Gladstone Commercial Corporation Reports Results for the Fourth Quarter and Year Ended December 31, 2011

MCLEAN, Va., Feb. 28, 2012 /PRNewswire/ -- Gladstone Commercial Corporation (NASDAQ: GOOD) (the "Company") today reported financial results for the quarter and year ended December 31, 2011.  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 earnings release.  All per share references are to fully-diluted weighted average shares of common stock, unless otherwise noted.

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FFO: FFO for the quarter and year ended December 31, 2011 was $3.8 million and $15.7 million, or $0.34 and $1.53 per share, which is a 23.5% and 11.6% increase, respectively, compared to the same periods one year ago.  The increase in FFO was primarily because of an increase in operating revenues derived from the seven properties acquired in 2011, coupled with a reduction in general and administrative expense and the net incentive fee.  General and administrative expenses decreased because of the write-off of $1.6 million of fees related to the termination of the private offering of unregistered senior common stock in 2010.   The net incentive fee decreased due to an increase in common stockholders' equity from the issuance of 2.2 million common shares during 2011, resulting in a higher hurdle rate to overcome. This was partially offset by an increase in due diligence expense during 2011 from acquisitions during the year combined with an increase in the base management fee during 2011.

Net Income: Net income available to common stockholders for the quarter and year ended December 31, 2011 was $0.1 million and $1.6 million, or $0.01 and $0.15 per share, respectively, compared to a net loss to common stockholders for the quarter ended December 31, 2010 of $0.2 million or $0.04 per share, and net income available to common stockholders for the year ended December 31, 2010 of $0.8 million, or $0.09 per share.   A reconciliation of FFO to net income for the quarters and years ended December 31, 2011 and 2010, which the Company believes is the most directly comparable GAAP measure to FFO, and a computation of basic and diluted FFO per weighted average share of common stock and basic and diluted net income per weighted average share of common stock is set forth below:  

Comments from the Company's President and Chief Investment Officer, Chip Stelljes: "Our financial results were positive for 2011 and reflected our ability to invest the proceeds we raised from both debt and equity into solid real estate investments with accretive returns. We continue to focus on maintaining our portfolio and working with our existing tenants to extend the few leases that are scheduled to mature in 2012 and 2013. With the proceeds from the common and preferred stock sales and the expansion of our line of credit in early 2012 [discussed in further detail below], we have positioned ourselves well to buy additional properties and increase our FFO in 2012."

Asset Characteristics: As of December 31, 2011, the Company owned 72 properties totaling 7.1 million square feet for a total net investment of $426.4 million. Currently, 70 of the Company's properties, or 98.7% of the portfolio's total square footage, are fully leased and all tenants at these properties are current and paying in accordance with the terms of their leases.

Mortgage Maturities: The Company has $45.2 million of balloon principal payments due on one of its long-term mortgages in October 2012; however, the mortgage has one remaining annual extension option through October 2013, which the Company currently intends to exercise.  The Company has no other balloon principal payments due on any of its mortgages until 2013.

Lease Expirations: The Company was able to re-lease its previously vacant building located in South Hadley, Massachusetts for another year, which expires in January 2013. The Company has two other buildings that remain vacant. Rental income from these two tenants was 2.3% of the Company's total annualized rental income when occupied.  The Company is actively working to re-tenant these properties along with the one additional lease that expires in 2012.

Highlights of 2011, the Company:

• Properties Acquired: Purchased seven fully-occupied properties comprised of 280,512 square feet of rental space for an aggregate purchase price of $54.6 million;
• Debt Issued:  Issued or assumed $31.5 million of long-term mortgages on four of its properties;
• Leases Extended: Extended the terms on two of its leases for additional periods of three and five years;
• Common Stock Issued: Issued 2.2 million shares of common stock through an underwritten public offering resulting in net proceeds of $37.0 million, after deducting underwriting discounts and other offering expenses;
• Debt Extended: Exercised a one-year renewal option on its $45.2 million mortgage loan on September 30, 2011 to extend the maturity date until October 1, 2012; and
• Distributions: Paid monthly distributions for the year totaling $1.50 per share on the common stock, $1.94 per share on the Series A Preferred Stock, $1.88 per share on the Series B Preferred Stock and $1.05 per share on the Senior Common Stock.  The common stock distributions paid in 2011 were an 83% return of capital.

Subsequent to the End of the Year, the Company:

• Properties Acquired: Purchased one fully-occupied property with 52,130 square feet of rental space for $10.8 million;
• Preferred Stock Issued: Issued 1.54 million shares of Series C Term Preferred Stock through an underwritten public offering resulting in net proceeds of $36.8 million, after deducting underwriting discounts and other offering expenses;
• Line of Credit Expanded: Increased the maximum availability of credit under its line of credit from $50.0 million to $75.0 million;
• Debt Repaid: Repaid in full the $2.3 million mortgage on its building located in Canton, North Carolina;
• New Lease Executed: Re-leased its previously vacant building located in South Hadley, Massachusetts through January 2013;
• Leases Extended: Extended the terms on two of its leases for additional periods of five and eight years; and
• Distributions: 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 January, February and March 2012.  Declared monthly cash distributions of $0.1484375 per share on the Series C Term Preferred Stock for each of the months of February and March 2012.

Conference Call: The Company will hold a conference call on Wednesday, February 29, 2012 at 8:30 a.m. EST 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 the questions. The conference call replay will be available one hour after the call and will be accessible through March 30, 2012.  To hear the replay, please dial (877) 344-7529 and use conference number 10009320.

The live audio broadcast of Gladstone Commercial's quarterly conference call will also be available online at www.GladstoneCommercial.com. The event will be archived and available for replay on the Company's website through April 30, 2012.

Who we are: Gladstone Commercial Corporation is a publicly-traded real estate investment trust that focuses on investing in and owning triple-net leased industrial, commercial, medical and retail real estate properties.  Including payments declared through February 2012, the Company has paid 91 consecutive monthly cash distributions on its common stock, 74 consecutive monthly cash distributions on its Series A preferred stock, 65 consecutive monthly cash distributions on its Series B preferred stock and 22 consecutive monthly cash distributions on its Senior Common Stock.  The Company has never skipped, reduced or deferred a monthly distribution since inception, over eight years ago. Information on the business activities of all the Gladstone funds can be found at www.gladstonecompanies.com.

Investor Relations: For Investor Relations inquiries related to any of the monthly dividend paying Gladstone funds, please visit www.gladstone.com.

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 an additional 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 Company's Annual Report on Form 10-K (the "Form 10-K") for the year ended December 31, 2011, as filed with the Securities and Exchange Commission (the "SEC") today.

Warning: The financial statements attached below are without footnotes so readers should obtain and carefully review the Form 10-K, including the footnotes to the financial statements contained therein. The Company 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 statements in this press release regarding the Company's ability, plans or prospects to re-tenant its unoccupied properties, extend the respective maturity dates of its long-term mortgages, grow its portfolio and FFO, renegotiate leases, and raise additional capital 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 the Company'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, its ability to raise additional capital, the duration of, or further downturns in, the current economic environment, the performance of its tenants, the impact of competition on the Company's 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 the Company's forward-looking statements are disclosed under the caption "Risk factors" of the Company's Form 10-K for the fiscal year ended December 31, 2011, as filed with the SEC on February 28, 2012.  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