[PART I - FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements for Gladstone Commercial Corporation as of March 31, 2022, and for the three months then ended [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for Gladstone Commercial Corporation as of March 31, 2022, and for the three months then ended [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2022, total assets were $1.15 billion, a slight increase from $1.14 billion at year-end 2021 Condensed Consolidated Balance Sheets (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total real estate, net | $964,316 | $958,586 | | Cash and cash equivalents | $9,585 | $7,956 | | **TOTAL ASSETS** | **$1,154,409** | **$1,143,352** | | Mortgage notes payable, net | $446,720 | $449,944 | | Borrowings under Revolver | $34,550 | $33,550 | | **TOTAL LIABILITIES** | **$769,578** | **$770,529** | | **TOTAL EQUITY** | **$214,570** | **$202,562** | [Condensed Consolidated Statements of Operations and Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) For the three months ended March 31, 2022, the company reported a net income of $3.4 million, a substantial improvement from $38 thousand in the same period of 2021 Q1 2022 vs Q1 2021 Operations (in thousands, except per share data) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Lease revenue | $35,531 | $34,677 | | Total operating expenses | $25,658 | $26,904 | | Net income | $3,391 | $38 | | Net income (loss) available to common stockholders | $322 | $(2,955) | | EPS - basic & diluted | $0.01 | $(0.08) | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For Q1 2022, net cash from operating activities was stable at $17.2 million, with financing activities providing $1.9 million due to equity issuance Q1 2022 vs Q1 2021 Cash Flows (in thousands) | Cash Flow Activity | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $17,187 | $16,879 | | Net cash used in investing activities | $(17,571) | $(6,526) | | Net cash provided by (used in) financing activities | $1,866 | $(11,824) | | **Net increase (decrease) in cash** | **$1,482** | **$(1,471)** | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail accounting policies, related-party transactions, real estate, debt, and equity, including Q1 2022 property acquisitions and equity raises - In Q1 2022, the company acquired two properties for an aggregate purchase price of **$13.5 million**[42](index=42&type=chunk) - No properties were sold during Q1 2022, in contrast to two non-core properties sold in Q1 2021[50](index=50&type=chunk) - The company raised **$20.3 million** in net proceeds from selling **0.9 million shares** of common stock through its At-the-Market (ATM) program during Q1 2022[79](index=79&type=chunk) - Subsequent to quarter-end, on May 4, 2022, the company acquired a two-property portfolio for **$19.3 million** and issued **$10.0 million** of fixed-rate debt[88](index=88&type=chunk)[89](index=89&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the business environment, including strong industrial demand, rising interest rates, and the impact of COVID-19, with FFO per share at $0.39 [Business Environment and COVID-19 Impact](index=28&type=section&id=Business%20Environment%20and%20COVID-19%20Impact) The business environment features strong industrial demand offsetting weaker office demand, with the company maintaining 100% rent collection and adequate liquidity - Demand for industrial space continues to be strong due to e-commerce growth, while the office sector experiences negative absorption and downward pressure on rental rates[97](index=97&type=chunk) - As of May 4, 2022, the company has collected **100%** of all outstanding rent for calendar year 2021 and the first quarter of 2022[101](index=101&type=chunk) - The company is monitoring the transition from LIBOR to SOFR for its variable rate debt, anticipated to be phased out by June 2023[106](index=106&type=chunk) [Recent Developments](index=29&type=section&id=Recent%20Developments) During Q1 2022 and subsequently, the company acquired properties, executed new leases, and raised $20.3 million via its common stock ATM program Q1 2022 Acquisition Activity (in thousands) | Aggregate Square Footage | Weighted Average Remaining Lease Term | Aggregate Purchase Price | Annualized GAAP Fixed Lease Payments | | :--- | :--- | :--- | :--- | | 136,000 | 10.2 years | $13,463 | $876 | - During and subsequent to Q1 2022, the company executed four leases totaling **257,978 sq. ft.