All statements contained herein, 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, or the Exchange Act. These statements may relate to, among other
things, future events or our future performance or financial condition. In some
cases, you can identify forward-looking statements by terminology such as "may,"
"might," "believe," "will," "provided," "anticipate," "future," "could,"
"growth," "plan," "intend," "expect," "should," "would," "if," "seek,"
"possible," "potential," "likely" or the negative of such terms or comparable
terminology. These forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause our business, financial
condition, liquidity, results of operations, funds from operations or prospects
to be materially different from any future business, financial condition,
liquidity, results of operations, funds from operations or prospects expressed
or implied by such forward-looking statements. For further information about
these and other factors that could affect our future results, please see the
captions titled "Risk Factors" in this report and in our Annual Report on Form
10-K for the year ended December 31, 2011. We caution readers not to place undue
reliance on any such forward-looking statements, which are made pursuant to the
Private Securities Litigation Reform Act of 1995 and, as such, speak only as of
the date made. We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise, after the date of this Quarterly Report on Form 10-Q, or
Report.
All references to "we," "our," "us" and the "Company" in this Report mean
Gladstone Commercial Corporation and its consolidated subsidiaries, except where
it is made clear that the term means only Gladstone Commercial Corporation.
OVERVIEW
General
We are a real estate investment trust, or REIT, that was incorporated under the
General Corporation Law of the State of Maryland on February 14, 2003, primarily
for the purpose of investing in and owning net leased industrial, commercial and
retail real property and selectively making long-term industrial and commercial
mortgage loans. Our portfolio of real estate is leased to a wide cross section
of tenants ranging from small businesses to large public companies, many of
which are corporations that do not have publicly-rated debt. We have
historically entered into, and intend in the future to enter into, purchase
agreements for real estate having triple net leases with terms of approximately
10 to 15 years and built in rental rate increases. Under a triple net lease, the
tenant is required to pay all operating, maintenance and insurance costs and
real estate taxes with respect to the leased property. We actively communicate
with buyout funds, real estate brokers and other third parties to locate
properties for potential acquisition or to provide mortgage financing in an
effort to build our portfolio. We currently own 77 properties totaling
7.6 million square feet, which have a total gross and net carrying value,
including intangible assets, of $549.2 million and $464.9 million, respectively.
We do not currently have any mortgage loans receivable outstanding.
Business Environment
The United States continues to feel the lingering impact of the recession that
began in late 2007; while the unemployment rate has decreased over the last
several months, it still remains higher than pre-recessionary levels. In
addition, housing starts remain low, there continues to be a large inventory of
homes that need to be sold, and the economic situation in Europe continues to be
unpredictable and will need to stabilize for the economy to fully recover. As a
result, conditions within the U.S. capital markets generally, and the U.S. real
estate capital markets particularly, continue to experience certain levels of
dislocation and stress.
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These economic conditions could materially and adversely impact the financial
condition of one or more of our tenants and, therefore, could increase the
likelihood that a tenant may declare bankruptcy or default upon its payment
obligations arising under a related lease. For example, the tenant occupying our
building located in Hazelwood, Missouri declared bankruptcy in October 2010. The
tenant did not confirm our lease in its bankruptcy proceedings in March 2011,
and the final rent payment was received in April 2011. We are currently working
to re-tenant this property. In addition, our building located in Richmond,
Virginia remains vacant. The leases on these two vacant buildings comprised 2.0%
of our annualized rental income as of June 30, 2012 and the annual carrying
costs are $0.2 million. We are actively seeking new tenants for these
properties. All of our remaining properties are occupied and the tenants are
paying in accordance with their leases.
Moreover, our ability to make new investments is highly dependent upon our
ability to procure external financing. Our principal sources of external
financing generally include the issuance of equity securities, long-term
mortgage loans secured by properties and borrowings under our line of credit, or
the Line of Credit. The market for long-term mortgages has been limited for some
time; however, we have recently seen mid-to-long-term (5 to 10 year) mortgages
become more obtainable. The collateralized mortgage backed securities, or CMBS,
market has made a comeback in recent months, but it is more conservative and
restrictive than it was prior to the recession and the pricing in the market
remains somewhat volatile. Consequently, we continue to look primarily to
regional banks, insurance companies and other non-bank lenders, and, to a lesser
extent, the CMBS market to issue mortgages to finance our real estate
activities.
Despite the challenges in the marketplace, we issued 2.2 million common shares
during 2011 for gross proceeds of $39.4 million. In addition, in January 2012 we
issued $38.5 million of 7.125% Series C Cumulative Term Preferred Stock, or Term
Preferred Stock, which is mandatorily redeemable five years from issuance. We
also assumed or issued $31.7 million and $33.7 million in mortgages from
regional banks during 2011 and 2012, respectively, to finance some of our new
properties.
Recent Developments
Investment Activities
The following is a summary of our recent acquisitions:
Ashburn, Virginia: On January 25, 2012, we acquired a 52,130 square foot office
building located in Ashburn, Virginia for $10.8 million, excluding related
acquisition expenses of $0.1 million. We funded this acquisition using
borrowings from our Line of Credit. Independent Project Analysis, Inc., an
energy consultant, is the tenant in this building and has leased the property
for 15 years and has 2 options to renew the lease for additional periods of 5
years each. The lease provides for prescribed rent escalations over the life of
the lease, with annualized straight line rents of $1.0 million.
Ottumwa, Iowa: On May 30, 2012, we acquired a 352,860 square foot bottling plant
located in Ottumwa, Iowa for $7.1 million, excluding related acquisition
expenses of $0.1 million. We funded this acquisition through a combination of
cash on hand and the issuance of $5.0 million of mortgage debt on the property.
The American Bottling Company, the largest operating subsidiary of Dr Pepper
Snapple Group, Inc., is the tenant in this building and has leased the property
for 12 years and has 3 options to renew the lease for additional periods of 5
years each. The lease provides for prescribed rent escalations over the life of
the lease, with annualized straight line rents of $0.68 million.
New Albany, Ohio: On June 5, 2012, we acquired an 89,000 square foot office
building located in New Albany, Ohio for $13.3 million, excluding related
acquisition expenses of $0.2 million. We funded this acquisition with existing
cash on hand. Commercial Vehicle Group, Inc., a global supplier of fully
integrated interiors system solutions for the global commercial vehicle market,
is the tenant in this building and has leased the property for 10.5 years and
has 2 options to renew the lease for additional periods of 5 years each. The
lease provides for prescribed rent escalations over the life of the lease, with
annualized straight line rents of $1.36 million.
