Key Takeaways Gladstone Commercial signed a 10-year, one-month lease extension with JBT Marel.The lease covers a 67,200-square-foot industrial building in Chalfont, Pennsylvania.This marks the third lease extension with JBT Marel since Gladstone's original purchase.Gladstone Commercial (GOOD) recently executed a 10-year, one-month lease extension with JBT Marel Corporation at its industrial building, which spans 67,200 square feet of space in Chalfont, PA.JBT Marel is the successor entity after the recent a ...

MCLEAN, VA / ACCESS Newswire / September 10, 2025 / Gladstone Commercial Corporation (Nasdaq:GOOD) ("Gladstone Commercial") announced that it has executed a 10-year, 1-month lease extension with JBT Marel Corporation ("JBT Marel") at its 67,200 square foot industrial building in Chalfont, Pennsylvania. JBT Marel is the successor entity following the recently closed acquisition of Marel hf. ...

Group 1 - Gladstone Commercial is shifting its property portfolio from offices to industrial properties to reduce its risk profile, but this has not led to expected dividend yield compression [1] - The equity market is highlighted as a powerful mechanism for wealth creation or destruction over the long term [1] - Pacifica Yield focuses on long-term wealth creation by targeting undervalued high-growth companies, high-dividend stocks, REITs, and green energy firms [1]

Core Insights - The triple net REIT sector is experiencing significant changes due to rising cap rates, the reintroduction of rent escalators, and improved valuations, creating new investment opportunities [2][8][40] Group 1: Factors Reviving the Triple Net Sector - Cap rates have risen considerably, now ranging from 7% to 9.5% for high-quality triple net assets, which is conducive to healthy acquisition pipelines [4][8] - Escalators have returned, with many transactions now featuring escalators of 2% to 3.5%, enhancing long-term growth potential [6][12] - Valuations are cheaper, with triple net REITs trading at an average price to AFFO of 12.9X compared to the average REIT at 16.1X, indicating a favorable investment environment [19][21] Group 2: Company-Specific Insights - W.P. Carey (WPC) has a significant acquisition pipeline with $1.1 billion in new investments at mid-9% cap rates, supported by a low cost of capital [26][30] - Broadstone Net Lease (BNL) is capitalizing on a massive build-to-suit pipeline, which is projected to enhance long-term growth due to the development of new properties at high cap rates [32][35] - Gladstone Commercial (GOOD) is leveraging in-house credit underwriting capabilities to secure high cap rate acquisitions, resulting in a current dividend yield of 9% and potential for double-digit total returns [37][39] Group 3: Market Dynamics - The demand for triple net REITs has decreased in a higher interest rate environment, but the growth potential from escalators is expected to attract investors back to the sector [40][41] - Current market valuations do not fully account for the growth potential alongside dividend yields, suggesting that multiples may re-rate higher as companies demonstrate consistent growth [41]

Core Insights - Gladstone Commercial Corp. (NASDAQ: GOOD) maintained a disciplined portfolio management approach in Q2 2025, ending the quarter with 143 properties across 27 states, marking an expansion from the previous quarter [1][3]. Portfolio Management - In Q2 2025, GOOD executed its capital recycling strategy by selling two non-core properties for a combined total of $23.6 million [1][5]. - The company expanded its portfolio by acquiring properties totaling 519,093 square feet for $79.3 million, achieving a blended cap rate of 8.88% [1][5]. Leasing Activity - During the same period, GOOD leased or renewed 55,308 square feet with a remaining lease term of 0.8 years, emphasizing its focus on industrial assets [1][5]. Financial Moves - The company raised $10.4 million through an ATM equity offering and repaid $7.2 million in variable rate debt, indicating a proactive approach to managing its capital structure [5].

