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What changed in GLADSTONE COMMERCIAL CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of GLADSTONE COMMERCIAL CORP's 2022 and 2023 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 2023 report.

+262 added−274 removedSource: 10-K (2024-02-21) vs 10-K (2023-02-22)

Top changes in GLADSTONE COMMERCIAL CORP's 2023 10-K

262 paragraphs added · 274 removed · 220 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

44 edited+5 added−6 removed89 unchanged
Biggest changeWe incurred fees of approximately $4.2 million in connection with extending and upsizing our Credit Facility. As of December 31, 2022, there was $150.0 million outstanding under Term Loan C, and we used all net proceeds to repay all outstanding borrowings on the Revolver, pay off mortgage debt, and fund acquisitions.
Biggest changeWe 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%.
In connection with this engagement, Gladstone Securities may from time to time solicit the interest of various commercial real estate lenders or recommend to us third party lenders offering credit products or packages that are responsive to our needs.
In connection with this engagement, Gladstone Securities may from time to time solicit the interest of various commercial real estate lenders or recommend third party lenders to us offering credit products or packages that are responsive to our needs.
No Selling Commissions or Dealer Manager Fee are paid with respect to Shares sold pursuant to the DRIP. Gladstone Securities may, in its sole discretion, reallow a portion of the Dealer Manager Fee to participating broker-dealers in support of the Offering.
No Selling Commissions or Dealer Manager Fees are paid with respect to Shares sold pursuant to the DRIP. Gladstone Securities may, in its sole discretion, reallow a portion of the Dealer Manager Fee to participating broker-dealers in support of the Offering.
During the years ended December 31, 2020, 2021 and 2022, 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, 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.
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 11 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%; • 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).
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. • 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. • 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.
We may sell some of our real estate assets when our Adviser determines that doing so would be advantageous to us and our stockholders. 7 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 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: Number of Individuals Functional Area 13 Executive Management 40 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: 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.
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 31,2023, 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, 2024, as compared to prior periods.
We have entered into an investment advisory agreement with our Adviser, as amended from time to time (including the Seventh Amended and Restated Investment Advisory Agreement dated January 10, 2023, the “Advisory Agreement”), under which our Adviser is responsible for managing our assets and liabilities, for operating our business on a day-to-day basis and for identifying, evaluating, negotiating and consummating investment transactions consistent with our investment policies as determined by our Board of Directors from time to time.
We have entered into an investment advisory agreement with our Adviser, as amended from time to time (including the Seventh Amended and Restated Investment Advisory Agreement dated January 10, 2023 and the Eighth Amended and Restated Investment Advisory Agreement dated July 11, 2023, the “Advisory Agreement”), under which our Adviser is responsible for managing our assets and liabilities, for operating our business on a day-to-day basis and for identifying, evaluating, negotiating and consummating investment transactions consistent with our investment policies as determined by our Board of Directors from time to time.
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 2023.
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.
Although we did not sell any shares of our Series E Preferred Stock during the year ended December 31, 2022, we also had an at-the-market program for our Series E Preferred Stock during the period.
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.
We believe that these investment properties 9 Table of Contents provide better protection in the event a tenant files bankruptcy, as leases on properties essential or important to the operations of a bankrupt tenant are typically less likely to be rejected in bankruptcy or otherwise terminated. • Lease Provisions that Enhance and Protect Value .
We believe that these investment properties provide better protection in the event a tenant files bankruptcy, as leases on properties essential or important to the operations of a bankrupt tenant are typically less likely to be rejected in bankruptcy or otherwise terminated. • Lease Provisions that Enhance and Protect Value .
The SEC also maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov . 15 Table of Contents
The SEC also maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov . 14 Table of Contents
We control the sole general partner of the Operating Partnership and currently own, directly or indirectly, approximately 99.0% 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 99.2% of the common units of limited partnership interest in the Operating Partnership (“OP Units”).
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, 2022, 40% 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, 2023, 38% of our lease revenues were earned from tenants that were rated by a nationally recognized statistical rating organization.
Our 14 Table of Contents 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. 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.
The agreement is scheduled to terminate on August 31, 2023, unless renewed and approved by our Board of Directors or earlier terminated.
The agreement is scheduled to terminate on August 31, 2024, 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 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 8 Table of Contents independent appraiser.
In addition to our use of leverage, we were active in the equity markets during 2022 by issuing shares of common stock under our common stock at-the-market program (“Common ATM 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 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 response to public health emergencies such as the recent COVID-19 pandemic, federal governmental authorities, as well as state and local governmental authorities in jurisdictions where our properties are located, have in recent years implemented laws and regulations which impacted our ability to operate our business in the ordinary course.
In response to public health emergencies, federal governmental authorities, as well as state and local governmental authorities in jurisdictions where our properties are located, have in recent years implemented laws and regulations which impacted our ability to operate our business in the ordinary course.
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 assure you that these policies or provisions of law will reduce or eliminate the influence of these conflicts.
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.
This strategy improves our operating efficiencies, increases 8 Table of Contents local market intelligence for the Adviser, and generally does not increase our costs as the local property managers are reimbursed by the tenants in accordance with the lease agreements.
This strategy improves our operating efficiencies, increases local market intelligence for the Adviser, and generally does not increase our costs as the local property managers are reimbursed by the tenants in accordance with the lease agreements.
Please see Item 2 of this Form 10-K for a summary of our portfolio by industry and geographic location. • Property Valuation .
Please see Part I, Item 2, “Properties” of this Form 10-K for a summary of our portfolio by industry and geographic location. • Property Valuation .
Refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Advisory and Administration Agreements” for a detailed discussion on the Adviser and Administrator’s fee structure.
Refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Advisory and Administration Agreements” of this Form 10-K for a detailed discussion on the Adviser and Administrator’s fee structure.
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.
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, some types of transactions require the prior approval of our Board of Directors, including a majority of our independent directors, including the following: • loans not secured or otherwise supported by real property; • any acquisition or which at the time of investment would have a cost exceeding 20% of our total assets; • transactions that involve conflicts of interest with our Adviser or other affiliates (other than reimbursement of expenses in accordance with the Advisory Agreement); and • the lease of assets to our Adviser, its affiliates or any of our officers or directors. 13 Table of Contents Our Adviser and Administrator also engage in other business ventures and, as a result, their resources are not dedicated exclusively to our business.
However, some types of transactions, including the following, require the prior approval of our Board of Directors, including a majority of our independent directors: • loans not secured or otherwise supported by real property; • any acquisition which at the time of investment would have a cost exceeding 20% of our total assets; • transactions that involve conflicts of interest with our Adviser or other affiliates (other than reimbursement of expenses in accordance with the Advisory Agreement); and • the lease of assets to our Adviser, its affiliates or any of our officers or directors.
As of December 31, 2022, our Adviser and Administrator collectively had 74 full-time employees.
As of December 31, 2023, our Adviser and Administrator collectively had 69 full-time employees.
We believe that the review process of our investment committee gives us a unique 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.
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.
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 vice chairman and chief operating officer, also serves in the same capacities for our Adviser and our Administrator.
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.
These governmental authorities may take similar actions in the future in the event of new public health emergencies, or if a new strain of COVID-19 emerges. Such regulations may materially affect our results of operations for the year ending December 31, 2023.
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.
As of February 22, 2023: • we owned 137 properties totaling 17.2 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 95.9%; • the weighted average remaining term of our mortgage debt was 4.1 years, and the weighted average interest rate was 5.15%; and • the average remaining lease term of the portfolio was 6.9 years.
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.
Term Loan C has a maturity date of February 18, 2028 and a Secured Overnight Financing Rate (“SOFR”) spread ranging from 125 to 195 basis points, depending on our leverage.
On August 18, 2022, we added a new $140.0 million term loan facility component (“Term Loan C”). Term Loan C has a maturity date of February 18, 2028 and a Secured Overnight Financing Rate (“SOFR”) spread ranging from 125 to 195 basis points, depending on our leverage.
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.
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.
When appropriate, our Adviser may engage experts to undertake some or all of the due diligence efforts described above. 10 Table of Contents 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 and other sources that may become available from time to time.
On February 11, 2021, we added a new $65.0 million term loan component, inclusive of a $15.0 million delayed funding component which was funded on July 20, 2021 (“Term Loan B”).
On October 5, 2015, we added a $25.0 million five-year term loan facility (“Term Loan A”) that was increased to $160.0 million through subsequent amendments. On February 11, 2021, we added a new $65.0 million term loan component, inclusive of a $15.0 million delayed funding component which was funded on July 20, 2021 (“Term Loan B”).
These relationships provide local expertise to ensure that our properties are properly maintained and that our tenants have local points of contact to address property issues.