** with a weighted average lease term of **10.6 years**[112](index=112&type=chunk) - In Q1 2022, the company sold **0.9 million shares** of common stock, raising **$20.3 million** in net proceeds under its ATM program[116](index=116&type=chunk) [Portfolio Diversity](index=32&type=section&id=Portfolio%20Diversity) The company's portfolio is diversified by tenant, industry, and geography to mitigate risk, with no single tenant exceeding 4.4% of lease revenue Top 5 Industries by Lease Revenue (Q1 2022) | Industry Classification | Lease Revenue (in thousands) | Percentage of Revenue | | :--- | :--- | :--- | | Telecommunications | $5,609 | 15.8% | | Automotive | $4,636 | 13.0% | | Diversified/Conglomerate Services | $4,537 | 12.8% | | Healthcare | $3,984 | 11.2% | | Diversified/Conglomerate Manufacturing | $2,626 | 7.4% | [Results of Operations](index=35&type=section&id=Results%20of%20Operations) Total operating revenues increased by 2.5% to $35.5 million in Q1 2022, driven by acquisitions, while net income available to common stockholders significantly improved Lease Revenue by Property Type (in thousands) | Property Type | Q1 2022 | Q1 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Same Store Properties | $29,258 | $30,163 | $(905) | (3.0)% | | Acquired & Disposed Properties | $1,842 | $528 | $1,314 | 248.9% | | Properties with Vacancy | $4,431 | $3,986 | $445 | 11.2% | | **Total** | **$35,531** | **$34,677** | **$854** | **2.5%** | - Depreciation and amortization decreased by **$2.0 million (12.1%)** YoY, mainly due to accelerated depreciation related to two early lease terminations in Q1 2021[139](index=139&type=chunk) - Interest expense decreased by **8.1%** YoY, primarily due to costs incurred to repay outstanding mortgage debt in Q1 2021[143](index=143&type=chunk) [Liquidity and Capital Resources](index=37&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2022, the company had $35.2 million in available liquidity and anticipates refinancing $101.7 million in mortgage debt maturing in 2022 - Available liquidity as of March 31, 2022, was **$35.2 million**, consisting of **$9.6 million** in cash and **$25.6 million** of availability under the Credit Facility[147](index=147&type=chunk) - As of May 4, 2022, the company had the ability to raise up to **$669.3 million** of additional equity capital under its 2020 Universal Shelf registration[153](index=153&type=chunk) Contractual Obligations as of March 31, 2022 (in thousands) | Obligation Type | Total | Less than 1 Year | 1-3 Years | 3-5 Years | More than 5 Years | | :--- | :--- | :--- | :--- | :--- | :--- | | Debt Obligations | $708,956 | $121,447 | $310,385 | $164,437 | $112,687 | | Interest on Debt | $75,199 | $21,516 | $30,194 | $15,613 | $7,876 | | Operating Lease Obligations | $9,152 | $491 | $986 | $994 | $6,681 | | Purchase Obligations | $8,109 | $4,337 | $3,772 | — | — | [Funds from Operations (FFO)](index=40&type=section&id=Funds%20from%20Operations%20(FFO)) Basic FFO available to common stockholders and OP unitholders for Q1 2022 was $15.0 million, or $0.39 per share, a slight decrease from the prior year FFO Reconciliation and Per Share Data (in thousands, except per share amounts) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net income (loss) available to common stockholders and Non-controlling OP Unitholders | $324 | $(2,996) | | Add: Real estate depreciation and amortization | $14,689 | $16,710 | | Add: Loss on sale of real estate, net | — | $882 | | **FFO available - basic** | **$15,013** | **$14,596** | | **Basic FFO per share/unit** | **$0.39** | **$0.40** | | **Diluted FFO per share/unit** | **$0.39** | **$0.40** | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=43&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% LIBOR increase decreasing annual net income by $2.8 million Annual Impact of LIBOR Increase on Net Income (in thousands) | Interest Rate Change | Increase to Interest Expense | Net decrease to Net Income | | :--- | :--- | :--- | | 1% Increase to LIBOR | $2,795 | $(2,795) | | 2% Increase to LIBOR | $5,024 | $(5,024) | | 3% Increase to LIBOR | $5,740 | $(5,740) | - The company's primary market risk exposure is to interest rate changes, mitigated by derivative instruments including interest rate caps and swaps[173](index=173&type=chunk) [Item 4. Controls and Procedures](index=44&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal control over financial reporting - Management concluded that disclosure controls and procedures were effective as of March 31, 2022[181](index=181&type=chunk) - No changes occurred in internal control over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[182](index=182&type=chunk) [PART II - OTHER INFORMATION](index=45&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits [Item 1. Legal Proceedings](index=45&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently subject to any material legal proceedings, nor is it aware of any material threats - The company is not currently subject to any material legal proceedings[185](index=185&type=chunk) [Item 1A. Risk Factors](index=45&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2021 - There