Financial Data and Key Metrics Changes - Funds from Operations (FFO) per share for Q2 2025 was $0.33, down from $0.36 in Q2 2024, while Core FFO per share was $0.35 compared to $0.36 in the same period [13][14] - Total operating revenues increased to $39.5 million in Q2 2025 from $37.1 million in Q2 2024, while operating expenses decreased to $25.1 million from $26 million [14] - Net assets rose from $1.16 billion to $1.2 billion due to acquisitions made during the quarter [15] Business Line Data and Key Metrics Changes - The company acquired two industrial facilities totaling 519,093 square feet for approximately $79 million, increasing the industrial concentration in the portfolio to 67% of annualized straight-line rents [9][10] - Portfolio occupancy remained high at 98.7% as of June 30, 2025 [9][13] Market Data and Key Metrics Changes - The industrial real estate sector showed steady performance with net absorption of 29.6 million square feet in 2025, while the vacancy rate rose slightly to 7.1% [7][8] - New construction completions declined to the lowest level since 2019, indicating a slowdown in the development pipeline [8] Company Strategy and Development Direction - The company aims to acquire high-quality industrial assets that are mission-critical to tenants while selectively disposing of non-core assets [12] - The focus remains on maintaining a disciplined underwriting approach, emphasizing credit quality, location, and long-term value [11] Management's Comments on Operating Environment and Future Outlook - Management noted continued uncertainty in the economic environment but expressed confidence in the industrial real estate sector's resilience [6][9] - The company anticipates upward pressure on industrial rental rates due to a slowdown in new construction and increasing competition for space [9] Other Important Information - The company maintained a common stock dividend of $0.30 per share per quarter [18] - As of June 30, 2025, the company had $94.4 million in revolver borrowings outstanding and approximately $6 million in cash [17] Q&A Session Summary Question: Can you talk about the acquisition pipeline? - The company currently has six Letters of Intent (LOIs) out and is reviewing around 20 transactions, expecting to finalize a $50 million transaction soon [25][27] Question: Can you provide details on the industrial property sold? - The sold property was located in Georgia, where the tenant exercised a purchase option within the lease [29] Question: How is the incentive fee waiver determined? - The waiver is discussed quarterly with management, considering the alignment with shareholder interests and employee retention [30] Question: What are the plans regarding the revolver borrowings? - The company is considering options such as sales under the ATM program and refinancing discussions with lenders [57] Question: Are you seeing any changes in cap rates? - Management does not expect cap rates to reach the 9% range, with average cap rates projected to be around 8.5% [47][48] Question: How is the company managing tenant quality amid macro uncertainties? - The company has not seen significant impacts on tenant quality and maintains its underwriting criteria [49]

Portfolio Overview - As of June 30, 2025, Gladstone Commercial owned approximately 17 million square feet of primarily industrial and office real estate nationwide[8] - Total assets were approximately $1.21 billion, representing investments in 143 properties leased to 107 tenants across 27 states[9, 11] - The company's leases had an average remaining term of 7.1 years, with approximately 51% of tenants having an investment-grade or equivalent credit rating[9] - The portfolio's occupancy rate was 98.7%[11] Financial Highlights - For Q2 2025, Gladstone Commercial generated Funds From Operations (FFO) of $15.4 million, or $0.33 per diluted share, and Core FFO of $16.1 million, or $0.35 per diluted share[16] - The company purchased a 303,991 square foot industrial property in Germantown, Wisconsin for $62.7 million with a 19.4-year lease term, and a 215,102 square foot, three-property industrial portfolio in Harrison Township, Michigan for $16.3 million with a 10.0-year lease term[16] - The company paid monthly common stock dividends totaling $0.30 per common share for the quarter, or an annualized $1.20 per common share[16] - As of June 30, 2025, the company's total capitalization was $1.663 billion, with net total debt at $794 million, resulting in a net total debt to enterprise value ratio of 47.4%[12] Capital Structure - As of June 30, 2025, the implied common equity market capitalization was $672 million, based on a closing stock price of $14.33 per share[12, 31] - The company's net mortgage debt was $246.222 million, with a weighted average interest rate of 4.22%[31] - The company had $38.7 million in corporate liquidity, including $11.7 million in cash and cash equivalents and $27.0 million available under the revolving credit facility[13]

Gladstone Commercial (GOOD) came out with quarterly funds from operations (FFO) of $0.35 per share, in line with the Zacks Consensus Estimate . This compares to FFO of $0.36 per share a year ago. These figures are adjusted for non-recurring items. A quarter ago, it was expected that this real estate investment trust would post FFO of $0.34 per share when it actually produced FFO of $0.34, delivering no surprise.Over the last four quarters, the company has surpassed consensus FFO estimates just once.Gladston ...