We have formed relationships with nationally recognized strategic partners to assist us with the management of our properties in each of our markets. These relationships provide local expertise to ensure that our properties are properly maintained and that our tenants have local points of contact to address property issues.
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. 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.
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.
Arthur “Buzz” Cooper, our president, is also an executive managing director of our Adviser. 12 Table of Contents Our Adviser has an investment committee that approves each of our investments. This investment committee is currently comprised of Messrs.
Our 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.
In addition, our Adviser supplements its valuation with an independent real estate appraisal in connection with each investment that we consider.
In addition, our Adviser supplements its valuation with an independent real estate appraisal in connection with each investment that we consider. When appropriate, our Adviser may engage experts to undertake some or all of the due diligence efforts described above.
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. Investment Policies Types of Investments Overview We intend to continue earning substantially all of our revenues from the ownership of income-producing 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.
The Credit Facility’s current bank syndicate is comprised of KeyBank, Fifth Third Bank, The Huntington National Bank, Bank of America, Synovus Bank, United Bank, First Financial Bank, and S&T Bank. We refer to Term Loan A, Term Loan B, Term Loan C and the Revolver, collectively, herein as the Credit Facility.
We incurred fees of approximately $4.2 million in connection with extending and upsizing our Credit Facility. The Credit Facility’s current bank syndicate is comprised of KeyBank, Fifth Third Bank, The Huntington National Bank, Bank of America, Synovus Bank, United Bank, First Financial Bank, and S&T Bank.
None of the $359.4 million in mortgage notes payable, net, outstanding as of December 31, 2022 have recourse to the Company. On August 7, 2013, we procured a senior unsecured revolving credit facility (“Revolver”), with KeyBank National Association (“Keybank”) (serving as a revolving lender, a letter of credit issuer and an administrative agent) and other syndicated lenders.
On August 7, 2013, we procured a senior unsecured revolving credit facility (“Revolver”), with KeyBank National Association (“KeyBank”) (serving as a revolving lender, a letter of credit issuer and an administrative agent) for $60.0 million that was increased to $100.0 million through subsequent amendments.
We seek to obtain lease terms of approximately seven to 15 years with built-in rental increases. We have formed relationships with nationally recognized strategic partners to assist us with the management of our properties in each of our markets.
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.
Removed
Our Revolver was initially for $60.0 million, but was increased to $85.0 million through subsequent amendments. On October 5, 2015, we added a $25.0 million 5-year term loan facility (“Term Loan A”).
Added
(“BofA”), Goldman Sachs, Baird, KeyBanc Capital Markets Inc. (“KeyBanc”), and Fifth Third (collectively the “Common Stock Sales Agents”).
Removed
On October 27, 2017, we expanded our Term Loan A to $75.0 million and extended the maturity date to October 27, 2022, and also extended the maturity date of our Revolver through October 27, 2021.
Added
In connection with the 2023 Common Stock Sales Agreement, we filed prospectus supplements dated March 3, 2023 and March 7, 2023, to the prospectus dated November 23, 2022, with the SEC, for the offer and sale of an aggregate offering amount of $250.0 million of common stock.
Removed
On July 2, 2019, we expanded our Term Loan A from $75.0 million to $160.0 million, inclusive of a delayed draw component whereby we can incrementally borrow on the Term Loan A up to the $160.0 million commitment, and increased the Revolver from $85.0 million to $100.0 million.
Added
Investment Policies Types of Investments Overview We intend to continue earning substantially all of our revenues from the ownership of income-producing real property.
Removed
The Term Loan A has a five-year term, with a maturity date of July 2, 2024, and the Revolver has a four-year term, with a maturity date of July 2, 2023. The interest rate margin for each of the Term Loan A and Revolver was reduced by 10 basis points at each leverage tier.
Added
None of the $295.9 million in mortgage notes payable, net, outstanding as of December 31, 2023 have recourse to the Company.
Removed
Term Loan B has a maturity date of 60 months from the closing of the amended Credit Facility and a London Inter-bank Offered Rate (“LIBOR”) floor of 25 basis points. On August 18, 2022, we added a new $140.0 million term loan facility component (“Term Loan C”).
Added
Our Adviser and Administrator also engage in other business ventures and, as a result, their resources are not dedicated exclusively to our business.
Removed
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.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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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 and Gladstone Land could compete for the time and services of our officers and directors.
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.
We have entered into interest rate caps and interest rate swaps to attempt to manage our exposure to interest rate fluctuations on all our outstanding variable rate mortgages as well as the outstanding Term Loan components of our Credit Facility.
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.
Termination of the Advisory Agreement with our Adviser without cause would be difficult and costly. We may only terminate the agreement without cause (as defined therein) upon 120 days’ prior written notice and after the affirmative vote of at least two-thirds of our independent directors.
Termination of the Advisory Agreement with our Adviser without cause would be difficult and costly. We may only terminate the Advisory Agreement without cause (as defined therein) upon 120 days’ prior written notice and after the affirmative vote of at least two-thirds of our independent directors.
Some market conditions that could negatively affect our share price or result in fluctuations in the price or trading volume of our securities include, but are not limited to: • price and volume fluctuations in the stock market from time to time, which are often unrelated to the operating performance of particular companies; • significant volatility in the market price and trading volume of shares of REITs, real estate companies or other companies in our sector, which is not necessarily related to the performance of those companies; • price and volume fluctuations in the stock market as a result of terrorist attacks, or speculation regarding future terrorist attacks, in the United States or abroad; • actual or anticipated variations in our quarterly operating results or distributions to shareholders; • changes in our FFO or earnings estimates or the publication of research reports about us or the real estate industry generally; • actions by institutional stockholders; • speculation in the press or investment community; • the national and global political environment, including foreign relations, conflicts and trading policies; • changes in regulatory policies or tax guidelines, particularly with respect to REITs; and • investor confidence in the stock market.
Some market conditions that could negatively affect our share price or result in fluctuations in the price or trading volume of our securities include, but are not limited to: • price and volume fluctuations in the stock market from time to time, which are often unrelated to the operating performance of particular companies; • significant volatility in the market price and trading volume of shares of REITs, real estate companies or other companies in our sector, which is not necessarily related to the performance of those companies; • price and volume fluctuations in the stock market as a result of terrorist attacks, or speculation regarding future terrorist attacks, in the United States or abroad; • actual or anticipated variations in our quarterly operating results or distributions to stockholders; • changes in our FFO or earnings estimates or the publication of research reports about us or the real estate industry generally; • actions by institutional stockholders; • speculation in the press or investment community; • the national and global political environment, including foreign relations, conflicts and trading policies; • changes in regulatory policies or tax guidelines, particularly with respect to REITs; and • investor confidence in the stock market.
Sales of substantial amounts of common or preferred stock (including shares of common stock issuable upon the conversion of units of the Operating Partnership that we may issue from time to time, issuable upon conversion of our Senior Common Stock, or issuances made through our ATM Programs or otherwise), or the perception that these sales could occur, may adversely affect prevailing market prices for our common and preferred stock.
Sales of substantial amounts of common or preferred stock (including shares of common stock issuable upon the conversion of units of the Operating Partnership that we may issue from time to time, issuable upon conversion of our Senior Common Stock, or issuances made through any ATM programs or otherwise), or the perception that these sales could occur, may adversely affect prevailing market prices for our common and preferred stock.
We are exposed to the potential impacts of climate change, which may result in unanticipated losses that could affect our business and financial condition. We are also exposed to potential physical risks from possible changes in climate. Our properties may be exposed to catastrophic weather events, such as severe storms, fires or floods.
We are exposed to the potential impacts of climate change, which may result in unanticipated losses that could affect our business and financial condition. We are exposed to potential physical risks from possible changes in climate. Our properties may be exposed to catastrophic weather events, such as severe storms, fires or floods.
Many of our tenants and borrowers are privately owned businesses, about which there is generally little or no publicly available operating and financial information. As a result, we will rely on our Adviser to perform due diligence investigations of these tenants and borrowers, their operations and their prospects.
Many of our tenants and borrowers are privately owned businesses, about which there is generally little or no publicly available operating and financial information. As a result, we rely on our Adviser to perform due diligence investigations of these tenants and borrowers, their operations and their prospects.
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 vice chairman and 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, Terry Lee Brubaker, our chief operating officer, Arthur “Buzz” Cooper, our president, and Gary Gerson, our chief financial officer.
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 26 Table of Contents 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 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.
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.
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.
This liquidity will limit our ability to quickly change our portfolio in response to changes in economic or other conditions. To the extent the properties are not subject to net leases, some significant expenditures, such as real estate taxes and maintenance costs, are generally not reduced when circumstances cause a reduction in income from the investment.