are no material changes to risk factors from those set forth in the Annual Report on Form 10-K for the year ended December 31, 2021[186](index=186&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=45&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reports no unregistered sales of equity securities and no issuer purchases of equity securities during the period - There were no unregistered sales of equity securities or issuer purchases of equity securities in the period[187](index=187&type=chunk) [Item 3. Defaults Upon Senior Securities](index=45&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon senior securities - None[188](index=188&type=chunk) [Item 4. Mine Safety Disclosures](index=45&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[188](index=188&type=chunk) [Item 5. Other Information](index=45&type=section&id=Item%205.%20Other%20Information) The company reports no other information for this item - None[188](index=188&type=chunk) [Item 6. Exhibits](index=45&type=section&id=Item%206.%20Exhibits) This section provides an index of all exhibits filed with or furnished as part of the quarterly report, including certifications and XBRL data files - Lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and XBRL interactive data files[190](index=190&type=chunk)[192](index=192&type=chunk)

Financial Data and Key Metrics Changes - FFO and core FFO available to common stockholders were both $0.40 per share for Q4 2021, compared to $0.37 and $0.38 per share in Q4 2020 respectively [28] - Total operating revenues for Q4 2021 were $35.3 million, up from $32.9 million in the same period last year, while operating expenses increased to $25.4 million from $24.7 million [29] - Same-store cash rent grew by 3.2% overall in 2021 compared to 2020 [28] Business Line Data and Key Metrics Changes - The company acquired three industrial assets in Q4 2021 for a total investment of $53.8 million, focusing on industrial properties [37] - The industrial allocation in the portfolio increased from 33% to 51% since 2019, with a target of reaching 60% in the next 12 to 18 months [10] Market Data and Key Metrics Changes - Industrial vacancy rates remained low at 4% to 4.5%, with net absorption exceeding 100 million square feet per quarter in 2021 [22] - Office vacancy rates dropped to 16.6% in Q4 2021, marking the first decrease since mid-2019 [23] Company Strategy and Development Direction - The company aims to increase its industrial allocation and improve property operations while divesting non-core assets [8] - The acquisition pipeline currently stands at approximately $350 million, with a focus on industrial properties [25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strong performance and ability to navigate challenges posed by COVID-19 and supply chain disruptions [40] - The outlook for 2022 acquisitions is optimistic, with expectations to exceed $120 million based on current market conditions [44] Other Important Information - The company has maintained its common stock dividend at $0.3762 per share per quarter, with a distribution yield of 6.97% [35] - Institutional ownership of the stock has increased to 50.5% as of December 31 [34] Q&A Session Summary Question: What is the current acquisition pipeline? - The acquisition pipeline includes $32 million in due diligence and $100 million to $110 million in the letter of intent stage, with expectations for a significant portion to convert to contracts soon [43][44] Question: How are you thinking about dispositions this year? - The company aims to limit dispositions to $15 million to $20 million per year, but this could increase if significant capital gains opportunities arise [48] Question: What is the outlook for the Austin office asset? - The Austin asset has been refilled to over half of the building, generating approximately 90% of the previous cash flow, with ongoing interest from potential tenants [50][52] Question: What is the overall cap rate outlook for potential acquisitions? - The average cap rate for industrial properties is expected to be between 5.25% to 6%, consistent with 2021 levels [63] Question: What is the outlook for refinancing maturing debt? - Current interest rates are manageable, and refinancing is expected to be accretive given today's rates [75][77]

1.87.148 200.201.204 7.161.142 210.189.154 224.224.13 247.82.73 200.201.204 GLADSTONE COMMERCIAL 114.95.164Supplemental Financial & Operating Information for the Quarter Ended September 30, 2021 1 1.87.148 Legal disclaimer 200.201.204 7.161.142 210.189.154 114.95.164 224.224.13 247.82.73 200.201.204 Forward-Looking Statements: This presentation may include forward-looking statements within the meaning of the Securities Act of 1933 or the Securities Exchange Act of 1934. Forward-looking statements are typica ...

