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What changed in GLADSTONE COMMERCIAL CORP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of GLADSTONE COMMERCIAL CORP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+280 added−269 removedSource: 10-K (2025-02-18) vs 10-K (2024-02-21)

Top changes in GLADSTONE COMMERCIAL CORP's 2024 10-K

280 paragraphs added · 269 removed · 236 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

40 edited+9 added−4 removed94 unchanged
Biggest changeOur Adviser has an investment committee that approves each of our investments. This investment committee is currently comprised of Messrs. Gladstone, Brubaker, and Cooper, Laura Gladstone, who is a managing director of our Adviser, and John Sateri, who is also a managing director of our Adviser.
Biggest changeDavid Gladstone, our chairman and chief executive officer, is also the chairman, chief executive officer and the controlling stockholder of our Adviser and our Administrator. Arthur “Buzz” Cooper, our president, is also an executive managing director of our Adviser. Our Adviser has an investment committee that approves each of our investments. This investment committee is currently comprised of Messrs.
The question of comparable properties’ sale prices is particularly relevant if a property might be sold by us at a later date. • An assessment of the relative appropriate nature and flexibility of the building configuration and its ability to be re-leased to other users in a single or multiple tenant arrangement. • The comparable real estate rental rates for similar properties in the same area of the prospective property. • Alternative property uses that may offer higher value. • The replacement cost of the property at current construction prices if it were to be sold. 9 Table of Contents • The assessed value as determined by the local real estate taxing authority.
The question of comparable properties’ sale prices is particularly relevant if a property might be sold by us at a later date. • An assessment of the relative appropriate nature and flexibility of the building configuration and its ability to be re-leased to other users in a single or multiple tenant arrangement. • The comparable real estate rental rates for similar properties in the same area of the prospective property. • Alternative property uses that may offer higher value. 9 Table of Contents • The replacement cost of the property at current construction prices if it were to be sold. • The assessed value as determined by the local real estate taxing authority.
Under our current conflict of interest policy, without the approval of a majority of our independent directors, we will not: • acquire from or sell any assets or other property to any of our officers, directors or our Adviser’s employees, or any entity in which any of our officers, directors or Adviser’s employees has an interest of more than 5%; • borrow from any of our directors, officers or our Adviser’s employees, or any entity, in which any of our officers, directors or our Adviser’s employees has an interest of more than 5%; or 10 Table of Contents • engage in any other transaction with any of our directors, officers or our Adviser’s employees, or any entity in which any of our directors, officers or our Adviser’s employees has an interest of more than 5% (except that our Adviser may lease office space in a building that we own, provided that the rental rate under the lease is determined by our independent directors to be at a fair market rate).
Under our current conflict of interest policy, without the approval of a majority of our independent directors, we will not: • acquire from or sell any assets or other property to any of our officers, directors or our Adviser’s employees, or any entity in which any of our officers, directors or Adviser’s employees has an interest of more than 5%; 10 Table of Contents • borrow from any of our directors, officers or our Adviser’s employees, or any entity, in which any of our officers, directors or our Adviser’s employees has an interest of more than 5%; or • engage in any other transaction with any of our directors, officers or our Adviser’s employees, or any entity in which any of our directors, officers or our Adviser’s employees has an interest of more than 5% (except that our Adviser may lease office space in a building that we own, provided that the rental rate under the lease is determined by our independent directors to be at a fair market rate).
For additional information, see “ Risk Factors - We could incur significant costs related to government regulation and private litigation over environmental matters. ”, “ Risk Factors - Compliance or failure to comply with laws requiring access to our properties by disabled persons could result in substantial cost. ”, and “Risk Factors – We could be exposed to liability and remedial costs related to environmental matters.” Available Information Copies of our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and amendments, if any, to those reports filed or furnished with the Securities and Exchange Commission (the “SEC”), pursuant to Section 13(a) or 15(d) of the Securities Exchange Act are available free of charge through the investors section of our website at www.GladstoneCommercial.com as soon as practicable after such reports have been filed or furnished to the SEC.
For additional information, see “ Risk Factors - We could incur significant costs related to government regulation and private litigation over environmental matters. ”, “ Risk Factors - Compliance or failure to comply with laws requiring access to our properties by disabled persons could result in substantial cost. ”, and “Risk Factors – We could be exposed to liability and remedial costs related to environmental matters.” Available Information Copies of our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and amendments, if any, to those reports filed or furnished with the SEC, pursuant to Section 13(a) or 15(d) of the Securities Exchange Act are available free of charge through the investors section of our website at www.GladstoneCommercial.com as soon as practicable after such reports have been filed or furnished to the SEC.
Our Adviser may also seek to enhance the likelihood of a tenant’s lease obligations being satisfied through a cross-default with other tenant obligations, a letter of credit or a guaranty of lease obligations from each tenant’s corporate parent. We believe that this type of credit enhancement, if obtained, provides us with additional financial security.
Our Adviser may also seek to enhance the likelihood of a tenant’s lease obligations being satisfied through a cross-default with other tenant obligations, a letter of credit or a guaranty of lease obligations from the tenant’s corporate parent. We believe that this type of credit enhancement, if obtained, provides us with additional financial security.
Our Adviser evaluates each potential tenant or borrower for its creditworthiness, considering factors such as its rating by a national credit rating agency, if any, management experience, industry position and fundamentals, operating history and capital structure. As of December 31, 2023, 38% of our lease revenues were earned from tenants that were rated by a nationally recognized statistical rating organization.
Our Adviser evaluates each potential tenant or borrower for its creditworthiness, considering factors such as its rating by a national credit rating agency, if any, management experience, industry position and fundamentals, operating history and capital structure. As of December 31, 2024, 38% of our lease revenues were earned from tenants that were rated by a nationally recognized statistical rating organization.
Otherwise, we do not expect that compliance with the various laws and regulations we are subject to will have a material effect on our capital expenditures, results of operations and competitive position for the year ending December 31, 2024, as compared to prior periods.
Otherwise, we do not expect that compliance with the various laws and regulations we are subject to will have a material effect on our capital expenditures, results of operations and competitive position for the year ending December 31, 2025, as compared to prior periods.
Our policy also prohibits us from purchasing any real property owned by or co-investing with our Adviser, any of its affiliates or any business in which our Adviser or any of its subsidiaries have invested, except that we may lease property to existing and prospective portfolio companies of current or future affiliates, such as our affiliated publicly-traded funds Gladstone Capital Corporation (“Gladstone Capital”), Gladstone Land Corporation (“Gladstone Land”), or Gladstone Investment Corporation (“Gladstone Investment”), and other entities advised by our Adviser, so long as that entity does not control the portfolio company and the transaction is approved by both companies’ board of directors.
Our policy also prohibits us from purchasing any real property owned by or co-investing with our Adviser, any of its affiliates or any business in which our Adviser or any of its subsidiaries have invested, except that we may lease property to existing and prospective portfolio companies of current or future affiliates, such as our affiliated publicly-traded funds Gladstone Capital Corporation (“Gladstone Capital”), Gladstone Land Corporation (“Gladstone Land”), Gladstone Investment Corporation (“Gladstone Investment”), or Gladstone Alternative Income Fund (“Gladstone Alternative”), and other entities advised by our Adviser, so long as that entity does not control the portfolio company and the transaction is approved by both companies’ board of directors.
Each of our executive officers is an employee or officer, or both, of our Adviser or our Administrator. We expect that a total of 15 to 20 full time employees of our Adviser and our Administrator will spend substantially all or all of their time on our matters during calendar year 2024.
Each of our executive officers is an employee or officer, or both, of our Adviser or our Administrator. We expect that a total of 15 to 20 full time employees of our Adviser and our Administrator will spend substantially all or all of their time on our matters during calendar year 2025.
These governmental authorities may take similar actions in the future in the event of new public health emergencies. Such regulations may materially affect our results of operations for the year ending December 31, 2024.
These governmental authorities may take similar actions in the future in the event of new public health emergencies. Such regulations may materially affect our results of operations for the year ending December 31, 2025.
We control the sole general partner of the Operating Partnership and currently own, directly or indirectly, approximately 99.2% of the common units of limited partnership interest in the Operating Partnership (“OP Units”).
We control the sole general partner of the Operating Partnership and currently own, directly or indirectly, approximately 99.9% of the common units of limited partnership interest in the Operating Partnership (“OP Units”).
We may sell some of our real estate assets when our Adviser determines that doing so would be advantageous to us and our stockholders. 6 Table of Contents In addition to cash on hand and cash from operations, we use funds from various other sources to finance our acquisitions and operations, including equity, our Credit Facility, mortgage financing and other sources that may become available from time to time.
We may sell some of our real estate assets when our Adviser determines that doing so would be advantageous to us and our stockholders. 6 Table of Contents In addition to cash on hand and cash from operations, we use funds from various other sources to finance our acquisitions and operations, including equity, our Credit Facility, mortgage financing, long-term private debt, and other sources that may become available from time to time.
Generally, we 7 Table of Contents lease properties to tenants that our Adviser deems creditworthy under leases that will be full recourse obligations of our tenants or their affiliates. We seek to obtain lease terms of approximately seven to 15 years with built-in rental increases.
Generally, we lease properties to tenants that our Adviser deems creditworthy under leases that will be full recourse obligations of our tenants or their affiliates. We seek to obtain lease terms of approximately seven to 15 years with built-in rental increases.
The agreement is scheduled to terminate on August 31, 2024, unless renewed and approved by our Board of Directors or earlier terminated.
The agreement is scheduled to terminate on August 31, 2025, unless renewed and approved by our Board of Directors or earlier terminated.
Our Adviser then computes the value of the property based on historical and projected operating results. In addition, each property that we propose to purchase is appraised by an 8 Table of Contents independent appraiser.
Our Adviser then computes the value of the property based on historical and projected operating results. In addition, each property that we propose to purchase is appraised by an independent appraiser.
Our Adviser will also examine the available operating results of prospective investment properties to determine whether or not projected rental levels are likely to be met.
Our Adviser will also examine 8 Table of Contents the available operating results of prospective investment properties to determine whether or not projected rental levels are likely to be met.
Use of Leverage In addition to cash on hand and cash from operations, we use funds from various other sources to finance our acquisitions and operations, including common and preferred equity, our Credit Facility, mortgage financing and other sources that may become available from time to time.
Use of Leverage In addition to cash on hand and cash from operations, we use funds from various other sources to finance our acquisitions and operations, including common and preferred equity, our Credit Facility, mortgage financing, long-term private debt, and other sources that may become available from time to time.
A breakdown of these employees is summarized by functional area in the table below: 13 Table of Contents Number of Individuals Functional Area 13 Executive Management 35 Investment Management, Asset Management, Portfolio Management and Due Diligence 21 Administration, Accounting, Compliance, Human Resources, Legal and Treasury The Adviser and the Administrator aim to attract and retain capable advisory and administrative personnel, respectively, by offering competitive base salaries, benefits and bonus structure and by providing employees with appropriate opportunities for professional development and growth.
A breakdown of these employees is summarized by functional area in the table below: Number of Individuals Functional Area 12 Executive Management 37 Investment Management, Asset Management, Portfolio Management and Due Diligence 23 Administration, Accounting, Compliance, Human Resources, Legal and Treasury The Adviser and the Administrator aim to attract and retain capable advisory and administrative personnel, respectively, by offering competitive base salaries, benefits and bonus structure and by providing employees with appropriate opportunities for professional development and growth.
The Series F Preferred Stock is registered with the SEC pursuant to a registration statement on Form S-3 (File No. 333-268549), as the same may be amended and/or supplemented (the “2022 Registration Statement”), under the Securities Act of 1933, as amended, and are offered and sold pursuant to a prospectus supplement, dated February 9, 2023, and a base prospectus dated November 23, 2022 relating to the 2022 Registration Statement (the “Prospectus”).
The Series F Preferred Stock was previously registered with the SEC pursuant to a registration statement on Form S-3 (File No. 333-268549), as the same may be amended and/or supplemented (the “2022 Registration Statement”), under the Securities Act, and are offered and sold pursuant to a prospectus supplement, dated February 9, 2023, and a base prospectus dated November 23, 2022 relating to the 2022 Registration Statement.
However, under the Advisory Agreement, our Adviser is required to devote sufficient resources to the administration of our affairs to discharge its obligations 12 Table of Contents under the agreement.
However, under the Advisory Agreement, our Adviser is required to devote sufficient resources to the administration of our affairs to discharge its obligations under the agreement.
Gladstone also serves on the board of managers of Gladstone Securities. Mortgage Financing Arrangement Agreement We also entered into an agreement with Gladstone Securities, effective June 18, 2013, for it to act as our non-exclusive agent to assist us with arranging mortgage financing for properties we own.
Mortgage Financing Arrangement Agreement We also entered into an agreement with Gladstone Securities, effective June 18, 2013, for it to act as our non-exclusive agent to assist us with arranging mortgage financing for properties we own.
Conflict of Interest Policy We have adopted policies to reduce potential conflicts of interest. In addition, our directors are subject to certain provisions of Maryland law that are designed to minimize conflicts. However, we cannot provide assurance that these policies or provisions of law will reduce or eliminate the influence of these conflicts.
In addition, our directors are subject to certain provisions of Maryland law that are designed to minimize conflicts. However, we cannot provide assurance that these policies or provisions of law will reduce or eliminate the influence of these conflicts.
Code of Ethics We have adopted a code of ethics and business conduct applicable to all personnel of our Adviser and Administrator that complies with the guidelines set forth in Item 406 of Regulation S-K of the Securities Act of 1933, as amended.
Code of Ethics We have adopted a code of ethics and business conduct (a “Code”) applicable to all personnel of our Adviser and Administrator performing services on our behalf that complies with the guidelines set forth in Item 406 of Regulation S-K of the Securities Act of 1933.
We believe that the review process of our investment committee gives us a competitive advantage over other REITs because of the substantial experience that its members possess and their unique perspective in evaluating the blend of corporate credit, real estate and lease terms that collectively provide an acceptable risk for our investments. 11 Table of Contents Our Adviser’s board of directors has empowered our investment committee to authorize and approve our investments, subject to the terms of the Advisory Agreement.
We believe that the review process of our investment committee gives us a competitive advantage over other REITs because of the substantial experience that its 11 Table of Contents members possess and their unique perspective in evaluating the blend of corporate credit, real estate and lease terms that collectively provide an acceptable risk for our investments.
As of February 21, 2024: • we owned 134 properties totaling 16.9 million square feet (all references herein and throughout the Notes to Consolidated Financial Statements to the number of properties and square footage are unaudited) of rentable space, located in 27 states; • our occupancy rate was 97.4%; • the weighted average remaining term of our mortgage debt was 3.9 years, and the weighted average interest rate was 4.19%; and • the average remaining lease term of the portfolio was 6.8 years.
As of February 18, 2025: • we owned 135 properties totaling 16.9 million square feet (all references herein and throughout the Notes to Consolidated Financial Statements to the number of properties and square footage are unaudited) of rentable space, located in 27 states; • our occupancy rate was 98.7%; • the weighted average remaining term of our mortgage debt was 3.4 years, and the weighted average interest rate was 4.29%; and • the average remaining lease term of the portfolio was 6.9 years.
During the years ended December 31, 2021, 2022 and 2023, the Series F Preferred Stock was registered with the SEC pursuant to the 2020 Registration Statement, and offered and sold pursuant to a prospectus supplement, dated February 20, 2020, and a base prospectus dated February 11, 2020.
During the years ended December 31, 2022, and 2023, the Series F Preferred Stock was registered with the SEC pursuant to the 2022 Registration Statement, and offered and sold pursuant to a prospectus supplement, dated February 9, 2023, and a base prospectus dated November 23, 2022.
For example, our Adviser and Administrator also serve as the external adviser or administrator, respectively, to Gladstone Capital and Gladstone Investment, both publicly traded business development companies affiliated with us, and Gladstone Land, a publicly traded agricultural REIT that is also our affiliate.
For example, our Adviser and Administrator also serve as the external adviser or administrator, respectively, to Gladstone Capital and Gladstone Investment, both publicly traded business development companies affiliated with us, Gladstone Land, a publicly traded agricultural REIT that is also our affiliate, and Gladstone Alternative, a non-diversified, closed-end management investment company that operates as an “interval fund” that is also our affiliate.
None of the $295.9 million in mortgage notes payable, net, outstanding as of December 31, 2023 have recourse to the Company.
None of the $269.6 million in mortgage notes payable, net, outstanding as of December 31, 2024 have recourse to the Company.
We refer to Term Loan A, Term Loan B, Term Loan C and the Revolver, collectively, herein as the Credit Facility. As of December 31, 2023, there was $445.8 million outstanding under our Credit Facility at a weighted average interest rate of approximately 6.84% and $2.0 million outstanding under letters of credit at a weighted average interest rate of 1.50%.
We refer to Term Loan A, Term Loan B, Term Loan C and the Revolver, collectively, herein as the Credit Facility. As of December 31, 2024, there was $351.9 million outstanding under our Credit Facility at a weighted average interest rate of approximately 5.79% and no outstanding letters of credit.