This illiquidity will limit our ability to quickly change our portfolio in response to changes in economic or other conditions. To the extent the properties are not subject to net leases, some significant expenditures, such as real estate taxes and maintenance costs, are generally not reduced when circumstances cause a reduction in income from the investment.
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 1.0% 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 0.8% of the outstanding OP Units.
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.
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.
We cannot assure investors that the market price of our common and preferred stock will not fluctuate or decline further in the future.
We cannot assure investors that the market price of our common and preferred stock will not fluctuate or decline in the future.
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 22 Table of Contents • 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 • variations in the occupancy rate of our properties.
Leasing real property to lower middle market businesses exposes us to a number of unique risks related to these entities, including the following: • Lower middle market businesses may have limited financial resources and may not be able to make their lease or mortgage payments on a timely basis, or at all.
Leasing real property to lower middle market businesses exposes us to a number of risks specifically related to these entities, including the following: • Lower middle market businesses may have limited financial resources and may not be able to make their lease or mortgage payments on a timely basis, or at all.
If confirmed by the bankruptcy court, 16 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, 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.
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. 18 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. 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.
Cybersecurity risks 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.
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.
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 25 Table of Contents 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.
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 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.
These indirect effects may include increases to the costs of electricity, fuel, water consumption, and waste 30 Table of Contents disposal, as well as increasing the cost of (or making unavailable) property insurance on terms we find acceptable. Together, these risks would require us to expend the necessary funds to adequately protect and repair our properties.
These indirect effects may include increases to the costs of electricity, fuel, water consumption, and waste disposal, as well as increasing the cost of (or making unavailable) property insurance on terms we find acceptable. Together, these risks would require us to expend the necessary funds to adequately protect and repair our properties.
If this were to occur, we could incur significant remedial costs 19 Table of Contents 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 reactions.
Tenants and borrowers that are subject to significant debt obligations may be unable to make their rent or mortgage payments if there are adverse changes to their businesses or because of the impact of public health emergencies like COVID-19. Rising interest rates, inflation and recessionary conditions also impact a tenant’s ability to timely make their rent or mortgage payments.
Tenants and borrowers that are subject to significant debt obligations may be unable to make their rent or mortgage payments if there are adverse changes to their businesses or because of the impact of public health emergencies. Rising interest rates, inflation and recessionary conditions also impact a tenant’s ability to timely make their rent or mortgage payments.
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.
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.
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. 23 Table of Contents 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 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.
There is also a risk that a significant increase in the ratio of our indebtedness to the measures of asset value used by financial analysts may have an adverse effect on the market price of our securities. We face risks related to “balloon payments” and refinancing.
There is also a risk that a significant increase in the ratio of our indebtedness to the measures of asset value used by financial analysts may have an adverse effect on the market price of our securities. We face liquidity, credit, and performance risks related to “balloon payments” and refinancing.
We have implemented processes, procedures and internal controls to help prevent, detect and mitigate cybersecurity risks and cyber intrusions, but these measures, as well as our increased awareness of the nature and extent of a risk of a cyber-incident, do not guarantee that a cyber-incident will not occur, will be timely detected and/or that our financial results, operations or confidential information will not be negatively impacted by such an incident.
We have implemented processes, procedures and internal controls to help prevent, detect and mitigate cybersecurity threats and cyber intrusions, but these measures, as well as our increased awareness of the nature and extent of a threat of a cyber-incident, do not guarantee that a cyber-incident will not occur, will be timely detected and/or that our financial results, operations or confidential information will not be negatively impacted by such an incident.
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, 2022, we obtained approximately $62.9 million in long-term financing, which we used to acquire additional properties.
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.
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.
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.
Alternatively, if we were to redeem a large number of 29 Table of Contents OP Units for cash, we may be required to expend significant amounts to pay the redemption price, which may limit our funds necessary to make distributions on our common stock.
Alternatively, if we were to redeem a large number of OP Units for cash, we may be required to expend significant amounts to pay the redemption price, which may limit our funds necessary to make distributions on our common stock.
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 96% of our FFO. As of 20 Table of Contents December 31, 2022, 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 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.
We face a risk from the fact that certain of our properties are cross-collateralized. As of December 31, 2022, 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, 2023, the mortgages on certain of our properties were cross-collateralized.
Shares of common and preferred stock eligible for future sale may have adverse effects on the respective share price. 28 Table of Contents We cannot predict the effect, if any, of future sales of common or preferred stock, or the availability of shares for future sales, on the market price of our common or preferred stock.
Shares of common and preferred stock eligible for future sale may have adverse effects on the respective share price. We cannot predict the effect, if any, of future sales of common or preferred stock, or the availability of shares for future sales, on the market price of our common or 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.
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.
If we become subject to claims in this regard, it could materially and adversely affect us and our future insurability for such matters. The assessments we perform on our acquisition of property may fail to reveal all environmental conditions, liabilities or compliance concerns.
If we become subject to claims in this regard, it could materially and adversely affect us and our future insurability for such matters. The assessments we perform on our acquisitions of properties may fail to reveal all environmental conditions, liabilities or compliance concerns.
A change in the value of our assets could cause us to experience a cash shortfall or be in default of our loan covenants. 21 Table of Contents We borrow on an unsecured basis under the Credit Facility; however, we are required to maintain a pool of unsecured assets sufficient to draw on the Credit Facility.
A change in the value of our assets could cause us to experience a cash shortfall or be in default of our loan covenants. We borrow on an unsecured basis under the Credit Facility; however, we are required to maintain a sufficient pool of unsecured assets in order to draw on the Credit Facility.
For the year ended December 31, 2021, our Advisor issued a waiver of the incentive fee of $0.02 million. For the years ended December 31, 2022 and 2020, our Adviser did not issue a full or partial waiver of the incentive fee.
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.
Our Board of Directors may change our investment policy without stockholders’ approval. 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 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.
These incidents may be an intentional attack or an unintentional event and could involve gaining unauthorized access to our information systems or those of our third party providers for purposes of misappropriating assets, stealing confidential information, corrupting data or causing operational disruption.
A cybersecurity incident may be an intentional attack or an unintentional event and could involve gaining unauthorized access to our information systems or those of our third-party providers for purposes of misappropriating assets, stealing confidential information, corrupting data or causing operational disruption.
We have no outstanding principal on variable rate mortgages as of December 31, 2022.
We have no outstanding principal on variable rate mortgages as of December 31, 2023.
With these properties, if the current lease is terminated or not renewed or, 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 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.
As of December 31, 2022, we owned 137 properties and had 137 leases on these properties, and our five largest tenants accounted for approximately 15.0% 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, 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.
The development and maintenance of these measures is also costly and requires ongoing monitoring, testing and updating as technologies and processes change, and efforts to overcome security measures become increasingly sophisticated. Legislative or regulatory tax changes related to REITs could materially and adversely affect us.
The development and maintenance of these measures are also costly and require ongoing monitoring, testing and updating as technologies and processes change, and efforts to overcome cybersecurity measures become increasingly sophisticated. Legislative or regulatory tax changes related to REITs could materially and adversely affect us.
No assurance can be given that we will be able to recover the current carrying amount of our properties in the future. Our failure to do so would require us to recognize additional impairment charges for the period in which we reached that conclusion, which could materially and adversely affect us and our results of operations.
We may not be able to recover the current carrying amount of our properties in the future. Our failure to do so would require us to recognize additional impairment charges for the period in which we reached that conclusion, which could materially and adversely affect us and our results of operations.
If we were unable to meet a request to add collateral to the Credit Facility, this inability could have a material adverse effect on our liquidity and our ability to meet our loan covenants. Interest rate fluctuations may adversely affect our results of operations.
If we were unable to meet a request to add collateral 20 Table of Contents to this unsecured asset pool under the Credit Facility, this inability could have a material adverse effect on our liquidity and our ability to meet our loan covenants. Interest rate fluctuations may adversely affect our results of operations.
After election, a director may only be removed by our stockholders for cause. Election of directors for staggered terms with limited rights to remove directors makes it more difficult for a hostile bidder to acquire control of us. The existence of this provision may negatively impact the price of our securities and may discourage third-party bids to acquire our securities.
Election of directors for staggered terms with limited rights to remove directors makes it more difficult for a hostile bidder to acquire control of us. The existence of this provision may negatively impact the price of our securities and may discourage third-party bids to acquire our securities.
We have balloon payments of $58.3 million payable during the year ending December 31, 2023. We mortgage our properties, which subjects us to the risk of foreclosure in the event of non-payment.
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.
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.
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.
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. We are dependent on our senior management and other key management members to carry out our business and investment strategies.
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.
