GLADSTONE COMMERCIAL CORP

Previous wording

We are an externally advised real estate investment trust (“REIT”) that was incorporated under the General Corporation Law of the State of Maryland on February 14, 2003. We focus on acquiring, owning, and managing primarily office and industrial properties. 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. 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 contractual rental rate increases. Under a net lease, the tenant is required to pay most or all operating, maintenance, repair and insurance costs and real estate taxes with respect to the leased property.

Current wording

We are an externally advised real estate investment trust (“REIT”) that was incorporated under the General Corporation Law of the State of Maryland on February 14, 2003. We focus on acquiring, owning, and managing primarily industrial and office properties. 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. 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 contractual rental rate increases. Under a net lease, the tenant is required to pay most or all operating, maintenance, repair, and insurance costs and real estate taxes with respect to the leased property.

Previous wording

We actively communicate with buyout funds, real estate brokers and other third parties to locate properties for potential acquisition or to provide mortgage financing in an effort to build our portfolio. We target secondary growth markets that possess favorable economic growth trends, diversified industries, and growing population and employment.

Current wording

We actively communicate with private equity funds, real estate brokers and other third parties to locate properties for potential acquisition or to provide mortgage financing in an effort to build our portfolio. We target secondary growth markets that possess favorable economic growth trends, diversified industries, and growing population and employment.

Previous wording

•we owned 135 properties totaling 16.8 million square feet of rentable space, located in 27 states;

Current wording

•we owned 139 properties totaling 16.5 million square feet of rentable space, located in 27 states;

Previous wording

•the weighted average remaining term of our mortgage debt was 3.7 years and the weighted average interest rate was 4.31%; and

Current wording

•the weighted average remaining term of our mortgage debt was 3.3 years and the weighted average interest rate was 4.23%; and

Previous wording

We collected 100% of all outstanding cash rents for the nine months ended September 30, 2024. 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. Additionally, our properties are located across 27 states, which we believe mitigates our exposure to regional economic and weather-related issues, including regulations or laws implemented by state and local governments, in any one geographic market or area. In the past, we have received rent modification requests from certain of our tenants, and we may receive additional requests in the future.

Current wording

We collected 100% of all outstanding base rents for the three months ended March 31, 2025. This is a testament to the strength of our credit underwriting and asset management teams. 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. Additionally, our properties are located across 27 states, which we believe mitigates our exposure to regional economic and weather-related issues, including regulations or laws implemented by state and local governments in any one geographic market or area. In the past, we have received rent modification requests from certain of our tenants, and it is possible we may receive additional requests in the future.

Previous wording

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 as of September 30, 2024. 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. Based on market observations and conversations we routinely have with lenders, we believe that credit continues to be available for well-capitalized borrowers. We continue to monitor our portfolio and intend to maintain a reasonably conservative liquidity position for the foreseeable future.

Current wording

We believe we currently have adequate liquidity in the near term, and believe that our cash on hand combined with the availability on our Credit Facility is sufficient to cover all near-term debt obligations and operating expenses and to continue our industrial growth strategy. We are in compliance with all of our debt covenants as of March 31, 2025. Based on market observations and conversations we routinely have with lenders, we believe that credit continues to be available for well-capitalized borrowers, as demonstrated by the Operating Partnership’s issuance, on December 18, 2024, of $75.0 million of senior unsecured notes in a private placement. We continue to monitor our portfolio and intend to maintain a reasonably conservative liquidity position for the foreseeable future.

Previous wording

The geopolitical landscape remains fractured due to recent world events. Many domestic manufacturing businesses seek to limit supply chain disruptions by bringing their operations back to the U.S. The COVID-19 pandemic is behind us, but a level of work-from-home trends appear to be here to stay, which may affect demand for commercial real estate. We expect that industrial demand will be further buoyed by government investment in infrastructure and advanced manufacturing operations. The Federal Reserve recently indicated it does not expect additional rate increases and has indicated possible interest rate cuts, but the timing of those cuts is unknown. These uncertain times create both risks and opportunities for us and our tenants, and we believe we are well-capitalized and positioned to take advantage. The environmental landscape remains unpredictable due to the increase in intensity of weather patterns, including hurricanes. We continue to monitor our properties and have not seen any significant impact to our properties in Florida, Georgia, North Carolina, South Carolina, and Tennessee from the recent hurricane season.

