What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-02-15 compared with 2021-02-16 · 170 added, 165 removed, 325 unchanged (51% of the section changed)

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We are an externally-advised 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 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 built-in rental rate increases.

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Business Environment

In March 2020, the World Health Organization characterized COVID-19 as a pandemic, and widespread infection continues in the United States and many parts of the world.

The rapid spread of the coronavirus identified as COVID-19 resulted in authorities throughout the United States and the world implementing widespread measures attempting to contain the spread and impact of COVID-19, such as travel bans and restrictions, quarantines, shelter in place orders, the promotion of social distancing and limitations on business activity, including business closures.

These measures and the pandemic have caused a significant national and global economic downturn, disrupted business operations, including those of certain of our tenants, significantly increased unemployment and underemployment levels, and are expected to have an adverse effect on office demand for space in the short term, at a minimum.

In March 2020, the World Health Organization characterized COVID-19 as a pandemic, and infection continues in the United States and many parts of the world.

Since the onset of the pandemic, the spread of the coronavirus identified as COVID-19 has resulted in authorities throughout the United States and the world implementing widespread measures attempting to contain the spread and impact of COVID-19, such as travel bans and restrictions, quarantines, shelter in place orders, vaccine mandates, the promotion of social distancing and limitations on business activity, including business closures.

Generally, although certain restrictive measures were implemented during certain periods of 2021, the prevalence and scale of closures and operating limitations were less severe as compared to 2020.

These measures and the pandemic have generally caused significant national and global economic disruption, including disrupted business operations, such as those of certain of our tenants, increased unemployment and underemployment levels, and continue to have an adverse effect on office demand for space in the short term, at a minimum.

Economic recovery in the United States and various other regions of the world has continued but may be threatened by the continued adverse effects of COVID-19 and other factors.

The demand for industrial space has continued due to the continuing growth of e-commerce and appears to be partially counterbalancing the adverse effects of COVID-19 on the commercial real estate industry.

Industrial absorption increased by greater than 10% compared to 2019 according to research reports.

Interest rates have been volatile and although interest rates are still low by historical standards (and in some cases have been reduced to help curb the impact of COVID-19), lenders have varied on their required spreads over the last several quarters.

Investment sales volume across all product types, but especially office and retail, in recent months is lower year over year, as compared to 2019 as a direct result of COVID-19.

After completing the 11th year of the current cycle, some national research firms had been estimating that both pricing and investment sales volume would be peaking and the national economy would be slowing in the near term, prior to the rapid spread of COVID-19.

Global recessionary conditions are currently expected during 2021 as a direct result of the COVID-19 pandemic, although the actual impact and duration are unknown.

See “ Impact of COVID-19 on Our Business ” below for the impact on the COVID-19 pandemic on our business.

From a more macro-economic perspective, there continues to be significant uncertainties associated with the COVID-19 pandemic, including with respect to the severity of the disease, the duration of the outbreak, actions that may be taken by governmental authorities and private businesses to attempt to contain the COVID-19 outbreak or to mitigate its impact, including adequate production and distribution of vaccines, the extent and duration of social distancing and the adoption of shelter-in-place orders, or reversal of reopening orders, and the ongoing impact of COVID-19 on business and economic activity.

Much of the United States economy is now in the process of re-opening, but at the same time the COVID-19 pandemic is intensifying in most of the country.

However, the increased cost of construction materials and product delivery delays caused by supply chain disruption, and the apparent labor shortage we are facing nationally, have resulted in inflation and higher costs for both industrial and office construction projects.

Industrial absorption increased on a nominal basis in 2020, compared to 2019, according to research reports and continues to be strong through the third quarter of 2021 averaging approximately 100 million square feet of absorption each quarter.

Construction activity for the industrial sector remains strong as both third quarter and year end 2021 estimates have approximately $500.0 million of properties under construction with over 30% of that space pre-leased.

Research reports also reflect that the office sector experienced negative absorption for each of the first three quarters of 2021 and office space available for sublease has increased and placing downward pressure on office rental rates.

Interest rates remain volatile in response to competing concerns about inflationary pressures and the spread and effect of COVID-19 variants and are expected to increase.

The yield on the 10 year US Treasury Note has increased significantly since the beginning of 2021 and finished 2021 at 1.51%.

Global recessionary conditions may occur over the next 12-24 months as a direct result of the COVID-19 pandemic, although the actual impact and duration are unknown.

See “Impact of COVID-19 on Our Business,” below.

From a more macro-economic perspective, there continues to be significant uncertainties associated with the COVID-19 pandemic, including with respect to the severity of the disease, the duration of the outbreak, actions that may be taken by governmental authorities and private businesses to attempt to contain the COVID-19 outbreak or to mitigate its impact, including adequate production, distribution, acceptance and efficacy of vaccines and other treatments, the extent and duration of social distancing and the adoption of shelter-in-place orders, or reversal of reopening orders, and the ongoing impact of COVID-19 on business and economic activity.

Impact of COVID-19 on Our Business

The extent to which the COVID-19 pandemic may impact our business, financial condition, liquidity, results of operations, funds from operations or prospects will depend on numerous evolving factors that we are not be able to predict at this time, including the duration and long-term scope of the pandemic;

the adequate production and distribution of vaccinations;

The extent to which the COVID-19 pandemic may impact our business, financial condition, liquidity, results of operations, funds from operations or prospects will depend on numerous evolving factors that we are not able to predict at this time, including the duration and long-term scope of the pandemic;

the adequate production, distribution, acceptance and efficacy of vaccinations;

development and acceptance of therapeutics;

the spread and effect of COVID-19 variants;

governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic;

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the effect on our tenants and their businesses;

the ability of our tenants to make their rental payments, any closures of our tenants’ properties, our ability to secure debt financing, service future debt obligations or pay distributions to our stockholders.

the ability of our tenants to make their rental payments;

any closures of our tenants’ properties;

and our ability to secure debt financing, service future debt obligations or pay distributions to our stockholders.

Any of these events could materially adversely impact our business, financial condition, liquidity, results of operations, funds from operations or prospects.

As of February 16, 2021, we have col lected 97% of all outstanding February 2021 cash base rent obligations and approximately 98% of January 2021 cash base rent obligations.

In April 2020, we granted rent deferrals to three tenants representing approximately 2% of total portfolio rents.

The agreements with these tenants include current partial payment in exchange for rent deferrals of varying terms with deferred amounts to be paid by the respective tenant back to us, for the period starting in July 2020 and ending in March 2021.