As of December 31, 2022, 15.1% of our total lease revenue was earned from tenants in the Telecommunications industry, 12.8% was earned from tenants in the Automotive industry, 12.0% was earned from tenants in the Diversified/Conglomerate Services industry, and 10.7% was earned from tenants in the Healthcare industry.
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.
Under the most recent amendment of the Advisory Agreement dated January 10, 2023, our Advisor will not receive an incentive fee for the quarters ending March 31, 2023 and June 30, 2023.
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.
At each annual meeting of stockholders, the successors to the class of directors whose term expires at such meeting will be elected to hold office for a term expiring at the annual meeting of stockholders held in the third year 27 Table of Contents following the year of their election.
At each annual meeting of stockholders, the successors to the class of directors whose term expires at such meeting will be elected to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election. After election, a director may only be removed by our stockholders for cause.
Furthermore, multi-tenant properties expose us to the risk of increased operating expenses, which may occur when the actual cost of taxes, insurance and maintenance at the property exceeds the operating expenses paid by tenants and/or the amounts budgeted.
Multi-tenant properties are also subject to tenant turnover and fluctuation in occupancy rates, which could affect our operating results. Furthermore, multi-tenant properties expose us to the risk of increased operating expenses, which may occur when the actual cost of taxes, insurance and maintenance at the property exceeds the operating expenses paid by tenants and/or the amounts budgeted.
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.
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.
Risks related to the real estate industry We are subject to certain risks associated with real estate ownership and lending which could reduce the value of our investments. Our investments include primarily industrial and office property.
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.
As a result, our income and distributions to our stockholders could be lower than they would otherwise be if we did not engage in net leases. Multi-tenant properties expose us to additional risks. Our multi-tenant properties could expose us to the risk that a sufficient number of suitable tenants may not be found to enable the property to operate profitably.
As a result, our income and distributions to our stockholders could be lower than they would otherwise be if we did not engage in net leases. Multi-tenant properties expose us to additional risks, such as increasing operating expenses and difficulty funding suitable replacement tenants.
The unplanned departure of any of our executive officers or key personnel could have a material adverse effect on our ability to implement our business strategy and to achieve our investment objectives. Our success depends on the performance of our Adviser and if our Adviser makes inadvisable investment or management decisions, our operations could be materially adversely impacted.
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.
In addition, in the event we are forced to sell the property, we may have 17 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.
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.
We recognized impairment charges of $12.1 million, $0.0 million, and $3.6 million during the years ended December 31, 2022, 2021, and 2020, respectively. Risks related to our financing Capital markets and economic conditions can materially affect our financial condition and results of operations, the value of our equity securities, and our ability to sustain payment of distributions at current levels.
Risks related to our financing Capital markets and economic conditions can materially affect our financial condition and results of operations, the value of our equity securities, and our ability to sustain the payment of distributions at current levels.
Despite careful security and controls design, implementation, updating and independent third party verification, our information technology systems, and those of our third party providers, could become subject to cyber incidents. A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity or availability of our information resources.
Despite careful security and controls design, implementation, updating and independent third-party verification, our information technology systems, and those of our third party providers, could become subject to cybersecurity incidents.
Qualification as a REIT involves the application of highly technical and complex rules for which there are only limited judicial or administrative interpretations. The determination of various factual matters and circumstances not entirely within our control may affect our ability to continue to qualify as a REIT.
The determination of various factual matters and circumstances not entirely within our control may affect our ability to continue to qualify as a REIT.
The result of these incidents may include disrupted operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance costs, litigation and damage to our business relationships. As our reliance on technology has increased, so have the risks posed to our information systems, both internal and those provided to us by third-party service providers.
The result of a cybersecurity incident may include disrupted operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance costs, litigation and damage to our business relationships.
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.
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.
In addition, cybersecurity risks such as those above have increased in recent years in part due to increasingly numerous and sophisticated malicious cyber actors.
As our reliance on technology has increased, so have the risks posed to our information systems, both internal and those provided to us by third-party service providers. In addition, cybersecurity threats such as those noted above have increased in recent years in part due to increasingly numerous and sophisticated malicious cyber actors.
Therefore, such six-month waiver is contractual. 24 Table of Contents Risks Related to Qualification and Operation as a REIT If we fail to qualify as a REIT, our operations and distributions to stockholders would be adversely impacted.
Risks Related to Qualification and Operation as a REIT If we fail to qualify as a REIT, our operations and distributions to stockholders would be adversely impacted. We intend to continue to be organized and to operate to qualify as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”).
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.
Thus, compliance with the REIT requirements may hinder our ability to make, and, in certain cases, maintain ownership of certain attractive investments.
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 unique to these entities.
Many of our tenants are lower middle market businesses, which exposes us to additional risks specific to these entities.
This loss of income could cause a material adverse impact to our results of operations and business. Multi-tenant properties are also subject to tenant turnover and fluctuation in occupancy rates, which could affect our operating results.
Our multi-tenant properties could expose us to the risk that a sufficient number of suitable tenants may not be found to enable the property to operate profitably. This loss of income could cause a material adverse impact to our results of operations and business.
We intend to continue to be organized and to operate to qualify as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”). A REIT generally is not taxed at the corporate level on income it currently distributes to its stockholders.
A REIT generally is not taxed at the corporate level on income it currently distributes to its stockholders. Qualification as a REIT involves the application of highly technical and complex rules for which there are only limited judicial or administrative interpretations.
Removed
A significant change in interest rates could have an adverse impact on our results of operations. Changes relating to the LIBOR calculation process may adversely affect the value of the LIBOR-indexed, floating-rate debt in our portfolio.
Added
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.
Removed
LIBOR has been largely replaced by SOFR as the basic rate of interest used in lending between banks and is widely used as a reference for setting the interest rate on loans globally. LIBOR is still expected to be phased out in mid-2023, when private-sector banks are no longer required to report the information used to set the rate.
Added
We have no employees, and are therefore dependent on the senior management and other key management members who are employed by our Adviser or Administrator, as applicable, to carry out our business and investment strategies.
Removed
Without this data, LIBOR may no longer be published, or the lack of quality and quantity of data may cause the rate to no longer be representative of the market. Also, the U.S. Federal Reserve, in combination with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, recommended replacing U.S.-dollar LIBOR with SOFR.
Added
Our success depends on the performance of our Adviser and if our Adviser makes inadvisable investment or management decisions, our operations could be materially adversely impacted.
Removed
SOFR is a more generic measure than LIBOR and considers the cost of borrowing cash overnight, collateralized by U.S. Treasury securities.
Added
Under the amendment of the Advisory Agreement dated July 11, 2023, our Advisor was not entitled to receive an incentive fee for the quarters ended September 30, 2023 and December 31, 2023. No waivers were required, as the incentive fees for the 12-month period were contractually eliminated.
Removed
At December 31, 2022, all of our variable rate debt was based upon SOFR, with the exception of $41.8 million of hedged variable rate mortgages still based on LIBOR, which we are planning to transition to SOFR prior to the targeted mid-2023 phase out of LIBOR.