Current wording

These uncertain times create both risks and opportunities for us and our tenants, and we believe we are well-capitalized and positioned to take advantage. The environmental landscape remains unpredictable due to the increase in intensity of weather patterns, including hurricanes. We continue to monitor our properties and have not seen any significant impact to our properties in Florida, Georgia, North Carolina, South Carolina, Tennessee, and Texas from the recent hurricane season.

Previous wording

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. Currently, we have five partially vacant buildings and one fully vacant building. Our available vacant space at September 30, 2024 represents 1.5% of our total square footage and the annual carrying costs on the vacant space, including real estate taxes and property operating expenses, are approximately $1.8 million. We continue to actively seek new tenants for these properties.

Current wording

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. Currently, we have four partially vacant buildings and one fully vacant building. Our available vacant space at March 31, 2025 represented 1.6% of our total square footage and the annual carrying costs on the vacant space, including real estate taxes and property operating expenses, are approximately $2.0 million. We continue to actively seek new tenants for these properties.

Previous wording

We believe our lease expiration schedule for the remainder of 2024 is manageable, as it equates to 1.8% of our lease revenue at September 30, 2024. Property acquisitions since the beginning of 2020 have totaled $394.3 million and all but one transaction was industrial in nature, with a weighted average lease term of 14.0 years and a current weighted average lease term today of 10.8 years.

Current wording

We believe our lease expiration schedule for the remainder of 2025 is manageable, as it equates to 2.5% of our lease revenue at March 31, 2025. Property acquisitions since the beginning of 2020 have totaled $472.7 million and all but one transaction was industrial in nature, with a weighted average lease term of 13.6 years and a weighted average lease term of 10.4 years at the time of this filing.

Previous wording

Our ability to make new investments is highly dependent upon our ability to procure financing. Our principal sources of financing generally include the issuance of equity securities, long-term mortgage loans secured by properties, borrowings under our $125.0 million senior unsecured revolving credit facility (“Revolver”), with KeyBank National Association (“KeyBank”), which matures in August 2026, our $160.0 million term loan facility (“Term Loan A”), which matures in August 2027, our $60.0 million term loan facility (“Term Loan B”), which matures in February 2026, and our $150.0 million term loan facility (“Term Loan C”) which matures in February 2028. We refer to the Revolver, Term Loan A, Term Loan B and Term Loan C collectively herein as the “Credit Facility”. While lenders’ credit standards have tightened, we continue to look to national and regional banks, insurance companies and non-bank lenders to make mortgage loans to finance our real estate activities.

Current wording

Our ability to make new investments is highly dependent upon our ability to procure financing. Our principal sources of financing generally include the issuance of equity securities, long-term unsecured notes in the private placement market, long-term mortgage loans secured by properties, borrowings under our $125.0 million senior unsecured revolving credit facility (“Revolver”), with KeyBank National Association (“KeyBank”), which matures in August 2026, our $160.0 million term loan facility (“Term Loan A”), which matures in August 2027, our $60.0 million term loan facility (“Term Loan B”), which matures in February 2026, our $150.0 million term loan facility (“Term Loan C”) which matures in February 2028, and our Operating Partnership’s $75.0 million senior unsecured notes (the “2029 Notes”) which mature in December 2029. As of March 31, 2025, there was $40.0 million outstanding under Term Loan B. We refer to the Revolver, Term Loan A, Term Loan B, and Term Loan C collectively herein as the “Credit Facility”. While lenders’ credit standards have tightened, we continue to look to private credit institutions, national and regional banks, insurance companies and non-bank lenders to finance our real estate activities.

Previous wording

During the nine months ended September 30, 2024, we acquired six industrial properties located in Warfordsburg, Pennsylvania and Midland, Texas, which are summarized below (dollars in thousands):

Current wording

During the three months ended March 31, 2025, we acquired six industrial properties located in Houston, Texas and Dallas-Fort Worth, Texas, which are summarized below (dollars in thousands):

Previous wording

During and subsequent to the nine months ended September 30, 2024, we executed ten leases, which are summarized below (dollars in thousands):

Current wording

During and subsequent to the three months ended March 31, 2025, we executed one lease, which is summarized below (dollars in thousands):

Previous wording

On October 21, 2024, we fully repaid one mortgage with an outstanding balance of $14.8 million collateralized by two properties. This mortgage had a fixed rate of 4.04%.

