other income 380,915 - -
Interest expense (9,104,894) (2,333,376) -
------------ ------------ ------------
Total other income
(expense) (8,521,419) (2,185,509) 614,659
------------ ------------ ------------
Income from continuing
operations 3,357,031 3,510,957 1,529,253
------------ ------------ ------------
Discontinued operations
Income from discontinued
operations 112,145 309,545 94,675
Net realized loss from
foreign currency
transactions (202,938) (6,278) -
Net unrealized loss from
foreign currency
transactions - (212,279) -
Gain on sale of real estate 1,422,026 - -
Taxes on sale of real estate (315,436) - -
------------ ------------ ------------
Total discontinued
operations 1,015,797 90,988 94,675
------------ ------------ ------------
Net income 4,372,828 3,601,945 1,623,928
------------ ------------ ------------
Dividends attributable to
preferred stock (2,186,890) - -
------------ ------------ ------------
Net income available to common
stockholders $2,185,938 $3,601,945 $1,623,928
============ ============ ============
Earnings per weighted average
common share - basic
Income from continuing
operations (net of dividends
attributable to preferred
stock) $0.15 $0.46 $0.20
Discontinued operations 0.13 0.01 0.01
------------ ------------ ------------
Net income available to
common stockholders $0.28 $0.47 $0.21
============ ============ ============
Earnings per weighted average
common share - diluted
Income from continuing
operations (net of dividends
attributable to preferred
stock) $0.14 $0.46 $0.20
Discontinued operations 0.13 0.01 0.01
------------ ------------ ------------
Net income available to
common stockholders $0.27 $0.47 $0.21
============ ============ ============
Weighted average shares
outstanding
Basic 7,827,781 7,670,219 7,649,855
============ ============ ============
Diluted 7,986,690 7,723,220 7,708,534
============ ============ ============
Gladstone Commercial Corporation
Consolidated Statements of Cash Flows
For the year ended December 31,
-----------------------------------------
2006 2005 2004
------------- ------------- -------------
Cash flows from operating
activities:
Net income $4,372,828 $3,601,945 $1,623,928
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and
amortization, including
discontinued operations 8,349,474 3,651,119 973,345
Amortization of deferred
financing costs,
including discontinued
operations 1,207,198 260,099 -
Amortization of deferred
rent asset 253,496 178,070 -
Amortization of deferred
rent liability (696,261) - -
Asset retirement
obligation expense,
including discontinued
operations 139,074 - -
Increase in deferred
rent receivable (1,270,159) (562,133) (210,846)
Stock compensation 394,411 - -
Increase in mortgage
notes payable due to
change in value of
foreign currency 202,066 209,395 -
Value of building
acquired in excess of
mortgage note
satisfied, applied to
interest income (335,701) - -
Gain on sale of real
estate (1,422,026) - -
Decrease (increase) in
mortgage interest
receivable 70,749 (5,954) (64,795)
(Increase) decrease in
employee interest
receivable (43,716) 4,792 (4,792)
Increase in prepaid
expenses and other
assets (89,913) (425,120) 5,928
Increase in accounts
payable, accrued
expenses, and amount
due adviser 196,294 359,537 63,325
Increase in rent
received in advance and
security deposits 695,988 488,913 214,066
------------- ------------- -------------
Net cash provided by
operating activities 12,023,802 7,760,663 2,600,159
------------- ------------- -------------
Cash flows from investing
activities:
Real estate investments (48,339,307) (117,531,731) (58,875,648)
Proceeds from sales of
real estate 2,102,567 - -
Issuance of mortgage note
receivable - (10,000,000) (11,170,000)
Principal repayments on
mortgage notes
receivable 44,742 81,902 62,283
Net payments to lenders
for reserves held in
escrow (3,346,216) (1,041,292) -
Increase in reserves from
tenants 1,574,464 158,646 -
Deposits on future
acquisitions (900,000) (2,686,000) (775,000)
Deposits applied against
real estate investments 1,200,000 1,986,000 725,000
Refunds of deposits on
real estate - 150,000 -
------------- ------------- -------------
Net cash used in
investing activities (47,663,750) (128,882,475) (70,033,365)
------------- ------------- -------------
Cash flows from financing
activities:
Proceeds from share
issuance 65,089,026 - -
Redemption of shares for
payment of taxes (457,634) - -
Offering costs (2,654,279) - (7,730)
Borrowings under mortgage
notes payable 68,055,000 61,419,179 -
Principal repayments on
mortgage notes payable (604,318) (70,479) -
Borrowings from line of
credit 71,400,400 85,460,000 -
Repayments on line of
credit (114,960,400) (41,900,000) -
Increase (decrease) in
restricted cash 749,274 (513,761) -
Principal repayments on
employee loans 914 17,718 -
Payments for deferred
financing costs (3,242,881) (2,021,115) (50,000)
Dividends paid for common
and preferred (13,469,627) (8,283,860) (2,830,540)
------------- ------------- -------------
Net cash provided by
(used in) financing
activities 69,905,475 94,107,682 (2,888,270)
------------- ------------- -------------
Net increase (decrease) in
cash and cash equivalents 34,265,527 (27,014,130) (70,321,476)
Cash and cash equivalents,
beginning of period 1,740,159 28,754,289 99,075,765
------------- ------------- -------------
Cash and cash equivalents,
end of period $36,005,686 $1,740,159 $28,754,289
============= ============= =============
Cash paid during period for
interest $8,045,342 $2,014,236 $-
------------- ------------- -------------
NON-CASH INVESTING
ACTIVITIES
Increase in asset retirement
obligation $1,631,294 $- $-
------------- ------------- -------------
NON-CASH FINANCING
ACTIVITIES
Fixed rate debt assumed in
connection with
acquisitions $30,129,654 $- $-
------------- ------------- -------------
Assumption of mortgage notes
payable by buyer $4,846,925 $- $-
------------- ------------- -------------
Notes receivable issued in
exchange for common stock
associated with the
exercise of employee stock
options $2,769,954 $75,000 $375,000
------------- ------------- -------------
Acquisition of building in
satisfaction of mortgage
note receivable $11,316,774 $- $-
------------- ------------- -------------
CONTACT: Gladstone Commercial Corp.
Robert Johnson, 703-287-5835