Added
Legislation or regulations adopted in the future may impose further burdens or restrictions on us with respect to improved access by disabled persons.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeN/A - Not Applicable The following table summarizes the geographic locations of our properties as of December 31, 2022, 2021, and 2020, respectively (dollars in thousands): 31 Table of Contents State 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 twelve months ended December 31, 2021 % of Lease Revenue Number of Leases for the twelve months ended December 31, 2021 Rentable Square Feet for the twelve months ended December 31, 2021 Lease Revenue for the year ended December 31, 2020 % of Lease Revenue Number of Leases for the year ended December 31, 2020 Rentable Square Feet for the year ended December 31, 2020 Texas $ 21,462 14.4 % 14 1,377,568 $ 16,124 11.7 % 14 1,492,768 $ 19,021 14.3 % 14 1,474,967 Florida 16,329 11.0 9 1,045,404 16,741 12.2 9 1,038,076 16,686 12.5 11 1,038,076 Pennsylvania 14,850 10.0 10 2,224,007 15,382 11.2 10 2,224,007 13,978 10.5 10 2,224,007 Ohio 13,888 9.3 16 1,312,291 14,911 10.8 15 1,275,023 14,008 10.5 15 1,094,871 Georgia 11,674 7.8 10 1,686,986 10,778 7.8 10 1,686,986 10,360 7.8 9 1,566,986 North Carolina 8,684 5.8 10 1,539,430 6,860 5.0 8 1,113,846 6,101 4.6 8 944,943 Alabama 7,578 5.1 7 1,138,504 6,477 4.7 5 921,891 3,865 2.9 5 921,891 New Jersey 6,757 4.5 4 331,575 3,025 2.2 4 145,686 3,000 2.3 4 145,686 Michigan 6,435 4.3 6 973,638 6,374 4.6 6 973,638 6,293 4.7 6 973,638 South Carolina 5,426 3.6 2 489,683 5,559 4.0 2 424,683 4,826 3.6 2 424,683 All Other States 35,898 24.2 49 5,060,865 35,457 25.8 47 4,936,191 35,014 26.3 46 4,597,798 $ 148,981 100.0 % 137 17,179,951 $ 137,688 100.0 % 130 16,232,795 $ 133,152 100.0 % 130 15,407,546 The following table summarizes lease revenue by tenant industries for the years ended December 31, 2022, 2021 and 2020 (dollars in thousands): For the year ended December 31, 2022 2021 2020 Industry Classification Lease Revenue Percentage of Lease Revenue Lease Revenue Percentage of Lease Revenue Lease Revenue Percentage of Lease Revenue Telecommunications $ 22,456 15.1 % $ 22,712 16.5 % $ 22,222 16.9 % Automotive 19,133 12.8 13,555 9.8 13,768 10.3 Diversified/Conglomerate Services 17,946 12.0 18,613 13.5 16,587 12.5 Healthcare 15,928 10.7 15,216 11.1 16,133 12.1 Banking 13,136 8.8 10,264 7.5 10,042 7.5 Diversified/Conglomerate Manufacturing 10,976 7.4 7,774 5.6 6,268 4.7 Buildings and Real Estate 9,319 6.3 9,582 7.0 9,050 6.8 Personal, Food & Miscellaneous Services 7,232 4.9 7,097 5.2 6,323 4.7 Beverage, Food & Tobacco 5,615 3.8 5,805 4.2 4,268 3.2 Personal & Non-Durable Consumer Products 5,531 3.7 2,495 1.8 2,450 1.8 Chemicals, Plastics & Rubber 4,838 3.2 4,703 3.4 3,647 2.7 Machinery 4,257 2.9 4,001 2.9 4,191 3.1 Containers, Packaging & Glass 3,827 2.6 2,937 2.1 1,972 1.5 Information Technology 3,515 2.4 6,657 4.8 6,899 5.2 Childcare 2,292 1.5 2,293 1.7 2,237 1.7 Printing & Publishing 917 0.6 1,668 1.2 1,377 1.0 Education 845 0.6 818 0.6 823 0.6 Electronics 725 0.5 1,013 0.7 4,412 3.3 Home & Office Furnishings 493 0.2 485 0.4 483 0.4 Total $ 148,981 100.0 % $ 137,688 100.0 % $ 133,152 100.0 % 32 Table of Contents
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
Item 2. Properties. As of December 31, 2022, we wholly-owned 137 properties, comprised of 17.2 million square feet of rentable space in 27 states. Our properties were 96.8% leased with an average remaining lease term of 7.0 years.
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.
The following table summarizes the lease expirations by year for our properties for leases in place as of December 31, 2022 (dollars in thousands): Year of Lease Expiration Square Feet (1) Number of Expiring Leases Lease Revenue for the year ended December 31, 2022 % Expiring 2023 910,526 7 10,454 7.0 % 2024 1,251,411 8 6,576 4.4 % 2025 561,854 10 14,313 9.6 % 2026 1,795,019 13 16,717 11.2 % 2027 1,833,683 13 18,716 12.6 % Thereafter 10,284,432 86 71,896 48.3 % Sold/terminated leases N/A N/A 10,309 6.9 % 16,636,925 137 $ 148,981 100.0 % (1) Our vacant square footage totaled 543,026 square feet as of December 31, 2022.
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.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+1 added−0 removed12 unchanged
Biggest changeAt December 31, 2017 2018 2019 2020 2021 2022 GOOD $ 100.00 $ 98.21 $ 128.57 $ 115.60 $ 176.15 $ 137.74 S&P 500 $ 100.00 $ 95.25 $ 128.15 $ 117.87 $ 122.21 $ 88.34 FNAR $ 100.00 $ 95.90 $ 122.82 $ 115.62 $ 161.73 $ 138.04 Item 6. Reserved.
Biggest changeAt 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.
The stock performance graph assumes $100 was invested on December 31, 2017.
The stock performance graph assumes $100 was invested on December 31, 2018.
As of February 14, 2023, there were 56,188 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.
As 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.
The Senior Common Stock is not traded on any exchange or automated quotation system. As of February 14, 2023, there were 147 beneficial owners of our Senior Common Stock.
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.
Sale of Unregistered Securities We did not sell unregistered shares of stock during the fiscal year ended December 31, 2022. 33 Table of Contents Issuer Purchaser of Equity Securities We repurchased 8,514 shares of our Series G Preferred Stock during the fiscal year ended December 31, 2022.
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.
Added
We did not repurchase any stock during the three months ended December 31, 2023.

Item 7. Management's Discussion & Analysis

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

92 edited+30 added−41 removed81 unchanged
Biggest changeThe following table provides a reconciliation of our FFO and FFO as adjusted for comparability for the years ended December 31, 2022 and 2021 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: 51 Table of Contents For the twelve months ended December 31, (Dollars in Thousands, Except for Per Share Amounts) 2022 2021 Calculation of basic FFO per share of common stock and Non-controlling OP Unit Net income $ 9,272 $ 9,733 Less: Distributions attributable to preferred and senior common stock (12,361) (12,186) Less: Series D preferred stock offering costs write off — (2,141) Less: Loss on extinguishment of Series F preferred stock (10) — Add: Gain on repurchase of Series G preferred stock 37 — Net loss attributable to common stockholders and Non-controlling OP Unitholders $ (3,062) $ (4,594) Adjustments: Add: Real estate depreciation and amortization 61,664 60,311 Add: Impairment charge 12,092 — Add: Loss on sale of real estate, net — 1,148 Less: Gain on sale of real estate, net (10,052) — FFO available to common stockholders and Non-controlling OP Unitholders - basic $ 60,642 $ 56,865 Weighted average common shares outstanding - basic 38,950,734 36,537,306 Weighted average Non-controlling OP Units outstanding 294,941 316,987 Total common shares and Non-controlling OP Units 39,245,675 36,854,293 Basic FFO per weighted average share of common stock and Non-controlling OP Unit $ 1.55 $ 1.54 Calculation of diluted FFO per share of common stock and Non-controlling OP Unit Net income $ 9,272 $ 9,733 Less: Distributions attributable to preferred and senior common stock (12,361) (12,186) Less: Series D preferred stock offering costs write off — (2,141) Less: Loss on extinguishment of Series F preferred stock (10) — Add: Gain on repurchase of Series G preferred stock 37 — Net loss attributable to common stockholders and Non-controlling OP Unitholders $ (3,062) $ (4,594) Adjustments: Add: Real estate depreciation and amortization 61,664 60,311 Add: Impairment charge 12,092 — Add: Income impact of assumed conversion of senior common stock 458 698 Add: Loss on sale of real estate, net — 1,148 Less: Gain on sale of real estate, net (10,052) — FFO available to common stockholders and Non-controlling OP Unitholders plus assumed conversions $ 61,100 $ 57,563 Weighted average common shares outstanding - basic 38,950,734 36,537,306 Weighted average Non-controlling OP Units outstanding 294,941 316,987 Effect of convertible senior common stock 363,246 503,962 Weighted average common shares and Non-controlling OP Units outstanding - diluted 39,608,921 37,358,255 Diluted FFO per weighted average share of common stock and Non-controlling OP Unit $ 1.54 $ 1.54 Calculation of diluted FFO per share of common stock and Non-controlling OP Unit, as adjusted for comparability FFO available to common stockholders and Non-controlling OP Unitholders plus assumed conversions $ 61,100 $ 57,563 Add: Series D preferred stock offering costs write off — 2,141 FFO available to common stockholders and Non-controlling OP Unitholders plus assumed conversions, as adjusted for comparability $ 61,100 $ 59,704 Weighted average common shares and Non-controlling OP Units outstanding - diluted 39,608,921 37,358,255 Diluted FFO per weighted average share of common stock and Non-controlling OP Unit, as adjusted for comparability $ 1.54 $ 1.60 Distributions declared per share of common stock and Non-controlling OP Unit $ 1.504800 $ 1.502175 52 Table of Contents
Biggest changeThe 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
Brubaker, our vice chairman and chief operating officer, is also the vice chairman and chief operating officer of our Adviser and Administrator. Mr. Cooper, our president, is also an executive managing director of our Adviser.
Brubaker, our chief operating officer, is also the vice chairman and chief operating officer of our Adviser and Administrator. Mr. Cooper, our president, is also an executive managing director of our Adviser.