Current wording

On April 30, 2025, we fully repaid one mortgage with an outstanding balance of $7.2 million collateralized by one property. This mortgage had a variable interest rate of SOFR + 2.25%.

Previous wording

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. (“BofA”), Goldman Sachs, Baird, KeyBanc Capital Markets Inc. (“KeyBanc”), and Fifth Third (collectively the “Common Stock Sales Agents”). In connection with the 2023 Common Stock Sales Agreement, we filed prospectus supplements with the SEC dated March 3, 2023 and March 7, 2023, to the prospectus dated November 23, 2022, for the offer and sale of an aggregate offering amount of $250.0 million of common stock. During the nine months ended September 30, 2024, we did not sell any shares of common stock under the 2023 Common Stock Sales Agreement.

Current wording

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. (“BofA”), Goldman Sachs, Baird, KeyBanc Capital Markets Inc. (“KeyBanc”), and Fifth Third (collectively the “Common Stock Sales Agents”). In connection with the 2023 Common Stock Sales Agreement, we filed prospectus supplements with the SEC dated March 3, 2023 and March 7, 2023, to the prospectus dated November 23, 2022, for the offer and sale of an aggregate offering amount of $250.0 million of common stock. During the three months ended March 31, 2025, we did not sell any shares of common stock under the 2023 Common Stock Sales Agreement.

Previous wording

On March 26, 2024, we entered into Amendment No. 1 to the 2023 Common Stock Sales Agreement (the “2024 Common Stock Sales Agreement”). The amendment permitted shares of common stock to be issued pursuant to the 2024 Common Stock Sales Agreement under the Company’s Registration Statement on Form S-3 (File No. 333-277877) (the “2024 Registration Statement”), and future registration statements on Form S-3. In connection with the 2024 Common Stock Sales Agreement, we filed a prospectus supplement with the SEC dated March 26, 2024, to the prospectus dated March 21, 2024, for the offer and sale of an aggregate offering amount of $250.0 million of common stock. During the nine months ended September 30, 2024, we sold 3,450,500 shares of common stock, raising approximately $49.5 million in net proceeds under the 2024 Common Stock Sales Agreement.

Current wording

On March 26, 2024, we entered into Amendment No. 1 to the 2023 Common Stock Sales Agreement (the “2024 Common Stock Sales Agreement”). The amendment permitted shares of common stock to be issued pursuant to the 2024 Common Stock Sales Agreement under the Company’s Registration Statement on Form S-3 (File No. 333-277877) (the “2024 Registration Statement”), and future registration statements on Form S-3. In connection with the 2024 Common Stock Sales Agreement, we filed a prospectus supplement with the SEC dated March 26, 2024, to the prospectus dated March 21, 2024, for the offer and sale of an aggregate offering amount of $250.0 million of common stock. During the three months ended March 31, 2025, we sold 1,770,581 shares of common stock, raising approximately $27.7 million in net proceeds under the 2024 Common Stock Sales Agreement.

Previous wording

On March 13, 2024, we filed the 2024 Registration Statement, which was declared effective on March 21, 2024. The 2024 Registration Statement allows us to issue up to $1.3 billion of securities and replaces the 2022 Registration Statement.

Current wording

On March 13, 2024, we filed the 2024 Registration Statement, which was declared effective on March 21, 2024. The 2024 Registration Statement allows us to issue up to $1.3 billion of securities and replaced the 2022 Registration Statement.

Previous wording

On February 20, 2020, we filed with the Maryland Department of Assessments and Taxation Articles Supplementary (i) setting forth the rights, preferences and terms of the 6.00% Series F Cumulative Redeemable Preferred Stock, par value $0.001 per share, (the “Series F Preferred Stock”) and (ii) reclassifying and designating 26,000,000 shares of our authorized and unissued shares of common stock as shares of Series F Preferred Stock. 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 30,180 shares of our Series F Preferred Stock, raising $0.7 million in net proceeds, during the nine months ended September 30, 2024.

Current wording

On February 20, 2020, we filed with the Maryland Department of Assessments and Taxation Articles Supplementary (i) setting forth the rights, preferences and terms of the 6.00% Series F Cumulative Redeemable Preferred Stock, par value $0.001 per share, (the “Series F Preferred Stock”) and (ii) reclassifying and designating 26,000,000 shares of our authorized and unissued shares of common stock as shares of Series F Preferred Stock. 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 13,500 shares of our Series F Preferred Stock, raising $0.3 million in net proceeds, during the three months ended March 31, 2025.