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Columbus, Georgia: On June 21, 2012, we acquired a 32,000 square foot office and
classroom facility located in Columbus, Georgia for $7.3 million, excluding
related acquisition expenses of $0.1 million. We funded this acquisition through
a combination of cash on hand and the issuance of $4.8 million of mortgage debt
on the property. University of Phoenix, a private education provider, which has
been in the education business for more than 35 years, is the tenant in this
building and has leased the property for 11.5 years and has 2 options to renew
the lease for additional periods of 5 years each. The lease provides for
prescribed rent escalations over the life of the lease, with annualized straight
line rents of $0.66 million.
Columbus, Ohio: On June 28, 2012, we acquired a 31,293 square foot office
building located in Columbus, Ohio for $4.0 million, excluding related
acquisition expenses of $0.1 million. We funded this acquisition with existing
cash on hand. Nationwide Children's Hospital, one of the largest children's
hospital systems in the United States, is the tenant in this building and has
leased the property for 10 years. The lease provides for prescribed rent
escalations over the life of the lease, with annualized straight line rents of
$0.34 million.
Financing Activities
Line of Credit
Expansion: On January 31, 2012, we amended our Line of Credit to increase the
current maximum availability of credit thereunder from $50.0 million to $75.0
million. The Line of Credit was arranged by Capital One, N.A. as administrative
agent, and Branch Banking and Trust Company as an additional lender. Citizens
Bank of Pennsylvania joined the Line of Credit as an additional lender. All
other terms of the agreement remained the same.
Debt
KeyBank: On April 5, 2012, through wholly-owned subsidiaries, we borrowed $19.0
million pursuant to a long-term note payable from KeyBank National Association,
which is collateralized by security interests in four of our properties. The
note accrues interest at a rate of 6.1% per year and we may not repay this note
prior to the last three months of the term, or we would be subject to a
substantial prepayment penalty. The note has a maturity date of May 1, 2022. We
intend to use the proceeds from the note for future acquisitions and working
capital.
City National Bank: On May 16, 2012, through a wholly-owned subsidiary, we
borrowed $2.94 million pursuant to a long-term note payable from City National
Bank, which is collateralized by a security interest in one of our properties.
The note accrues interest at a rate of 4.3% per year for the first five years,
and resets at five year intervals thereafter. We may repay this note after five
years and would not be subject to any prepayment penalty. The note has a
maturity date of December 31, 2026. We intend to use the proceeds from the note
for future acquisitions and working capital.
Modern Woodmen of America: On May 30, 2012, through a wholly-owned subsidiary,
we borrowed $5.0 million pursuant to a long-term note payable from Modern
Woodmen of America, which is collateralized by a security interest in one of our
properties. The note accrues interest at a rate of 6.5% per year and we may not
repay this note prior to the last six months of the term, or we would be subject
to a substantial prepayment penalty. The note has a maturity date of May 10,
2027. We intend to use the proceeds from the note for future acquisitions and
working capital.
Citigroup: On June 21, 2012, through a wholly-owned subsidiary, we borrowed
$4.75 million pursuant to a long-term note payable from Citigroup, which is
collateralized by a security interest in one of our properties. The note accrues
interest at a rate of 5.05% per year and we may not repay this note prior to the
last two months of the term, or we would be subject to a substantial prepayment
penalty. The note has a maturity date of July 6, 2022. We intend to use the
proceeds from the note for future acquisitions and working capital.
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American Equity Investment Life Insurance Company: On June 27, 2012, through a
wholly-owned subsidiary, we borrowed $2.0 million pursuant to a long-term note
payable from American Equity Investment Life Insurance Company, which is
collateralized by a security interest in one of our properties. The note accrues
interest at a rate of 5.1% per year and we may not repay this note prior to the
last five years of the term, or we would be subject to a substantial prepayment
penalty. The note has a maturity date of July 1, 2029. We intend to use the
proceeds from the note for future acquisitions and working capital.
American National Insurance Company: On July 24, 2012, through a wholly-owned
subsidiary, we borrowed $9.8 million pursuant to a long-term note payable from
American National Insurance Company, which is collateralized by a security
interest in one of our properties. The note accrues interest at a rate of
5.6% per year and we may not repay this note during the first five years of the
term; however, we may repay the note during the last five years of the term but
we would be subject to a substantial prepayment penalty. The note has a maturity
date of August 1, 2022. We intend to use the proceeds from the note for future
acquisitions and working capital.
Leasing Activities
The following is a summary of leases that have been recently extended:
South Hadley, Massachusetts: On February 13, 2012, the tenant in our building
located in South Hadley, Massachusetts signed a new lease with a term expiring
in January 2013, with a one-year extension option.
San Antonio, Texas: On February 14, 2012, we extended the lease with the tenant
occupying our property located in San Antonio, Texas. The lease covering this
property was extended for an additional eight-year period, through November
2021. The lease was originally set to expire in February 2014. The lease
provides for prescribed rent escalations over the life of the lease, with
annualized straight line rents of approximately $0.8 million. Furthermore, the
lease grants the tenant two options to extend the lease for a period of five
years each. In connection with the extension of the lease and the modification
of certain terms under the lease, we provided a tenant allowance of $0.6
million, payable over two years, and paid $0.3 million in leasing commissions.
Roseville, Minnesota: On February 27, 2012, we extended the lease with the
tenant occupying our property located in Roseville, Minnesota. The new lease
covers approximately one-third of this property and was extended for an
additional five year period, through December 2017. The lease was originally set
to expire in December 2012. The tenant in this property will pay rent on the
entire building through the end of 2012, and we continue to search for new
tenants to lease the remainder of the building. The new lease provides for
prescribed rent escalations over the life of the lease, with annualized straight
line rents of $1.2 million. Furthermore, the lease grants the tenant one option
to extend the lease for a period of five years. In connection with the extension
of the lease and the modification of certain terms under the lease, we provided
a tenant allowance of $0.4 million, payable over two years, and paid $0.8
million in leasing commissions.
Hialeah, Florida: On June 29, 2012, we extended the lease with the tenant
occupying our property located in Hialeah, Florida. The lease covering this
property was extended for an additional five-year period, through March
2027. The lease was originally set to expire in March 2022. The lease provides
for prescribed rent escalations over the life of the lease, with annualized
straight line rents of approximately $1.1 million. In connection with the
extension of the lease and the modification of certain terms under the lease, we
provided a tenant allowance of $0.3 million.