The Reclassification Articles Supplementary did not increase our authorized shares of capital stock. Series E Preferred ATM Program During the year ended December 31, 2022, 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.
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.
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, 2022. (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, 2023. (3) Operating lease obligations represent the ground lease payments due on four of our properties.
Same Store Analysis For the purposes of the following discussion, same store properties are properties we owned as of January 1, 2021, 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, 2020.
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.
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, 2022, as compared to the year ended December 31, 2021. The increase is a result of our Administrator incurring greater costs that are allocated to the Company.
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.
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 2022 meeting, our Board of Directors reviewed and renewed the Advisory Agreement and Administration Agreement for an additional year, through August 31, 2023.
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.
On June 23, 2021, the Operating Partnership adopted the Third Amendment to its Second Amended and Restated Agreement of Limited Partnership, including Exhibit SGP thereto (collectively, the “Third Amendment”), establishing the rights, privileges, 39 Table of Contents and preferences of 6.00% Series G Cumulative Redeemable Preferred Units, a newly-designated class of limited partnership interests (the “Series G Term Preferred Units”).
On June 23, 2021, the Operating Partnership adopted the Third Amendment to its Second Amended and Restated Agreement of Limited Partnership, including Exhibit SGP thereto (collectively, the “Third Amendment”), establishing the rights, privileges, and preferences of 6.00% Series G Cumulative Redeemable Preferred Units, a newly-designated class of limited partnership interests (the “Series G Term Preferred Units”).
In connection with this redemption, we recognized a $2.1 million decrease to net income available to common shareholders pertaining to the original issuance costs incurred upon issuance of our Series D Preferred Stock.
In connection with this redemption, we recognized a $2.1 million decrease to net income available to common stockholders pertaining to the original issuance costs incurred upon issuance of our Series D Preferred Stock.
We anticipate being able to refinance our mortgages that come due during 2023 and 2024 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 2024 and 2025 with a combination of new mortgage debt, availability under our Credit Facility and the issuance of additional equity securities.
FFO as adjusted for comparability is 50 Table of Contents generally calculated as FFO available to common stockholders and Non-controlling OP Unitholders, excluding certain non-recurring and non-cash income and expense adjustments, which management believes are not reflective of the results within our operating real estate portfolio.
FFO as adjusted for comparability is generally calculated as FFO available to common stockholders and Non-controlling OP Unitholders, excluding certain non-recurring and non-cash income and expense adjustments, which management believes are not reflective of the results within our operating real estate portfolio.
Our properties are geographically diversified and our tenants cover a broad cross section of business sectors and range in size from small to very 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 35 Table of Contents large private and public companies, many of which are corporations that do not have publicly-rated debt.
After giving effect to the filing of the Reclassification Articles 38 Table of Contents Supplementary in August 2021, our authorized capital stock consisted of 62,290,000 shares of common stock, 6,760,000 shares of Series E Preferred Stock, 26,000,000 shares of Series F Preferred Stock, 4,000,000 shares of Series G Preferred Stock, and 950,000 shares of senior common stock.
After giving effect to the filing of the Reclassification Articles Supplementary in August 2021, our authorized capital stock consisted of 62,290,000 shares of common stock, 6,760,000 shares of Series E Preferred Stock, 26,000,000 shares of Series F Preferred Stock, 4,000,000 shares of Series G Preferred Stock, and 950,000 shares of senior common stock.
We have historically 34 Table of Contents entered into, and intend in the future to enter into, purchase agreements primarily for real estate having net leases with remaining terms of approximately seven to 15 years and built-in rental rate increases.
We have historically entered into, and intend in the future to enter into, purchase agreements primarily for real estate having net leases with remaining terms of approximately seven to 15 years and built-in rental rate increases.
The base management fee paid to the Adviser increased for the year ended December 31, 2022, as compared to the year ended December 31, 2021, 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 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.
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 47 Table of Contents 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, 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.
We believe that the methodology of allocating the Administrator’s total expenses by approximate 42 Table of Contents percentage of time services were performed among all companies serviced by our Administrator more closely approximates fees paid to actual services performed.
We believe that the methodology of allocating the Administrator’s total expenses by approximate percentage of time services were performed among all companies serviced by our Administrator more closely approximates fees paid to actual services performed.
We will 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.
Additionally, our 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 response to public health emergencies, 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 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.
There were no material changes to our critical accounting policies during the year ended December 31, 2022.
There were no material changes to our critical accounting policies during the year ended December 31, 2023.
Results of Operations The weighted average yield on our total portfolio, which was 7.7% and 7.9% at December 31, 2022 and 2021, 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.
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 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 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 were in compliance with all covenants under the Credit Facility as of December 31, 2022.
We were in compliance with all covenants under the Credit Facility as of December 31, 2023.
On September 20, 2022, we issued 134,474 OP Units as partial consideration to acquire our 49,375 square foot property located in Fort Payne, Alabama for $5.6 million. During the year ended December 31, 2021, we redeemed 246,039 OP units for an equivalent amount of common stock.
On September 20, 2022, we issued 134,474 OP Units as partial consideration to acquire our 49,375 square foot property located in Fort Payne, Alabama for $5.6 million. During the year ended December 31, 2023, we redeemed 80,825 OP units for an equivalent amount of common stock.
Financing Activities Net cash provided by financing activities during the year ended December 31, 2022, was $16.2 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 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.
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, 2022, we only had five 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, 2023, we had four partially vacant buildings and three fully vacant buildings.
(4) Purchase obligations consist of tenant and capital improvements at 10 of our properties. Off-Balance Sheet Arrangements We did not have any material off-balance sheet arrangements as of December 31, 2022.
(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.
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 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.
Recent Developments Sale Activity During the year ended December 31, 2022, we continued to execute our capital recycling program, whereby we sell non-core properties and redeploy 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, 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.
Every acquisition was industrial in nature, reinforcing our commitment to increase our portfolio’s industrial allocation. Our ability to make new investments is highly dependent upon our ability to procure financing.
All but one acquisition was industrial in nature, reinforcing our commitment to increase our portfolio’s industrial allocation. Our ability to make new investments is highly dependent upon our ability to procure financing.
A discussion of the results of operations for the year ended December 31, 2020 is found in Item 7 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 15, 2022, 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, 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.
This figure does not include $(0.1) million of premiums and (discounts), net, and $6.0 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 and Term Loan C, net, on the consolidated balance sheet.
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.
We believe we currently 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 are in compliance with all of our debt covenants.
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.
Our available borrowing capacity under the Revolver has increased to $86.4 million as of February 22, 2023. 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 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.
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 238,100 shares of our Series F Preferred Stock, raising $5.4 million in net proceeds, during the year ended December 31, 2022.
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.
On January 10, 2023, we amended 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”), which was approved unanimously by our board of directors, including specifically, our independent directors.
On January 10, 2023, we amended and restated the Sixth Amended Advisory Agreement, by entering into the Seventh Amended Advisory Agreement, which was approved unanimously by our Board of Directors, including specifically, our independent directors.
Net cash used in investing activities during the year ended December 31, 2021, was $94.8 million, which primarily consisted of the acquisition of 11 properties, coupled with the capital improvements performed at certain of our properties, partially offset by proceeds from sale of real estate.
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.
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.
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.
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.
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.
Debt Capital As of December 31, 2022, we had 44 mortgage notes payable in the aggregate principal amount of $362.0 million, collateralized by a total of 50 properties with a remaining weighted average maturity of 4.3 years. The weighted-average interest rate on the mortgage notes payable as of December 31, 2022 was 4.24%.
Debt Capital As of December 31, 2023, we had 41 mortgage notes payable in the aggregate principal amount of $298.1 million, collateralized by a total of 47 properties with a remaining weighted average maturity of 4.1 years. The weighted-average interest rate on the mortgage notes payable as of December 31, 2023 was 4.19%.
This was coupled with our acquisition of 13 properties during the year ended December 31, 2022, and the inclusion of a full year of lease revenues recorded in 2022 for 11 properties acquired during the year ended December 31, 2021, partially offset by a decrease in lease revenues from the eight properties sold during and subsequent to December 31, 2021.
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.
Net cash provided by financing activities for the year ended December 31, 2021, was $21.8 million, which primarily consisted of proceeds from our common and preferred stock offerings, mortgage borrowings on new acquisitions and borrowings on our Credit Facility, partially offset by distributions paid to our stockholders and Non-controlling OP Unitholders.
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.
Liquidity and Capital Resources Overview Our sources of liquidity include cash flows from operations, cash and cash equivalents, borrowing capacity under our Revolver and issuing additional equity securities. Our available liquidity as of December 31, 2022, was $60.0 million, including $11.7 million in cash and cash equivalents and an available borrowing capacity of $48.3 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, 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.