Previous wording

Gladstone Commercial Corporation conducts substantially all of its operations through a subsidiary, Gladstone Commercial Limited Partnership, a Delaware limited partnership (the “Operating Partnership”). As of September 30, 2024 and December 31, 2023, we owned approximately 99.9% and 99.2%, respectively, of the outstanding operating partnership units in the Operating Partnership (“OP Units”). During thenine months ended September 30, 2024, we redeemed 271,169 OP Units for an equivalent amount of common stock.

Current wording

Gladstone Commercial Corporation conducts substantially all of its operations through a subsidiary, Gladstone Commercial Limited Partnership, a Delaware limited partnership (the “Operating Partnership”). As of March 31, 2025 and December 31, 2024, we owned approximately 99.9% and 99.9%, respectively, of the outstanding operating partnership units in the Operating Partnership (“OP Units”).

Previous wording

As of September 30, 2024 and December 31, 2023, there were 39,474 and 310,643 outstanding OP Units held by holders who do not control the Operating Partnership (“Non-controlling OP Unitholders”), respectively.

Current wording

As of March 31, 2025 and December 31, 2024, there were 39,474 and 39,474 outstanding OP Units held by holders who do not control the Operating Partnership (“Non-controlling OP Unitholders”), respectively.

Previous wording

Gladstone Management Corporation, a Delaware corporation (our “Adviser”), seeks to diversify our portfolio to avoid dependence on any one particular tenant, industry or geographic market. By diversifying our portfolio, our Adviser intends to reduce the adverse effect on our portfolio of a single under-performing investment or a downturn in any particular industry or geographic market. For the nine months ended September 30, 2024, our largest tenant comprised only 4.3% of total lease revenue. The table below reflects the breakdown of our total lease revenue by tenant industry classification for the three and nine months ended September 30, 2024 and 2023 (dollars in thousands):

Current wording

Gladstone Management Corporation, a Delaware corporation (our “Adviser”), seeks to diversify our portfolio to avoid dependence on any one particular tenant, industry or geographic market. By diversifying our portfolio, our Adviser intends to reduce the adverse effect on our portfolio of a single under-performing investment or a downturn in any particular industry or geographic market. For the three months ended March 31, 2025, our largest tenant comprised only 5.4% of total lease revenue. The table below reflects the breakdown of our total lease revenue by tenant industry classification for the three months ended March 31, 2025 and 2024 (dollars in thousands):

Previous wording

The tables below reflect the breakdown of total lease revenue by state for the three and nine months ended September 30, 2024 and 2023 (dollars in thousands):

Current wording

The tables below reflect the breakdown of total lease revenue by state for the three months ended March 31, 2025 and 2024 (dollars in thousands):

Previous wording

Our Adviser is led by a management team with extensive experience purchasing real estate and originating mortgage loans. Our Adviser and Gladstone Administration, LLC, a Delaware limited liability company (our “Administrator”) are controlled by Mr. David Gladstone, who is also our chairman and chief executive officer. Mr. Gladstone also serves as the chairman and chief executive officer of both our Adviser and Administrator, as well as president and chief investment officer of our Adviser. Mr. Terry Lee Brubaker, our chief operating officer, is also the vice chairman and chief operating officer of our Adviser and Administrator and assistant secretary of our Adviser. Mr. Arthur “Buzz” Cooper, our president, also serves as executive vice president of commercial and industrial real estate of our Adviser. Our Administrator employs our chief financial officer, treasurer, chief compliance officer, general counsel and secretary, Mr. Michael LiCalsi (who also serves as our Administrator’s president, general counsel, and secretary, as well as executive vice president of administration of our Adviser) and their respective staffs.

Current wording

Our Adviser is led by a management team with extensive experience purchasing real estate and originating mortgage loans. Our Adviser and Gladstone Administration, LLC, a Delaware limited liability company (our “Administrator”) are controlled by Mr. David Gladstone, who is also our chairman and chief executive officer. Mr. Gladstone also serves as the chairman and chief executive officer of both our Adviser and Administrator, as well as president and chief investment officer of our Adviser. Mr. Arthur “Buzz” Cooper, our president, also serves as executive vice president of commercial and industrial real estate of our Adviser. Our Administrator employs our chief financial officer, treasurer, chief compliance officer, general counsel and secretary, Mr. Michael LiCalsi (who also serves as our Administrator’s president, general counsel, and secretary, as well as executive vice president of administration of our Adviser) and their respective staffs.