Before we acquire any property, the transaction is reviewed by our investment committee to ensure that, in its view, the proposed transaction satisfies our investment criteria and is within our investment policies.
Our Adviser’s board of directors has empowered our investment committee to authorize and approve our investments, subject to the terms of the Advisory Agreement. Before we acquire any property, the transaction is reviewed by our investment committee to ensure that, in its view, the proposed transaction satisfies our investment criteria and is within our investment policies.
In addition to our use of leverage, we were active in the equity markets during 2023 by issuing shares of common stock under our common stock at-the-market program, pursuant to our At-the-Market Equity Offering Sales Agreement (the “Common Stock Sales Agreement”) with Robert W. Baird & Co. Incorporated (“Baird”), Goldman Sachs & Co.
In addition to our use of leverage, we were active in the equity markets during 2024 by issuing shares of common stock under our common stock at-the-market program, pursuant to our current At-the-Market Equity Offering Sales Agreement (defined below as the 2024 Common Stock Sales Agreement) with BofA Securities, Inc. (“BofA”), Goldman Sachs & Co. LLC (“Goldman Sachs”), Robert W.
Our president and CFO, accounting team, and the employees of our Adviser that manage our assets and our investments spend all of their time on our matters. To the extent that we acquire more investments, we anticipate that the number of employees of our Adviser and our Administrator who devote time to our matters will increase.
Our president and CFO, accounting team, and the employees of our Adviser that manage our assets and our investments spend all of their time on our matters.
The Advisory Agreement is not assignable or transferable by either us or our Adviser without the consent of the other party, except that our Adviser may assign the Advisory Agreement to an affiliate for whom our Adviser agrees to guarantee its obligations to us.
The Advisory Agreement is not assignable or transferable by either us or our Adviser without the consent of the other party, except that our Adviser may assign the Advisory Agreement to an affiliate for whom our Adviser agrees to guarantee its obligations to us. 12 Table of Contents Gladstone Securities Gladstone Securities, LLC (“Gladstone Securities”), is a privately held broker dealer registered with the Financial Industry Regulatory Authority and insured by the Securities Investor Protection Corporation.
We expect that some of our sale-leaseback transactions will be in conjunction with acquisitions, recapitalizations or other corporate transactions affecting our tenants. In these transactions, we may act as one of several sources of financing by purchasing one or more properties from the tenant and by leasing it on a net basis to the tenant or its successor in interest.
In these transactions, 7 Table of Contents we may act as one of several sources of financing by purchasing one or more properties from the tenant and by leasing it on a net basis to the tenant or its successor in interest. Our portfolio consists primarily of single-tenant industrial and office real property.
We terminated that program and the Common Stock Sales Agreement, effective February 10, 2023, in connection with the expiration of our registration statement on Form S-3 (File No. 333-236143) (the “2020 Registration Statement”) on February 11, 2023. On March 3, 2023, we entered into an At-the-Market Equity Offering Sales Agreement (the “2023 Common Stock Sales Agreement”), with BofA Securities, Inc.
We did not sell any shares of our Series E Preferred Stock during the year ended December 31, 2024, as we terminated that program and the Common Stock Sales Agreement, effective February 10, 2023, in connection with the expiration of our registration statement on Form S-3 (File No. 333-236143) (the “2020 Registration Statement”) on February 11, 2023.
Gladstone Securities Gladstone Securities, LLC (“Gladstone Securities”), is a privately held broker dealer registered with the Financial Industry Regulatory Authority and insured by the Securities Investor Protection Corporation. Gladstone Securities is an affiliate of ours, as its parent company is controlled by David Gladstone, our chairman and chief executive officer. Mr.
Gladstone Securities is an affiliate of ours, as its parent company is controlled by David Gladstone, our chairman and chief executive officer. Mr. Gladstone also serves on the board of managers of Gladstone Securities.
Investment Policies Types of Investments Overview We intend to continue earning substantially all of our revenues from the ownership of income-producing real property.
During the year ended December 31, 2024, we sold 3,699,597 shares of common stock, raising approximately $53.5 million in net proceeds under the 2024 Common Stock Sales Agreement. Investment Policies Types of Investments Overview We intend to continue earning substantially all of our revenues from the ownership of income-producing real property.
Our portfolio consists primarily of single-tenant industrial and office real property. While we will continue to acquire select multi-tenant industrial and office properties, our primary focus is single-tenant industrial and office properties.
Our primary focus currently and going forward is single-tenant industrial properties, although we may continue to acquire select multi-tenant industrial properties. We may, from time to time, also acquire office properties, but this is not our primary focus.
As of December 31, 2023, our Adviser and Administrator collectively had 69 full-time employees.
To the extent that we acquire more investments, we anticipate that the number of employees of our Adviser and our Administrator who devote time to our matters will increase. 13 Table of Contents As of December 31, 2024, our Adviser and Administrator collectively had 72 full-time employees.
(“BofA”), Goldman Sachs, Baird, KeyBanc Capital Markets Inc. (“KeyBanc”), and Fifth Third (collectively the “Common Stock Sales Agents”).
Baird & Co. Incorporated (“Baird”), KeyBanc Capital Markets Inc. (“KeyBanc”), and Fifth Third Securities, Inc. (“Fifth Third”) (collectively the “Common Stock Sales Agents”). We also issued shares of our Series F Preferred Stock through bimonthly closings of this registered non-traded continuous offering.
Removed
LLC (“Goldman Sachs”), Stifel, Nicolaus & Company, Incorporated (“Stifel”), BTIG, LLC, and Fifth Third Securities, Inc. (“Fifth Third”) (collectively, the “Common Stock Sales Agents”).
Added
On March 3, 2023, we entered into an At-the-Market Equity Offering Sales Agreement (the “2023 Common Stock Sales Agreement”), with the Common Stock Sales Agents.
Removed
We voluntarily redeemed all outstanding shares of our 7.00% Series D Cumulative Redeemable Preferred Stock, par value $0.001 per share (“Series D Preferred Stock”) on June 30, 2021, through raising proceeds from an underwritten public offering of Series G Preferred Stock. We also issued shares of our Series F Preferred Stock through bimonthly closings of this registered non-traded continuous offering.
Added
On March 26, 2024, we entered into Amendment No. 1 to the 2023 Common Stock Sales Agreement (the “2024 Common Stock Sales Agreement”).
Removed
Although we did not sell any shares of our Series E Preferred Stock during the year ended December 31, 2023, we also had an at-the-market program for our Series E Preferred Stock during the period.
Added
The amendment permitted shares of common stock to be issued pursuant to the 2024 Common Stock Sales Agreement under our registration statement on Form S-3 (File No. 333-277877) (the “2024 Registration Statement”), and future registration statements on Form S-3.
Removed
David Gladstone, our chairman and chief executive officer, is also the chairman, chief executive officer and the controlling stockholder of our Adviser and our Administrator. Terry Lee Brubaker, our chief operating officer, also serves in the same capacities for our Adviser and our Administrator. Arthur “Buzz” Cooper, our president, is also an executive managing director of our Adviser.
Added
In connection with the 2024 Common Stock Sales Agreement, we filed a prospectus supplement with the SEC dated March 26, 2024, to the prospectus dated March 21, 2024, for the offer and sale of an aggregate offering amount of $250.0 million of common stock.
Added
We expect that some of our sale-leaseback transactions will be in conjunction with acquisitions, recapitalizations or other corporate transactions affecting our tenants.
Added
On December 18, 2024, we and the Operating Partnership entered into a Note Purchase Agreement with the institutional investors named therein, in connection with a private placement of $75.0 million of 6.47% senior unsecured notes, maturing on December 18, 2029 (the “2029 Notes”). Conflict of Interest Policy We have adopted policies to reduce potential conflicts of interest.
Added
Gladstone and Cooper, Laura Gladstone, who is a managing director of our Adviser, and John Sateri, who is also a managing director of our Adviser and President of Gladstone Alternative.
Added
The Series F Preferred Stock is currently registered with the SEC pursuant to a registration statement on Form S-3 (File No. 333-277877), as the same may be amended and/or supplemented (the “2024 Registration Statement”), under the Securities Act, and is offered and sold pursuant to a prospectus supplement dated May 1, 2024, and a base prospectus dated March 21, 2024 relating to the 2024 Registration Statement (the “Prospectus”).
Added
During the year ended December 31, 2024, the Series F Preferred Stock was registered with the SEC pursuant to the 2024 Registration Statement, and offered and sold pursuant to a prospectus supplement, dated May 1, 2024, and a base prospectus dated March 21, 2024.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

56 edited+13 added−3 removed189 unchanged
Biggest changeAs a result, we may from time to time have conflicts of interest with our Adviser in its management of our business, Gladstone Securities, in its provision of services to us and our other affiliated funds, and with Gladstone Capital, Gladstone Investment and Gladstone Land, which may arise primarily from the involvement of our Adviser, Gladstone Securities, Gladstone Capital, Gladstone Investment, Gladstone Land and their affiliates in other activities that may conflict with our business. 22 Table of Contents Examples of these potential conflicts include: • our Adviser may realize substantial compensation on account of its activities on our behalf, and may, therefore, be motivated to approve acquisitions solely on the basis of increasing compensation to itself; • Gladstone Securities acts as the dealer manager for our Series F Preferred Stock Offering, and earns fee income from Series F Preferred Stock proceeds; • our Adviser or Gladstone Securities, may earn fee income from our borrowers or tenants; and • our Adviser and other affiliates such as Gladstone Capital, Gladstone Investment and Gladstone Land could compete for the time and services of our officers and directors.
Biggest changeExamples of these potential conflicts include: • our Adviser may realize substantial compensation on account of its activities on our behalf, and may, therefore, be motivated to approve acquisitions solely on the basis of increasing compensation to itself; • Gladstone Securities acts as the dealer manager for our Series F Preferred Stock Offering, and earns fee income from Series F Preferred Stock proceeds; • our Adviser or Gladstone Securities, may earn fee income from our borrowers or tenants; and • our Adviser and other affiliates such as Gladstone Capital, Gladstone Investment, Gladstone Land, and Gladstone Alternative could compete for the time and services of our officers and directors.
The debt obligations of our tenants are dependent upon certain factors, which neither we nor our tenants or borrowers control, such as national, local and regional business and economic conditions, government economic policies, and the level of interest rates. Competition for real estate may impede our ability to make acquisitions or increase the cost of these acquisitions.
The debt obligations of our tenants are dependent upon certain factors, which neither we nor our tenants or borrowers control, such as national, local and regional business and economic conditions, government economic policies, and the level of interest rates. Competition for real estate may impede our ability to make acquisitions or may increase the cost of these acquisitions.
If we are unable to make our debt payments as required, a lender could foreclose on the property securing its loan. This could cause us to lose part or all of our investment in such property which in turn could cause the value of our securities or the amount of distributions to our stockholders to be reduced.
If we are unable to make our debt payments as required, a mortgage lender could foreclose on the property securing its loan. This could cause us to lose part or all of our investment in such property which in turn could cause the value of our securities or the amount of distributions to our stockholders to be reduced.
Moreover, with the exception of our chief financial officer, treasurer and president, all of our executive officers and directors are also executive officers and directors of Gladstone Capital and Gladstone Investment, which actively make loans to and invest in lower middle market companies, and with the exception of our chief financial officer and president, all of our executive officers and directors are also officers and directors of Gladstone Land, an agricultural REIT.
Moreover, with the exception of our chief financial officer, treasurer and president, all of our executive officers and directors are also executive officers and directors of Gladstone Capital, Gladstone Investment, and Gladstone Alternative, which actively make loans to and invest in lower middle market companies, and with the exception of our chief financial officer and president, all of our executive officers and directors are also officers and directors of Gladstone Land, an agricultural REIT.
The ownership limit does not apply to (i) offerors which, in accordance with applicable federal and state securities laws, make a cash tender offer, where at least 90% of the outstanding shares of our stock (not including shares or subsequently issued securities convertible into common stock which are held by the tender offeror and any “affiliates” or “associates” thereof within the meaning of the Exchange Act) are duly tendered and accepted pursuant to the cash tender offer; (ii) an underwriter in a public offering of our shares; (iii) a party initially acquiring shares in a transaction involving the issuance of our shares of capital stock, if our Board determines such party will timely distribute such shares such that, following such distribution, such shares will not be deemed excess shares; and (iv) a person or persons which our Board exempt from the ownership limit upon appropriate assurances that our qualification as a REIT is not jeopardized.
The ownership limit does not apply to (i) offerors which, in accordance with applicable federal and state securities laws, make a cash tender offer, where at least 90% of the outstanding shares of our stock (not including shares or subsequently issued securities convertible into common stock which are held by the tender offeror and any “affiliates” or “associates” thereof within the meaning of the Exchange Act) are duly tendered and accepted pursuant to the cash tender offer; (ii) an underwriter in a 25 Table of Contents public offering of our shares; (iii) a party initially acquiring shares in a transaction involving the issuance of our shares of capital stock, if our Board determines such party will timely distribute such shares such that, following such distribution, such shares will not be deemed excess shares; and (iv) a person or persons which our Board exempt from the ownership limit upon appropriate assurances that our qualification as a REIT is not jeopardized.
At the same time, our Advisory Agreement permits our Adviser to conduct other commercial activities and provide management and advisory services to other entities, including, but not limited to, Gladstone Capital, Gladstone Investment, and Gladstone Land.
At the same time, our Advisory Agreement permits our Adviser to conduct other commercial activities and provide management and advisory services to other entities, including, but not limited to, Gladstone Capital, Gladstone Investment, Gladstone Land, and Gladstone Alternative.
If we were to fail to qualify as a REIT in any taxable year: • we would not be allowed to deduct our distributions to stockholders when computing our taxable income; 23 Table of Contents • we would be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates; • we would be disqualified from being taxed as a REIT for the four taxable years following the year during which qualification was lost, unless entitled to relief under certain statutory provisions; • our cash available for distributions to stockholders would be reduced; and • we may be required to borrow additional funds or sell some of our assets to pay corporate tax obligations that we may incur as a result of our disqualification.
If we were to fail to qualify as a REIT in any taxable year: • we would not be allowed to deduct our distributions to stockholders when computing our taxable income; • we would be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates; • we would be disqualified from being taxed as a REIT for the four taxable years following the year during which qualification was lost, unless entitled to relief under certain statutory provisions; • our cash available for distributions to stockholders would be reduced; and • we may be required to borrow additional funds or sell some of our assets to pay corporate tax obligations that we may incur as a result of our disqualification.
Our redemption of OP Units could result in the issuance of a large number of new shares of our common stock and/or force us to expend significant cash, which may limit our funds necessary to make distributions on our common stock. As of the date of this filing, unaffiliated third parties owned approximately 0.8% of the outstanding OP Units.
Our redemption of OP Units could result in the issuance of a large number of new shares of our common stock and/or force us to expend significant cash, which may limit our funds necessary to make distributions on our common stock. As of the date of this filing, unaffiliated third parties owned approximately 0.1% of the outstanding OP Units.
Our performance, and the value of our investments, is subject to risks inherent to the ownership and operation of these types of properties, including: • changes in the general economic climate, including the credit market; • changes in local conditions, such as an oversupply of space or reduction in demand for real estate; • changes in interest rates and the availability of financing; • competition from other available space; • changes in laws and governmental regulations, including those governing real estate usage, zoning and taxes, and the related costs of compliance with laws and regulations; and • variations in the occupancy rate of our properties.
Our performance, and the value of our investments, is subject to risks inherent to the ownership and operation of these types of properties, including: • changes in the general economic climate, including the credit market; • changes in local conditions, such as an oversupply of space or reduction in demand for real estate; • changes in interest rates and the availability of financing; • competition from other available space; • changes in laws and governmental regulations, including those governing real estate usage, zoning and taxes, and the related costs of compliance with laws and regulations; and 21 Table of Contents • variations in the occupancy rate of our properties.
Losses from disaster-type occurrences (such as wars, floods or earthquakes) may be either uninsurable or not insurable on economically viable terms. Should such a loss occur, we could lose our capital investment or anticipated profits and cash flow from one or more properties.
Losses from disaster-type occurrences (such as wars, hurricanes, floods, wildfires, or earthquakes) may be either uninsurable or not insurable on economically viable terms. Should such a loss occur, we could lose our capital investment or anticipated profits and cash flow from one or more properties.
We expect that we will primarily borrow money that will be secured by our properties and that these financing arrangements will contain customary covenants such as those that limit our ability, without the prior consent of the lender, to further mortgage the applicable property or to discontinue insurance coverage.
We expect that we will primarily borrow funds that will be secured by our properties and that these financing arrangements will contain customary covenants such as those that limit our ability, without the prior consent of the lender, to further mortgage the applicable property or to discontinue insurance coverage.
In this situation, we have no economic interest in the land underlying the property and do not control this land; thus, this type of ownership interest poses potential risks for our business because (i) if the ground lease terminates for any reason, we will lose our interest in the property, including any investment that we made in the property, (ii) if our tenant defaults under the previously existing lease, we will continue to be obligated to meet the terms and conditions of the ground lease without the annual amount of ground lease payments reimbursable to us by the tenant, and (iii) if the third party owning the land under the ground lease disrupts our use either permanently or for a significant period of time, then the value of our assets could be impaired and our results of operations could be adversely affected.