Two of these tenants have repaid their deferred rent balance in full as of December 31, 2020.

The other tenant was granted a second rent deferral in November 2020 in exchange for one year of additional lease term.

The deferred rent will be repaid beginning May 2021 and through the tenant’s remaining lease term.

We may pursue additional loan relief agreements in the future.

We have received and may receive additional rent modification requests in future periods from our tenants.

As of February 15, 2022, we have collected 100% of all outstanding rent collections for calendar year 2021.

In the past, we have received rent modification requests from our tenants, and we may receive additional requests in the future.

However, we are unable to quantify the outcomes of the negotiation of relief packages, the success of any tenant’s financial prospects or the amount of relief requests that we will ultimately receive or grant.

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.

These industries, among certain others, have generally been severely impacted by the COVID-19.

Additionally, our properties are located in 28 states, which we believe mitigates our exposure to economic issues, including as a result of COVID-19, in any one geographic market or area.

These industries, among certain others, have generally been severely impacted by COVID-19.

Additionally, our properties are located across 27 states, which we believe mitigates our exposure to economic issues, including as a result of COVID-19, in any one geographic market or area.

We also have a cap on industry sector concentration to further diversify our portfolio and mitigate risk.

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, and we amended our Credit Facility in 2019 to increase our borrowing capacity and extend its maturity date.

In addition, on February 11, 2021, we added a new $65.0 million term loan component, inclusive of a $15.0 million delayed funding component .

We have had numerous conversations with lenders and do not believe there will be a credit freeze in the near term.

We are in compliance with all of our debt covenants.

We amended our Credit Facility in 2019 to increase our borrowing capacity and extend its maturity date.

In addition, on February 11, 2021, we added a new $65.0 million term loan component.

We have had numerous conversations with lenders, and 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.

We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state or local authorities or that we determine are in the best interests of our personnel, tenants and stockholders.

While we are unable to determine or predict the nature, duration or scope of the overall impact the COVID-19 pandemic will have on our business, financial condition, liquidity, results of operations, funds from operations or prospects, we believe that it is important to share where we stand today, how our response to COVID-19 is progressing and how our operations and financial condition may change as the fight against COVID-19 progresses.

While we are unable to determine or predict the nature, duration or scope of the overall impact the COVID-19 pandemic, including the recent spread of COVID-19 variants, will have on our business, financial condition, liquidity, results of operations, funds from operations or prospects, we believe that it is important to share where we stand today, how our response to COVID-19 is progressing and how our operations and financial condition may change as the fight against COVID-19 continues.

Other Business Environment Considerations

The short-term and long-term economic implications of the presidential election result are unknown at this time, inclusive of any subsequent shift in policy, new regulations or the long-term impact of tax reform in the U.S.

Finally, the continuing uncertainty surrounding the ability of the federal government to address its fiscal condition in both the near and long term, particularly with the ongoing discussions regarding additional fiscal stimulus as well as other geopolitical issues relating to the global economic slowdown has increased domestic and global instability.

The short-term and long-term economic implications are unknown, in relation to recent world events including inflation, supply chain disruptions, labor shortages, rising interest rates, the ongoing COVID-19 pandemic and associated government response in addition to any subsequent shift in policy, new regulations or the long-term impact of social and infrastructure spending and tax reform in the U.S.

Finally, the continuing uncertainty surrounding the ability of the federal government to address its fiscal condition in both the near and long term, as well as other geopolitical issues relating to the global economic slowdown has increased domestic and global instability.

These developments could cause interest rates and borrowing costs to be volatile, which may adversely affect our ability to access both the equity and debt markets and could have an adverse impact on our tenants as well.

All of our variable rate debt is based upon the one month LIBOR rate, although LIBOR is currently anticipated to be phased out during late 2021.

All of our variable rate debt is based upon one-month LIBOR, although LIBOR is currently anticipated to be phased out by June 2023.

LIBOR is expected to transition to a new standard rate, SOFR, which will incorporate repo data collected from multiple data sets.

The intent is to adjust the SOFR to minimize differences between the interest that a borrower would be paying using LIBOR versus what it will be paying using SOFR.

We are currently monitoring the transition, as we cannot assess whether SOFR will become a standard rate for variable rate debt.

Any further changes or reforms to the determination or supervision of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR, which could have an adverse impact on the market for LIBOR-based debt, or the value of our portfolio of LIBOR-indexed, floating-rate debt.

We are currently monitoring the transition as SOFR becomes the standard benchmark for variable rate debt.

During the transition further changes or reforms to the determination of supervision of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR, which could have an adverse impact on the market for LIBOR-based debt, or the value of our portfolio of LIBOR-indexed, floating-rate debt.

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 only have two partially vacant buildings and four fully vacant buildings, with one of these fully vacant buildings classified as held for sale as of December 31, 2020.

Our available vacant space as of December 31, 2020 represents 4.7% of our total square footage and the annual carrying costs on the vacant space, including real estate taxes and property operating expenses, are approximately $4.2 million.

We continue to actively seek new tenants for these properties.

Currently, we only have seven partially vacant buildings and two fully vacant buildings.

We believe our lease expiration schedule for 2022 is quite manageable as it equates to 4.5% of annual rental income and the expirations are due to occur at the end of June, July, and October.

Property acquisitions increased during the third and fourth

quarters of the year ended December 31, 2021 equating to over $80.0 million in volume.

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.

Our principal sources of financing generally include the issuance of equity securities, long-term mortgage loans secured by properties, and borrowings under our Credit Facility.

While lenders’ credit standards have tightened, we continue to look to national and regional banks, insurance companies and non-bank lenders, in addition to the CMBS market, to issue mortgages to finance our real estate activities.

In addition to obtaining funds through borrowing, we were active in the equity markets during 2020 by issuing shares of common stock and preferred stock under our ATM Programs, pursuant to our Common Stock Sales Agreement with the Common Stock Sales Agents, and the Series E Preferred Stock Sales Agreement with the Series E Preferred Stock Sales Agents, discussed in more detail below.

We also began the Offering our newly designated Series F Preferred Stock and issued shares during the 3rd and 4th quarters of 2020.

Our principal sources of financing generally include the issuance of equity securities, long-term mortgage loans secured by properties, borrowings under our senior unsecured revolving credit facility (“Revolver”), with KeyBank, which matures in July 2023, our $160.0 million term loan facility (“Term Loan A”), which matures in July 2024 and our $65.0 million term loan facility (“Term Loan B”), which matures in February 2026.