Previous wording

Our Adviser and Administrator also provide investment advisory and administrative services, respectively, to certain of our affiliates, including, but not limited to, Gladstone Capital Corporation and Gladstone Investment Corporation, both publicly-traded business development companies, as well as Gladstone Land Corporation, a publicly-traded REIT that primarily invests in farmland. With the exception of Mr. Gary Gerson, our chief financial officer, Mr. Jay Beckhorn, our treasurer, and Mr. Cooper, all of our executive officers and all of our directors serve as either directors or executive officers, or both, of Gladstone Capital Corporation and Gladstone Investment Corporation. In addition, with the exception of Messrs. Cooper and Gerson, all of our executive officers and all of our directors, serve as either directors or executive officers, or both, of Gladstone

Current wording

Our Adviser and Administrator also provide investment advisory and administrative services, respectively, to certain of our affiliates, including, but not limited to, Gladstone Capital Corporation and Gladstone Investment Corporation, both publicly-traded business development companies, Gladstone Land Corporation, a publicly-traded REIT that primarily invests in farmland, and Gladstone Alternative Income Fund, a non-diversified, closed-end management company that operates as an “interval fund” that is also our affiliate. With the exception of Mr. Gary Gerson, our chief financial officer, Mr. Jay Beckhorn, our treasurer, and Mr. Cooper, all of our executive officers and all of our directors serve as either directors or executive officers, or both, of Gladstone Capital Corporation, Gladstone Investment Corporation, and Gladstone Alternative Income Fund. In addition, with the exception of Messrs. Cooper and Gerson, all of our executive officers and all of our directors, serve as either directors or executive officers, or both, of Gladstone Land Corporation. Messrs. Cooper and Gerson generally spend all of their time focused on the Company, and do not put forth any material efforts in assisting affiliated companies. In the future, our Adviser may provide investment advisory services to other companies, both public and private.

Previous wording

Pursuant to the Advisory Agreement, the calculation of the incentive fee rewards the Adviser in circumstances where our quarterly Core FFO (defined at the end of this paragraph), before giving effect to any incentive fee, or pre-incentive fee Core FFO, exceeds 2.0% quarterly, or 8.0% annualized, of adjusted total stockholders’ equity (after giving effect to the base management fee but before giving effect to the incentive fee). We refer to this as the hurdle rate. The Adviser will receive 15.0% of the amount of our pre-incentive fee Core FFO that exceeds the hurdle rate. However, in no event shall the incentive fee for a particular quarter exceed by 15.0% (the cap) the average quarterly incentive fee paid by us for the previous four quarters (excluding quarters for which no incentive fee was paid). Core FFO (as defined in the Advisory Agreement) is GAAP net (loss) income (attributable) available to common stockholders, excluding the incentive fee, depreciation and amortization, any realized and unrealized gains, losses or other non-cash items recorded in net (loss) income (attributable) available to common stockholders for the period, and one-time events pursuant to changes in GAAP.

Current wording

Pursuant to the Advisory Agreement, the calculation of the incentive fee rewards the Adviser in circumstances where our quarterly Core FFO (defined at the end of this paragraph), before giving effect to any incentive fee, or pre-incentive fee Core FFO, exceeds 2.0% quarterly, or 8.0% annualized, of adjusted total equity (after giving effect to the base management fee but before giving effect to the incentive fee). We refer to this as the new hurdle rate. The Adviser will receive 15.0% of the amount of our pre-incentive fee Core FFO that exceeds the new hurdle rate. However, in no event shall the incentive fee for a particular quarter exceed by 15.0% (the cap) the average quarterly incentive fee paid by us for the previous four quarters (excluding quarters for which no incentive fee was paid). Core FFO (as defined in the Advisory Agreement) is GAAP net income (loss) available (attributable) to common stockholders, excluding the incentive fee, depreciation and amortization, any realized and unrealized gains, losses or other non-cash items recorded in net income (loss) available (attributable) to common stockholders for the period, and one-time events pursuant to changes in GAAP.