In this situation, while we own the building that occupies the land subject to the ground lease, we have no economic interest in the land underlying the property and do not control this land; thus, this type of ownership interest poses potential risks for our business because (i) if the ground lease terminates for any reason, we will lose our interest in the property, including any investment that we made in the property, (ii) if our tenant defaults under the previously existing lease, we will continue to be obligated to meet the terms and conditions of the ground lease without the annual amount of ground lease payments reimbursable to us by the tenant, and (iii) if the third party owning the land under the ground lease disrupts our use either permanently or for a significant period of time, then the value of our assets could be impaired and our results of operations could be adversely affected.
In addition, because we are a holding company, stockholders’ claims will be structurally subordinated to all existing and future liabilities and obligations (whether or not for borrowed money) of our Operating Partnership and its subsidiaries.
In addition, because we are a holding company, stockholders’ claims will be structurally subordinated to all existing and future liabilities and obligations (whether or not for borrowed funds) of our Operating Partnership and its subsidiaries.
We cannot give any assurance that other such conditions do not exist or may not arise in the future. The potential impacts of climate change on our real estate properties could adversely affect our ability to lease, develop or sell such properties or to borrow using such properties as collateral. 29 Table of Contents Item 1B. Unresolved Staff Comments. None.
We cannot give any assurance that other such conditions do not exist or may not arise in the future. The potential impacts of climate change on our real estate properties could adversely affect our ability to lease, develop or sell such properties or to borrow using such properties as collateral. Item 1B. Unresolved Staff Comments. None.
We have acquired an interest in four of our properties by acquiring a leasehold interest in the land underlying the property, and we may acquire additional properties in the future that are subject to similar ground leases.
We have acquired an interest in three of our properties by acquiring a leasehold interest in the land underlying the property, and we may acquire additional properties in the future that are subject to similar ground leases.
If a tenant defaults, our lease revenues would be reduced and our expenses associated with carrying the property would increase, as we would be responsible for payments such as taxes and insurance. Lease payment defaults by these tenants could adversely affect our cash flows and cause us to reduce the amount of distributions to stockholders.
If a tenant defaults, our lease revenues would be reduced and our expenses associated with carrying the property would increase, as we would be responsible for payments such as taxes and insurance. Lease payment 17 Table of Contents defaults by these tenants could adversely affect our cash flows and cause us to reduce the amount of distributions to stockholders.
If this were to occur, we could incur significant remedial costs and we may also be subject to material private damage claims and awards. Concern about indoor exposure to mold has been increasing, as exposure to mold may cause a variety of adverse health effects and symptoms, including allergic or other reactions.
If this were to occur, we could incur significant remedial costs and we may also be subject to material private damage claims and awards. Concern about indoor exposure to mold has been increasing, as exposure to mold may cause a variety of adverse health effects and symptoms, including allergic or other 18 Table of Contents reactions.
In addition, the number of entities and the amount of funds competing for suitable investment properties may increase, resulting in increased demand and increased prices paid for these properties. 21 Table of Contents Our ownership of properties through ground leases exposes us to risks which are different than those resulting from our ownership of fee title to other properties.
In addition, the number of entities and the amount of funds competing for suitable investment properties may increase, resulting in increased demand and increased prices paid for these properties. Our ownership of properties through ground leases exposes us to risks which are different than those resulting from our ownership of fee title to other properties.
Our Adviser’s failure to effectively manage our future growth could have a material adverse effect on our business, financial condition and results of operations. We may have conflicts of interest with our Adviser and other affiliates. Our Adviser manages our business and locates, evaluates, recommends and negotiates the acquisition of our real estate investments.
Our 22 Table of Contents Adviser’s failure to effectively manage our future growth could have a material adverse effect on our business, financial condition and results of operations. We may have conflicts of interest with our Adviser and other affiliates. Our Adviser manages our business and locates, evaluates, recommends and negotiates the acquisition of our real estate investments.
The inability of a tenant in a single tenant property to pay rent will reduce our revenues and increase our carrying costs of the building. 17 Table of Contents Since most of our properties are occupied by a single tenant, the success of each investment will be materially dependent on the financial stability of these tenants.
The inability of a tenant in a single tenant property to pay rent will reduce our revenues and increase our carrying costs of the building. Since most of our properties are occupied by a single tenant, the success of each investment will be materially dependent on the financial stability of these tenants.
As a result, we could be held liable, under some circumstances, for debts incurred by the lessee relating to the property. Either of these outcomes could adversely affect our cash flow and our ability to pay distributions to stockholders.
As a result, we 15 Table of Contents could be held liable, under some circumstances, for debts incurred by the lessee relating to the property. Either of these outcomes could adversely affect our cash flow and our ability to pay distributions to stockholders.
When excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if the moisture problem remains undiscovered or is not addressed over a period 18 Table of Contents of time. Some molds may produce airborne toxins or irritants.
When excessive moisture accumulates in buildings or on building materials, mold growth may occur, particularly if the moisture problem remains undiscovered or is not addressed over a period of time. Some molds may produce airborne toxins or irritants.
We face a risk from the fact that certain of our properties are cross-collateralized. As of December 31, 2023, the mortgages on certain of our properties were cross-collateralized.
We face a risk from the fact that certain of our properties are cross-collateralized. As of December 31, 2024, the mortgages on certain of our properties were cross-collateralized.
Risks related to our Adviser and Administrator We are dependent upon our key personnel, who are employed by our Adviser or Administrator, as applicable, for our future success, particularly David Gladstone, Terry Lee Brubaker, Arthur “Buzz” Cooper and Gary Gerson.
Risks related to our Adviser and Administrator We are dependent upon our key personnel, who are employed by our Adviser or Administrator, as applicable, for our future success, particularly David Gladstone, Arthur “Buzz” Cooper and Gary Gerson.
Our subsidiaries’ ability to pay such dividends and/or make such loans, advances, 25 Table of Contents leases or other payments may be restricted by, among other things, applicable laws and regulations, current and future debt agreements and management agreements into which our subsidiaries may enter, which may impair our ability to make cash payments on our common stock or our preferred stock.
Our subsidiaries’ ability to pay such dividends and/or make such loans, advances, leases or other payments may be restricted by, among other things, applicable laws and regulations, current and future debt agreements and management agreements into which our subsidiaries may enter, which may impair our ability to make cash payments on our common stock or our preferred stock.
We intend to acquire additional properties by using our Credit Facility and by continuing to seek long-term mortgage financing, where we will borrow a portion of the purchase price of a potential acquisition and secure the loan with a mortgage on some or all of our existing real property.
We intend to acquire additional properties by using our Credit Facility, long-term private debt financing and long-term mortgage financing, where we will borrow a portion of the purchase price of a potential acquisition and secure the loan with a mortgage on some or all of our existing real property.
If confirmed by the bankruptcy court, 15 Table of Contents we could be bound by the new terms, and prevented from foreclosing our lien on the property. If the sale-leaseback were re-characterized as a joint venture, we could be treated as a co-venturer with our lessee with regard to the property.
If confirmed by the bankruptcy court, we could be bound by the new terms, and prevented from foreclosing our lien on the property. If the sale-leaseback were re-characterized as a joint venture, we could be treated as a co-venturer with our lessee with regard to the property.
Our ability to achieve our investment objectives will be affected by our ability to borrow money in sufficient amounts and on favorable terms.
Our ability to achieve our investment objectives will be affected by our ability to borrow funds in sufficient amounts and on favorable terms.
However, our continued compliance with these covenants depends on many factors, and could be impacted by current or future economic conditions, and thus there are no assurances that we will continue to comply with these covenants.
However, our continued compliance with these covenants depends on many factors, and could be impacted by current or future economic conditions, and thus there are no assurances that 19 Table of Contents we will continue to comply with these covenants.
Our future success depends to a significant extent on the continued service and coordination of our senior management team, particularly David Gladstone, our chairman and chief executive officer, Terry Lee Brubaker, our chief operating officer, Arthur “Buzz” Cooper, our president, and Gary Gerson, our chief financial officer.
Our future success depends to a significant extent on the continued service and coordination of our senior management team, particularly David Gladstone, our chairman and chief executive officer, Arthur “Buzz” Cooper, our president, and Gary Gerson, our chief financial officer.
Our Adviser is not obligated to provide a waiver of the incentive fee, which could negatively impact our earnings and our ability to maintain our current level of, or increase, distributions to our stockholders. The Advisory Agreement contemplates a quarterly incentive fee based on our Core FFO (as defined in the Advisory Agreement).
Our Adviser is not obligated to provide a waiver of the incentive fee, which could negatively impact our earnings and our ability to maintain our current level of, or increase, distributions to our stockholders. The Advisory Agreement contemplates a quarterly incentive fee based on our Core Funds from Operations (“FFO”) (as defined in the Advisory Agreement).
With these properties, if the current 16 Table of Contents lease is terminated or not renewed, we may be required to renovate the property or to make rent concessions to lease the property to another tenant or sell the property.
With these properties, if the current lease is terminated or not renewed, we may be required to renovate the property or to make rent concessions to lease the property to another tenant or sell the property.
These covenants require us to, among other things, maintain certain financial ratios, including fixed charge coverage, debt service 19 Table of Contents coverage and a minimum net worth. We are also required to limit our distributions to stockholders to 96% of our FFO. As of December 31, 2023, we were in compliance with these covenants.
These covenants require us to, among other things, maintain certain financial ratios, including fixed charge coverage, debt service coverage and a minimum net worth. We are also required to limit our distributions to stockholders to 95% of our FFO. As of December 31, 2024, we were in compliance with these covenants.
As of December 31, 2023, we owned 135 properties and had 137 leases on these properties, and our five largest tenants accounted for approximately 14.4% of our total lease revenue. A consequence of a limited number of tenants is that the aggregate returns we realize may be materially adversely affected by the unfavorable performance of a small number of tenants.
As of December 31, 2024, we owned 135 properties and had 132 leases on these properties, and our five largest tenants accounted for approximately 16.9% of our total lease revenue. A consequence of a limited number of tenants is that the aggregate returns we realize may be materially adversely affected by the unfavorable performance of a small number of tenants.
This provision may reduce any premiums paid to stockholders in a change in control transaction. • Certain provisions of Maryland law applicable to us prohibit business combinations with: • any person who beneficially owns 10% or more of the voting power of our common stock, referred to as an “interested stockholder;” • an affiliate of ours who, at any time within the two-year period prior to the date in question, was an interested stockholder; or • an affiliate of an interested stockholder. 26 Table of Contents These prohibitions last for five years after the most recent date on which the interested stockholder became an interested stockholder.
This provision may reduce any premiums paid to stockholders in a change in control transaction. 26 Table of Contents • Certain provisions of Maryland law applicable to us prohibit business combinations with: • any person who beneficially owns 10% or more of the voting power of our common stock, referred to as an “interested stockholder;” • an affiliate of ours who, at any time within the two-year period prior to the date in question, was an interested stockholder; or • an affiliate of an interested stockholder.
If our Adviser does not issue this waiver in future quarters, it could negatively impact our earnings and may compromise our ability to maintain our current level of, or increase, distributions to our stockholders, which could have a material adverse impact on the market price of our securities.
If our Adviser does not issue other voluntary waivers in future quarters, it could negatively impact 23 Table of Contents our earnings and may compromise our ability to maintain our current level of, or increase, distributions to our stockholders, which could have a material adverse impact on the market price of our securities.
Our Board of Directors will determine our investment and financing policies, growth strategy and our debt, capitalization, distribution, acquisition, disposition and operating policies. Our Board of Directors may revise or amend these strategies and policies at any time without a vote by stockholders.
Our Board of Directors may change our investment policy without stockholders’ approval. 27 Table of Contents Our Board of Directors will determine our investment and financing policies, growth strategy and our debt, capitalization, distribution, acquisition, disposition and operating policies. Our Board of Directors may revise or amend these strategies and policies at any time without a vote by stockholders.
We have balloon payments of $15.6 million payable during the year ending December 31, 2024. We mortgage our properties, which subjects us to the risk of foreclosure in the event of non-payment.
We have balloon payments of $10.4 million payable during the year ending December 31, 2025. We mortgage our properties, which subjects us to the risk of foreclosure in the event of non-payment.
We recognized impairment charges of $19.3 million, $12.1 million, and $0.0 million during the years ended December 31, 2023, 2022, and 2021, respectively.
We recognized impairment charges of $6.8 million, $19.3 million, and $12.1 million during the years ended December 31, 2024, 2023, and 2022, respectively.
The unplanned departure of any of our executive officers or key personnel from the Adviser or Administrator, as applicable, could have a material adverse effect on our ability to implement our business strategy and to achieve our investment objectives.
Although we, through our Adviser and Administrator, engage in customary mitigating activities, such as succession planning, the unplanned departure of any of our executive officers or key personnel from the Adviser or Administrator, as applicable, could have a material adverse effect on our ability to implement our business strategy and to achieve our investment objectives.
Under the amendment of the Advisory Agreement dated January 10, 2023, our Advisor was not entitled to receive an incentive fee for the quarters ended March 31, 2023 and June 30, 2023.
For the year ended December 31, 2022, our Advisor did not issue a full or partial waiver of the incentive fee. Under the amendment of the Advisory Agreement dated January 10, 2023, our Advisor was not entitled to receive an incentive fee for the quarters ended March 31, 2023 and June 30, 2023.
If a large number of OP Units were redeemed, it could result in the issuance of a large number of new shares of our common stock, which could dilute our existing stockholders’ ownership.
If we issued a large number of OP Units in connection with future property acquisitions and/or a large number of OP Units were redeemed, it could result in the issuance of a large number of new shares of our common stock, which could dilute our existing stockholders’ ownership.
We also must ensure that (i) at least 75% of our gross income for each taxable year consists of certain types of income that we derive, directly or indirectly, from investments relating to real property or mortgages on real property or qualified temporary investment income and (ii) at least 95% of our gross income for each taxable year consists of income that is qualifying income for purposes of the 75% gross income test, other types of interest and distributions, gain from the sale or disposition of stock or securities, or any combination of these.
We also must ensure that (i) at least 75% of our gross income for each taxable year consists of certain types of income that we derive, directly or indirectly, from investments relating to real property or mortgages on real property or qualified temporary investment income and (ii) at least 95% of our gross income for each taxable year consists of income that is qualifying income for purposes of the 75% gross income test, other types of interest and distributions, gain from the sale or disposition of stock or securities, or any combination of these. 24 Table of Contents In addition, we may be required to make distributions to our stockholders at disadvantageous times or when we do not have funds readily available for distribution.
Accordingly, we generally may not make a distribution on our stock if, after giving effect to the distribution, we would not be able to pay our debts as they become due in the usual course of business or our total assets would be less than the sum of our total liabilities plus, unless the terms of such class or 28 Table of Contents series provide otherwise, the amount that would be needed to satisfy the preferential rights upon dissolution of the holders of shares of any class or series of stock then outstanding, if any, with preferences upon dissolution senior to those of such class of stock with respect to which the distribution would be made.
Accordingly, we generally may not make a distribution on our stock if, after giving effect to the distribution, we would not be able to pay our debts as they become due in the usual course of business or our total assets would be less than the sum of our total liabilities plus, unless the terms of such class or series provide otherwise, the amount that would be needed to satisfy the preferential rights upon dissolution of the holders of shares of any class or series of stock then outstanding, if any, with preferences upon dissolution senior to those of such class of stock with respect to which the distribution would be made. 28 Table of Contents Cybersecurity threats and cyber incidents may adversely affect our business by causing a disruption to our operations, or the operations of businesses in which we invest, a compromise or corruption of our confidential information and/or damage to our business relationships, all of which could negatively impact our business, financial condition and operating results.
To the extent that our distributions represent a return of capital for tax purposes, you could recognize an increased capital gain upon a subsequent sale of your stock. 24 Table of Contents Distributions in excess of our current and accumulated earnings and profits and not treated by us as a dividend will not be taxable to a U.S. stockholder to the extent such distributions do not exceed the stockholder’s adjusted tax basis in its shares of our stock but instead will constitute a return of capital and will reduce the stockholder’s adjusted tax basis in its share of our stock.
Distributions in excess of our current and accumulated earnings and profits and not treated by us as a dividend will not be taxable to a U.S. stockholder to the extent such distributions do not exceed the stockholder’s adjusted tax basis in its shares of our stock but instead will constitute a return of capital and will reduce the stockholder’s adjusted tax basis in its share of our stock.
We have no outstanding principal on variable rate mortgages as of December 31, 2023.
We have $7.3 million outstanding principal on variable rate mortgages as of December 31, 2024.
As of December 31, 2023, 14.1% of our total lease revenue was earned from tenants in the Telecommunications industry, 14.0% was earned from tenants in the Automotive industry, 12.5% was earned from tenants in the Diversified/Conglomerate Services industry, and 7.6% was earned from tenants in the Healthcare industry.
As of December 31, 2024, 15.8% of our total lease revenue was earned from tenants in the Diversified/Conglomerate Services industry, 14.5% was earned from tenants in the Automotive industry, 9.9% was earned from tenants in the Buildings and Real Estate industry, and 9.0% was earned from tenants in the Telecommunications industry.