[Financial Highlights](index=1&type=section&id=Financial%20Highlights) Gladstone Commercial reported a 5.4% sequential increase in total operating revenue to **$39.5 million**, with Core FFO growing 5.4% to **$16.1 million** or **$0.35 per share**, despite a 24.0% decrease in net income to **$1.5 million** Q2 2025 Key Financial Metrics (vs. Q1 2025) | Metric | Q2 2025 (USD) | Q1 2025 (USD) | Change (USD) | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Operating Revenue | $39,533,000 | $37,501,000 | $2,032,000 | 5.4% | | Net Income to Common Stockholders | $1,457,000 | $1,917,000 | ($460,000) | (24.0)% | | FFO per Share (diluted) | $0.33 | $0.34 | ($0.01) | (2.9)% | | Core FFO per Share (diluted) | $0.35 | $0.34 | $0.01 | 2.9% | | Dividends Declared per Common Share | $0.30 | $0.30 | $0.00 | 0.0% | - Core FFO increased by **5.4%** quarter-over-quarter to **$16.1 million**, primarily due to higher revenues from recent acquisitions and a lower net incentive fee, partially offset by increased interest expense from higher variable rate debt[7](index=7&type=chunk) - Net income available to common stockholders was **$1.5 million** (**$0.03 per share**) for Q2 2025, a decrease from **$1.9 million** (**$0.04 per share**) in Q1 2025[8](index=8&type=chunk) - As of June 30, 2025, the company owned **143 properties** with a portfolio lease rate of **98.7%**, a slight increase from **98.4%** in the prior quarter[4](index=4&type=chunk) [Operational Highlights](index=2&type=section&id=Operational%20Highlights) The company maintained 100% rent collection, executed strategic property acquisitions and dispositions, and continued capital raising and debt management activities both during and after the quarter [Second Quarter 2025 Activity](index=2&type=section&id=Second%20Quarter%202025%20Activity) The company achieved **100% cash rent collection**, acquired two properties for **$79.3 million**, sold two non-core assets for **$23.6 million**, raised **$10.4 million** via ATM, and repaid **$7.2 million** in variable rate debt - Collected **100%** of cash rents due for April, May, and June[9](index=9&type=chunk) - Acquired two fully-occupied facilities for **$79.3 million** at a weighted average cap rate of **8.88%**, and sold one non-core office property for **$5.1 million** and one non-core industrial property for **$18.5 million**[9](index=9&type=chunk) - Issued **750,426 common shares** under the ATM program for net proceeds of **$10.4 million**, and repaid **$7.2 million** in variable rate mortgage debt[9](index=9&type=chunk) - Paid monthly cash distributions totaling **$0.30 per common share** for the quarter[9](index=9&type=chunk) [Subsequent Events (Post-Quarter End)](index=4&type=section&id=Subsequent%20Events%20(Post-Quarter%20End)) Post-quarter, the company maintained **100% July rent collection**, executed new leases for **143,844 square feet**, raised **$0.7 million** via ATM, and declared Q3 2025 monthly distributions - Collected **100%** of cash rents due in July[15](index=15&type=chunk) - Leased or renewed **143,844 square feet** at two properties with remaining lease terms ranging from **5.3 to 11.4 years**[15](index=15&type=chunk) - Issued **50,540 shares** of common stock under the ATM program for net proceeds of **$0.7 million**[15](index=15&type=chunk) - Declared monthly cash distributions for July, August, and September 2025, totaling **$0.30 per common share**[15](index=15&type=chunk) [Management Commentary](index=4&type=section&id=Management%20Commentary) Management emphasized consistent performance, strong rent collection, and a capital recycling strategy focused on de-levering and reinvesting in industrial properties within target growth markets, anticipating continued same-store rent increases - The company's capital recycling program involves selling non-core assets to de-lever the portfolio and redeploy proceeds into stronger target growth markets, with a specific focus on industrial investment opportunities[11](index=11&type=chunk) - Management expressed confidence in the tenant base's ability to navigate economic challenges, citing **100%** cash rent collection through July 2025[11](index=11&type=chunk) - The company expects same-store rents, which have increased by **2% annually** in recent years, to continue rising as the portfolio grows[11](index=11&type=chunk) [Non-GAAP Financial Measures](index=4&type=section&id=Non-GAAP%20Financial%20Measures) This section defines FFO as a NAREIT-standardized measure adjusting net income for real estate depreciation and property sales, and Core FFO as a company-specific adjustment for non-recurring items to enhance comparability - **FFO (Funds from Operations):** Defined by NAREIT as net income excluding gains/losses from property sales and impairment losses, plus real estate depreciation and amortization, serving as a supplemental measure of a REIT's operating performance[14](index=14&type=chunk) - **Core FFO:** Defined as FFO adjusted for certain non-recurring items such as acquisition-related expenses or gains/losses from early debt extinguishment, intended to reflect the results of the core operating portfolio[16](index=16&type=chunk) [Forward-Looking Statements](index=5&type=section&id=Forward-Looking%20Statements) The report contains forward-looking statements regarding income stability, re-leasing, and portfolio growth, which are subject to inherent risks and uncertainties detailed in SEC filings - Statements regarding the stability of income, ability to re-lease properties, and portfolio growth are considered "forward-looking statements" and involve inherent risks and uncertainties[18](index=18&type=chunk)

