Expenses of $1.8 million related to an internal audit committee investigation and a special committee negatively impacted both quarterly income and FFO. So far this year, the audit investigation and committee has cost the locally based military and student housing REIT $6.7 million.
As GlobeSt.com previously reported, the investigation and formation of the special committee began this March, prompted by an allegation of "tone at the top" problems and "material weaknesses" in controls over financial reporting. The special committee is exploring strategic alternatives, including a sale of all or part of the company. Gary Holloway Sr., president, chairman and CEO, has said he would not buy the company but was open to participation in a buyout.
During the third quarter, the student housing division had a net loss of $3.7 million on total revenues of $48.6 million, compared with a third-quarter 2005 loss of $1 million on revenues of $37.3 million. Revenues from same-store student housing properties, those in the portfolio for 12 months, were relatively unchanged, but same-store operating expenses rose 16.6%. The increase was attributed to higher utility, payroll, repair and maintenance expenses along with bad debt from uncollected rents.
Net income from the military housing business segment inched up to $2.9 million on revenues of $25 million in third quarter. This compares with net income of $2.6 million on approximately $27.8 million in revenues in third quarter 2005.
GMH did not hold a third-quarter conference call. The quarterly and nine-month data was provided in a statement in which management said it would announce the date and time of a conference call. The statement also said GMH would not provide guidance for 2006 and 2007, pending completion of the special committee's process.
By midday Nov. 14, GCT common stock was trading on the NYSE at $13.36 a share. The 52-week high of $17.10 occurred this March 1, prior to the audit committee investigation, and the 52-week low of $10.75 a share occurred the following April 13.
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