We refer to the Revolver, Term Loan A and Term Loan B collectively herein as the Credit Facility.

While lenders’ credit standards have tightened, we continue to look to national and regional banks, insurance companies and non-bank lenders, in addition to the collateralized mortgage backed securities market (“CMBS”), to issue mortgages to finance our real estate activities.

Recent Developments

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We will continue to execute our capital recycling plan and sell non-core properties as reasonable disposition opportunities become available.

During the year ended December 31, 2020, we sold six non-core properties, located in Charlotte, North Carolina;

Maple Heights, Ohio;

During the year ended December 31, 2021, we sold three non-core properties, located in Rancho Cordova, California;

Champaign, Illinois;

and Austin, Texas, which are summarized in the table below (dollars in thousands):

Aggregate Square Footage Sold Sales Price Sales Costs Gain on Sale of Real Estate, net

and Richmond, Virginia, which are summarized in the table below (dollars in thousands):

Aggregate Square Footage Sold Aggregate Sales Price Aggregate Sales Costs Aggregate Loss on Sale of Real Estate, net

123,971 $ 9,473 $ 633 $ (1,148)

Acquisition Activity

During the year ended December 31, 2020, we acquired nine properties, which are summarized below (dollars in thousands):

Aggregate Square Footage Weighted Average Lease Term Aggregate Purchase Price Capitalized Acquisition Expenses Aggregate Annualized GAAP Fixed Lease Payments Aggregate Debt Issued

During the year ended December 31, 2021, we acquired 11 properties, which are summarized below (dollars in thousands):

Aggregate Square Footage Weighted Average Remaining Lease Term at Time of Acquisition Aggregate Purchase Price Aggregate Capitalized Acquisition Expenses Aggregate Annualized GAAP Fixed Lease Payments Aggregate Debt Issued

949,174 13.4 years $ 100,453 $ 798 $ 7,006 $ 21,500

On January 22, 2021, we purchased a 180,152 square foot industrial property in Findlay, Ohio for $11.1 million.

This property is fully leased to one tenant on a 14.2 year lease.

Leasing Activity

During the year ended December 31, 2020, we executed 20 lease extensions and/or modifications, which are summarized below (dollars in thousands):

During and subsequent to the year ended December 31, 2021, we executed 16 lease extensions and/or modifications, which are summarized below (dollars in thousands):

Aggregate Square Footage Weighted Average Remaining Lease Term Aggregate Annualized GAAP Fixed Lease Payments Aggregate Tenant Improvement Aggregate Leasing Commissions

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Our leases have remaining terms ranging from 0.3 years to 13.6 years.

During the year ended December 31, 2020, we had two lease contractions, which are aggregated below (dollars in thousands):

Aggregate Square Footage Reduced Aggregate Termination Fee Aggregate Deferred Rent Write Off

During the year ended December 31, 2021, we had eight lease contractions, which are aggregated below (dollars in thousands):

Aggregate Square Footage Reduced Aggregate Accelerated Rent Aggregate Accelerated Rent Recognized through December 31, 2021

497,369 (1) $ 2,865 $ 2,182

(1) We have signed leases with two replacement tenants for 211,408 square feet of the 497,369 square feet reduced with no downtime and sold one of these properties with 42,213 square feet.

Financing Activity

During the year ended December 31, 2020, we repaid seven mortgages, collateralized by eight properties, which are summarized below (dollars in thousands):

During the year ended December 31, 2021, we repaid three mortgages, collateralized by three properties, which are summarized below (dollars in thousands):

Aggregate Fixed Rate Debt Repaid Weighted Average Interest Rate on Fixed Rate Debt Repaid

$ 7,669 4.91 %

Aggregate Variable Rate Debt Repaid Weighted Average Interest Rate on Variable Rate Debt Repaid

Variable Rate Debt Repaid Interest Rate on Variable Rate Debt Repaid

$ 7,500 LIBOR + 2.50%

During the year ended December 31, 2020, we issued six mortgages, collateralized by six properties, which are summarized below (dollars in thousands):

Aggregate Fixed Rate Debt Issued Weighted Average Interest Rate on Fixed Rate Debt

During the year ended December 31, 2021, we issued two mortgages, collateralized by two properties, which are summarized below (dollars in thousands):

Fixed Rate Debt Issued Interest Rate on Fixed Rate Debt

$ 21,500 (1) 3.36 %

(1) We issued an aggregate of $18.3 million of fixed rate debt in connection with our three property portfolio acquisition on January 27, 2020, with a maturity date of February 1, 2030 and a rate of 3.625%.

We issued $17.5 million of floating rate debt swapped to fixed of 2.8% in connection with our March 9, 2020 property acquisition, with a maturity date of March 9, 2030.

We issued $10.3 million of fixed rate debt in connection with our December 18, 2020 property acquisition, with a maturity date of January 1, 2028 and a rate of 3.0%.

We issued $6.4 million of floating rate debt swapped to fixed of 3.25% in connection with our December 21, 2020 property acquisition, with a maturity date of December 23, 2030.

On January 22, 2021, we issued $5.5 million of floating rate debt swapped to a fixed rate of 3.24% in connection with the industrial property acquisition on the same date, with a maturity date of February 15, 2031.

(1) On January 22, 2021, we issued $5.5 million of floating rate debt swapped to fixed debt of 3.24% in connection with one property acquisition on the same date.

Legal Settlement

In August 2021, we reached separate legal settlements through which we recognized $2.4 million, net, recorded in other income on the consolidated statement of operations and comprehensive income.

Equity Activity

Common Stock ATM Program

During the year ended December 31, 2020, we sold 2.7 million shares of common stock, raising $52.8 million in net proceeds under our At-the-Market Equity Offering Sales Agreements with sales agents Robert W.

Incorporated (“Baird”), Goldman Sachs & Co.

LLC (“Goldman Sachs”), Stifel, Nicolaus & Company, Incorporated (“Stifel”), BTIG, LLC, and Fifth Third Securities, Inc.

(“Fifth Third”), pursuant to which we may sell shares of our common stock in an aggregate offering price of up to $250.0 million (the “Common Stock ATM Program”).

During the year ended December 31, 2021, we sold 1.8 million shares of common stock, raising $36.6 million in net proceeds under our Common ATM Program, pursuant to which we may sell shares of our common stock in an aggregate offering price of up to $250.0 million (the “Common Stock ATM Program”).