PART I [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Gladstone Commercial Corporation's unaudited condensed consolidated financial statements as of June 30, 2025, detail its financial position, operational performance, and cash flows [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to **$1.21 billion** by June 30, 2025, driven by real estate acquisitions, while liabilities and equity also saw increases Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total real estate, net** | $1,007,821 | $892,147 | | **Cash and cash equivalents** | $11,660 | $10,956 | | **TOTAL ASSETS** | **$1,209,993** | **$1,094,348** | | **Mortgage notes payable, net** | $257,882 | $269,579 | | **Borrowings under Revolver** | $94,370 | $1,900 | | **TOTAL LIABILITIES** | **$862,631** | **$753,006** | | **TOTAL EQUITY** | **$177,321** | **$171,301** | [Condensed Consolidated Statements of Operations and Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) Net income significantly improved to **$4.6 million** for Q2 2025 and **$9.8 million** for the six-month period, driven by increased lease revenue Statement of Operations Summary (in thousands) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | **Lease revenue** | $39,533 | $37,057 | $77,034 | $72,779 | | **Total operating expenses** | $25,146 | $25,973 | $49,001 | $49,290 | | **Net income** | $4,634 | $1,600 | $9,773 | $5,125 | | **Net income (loss) available to common stockholders** | $1,456 | $(1,614) | $3,374 | $(1,313) | | **EPS (basic & diluted)** | $0.03 | $(0.04) | $0.07 | $(0.03) | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow increased to **$53.5 million**, while significant real estate acquisitions led to **$155.8 million** in cash used for investing, largely funded by **$103.1 million** from financing activities Cash Flow Summary for the Six Months Ended June 30 (in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $53,532 | $28,626 | | **Net cash (used in) provided by investing activities** | $(155,828) | $5,807 | | **Net cash provided by (used in) financing activities** | $103,122 | $(36,149) | | **Net increase (decrease) in cash** | $826 | $(1,716) | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes disclose accounting policies, related-party transactions, real estate portfolio changes, debt structure, and equity activities, including significant acquisitions and financing events - As of June 30, 2025, the company owned **143 properties** totaling **17.0 million square feet** across 27 states[19](index=19&type=chunk) - During the first six months of 2025, the company acquired **ten industrial properties** for a total purchase price of **$153.1 million**[47](index=47&type=chunk)[48](index=48&type=chunk) - The company sold **one property** for **$5.1 million**, resulting in a net gain of **$377,000**, as part of its capital recycling program[61](index=61&type=chunk) - On May 30, 2025, the Operating Partnership entered into a new **$20.0 million unsecured term loan (Term Loan D)** maturing in 2027[83](index=83&type=chunk) - During the six months ended June 30, 2025, the company sold **2,521,007 shares of common stock**, raising approximately **$38.0 million** in net proceeds under its ATM program[96](index=96&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's strong operational performance, including high occupancy and rent collection, significant industrial property acquisitions, and financing activities, noting a slight decrease in FFO per share - As of August 6, 2025, the company's portfolio of **143 properties** was **98.7% occupied**, with an average remaining lease term of **7.0 years**[111](index=111&type=chunk) - The company collected **100% of all outstanding base rents** for the six months ended June 30, 2025, demonstrating the strength of its tenant base and underwriting[115](index=115&type=chunk) H1 2025 Acquisition Activity (in thousands) | Aggregate Square Footage | Weighted Avg. Remaining Lease Term | Aggregate Purchase Price | Annualized GAAP Fixed Lease Payments | | :--- | :--- | :--- | :--- | | 874,871 | 14.3 years | $153,067 | $13,155 | FFO Reconciliation Summary (in thousands, except per share) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | **Net income (loss) available to common stockholders** | $1,457 | $(1,625) | $3,377 | $(1,322) | | **FFO available to common stockholders - basic** | $15,338 | $14,437 | $30,501 | $27,976 | | **Basic FFO per share** | $0.33 | $0.36 | $0.67 | $0.69 | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=50&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk on variable-rate debt, mitigated by derivatives, with a **1% SOFR increase** potentially decreasing annual net income by **$1.57 million** Interest Rate Sensitivity Analysis (Annual Impact, in thousands) | Interest Rate Change | Net increase (decrease) to Net Income | | :--- | :--- | | 3% Decrease to SOFR | $4,695 | | 1% Decrease to SOFR | $1,565 | | 1% Increase to SOFR | $(1,565) | | 3% Increase to SOFR | $(4,695) | [Item 4. Controls and Procedures](index=51&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[198](index=198&type=chunk) - No changes occurred during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[199](index=199&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=52&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently subject to any material legal proceedings - The company is not currently subject to any material legal proceedings, nor is any material legal proceeding threatened against it[202](index=202&type=chunk) [Item 1A. Risk Factors](index=52&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - There are no material changes to risks associated with the business from those previously set forth in the Annual Report on Form 10-K for the year ended December 31, 2024[203](index=203&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=52&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports no sales of unregistered securities or issuer purchases of its equity securities during the period - There were no sales of unregistered securities or issuer purchases of equity securities[204](index=204&type=chunk) [Item 3. Defaults Upon Senior Securities](index=52&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon its senior securities - None[205](index=205&type=chunk) [Item 6. Exhibits](index=52&type=section&id=Item%206.%20Exhibits) This section provides an index of all exhibits filed with the Form 10-Q, including corporate governance documents, material contracts, and certifications