In addition, we may be required to make distributions to our stockholders at disadvantageous times or when we do not have funds readily available for distribution. If we fail to comply with these requirements at the end of any calendar quarter, we must qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences.
If we fail to comply with these requirements at the end of any calendar quarter, we must qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences.
In addition, in the event we are forced to sell the property, we may have difficulty selling it to a party other than the tenant or borrower due to the special purpose for which the property may have been designed. These and other limitations may affect our ability to sell or re-lease properties without adversely affecting returns to our stockholders.
In addition, in the event we are forced to sell the property, we may have 16 Table of Contents difficulty selling it to a party other than the tenant or borrower due to the special purpose for which the property may have been designed.
We are also exposed to the effects of interest rate changes as a result of holding cash and cash equivalents in short-term, interest-bearing investments.
We are also exposed to the effects of interest rate changes as a result of holding cash and cash equivalents in short-term, interest-bearing investments. We have entered into interest rate caps and interest rate swaps to attempt to manage our exposure to interest rate fluctuations on the outstanding Term Loan components of our Credit Facility.
We look to regional banks, insurance companies and other non-bank lenders, and, to a lesser extent, the commercial mortgage backed securities (“CMBS”) market to issue mortgages to finance our real estate activities. For the year ended December 31, 2023, we obtained approximately $9.0 million in long-term financing, which we used to acquire additional properties.
We look to institutional buyers for our bond issuances and we look to regional banks, insurance companies and other non-bank lenders, and, to a lesser extent, the commercial mortgage backed securities (“CMBS”) market to issue mortgages to finance our real estate activities.
We may incur unanticipated expenses that may be 27 Table of Contents material to our financial condition or results of operations to comply with ADA and other federal, state and local laws, or in connection with lawsuits brought by private litigants. Our Board of Directors may change our investment policy without stockholders’ approval.
Legislation or regulations adopted in the future may impose further burdens or restrictions on us with respect to improved access by disabled persons. We may incur unanticipated expenses that may be material to our financial condition or results of operations to comply with ADA and other federal, state and local laws, or in connection with lawsuits brought by private litigants.
Many of our tenants are lower middle market businesses, which exposes us to additional risks specific to these entities.
These and other limitations may affect our ability to sell or re-lease properties without adversely affecting returns to our stockholders. Many of our tenants are lower middle market businesses, which exposes us to additional risks specific to these entities.
Thus, compliance with the REIT requirements may hinder our ability to make, and, in certain cases, maintain ownership of certain attractive investments.
Thus, compliance with the REIT requirements may hinder our ability to make, and, in certain cases, maintain ownership of certain attractive investments. To the extent that our distributions represent a return of capital for tax purposes, you could recognize an increased capital gain upon a subsequent sale of your stock.
For the year ended December 31, 2021, our Advisor issued a waiver of the incentive fee of $0.02 million. For the year ended December 31, 2022, our Adviser did not issue a full or partial waiver of the incentive fee.
For the year ended December 31, 2024, our Adviser issued a voluntary waiver of a portion of the incentive fee of $2.3 million.
A significant change in interest rates could have an adverse impact on our results of operations. Risks related to the real estate industry We are subject to certain risks associated with real estate ownership and borrowing which could reduce the value of our investments. Our investments include primarily industrial and office property.
The business activity limitations contained in the various covenants will restrict our ability to engage in some business activities that may otherwise be in our best interests. Risks related to the real estate industry We are subject to certain risks associated with real estate ownership and borrowing which could reduce the value of our investments.
Removed
We have entered into interest rate caps and interest rate swaps to attempt to manage our exposure to interest rate fluctuations on all of our outstanding variable rate mortgages as well as the outstanding Term Loan components of our Credit Facility.
Added
Similarly, events and actions that may not affect us directly, such as tariffs or changes in government regulation, could nevertheless have a material adverse effect on us if such events and actions adversely impact our tenants.
Removed
Legislation or regulations adopted in the future may impose further burdens or restrictions on us with respect to improved access by disabled persons.
Added
For the year ended December 31, 2024, we obtained approximately $15.2 million in long-term mortgage financing and $75.0 million of long-term private debt financing, which we used to acquire additional properties and repay our revolving credit facility and bank term loans.
Removed
Cybersecurity threats and cyber incidents may adversely affect our business by causing a disruption to our operations, or the operations of businesses in which we invest, a compromise or corruption of our confidential information and/or damage to our business relationships, all of which could negatively impact our business, financial condition and operating results.
Added
A significant change in interest rates could have an adverse impact on our results of operations. Adverse changes in our credit ratings could negatively affect our financing activity. A decline in the credit rating of the 2029 Notes, which we guarantee, will increase our cost of such debt.
Added
In addition, our credit ratings can affect the amount of capital we can access, as well as the terms and pricing of any debt we may incur.
Added
There can be no assurance that we will be able to maintain our current credit ratings, and in the event our credit ratings are downgraded, we would likely incur higher borrowing costs and may encounter difficulty in obtaining additional financing.
Added
Also, a downgrade in our credit ratings may trigger additional payments or other negative consequences under certain of our debt instruments. Adverse changes in our credit ratings could negatively impact our business and, in particular, our refinancing and other capital market activities, our ability to manage debt maturities, our future growth and our development and acquisition activity.
Added
The 2029 Notes and certain of our other secured loans contain, and any other future indebtedness we incur may contain, various covenants, including business activity restrictions, and the failure to comply with those covenants could materially adversely affect us.
Added
The 2029 Notes and certain of our other secured loans contain, and any other future indebtedness we incur may contain, certain covenants, which, among other things, restrict our activities, including, the incurrence of indebtedness, disposition of assets, mergers and transactions with affiliates.
Added
We are also subject to financial and operating covenants including, as applicable, requirements to maintain certain financial coverage ratios and restrictions on our ability to make distributions to stockholders.
Added
Failure to comply with any of these covenants would likely result in a default under the applicable indebtedness that would permit the acceleration of amounts due thereunder and under other indebtedness and foreclosure of properties, if any, serving as collateral therefor.
Added
Our investments include primarily industrial and office property.
Added
As a result, we may from time to time have conflicts of interest with our Adviser in its management of our business, Gladstone Securities, in its provision of services to us and our other affiliated funds, and with Gladstone Capital, Gladstone Investment, Gladstone Land, and Gladstone Alternative, which may arise primarily from the involvement of our Adviser, Gladstone Securities, Gladstone Capital, Gladstone Investment, Gladstone Land, Gladstone Alternative and their affiliates in other activities that may conflict with our business.
Added
These prohibitions last for five years after the most recent date on which the interested stockholder became an interested stockholder.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

10 edited+2 added−0 removed12 unchanged
Biggest changeIn addition to the ongoing dialogue and technology interaction between our Adviser and Administrator, on our behalf, and our ISP, any significant findings in these reports are shared with us, including our Board of Directors and other officers, to enhance ongoing monitoring and assessment of our information technology and cybersecurity risk management. 30 Table of Contents While our ISP works to create a hardened information technology systems environment, our Adviser and Administrator also regularly trains employees working on our behalf on the evolving threats and educates them on cybersecurity risks.
Biggest changeIn addition to the ongoing dialogue and technology interaction between our Director of IT and our ISP, any significant findings in these reports are shared with us, including our Board of Directors and other officers, to enhance ongoing monitoring and assessment of our information technology and cybersecurity risk management.
Our cybersecurity threat risks are identified, assessed, managed, and monitored by our Adviser’s and Administrator’s resource management and compliance departments, on our behalf, and work in conjunction with an independent third-party information technology service provider (“ISP”) engaged by our Adviser to manage our information technology strategy.
Our cybersecurity threat risks are identified, assessed, managed, and monitored by our Adviser’s and Administrator’s resource management, information technology (“IT”), and compliance departments, on our behalf, and work in conjunction with an independent third-party information technology service provider (“ISP”) engaged by our Adviser to manage our information technology strategy.
Appropriate members of management and third party providers will be involved as deemed necessary based on the potential impact. Our management personnel most involved with assessing and managing the cybersecurity risks and program with our ISP include our Head of Resources Management, who is also a member of our Board of Directors, and our CCO.
Appropriate members of management and third party providers will be involved as deemed necessary based on the potential impact. Our management personnel most involved with assessing and managing the cybersecurity risks and program with our ISP include our Head of Resources Management, who is also a member of our Board of Directors, Director of IT, and CCO.
Relevant examples of such efforts include but are not limited to: • implementation of industry leading Cloud solutions and business applications which possess integrated cybersecurity safeguards; • anti-malware, antivirus and threat detection software; • ransomware containment and isolation software; • enhanced password requirements and multifactor authentication requirements; • endpoint encryption; • intrusion detection and response system conduct file integrity monitoring; • email archiving, firewalls, and quarantine capabilities; • mobile device management of business applications; • frequent systems backups with recovery capabilities; and • regular vulnerability scans and penetration testing.
Relevant examples of such efforts include but are not limited to: • implementation of industry leading Cloud solutions and business applications which possess integrated cybersecurity safeguards; • restrict access to known devices only; • anti-malware, antivirus and threat detection software; • ransomware containment and isolation software; • enhanced password requirements and multifactor authentication requirements; • endpoint encryption; • intrusion detection and response system conduct file integrity monitoring; • email archiving, firewalls, and quarantine capabilities; • mobile device management of business applications; • frequent systems backups with recovery capabilities; and • regular vulnerability scans and penetration testing.
Item 1C. Cybersecurity. Risk Management and Strategy We have implemented ongoing processes that are designed to continually identify, assess, manage and mitigate the dynamic and evolving material risks to us from cybersecurity threats.
Item 1C. Cybersecurity. 29 Table of Contents Risk Management and Strategy We have implemented ongoing processes that are designed to continually identify, assess, manage and mitigate the dynamic and evolving material risks to us from cybersecurity threats.
The ISP proposes recommendations to our Adviser’s resource management and compliance departments, which then are considered by other officers and employees of our Adviser and Administrator, working on our behalf, before improvements are implemented to our information technology strategy, cybersecurity, and incident response policies, processes and procedures.
The ISP proposes recommendations to our Adviser’s Head of Resource Management, Director of IT, and Chief Compliance Office (“CCO”), which then are considered by other officers and employees of our Adviser and Administrator, working on our behalf, before improvements are implemented to our information technology strategy, cybersecurity, and incident response policies, processes and procedures.
In addition, regular ongoing cybersecurity threat risk assessments are performed throughout the year and reported to our officers and Board of Directors by our Chief Compliance Officer (“CCO”) no less than quarterly.
In addition, regular ongoing cybersecurity threat risk assessments are performed throughout the year and reported to our officers and Board of Directors by our CCO no less than quarterly.
Governance Our Board of Directors is actively engaged in overseeing our cybersecurity and information security program. Our Board of Directors receives regular reports during board meetings from our CCO on our and our Adviser’s and Administrator’s efforts concerning information security and addressing information technology and cybersecurity risks, no less than quarterly.
Our Board of Directors receives regular reports during board meetings from our CCO on our and our Adviser’s and Administrator’s efforts concerning information security and addressing information technology and cybersecurity risks, no less than quarterly.
See “ Risk Factors - Cybersecurity threats and cyber incidents may adversely affect our business by causing a disruption to our operations, or the operations of businesses in which we invest, a compromise or corruption of our confidential information and/or damage to our business relationships, all of which could negatively impact our business, financial condition and operating results. ” for a discussion of risks related to cybersecurity and cyber incidents.
See “ Risk Factors - Cybersecurity threats and cyber incidents may adversely affect our business by causing a disruption to our operations, or the operations of businesses in which we invest, a compromise or corruption of our confidential information and/or damage to our business relationships, all of which could negatively impact our business, financial condition and operating results. ” for a discussion of risks related to cybersecurity and cyber incidents. 30 Table of Contents Governance Our Board of Directors is actively engaged in overseeing our cybersecurity and information security program.
As an international service provider, our ISP constantly monitors information technology risk and cybersecurity threats globally. When risks are detected, we, through our Adviser and Administrator, consults with the ISP to assess if the risk is a cybersecurity threat to our information technology systems or data.
As an international service provider, our ISP constantly monitors information technology risk and cybersecurity threats globally. When risks are detected, our Head of Resource Management, Director of IT, and CCO consult with the ISP to assess if the risk is a cybersecurity threat to our information technology systems or data.
Added
While our ISP works to create a hardened information technology systems environment, our Adviser and Administrator also regularly trains employees working on our behalf on the evolving threats and educates them on cybersecurity risks.
Added
Our Director of IT has over 20 years of experience in IT, with a focus in the implementation of information security projects to enhance organizations’ resilience against emerging threats, and has collaborated closely with security vendors/partners to contain and address cybersecurity incidents.