As of December 31, 2021, we had a remaining capacity to sell up to $146.9 million of common stock under the Common Stock Sales Agreement.

The proceeds from these issuances were used to acquire real estate, repay outstanding debt and for other general corporate purposes.

Mezzanine Equity

Both our Series D Preferred Stock, and Series E Preferred Stock are classified as mezzanine equity in our consolidated balance sheet because both are redeemable at the option of the shareholder upon a change of control of greater than 50% in accordance with ASC 480-10-S99 “Distinguishing Liabilities from Equity,” which requires mezzanine equity classification for preferred stock issuances with redemption features which are outside of the control of the issuer.

A change in control of our company, outside of our control, is only possible if a tender offer is accepted by over 90% of our shareholders.

All other change in control situations would require input from our Board of Directors.

In addition, our Series E Preferred Stock is redeemable at the option

of the shareholder in the event a delisting event occurs.

We will periodically evaluate the likelihood that a change of control or delisting event of greater than 50% will take place, and if we deem this probable, we would adjust the Series D Preferred Stock and Series E Preferred Stock presented in mezzanine equity to their redemption value, with the offset to gain (loss) on extinguishment.

We currently believe the likelihood of a change of control of greater than 50% is remote.

We do not have an active At-the-Market program for our Series D Preferred Stock as of the date of the filing of this Annual Report on Form 10-K.

Amendment to Articles of Restatement

On June 23, 2021, we filed with the State Department of Assessments and Taxation of Maryland (“SDAT”) the Articles Supplementary (i) setting forth the rights, preferences and terms of our newly designated Series G Preferred Stock and (ii) reclassifying and designating 4,000,000 shares of our authorized and unissued shares of common stock as shares of Series G Preferred Stock.

Series G Preferred Stock Offering

On June 28, 2021, we completed an underwritten public offering of 4,000,000 shares of our newly designated Series G Preferred Stock at a public offering price of $25.00 per share, raising $100.0 million in gross proceeds and approximately $96.6 million in net proceeds, after payment of underwriting discounts and commissions.

We used the net proceeds from this offering to voluntarily redeem all of our then outstanding shares of our Series D Preferred Stock.

Series D Preferred Stock Redemption

On June 30, 2021, we voluntarily redeemed all 3,509,555 outstanding shares of our Series D Preferred Stock at a redemption price of $25.1458333 per share, which represented the liquidation preference per share, plus accrued and unpaid dividends through June 30, 2021, for an aggregate redemption price of approximately $88.3 million.

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.

Articles Supplementary Reclassifying Remaining Series D Preferred Stock

On August 5, 2021, we filed Articles Supplementary (the “Reclassification Articles Supplementary”) with the SDAT, pursuant to which our board of directors reclassified and designated the remaining 2,490,445 shares of authorized but unissued Series D Preferred Stock as additional shares of common stock.

After giving effect to the filing of the Reclassification Articles Supplementary, our authorized capital stock consists 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.

The Reclassification Articles Supplementary did not increase our authorized shares of capital stock.

Series E Preferred ATM Program

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Bancorp Investments, Inc., pursuant to which we may, from time to time, offer to sell shares of our Series E Preferred Stock, in an aggregate offering price of up to $100.0 million (the “Series E Preferred ATM Program”).

We sold 0.3 million shares of our Series E Preferred Stock, raising $7.1 million in net proceeds pursuant to the Series E Preferred Stock Sales Agreement during the year ended December 31, 2020.

As of December 31, 2020, we had remaining capacity to sell up to $92.8 million of Series E Preferred Stock under the program.

We did not sell any shares of our Series E Preferred Stock pursuant to the Series E Preferred Stock Sales Agreement during the year ended December 31, 2021.

As of December 31, 2021, we had remaining capacity to sell up to $92.8 million of Series E Preferred Stock under the Series E Preferred ATM Program.

Universal Shelf Registration Statement

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The 2020 Universal Shelf allows us to issue up to an additional $800.0 million of securities.

Of the $800.0 million of available capacity under our 2020 Universal Shelf, approximately $636.5 million is reserved for the sale of our 6.00% Series F Cumulative Redeemable Preferred Stock of the Company, par value $0.001 per share (the “Series F Preferred Stock”).

Of the $800.0 million of available capacity under our 2020 Universal Shelf, approximately $636.5 million is reserved for the sale of Series F Preferred Stock.

As of December 31, 2021, we had the ability to issue up to $689.5 million of securities under the 2020 Universal Shelf.

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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 0.1 million shares of our Series F Preferred Stock, raising $2.7 million in net proceeds during the year ended December 31, 2020.

We sold 302,007 shares of our Series F Preferred Stock, raising $6.9 million in net proceeds during the year ended December 31, 2021.

As of December 31, 2021, we had remaining capacity to sell up to $626.0 million of Series F Preferred Stock.

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Generally, the Series F Preferred Units provided for under the Amendment have preferences, distribution rights and other provisions substantially equivalent to those of the Series F Preferred Stock.

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 “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”).

The Amendment provides for the Operating Partnership’s establishment and issuance of an equal number of Series G Term Preferred Units as are issued shares of Series G Preferred Stock by the Company in connection with the offering of Series G Preferred Stock upon the Company’s contribution to the Operating Partnership of the net proceeds of the offering of Series G Preferred Stock.

Generally, the Series G Preferred Units provided for under the Amendment have preferences, distribution rights, and other provisions substantially equivalent to those of the Series G Preferred Stock.

Amendment to the Advisory Agreement

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The Sixth Amended Advisory Agreement revised and replaced the Fifth Amended and Restated Investment Advisory Agreement between the Company and the Adviser (the “Fifth Amended Advisory Agreement”), under which the calculation of the Base Management Fee was based on Total Equity (as was defined in the Fifth Amended Advisory Agreement), with a calculation based on Gross Tangible Real Estate (as defined in the Sixth Amended Advisory Agreement).

The revised Base Management Fee will be payable quarterly in arrears and shall be calculated at an annual rate of 0.425% (0.10625% per quarter) of the prior calendar quarter’s “Gross Tangible Real Estate,” defined as the current gross value of the Company’s property portfolio (meaning the aggregate of each property’s original acquisition price plus the cost of any subsequent capital improvements thereon).

The revised Base Management Fee is payable quarterly in arrears and calculated at an annual rate of 0.425% (0.10625% per quarter) of the prior calendar quarter’s “Gross Tangible Real Estate,” defined as the current gross value of the Company’s property portfolio (meaning the aggregate of each property’s original acquisition price plus the cost of any subsequent capital improvements thereon).