Previous wording

Under the Advisory Agreement, we will pay to the Adviser a capital gain-based incentive fee that will be calculated and payable in arrears as of the end of each fiscal year (or upon termination of the Advisory Agreement). In determining the capital gain fee, we will calculate aggregate realized capital gains and aggregate realized capital losses for the applicable time period. For this purpose, aggregate realized capital gains and losses, if any, equals the realized gain or loss calculated by the difference between the sales price of the property, less any costs to sell the property and the current gross value of the property (equal to the property’s original acquisition price plus any subsequent non-reimbursed capital improvements) of the disposed property. 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 three and nine months ended September 30, 2024 or 2023.

Current wording

Under the Advisory Agreement, we will pay to the Adviser a capital gain-based incentive fee that will be calculated and payable in arrears as of the end of each fiscal year (or upon termination of the Advisory Agreement). In determining the capital gain fee, we will calculate aggregate realized capital gains and aggregate realized capital losses for the applicable time period. For this purpose, aggregate realized capital gains and losses, if any, equals the realized gain or loss calculated by the difference between the sales price of the property, less any costs to sell the property and the current gross value of the property (equal to the property’s original acquisition price plus any subsequent non-reimbursed capital improvements) of the disposed property. 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 three months ended March 31, 2025 or 2024.

Previous wording

The preparation of our financial statements in accordance with GAAP requires management to make judgments that are subjective in nature to make certain estimates and assumptions. Application of these accounting policies involves the exercise of judgment regarding the use of assumptions as to future uncertainties, and as a result, actual results could materially differ from these estimates. A summary of all of our significant accounting policies is provided in Note 1 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2023, filed by us with the U.S. Securities and Exchange Commission (the “SEC”) on February 21, 2024 (our “2023 Form 10-K”). There were no material changes to our critical accounting policies or estimates during the nine months ended September 30, 2024.

Current wording

The preparation of our financial statements in accordance with GAAP requires management to make judgments that are subjective in nature to make certain estimates and assumptions. Application of these accounting policies involves the exercise of judgment regarding the use of assumptions as to future uncertainties, and as a result, actual results could materially differ from these estimates. A summary of all of our significant accounting policies is provided in Note 1 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2024, filed by us with the U.S. Securities and Exchange Commission (the “SEC”) on February 18, 2025 (our “2024 Form 10-K”). There were no material changes to our critical accounting policies or estimates during the three months ended March 31, 2025.

Previous wording

The weighted average yield on our total portfolio, which was 8.5% and 8.0% as of September 30, 2024 and 2023, respectively, is calculated by taking the annualized straight-line rents plus operating expense recoveries, reflected as lease revenue on our condensed consolidated statements of operations and other comprehensive income, less property operating expenses, of each acquisition since inception, as a percentage of the acquisition cost plus subsequent capital improvements. The weighted average yield does not account for the interest expense incurred on the mortgages placed on our properties.

Current wording

The weighted average yield on our total portfolio, which was 8.5% and 8.5% as of March 31, 2025 and 2024, respectively, is calculated by taking the annualized straight-line rents plus operating expense recoveries, reflected as lease revenue on our condensed consolidated statements of operations and other comprehensive income, less property operating expenses, of each acquisition since inception, as a percentage of the acquisition cost plus subsequent capital improvements. The weighted average yield does not account for the interest expense incurred on the mortgages placed on our properties or other types of existing indebtedness.

Previous wording

A comparison of our operating results for the three and nine months ended September 30, 2024 and 2023 is below (dollars in thousands, except per share amounts):

Current wording

A comparison of our operating results for the three months ended March 31, 2025 and 2024 is below (dollars in thousands, except per share amounts):

Previous wording

Lease revenues consist of rental income and operating expense recoveries earned from our tenants. Lease revenues from same store properties increased for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, due to a settlement received at one of our properties related to deferred maintenance. Lease revenues from same store properties increased for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, due to a settlement received at one of our properties related to deferred maintenance, partially offset by accelerated rent attributable to a lease termination during the nine months ended September 30, 2023. Lease revenues decreased for acquired and disposed of properties for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, primarily due to the loss of variable lease payments from the eight property sales subsequent to September 30, 2023, minimally offset by lease revenue from the eight properties acquired subsequent to September 30, 2023. Lease revenues decreased for acquired and disposed of properties for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, primarily due to the loss of variable lease payments from the eight property sales subsequent to September 30, 2023, minimally offset by lease revenue from the eight properties acquired subsequent to September 30, 2023 and accelerated rent attributable to a lease termination on a property that was sold during the nine months ended September 30, 2024. Lease revenues decreased for our properties with vacancy for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, mainly due to a loss of rental revenue from increased vacancy, partially offset by an increase in variable lease payments. Lease revenues increased for our properties with vacancy for the nine months ended September 30, 2024 from the comparable 2023 period, due to an increase in variable lease payments.