Item 2. Properties

Properties — owned and leased real estate

3 edited+0 added−0 removed1 unchanged
Biggest changeN/A - Not Applicable The following table summarizes the geographic locations of our properties as of December 31, 2023, 2022, and 2021, respectively (dollars in thousands): State Lease Revenue for the twelve months ended December 31, 2023 % of Lease Revenue Number of Leases for the twelve months ended December 31, 2023 Rentable Square Feet for the twelve months ended December 31, 2023 Lease Revenue for the twelve months ended December 31, 2022 % of Lease Revenue Number of Leases for the twelve months ended December 31, 2022 Rentable Square Feet for the twelve months ended December 31, 2022 Lease Revenue for the year ended December 31, 2021 % of Lease Revenue Number of Leases for the year ended December 31, 2021 Rentable Square Feet for the year ended December 31, 2021 Florida $ 19,387 13.1 % 9 1,045,404 $ 16,329 11.0 % 9 1,045,404 $ 16,741 12.2 % 9 1,038,076 Texas 17,847 12.1 14 1,473,264 21,462 14.4 14 1,377,568 16,124 11.7 14 1,492,768 Pennsylvania 14,809 10.0 10 2,267,847 14,850 10.0 10 2,224,007 15,382 11.2 10 2,224,007 Ohio 14,347 9.7 15 1,312,291 13,888 9.3 16 1,312,291 14,911 10.8 15 1,275,023 Georgia 12,061 8.2 11 1,686,986 11,674 7.8 10 1,686,986 10,778 7.8 10 1,686,986 North Carolina 9,340 6.3 10 1,539,430 8,684 5.8 10 1,539,430 6,860 5.0 8 1,113,846 Alabama 8,793 6.0 6 1,107,654 7,578 5.1 7 1,138,504 6,477 4.7 5 921,891 Colorado 7,480 5.1 4 482,481 4,613 3.1 4 482,481 4,331 3.1 3 413,807 Michigan 6,487 4.4 6 973,638 6,435 4.3 6 973,638 6,374 4.6 6 973,638 Indiana 4,223 2.9 11 639,605 4,121 2.8 10 571,896 4,129 3.0 10 571,896 All Other States 32,810 22.2 41 4,530,669 39,347 26.4 41 4,827,746 35,581 25.9 40 4,520,857 $ 147,584 100.0 % 137 17,059,269 $ 148,981 100.0 % 137 17,179,951 $ 137,688 100.0 % 130 16,232,795 The following table summarizes lease revenue by tenant industries for the years ended December 31, 2023, 2022 and 2021 (dollars in thousands): 32 Table of Contents For the year ended December 31, 2023 2022 2021 Industry Classification Lease Revenue Percentage of Lease Revenue Lease Revenue Percentage of Lease Revenue Lease Revenue Percentage of Lease Revenue Telecommunications $ 21,306 14.1 % $ 22,456 15.1 % $ 22,712 16.5 % Automotive 20,697 14.0 19,133 12.8 13,555 9.8 Diversified/Conglomerate Services 18,379 12.5 17,946 12.0 18,613 13.5 Healthcare 11,156 7.6 15,928 10.7 15,216 11.1 Diversified/Conglomerate Manufacturing 10,648 7.2 10,976 7.4 7,774 5.6 Buildings and Real Estate 9,667 6.6 9,319 6.3 9,582 7.0 Banking 9,538 6.5 13,136 8.8 10,264 7.5 Personal, Food & Miscellaneous Services 9,382 6.4 7,232 4.9 7,097 5.2 Personal & Non-Durable Consumer Products 7,648 5.2 5,531 3.7 2,495 1.8 Machinery 5,874 4.0 4,257 2.9 4,001 2.9 Beverage, Food & Tobacco 5,724 3.9 5,615 3.8 5,805 4.2 Chemicals, Plastics & Rubber 5,365 3.6 4,838 3.2 4,703 3.4 Containers, Packaging & Glass 4,065 2.8 3,827 2.6 2,937 2.1 Information Technology 2,439 1.7 3,515 2.4 6,657 4.8 Childcare 2,292 1.6 2,292 1.5 2,293 1.7 Electronics 1,145 0.8 725 0.5 1,013 0.7 Printing & Publishing 930 0.6 917 0.6 1,668 1.2 Education 836 0.6 845 0.6 818 0.6 Home & Office Furnishings 493 0.3 493 0.2 485 0.4 Total $ 147,584 100.0 % $ 148,981 100.0 % $ 137,688 100.0 % 33 Table of Contents
Biggest changeN/A - Not Applicable The following table summarizes the geographic locations of our properties as of December 31, 2024, 2023, and 2022, respectively (dollars in thousands): 31 Table of Contents State Lease Revenue for the twelve months ended December 31, 2024 % of Lease Revenue Number of Leases for the twelve months ended December 31, 2024 Rentable Square Feet for the twelve months ended December 31, 2024 Lease Revenue for the twelve months ended December 31, 2023 % of Lease Revenue Number of Leases for the twelve months ended December 31, 2023 Rentable Square Feet for the twelve months ended December 31, 2023 Lease Revenue for the year ended December 31, 2022 % of Lease Revenue Number of Leases for the year ended December 31, 2022 Rentable Square Feet for the year ended December 31, 2022 Pennsylvania $ 20,209 13.5 % 11 2,420,790 $ 14,809 10.0 % 10 2,267,847 $ 14,850 10.0 % 10 2,224,007 Texas 18,772 12.6 15 1,367,382 17,847 12.1 14 1,473,264 21,462 14.4 14 1,377,568 Florida 17,228 11.5 9 1,045,404 19,387 13.1 9 1,045,404 16,329 11.0 9 1,045,404 Ohio 12,267 8.2 15 1,197,505 14,347 9.7 15 1,312,291 13,888 9.3 16 1,312,291 Georgia 12,132 8.1 9 1,660,655 12,061 8.2 11 1,686,986 11,674 7.8 10 1,686,986 North Carolina 9,464 6.3 10 1,539,430 9,340 6.3 10 1,539,430 8,684 5.8 10 1,539,430 Alabama 8,675 5.8 6 1,107,654 8,793 6.0 6 1,107,654 7,578 5.1 7 1,138,504 Colorado 7,480 5.0 4 482,481 7,480 5.1 4 482,481 4,613 3.1 4 482,481 Michigan 6,833 4.6 6 973,638 6,487 4.4 6 973,638 6,435 4.3 6 973,638 Indiana 4,685 3.1 10 639,605 4,223 2.9 11 639,605 4,121 2.8 10 571,896 All Other States 31,643 21.3 37 4,465,343 32,810 22.2 41 4,530,669 39,347 26.4 41 4,827,746 $ 149,388 100.0 % 132 16,899,887 $ 147,584 100.0 % 137 17,059,269 $ 148,981 100.0 % 137 17,179,951 The following table summarizes lease revenue by tenant industries for the years ended December 31, 2024, 2023 and 2022 (dollars in thousands): For the year ended December 31, 2024 2023 2022 Industry Classification Lease Revenue Percentage of Lease Revenue Lease Revenue Percentage of Lease Revenue Lease Revenue Percentage of Lease Revenue Diversified/Conglomerate Services $ 23,584 15.8 % $ 18,379 12.5 % $ 17,946 12.0 % Automotive 21,617 14.5 20,697 14.0 19,133 12.8 Buildings and Real Estate 14,800 9.9 9,667 6.6 9,319 6.3 Telecommunications 13,401 9.0 21,306 14.1 22,456 15.1 Diversified/Conglomerate Manufacturing 9,969 6.7 10,648 7.2 10,976 7.4 Personal, Food & Miscellaneous Services 9,554 6.4 9,382 6.4 7,232 4.9 Banking 9,366 6.3 9,538 6.5 13,136 8.8 Healthcare 8,180 5.5 11,156 7.6 15,928 10.7 Personal & Non-Durable Consumer Products 7,440 5.0 7,648 5.2 5,531 3.7 Machinery 7,393 4.9 5,874 4.0 4,257 2.9 Beverage, Food & Tobacco 5,829 3.9 5,724 3.9 5,615 3.8 Chemicals, Plastics & Rubber 5,391 3.6 5,365 3.6 4,838 3.2 Containers, Packaging & Glass 4,620 3.1 4,065 2.8 3,827 2.6 Childcare 2,293 1.5 2,292 1.6 2,292 1.5 Information Technology 2,288 1.5 2,439 1.7 3,515 2.4 Electronics 1,176 0.8 1,145 0.8 725 0.5 Printing & Publishing 1,065 0.7 930 0.6 917 0.6 Education 590 0.4 836 0.6 845 0.6 Home & Office Furnishings 493 0.3 493 0.3 493 0.2 Oil & Gas 339 0.2 — — — — Total $ 149,388 100.0 % $ 147,584 100.0 % $ 148,981 100.0 % 32 Table of Contents
Item 2. Properties. As of December 31, 2023, we wholly-owned 135 properties, comprised of 17.1 million square feet of rentable space in 27 states. Our properties were 96.8% leased with an average remaining lease term of 6.8 years.
Item 2. Properties. As of December 31, 2024, we wholly-owned 135 properties, comprised of 16.9 million square feet of rentable space in 27 states. Our properties were 98.7% leased with an average remaining lease term of 7.0 years.
The following table summarizes the lease expirations by year for our properties for leases in place as of December 31, 2023 (dollars in thousands): 31 Table of Contents Year of Lease Expiration Square Feet (1) Number of Expiring Leases Lease Revenue for the year ended December 31, 2023 % Expiring 2024 1,794,776 4 6,596 4.5 % 2025 442,630 9 11,073 7.5 % 2026 1,781,100 12 18,635 12.6 % 2027 1,081,647 12 16,132 10.9 % 2028 2,276,338 15 12,857 8.7 % Thereafter 9,135,521 85 73,462 49.8 % Sold/terminated leases N/A N/A 8,829 6.0 % 16,512,012 137 $ 147,584 100.0 % (1) Our vacant square footage totaled 547,257 square feet as of December 31, 2023.
The following table summarizes the lease expirations by year for our properties for leases in place as of December 31, 2024 (dollars in thousands): Year of Lease Expiration Square Feet (1) Number of Expiring Leases Lease Revenue for the year ended December 31, 2024 % Expiring 2025 851,355 4 $ 4,773 3.2 % 2026 1,683,479 9 17,535 11.7 2027 1,081,647 12 16,497 11.0 2028 1,754,938 14 12,082 8.1 2029 1,647,579 17 11,619 7.8 Thereafter 9,658,573 76 79,743 53.4 Sold/terminated leases N/A N/A 7,139 4.8 16,677,571 132 $ 149,388 100.0 % (1) Our vacant square footage totaled 222,316 square feet as of December 31, 2024.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+1 added−1 removed11 unchanged
Biggest changeAs of February 13, 2024, there were 49,397 beneficial owners of our common stock. We pay distributions on shares of our Senior Common Stock in an amount equal to $1.05 per share per annum, declared daily and paid at the rate of $0.0875 per share per month.
Biggest changeAs of February 10, 2025, there were 49,912 beneficial owners of our common stock. We pay distributions on shares of our Senior Common Stock in an amount equal to $1.05 per share per annum, declared daily and paid at the rate of $0.0875 per share per month.
A covenant in the agreement governing our Credit Facility requires us to, among other things, limit our distributions to stockholders to 96% of our FFO, excluding extraordinary or non-routine items, and continued compliance with this covenant may require us to limit our distributions to stockholders in the future.
A covenant in the agreement governing our Credit Facility requires us to, among other things, limit our distributions to stockholders to 95% of our FFO, excluding extraordinary or non-routine items, and continued compliance with this covenant may require us to limit our distributions to stockholders in the future.
Sale of Unregistered Securities We did not sell unregistered shares of stock during the fiscal year ended December 31, 2023. 34 Table of Contents Issuer Purchaser of Equity Securities We repurchased 600 shares of our Series G Preferred Stock and 80,780 shares of our Common Stock during the fiscal year ended December 31, 2023.
Sale of Unregistered Securities We did not sell unregistered shares of stock during the fiscal year ended December 31, 2024. 33 Table of Contents Issuer Purchaser of Equity Securities We repurchased 600 shares of our Series G Preferred Stock and 80,780 shares of our Common Stock during the fiscal year ended December 31, 2023.
The Senior Common Stock is not traded on any exchange or automated quotation system. As of February 13, 2024, there were 143 beneficial owners of our Senior Common Stock.
The Senior Common Stock is not traded on any exchange or automated quotation system. As of February 10, 2025, there were 143 beneficial owners of our Senior Common Stock.
The stock performance graph assumes $100 was invested on December 31, 2018.
The stock performance graph assumes $100 was invested on December 31, 2019.
We did not repurchase any stock during the three months ended December 31, 2023.
We did not repurchase any stock during the year ended December 31, 2024.
Removed
At December 31, 2018 2019 2020 2021 2022 2023 GOOD $ 100.00 $ 151.10 $ 135.86 $ 207.01 $ 161.88 $ 126.91 S&P 500 $ 100.00 $ 126.15 $ 149.49 $ 191.74 $ 163.01 $ 198.36 FNAR $ 100.00 $ 128.07 $ 120.57 $ 168.65 $ 126.32 $ 140.78 Item 6. Reserved.
Added
At December 31, 2019 2020 2021 2022 2023 2024 GOOD $ 100.00 $ 89.41 $ 136.24 $ 106.53 $ 83.52 $ 111.39 S&P 500 $ 100.00 $ 118.50 $ 151.99 $ 129.21 $ 157.24 $ 204.45 FNAR $ 100.00 $ 94.14 $ 131.68 $ 98.63 $ 109.95 $ 114.69 Item 6. Reserved.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

111 edited+19 added−25 removed67 unchanged
Biggest changeA comparison of our operating results for the year ended December 31, 2023 and 2022 is below (dollars in thousands, except per share amounts): 44 Table of Contents For the year ended December 31, 2023 2022 $ Change % Change Operating revenues Lease revenue $ 147,584 $ 148,981 $ (1,397) (0.9) % Total operating revenues $ 147,584 $ 148,981 $ (1,397) (0.9) % Operating expenses Depreciation and amortization $ 57,856 $ 60,154 $ (2,298) (3.8) % Property operating expenses 25,858 26,832 (974) (3.6) % Base management fee 6,380 6,331 49 0.8 % Incentive fee — 5,270 (5,270) (100.0) % Administration fee 2,350 1,864 486 26.1 % General and administrative 4,363 3,705 658 17.8 % Impairment charge 19,296 12,092 7,204 59.6 % Total operating expenses $ 116,103 $ 116,248 $ (145) (0.1) % Other (expense) income Interest expense $ (37,330) $ (32,457) $ (4,873) 15.0 % Gain on sale of real estate, net 7,737 10,052 (2,315) (23.0) % Gain on debt extinguishment, net 2,830 — 2,830 100.0 % Other income 204 454 (250) (55.1) % Total other expense, net $ (26,559) $ (21,951) $ (4,608) 21.0 % Net income $ 4,922 $ 10,782 $ (5,860) (54.3) % Distributions attributable to Series E, F, and G preferred stock (12,285) (11,903) (382) 3.2 % Distributions attributable to senior common stock (430) (458) 28 (6.1) % Loss on extinguishment of Series F preferred stock (11) (10) (1) 10.0 % Gain on repurchase of Series G preferred stock 3 37 (34) (91.9) % Net loss attributable to common stockholders and Non-controlling OP Unitholders $ (7,801) $ (1,552) $ (6,249) 402.6 % Net loss attributable to common stockholders and Non-controlling OP Unitholders per weighted average share and unit - basic & diluted $ (0.19) $ (0.04) $ (0.15) 375.0 % FFO available to common stockholders and Non-controlling OP Unitholders - basic (1) $ 58,784 $ 60,642 $ (1,858) (3.1) % FFO available to common stockholders and Non-controlling OP Unitholders - diluted (1) $ 59,214 $ 61,100 $ (1,886) (3.1) % FFO per weighted average share of common stock and Non-controlling OP Unit - basic (1) $ 1.46 $ 1.55 $ (0.09) (5.8) % FFO per weighted average share of common stock and Non-controlling OP Unit - diluted (1) $ 1.46 $ 1.54 $ (0.08) (5.2) % (1) Refer to the “Funds from Operations” section below within the Management’s Discussion and Analysis section for the definition of FFO and FFO, as adjusted for comparability.
Biggest changeA comparison of our operating results for the year ended December 31, 2024 and 2023 is below (dollars in thousands, except per share amounts): For the year ended December 31, 2024 2023 $ Change % Change Operating revenues Lease revenue $ 149,388 $ 147,584 $ 1,804 1.2 % Total operating revenues $ 149,388 $ 147,584 $ 1,804 1.2 % Operating expenses Depreciation and amortization $ 55,786 $ 57,856 $ (2,070) (3.6) % Property operating expenses 25,418 25,858 (440) (1.7) % Base management fee 6,111 6,380 (269) (4.2) % Incentive fee 4,488 — 4,488 100.0 % Administration fee 2,567 2,350 217 9.2 % General and administrative 3,879 4,363 (484) (11.1) % Impairment charge 6,822 19,296 (12,474) (64.6) % Total operating expense before incentive fee waiver $ 105,071 $ 116,103 $ (11,032) (9.5) % Incentive fee waiver (2,263) — (2,263) 100.0 % Total operating expenses $ 102,808 $ 116,103 $ (13,295) (11.5) % Other income (expense) Interest expense $ (37,395) $ (37,330) $ (65) 0.2 % Gain on sale of real estate, net 14,229 7,737 6,492 83.9 % Gain on debt extinguishment, net 300 2,830 (2,530) (89.4) % Other income 326 204 122 59.8 % Total other expense, net $ (22,540) $ (26,559) $ 4,019 (15.1) % Net income $ 24,040 $ 4,922 $ 19,118 388.4 % Distributions attributable to Series E, F, and G preferred stock (12,440) (12,285) (155) 1.3 % Distributions attributable to senior common stock (420) (430) 10 (2.3) % Loss on extinguishment of Series F preferred stock (14) (11) (3) 27.3 % Gain on repurchase of Series G preferred stock — 3 (3) (100.0) % Net income (loss) available (attributable) to common stockholders and Non-controlling OP Unitholders $ 11,166 $ (7,801) $ 18,967 (243.1) % Net income (loss) available (attributable) to common stockholders and Non-controlling OP Unitholders per weighted average share and unit - basic & diluted $ 0.27 $ (0.19) $ 0.46 (242.1) % FFO available to common stockholders and Non-controlling OP Unitholders - basic (1) $ 59,245 $ 58,784 $ 461 0.8 % FFO available to common stockholders and Non-controlling OP Unitholders - diluted (1) $ 59,665 $ 59,214 $ 451 0.8 % FFO per weighted average share of common stock and Non-controlling OP Unit - basic (1) $ 1.41 $ 1.46 $ (0.05) (3.4) % FFO per weighted average share of common stock and Non-controlling OP Unit - diluted (1) $ 1.41 $ 1.46 $ (0.05) (3.4) % (1) Refer to the “Funds from Operations” section below within the Management’s Discussion and Analysis section for the definition of FFO and FFO, as adjusted for comparability.
The Eighth Amended Advisory Agreement contractually eliminated the payment of the incentive fee for the quarters ended September 30, 2023 and December 31, 2023.
The Eighth Amended Advisory Agreement contractually eliminated the payment of the incentive fee for the quarters ended September 30, 2023 and December 31, 2023.
Critical Accounting Policies The preparation of our financial statements in accordance with GAAP, requires management to make judgments that are subjective in nature to make certain estimates and assumptions. Application of these accounting policies involves the exercise of judgment regarding the use of assumptions as to future uncertainties, and as a result, actual results could materially differ from these estimates.
Critical Accounting Estimates The preparation of our financial statements in accordance with GAAP, requires management to make judgments that are subjective in nature to make certain estimates and assumptions. Application of these accounting policies involves the exercise of judgment regarding the use of assumptions as to future uncertainties, and as a result, actual results could materially differ from these estimates.
Investing Activities Net cash provided by investing activities during the year ended December 31, 2023, was $1.1 million, which primarily consisted of proceeds from the sale of real estate, partially offset by the acquisition of five properties, coupled with the capital improvements performed at certain of our properties.
Net cash provided by investing activities during the year ended December 31, 2023, was $1.1 million, which primarily consisted of proceeds from the sale of real estate, partially offset by the acquisition of five properties, coupled with the capital improvements performed at certain of our properties.
Gerson, our chief financial officer, Jay Beckhorn, our treasurer, and Mr. Cooper, our president, all of our executive officers and all of our directors serve as either directors or executive officers, or both, of Gladstone Capital and Gladstone Investment. In addition, with the exception of Messrs.
With the exception of Mr. Gerson, our chief financial officer, Jay Beckhorn, our treasurer, and Mr. Cooper, our president, all of our executive officers and all of our directors serve as either directors or executive officers, or both, of Gladstone Capital, Gladstone Investment, and Gladstone Alternative. In addition, with the exception of Messrs.
Financing Activities Net cash used in financing activities during the year ended December 31, 2023, was $61.4 million, which primarily consisted of proceeds from our common and preferred equity offerings, mortgage borrowings on new acquisitions and a net increase in Credit Facility borrowings, partially offset by the repayment of outstanding mortgage debt and distributions paid to our stockholders and Non-controlling OP Unitholders.