As of December 31, 2022, there was $393.3 million outstanding under our Credit Facility at a weighted average interest rate of approximately 5.75% and $15.6 million outstanding under letters of credit at a weighted average interest rate of 1.50%. As of February 22, 2023, the maximum additional amount we could draw under the Credit Facility was $86.4 million.
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%. As of February 21, 2024, the maximum additional amount we could draw under the Credit Facility was $51.5 million.
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 gain fee was recognized during the years ended December 31, 2022, 2021, and 2020.
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.
As of December 31, 2022, we had mortgage debt in the aggregate principal amount of $67.3 million payable during 2023 and $20.4 million payable during 2024. The 2023 principal amounts payable include both amortizing principal payments and five balloon principal payments.
As of December 31, 2023, we had mortgage debt in the aggregate principal amount of $25.1 million payable during 2024 and $36.5 million payable during 2025. The 2024 principal amounts payable include both amortizing principal payments and two balloon principal payments.
The decrease in property operating expenses for properties with vacancy for the year ended December 31, 2022, as compared to the year ended December 31, 2021, is a result of reduced real estate tax during the period, partially offset by general cost increases due to the inflationary environment.
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.
We incurred fees of approximately $4.2 million in connection with extending and upsizing our Credit Facility. As of December 31, 2022, there was $150.0 million outstanding under Term Loan C, and we used all net proceeds to repay all outstanding borrowings on the Revolver, pay off mortgage debt, and fund acquisitions.
We incurred fees of approximately $4.2 million in connection with extending and upsizing our Credit Facility. The net proceeds of the transaction were used to repay the then-outstanding borrowings on the Revolver, pay off mortgage debt, and fund acquisitions.
As of February 22, 2023: • we owned 137 properties totaling 17.2 million square feet of rentable space, located in 27 states; • our occupancy rate was 95.9%; • the weighted average remaining term of our mortgage debt was 4.1 years and the weighted average interest rate was 5.15%; and • the average remaining lease term of the portfolio was 6.9 years.
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.
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.
(“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.
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”).
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.
Intangible assets are generally amortized over the respective life of the leases, which normally range from 10 to 15 years. Also, we depreciate our buildings over up to 39 years, but do not depreciate our land.
Intangible assets are generally amortized over the respective life of the leases, which normally range from 10 to 15 years. Also, we depreciate our buildings for a period of time up to 39 years, but do not depreciate our land. These differences in timing could have a material impact on our results of operations.
We continue to see banks and other non-bank lenders willing to issue mortgages. Consequently, we remain focused on obtaining mortgages through regional banks, non-bank lenders and, to a lesser extent, the commercial mortgage backed securities market.
We continue to see banks and other non-bank lenders willing to issue mortgages for properties comparable to those held in our portfolio on terms that are commercially reasonable. Consequently, we remain focused on obtaining mortgages through insurance companies, regional banks, non-bank lenders and, to a lesser extent, the commercial mortgage backed securities market.
We believe our lease expiration schedule for 2023 is quite manageable as it equates to 7.0% of annual rental income with a majority of the expirations due to occur in the second half of the year. Property acquisitions increased during the third and fourth quarters of the year ended December 31, 2022 equating to almost $63.0 million in volume.
We believe our lease expiration schedule for 2024 is manageable as it equates to 4.5% of annual lease revenue with all of the expirations due beyond the first quarter of the year. Property acquisitions increased during the third and fourth quarters of the year ended December 31, 2023 equating to almost $24.7 million in volume.
Property operating expenses increased for same store properties for the year ended December 31, 2022, as compared to the year ended December 31, 2021, due to general cost increases due to the inflationary environment.
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.
Operating Expenses Depreciation and amortization increased for the year ended December 31, 2022, as compared to the year ended December 31, 2021, primarily due to recognizing a full year of depreciation for the 11 properties acquired during the year ended December 31, 2021, as well as increased depreciation expense from the 13 properties acquired during the year ended December 31, 2022, partially offset by a decrease in depreciation expense for the five properties sold during the year ended December 31, 2022.
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.
Lease revenues increased for acquired and disposed of properties for the year ended December 31, 2022, as compared to the year ended December 31, 2021, primarily due to accelerated rent from two lease terminations, one of which related to a property we sold.
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.
On January 10, 2023, we amended and restated the Sixth Amended Advisory Agreement, by entering into the Seventh Amended Advisory Agreement, which was approved unanimously by our board of directors, including specifically, our independent directors. The Seventh Amended Advisory Agreement waived the payment of the incentive fee, as applicable, for the quarters ending March 31, 2023 and June 30, 2023.
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.
There is no limit on the aggregate amount of the securities that we may offer pursuant to the 2022 Registration Statement.
On November 23, 2022, we filed an automatic registration statement on Form S-3 (File No. 333-268549) (the “2022 Registration Statement”). There is no limit on the aggregate amount of the securities that we may offer pursuant to the 2022 Registration Statement.
These differences in timing could have a material impact on our results of operations. 43 Table of Contents Asset Impairment Evaluation We periodically review the carrying value of each property to determine if circumstances that indicate impairment in the carrying value of the investment exist or that depreciation periods should be modified.
Real Estate Impairment Evaluation We periodically review the carrying value of each property to determine if circumstances that indicate impairment in the carrying value of the investment exist or that depreciation periods should be modified.
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 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.
Using the methodology discussed above, we evaluated our entire portfolio, as of December 31, 2022, for any impairment indicators and performed an impairment analysis on select properties that had an indication of impairment. We will continue to monitor our portfolio for any other indicators of impairment.
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.
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.
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.
For the year ended December 31, (Dollars in Thousands) Property Operating Expenses 2022 2021 $ Change % Change Same Store Properties $ 16,463 $ 16,164 $ 299 1.8 % Acquired & Disposed Properties 2,081 2,226 (145) (6.5) % Properties with Vacancy 8,288 8,708 (420) (4.8) % $ 26,832 $ 27,098 $ (266) (1.0) % 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 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.
During the year ended December 31, 2022, we had two lease terminations, which are aggregated below (dollars in thousands): Aggregate Square Footage Reduced Aggregate Accelerated Rent Aggregate Accelerated Rent Recognized through December 31, 2022 216,095 $ 5,888 $ 5,710 Financing Activity During the year ended December 31, 2022, we repaid 14 mortgages, collateralized by 28 properties, which are summarized below (dollars in thousands): Aggregate Fixed Rate Debt Repaid Weighted Average Interest Rate on Fixed Rate Debt Repaid $ 104,906 4.64 % Aggregate Variable Rate Debt Repaid Weighted Average Interest Rate on Variable Rate Debt Repaid $ 30,336 LIBOR/SOFR + 2.50% During the year ended December 31, 2022, we issued six mortgages, collateralized by 11 properties, which are summarized below (dollars in thousands): Aggregate Fixed Rate Debt Issued Weighted Average Interest Rate on Fixed Rate Debt $ 47,913 (1) 4.60 % (1) We issued $10.0 million of fixed rate debt with a maturity date of May 4, 2027, in connection with our two-property portfolio we acquired on May 4, 2022.
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.
Our leases have remaining terms ranging from 1.9 years to 15.0 years.
Our leases have remaining terms ranging from 3.3 years to 18.7 years.
Equity Capital The following table summarizes net proceeds raised from our various equity sales during the year ended December 31, 2022 (dollars in thousands, except for share price): Net Proceeds Number of Shares Sold Weighted Average Share Price Common Stock ATM Program $ 43,170 2,130,056 $ 20.53 Series F Preferred Stock Continuous Public Offering 5,415 238,100 24.96 $ 48,585 2,368,156 As of February 22, 2023, there is no limit on the aggregate amount of the securities that we may offer pursuant to the 2022 Registration Statement.
We further believe that our cash flow from operations, coupled with the financing capital available to us in the future, are sufficient to fund our long-term liquidity needs. 47 Table of Contents Equity Capital The following table summarizes net proceeds raised from our various equity sales during the year ended December 31, 2023 (dollars in thousands, except for share price): Net Proceeds Number of Shares Sold Weighted Average Share Price Common Stock ATM Program $ 4,063 238,078 $ 17.29 Series F Preferred Stock Continuous Public Offering 5,611 246,775 24.75 $ 9,674 484,853 As of February 21, 2024, there is no limit on the aggregate amount of the securities that we may offer pursuant to the 2022 Registration Statement.
Other income decreased during the year ended December 31, 2022, as compared to the year ended December 31, 2021, primarily due to legal settlement income earned during the year ended December 31, 2021.
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.
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, 2022, as compared to the year ended December 31, 2021, due to an increase in pre-incentive fee Core FFO.
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.