The calculation of the other fees in the Advisory Agreement remained unchanged.

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Non-controlling Interests in Operating Partnership

As of each of December 31, 2020 and 2019, we owned approximately 98.6%, of the outstanding OP Units.

On October 30, 2018, we issued 742,937 OP units as partial consideration to acquire a 218,703 square foot, two property portfolio located in Detroit, Michigan for $21.7 million.

During November 2019, 263,300 OP units were redeemed for common stock.

On January 8, 2020, we issued 23,396 OP units as partial consideration to acquire a 64,800 square foot property located in Indianapolis, Indiana for $5.3 million.

As of December 31, 2021 and 2020, we owned approximately 99.3% and 98.6%, respectively, of the outstanding OP Units.

During the year ended December 31, 2021, we redeemed 246,039 OP units for an equivalent amount of common stock.

The Operating Partnership is required to make distributions on each OP Unit in the same amount as those paid on each share of the Company’s common stock, with the distributions on the OP Units held by the Company being utilized to make distributions to the Company’s common stockholders.

As of December 31, 2021 and 2020, there were 256,994 and 503,033 outstanding OP Units held by Non-controlling OP Unitholders, respectively.

Personnel Activity

On January 11, 2022, the board of directors appointed Mr.

Arthur “Buzz” Cooper as our co-president to serve alongside Mr.

Robert Cutlip, who announced his intention to resign on or about June 30, 2022.

Cutlip’s resignation is in connection with his planned retirement.

Our Adviser and Administrator

Our Adviser is led by a management team with extensive experience purchasing real estate.

Our Adviser and Administrator are controlled by Mr.

Gladstone Management Corporation, a Delaware corporation (our “Adviser”) is led by a management team with extensive experience purchasing real estate.

Our Adviser and Gladstone Administration, LLC, a Delaware limited liability company (our “Administrator”) are controlled by Mr.

Gladstone, who is also our chairman and chief executive officer.

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Brubaker, our vice chairman and chief operating officer, is also the vice chairman and chief operating officer of our Adviser and Administrator.

Cutlip, our president, is also an executive managing director of our Adviser.

The Administrator employs our chief financial officer, treasurer, chief compliance officer, and general counsel and secretary (who also serves as our Administrator’s president, general counsel, and secretary) and their respective staffs.

Our Adviser and Administrator also provide investment advisory and administrative services, respectively, to certain of our affiliates, including, but not limited to, Gladstone Capital and Gladstone Investment, both publicly-traded business development companies, as well as Gladstone Land, a publicly-traded REIT that primarily invests in farmland.

With the exception of Mr.

Sodo, our chief financial officer, Jay Beckhorn, our treasurer, and Mr.

Cutlip, our president, all of our executive officers and all of our directors serve as either directors or executive officers, or both, of Gladstone Capital and Gladstone Investment.

In addition, with the exception of Mr.

Cutlip and Mr.

Sodo, all of our executive officers and all of our directors, serve as either directors or executive officers, or both, of Gladstone Land.

Cutlip and Mr.

Sodo generally spend all of their time focused on Gladstone Commercial, and do not put forth any material efforts in assisting affiliated companies.

Cooper, our co-presidents, are also executive managing directors of our Adviser.

Our Administrator employs our chief financial officer, treasurer, chief compliance officer, and general counsel and secretary (who also serves as our Administrator’s president, general counsel, and secretary) and their respective staffs.

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 (“Gladstone Capital”) and Gladstone Investment Corporation (“Gladstone Investment”), both publicly-traded business development companies, as well as Gladstone Land Corporation (“Gladstone Land”), a publicly-traded REIT that primarily invests in farmland.

With the exception of Mr.

Gerson, our chief financial officer, Jay Beckhorn, our treasurer, and Messrs.

Cutlip and Cooper, our co-presidents, all of our executive

officers and all of our directors serve as either directors or executive officers, or both, of Gladstone Capital and Gladstone Investment.

In addition, with the exception of Messrs.

Cutlip, 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.

Cutlip, 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.

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In addition, we are also responsible for all fees charged by third parties that are directly related to our business, which include real estate brokerage fees, mortgage placement fees, lease-up fees and transaction structuring fees (although we may be able to pass some or all of such fees on to our tenants and borrowers).

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 2021 meeting, our Board of Directors reviewed and renewed the Advisory Agreement and Administration Agreement for an additional year, through August 31, 2022.

Base Management Fee

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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 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 to common stockholders for the period, and one-time events pursuant to changes in GAAP.

Core FFO (as defined in the Advisory Agreement) is GAAP net income (loss) 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 income (loss) available to common stockholders for the period, and one-time events pursuant to changes in GAAP.

Capital Gain Fee

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When we acquire real estate with an existing lease, we allocate the purchase price to (i) the acquired tangible assets and liabilities, consisting of land, building, tenant improvements and long-term debt and (ii) the identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, in-place leases, unamortized lease origination costs, tenant relationships and capital lease obligations.

We allocate the fair values in accordance with ASC 360, Property Plant and Equipment.

We allocate the fair values in accordance with Accounting Standard Codification 360, Property Plant and Equipment.

All expenses related to the acquisition are capitalized and allocated among the identified assets.

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Impairment charge — 3,621 (3,621) (100.0) %

Total operating expense before incentive fee waiver $ 102,816 $ 99,855 $ 2,961 3.0 %

Incentive fee waiver (16) — (16) 100.0 %

Total operating expenses $ 102,800 $ 99,855 $ 2,945 2.9 %

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Interest expense $ (26,887) $ (26,803) $ (84) 0.3 %

Gain on sale of real estate, net 8,096 2,952 5,144 174.3 %

(Loss) gain on sale of real estate, net (1,148) 8,096 (9,244) (114.2) %

Other income 2,880 395 2,485 629.1 %

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Net income $ 9,733 $ 14,985 $ (5,252) (35.0) %

Distributions attributable to Series A, B, D, E, and F preferred stock (10,973) (10,822) (151) 1.4 %

Series A and B preferred stock offering costs write off — (2,674) 2,674 (100.0) %

Distributions attributable to Series D, E, F, and G preferred stock (11,488) (10,973) (515) 4.7 %

Series D preferred stock offering costs write off (2,141) — (2,141) 100.0 %

Distributions attributable to senior common stock (698) (816) 118 (14.5) %

Net income (loss) available (attributable) available to common stockholders and Non-controlling OP Unitholders $ 3,196 $ (4,847) $ 8,043 (165.9) %