Net cash used in financing activities for the year ended December 31, 2023, was $61.4 million, which primarily consisted of proceeds from our common and preferred equity offerings, mortgage borrowings on new acquisitions and a net increase in Credit Facility borrowings, partially offset by the repayment of outstanding mortgage debt and distributions paid to our stockholders and Non-controlling OP Unitholders.
The Seventh Amended Advisory Agreement contractually eliminated the payment of the incentive fee, as applicable, for the quarters ended March 31, 2023 and June 30, 2023. The calculation of the other fees remains unchanged. On July 11, 2023, we entered into the Eighth Amended Advisory Agreement, as approved unanimously by our Board of Directors, including specifically, our independent directors.
The Seventh Amended Advisory Agreement contractually eliminated the payment of the incentive fee, as applicable, for the quarters ended March 31, 2023 and June 30, 2023. The calculation of the other fees remained unchanged. On July 11, 2023, we entered into the Eighth Amended Advisory Agreement, as approved unanimously by our Board of Directors, including specifically, our independent directors.
The Seventh Amended Advisory Agreement contractually eliminated the payment of the incentive fee for the quarters ended March 31, 2023 and June 30, 2023. The calculation of the other fees was unchanged. On July 11, 2023, the Company entered into the Eighth Amended Advisory Agreement, as approved unanimously by our Board of Directors, including specifically, our independent directors.
The Seventh Amended Advisory Agreement contractually eliminated the payment of the incentive fee for the quarters ended March 31, 2023 and June 30, 2023. The calculation of the other fees remained unchanged. On July 11, 2023, the Company entered into the Eighth Amended Advisory Agreement, as approved unanimously by our Board of Directors, including specifically, our independent directors.
In addition, the Eighth Amended Advisory Agreement also clarified that for any future quarter whereby an incentive fee would exceed by greater than 15% of the average quarterly incentive fee paid, the measurement would be versus the last four quarters where an incentive fee was actually paid. The calculation of the other fees remains unchanged.
In addition, the Eighth Amended Advisory Agreement also clarified that for any future quarter whereby an incentive fee would exceed by greater than 15% of the average quarterly incentive fee paid, the measurement would be versus the last four quarters where an incentive fee was actually paid. The calculation of the other fees remained unchanged.
In addition, the Eighth Amended Advisory Agreement also clarified that for any future quarter whereby an incentive fee would exceed by greater than 15% of the average quarterly incentive fee paid, the measurement would be versus the last four quarters where an incentive fee was actually paid. The calculation of the other fees remains unchanged.
In addition, the Eighth Amended Advisory Agreement also clarified that for any future quarter whereby an incentive fee would exceed by greater than 15% of the average quarterly incentive fee paid, the measurement would be versus the last four quarters where an incentive fee was actually paid. The calculation of the other fees remained unchanged.
Using the methodology discussed above, we evaluated our entire portfolio, as of December 31, 2023, for any impairment indicators and performed an impairment analysis on select properties that had an indication of impairment. See Note 5 - Real Estate Dispositions, Held for Sale, and Impairment Charges - Impairment Charges of the accompanying consolidated financial statements.
Using the methodology discussed above, we evaluated our entire portfolio, as of December 31, 2024, for any impairment indicators and performed an impairment analysis on select properties that had an indication of impairment. See Note 5 - Real Estate Dispositions, Held for Sale, and Impairment Charges - Impairment Charges of the accompanying consolidated financial statements.
Our properties are geographically diversified and our tenants cover a broad cross section of business sectors and range in size from small to very 35 Table of Contents large private and public companies, many of which are corporations that do not have publicly-rated debt.
Our properties are geographically diversified and our tenants cover a broad cross section of business sectors and range in size from small to very 34 Table of Contents large private and public companies, many of which are corporations that do not have publicly-rated debt.
Amendments to Operating Partnership Agreement In connection with the authorization of the Series F Preferred Stock in February of 2020, the Operating Partnership controlled by the Company through its ownership of GCLP Business Trust II, the general partner of the Operating Partnership, adopted the Second Amendment to its Second Amended and Restated Agreement of Limited Partnership (collectively, the “Amendment”), as amended from time to time, establishing the rights, privileges and preferences of 6.00% Series F Cumulative Redeemable Preferred Units, a newly-designated class of limited partnership interests (the “Series F Preferred Units”).
Amendments to Operating Partnership Agreement In connection with the authorization of the Series F Preferred Stock in February of 2020, the Operating Partnership controlled by the Company through its ownership of GCLP Business Trust II, the general partner of the Operating Partnership, adopted the Second Amendment to its Second Amended and Restated Agreement of Limited Partnership (collectively, the “Amendment”), 38 Table of Contents as amended from time to time, establishing the rights, privileges and preferences of 6.00% Series F Cumulative Redeemable Preferred Units, a newly-designated class of limited partnership interests (the “Series F Preferred Units”).
Our short-term liquidity needs include proceeds necessary to fund our distributions to stockholders, pay the debt service costs on our existing long-term mortgages, refinancing maturing debt and fund our current operating costs. Our long-term liquidity needs include proceeds necessary to grow and maintain our portfolio of investments.
Our short-term liquidity needs include proceeds necessary to fund our distributions to stockholders, pay the debt service costs on our existing long-term mortgages, bank debt, and long-term private debt, refinancing maturing debt and fund our current operating costs. Our long-term liquidity needs include proceeds necessary to grow and maintain our portfolio of investments.
Allocation of Purchase Price When we acquire real estate with an existing lease, we allocate the purchase price to (i) the acquired tangible assets and liabilities, consisting of land, building, tenant improvements and long-term debt and (ii) the identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, in-place leases, unamortized lease origination costs, tenant relationships and capital lease obligations.
Allocation of Purchase Price When we acquire real estate with an existing lease, we allocate the purchase price to (i) the acquired tangible assets and liabilities, consisting of land, building, tenant improvements and long-term debt and (ii) the identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, in-place leases, unamortized lease origination 41 Table of Contents costs, tenant relationships and capital lease obligations.
The increase in property operating expenses for properties with vacancy for the year ended December 31, 2023, as compared to the year ended December 31, 2022, is a result of general cost increases due to the inflationary environment.
The increase in property operating expenses for properties with vacancy for the year ended December 31, 2024, as compared to the year ended December 31, 2023, is a result of general cost increases due to the inflationary environment.
Incentive Fee Pursuant to the Advisory Agreement, the calculation of the incentive fee rewards the Adviser in circumstances where our quarterly Core FFO (defined at the end of this paragraph), before giving effect to any incentive fee, or pre-incentive fee Core FFO, exceeds 2.0% quarterly, or 8.0% annualized, of adjusted total equity (after giving effect to the base management fee but before giving effect to the incentive fee).
Incentive Fee Pursuant to the Advisory Agreement, the calculation of the incentive fee rewards the Adviser in circumstances where our quarterly Core FFO (defined at the end of this paragraph), before giving effect to any incentive fee, or pre-incentive fee Core FFO, exceeds 2.0% quarterly, or 8.0% annualized, of adjusted total equity (after giving effect to the base management fee but 40 Table of Contents before giving effect to the incentive fee).
A discussion of the results of operations for the year ended December 31, 2021 is found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 22, 2023, which is available free of charge on the SEC's website at www.sec.gov and on the investors section of our website at www.GladstoneCommercial.com.
A discussion of the results of operations for the year ended December 31, 2022 is found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 21, 2024, which is available free of charge on the SEC's website at www.sec.gov and on the investors section of our website at www.GladstoneCommercial.com.
Properties with vacancy are properties that were fully vacant or had greater than 5% vacancy, based on square footage, at any point subsequent to January 1, 2022.
Properties with vacancy are properties that were fully vacant or had greater than 5% vacancy, based on square footage, at any point subsequent to January 1, 2023.
The decrease in property operating expenses on acquired and disposed of properties for the year ended December 31, 2023, as compared to the year ended December 31, 2022, is a result of a decrease in property operating expenses in relation to properties held for sale or sold during the year that are or were fully vacant.
The decrease in property operating expenses on acquired and disposed of properties for the year ended December 31, 2024, as compared to the year ended December 31, 2023, is a result of a decrease in property operating expenses in relation to properties held for sale or sold during the year that were fully vacant.
In preparing the projection of undiscounted future cash flows, we estimate cap rates and market rental rates using information that we obtain from market comparability studies and other comparable sources, and apply the undiscounted cash flows against our expected holding period.
In preparing the projection of undiscounted future cash flows, we estimate cap rates, market rental rates, and tenant improvement allowances using information that we obtain from market comparability studies and other comparable sources, and apply the undiscounted cash flows against our expected holding period.
The balance and interest rate on our Revolver and Term Loan A, Term Loan B, Term Loan C is variable; thus, the interest payment obligation calculated for purposes of this table was based upon rates and balances as of December 31, 2023. (3) Operating lease obligations represent the ground lease payments due on four of our properties.
The balance and interest rate on our Revolver and Term Loan A, Term Loan B, Term Loan C is variable; thus, the interest payment obligation calculated for purposes of this table was based upon rates and balances as of December 31, 2024. (3) Operating lease obligations represent the ground lease payments due on three of our properties.
(2) Interest on debt obligations includes estimated interest on our borrowings under our Revolver, Term Loan A, Term Loan B, Term Loan C and mortgage notes payable.
(2) Interest on debt obligations includes estimated interest on our borrowings under our Revolver, Term Loan A, Term Loan B, Term Loan C, senior unsecured notes, and mortgage notes payable.
For the year ended December 31, 2023, the contractually eliminated incentive fee would have been $4.6 million. Non-controlling Interests in Operating Partnership As of December 31, 2023 and 2022, we owned approximately 99.2% and 99.0%, respectively, of the outstanding OP Units.
For the year ended December 31, 2023, the contractually eliminated incentive fee would have been $4.6 million. Non-controlling Interests in Operating Partnership As of December 31, 2024 and 2023, we owned approximately 99.9% and 99.2%, respectively, of the outstanding OP Units.
We utilize this cash to fund our property-level operating expenses and use the excess cash primarily for debt and interest payments on our mortgage notes payable, interest payments on our Credit Facility, distributions to our stockholders, management fees to our Adviser, administration fees to our Administrator and other entity-level operating expenses.
We utilize 46 Table of Contents this cash to fund our property-level operating expenses and use the excess cash primarily for debt and interest payments on our mortgage notes payable, interest payments on our Credit Facility, distributions to our stockholders, management fees to our Adviser, administration fees to our Administrator and other entity-level operating expenses.
There were no material changes to our critical accounting policies during the year ended December 31, 2023.
There were no material changes to our critical accounting policies during the year ended December 31, 2024.
Same Store Analysis For the purposes of the following discussion, same store properties are properties we owned as of January 1, 2022, which have not been subsequently vacated or disposed. Acquired and disposed properties are properties which were either acquired, disposed of or classified as held for sale at any point subsequent to December 31, 2021.
Same Store Analysis For the purposes of the following discussion, same store properties are properties we owned as of January 1, 2023, which have not been subsequently vacated or disposed. Acquired and disposed properties are properties which were either acquired, 43 Table of Contents disposed of or classified as held for sale at any point subsequent to December 31, 2022.
We believe that we have a diverse tenant base, and specifically, we do not have significant exposure to tenants in cyclical retail, hospitality, airlines, or oil & gas industries.
We believe that we have a diverse tenant base, and specifically, we do not have significant exposure to tenants in the retail, hospitality, airlines, and oil and gas industries.
We did not sell any shares of our Series E Preferred 39 Table of Contents Stock pursuant to the Series E Preferred Stock Sales Agreement during the year ended December 31, 2023. We terminated the Series E Preferred Stock Sales Agreement effective February 10, 2023 in connection with the expiration of the 2020 Registration Statement on February 11, 2023.
We did not sell any shares of our Series E Preferred Stock pursuant to the Series E Preferred Stock Sales Agreement during the year ended December 31, 2024, as we terminated the Series E Preferred Stock Sales Agreement effective February 10, 2023 in connection with the expiration of the 2020 Registration Statement on February 11, 2023.
This was partially offset with our acquisition of five properties during the year ended December 31, 2023, and the inclusion of a full year of lease revenues recorded in 2023 for 13 properties acquired during the year ended December 31, 2022.
This was partially offset with our acquisition of seven properties during the year ended December 31, 2024, and the inclusion of a full year of lease revenues recorded in 2024 for five properties acquired during the year ended December 31, 2023.
This was partially offset by a full year of depreciation and amortization for the 13 properties acquired during the year ended December 31, 2022, as well as increased depreciation and amortization expense from the five properties acquired during the year ended December 31, 2023.
This was partially offset by a full year of depreciation and amortization for the five properties acquired during the year ended December 31, 2023, as well as increased depreciation and amortization expense from the seven properties acquired during the year ended December 31, 2024.
We continue to focus on re-leasing vacant space, renewing upcoming lease expirations, re-financing upcoming loan maturities, and acquiring additional properties with associated long-term leases. At December 31, 2023, we had four partially vacant buildings and three fully vacant buildings.
We continue to focus on re-leasing vacant space, renewing upcoming lease expirations, re-financing upcoming loan maturities, and acquiring additional properties with associated long-term leases. At December 31, 2024, we had four partially vacant buildings and one fully vacant building.
The calculation of the base management fee is described in detail above within “Advisory and Administration Agreements.” The incentive fee paid to the Adviser decreased for the year ended December 31, 2023, as compared to the year ended December 31, 2022, due to the payment of the incentive fee being contractually eliminated for the quarters ended March 31, 2023 and June 30, 2023, as outlined in the Seventh Amended Advisory Agreement, and for the quarters ended September 30, 2023 and December 31, 2023, as outlined in the Eighth Amended Advisory Agreement.
The calculation of the base management fee is described in detail above within “Advisory and Administration Agreements.” The incentive fee paid to the Adviser increased for the year ended December 31, 2024, as compared to the year ended December 31, 2023, due to the payment of the incentive fee being contractually eliminated for the quarters ended March 31, 2023 and June 30, 2023, as outlined in the Seventh Amended Advisory Agreement, and for the quarters ended September 30, 44 Table of Contents 2023 and December 31, 2023, as outlined in the Eighth Amended Advisory Agreement.
(4) Purchase obligations consist of tenant and capital improvements at eight of our properties. Off-Balance Sheet Arrangements We did not have any material off-balance sheet arrangements as of December 31, 2023.
(4) Purchase obligations consist of tenant and capital improvements at ten of our properties. Off-Balance Sheet Arrangements We did not have any material off-balance sheet arrangements as of December 31, 2024.
This figure does not include $(0.04) million of premiums and (discounts), net, and $5.0 million of deferred financing costs, net, which are reflected in mortgage 49 Table of Contents notes payable, net, borrowings under Revolver, and borrowings under Term Loan A, Term Loan B and Term Loan C, net, on the consolidated balance sheet.
This figure does not include $(0.01) million of premiums and (discounts), net, and $5.0 million of deferred financing costs, net, which are reflected in mortgage notes payable, net, borrowings under Revolver, and borrowings under Term Loan A, Term Loan B, Term Loan C, net, and the 2029 Notes, net, on the consolidated balance sheet.
We believe that our available liquidity is sufficient to fund our distributions to stockholders, pay the debt service costs on our existing long-term mortgages and fund our current operating costs in the near term. We also believe we will be able to refinance our mortgage debt as it matures.
We believe that our available liquidity is sufficient to fund our distributions to stockholders, pay the debt service costs on our existing long-term mortgages and fund our current operating costs in the near term. We also believe we will be able to refinance our mortgage debt, bank debt, and long-term private debt as they mature.
We believe we have adequate liquidity in the near term, and we believe the availability on our Credit Facility is sufficient to cover all near-term debt obligations and operating expenses and to continue our industrial growth strategy.
We believe we currently have adequate liquidity in the near term, and we believe that our cash on hand combined with the availability on our Credit Facility is sufficient to cover all near term debt obligations and operating expenses and to continue our industrial growth strategy.
We entered into multiple interest rate cap agreements on Term Loan B, which cap LIBOR from 1.50% to 1.75%. During 2022, we began transitioning our variable rate debt to SOFR, and, at December 31, 2023, all of our variable rate debt was based upon SOFR.
We entered into multiple interest rate cap agreements on Term Loan B, which cap LIBOR from 1.50% to 1.75%. We transitioned our variable rate debt to SOFR, and, at December 31, 2024, all of our variable rate debt was based upon SOFR.
Other income decreased minimally during the year ended December 31, 2023, as compared to the year ended December 31, 2022, due to nonrecurring income items that occurred during the year ended December 31, 2022.
Other income increased minimally during the year ended December 31, 2024, as compared to the year ended December 31, 2023, due to nonrecurring income items that occurred during the year ended December 31, 2024.
Net cash used in investing activities during the year ended December 31, 2022, was $82.5 million, which primarily consisted of the acquisition of 13 properties, coupled with the capital improvements performed at certain of our properties, partially offset by proceeds from sale of real estate.
Investing Activities Net cash used in investing activities during the year ended December 31, 2024, was $1.7 million, which primarily consisted of the acquisition of seven properties, coupled with the capital improvements performed at certain of our properties, partially offset by proceeds from the sale of real estate.
As of December 31, 2023, we had $56.5 million in available liquidity via our revolving credit facility and cash on hand and were in compliance with all of our debt covenants. We amended our Credit Facility in 2019 to increase our borrowing capacity and extend its maturity 36 Table of Contents date.