Gladstone Commercial Corporation (NASDAQ:GOOD) Q3 2021 Earnings Conference Call November 2, 2021 8:30 AM ET Company Participants Michael LiCalsi - General Counsel & Secretary David Gladstone - Chairman & CEO Bob Cutlip - President Gary Gerson - CFO & Assistant Treasurer Conference Call Participants Craig Kucera - B Riley and Securities John Massocca - Ladenburg Brian Hollenden - Aegis Operator Greetings and welcome to Gladstone Commercial's Third Quarter Earnings Call. At this time all participants are in a ...

[PART I: FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Presents the unaudited condensed consolidated financial statements for the period ended September 30, 2021 [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to $1.105 billion, driven by real estate growth, while total equity declined to $201.5 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Total real estate, net | $915,498 | $900,215 | | Cash and cash equivalents | $10,230 | $11,016 | | **TOTAL ASSETS** | **$1,104,794** | **$1,097,908** | | Mortgage notes payable, net | $448,001 | $456,177 | | Borrowings under Revolver | $2,100 | $53,312 | | Borrowings under Term Loan, net | $223,951 | $159,203 | | **TOTAL LIABILITIES** | **$732,988** | **$722,585** | | **TOTAL EQUITY** | **$201,542** | **$216,037** | [Condensed Consolidated Statements of Operations and Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income) Quarterly net income rose to $4.5 million, boosted by higher lease revenue and a significant legal settlement Key Performance Indicators (in thousands, except per share data) | Metric | Q3 2021 | Q3 2020 | 9 Months 2021 | 9 Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Lease Revenue | $34,334 | $33,142 | $102,381 | $100,287 | | Total Operating Expenses | $25,498 | $25,254 | $77,388 | $75,199 | | Net Income | $4,498 | $2,844 | $6,657 | $6,070 | | Net Income (Loss) to Common Stockholders | $1,439 | $(128) | $(4,547) | $(2,643) | | EPS (basic & diluted) | $0.04 | $(0.004) | $(0.13) | $(0.08) | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow remained stable, while financing activities used cash due to preferred stock redemption and debt repayments Net Cash Flow Summary (in thousands) | Activity | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $53,693 | $52,384 | | Net cash used in investing activities | $(45,956) | $(73,008) | | Net cash (used in) provided by financing activities | $(8,611) | $24,398 | | **Net (decrease) increase in cash** | **$(874)** | **$3,774** | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Details significant activities including property acquisitions, capital recycling, debt management, and equity offerings - The company acquired eight properties for an aggregate purchase price of **$46.2 million** during the first nine months of 2021[45](index=45&type=chunk) - During the first nine months of 2021, the company sold two non-core properties for aggregate proceeds of **$5.5 million**, resulting in a net loss of **$0.9 million**[56](index=56&type=chunk)[57](index=57&type=chunk) - On June 28, 2021, the company issued 4 million shares of 6.00% Series G Preferred Stock, raising **$96.6 million** in net proceeds, which were used to redeem all outstanding shares of its 7.00% Series D Preferred Stock[88](index=88&type=chunk)[91](index=91&type=chunk) - Subsequent to the quarter end, the company declared monthly distributions for October, November, and December 2021 for its common, Series E, and Series G preferred stock[99](index=99&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, strategic activities, and the minimal impact of COVID-19 on rent collections [Business Environment and COVID-19 Impact](index=28&type=section&id=Business%20Environment%20and%20COVID-19%20Impact) The company maintained 100% rent collection, citing its diversified portfolio as a key mitigant to COVID-19 impacts - As of November 1, 2021, the company has collected **100% of all outstanding September 2021 cash base rent** and approximately **100% of October 2021 cash base rent**[114](index=114&type=chunk) - The company believes its portfolio is well-diversified, with properties across 27 states and **no significant exposure to industries severely impacted by COVID-19**, such as retail, hospitality, airlines, and oil and gas[114](index=114&type=chunk) - Management believes the company has **adequate near-term liquidity** and that the availability on its Credit Facility is sufficient to cover debt obligations, operating expenses, and its industrial growth strategy[115](index=115&type=chunk) [Recent Developments](index=30&type=section&id=Recent%20Developments) The company executed its capital recycling strategy, completed significant leasing, and