A comparison of our operating results for the year ended December 31, 2022 and 2021 is below (dollars in thousands, except per share amounts): 44 Table of Contents For the year ended December 31, 2022 2021 $ Change % Change Operating revenues Lease revenue $ 148,981 $ 137,688 $ 11,293 8.2 % Total operating revenues $ 148,981 $ 137,688 $ 11,293 8.2 % Operating expenses Depreciation and amortization $ 61,664 $ 60,311 $ 1,353 2.2 % Property operating expenses 26,832 27,098 (266) (1.0) % Base management fee 6,331 5,882 449 7.6 % Incentive fee 5,270 4,859 411 8.5 % Administration fee 1,864 1,448 416 28.7 % General and administrative 3,705 3,218 487 15.1 % Impairment charge 12,092 — 12,092 100.0 % Total operating expense before incentive fee waiver $ 117,758 $ 102,816 $ 14,942 14.5 % Incentive fee waiver — (16) 16 (100.0) % Total operating expenses $ 117,758 $ 102,800 $ 14,958 14.6 % Other (expense) income Interest expense $ (32,457) $ (26,887) $ (5,570) 20.7 % Gain (loss) on sale of real estate, net 10,052 (1,148) 11,200 (975.6) % Other income 454 2,880 (2,426) (84.2) % Total other expense, net $ (21,951) $ (25,155) $ 3,204 (12.7) % Net income $ 9,272 $ 9,733 $ (461) (4.7) % Distributions attributable to Series D, E, F, and G preferred stock (11,903) (11,488) (415) 3.6 % Series D preferred stock offering costs write off — (2,141) 2,141 (100.0) % Distributions attributable to senior common stock (458) (698) 240 (34.4) % Loss on extinguishment of Series F preferred stock (10) — (10) 100.0 % Gain on repurchase of Series G preferred stock 37 — 37 100.0 % Net loss attributable to common stockholders and Non-controlling OP Unitholders $ (3,062) $ (4,594) $ 1,532 (33.3) % Net loss attributable to common stockholders and Non-controlling OP Unitholders per weighted average share and unit - basic & diluted $ (0.08) $ (0.12) $ 0.04 (33.3) % FFO available to common stockholders and Non-controlling OP Unitholders - basic (1) $ 60,642 $ 56,865 $ 3,777 6.6 % FFO available to common stockholders and Non-controlling OP Unitholders - diluted (1) $ 61,100 $ 57,563 $ 3,537 6.1 % FFO available to common stockholders and Non-controlling OP Unitholders - diluted, as adjusted for comparability (1) $ 61,100 $ 59,704 $ 1,396 2.3 % FFO per weighted average share of common stock and Non-controlling OP Unit - basic (1) $ 1.55 $ 1.54 $ 0.01 0.6 % FFO per weighted average share of common stock and Non-controlling OP Unit - diluted (1) $ 1.54 $ 1.54 $ — — % FFO per weighted average share of common stock and Non-controlling OP Unit - diluted, as adjusted for comparability (1) $ 1.54 $ 1.60 $ (0.06) (3.8) % (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.
A 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.
We amended our Credit Facility in 2019 to increase our borrowing capacity and extend its maturity date. In addition, on August 18, 2022, we added a new $150.0 million term loan component. We have had numerous conversations with lenders, and credit continues to be available for well capitalized borrowers.
In addition, on August 18, 2022, we added a new $150.0 million term loan component. We have numerous ongoing conversations with lenders, and credit continues to be available for well capitalized borrowers. Other Business Environment Considerations The geopolitical landscape remains fractured due to recent world events.
The gain on sale of real estate, net, during the year ended December 31, 2022 is a result of the sale of five properties. The loss on sale of real estate, net, during the year ended December 31, 2021 was a result of the sale of three of our properties.
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.
We recorded an impairment charge during the year ended December 31, 2022 on two properties, as we had determined the carrying value of these properties was in excess of the fair market value and not recoverable. Accordingly, we impaired these properties to fair market value. We did not record an impairment charge during the year ended December 31, 2021.
Accordingly, we impaired these properties to fair market value. We recorded an impairment charge on two properties during the year ended December 31, 2022. Other Income and Expenses Interest expense increased for the year ended December 31, 2023, as compared to the year ended December 31, 2022.
Net Loss Attributable to Common Stockholders and Non-controlling OP Unitholders Net loss attributable to common stockholders and Non-controlling OP Unitholders decreased for the year ended December 31, 2022, as compared to the year ended December 31, 2021, primarily due to asset acquisition activity causing an increase in operating revenues during and subsequent to December 31, 2021, coupled with a gain on sale of real estate, net, from five property sales, partially offset by an increase in interest expense due to higher borrowing costs due to global interest rate expansion.
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.
Advisory Agreement Under the terms of the Amended Advisory Agreement, we continue to be responsible for all expenses incurred for our direct benefit. Examples of these expenses include legal, accounting, interest, directors’ and officers’ insurance, stock transfer services, stockholder-related fees, consulting and related fees.
Examples of these expenses include legal, accounting, interest, directors’ and officers’ insurance, stock transfer services, stockholder-related fees, consulting and related fees.
We entered into multiple interest rate cap agreements on Term Loan B, which cap LIBOR from 1.50% to 1.75%.
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.
The London Inter-bank Offered Rate (“LIBOR”) is anticipated to be phased out by June 2023, and LIBOR is being transitioned to a new standard rate, the Secured Overnight Financing Rate (“SOFR”).
The London Inter-bank Offered Rate (“LIBOR”) was phased out by June 2023, and transitioned to a new standard rate, the Secured Overnight Financing Rate (“SOFR”). 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.
The calculation of the administration fee is described in detail above within “ Advisory and Administration Agreements.” General and administrative expenses increased for the year ended December 31, 2022, as compared to the year ended December 31, 2021, primarily as a result of an increase in due diligence expenses for potential acquisition targets that were not completed, coupled with an increase in legal fees.
The calculation of the administration fee is described in detail above within “ Advisory and Administration Agreements.” General and administrative expenses increased for the year ended December 31, 2023, as compared to the year ended December 31, 2022, primarily as a result of an increase in professional fees. 46 Table of Contents We recorded an impairment charge during the year ended December 31, 2023 on five properties, as we had determined the carrying value of these properties was in excess of the fair market value and not recoverable.
We have successfully repaid $135.2 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, as well as additional funds generated from our 2022 Credit Facility amendment, which resulted in us reducing our Term Loan B from $65.0 million to $60.0 million, increasing our Revolver from $100.0 million to $125.0 million, and adding Term Loan C, a new $150.0 million term loan component.
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.
The decrease in property operating expenses on acquired and disposed of properties for the year ended December 31, 2022, as compared to the year ended December 31, 2021, is a result of a decrease in property operating expenses from eight property sales during and subsequent to December 31, 2021, partially offset by increased property operating expenses on the 13 properties we acquired during the year ended December 31, 2022, coupled with a full year of property operating expenses for the 11 properties acquired during the year ended December 31, 2021.
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.

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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 changeAs of December 31, 2022, approximately $362.0 million of our debt bore interest at fixed rates, as shown in the future principal debt payment table below (dollars in thousands): 2023 2024 2025 2026 2027 Thereafter Total Fixed rate $ 67,296 $ 20,420 $ 38,889 $ 42,381 $ 94,848 $ 98,203 $ 362,037 Variable rate $ — $ — $ — $ 83,250 $ 160,000 $ 150,000 $ 393,250 $ 67,296 $ 20,420 $ 38,889 $ 125,631 $ 254,848 $ 248,203 $ 755,287 53 Table of Contents
Biggest changeAs 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
The amount outstanding under the Credit Facility approximates fair value as of December 31, 2022. 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, 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.
To illustrate the potential impact of changes in interest rates on our net income for the year ended December 31, 2022, 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, 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.
Interest rate fluctuations may affect the fair value of our debt instruments. If interest rates on our debt instruments, using rates at December 31, 2022, had been one percentage point higher or lower, the fair value of those debt instruments on that date would have decreased or increased by $11.0 million and $11.7 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, 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.
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, 2022. As of December 31, 2022, our effective average SOFR was 4.30%. 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, 2023. As of December 31, 2023, our effective average SOFR was 5.38%. The impact of these fluctuations is presented below (dollars in thousands).
Interest Rate Change Decrease to Interest Expense Net increase to Net Income 3% Decrease to SOFR $ (7,551) $ 7,551 2% Decrease to SOFR (3,513) 3,513 1% Decrease to SOFR (236) 236 1% Increase to SOFR 236 (236) 2% Increase to SOFR 471 (471) 3% Increase to SOFR 707 (707) As of December 31, 2022, the fair value of our mortgage debt outstanding was $333.1 million.
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.

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