As of December 31, 2024, we had $101.7 million in available liquidity via our revolving credit facility and cash on hand and were in compliance with all of our debt covenants. We amended our Credit Facility in 2019 to increase our borrowing capacity and extend its maturity date.
We also present FFO available to our common stockholders and Non-controlling OP Unitholders as adjusted for comparability as an additional supplemental measure, as we believe it is more reflective of our core operating performance, and provides investors and analysts an additional measure to compare our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance.
We believe that net income is the most directly comparable GAAP measure to FFO, Basic EPS is the most directly comparable GAAP measure to Basic FFO per share, and that Diluted EPS is the most directly comparable GAAP measure to Diluted FFO per share. 48 Table of Contents We also present FFO available to our common stockholders and Non-controlling OP Unitholders as adjusted for comparability as an additional supplemental measure, as we believe it is more reflective of our core operating performance, and provides investors and analysts an additional measure to compare our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance.
Liquidity and Capital Resources Overview Our sources of liquidity include cash flows from operations, cash and cash equivalents, borrowing capacity under our Revolver and through issuance of additional equity securities. Our available liquidity as of December 31, 2023, was $56.5 million, including $12.0 million in cash and cash equivalents and an available borrowing capacity of $44.5 million under our Revolver.
Liquidity and Capital Resources Overview Our sources of liquidity include cash flows from operations, cash and cash equivalents, borrowing capacity under our Revolver and through issuance of additional equity securities. Our available liquidity as of December 31, 2024, was $101.7 million, including $11.0 million in cash and cash equivalents and an available borrowing capacity of $90.7 million under our Revolver.
Our available borrowing capacity under the Revolver has increased to $51.5 million as of February 21, 2024. Future Capital Needs We actively seek conservative investments that are likely to produce income to allow us to pay distributions to our stockholders and Non-controlling OP Unitholders.
Our available borrowing capacity under the Revolver has decreased to $90.6 million as of February 18, 2025. Future Capital Needs We actively seek conservative investments that we expect are likely to produce income to allow us to pay distributions to our stockholders and Non-controlling OP Unitholders.
No capital gain fee was recognized during the years ended December 31, 2023, 2022, and 2021. 42 Table of Contents Termination Fee The Advisory Agreement includes a termination fee whereby, in the event of our termination of the agreement without cause (with 120 days’ prior written notice and the vote of at least two-thirds of our independent directors), a termination fee would be payable to the Adviser equal to two times the sum of the average annual base management fee and incentive fee earned by the Adviser during the 24-month period prior to such termination.
Termination Fee The Advisory Agreement includes a termination fee whereby, in the event of our termination of the agreement without cause (with 120 days’ prior written notice and the vote of at least two-thirds of our independent directors), a termination fee would be payable to the Adviser equal to two times the sum of the average annual base management fee and incentive fee earned by the Adviser during the 24-month period prior to such termination.
As of February 21, 2024: • we owned 134 properties totaling 16.9 million square feet of rentable space, located in 27 states; • our occupancy rate was 97.4%; • the weighted average remaining term of our mortgage debt was 3.9 years and the weighted average interest rate was 4.19%; and • the average remaining lease term of the portfolio was 6.8 years.
As of February 18, 2025: • we owned 135 properties totaling 16.9 million square feet of rentable space, located in 27 states; • our occupancy rate was 98.7%; • the weighted average remaining term of our mortgage debt was 3.4 years and the weighted average interest rate was 4.29%; and • the average remaining lease term of the portfolio was 6.9 years.
We refer to the Revolver, Term Loan A, Term Loan B, and Term Loan C, collectively, herein as the Credit Facility. While lenders’ credit standards have tightened, we continue to look to national and regional banks, insurance companies and non-bank lenders, in addition to the collateralized mortgage backed securities market (“CMBS”), to issue mortgages to finance our real estate activities.
We refer to the Revolver, Term Loan A, Term Loan B, and Term Loan C, collectively, herein as the Credit Facility. While lenders’ credit standards have tightened, we continue to look to private credit institutions, national and regional banks, insurance companies and non-bank lenders to finance our real estate activities.
The 2019 Registration Statement allowed us to issue up to $500.0 million of securities and expired on February 13, 2022. On January 29, 2020, we filed the 2020 Registration Statement. The 2020 Registration Statement was declared effective on February 11, 2020 and was in addition to the 2019 Registration Statement.
Universal Shelf Registration Statement On January 29, 2020, we filed the 2020 Registration Statement. The 2020 Registration Statement was declared effective on February 11, 2020 and was in addition to the 2019 Registration Statement. The 2020 Registration Statement allowed us to issue up to an additional $800.0 million of securities.
The reclassification decreased the number of shares classified as common stock from 86,290,000 shares immediately prior to the reclassification to 60,290,000 shares immediately after the reclassification. We sold 246,775 shares of our Series F Preferred Stock, raising $5.6 million in net proceeds, during the year ended December 31, 2023.
The reclassification decreased the number of shares classified as common stock from 86,290,000 shares immediately prior to the reclassification to 60,290,000 shares immediately after the reclassification. We sold 47,328 shares of our Series F Preferred Stock, raising $1.1 million in net proceeds, pursuant to the 2024 Registration Statement, during the year ended December 31, 2024.
The base management fee paid to the Adviser increased minimally for the year ended December 31, 2023, as compared to the year ended December 31, 2022, due to an increase in gross tangible real estate, the main component of the base management fee calculation under the Sixth Amended Advisory Agreement.
The base management fee paid to the Adviser decreased for the year ended December 31, 2024, as compared to the year ended December 31, 2023, due to a decrease in gross tangible real estate, the main component of the base management fee calculation under the Sixth Amended Advisory Agreement, due to property sales.
A change in any of the assumptions above, which are very subjective, could have a material impact on our results of operations. 43 Table of Contents The allocation of the purchase price directly affects the following in our consolidated financial statements: • the amount of purchase price allocated to the various tangible and intangible assets and liabilities on our balance sheet; • the amounts allocated to the value of above-market and below-market lease values are amortized to rental income over the remaining non-cancelable terms of the respective leases.
The allocation of the purchase price directly affects the following in our consolidated financial statements: • the amount of purchase price allocated to the various tangible and intangible assets and liabilities on our balance sheet; • the amounts allocated to the value of above-market and below-market lease values are amortized to rental income over the remaining non-cancelable terms of the respective leases.
Property operating expenses increased for same store properties for the year ended December 31, 2023, as compared to the year ended December 31, 2022, as a result of tenants requiring more employees to return on site, as well as general cost increases due to the inflationary environment.
Property operating expenses increased for same store properties for the year ended December 31, 2024, as compared to the year ended December 31, 2023, as a result of general cost increases due to the inflationary environment.
(“Fifth Third”). We terminated the Common Stock Sales Agreement effective February 10, 2023 in connection with the expiration of our registration statement on Form S-3 (File No. 333-236143) (the “2020 Registration Statement”) on February 11, 2023. On March 3, 2023, we entered into an At-the-Market Equity Offering Sales Agreement (the “2023 Common Stock Sales Agreement”), with BofA Securities, Inc.
We terminated the Prior Common Stock Sales Agreement effective February 10, 2023 in connection with the expiration of our registration statement on Form S-3 (File No. 333-236143) (the “2020 Registration Statement”) on February 11, 2023. On March 3, 2023, we entered into the 2023 Common Stock Sales Agreement, with the Common Stock Sales Agents.
Results of Operations The weighted average yield on our total portfolio, which was 8.2% and 7.7% at December 31, 2023 and 2022, respectively, is calculated by taking the annualized straight-line rents, reflected as lease revenue on our consolidated statements of operations, of each acquisition as a percentage of the acquisition cost.
We will continue to monitor our portfolio for any other indicators of impairment. 42 Table of Contents Results of Operations The weighted average yield on our total portfolio, which was 8.6% and 8.2% at December 31, 2024 and 2023, respectively, is calculated by taking the annualized straight-line rents, reflected as lease revenue on our consolidated statements of operations, of each acquisition as a percentage of the acquisition cost.
Lease revenues increased for properties with vacancy for the year ended December 31, 2023 due to an increase in rental revenue from partially leasing vacant space and an increase in variable lease payments due to an increase in property operating expenses.
Lease revenues increased for properties with vacancy for the year ended December 31, 2024 due to an increase in variable lease payments due to an increase in property operating expenses.
The following table provides a reconciliation of our FFO and FFO as adjusted for comparability for the years ended December 31, 2023 and 2022 to the most directly comparable GAAP measure, net income (loss), and a computation of basic and diluted FFO and diluted FFO as adjusted for comparability per weighted average total share: 50 Table of Contents For the twelve months ended December 31, (Dollars in Thousands, Except for Per Share Amounts) 2023 2022 Calculation of basic FFO per share of common stock and Non-controlling OP Unit Net income $ 4,922 $ 10,782 Less: Distributions attributable to preferred and senior common stock (12,715) (12,361) Less: Loss on extinguishment of Series F preferred stock (11) (10) Add: Gain on repurchase of Series G preferred stock 3 37 Net loss attributable to common stockholders and Non-controlling OP Unitholders $ (7,801) $ (1,552) Adjustments: Add: Real estate depreciation and amortization 57,856 60,154 Add: Impairment charge 19,296 12,092 Less: Gain on sale of real estate, net (7,737) (10,052) Less: Gain on debt extinguishment, net (2,830) — FFO available to common stockholders and Non-controlling OP Unitholders - basic (1) $ 58,784 $ 60,642 Weighted average common shares outstanding - basic 39,943,167 38,950,734 Weighted average Non-controlling OP Units outstanding 382,563 294,941 Weighted average common shares and Non-controlling OP Units 40,325,730 39,245,675 Basic FFO per weighted average share of common stock and Non-controlling OP Unit (1) $ 1.46 $ 1.55 Calculation of diluted FFO per share of common stock and Non-controlling OP Unit Net income $ 4,922 $ 10,782 Less: Distributions attributable to preferred and senior common stock (12,715) (12,361) Less: Loss on extinguishment of Series F preferred stock (11) (10) Add: Gain on repurchase of Series G preferred stock 3 37 Net loss attributable to common stockholders and Non-controlling OP Unitholders $ (7,801) $ (1,552) Adjustments: Add: Real estate depreciation and amortization 57,856 60,154 Add: Impairment charge 19,296 12,092 Add: Income impact of assumed conversion of senior common stock 430 458 Less: Gain on sale of real estate, net (7,737) (10,052) Less: Gain on debt extinguishment, net (2,830) — FFO available to common stockholders and Non-controlling OP Unitholders plus assumed conversions (1) $ 59,214 $ 61,100 Weighted average common shares outstanding - basic 39,943,167 38,950,734 Weighted average Non-controlling OP Units outstanding 382,563 294,941 Effect of convertible senior common stock 345,132 363,246 Weighted average common shares and Non-controlling OP Units outstanding - diluted 40,670,862 39,608,921 Diluted FFO per weighted average share of common stock and Non-controlling OP Unit (1) $ 1.46 $ 1.54 Distributions declared per share of common stock and Non-controlling OP Unit $ 1.2000 $ 1.5048 51 Table of Contents
The following table provides a reconciliation of our FFO and FFO as adjusted for comparability for the years ended December 31, 2024 and 2023 to the most directly comparable GAAP measure, net income (loss), and a computation of basic and diluted FFO and diluted FFO as adjusted for comparability per weighted average total share: For the twelve months ended December 31, (Dollars in Thousands, Except for Per Share Amounts) 2024 2023 Calculation of basic FFO per share of common stock and Non-controlling OP Unit Net income $ 24,040 $ 4,922 Less: Distributions attributable to preferred and senior common stock (12,860) (12,715) Less: Loss on extinguishment of Series F preferred stock, net (14) (11) Add: Gain on repurchase of Series G preferred stock — 3 Net income (loss) available (attributable) to common stockholders and Non-controlling OP Unitholders $ 11,166 $ (7,801) Adjustments: Add: Real estate depreciation and amortization 55,786 57,856 Add: Impairment charge 6,822 19,296 Less: Gain on sale of real estate, net (14,229) (7,737) Less: Gain on debt extinguishment, net (300) (2,830) FFO available to common stockholders and Non-controlling OP Unitholders - basic $ 59,245 $ 58,784 Weighted average common shares outstanding - basic 41,766,263 39,943,167 Weighted average Non-controlling OP Units outstanding 157,160 382,563 Weighted average common shares and Non-controlling OP Units 41,923,423 40,325,730 Basic FFO per weighted average share of common stock and Non-controlling OP Unit $ 1.41 $ 1.46 Calculation of diluted FFO per share of common stock and Non-controlling OP Unit Net income $ 24,040 $ 4,922 Less: Distributions attributable to preferred and senior common stock (12,860) (12,715) Less: Loss on extinguishment of Series F preferred stock, net (14) (11) Add: Gain on repurchase of Series G preferred stock — 3 Net income (loss) available (attributable) to common stockholders and Non-controlling OP Unitholders $ 11,166 $ (7,801) Adjustments: Add: Real estate depreciation and amortization 55,786 57,856 Add: Impairment charge 6,822 19,296 Add: Income impact of assumed conversion of senior common stock 420 430 Less: Gain on sale of real estate, net (14,229) (7,737) Less: Gain on debt extinguishment, net (300) (2,830) FFO available to common stockholders and Non-controlling OP Unitholders plus assumed conversions $ 59,665 $ 59,214 Weighted average common shares outstanding - basic 41,766,263 39,943,167 Weighted average Non-controlling OP Units outstanding 157,160 382,563 Effect of convertible senior common stock 330,456 345,132 Weighted average common shares and Non-controlling OP Units outstanding - diluted 42,253,879 40,670,862 Diluted FFO per weighted average share of common stock and Non-controlling OP Unit $ 1.41 $ 1.46 Distributions declared per share of common stock and Non-controlling OP Unit $ 1.20 $ 1.20 49 Table of Contents
The 2020 Registration Statement allowed us to issue up to an additional $800.0 million of securities. Of the $800.0 million of available capacity under our 2020 Registration Statement, approximately $636.5 million was reserved for the sale of Series F Preferred Stock. The 2020 Registration Statement expired on February 11, 2023.
Of the $800.0 million of available capacity under our 2020 Registration Statement, approximately $636.5 million was reserved for the sale of Series F Preferred Stock. The 2020 Registration Statement expired on February 11, 2023. On November 23, 2022, we filed the 2022 Registration Statement.
Additionally, our 135 properties are located across 27 states, which we believe mitigates our exposure to economic issues, including regulations or laws implemented by state and local governments in any one geographic market or area. We also have a cap on industry sector concentration to further diversify our portfolio and mitigate risk.
Additionally, our 135 properties are located across 27 states, which we believe mitigates our exposure to regional economic and weather-related issues, including regulations or laws implemented by state and local governments in any one geographic market or area.
This summary is provided to illustrate the material functions which our Adviser and Administrator perform for us pursuant to the terms of the Advisory Agreement with our Advisor and an administration agreement with our Administrator (the “Administration Agreement”). 41 Table of Contents Advisory Agreement Under the terms of the Amended Advisory Agreement, we continue to be responsible for all expenses incurred for our direct benefit.
This summary is provided to illustrate the material functions which our Adviser and Administrator perform for us pursuant to the terms of the Advisory Agreement with our Advisor and an administration agreement with our Administrator (the “Administration Agreement”).
We have successfully repaid $58.9 million of debt over the past 12 months with either new mortgage debt or by generating additional availability by adding properties to our unsecured pool under our Credit Facility.
We have successfully repaid $32.5 million of mortgage debt over the past 12 months with either new mortgage debt or by generating additional availability by adding properties to our unsecured pool under our Credit Facility. As of December 31, 2024, we also had $75.0 million of the 2029 Notes outstanding.
At the end of the fiscal year, if this number is positive, then the capital gain fee payable for such time period shall equal 15.0% of such amount.
At the end of the fiscal year, if this number is positive, then the capital gain fee payable for such time period shall equal 15.0% of such amount. No capital gains fee was recognized during the years ended December 31, 2024, 2023, and 2022.
Our principal sources of financing generally include the issuance of equity securities, long-term mortgage loans secured by properties, borrowings under our $125.0 million senior unsecured revolving credit facility (“Revolver”), with KeyBank, which matures in August 2026, our $160.0 million term loan facility (“Term Loan A”), which matures in August 2027, our $60.0 million term loan facility (“Term Loan B”), which matures in February 2026, and our $150.0 million term loan facility (“Term Loan C”), which matures in February 2028.
Our principal sources of financing generally include the issuance of equity securities, long-term unsecured notes in the private placement market, long-term mortgage loans secured by properties, borrowings under our $125.0 million Revolver, with KeyBank, which matures in August 2026, our $160.0 million Term Loan A, which matures in August 2027, our $60.0 million Term Loan B, which matures in February 2026, our $150.0 million Term Loan C, which matures in February 2028, and our Operating Partnership’s $75.0 million senior unsecured notes, which mature in December 2029.