refinanced preferred stock to lower costs Acquisition & Disposition Activity (9 Months Ended Sep 30, 2021) | Activity | Properties | Aggregate Square Footage | Aggregate Price | Net Gain/(Loss) | | :--- | :--- | :--- | :--- | :--- | | Acquisitions | 8 | 367,716 | $46,225,000 | N/A | | Dispositions | 2 | 81,758 | $5,473,000 | $(882,000) | - Executed 14 leases totaling **1,486,870 square feet** with a weighted average remaining lease term of **7.5 years**[124](index=124&type=chunk) - Completed a **$100 million offering of 6.00% Series G Preferred Stock** and redeemed all outstanding 7.00% Series D Preferred Stock[131](index=131&type=chunk)[133](index=133&type=chunk) - Sold 1.2 million shares of common stock under its ATM program, raising **$24.1 million** in net proceeds[132](index=132&type=chunk) [Results of Operations](index=39&type=section&id=Results%20of%20Operations) Revenue growth from acquisitions and a $2.4 million legal settlement drove higher net income for the quarter Same Store Lease Revenue Change (in thousands) | Period | 2021 | 2020 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Q3 | $28,076 | $27,480 | $596 | 2.2% | | 9 Months | $85,011 | $82,211 | $2,800 | 3.4% | - Other income increased significantly in Q3 and the first nine months of 2021, primarily due to recognizing **$2.4 million, net, from legal settlements**[171](index=171&type=chunk) - The net loss for common stockholders in the first nine months of 2021 was impacted by a **$2.1 million write-off** of original issuance costs for the redeemed Series D Preferred Stock[172](index=172&type=chunk)[177](index=177&type=chunk) [Liquidity and Capital Resources](index=44&type=section&id=Liquidity%20and%20Capital%20Resources) The company possesses $36.3 million in available liquidity, deemed sufficient for near-term operational and strategic needs - Available liquidity as of September 30, 2021, was **$36.3 million**, consisting of **$10.2 million in cash** and **$26.1 million of availability** under the Credit Facility[173](index=173&type=chunk) - As of November 1, 2021, the company had a combined capacity to issue up to **$1.035 billion of securities** under its 2019 and 2020 Universal Shelf registrations[180](index=180&type=chunk)[181](index=181&type=chunk) Contractual Obligations as of September 30, 2021 (in thousands) | Obligation Type | Total | Less than 1 Year | 1-3 Years | 3-5 Years | More than 5 Years | | :--- | :--- | :--- | :--- | :--- | :--- | | Debt Obligations | $678,102 | $77,270 | $315,006 | $131,644 | $154,182 | | Interest on Debt | $79,887 | $21,829 | $31,785 | $16,746 | $9,527 | | Operating Leases | $9,395 | $488 | $985 | $980 | $6,942 | | **Total** | **$771,945** | **$102,703** | **$349,221** | **$149,370** | **$170,651** | [Funds from Operations (FFO)](index=48&type=section&id=Funds%20from%20Operations%20(FFO)) Diluted FFO, a non-GAAP measure, increased to $0.44 per share for Q3 2021 from $0.39 in the prior year FFO Reconciliation and Per Share Data | Metric (Diluted) | Q3 2021 | Q3 2020 | 9 Months 2021 | 9 Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Net Income (Loss) to Common Stockholders & Unitholders | $1,460 | $(130) | $(4,589) | $(2,682) | | Real estate depreciation and amortization | $14,760 | $13,798 | $45,661 | $42,076 | | Impairment / (Gain) Loss on Sale | $0 | $(12) | $882 | $1,721 | | **FFO available to common stockholders** | **$16,390** | **$13,859** | **$42,488** | **$41,730** | | **Diluted FFO per share** | **$0.44** | **$0.39** | **$1.14** | **$1.19** | | **Diluted FFO per share, as adjusted** | **$0.44** | **$0.39** | **$1.20** | **$1.19** | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=51&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market exposure is interest rate risk on its variable-rate debt, managed via derivative contracts Annual Impact of LIBOR Increase on Net Income (in thousands) | Interest Rate Change | Decrease to Net Income | | :--- | :--- | | 1% Increase to LIBOR | $(2,547) | | 2% Increase to LIBOR | $(4,753) | | 3% Increase to LIBOR | $(5,817) | - The company uses derivative contracts, including **interest rate caps and swaps**, to mitigate interest rate risk on its variable-rate debt[202](index=202&type=chunk) [Item 4. Controls and Procedures](index=52&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls - The CEO and CFO concluded that the company's **disclosure controls and procedures were effective** as of September 30, 2021[210](index=210&type=chunk) - **No changes occurred** during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[211](index=211&type=chunk) [PART II: OTHER INFORMATION](index=53&type=section&id=PART%20II%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=53&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**[214](index=214&type=chunk) [Item 1A. Risk Factors](index=53&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the 2020 Annual Report - There are **no material changes** to the risk factors from those disclosed in the 2020 Annual Report on Form 10-K[215](index=215&type=chunk) [Other Items (Items 2-6)](index=53&type=section&id=Other%20Items) Reports no unregistered equity sales or defaults and notes other items are either not applicable or included in exhibits - The company reported **no unregistered sales of equity securities**, no defaults upon senior securities, and no other information under Item 5 for the period[216](index=216&type=chunk)

