Gladstone mercial (GOOD) - 2025 Q2 - Quarterly Report

PART I Item 1. Financial Statements 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 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 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 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 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] - During the first six months of 2025, the company acquired ten industrial properties for a total purchase price of $153.1 million[47][48] - 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] - On May 30, 2025, the Operating Partnership entered into a new $20.0 million unsecured term loan (Term Loan D) maturing in 2027[83] - 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] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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] - 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] 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 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 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] - 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] PART II – OTHER INFORMATION Item 1. Legal Proceedings 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] Item 1A. Risk Factors 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] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 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] Item 3. Defaults Upon Senior Securities The company reports no defaults upon its senior securities - None[205] Item 6. Exhibits This section provides an index of all exhibits filed with the Form 10-Q, including corporate governance documents, material contracts, and certifications