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Equity Activities
The equity issuances summarized below were all issued under our effective shelf
registration statement on file with the Securities and Exchange Commission, or
SEC.
Preferred Equity: In February 2012, we completed a public offering of 1,540,000
shares of our Term Preferred Stock at a public offering price of $25.00 per
share. Gross proceeds of the offering totaled $38.5 million and net proceeds,
after deducting underwriting discounts and offering expenses borne by us, were
$36.7 million and were used to repay a portion of outstanding borrowings under
our Line of Credit, for acquistions of real estate and working capital. The
shares are traded under the ticker symbol GOODN on the NASDAQ. The Term
Preferred Stock is not convertible into our common stock or any other security.
Generally, we may not redeem shares of the Term Preferred Stock prior to
January 31, 2016, except in limited circumstances to preserve our status as a
REIT. On or after January 31, 2016, we may redeem the shares at a redemption
price of $25.00 per share, plus any accumulated and unpaid dividends to and
including the date of redemption. The shares of the Term Preferred Stock have a
mandatory redemption date of January 31, 2017. In accordance with ASC 480,
"Distinguishing Liabilities from Equity," mandatorily redeemable financial
instruments should be classified as liabilities in the balance sheet and
therefore we recorded the Term Preferred Stock as a liability and the related
dividend payments as a component of interest expense in the statement of
operations.
Senior Common Equity: During 2011 and 2012, we have issued 38,133 shares of our
senior common stock at $15.00 per share in an ongoing best-efforts public
offering. The net proceeds, after deducting the underwriting discount and
commission were $0.5 million. We can issue up to 3,000,000 shares of senior
common stock and the offering will continue until the earlier of March 28, 2013
or the date on which 3,000,000 shares of senior common stock are sold. We have
used the proceeds of the offering for general corporate purposes.
Diversity of Our Portfolio
Gladstone Management Corporation, or our Adviser, seeks to diversify our
portfolio to avoid dependence on any one particular tenant, industry or
geographic market. By diversifying our portfolio, our Adviser intends to reduce
the adverse effect on our portfolio of a single under-performing investment or a
downturn in any particular industry or geographic market. The table below
reflects the breakdown of our total rental income by tenant industry
classification for the six months ended June 30, 2012 and 2011, respectively:
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For the six months ended June 30, 2012 For the six months ended June 30, 2011
(Dollars in Thousands) (Dollars in Thousands)
Rental Percentage of Rental Percentage of
Industry Classification Income Rental Income Income Rental Income
Telecommunications $ 3,636 14.8 % $ 2,768 13.1 %
Electronics 3,091 12.7 3,083 14.6
Healthcare 2,496 10.3 1,995 9.3
Diversified/Conglomerate Manufacturing 1,832 7.5 1,832 8.6
Chemicals, Plastics & Rubber 1,576 6.5 1,569 7.3
Beverage, Food & Tobacco 1,279 5.3 1,094 5.2
Personal & Non-Durable Consumer Products 1,217 5.0 1,116 5.3
Containers, Packaging & Glass 1,171 4.8 1,166 5.5
Machinery 1,130 4.6 1,126 5.3
Buildings and Real Estate 1,068 4.4 1,052 5.0
Printing & Publishing 947 3.9 1,033 4.9
Education 915 3.8 888 4.2
Personal, Food & Miscellaneous Services 907 3.7 288 1.4
Automobile 682 2.8 583 2.8
Oil & Gas 635 2.6 635 3.0
Diversified/Conglomerate Services 622 2.6 379 1.8
Banking 575 2.4 - 0.0
Childcare 292 1.2 292 1.4
Home & Office Furnishings 265 1.1 265 1.3
$ 24,336 100.0 % $ 21,164 100.0 %
The table below reflects the breakdown of our total rental income for our five
largest tenants for the six months ended June 30, 2012 and 2011, respectively:
Rental Revenue for the six
months ended June 30, 2012
Location (Dollars in Thousands) % of Base Rent
Roseville, MN $ 1,636 6.7 %
Duncan, SC 960 3.9 %
Concord Township, OH 862 3.5 % Multiple Locations, GA 824
3.4 %
Tulsa, OK 783 3.2 %
All Other Tenants 19,271 79.3 %
Total $ 24,336 100 %
The table below reflects the breakdown of our total rental income by state for
the six months ended June 30, 2012 and 2011, respectively:
Rental Revenue for the six
Number of months ended June 30, 2012
State Leases (Dollars in Thousands) % of Base Rent
Ohio 14 $ 3,981 16.4 %
Minnesota 3 2,660 10.9 %
North Carolina 7 2,390 9.8 %
Pennsylvania 5 1,719 7.1 %
Massachusetts 4 1,345 5.5 %
All Other States 29 12,241 50.3 %
Total 62 $ 24,336 100 %
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Our Adviser and Administrator
Our Adviser is led by a management team which has extensive experience
purchasing real estate and originating mortgage loans. Our Adviser is controlled
by Mr. David Gladstone, our chairman and chief executive officer. Mr. Gladstone
is also the chairman and chief executive officer of our Adviser. Terry Lee
Brubaker, our co-vice chairman, chief operating officer, secretary and director,
is a member of the Board of Directors of our Adviser as well as its vice
chairman and chief operating officer. George Stelljes III, our co-vice chairman,
chief investment officer and director, is a member of the Board of Directors of
our Adviser and its president and chief investment officer. Gladstone
Administration, LLC, or our Administrator, employs our chief financial officer
and treasurer, chief compliance officer, internal counsel, investor relations
department and their respective staffs.
Our Adviser and Administrator also provide investment advisory and
administrative services, respectively, to our affiliates, including, but not
limited to, Gladstone Capital Corporation and Gladstone Investment Corporation,
both publicly-traded business development companies, as well as Gladstone Land
Corporation, a private agricultural real estate company. With the exception of
Danielle Jones, our chief financial officer and treasurer, and Robert Cutlip,
our president, all of our executive officers serve as either directors or
executive officers, or both, of Gladstone Capital Corporation and Gladstone
Investment Corporation. In the future, our Adviser may provide investment
advisory services to other funds, both public and private, of which it is the
sponsor.