Current wording

Lease revenues consist of rental income and operating expense recoveries earned from our tenants. Lease revenues from same store properties increased for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, due to an increase in recovery revenue from property expenses and an increase in rental rates from leasing activity subsequent to the three months ended March 31, 2024. Lease revenues decreased for acquired and disposed of properties for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, primarily due to the loss of rental and variable lease payments from the seven property sales during and subsequent to March 31, 2024, minimally offset by lease revenue from the 13 properties acquired subsequent to March 31, 2024. Lease revenues decreased for our properties with vacancy for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, mainly due to a loss of rental revenue from increased vacancy, partially offset by an increase in variable lease payments.

Previous wording

Depreciation and amortization expense increased for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, due to an increase in depreciation and amortization expense on the eight properties acquired subsequent to September 30, 2023. Depreciation and amortization expense decreased for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, due to the reduced depreciation and amortization expense from the eight property sales subsequent to September 30, 2023.

Current wording

Depreciation and amortization expense decreased for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, due to the reduced depreciation and amortization expense from the four property sales subsequent to March 31, 2024, partially offset by an increase in depreciation and amortization expense on the 13 properties acquired subsequent to March 31, 2024.

Previous wording

Property operating expenses consist of franchise taxes, property management fees, insurance, ground lease payments, property maintenance and repair expenses paid on behalf of certain of our properties. The increase in property operating expenses for same store properties for the three and nine months ended September 30, 2024, from the comparable 2023 period, was a result of general cost increases due to the inflationary environment during the three and nine months ended September 30, 2024. The decrease in property operating expenses for acquired and disposed of properties for the three and nine months ended September 30, 2024, from the comparable 2023 period, is a result of a decrease in property operating expenses from the eight property sales subsequent to September 30, 2023, minimally offset by the property operating expense from the eight properties acquired subsequent to September 30, 2023. The increase in property operating expenses for properties with vacancy for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, is a result of increased repair expense. The decrease in property operating expenses for properties with vacancy for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, is a result of a lower reduction in real estate taxes due to successful appeals as compared to the prior period.

Current wording

Property operating expenses consist of franchise taxes, property management fees, insurance, ground lease payments, property maintenance and repair expenses paid on behalf of certain of our properties. The increase in property operating expenses for same store properties for the three months ended March 31, 2025, from the comparable 2024 period, was a result of general cost increases due to the inflationary environment during the three months ended March 31, 2025. The decrease in property operating expenses for acquired and disposed of properties for the three months ended March 31, 2025, from the comparable 2024 period, is a result of a decrease in property operating expenses from the seven property sales during and subsequent to March 31, 2024, minimally offset by the property operating expense from the 13 properties acquired subsequent to March 31, 2024. The increase in property operating expenses for properties with vacancy for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, is a result of increased maintenance expense.

Previous wording

The base management fee paid to the Adviser decreased for the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023, due to a decrease in Gross Tangible Real Estate over the three and nine months ended September 30, 2024 from property sales as compared to Gross Tangible Real Estate during the three and nine months ended September 30, 2023. The calculation of the base management fee is described in detail above in subheading “Advisory and Administration Agreements.”

Current wording

The base management fee paid to the Adviser increased slightly for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, due to an increase in Gross Tangible Real Estate over the three months ended March 31, 2025 from property acquisitions as compared to Gross Tangible Real Estate during the three months ended March 31, 2024. The calculation of the base management fee is described in detail above in subheading “Advisory and Administration Agreements.”

Previous wording

The incentive fee paid to the Adviser increased for the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023, due to the payment of the incentive fee being contractually eliminated for the quarters ended March 31, 2023 through September 30, 2023, as outlined in the Seventh Amended Advisory Agreement and Eighth Amended Advisory Agreement. We recorded an incentive fee, which was partially waived, during the three and nine months ended September 30, 2024. The calculation of the incentive fee is described in detail above in subheading “Advisory and Administration Agreements.”