Net income (loss) available (attributable) available to common stockholders and Non-controlling OP Unitholders per weighted average share of total stock - basic & diluted $ 0.09 $ (0.16) $ 0.25 (156.3) %

Net (loss) income (attributable) available to common stockholders and Non-controlling OP Unitholders $ (4,594) $ 3,196 $ (7,790) (243.7) %

Net (loss) income (attributable) available to common stockholders and Non-controlling OP Unitholders per weighted average share and unit - basic & diluted $ (0.12) $ 0.09 $ (0.21) (233.3) %

FFO available to common stockholders and Non-controlling OP Unitholders - basic (1) $ 56,865 $ 54,145 $ 2,720 5.0 %

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FFO per weighted average share of common stock and Non-controlling OP Unit - diluted (1) $ 1.54 $ 1.56

$ (0.02) (1.3) %

FFO per weighted average share of common stock and Non-controlling OP Unit - diluted, as adjusted for comparability (1) $ 1.60 $ 1.56 $ 0.04 2.6 %

(1) Refer to the “Funds from Operations” section below within the Management’s Discussion and Analysis section for the definition of FFO.

(2) Refer to the “Funds from Operations” section below within the Management’s Discussion and Analysis section for the definition of FFO as adjusted for comparability.

(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.

Same Store Analysis

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Lease revenues consist of rental income and operating expense recoveries earned from our tenants.

Lease revenues from same store properties increased for the year ended December 31, 2020, primarily due to increased rental charges from lease renewals and increased operating expense recoveries from triple net leased properties.

Lease revenues increased for acquired and disposed of properties for the year ended December 31, 2020, as compared to the year ended December 31, 2019, primarily as a result of our acquisition of nine properties during the year ended December 31, 2020, and the inclusion of a full year of lease revenues recorded in 2020 for 18 properties acquired during the year ended December 31, 2019, partially offset by a decrease in lease revenues from the six properties that we sold during the year ended December 31, 2020.

Lease revenues decreased for properties with vacancy for the year ended December 31, 2020, as our occupancy percentage has decreased from December 31, 2019, due to 2020 lease expirations for certain properties that have not yet been re-leased.

On January 1, 2020, we completed the integration of the accounting records of certain of our triple net leased third-party asset managed properties into our accounting system and paid property operating expenses out of our operating bank accounts.

For periods prior to January 1, 2020, we recorded property operating expenses and offsetting lease revenues for these certain triple net leased properties on a net basis.

Beginning January 1, 2020, we now record the property operating expenses and offsetting lease revenues for these triple net leased properties on a gross basis, as we have amended our process whereby we are paying operating expenses on behalf of our tenants and receiving reimbursement, whereas, previously these tenants were paying these expenses directly with limited insight provided to us.

See the table below for a reconciliation of lease revenue for the year ended December 31, 2020, and the comparable 2019 period.

Fixed rental payments consist of fixed rental charges that are contractually due to us, and variable rental payments consist of operating expense recoveries that we collect to pay for property operating expenses incurred at certain properties.

Lease revenues related to the December 31, 2019 reporting period have not been amended.

For the twelve months ended December 31,

(Dollars in Thousands)

Lease revenue reconciliation 2020 2019 $ Change % Change

Fixed lease payments $ 117,248 $ 110,273 $ 6,975 6.3 %

Variable lease payments 15,904 4,114 11,790 286.6 %

$ 133,152 $ 114,387 $ 18,765 16.4 %

Lease revenues from same store properties increased for the year ended December 31, 2021, primarily due to increased lease revenue from the amortization of tenant funded improvements, coupled with accelerated rent from tenants that have terminated their leases early.

One of the tenants that terminated early will remain in the building through October 2022, and we fully re-leased the space related to two other terminations with no downtime.

Lease revenues increased for acquired and disposed of properties for the year ended December 31, 2021, as compared to the year ended December 31, 2020, primarily as a result of our acquisition of 11 properties during the year ended December 31, 2021, and the inclusion of a full year of lease revenues recorded in 2021 for nine properties acquired during the year ended December 31, 2020, partially offset by a decrease in lease revenues from the nine property sales during and subsequent to December 31, 2020.

Lease revenues decreased for properties with vacancy for the year ended December 31, 2021, as our average vacancy has increased from the year ended December 31, 2020.

Operating Expenses

Depreciation and amortization increased for the year ended December 31, 2020, as compared to the year ended December 31, 2019, primarily due to recognizing a full year of depreciation for the 18 properties acquired during the year ended December 31, 2019, as well as increased depreciation expense from the nine properties acquired during the year ended December 31, 2020, partially offset by a decrease in depreciation expense for the six properties sold during the year ended December 31, 2020.

Depreciation and amortization increased for the year ended December 31, 2021, as compared to the year ended December 31, 2020, primarily due to recognizing a full year of depreciation for the nine properties acquired during the year ended December 31, 2020, as well as increased depreciation expense from the 11 properties acquired during the year ended December 31, 2021, partially offset by a decrease in depreciation expense for the three properties sold during the year ended December 31, 2021.

For the year ended December 31,

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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.

The increase in property operating expenses for same store properties for the year ended December 31, 2020, as compared to the year ended December 31, 2019, is primarily a result of an increase in our property operating expenses at our triple net leased properties.

The increase in property operating expenses on acquired and disposed of properties for the year ended December 31, 2020, as compared to the year ended December 31, 2019, is a result of property operating expenses on the nine properties we acquired during the year ended December 31, 2020, coupled with a full year of property operating expenses for the 18 properties acquired during the year ended December 31, 2019, partially offset by a decrease in property operating expenses for the six properties sold during the year ended December 31, 2020.

The increase in property operating expenses for properties with vacancy for the year ended December 31, 2020, as compared to the year ended December 31, 2019, is due to increased vacancy in our portfolio due to 2020 lease expirations for certain properties that have not been re-leased.

The base management fee paid to the Adviser increased for the year ended December 31, 2020, as compared to the year ended December 31, 2019, due to an increase in total equity and gross tangible real estate, the main components of the base management fee calculation under the Amended Advisory Agreement and the prior version thereof, respectively.

Property operating expenses remained flat for same store properties for the year ended December 31, 2021, as compared to the year ended December 31, 2020, as many of our tenants have not been operating fully in their properties since March 2020, due to the ongoing COVID-19 pandemic.