Advisory and Administration Agreements
We are externally managed pursuant to contractual arrangements with our Adviser
and our Administrator. Our Adviser and Administrator employ all of our personnel
and pay their payroll, benefits, and general expenses directly. We have an
advisory agreement with our Adviser, or the Advisory Agreement, and an
administration agreement with our Administrator, or the Administration
Agreement.
Under the terms of the Advisory Agreement, we are responsible for all expenses
incurred for our direct benefit. Examples of these expenses include legal,
accounting, interest on short-term debt and mortgages, tax preparation,
directors' and officers' insurance, stock transfer services, stockholder-related
fees, consulting and related fees. In addition, we are also responsible for all
fees charged by third parties that are directly related to our business, which
may include real estate brokerage fees, mortgage placement fees, lease-up fees
and transaction structuring fees (although we may be able to pass some or all of
such fees on to our tenants and borrowers).
During the six months ended June 30, 2012 and 2011, none of these third party
expenses were incurred by us directly. The actual amount of such fees that we
incur in the future will depend largely upon the aggregate costs of the
properties that we acquire, the aggregate amount of mortgage loans that we make
and the extent to which we are able to pass on such fees to our tenants and
borrowers pursuant to the terms of the agreements. Accordingly, the amount of
these fees that we will pay in the future is not determinable at this time.
Management Services and Fees under the Advisory Agreement
The Advisory Agreement provides for an annual base management fee equal to 2.0%
of our total stockholders' equity, less the recorded value of any preferred
stock, or total common stockholders' equity, and for an incentive fee based on
funds from operations, or FFO. Our Adviser does not charge acquisition or
disposition fees when we acquire or dispose of properties as is common with
other externally-advised REITs. Furthermore, there are no fees charged when our
Adviser secures long or short term credit or arranges mortgage loans on our
properties; however, our Adviser may earn fee income from our borrowers or
tenants or other sources.
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For purposes of calculating the incentive fee, FFO includes any realized capital
gains and capital losses, less any distributions paid on preferred stock and
senior common stock, but FFO does not include any unrealized capital gains or
losses. The incentive fee would reward our Adviser if our quarterly FFO, before
giving effect to any incentive fee, or pre-incentive fee FFO, exceeds 1.75%, or
the hurdle rate, of total common stockholders' equity. We pay our Adviser an
incentive fee with respect to our pre-incentive fee FFO in each calendar quarter
as follows:
• no incentive fee in any calendar quarter in which our pre-incentive fee
FFO does not exceed the hurdle rate of 1.75% (7% annualized);
• 100% of the amount of the pre-incentive fee FFO that exceeds the hurdle rate, but is less than 2.1875% in any calendar quarter (8.75% annualized);
and
• 20% of the amount of our pre-incentive fee FFO that exceeds 2.1875% in any
calendar quarter (8.75% annualized).
Quarterly Incentive Fee Based on FFO
Pre-incentive fee FFO
(expressed as a percentage of total common stockholders' equity)
[[Image Removed: LOGO]]
Percentage of pre-incentive fee FFO allocated to the incentive fee
The incentive fee may be reduced because of a covenant which exists in our Line
of Credit agreement which limits distributions to our stockholders to 95% of FFO
with acquisition-related costs that are required to be expensed under Accounting
Standards Codification, or ASC, 805, Business Combinations added back to FFO. In
order to comply with this covenant, our Board of Directors accepted our
Adviser's offer to unconditionally, irrevocably and voluntarily waive on a
quarterly basis a portion of the incentive fee for the three and six months
ended June 30, 2012 and 2011, which allowed us to maintain the current level of
distributions to our stockholders. These waived fees may not be recouped by our
Adviser in the future. Our Adviser has indicated that it intends to continue to
waive all or a portion of the incentive fee in order to support the current
level of distributions to our stockholders; however, our Adviser is not required
to issue any such waiver, either in whole or in part.
Administration Agreement
Pursuant to the Administration Agreement, we pay for our allocable portion of
our Administrator's overhead expenses incurred while performing its obligations
to us, including, but not limited to, rent and the salaries and benefits
expenses of our personnel, including our chief financial officer and treasurer,
chief compliance officer, internal counsel, investor relations department and
their respective staffs. Our allocable portion of expenses is generally derived
by multiplying our Administrator's total expenses by the percentage of our total
assets at the beginning of each quarter in comparison to the total assets of all
companies managed by our Adviser under similar agreements.
Critical Accounting Policies
The preparation of our financial statements in accordance with generally
accepted accounting principles in the United States of America, or GAAP,
requires management to make judgments that are subjective in nature in order to
make certain estimates and assumptions. Our Adviser relies on its experience,
collects historical and current market data and analyzes this information in
order to arrive at what it believes to be
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reasonable estimates. Under different conditions or assumptions, materially
different amounts could be reported related to the accounting policies described
below. In addition, application of these accounting policies involves the
exercise of judgment regarding the use of assumptions as to future
uncertainties, and as a result, actual results could materially differ from
these estimates. A summary of all of our significant accounting policies is
provided in Note 1 to our condensed consolidated financial statements included
elsewhere in this Form 10-Q. Below is a summary of accounting polices involving
estimates and assumptions that require complex, subjective or significant
judgments in their application and that materially affect our results of
operations.
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Allocation of Purchase Price
When we acquire real estate, we allocate the purchase price to (i) the acquired
tangible assets and liabilities, consisting of land, building, tenant
improvements, long-term debt and (ii) the identified intangible assets and
liabilities, consisting of the value of above-market and below-market leases,
in-place leases, unamortized lease origination costs, tenant relationships and
capital lease obligations, based in each case on their fair values. All expenses
related to the acquisition are expensed as incurred, rather than capitalized
into the cost of the acquisition as had been required by the previous
accounting.
Management's estimates of value are made using methods similar to those used by
independent appraisers (e.g., discounted cash flow analysis). Factors considered
by management in its analysis include an estimate of carrying costs during
hypothetical expected lease-up periods, considering current market conditions
and costs to execute similar leases. We also consider information obtained about
each property as a result of our pre-acquisition due diligence, marketing and
leasing activities in estimating the fair value of the tangible and intangible
assets and liabilities acquired. In estimating carrying costs, management also
includes real estate taxes, insurance and other operating expenses and estimates
of lost rentals at market rates during the hypothetical expected lease-up
periods, which primarily range from 9 to 18 months, depending on specific local
market conditions. Management also estimates costs to execute similar leases,
including leasing commissions, legal and other related expenses to the extent
that such costs are not already incurred in connection with a new lease
origination as part of the transaction. Management also considers the nature and
extent of our existing business relationships with the tenant, growth prospects
for developing new business with the tenant, the tenant's credit quality and
management's expectations of lease renewals (including those existing under the
terms of the lease agreement), among other factors. A change in any of the
assumptions above, which are very subjective, could have a material impact on
our results of operations.