Financial Data and Key Metrics Changes - FFO adjusted for comparability and core FFO available to common stockholders were $0.36 and $0.37 per share for Q2 2021, compared to $0.40 and $0.41 per share in Q2 2020 [25] - Total operating revenues for Q2 2021 were stable at $33.4 million, with operating expenses of $25 million, compared to $33.5 million and $25.9 million for the same period in 2020 [26] - Same-store cash rent in Q2 grew by 2.8% over Q2 2020, and for the first six months of 2021, it grew by 4% over the same period in 2020 [25] Business Line Data and Key Metrics Changes - The company acquired a 25,200 square foot industrial service facility in Baytown, Texas for $8.1 million and an 80,600 square foot industrial facility in St. Louis, Missouri for $22 million [6][10] - The asset management team extended, expanded, and/or leased 1.27 million square feet covering 12 tenants, with an average weighted lease term of 8.6 years [11] - 100% of cash-based rents were collected during Q2 2021, with July collections at 99% [13] Market Data and Key Metrics Changes - Industrial activity remains strong, with second quarter vacancy rates at 4% to 4.5% and net absorption exceeding 100 million square feet [18] - Office vacancy increased to 16.5%, but negative absorption has improved compared to previous quarters [19] - E-commerce and logistics demand continue to drive the industrial sector, while office rents increased approximately 1% quarter-over-quarter [20] Company Strategy and Development Direction - The company is focusing on increasing its industrial allocation from 49% today to a target of 60% within the next 18 months [9] - The current pipeline of acquisition candidates is approximately $360 million, with a focus on industrial properties [21] - The company is exploring dual strategies for its Austin office property, considering both re-leasing and selling options [16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to manage lease expirations, with only 2.9% of leases expiring through year-end 2021 [14] - The team is optimistic about future performance, citing strong tenant performance and a robust acquisition strategy [22] - Management noted that the operating environment remains challenging but emphasized the team's capability to navigate these conditions [38] Other Important Information - The company issued $100 million of Series G preferred stock, primarily to redeem Series D preferred stock, reducing total dividend expenses and providing additional investable capital [28] - Institutional ownership of the stock has increased to 54.3% as of June 30, a 7% increase over the last five years [33] Q&A Session Summary Question: Can you talk about the sequential revenue drop and its causes? - Management indicated that the drop was due to accelerated rents from Q1 not carrying into Q2 and increased G&A costs in Q2 compared to Q1 [41][42] Question: What is the status of the 310 million square feet of vacant space leased? - The free rent period for the leases does not start until November [43] Question: What was the spread on the rents for the renewals since the end of Q1? - Renewals represented about $6.3 million of straight-line rent, which increased by approximately 8.5% [44] Question: Has the investment expectation for 2021 changed? - Management expects to remain above $110 million in investments, with increased market activity [50] Question: What is the current cap rate environment for smaller assets? - Cap rates in secondary markets are in the mid- to high 5s, while gateway markets are lower [51] Question: What is the confidence level for potential transactions in the Austin market? - Increased interest in property tours and buyer inquiries has led to confidence in potential transactions by the end of Q3 [53]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) 1521 Westbranch Drive, Suite 100 22102 McLean, Virginia (Address of principal executive offices) (Zip Code) (I.R.S. Employer Identification No.) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD F ...

