Gladstone Commercial Corporation Reports Results for its Third Quarter Ended September 30, 2010

MCLEAN, Va., Nov. 1, 2010 /PRNewswire-FirstCall/ -- Gladstone Commercial Corporation (Nasdaq: GOOD) (the "Company") today reported financial results for its third quarter ended September 30, 2010.  A description of FFO, a relative non–GAAP (generally accepted accounting principles in the United States) financial measure, is presented at the end of this earnings release.  All per share references herein are to fully-diluted weighted average shares of common stock, unless otherwise noted.

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FFO for the three months ended September 30, 2010 was approximately $4.3 million, or $0.50 per share, a 26.6% increase as compared to the same period one year ago.  FFO for the nine months ended September 30, 2010 was approximately $11.0 million, or $1.29 per share, an 8.9% increase as compared to the same period one year ago. The increase was a direct result of the $3.3 million of additional income and prepayment fees the Company received in connection with the early repayment of its mortgage loan receivable, partially offset by a decrease in its rental and interest income and an increase in its professional fees.  Rental income decreased because two of the Company's tenants vacated their respective properties during the quarter and interest income decreased due to the repayment of the Company's mortgage loan receivable. Professional fees increased because of the write-off of $1.6 million of fees which are associated with the termination of the Company's private offering of senior common stock and for which the Company does not expect to be reimbursed.  

Commenting on the results of operations, Chip Stelljes, President and Chief Investment Officer, said "During the quarter, we continued our emphasis on managing and improving the portfolio.  As we previously announced, we received an additional $3.3 million of income from the early repayment of our mortgage loan, and, while we did not make any new investments during the quarter, we continue to actively search for suitable acquisitions.  After the quarter ended, we made the decision to terminate our private offering of unregistered senior common stock due to market conditions and wrote off approximately $1.6 million in associated offering expenses. Despite the termination, we remain optimistic about our future and are seeing signs of economic improvement and stabilization in both the equity and debt capital markets as evidenced by our issuance of common equity during the quarter. We are working hard to re-tenant our two vacant buildings and remain pleased with the overall performance of our portfolio. We are currently reviewing several potential acquisitions and continue to actively seek additional equity and mortgage debt in order to grow our portfolio."

Net income available to common stockholders for the three months ended September 30, 2010 was approximately $1.0 million, or $0.12 per share, as compared to net income available to common stockholders of approximately $256,000, or $0.03 per share, for the same period one year ago.   Net income available to common stockholders for the nine months ended September 30, 2010 was approximately $1.0 million, or $0.12 per share, as compared to net income available to common stockholders of approximately $415,000, or $0.05 per share, for the same period one year ago.   A reconciliation of FFO to net income, the metric which the Company believes is the most directly comparable GAAP measure to FFO, is set forth below:  

At September 30, 2010, the Company owned 64 properties totaling approximately 6.3 million square feet for a total net investment of approximately $375.6 million.  Currently, 62 of the Company's properties are fully leased, or approximately 97.0% of the portfolio, and each of these tenants are current and paying in accordance with their leases.

Two of the Company's leases have expired, which totaled approximately 2.6% of its total annualized rental income.  The Company is seeking new tenants for these two properties while concurrently researching alternative uses for these properties. The Company expects that it will re-lease these properties in the near future.   In addition, one of the Company's tenants declared bankruptcy on September 29, 2010; however, the Company received the October rental payment from this tenant.  The lease expires in January 2012 and rental income from this tenant is less than 1% of our total annualized rental income.  

The Company had $48.0 million of balloon principal payments maturing under one of its long-term mortgages in 2010; however, the mortgage has three annual extension options through 2013, and the Company exercised one of these options on September 30, 2010.  In connection with the exercise of the option, the interest rate reset from 6.85% to 4.58% through September 30, 2011.  The Company has no other balloon principal payments due under any of its mortgages until 2013.

Because the Company's line of credit with Key Bank matures in December 2010, it has executed a commitment with a large national bank for a new line of credit to serve as replacement financing.  Although the Company expects that it will be able to procure the new line of credit prior to the date of maturity of the existing line of credit, there can be no assurance that such replacement financing will be obtained on terms which are similar to those of the existing line of credit, or at all. 

Third quarter highlights, the Company:

• Received full early repayment on its $10.0 million mortgage loan and additional income and prepayment fees of $3.3 million, for total proceeds of $13.3 million;
• Exercised a one-year renewal option on its $48.0 million mortgage loan on September 30, 2010 to extend the maturity date until September 30, 2011;
• Issued 60,000 shares of common stock at an average price per share of $17.03 under its Open Market Sales Agreement with Jefferies & Company, Inc., for net proceeds of approximately $1.0 million; and
• Declared monthly cash distributions of $0.125 per share on the common stock, $0.1614583 per share on the Series A Preferred Stock, $0.15625 per share on the Series B Preferred Stock, and $0.0875 per share on the Senior Common Stock for each of the months of July, August and September 2010.  

Subsequent to September 30, 2010, the Company:

• Extended the lease on one of its properties for an additional period of 10 years, which was originally set to mature in December 2010; and
• Declared monthly cash distributions of $0.125 per share on the common stock, $0.1614583 per share on the Series A Preferred Stock, $0.15625 per share on the Series B Preferred Stock, and $0.0875 per share on the Senior Common Stock for each of the months of October, November and December 2010.  

The financial statements attached below are without footnotes so readers should obtain and carefully review the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2010, including the footnotes to the financial statements contained therein. The Company has filed the Form 10-Q today with the Securities and Exchange Commission ("SEC") and the Form 10-Q 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 on Tuesday, November 2, 2010 at 8:30 a.m. EDT to discuss its earnings results.  Please call (800) 860-2442 to enter the conference.  An operator will monitor the call and set a queue for questions.

The conference call replay will be available two hours after the call and will be available through December 2, 2010.  To hear the replay, please dial (877) 344-7529 and use playback conference number 445297.

The live audio broadcast of the Company's quarterly conference call will be available online at www.GladstoneCommercial.com.  The event will be archived and available for replay on the Company's website through January 1, 2011.

Gladstone Commercial Corporation is a publicly-traded real estate investment trust ("REIT") that focuses on investing in and owning triple-net leased industrial and commercial real estate properties and selectively making long-term mortgage loans.  To sign up to receive notifications about Gladstone Commercial or its affiliated companies, please visit www.gladstone.com.

For further information contact Investor Relations at 703-287-5893.

NON-GAAP FINANCIAL MEASURE - 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, 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 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 September 30, 2010, as filed with the SEC today.

All statements contained in this press release, other than historical facts, 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. Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates" and variations of these words and similar expressions are intended to identify forward-looking statements. Readers should not rely upon forward-looking statements because the matters they describe are subject to known and unknown risks and uncertainties that could cause the Company's business, financial condition, liquidity, results of operations, funds from operations or prospects to differ materially from those expressed in or implied by such statements. Such risks and uncertainties are disclosed under the caption "Risk Factors" of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2009, as filed with the SEC on February 24, 2010, and our Quarterly Report on Form 10-Q, as filed with the SEC on May 3, 2010 and November 1, 2010.  The Company cautions readers not to place undue reliance on any such forward-looking statements which speak only as of the date made. 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.

SOURCE Gladstone Commercial Corporation