The allocation of the purchase price directly affects the following in our
condensed consolidated financial statements:
• The amount of purchase price allocated to the various tangible and
intangible assets on our balance sheet;
• The amounts allocated to the value of above-market and below-market lease
values are amortized to rental income over the remaining non-cancelable
terms of the respective leases. The amounts allocated to all other
tangible and intangible assets are amortized to depreciation or
amortization expense. Thus, depending on the amounts allocated between
land and other depreciable assets, changes in the purchase price
allocation among our assets could have a material impact on our FFO, a metric which is used by many REIT investors to evaluate our operating
performance; and
• The period of time over which tangible and intangible assets are depreciated varies greatly, and thus, changes in the amounts allocated to
these assets will have a direct impact on our results of operations.
Intangible assets are generally amortized over the respective life of the
leases, which normally range from 10 to 15 years. Also, we depreciate our
buildings over 39 years, but do not depreciate our land. These differences
in timing could have a material impact on our results of operations.
Asset Impairment Evaluation
We periodically review the carrying value of each property to determine if
circumstances that indicate impairment in the carrying value of the investment
exist or that depreciation periods should be modified. In determining if
impairment exists, management considers such factors as our tenants' payment
histories, the financial condition of our tenants, including calculating the
current leverage ratios of tenants, the likelihood of lease renewal, business
conditions in the industries in which our tenants operate and whether the
carrying value of our real estate has decreased. If any of the factors above
support the possibility of impairment, we prepare a projection of the
undiscounted future cash flows, without interest charges, of the specific
property and determine if the carrying amount of such property is recoverable.
In preparing the projection of undiscounted future cash flows, we estimate the
holding periods of the properties and cap rates using information that we obtain
from market comparability studies and other comparable sources. If
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impairment were indicated, the carrying value of the property would be written
down to its estimated fair value based on our best estimate of the property's
discounted future cash flows using assumptions from market participants. Any
material changes to the estimates and assumptions used in this analysis could
have a significant impact on our results of operations, as the changes would
impact our determination of whether impairment is deemed to have occurred and
the amount of impairment loss that we would recognize.
Using the methodology discussed above and in light of the current economic
conditions discussed above in "Overview-Business Environment," we evaluated our
entire portfolio as of June 30, 2012 for any impairment indicators and performed
an impairment analysis on those select properties that had an indication of
impairment. As a result of this analysis, we concluded that none of our
properties were impaired and we will continue to monitor our portfolio for any
indicators that may change our conclusion.
Results of Operations
The weighted-average yield on our total portfolio, taking into account vacant
properties, was 9.2% as of June 30, 2012. If all properties in the portfolio
were fully occupied, the weighted-average yield would have been 9.4%, assuming
returns on our vacant buildings remained consistent, as of June 30, 2012. The
weighted-average yield on our portfolio is calculated by taking the annualized
straight-line rents, reflected as rental income on our condensed consolidated
statements of operations, of each acquisition as a percentage of the
acquisition. The weighted-average yield does not account for the interest
expense incurred on the mortgages placed on our properties.
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A comparison of our operating results for the three and six months ended
June 30, 2012 and 2011 is below:
For the three months ended June 30,
2012 2011 $ Change % Change
(Dollars in Thousands)
Operating revenues
Rental income $ 12,323 $ 10,729 $ 1,594 15 %
Tenant recovery revenue 87 87 - 0 %
Total operating revenues 12,410 10,816 1,594 15 %
Operating expenses
Depreciation and amortization 3,992 3,475 517 15 %
Property operating expenses 353 202 151 75 %
Due diligence expense 528 131 397 303 %
Base management fee 372 435 (63 ) -14 %
Incentive fee 787 840 (53 ) -6 %
Administration fee 265 260 5 2 %
General and administrative 404 357 47 13 %
Total operating expenses before credit
from Adviser 6,701 5,700 1,001 18 %
Credit to incentive fee (674 ) (445 ) (229 ) 51 %
Total operating expenses 6,027 5,255 772 15 %
Other income (expense)
Interest income-employee loans 8 9 (1 ) -11 %
Other income 34 1 33 NM
Interest expense (4,885 ) (4,201 ) 684 16 %
Distributions attributable to mandatorily
redeemable preferred stock (686 ) 0 686 NM
Total other expense (5,529 ) (4,191 ) (1,338 ) 32 %
Net income 854 1,370 (516 ) -38 %
Distributions attributable to preferred
stock (1,024 ) (1,024 ) - 0 %
Distributions attributable to senior
common stock (22 ) (15 ) (7 ) 47 %
Net income available to common
stockholders $ (192 ) $ 331 $ (523 ) -158 %
Net income available to common
stockholders per weighted average share
of common stock-diluted $ (0.02 ) $ 0.04 $ (0.06 ) -158 %
FFO available to common stockholders $ 3,800$ 3,806 $ (6 )
0 %
Diluted FFO per weighted average share of
common stock $ 0.35 $ 0.39 $ (0.04 ) -11 %
NM = Not meaningful
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For the six months ended June 30,
2012 2011 $ Change % Change
(Dollars in Thousands)
Operating revenues
Rental income $ 24,336 $ 21,164 $ 3,172 15 %
Tenant recovery revenue 171 170 1 1 %
Total operating revenues 24,507 21,334 3,173 15 %
Operating expenses
Depreciation and amortization 7,896 6,845 1,051 15 %
Property operating expenses 686 499 187 37 %
Due diligence expense 688 (8 ) 696 NM
Base management fee 765 787 (22 ) -3 %
Incentive fee 1,686 1,672 14 1 %
Administration fee 575 516 59 11 %
General and administrative 787 812 (25 ) -3 %
Total operating expenses before credit
from Adviser 13,083 11,123 1,960 18 %
Credit to incentive fee (1,259 ) (931 ) 328 35 %
Total operating expenses 11,824 10,192 1,632 16 %
Other income (expense)
Interest income-employee loans 17 19 (2 ) -11 %
Other income 56 45 11 24 %
Interest expense (9,458 ) (8,356 ) 1,102 13 %
Distributions attributable to mandatorily
redeemable preferred stock (1,143 ) 0 1,143 NM
Total other expense (10,528 ) (8,292 ) (2,236 ) 27 %
Net income 2,155 2,850 (695 ) -24 %
Distributions attributable to preferred
stock (2,047 ) (2,047 ) - 0 %
Distributions attributable to senior
common stock (41 ) (31 ) 10 32 %
Net income available to common
stockholders $ 67 $ 772 $ (705 ) -91 %
Net income available to common
stockholders per weighted average share
of common stock-diluted 0.01 $ 0.08 $ (0.07 ) -92 %
FFO available to common stockholders $ 7,963$ 7,617$ 346
5 %
Diluted FFO per weighted average share of
common stock $ 0.73 $ 0.80 $ (0.07 ) -8 %
NM = Not meaningful
Operating Revenues
Rental income increased for both the three and six months ended June 30, 2012,
as compared to the three and six months ended June 30, 2011, because of the 10
properties acquired subsequent to June 30, 2011.