Current wording

The net incentive fee paid to the Adviser increased for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, due to the Adviser waiving a portion of the incentive fee for the three months ended March 31, 2024. The Adviser did not wave the incentive fee during the three months ended March 31, 2025. The calculation of the incentive fee is described in detail above in subheading “Advisory and Administration Agreements.”

Previous wording

The administration fee paid to the Administrator increased for the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023, due to our Administrator incurring greater costs that are allocated to us. The calculation of the administration fee is described in detail above in subheading“Advisory and Administration Agreements.”

Current wording

The administration fee paid to the Administrator decreased slightly for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, due to our Administrator allocating a smaller portion of expenses to us. The calculation of the administration fee is described in detail above in subheading“Advisory and Administration Agreements.”

Previous wording

General and administrative expenses decreased for the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023 mainly due to a reduction in legal fee expenses.

Current wording

General and administrative expenses decreased for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, mainly due to a reduction in legal expenses.

Previous wording

Interest expense decreased for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023. This decrease was primarily a result of costs associated with the maturity of several interest rate caps in the previous period. Interest expense increased for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023. This increase was primarily a result of increased interest costs on variable rate debt, as global interest rates increased through most of the period in reaction to growing inflation, partially offset with costs associated with the maturity of several interest rate caps in the prior period.

Current wording

Interest expense decreased for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024. This decrease was primarily the result of decreased costs associated with the maturity of several interest rate caps in the previous period as well as reduced interest expense on mortgage debt that was repaid in during and subsequent to March 31, 2024.

Previous wording

We sold six non-core office properties during the nine months ended September 30, 2024, and as a result, incurred a gain on sale of real estate, net, and a gain on debt extinguishment, net. We sold five non-core office properties during the nine months ended September 30, 2023, and as a result, incurred a gain on sale of real estate, net.

Current wording

We did not sell any properties during the three months ended March 31, 2025. We sold three non-core office properties during the three months ended March 31, 2024, and as a result, incurred a gain on sale of real estate, net, and a gain on debt extinguishment, net.

Previous wording

Other income decreased for the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023, due to nonrecurring income items that occurred in the three and nine months ended September 30, 2023.

Current wording

Other income increased for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, due to interest income earned from sales-types leases and nonrecurring income items that occurred in the three months ended March 31, 2025.

Previous wording

Our sources of liquidity include cash flows from operations, cash and cash equivalents, borrowings under our Credit Facility, and additional issuances of equity and/or debt securities. Our available liquidity as of September 30, 2024 was $80.7 million, consisting of approximately $10.5 million in cash and cash equivalents and available borrowing capacity of $70.2 million under our Credit Facility. Our available borrowing capacity under the Credit Facility increased to $73.5 million as of November 4, 2024.

Current wording

Our sources of liquidity include cash flows from operations, cash and cash equivalents, borrowings under our Credit Facility, and additional issuances of equity and/or debt securities. Our available liquidity as of March 31, 2025 was $80.5 million, consisting of approximately $10.4 million in cash and cash equivalents and available borrowing capacity of $70.1 million under our Credit Facility. Our available borrowing capacity under the Credit Facility increased to $80.6 million as of May 7, 2025.

Previous wording

We actively seek conservative investments that we expect are likely to produce income to pay distributions to our stockholders. We intend to use the proceeds received from future equity raised and debt capital borrowed to continue to invest in industrial and office real property, make mortgage loans, or pay down outstanding borrowings under our Revolver. Accordingly, to ensure that we are able to effectively execute our business strategy, we routinely review our liquidity requirements and continually evaluate all potential sources of liquidity. 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, refinance maturing debt and fund our current operating costs. Our long-term liquidity needs include proceeds necessary to grow and maintain our portfolio of investments.

Current wording

We actively seek conservative investments that we expect are likely to produce income to allow us to pay distributions to our stockholders and Non-controlling OP Unitholders. We intend to use the proceeds received from future equity raised and debt capital borrowed to continue to invest in industrial properties, which is our strategic focus, or to a lesser extent, office real property, or pay down outstanding borrowings under our Revolver. Accordingly, to ensure that we are able to effectively execute our business strategy, we routinely review our liquidity requirements and continually evaluate all potential sources of liquidity. Our short-term liquidity needs include proceeds necessary to fund our distributions to stockholders, pay the debt service costs on our existing long-term mortgages, bank debt, and long-term private debt, refinance maturing debt and fund our current operating costs. Our long-term liquidity needs include proceeds necessary to grow and maintain our portfolio of investments.