The decrease in property operating expenses on acquired and disposed of properties for the year ended December 31, 2021, as compared to the year ended December 31, 2020, is a result of a decrease in property operating expenses from nine property sales during and subsequent to December 31, 2020, partially offset by increased property operating expenses on the 11 properties we acquired during the year ended December 31, 2021, coupled with a full year of property operating expenses for the nine properties acquired during the year ended December 31, 2020.

The increase in property operating expenses for properties with vacancy for the year ended December 31, 2021, as compared to the year ended December 31, 2020, is due to increased average vacancy in our portfolio subsequent to December 31, 2020.

The base management fee paid to the Adviser increased for the year ended December 31, 2021, as compared to the year ended December 31, 2020, 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 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, 2021, as compared to the year ended December 31, 2020, because of an increase in pre-incentive fee FFO.

The increase in pre-incentive fee FFO was primarily due to an increase in lease revenues from the nine properties acquired during the year ended December 31, 2020, coupled with a full year of lease revenues from the 18 properties acquired during the year ended December 31, 2019, partially offset by an increase in property operating expenses due to increased portfolio vacancy.

The increase in pre-incentive fee FFO was primarily due to an increase in lease revenues from the 11 properties acquired during the year ended December 31, 2021, coupled with a full

year of lease revenues from the nine properties acquired during the year ended December 31, 2020, partially offset by an increase in property operating expenses due to increased portfolio average vacancy.

The calculation of the incentive fee is described in detail above within “Advisory and Administration Agreements.”

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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, 2020, as compared to the year ended December 31, 2019, primarily as a result of an increase in legal and accounting expenses, slightly offset by a decrease in due diligence expenses.

General and administrative expenses decreased for the year ended December 31, 2021, as compared to the year ended December 31, 2020, primarily as a result of a decrease in due diligence expenses, slightly offset by an increase in legal expenses.

No impairment charge was recorded during the year ended December 31, 2021.

The impairment charge during the year ended December 31, 2020 resulted from impairment charges recorded on our Blaine, Minnesota, Champaign, Illinois and Rancho Cordova, California properties.

The impairment charge during the year ended December 31, 2019 resulted from an impairment charge on our Charlotte, North Carolina property.

This property was sold during the year ended December 31, 2020.

We subsequently sold the Champaign, Illinois and Rancho Cordova, California properties during the year ended December 31, 2021.

Other Income and Expenses

Interest expense decreased for the year ended December 31, 2020, as compared to the year ended December 31, 2019.

This decrease is primarily a result of a decrease in one month LIBOR, which is what our variable rate debt is based upon.

As a result of the COVID-19 pandemic, central banks across the world loosened monetary policy, including by lowering interest rates, and one month LIBOR decreased from 1.76% at December 31, 2019 to 0.14% at December 31, 2020.

The gain on sale of real estate, net, during the year ended December 31, 2020 is a result of a gain on sale from six property sales.

The gain on sale of real estate, net, during the year ended December 31, 2019 was a result of the sale of one of our properties.

Other income decreased during the year ended December 31, 2020, as compared to the year ended December 31, 2019, from decreased settlement income earned from certain tenants vacating our properties.

Net Income (Loss) Available (Attributable) to Common Stockholders and Non-controlling OP Unitholders

Net income (loss) available (attributable) to common stockholders and Non-controlling OP Unitholders increased for the year ended December 31, 2020, as compared to the year ended December 31, 2019, primarily because of gains on sale, net recognized on six property sales, an increase in lease revenue due to nine property acquisitions during 2020, and a decrease in interest expense due to lower interest rates on our LIBOR based debt due to the COVID-19 pandemic.

This is partially offset by

an increase in property operating expenses, impairment charges on three of our properties and increased base management and incentive fees due to portfolio growth and FFO growth.

A discussion of the results of operations for the year ended December 31, 2018 is found in Item 7 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on February 12, 2020, which is available free of charge on the SECs website at www.sec.gov and on the investors section of our website at www.GladstoneCommercial.com

Interest expense increased for the year ended December 31, 2021, as compared to the year ended December 31, 2020.

This increase is primarily a result of increased borrowings on our Credit Facility, partially offset by decreased mortgage borrowings.

The loss on sale of real estate, net, during the year ended December 31, 2021 is a result of the sale of three properties.

The gain on sale of real estate, net, during the year ended December 31, 2020 was a result of the sale of six of our properties.

Other income increased during the year ended December 31, 2021, as compared to the year ended December 31, 2020, as a result of legal settlement income.

Net (Loss) Income (Attributable) Available to Common Stockholders and Non-controlling OP Unitholders

Net (loss) income (attributable) available to common stockholders and Non-controlling OP Unitholders decreased for the year ended December 31, 2021, as compared to the year ended December 31, 2020, primarily because of losses on sale, net recognized on three property sales and an increase in depreciation and amortization expense from property acquisition activity during and subsequent to December 31, 2020, partially offset by an increase in lease revenues from leasing activity and acquisition activity.

A discussion of the results of operations for the year ended December 31, 2019 is found in Item 7 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 16, 2021, 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.

Liquidity and Capital Resources

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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, refinancing maturing debt and fund our current operating costs.

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.

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Common Stock ATM Program $ 36,561 1,771,277 $ 20.91

Series E Preferred Stock ATM Program 7,132 301,448 23.85

Series F Preferred Stock Continuous Public Offering 6,869 302,007 24.98

Series G Preferred Stock Public Offering $ 96,573 4,000,000 25.00

$ 140,003 6,073,284

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As of December 31, 2021, we had mortgage debt in the aggregate principal amount of $105.2 million payable during 2022 and $72.7 million payable during 2023.

The 2021 principal amounts payable include both amortizing principal payments and two balloon principal payments.

The 2022 principal amounts payable include both amortizing principal payments and nine balloon principal payments.

We anticipate being able to refinance our mortgages that come due during 2022 and 2023 with a combination of new mortgage debt, availability under our Credit Facility and the issuance of additional equity securities.

We have successfully repaid $37.4 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 July 2019 Credit Facility amendment, which resulted in us expanding our Term Loan from $75.0 million to $160.0 million, and increasing our Revolver from $85.0 million to $100.0 million.

In addition, on February 11, 2021, we added a new $65.0 million term loan component, inclusive of a $15.0 million delayed funding component.

We have successfully repaid $15.2 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 July 2019 Credit Facility amendment, which resulted in us expanding our Term Loan A from $75.0 million to $160.0 million, and increasing our Revolver from $85.0 million to $100.0 million.