Tenant recovery revenue remained relatively flat for the three and six months
ended June 30, 2012, as compared to the three and six months ended June 30,
2011. There was an increase in insurance premiums from 2011, resulting in
increased reimbursements from our tenants; however, this was partially offset by
a decrease in franchise taxes owed in certain states that are reimbursable by
our tenants.
Operating Expenses
Depreciation and amortization expenses increased for the three and six months
ended June 30, 2012, as compared to the three and six months ended June 30,
2011, because of the 10 properties acquired subsequent to June 30, 2011.
Property operating expenses consist of franchise taxes, management fees,
insurance, ground lease payments and overhead expenses paid on behalf of certain
of our properties. Property operating expenses increased for both the three and
six months ended June 30, 2012, as compared to the three and six months ended
June 30, 2011, primarily because of ground lease payments we are responsible for
paying at two of our properties acquired subsequent to June 30, 2011.
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Due diligence expense primarily consists of legal fees and fees incurred for
third-party reports prepared in connection with potential acquisitions and our
due diligence analyses related thereto. Due diligence expense increased for both
the three and six months ended June 30, 2012, as compared to the three and six
months ended June 30, 2011, as a result of costs incurred related to the five
properties acquired during the six months ended June 30, 2012 coupled with costs
incurred for other potential acquisitions, partially offset by an out of period
adjustment of $250,000 recorded during the six months ended June 30, 2011,
related to the acquisition of the property in Orange City, Iowa in December
2010. See Note 1 to our condensed consolidated financial statements included
elsewhere in this Form 10-Q for further information regarding the out of period
adjustment.
The base management fee decreased for the three and six months ended June 30,
2012, as compared to the three and six months ended June 30, 2011, due to a
decrease in total common stockholders' equity, the main component of the
calculation. The calculation of the base management fee is described in detail
above under "Advisory and Administration Agreements."
The incentive fee decreased for the three months ended June 30, 2012, as
compared to the three months ended June 30, 2011, because of a decrease in
pre-incentive fee FFO due to an increase in property operating, due diligence
and interest expense, partially offset by an increase in rental revenues during
the quarter ended June 30, 2012, as compared to the quarter ended June 30, 2011.
The incentive fee increased slightly for the six months ended June 30, 2012, as
compared to the six months ended June 30, 2011, because of an increase in
pre-incentive fee FFO due to an increase in rental revenues from the 10
acquisitions made over the past twelve months, partially offset by an increase
in property operating, due diligence and interest expense during the six months
ended June 30, 2012, as compared to the six months ended June 30, 2011.
The incentive fee credit increased for both the three and six months ended
June 30, 2012, as compared to the three and six months ended June 30, 2011,
because of the increase in the amount of common stock dividends paid during the
six months ended June 30, 2012, which resulted in a larger portion of the
incentive fee required to be credited. The calculation of the incentive fee is
described in the detail above under "Advisory and Administration Agreements."
The administration fee increased for both the three and six months ended
June 30, 2012, as compared to the three and six months ended June 30, 2011,
primarily as a result of an increase in the amount of the total expenses our
Administrator incurred during the periods, coupled with an increase in our
allocable portion of the total expenses. The calculation of the administration
fee is described in detail above under "Advisory and Administration Agreements."
General and administrative expenses increased for the three months ended
June 30, 2012, as compared to the three months ended June 30, 2011, primarily
due to timing of expenses related to our annual report and proxy. General and
administrative expenses decreased for the six months ended June 30, 2012, as
compared to the six months ended June 30, 2011, primarily due to a decrease in
tax preparation fees during the six months ended June 30, 2012.
Other Income and Expense
Interest income on employee loans decreased during the three and six months
ended June 30, 2012, as compared to the three and six months ended June 30,
2011. This decrease was a result of principal repayments made by employees of
our Adviser over the past 12 months.
Other income increased during the three and six months ended June 30, 2012, as
compared to the three and six months ended June 30, 2011, because of an easement
payment received in 2012 related to our property located in Sterling Heights,
Michigan.
Interest expense increased for the both the three and six months ended June 30,
2012, as compared to the three and six months ended June 30, 2011. This increase
was primarily a result of interest on the $53.5 million of mortgage debt assumed
and issued during the last 12 months, partially offset by reduced interest
expense on our long-term financings from amortizing principal payments made
during the last 12 months.
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Net (Loss) Income Available to Common Stockholders
Net (loss) income available to common stockholders decreased for both the three
and six months ended June 30, 2012, as compared to the three and six months
ended June 30, 2011, primarily because of increased interest expense and
increased distributions to our preferred stockholders from the issuance of our
Term Preferred Stock, partially offset by an increase in rental income earned
from the 10 properties acquired subsequent to June 30, 2011.
Liquidity and Capital Resources
Overview
Our sources of liquidity include cash flows from operations, cash and cash
equivalents, borrowings under our Line of Credit, obtaining mortgages on our
unencumbered properties and issuing additional equity securities. Our available
liquidity at June 30, 2012, was $26.4 million, including $4.3 million in cash
and cash equivalents and an available borrowing capacity of $22.1 million under
our Line of Credit.
