2024-03-20 08:00:00 ET
Summary
- Gladstone Commercial raised $9.2 million in equity, sold $7.0 million more in properties than they bought, and reported FFO in excess of its dividends of $11.5 million, yet net debt only fell by $10.7 million.
- Leasing commissions and property improvements drained $9.0 million of GOOD’s cash in 2023 and are likely to do so again in 2024.
- 2023 FFO was augmented by GOOD’s unusual accounting policy of booking revenue for improvements paid for by tenants, which generates no cash.
- 2024 FFO will be impacted by expiring interest rate caps and lost revenue due to expiring leases and properties that were or will be sold.
In January of 2023 Gladstone Commercial (GOOD) cut its dividend, which had been at approximately $0.125 per month since 2008 to $.10 per month. As I pointed out in 2022 in both Gladstone Commercial Beats Estimates on $4.3 Million In Non-Recurring Accelerated Rents (November 2022) and Gladstone Commercial: My Calculations Imply Rising Rates Will Show It Is Swimming Naked, (July 2022) GOOD’s dividend was unsustainable, and a dividend cut was the natural outcome of having overpaid the dividend relative to cash flow for years. On the earnings call following the cut, the CEO, David Gladstone, claimed it was likely the dividend would be raised within a year....
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Gladstone Commercial: Cash Flow And FFO Diverge