As of December 31, 2023 and 2022, there were 310,643 and 391,468 outstanding OP Units held by Non-controlling OP Unitholders, respectively. Our Adviser and Administrator Gladstone Management Corporation, a Delaware corporation (our “Adviser”) is led by a management team with extensive experience purchasing real estate.
As of December 31, 2024 and 2023, there were 39,474 and 310,643 outstanding OP Units held by Non-controlling OP Unitholders, respectively. Our Adviser and Administrator The Adviser is led by a management team with extensive experience purchasing real estate. Our Adviser and Administrator are controlled by Mr. Gladstone, who is also our chairman and chief executive officer. Mr.
During the year ended December 31, 2023, we had two lease terminations, which are aggregated below (dollars in thousands): Square Footage Reduced Accelerated Rent Accelerated Rent Recognized through December 31, 2023 119,224 $ 2,581 $ 2,134 Financing Activity During the year ended December 31, 2023, we repaid six mortgages, collateralized by six properties, which are summarized below (dollars in thousands): Fixed Rate Debt Repaid Interest Rate on Fixed Rate Debt Repaid $ 58,864 4.69 % During the year ended December 31, 2023, we issued three mortgages, collateralized by three properties, which are summarized below (dollars in thousands): Aggregate Fixed Rate Debt Issued Weighted Average Interest Rate on Fixed Rate Debt $ 9,000 (1) 6.10 % (1) We issued $9.0 million of fixed rate debt with an interest rate of 6.10% and a maturity date of September 1, 2028, in connection with three of our acquisitions during the year.
During the year ended December 31, 2024, we had three lease terminations, which are aggregated below (dollars in thousands): Aggregate Square Footage Reduced Aggregate Accelerated Rent Aggregate Accelerated Rent Recognized through December 31, 2024 93,937 $ 589 $ 589 Financing Activity During the year ended December 31, 2024, we repaid three mortgages, collateralized by four properties, which are summarized below (dollars in thousands): Aggregate Fixed Rate Debt Repaid Weighted Average Interest Rate on Fixed Rate Debt Repaid $ 32,464 4.59 % During the year ended December 31, 2024, we issued two mortgages, collateralized by two properties, which are summarized below (dollars in thousands): Aggregate Fixed Rate Debt Issued Weighted Average Interest Rate on Fixed Rate Debt $ 15,240 (1) 5.60 % (1) We issued $15.2 million of fixed rate debt with an interest rate of 5.6% and a maturity date of August 31, 2029.
Net cash provided by financing activities for the year ended December 31, 2022, was $16.2 million, which primarily consisted of proceeds from our common and preferred stock offerings, mortgage 48 Table of Contents borrowings on new acquisitions and a net increase in borrowings on our Credit Facility, partially offset by the repayment of outstanding mortgage debt and distributions paid to our stockholders and Non-controlling OP Unitholders.
Financing Activities Net cash used in financing activities during the year ended December 31, 2024, was $56.3 million, which primarily consisted of proceeds from our common and preferred equity offerings, mortgage borrowings, and borrowings under unsecured notes, partially offset by the repayment of outstanding mortgage debt, net decrease in Credit Facility borrowings and distributions paid to our stockholders and Non-controlling OP Unitholders.
The gain on sale of real estate, net, during the year ended December 31, 2022 was a result of the sale of five properties. We also recognized a gain on debt extinguishment during the year ended December 31, 2023 in conjunction with one of our sales; no debt extinguishment occurred during the year ended December 31, 2022.
The gain on debt extinguishment, net, during the year ended December 31, 2024 was recognized in conjunction with two of our sales. The gain on debt extinguishment, net, during the year ended December 31, 2023 was recognized in conjunction with one of our sales.
Our entrance into the Advisory Agreement and each amendment thereto has been approved unanimously by our Board of Directors. Our Board of Directors reviews and considers renewing the agreement with our Adviser each July. During its July 2023 meeting, our Board of Directors reviewed and renewed the Advisory Agreement and Administration Agreement for an additional year, through August 31, 2024.
Our entrance into the Advisory Agreement and each amendment thereto has been approved unanimously by our Board of Directors. Our Board of Directors reviews and considers renewing the agreement with our Adviser annually, typically during the month of July.
On August 5, 2021, the Operating Partnership adopted the Fourth Amendment to its Second Amended and Restated Agreement of Limited Partnership, including Exhibit SGP thereto, to remove all references to the 7.00% Series D Cumulative Redeemable Preferred Units of the Partnership and update the rights, privileges, and preferences accordingly. 40 Table of Contents Amendments to the Advisory Agreement On January 10, 2023, we amended and restated the Sixth Amended Advisory Agreement by entering into the Seventh Amended and Restated Investment Advisory Agreement between the Company and the Adviser (the “Seventh Amended Advisory Agreement”), as approved unanimously by our Board of Directors, including specifically, our independent directors.
On August 5, 2021, the Operating Partnership adopted the Fourth Amendment to its Second Amended and Restated Agreement of Limited Partnership, including Exhibit SGP thereto, to remove all references to the 7.00% Series D Cumulative Redeemable Preferred Units of the Partnership and update the rights, privileges, and preferences accordingly.
The Reclassification Articles Supplementary did not increase our authorized shares of capital stock. Series E Preferred ATM Program During the year ended December 31, 2023, we had an At-the-Market Equity Offering Sales Agreement (the “Series E Preferred Stock Sales Agreement”) with sales agents Baird, Goldman Sachs, Stifel, Fifth Third, and U.S.
During the year ended December 31, 2024, we sold 3,699,597 shares of common stock, raising approximately $53.5 million in net proceeds under the 2024 Common Stock Sales Agreement. Series E Preferred ATM Program We previously had an At-the-Market Equity Offering Sales Agreement (the “Series E Preferred Stock Sales Agreement”) with sales agents Baird, Goldman Sachs, Stifel, Fifth Third, and U.S.
For the year ended December 31, (Dollars in Thousands) Property Operating Expenses 2023 2022 $ Change % Change Same Store Properties $ 15,730 $ 14,689 $ 1,041 7.1 % Acquired & Disposed Properties 2,965 5,134 (2,169) (42.2) % Properties with Vacancy 7,163 7,009 154 2.2 % $ 25,858 $ 26,832 $ (974) (3.6) % Property operating expenses consist of franchise taxes, management fees, insurance, ground lease payments, property maintenance and repair expenses paid on behalf of tenants at certain of our properties.
For the year ended December 31, (Dollars in Thousands) Property Operating Expenses 2024 2023 $ Change % Change Same Store Properties $ 16,683 $ 14,930 $ 1,753 11.7 % Acquired & Disposed Properties 1,006 3,839 (2,833) (73.8) % Properties with Vacancy 7,729 7,089 640 9.0 % $ 25,418 $ 25,858 $ (440) (1.7) % Property operating expenses consist of franchise taxes, management fees, insurance, ground lease payments, property maintenance and repair expenses paid on behalf of tenants at certain of our properties.
Operating Expenses Depreciation and amortization decreased for the year ended December 31, 2023, as compared to the year ended December 31, 2022, due to reduced depreciation and amortization expense for the seven properties sold during the year ended December 31, 2023, coupled with the correction of certain errors in the calculation of the depreciation of certain tenant funded improvement assets, as outlined in Note 9.
Operating Expenses Depreciation and amortization decreased for the year ended December 31, 2024, as compared to the year ended December 31, 2023, due to reduced depreciation and amortization expense for the seven properties sold during the year ended December 31, 2024.
The calculation of the incentive fee is described in detail above within “Advisory and Administration Agreements.” The administration fee paid to the Administrator increased for the year ended December 31, 2023, as compared to the year ended December 31, 2022. The increase is a result of our Administrator incurring greater costs that are allocated to the Company.
We recorded an incentive fee, which was partially waived, during the year ended December 31, 2024. The calculation of the incentive fee is described in detail above within “Advisory and Administration Agreements.” The administration fee paid to the Administrator increased for the year ended December 31, 2024, as compared to the year ended December 31, 2023.
Operating Activities Net cash provided by operating activities during the year ended December 31, 2023, was $60.4 million, as compared to net cash provided by operating activities of $69.2 million for the year ended December 31, 2022. This change was primarily a result of an increase in interest expense due to higher interest rates on variable rate debt.
Operating Activities Net cash provided by operating activities during the year ended December 31, 2024, was $57.0 million, as compared to net cash provided by operating activities of $60.4 million for the year ended December 31, 2023. This change was primarily a result of incurring an Incentive Fee in 2024, which was contractually eliminated in the prior year.
We expect to continue to execute our capital recycling plan and sell non-core properties as reasonable disposition opportunities become available.
We expect to continue to execute our capital recycling plan and sell non-core properties as reasonable disposition opportunities become available, and we intend to use the sale proceeds to acquire properties in our target, secondary growth markets or pay down outstanding debt.
We anticipate being able to refinance our mortgages that come due during 2024 and 2025 with a combination of new mortgage debt, availability under our Credit Facility and the issuance of additional equity securities.
We anticipate being able to refinance our mortgages that come due during 2025 and 2026 with a combination of new mortgage debt, availability under our Credit Facility, the issuance of long-term unsecured notes in the private placement market, the issuance of additional equity securities under our 2024 Common Stock Sales Agreement, the sale and issuance of other equity securities (including our Series F Preferred Stock) that are registered under the 2024 Registration Statement, or the sale and issuance of unregistered equity or debt securities.
Recent Developments Sale Activity During the year ended December 31, 2023, we continued to execute our capital recycling program, whereby we sold non-core properties and redeployed proceeds to fund property acquisitions in our target secondary growth markets, as well as repay outstanding debt.
Recent Developments Sale Activity During the year ended December 31, 2024, we continued to execute our capital recycling program, whereby we sold non-core properties and reinvested the proceeds into new real estate assets.
The Federal Reserve recently indicated it does not expect additional rate increases, but the timing of an easing cycle remains unknown. These uncertain times create both risks and opportunities for us and our tenants, and we believe we are well-capitalized and positioned to take advantage.
The Federal Reserve’s interest rate cuts introduced more volatility to the market, and timing of future cuts, if any, remains uncertain. These uncertain times create both risks and opportunities for us and our tenants, and we believe we are well-capitalized and positioned to take advantage.
Our leases have remaining terms ranging from 3.3 years to 18.7 years.
Our leases have remaining terms ranging from 1.0 year to 13.8 years.
Net Income Available to Common Stockholders and Non-controlling OP Unitholders Net income available to common stockholders and Non-controlling OP Unitholders decreased for the year ended December 31, 2023, as compared to the year ended December 31, 2022, primarily due to an increase in interest expense due to higher borrowing costs on variable rate debt due to global interest rate expansion, coupled with impairment charges.
Net Income (Loss) Available (Attributable) to Common Stockholders and Non-controlling OP Unitholders Net income available to common stockholders and Non-controlling OP Unitholders increased for the year ended December 31, 2024, as compared to net loss attributable to common stockholders and Non-controlling OP Unitholders the year ended December 31, 2023, primarily due to lower impairment charges coupled with a higher gain on sale of real estate, net.
Lease revenues decreased for acquired and disposed of properties for the year ended December 31, 2023, as compared to the year ended December 31, 2022, primarily due to accelerated rent from three lease terminations, all related to properties we sold or are currently held for sale.
Lease revenues decreased for acquired and disposed of properties for the year ended December 31, 2024, as compared to the year ended December 31, 2023, primarily due to the loss of recovery revenue from the 14 properties sold during and subsequent to December 31, 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeOur interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower overall borrowing costs. To achieve these objectives, we will borrow primarily at fixed rates or variable rates with the lowest margins available and, in some cases, with the ability to convert variable rates to fixed rates.
Biggest changeTerm Loan A, Term Loan B, and Term Loan C), or long-term mortgage debt, which we use to maintain liquidity and fund expansion of our real estate investment portfolio and operations. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower overall borrowing costs.
To illustrate the potential impact of changes in interest rates on our net income for the year ended December 31, 2023, we have performed the following analysis, which assumes that our balance sheet remains constant and that no further actions beyond a minimum interest rate or escalation rate are taken to alter our existing interest rate sensitivity.
To illustrate the potential impact of changes in interest rates on our net income for the year ended December 31, 2024, we have performed the following analysis, which assumes that our consolidated balance sheet remains constant and that no further actions beyond a minimum interest rate or escalation rate are taken to alter our existing interest rate sensitivity.
For details regarding our rate cap agreements and our interest rate swap agreements, see Note 6 – Mortgage Notes Payable and Credit Facility of the accompanying consolidated financial statements .
For details regarding our rate cap agreements and our interest rate swap agreements, see Note 6 – Mortgage Notes Payable, Credit Facility, and Senior Unsecured Notes of the accompanying consolidated financial statements .
Interest rate fluctuations may affect the fair value of our debt instruments. If interest rates on our debt instruments, using rates at December 31, 2023, had been one percentage point higher or lower, the fair value of those debt instruments on that date would have decreased or increased by $8.4 million and $8.8 million, respectively.
Interest rate fluctuations may affect the fair value of our debt instruments. If interest rates on our debt instruments, using rates at December 31, 2024, had been one percentage point higher or lower, the fair value of those debt instruments on that date would have decreased or increased by $7.3 million and $7.6 million, respectively.
The following table summarizes the annual impact of a 1%, 2% and 3% increase, and a 1%, 2% and 3% decrease in SOFR as of December 31, 2023. As of December 31, 2023, our effective average SOFR was 5.38%. The impact of these fluctuations is presented below (dollars in thousands).
The following table summarizes the annual impact of a 1%, 2% and 3% increase, and a 1%, 2% and 3% decrease in SOFR as of December 31, 2024. As of December 31, 2024, our effective average SOFR was 4.49%. The impact of these fluctuations is presented below (dollars in thousands).
In addition to changes in interest rates, the value of our real estate is subject to fluctuations based on changes in local and regional economic conditions and changes in the creditworthiness of lessees and borrowers, all of which may affect our ability to refinance debt, if necessary.
We will not enter into derivative or interest rate transactions for speculative purposes. In addition to changes in interest rates, the value of our real estate is subject to fluctuations based on changes in local and regional economic conditions and changes in the creditworthiness of lessees and borrowers, all of which may affect our ability to refinance debt, if necessary.
Interest Rate Change (Decrease) increase to Interest Expense Net increase (decrease) to Net Income 3% Decrease to SOFR $ (2,310) $ 2,310 2% Decrease to SOFR (1,540) 1,540 1% Decrease to SOFR (770) 770 1% Increase to SOFR 770 (770) 2% Increase to SOFR 1,540 (1,540) 3% Increase to SOFR 2,310 (2,310) As of December 31, 2023, the fair value of our mortgage debt outstanding was $263.3 million.
Interest Rate Change (Decrease) increase to Interest Expense Net increase (decrease) to Net Income 3% Decrease to SOFR $ (1,495) $ 1,495 2% Decrease to SOFR (997) 997 1% Decrease to SOFR (498) 498 1% Increase to SOFR 498 (498) 2% Increase to SOFR 186 (186) 3% Increase to SOFR 279 (279) As of December 31, 2024, the fair value of our mortgage debt outstanding was $253.1 million.
The amount outstanding under the Credit Facility approximates fair value as of December 31, 2023. In the future, we may be exposed to additional effects of interest rate changes, primarily as a result of our Revolver, Term Loan or long-term mortgage debt, which we use to maintain liquidity and fund expansion of our real estate investment portfolio and operations.
The amount outstanding under the Credit Facility approximates fair value as of December 31, 2024. In the future, we may be exposed to additional effects of interest rate changes, primarily as a result of our Revolver, Term Loans (i.e.
We may also enter into derivative financial instruments, such as interest rate swaps and caps, to mitigate the interest rate risk on a related financial instrument. We will not enter into derivative or interest rate transactions for speculative purposes.
To achieve these objectives, we will borrow primarily at fixed rates or variable rates with the lowest margins available and, in some cases, with the ability to convert variable rates to fixed rates. We may also enter into derivative financial instruments, such as interest rate swaps and caps to mitigate the interest rate risk on a related financial instrument.
As of December 31, 2023, approximately $298.1 million of our debt bore interest at fixed rates, as shown in the future principal debt payment table below (dollars in thousands): 2024 2025 2026 2027 2028 Thereafter Total Fixed rate $ 25,079 $ 36,457 $ 35,087 $ 95,039 $ 37,115 $ 69,345 $ 298,122 Variable rate $ — $ — $ 135,750 $ 160,000 $ 150,000 $ — $ 445,750 $ 25,079 $ 36,457 $ 170,837 $ 255,039 $ 187,115 $ 69,345 $ 743,872 52 Table of Contents
As of December 31, 2024, approximately $339.2 million of our debt bore interest at fixed rates, as shown in the future principal debt payment table below (dollars in thousands): 2025 2026 2027 2028 2029 Thereafter Total Fixed rate $ 12,654 $ 35,367 $ 95,406 $ 37,444 $ 109,851 $ 48,521 $ 339,243 Variable rate $ 7,260 $ 41,900 $ 160,000 $ 150,000 $ — $ — $ 359,160 $ 19,914 $ 77,267 $ 255,406 $ 187,444 $ 109,851 $ 48,521 $ 698,403 50 Table of Contents

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