Future Capital Needs
We actively seek conservative investments that are likely to produce income in
order to pay distributions to our stockholders. We intend to use the proceeds of
future equity raised and debt capital borrowed to continue to invest in
industrial, commercial and retail real property, make mortgage loans, or pay
down outstanding borrowings under our Line of Credit. Accordingly, to ensure
that we are able to effectively execute our business strategy, we routinely
review our liquidity requirements and continually evaluate all potential sources
of liquidity. Our short-term liquidity needs include proceeds necessary to fund
our distributions to stockholders, pay the debt service costs on our existing
long-term mortgages, and fund our current operating costs. Our long-term
liquidity needs include proceeds necessary to grow and maintain our portfolio of
investments.
We believe that our available liquidity is sufficient to fund our distributions
to stockholders, pay the debt service costs on our existing long-term mortgages
and fund our current operating costs in the near term. We further believe that
our cash flow from operations coupled with the financing capital available to us
in the future are sufficient to fund our long-term liquidity needs.
Additionally, to satisfy either our short-term or long-term obligations, or
both, we may require credits to our management fees that are issued from our
Adviser, although our Adviser is under no obligation to provide any such
credits, either in whole or in part.
Equity Capital
Equity capital markets continue to improve. As a result, we raised, net of
offering costs, $37.0 million of common equity during 2011. We also raised $36.7
million of preferred equity, net of offering costs, in February 2012. We used
these proceeds to repay a portion of the outstanding balance of the Line of
Credit, to acquire additional properties and the remainder for general corporate
and working capital needs.
Currently, we have the ability to raise up to $218.1 million of additional
equity capital through the sale of securities that are registered under our
universal shelf registration statement on Form S-3, or the Universal Shelf, in
one or more future public offerings. Of the $218.1 million of available capacity
under our Universal Shelf, $21.6 million of common stock is reserved for
additional sales under our Open Market Sale Agreement and $51.9 million is
reserved for sales of our senior common stock.
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Debt Capital
As of June 30, 2012, we had 25 fixed-rate mortgage notes payable in the
aggregate principal amount of $314.8 million, collateralized by a total of 66
properties with terms at issuance ranging from 2 years to 25 years. The
weighted-average interest rate on the mortgage notes payable as of June 30, 2012
was 5.72%.
Generally, banks are recommencing their lending practices and the CMBS market is
slowly returning, see the discussion in "Overview - Business Environment" above.
Specifically, we are seeing banks and other non-bank lenders that are willing to
issue medium to long-term mortgages, between 5 and 10 years, albeit on less
favorable terms than were previously available. Consequently, we are focused on
obtaining mortgages through regional banks, non-bank lenders and CMBS.
We have mortgage debt in the aggregate principal amount of $2.4 million payable
during the remainder of 2012 and $58.9 million payable during 2013. The 2012
principal amount payable does not include $45.2 million of balloon principal
payments maturing on one of our long-term mortgages in 2012; however, this
mortgage has one remaining annual extension option through 2013, and we intend
to either exercise this option in 2012 or refinance the pool for a longer term.
As long as we are in compliance with certain covenants under the mortgage loan,
we will be able to exercise the renewal option and will be required to pay a fee
of 0.25% of the current outstanding principal balance, or approximately $0.1
million. The mortgage payments due in 2012 are solely comprised of debt
amortization payments. We have no balloon principal payments due under any of
our other mortgage loans until 2013 and these are not due until the fourth
quarter of 2013; however, we are initiating conversations with lenders in
advance of these maturities and anticipate being able to extend the maturity
dates or refinance with new lenders. We intend to pay the 2012 debt amortization
payments from operating cash flow and borrowings under our Line of Credit.
Operating Activities
Net cash provided by operating activities during the six months ended June 30,
2012, was $10.8 million, as compared to net cash provided by operating
activities of $9.6 million for the six months ended June 30, 2011. This increase
was primarily a result of rental income received from the 10 properties acquired
subsequent to June 30, 2011, partially offset by $1.1 million of leasing
commissions paid for renewing existing leases. The majority of cash from
operating activities is generated from the rental payments that we receive from
our tenants. We utilize this cash to fund our property-level operating expenses
and use the excess cash primarily for debt and interest payments on our mortgage
notes payable, interest payments on our Line of Credit, distributions to our
stockholders, management fees to our Adviser, and other entity-level expenses.
Investing Activities
Net cash used in investing activities during the six months ended June 30, 2012,
was $46.3 million, which primarily consisted of the acquisition of five
properties during the six months ended June 30, 2012, coupled with tenant
improvements performed at certain of our properties and net payments to our
lenders for reserves, as compared to net cash used in investing activities
during the six months ended June 30, 2011, of $16.4 million, which primarily
consisted of the acquisition of two properties, coupled with tenant improvements
performed at certain of our properties and net payments to our lenders for
reserves.
Financing Activities
Net cash provided by financing activities during the six months ended June 30,
2012, was $36.5 million, which primarily consisted of proceeds from the sale of
our Term Preferred Stock and proceeds from the issuance of mortgage notes
payable, partially offset by distributions paid to our stockholders, principal
repayments on mortgage notes payable and net repayments on our Line of Credit.
Net cash provided by financing activities for the six months ended June 30,
2011, was $2.1 million, which primarily consisted of proceeds from the sale of
common stock, partially offset by distributions paid to our stockholders,
principal repayments on mortgage notes payable and net repayments on our Line of
Credit.
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Line of Credit
In December 2010, we procured a $50.0 million Line of Credit maturing on
December 28, 2013, with Capital One, N.A. serving as a revolving lender, a
letter of credit issuer and as an administrative agent and Branch Banking and
Trust Company serving as a revolving lender and letter of credit issuer. The
Line of Credit originally provided for a senior secured revolving credit
facility of up to $50.0 million, with a standby letter of credit sublimit of up
to $20.0 million. In January 2012, the Line of Credit was expanded to $75.0
million and Citizens Bank of Pennsylvania was added as a revolving lender and
letter of credit issuer. Currently, seven of our properties are pledged as
collateral under our Line of Credit. The interest rate per annum applicable to
the Line of Credit is equal to the London Interbank Offered Rate, or LIBOR, plus
an applicable margin of up to 3.00% depending upon our leverage. Our leverage
ratio used in determining the applicable margin for interest on the Line of
Credit is recalculated quarterly. We are subject to an annual maintenance fee of
0.25% per year. Our ability to access this source of financing is subject to our
continued ability to meet customary lending requirements such as compliance with
financial and operating covenants and our meeting certain lending limits. One
such covenant requires us to limit distributions to our stockholders to 95% of
our FFO, with acquisition-related costs required to be expensed under ASC 805
added back to FFO for covenant purposes. In addition, the maximum amount that we
may draw under this agreement is based on a percentage of the value of
properties pledged as collateral to the banks, which must meet agreed upon
eligibility standards.