ll GLADSTONE COMMERCIAL REITWEEK 2021 1.87.148 Legal Disclaimer 200.201.204 7.161.142 210.189.154 114.95.164 224.224.13 247.82.73 200.201.204 Forward-Looking Statements: This presentation may include forward-looking statements within the meaning of the Securities Act of 1933 or the Securities Exchange Act of 1934. Forward-looking statements are typically identified by words such as "estimate," "may," "might," "believe," "will," "provided," "anticipate," "future," "could," "growth," "plan," "project," "inten ...

Financial Data and Key Metrics Changes - Funds From Operations (FFO) and core FFO available to common shareholders were $0.40 and $0.42 per share for Q1 2021, compared to $0.39 and $0.40 per share in Q1 2020, indicating growth [30] - Total operating revenues for Q1 2021 were stable at $34.7 million, with operating expenses of $26.9 million, compared to $33.6 million and $24.1 million in the same period of 2020 [31] - Debt to gross assets ratio has been reduced by over 20% to 45.4% over the past five years [32] Business Line Data and Key Metrics Changes - The company acquired a 180,000 square foot distribution property in Findlay, Ohio for $11 million, with a GAAP cap rate of 8.4% [16] - The asset management team extended, expanded, and/or leased 478,000 square feet covering six tenants, resulting in an annualized straight-line rent of $3.3 million [17] - The company sold two single-story office properties during Q1, contributing to a total net gain of $6 million from six such properties sold over the last two quarters [19] Market Data and Key Metrics Changes - The industrial allocation of the portfolio has increased from 33% in 2019 to 48% today, with a target of achieving 60% within the next 18 to 24 months [15] - The company reported strong rent collection, with 98% of cash rent collected in Q1 and April [20] - Market conditions for industrial properties remain favorable, with no increase in cap rates for this product type in many markets [25] Company Strategy and Development Direction - The company continues to focus on increasing its industrial allocation to improve property operating efficiencies, with a total investment volume of nearly $270 million in industrial properties since January 2019 [14] - The strategy includes selling non-core single-story office properties and redeploying proceeds into industrial assets [18] - The company is actively pursuing acquisition opportunities, with a current pipeline of approximately $280 million in volume representing 17 properties [26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the challenges posed by the pandemic, noting strong performance in rent collections and leasing activities [41][46] - Concerns about inflation were acknowledged, but management believes the company is well-positioned due to long-term fixed-rate financing [76][78] - The company anticipates manageable lease expirations, with less than 5% expected over the next two years [21] Other Important Information - Institutional ownership of the stock has increased to 55.3% as of March 31, representing a 46% increase over the past five years [38] - The company continues to pay a quarterly dividend of $0.37545, maintaining its distribution since the IPO in 2003 [39] Q&A Session Summary Question: Acquisition targets for the year - Management expects to acquire between $110 million to $130 million this year, with $34 million currently in due diligence or letter of intent [50] Question: Lease expirations compared to market - Current rents are at market levels, with one asset slightly above market [52] Question: Status of the Austin property - Increased foot traffic has been observed, and management is open to selling the asset if it makes sense to redeploy capital into industrial properties [54] Question: Cash rents for potential leases in Austin - Expected cash rents would likely start in 2022, with potential concessions due to current market conditions [57] Question: Acquisition capacity and capital raising - The company has $11 million in cash and $18.3 million available under its credit facility for acquisitions [59] Question: Impact of inflation on the company - Management believes they are well-positioned to absorb inflationary pressures due to long-term financing [76][78] Question: Lease termination income and future leasing activity - Elevated lease termination income was noted, but overall leasing activity is expected to decrease moving forward [90] Question: Potential dispositions of single-story office properties - The company sold $28 million worth of single-story office properties recently and anticipates limited future sales [92]

Table of Contents (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER: 001-33097 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q GLADSTONE COMMERCIAL CORPORATION (Exact name of registrant as specified in its charter) Maryland 02-068 ...