When we are able to procure mortgages for these pledged properties, the banks
will release the properties from the Line of Credit and reduce the availability
under the Line of Credit by the advanced amount of the released property.
Conversely, as we purchase new properties meeting the eligibility standards, we
may pledge these new properties to obtain additional advances under the Line of
Credit. Our availability under the Line of Credit will also be reduced by
letters of credit used in the ordinary course of business. We may use the
advances under the Line of Credit for both general corporate purposes and the
acquisition of new investments.
At June 30, 2012, there was $0 outstanding under the Line of Credit and $6.1
million outstanding under letters of credit at a weighted average interest rate
of 2.8%. At June 30, 2012, the remaining borrowing capacity available under the
Line of Credit was $22.1 million. Our ability to increase the availability under
our Line of Credit is dependent upon our pledging additional properties as
collateral. Traditionally, we have pledged new properties to the Line of Credit
as we arrange for long-term mortgages for these pledged properties. Currently,
only 9 of our properties do not have long-term mortgages, and 7 of those are
pledged as collateral under our Line of Credit. Accordingly, we have only 2
properties which are unencumbered. We were in compliance with all covenants
under the Line of Credit as of June 30, 2012.
Contractual Obligations
The following table reflects our material contractual obligations as of June 30,
2012:
Payments Due by
Period (Dollars in Thousands)
Less than
Contractual Obligations Total 1 Year 1-3 Years 3-5 Years More than 5 Years
Debt Obligations (1) $ 354,077 $ 5,006 $ 81,137 (4) $ 199,652 $ 68,286
Interest on Debt Obligations (2) 90,984 19,380 34,671
22,339 14,594
Operating Lease Obligations (3) 7,608 413 825 825 5,545
Total $ 452,669 $ 24,799 $ 116,633 $ 222,816 $ 88,425
(1) Debt obligations represent borrowings under our Line of Credit, which
represents $0 of the debt obligation due in 2013, mortgage notes payable that
were outstanding as of June 30, 2012 and amounts due under our Term Preferred
Stock.
(2) Interest on debt obligations includes estimated interest on our borrowings
under our Line of Credit, mortgage notes payable and interest due under our
Term Preferred Stock. The balance and interest rate on our Line of Credit is
variable; thus, the amount of interest calculated for purposes of this table
was based upon rates and balances as of June 30, 2012.
(3) Operating lease obligations represent the ground lease payments due on our
Tulsa, Oklahoma, Dartmouth, Massachusetts, and Springfield, Missouri
properties.
(4) The $45.2 million mortgage note issued in September 2008 was extended to
September 30, 2012. We have an additional option to extend the maturity date
until October 2013.
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Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of June 30, 2012.
Funds from Operations
The National Association of Real Estate Investment Trusts, or 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 same 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 and impairment losses on
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 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 our performance or to cash flows
from operations as a measure of liquidity or ability to make distributions.
Comparison of FFO, using the NAREIT definition, to similarly titled measures for
other REITs may not necessarily be meaningful due to possible differences in the
application of the NAREIT definition used by such REITs.
FFO available to common stockholders is FFO adjusted to subtract distributions
made to holders of preferred and senior common stock. We believe that net income
available to common stockholders is the most directly comparable GAAP measure to
FFO available to common stockholders.
Basic funds from operations per share, or Basic FFO per share, and diluted funds
from operations per share, or Diluted FFO per share, is FFO available to common
stockholders divided by the number of weighted average shares of common stock
outstanding and FFO available to common stockholders divided by the number of
weighted average shares of common stock outstanding on a diluted basis,
respectively, during a period. We believe that FFO available to common
stockholders, Basic FFO per share and Diluted FFO per share are useful to
investors because they provide investors with a further context for evaluating
our FFO results in the same manner that investors use net income and earnings
per share, or EPS, in evaluating net income available to common stockholders. In
addition, because most REITs provide FFO available to common stockholders, Basic
FFO and Diluted FFO per share information to the investment community, we
believe these are useful supplemental measures when comparing us to other REITs.
We believe that net income is the most directly comparable GAAP measure to FFO,
Basic EPS is the most directly comparable GAAP measure to Basic FFO per share,
and that diluted EPS is the most directly comparable GAAP measure to Diluted FFO
per share.
The following table provides a reconciliation of our FFO for the three and six
months ended June 30, 2012 and 2011, to the most directly comparable GAAP
measure, net income, 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:
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For the three months ended June 30,
2012 2011
(Dollars in Thousands, Except Per Share Data)
Net income $ 854 $ 1,370
Less: Distributions attributable to
preferred and senior common stock (1,046 ) (1,039 )
Net (loss) income available to common
stockholders (192 ) 331
Add: Real estate depreciation and
amortization 3,992 3,475
FFO available to common stockholders $ 3,800 $ 3,806
Weighted average shares
outstanding-basic 10,945 9,782
Weighted average shares
outstanding-diluted 10,945 9,834
Basic & diluted net (loss) income per
weighted average share of common stock $ (0.02 ) $ 0.04
Basic FFO per weighted average share of
common stock $ 0.35 $ 0.39
Diluted FFO per weighted average share
of common stock $ 0.35 $ 0.39
Distributions declared per share of
common stock $ 0.375 $ 0.375
For the six months ended June 30,
2012 2011
(Dollars in Thousands, Except Per Share Data)
Net income $ 2,155 $ 2,850
Less: Distributions attributable to
preferred and senior common stock (2,088 ) (2,078 )
Net income available to common
stockholders 67 772
Add: Real estate depreciation and
amortization 7,896 6,845
FFO available to common stockholders $ 7,963 $ 7,617
Weighted average shares
outstanding-basic 10,945 9,522
Weighted average shares
outstanding-diluted 11,011 9,573
Basic & diluted net (loss) income per
weighted average share of common stock $ 0.01 $ 0.08
Basic FFO per weighted average share
of common stock $ 0.73 $ 0.80
Diluted FFO per weighted average share
of common stock $ 0.73 $ 0.80
Distributions declared per share of
common stock $ 0.750 $ 0.750
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