In addition, on February 11, 2021, we added Term Loan B, a new $65.0 million term loan component.

Operating Activities

Net cash provided by operating activities during the year ended December 31, 2021, was $70.1 million, as compared to net cash provided by operating activities of $65.5 million for the year ended December 31, 2020.

This increase was primarily a result of an increase in operating revenues received from the properties acquired during the past 12 months, coupled with a decrease in interest expense due to one month LIBOR decreasing as a result of the COVID-19 pandemic, partially offset by an increase in property operating expenses, due to increased portfolio vacancy.

The majority of cash from operating activities is generated from the rental payments and operating expense recoveries that we receive from our tenants.

This increase was primarily a result of an increase in operating revenues received from the properties acquired during the past 12 months, partially offset by an increase in property operating expenses, due to increased average vacancy in our portfolio.

The majority of cash from operating

activities is generated from the rental payments and operating expense recoveries that we receive from our tenants.

We utilize this cash to fund our property-level operating expenses and use the excess cash primarily for debt and interest payments on our mortgage notes payable, interest payments on our Credit Facility, distributions to our stockholders, management fees to our Adviser, administration fees to our Administrator and other entity-level operating expenses.

Investing Activities

Net cash used in investing activities during the year ended December 31, 2020, was $100.3 million, which primarily consisted of the acquisition of nine properties and tenant improvements performed at certain of our properties, coupled with the capital improvements performed at certain of our properties, partially offset by proceeds from the sale of real estate.

Net cash used in investing activities during the year ended December 31, 2019, was $132.0 million, which primarily consisted of the acquisition of 18 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, 2021, was $94.8 million, which primarily consisted of the acquisition of 11 properties and tenant improvements performed at certain of our properties, coupled with the capital improvements performed at certain of our properties, partially offset by proceeds from the sale of real estate.

Net cash used in investing activities during the year ended December 31, 2020, was $100.3 million, which primarily consisted of the acquisition of nine properties, coupled with the capital improvements performed at certain of our properties, partially offset by proceeds from sale of real estate.

Financing Activities

Net cash provided by financing activities during the year ended December 31, 2020, was $39.4 million, which primarily consisted of proceeds from our common and preferred equity offerings, mortgage borrowings on new acquisitions and borrowings from our Term Loan, partially offset by distributions paid to our stockholders and Non-controlling OP Unitholders.

Net cash provided by financing activities during the year ended December 31, 2021, was $21.8 million, which primarily consisted of proceeds from our common and preferred equity offerings, mortgage borrowings on new acquisitions and borrowings from our Term Loan B, partially offset by distributions paid to our stockholders and Non-controlling OP Unitholders.

Net cash provided by financing activities for the year ended December 31, 2020, was $39.4 million, which primarily consisted of proceeds from our common stock and Series E 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.

Credit Facility

On July 2, 2019, we amended, extended and upsized our Credit Facility, expanding the Term Loan from $75.0 million to $160.0 million, inclusive of a delayed draw component whereby we can incrementally borrow on the Term Loan up to the $160.0 million commitment, and increasing the Revolver from $85.0 million to $100.0 million.

The Term Loan has a new five-year term, with a maturity date of July 2, 2024, and the Revolver has a new four-year term, with a maturity date of July 2, 2023.

On July 2, 2019, we amended, extended and upsized our Credit Facility, expanding Term Loan A from $75.0 million to $160.0 million, inclusive of a delayed draw component whereby we can incrementally borrow on Term Loan A up to the $160.0 million commitment, and increasing the Revolver from $85.0 million to $100.0 million.

Term Loan A has a maturity date of July 2, 2024, and the Revolver has a maturity date of July 2, 2023.

The interest rate margin for the Credit Facility was reduced by 10 basis points at each of the leverage tiers.

We entered into multiple interest rate cap agreements on the amended Term Loan, which cap LIBOR ranging from 2.50% to 2.75%, to hedge our exposure to variable interest rates.

We entered into multiple interest rate cap agreements on Term Loan A, which cap LIBOR ranging from 2.50% to 2.75%, to hedge our exposure to variable interest rates.

We used the net proceeds derived from the amended Credit Facility to repay all previously existing borrowings under the Revolver.

We incurred fees of approximately $1.3 million in connection with the

Credit Facility amendment.

We incurred fees of approximately $1.3 million in connection with the Credit Facility amendment.

The bank syndicate for the Credit Facility is now comprised of KeyBank, Fifth Third Bank, U.S.

Bank National Association, The Huntington National Bank, Goldman Sachs Bank USA, and Wells Fargo Bank, National Association.

On February 11, 2021, we added a new $65 million term loan component, inclusive of a $15 million delayed funding component.

The New Term Loan has a maturity date of 60 months from the closing of the amended Credit Facility and a London Inter-bank Offered Rate floor of 25 basis points.

On February 11, 2021, we added Term Loan B, a new $65.0 million term loan component, inclusive of a $15.0 million delayed funding component, which was subsequently funded on July 20, 2021.

Term Loan B has a maturity date of 60 months from the closing of the amended Credit Facility and a LIBOR floor of 25 basis points.

As of December 31, 2021, there was $258.6 million outstanding under our Credit Facility at a weighted average interest rate of approximately 2.00% and $19.5 million outstanding under letters of credit at a weighted average interest rate of 1.90%.

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$ 803,991 $ 130,880 $ 345,468 $ 164,013 $ 163,630

(1) Debt obligations represent borrowings under our Revolver, which represents $53.9 million of the debt obligation due in 2023, our Term Loan, which represents $160.0 million of the debt obligation due in 2024, and mortgage notes payable that were outstanding as of December 31, 2020.

This figure does not include $(0.2) million of premiums and (discounts), net, and $4.9 million of deferred financing costs, net, which are reflected in mortgage notes payable, net, borrowings under Revolver, and borrowings under Term Loan, net, on the consolidated balance sheet.

(2) Interest on debt obligations includes estimated interest on our borrowings under our Revolver and Term Loan and mortgage notes payable.

The balance and interest rate on our Revolver and Term Loan is variable;

(1) Debt obligations represent borrowings under our Revolver, which represents $33.6 million of the debt obligation due in 2023, Term Loan A, which represents $160.0 million of the debt obligation due in 2024, Term Loan B, which represents $65.0 million of the debt obligation due in 2026 and mortgage notes payable that were outstanding as of December 31, 2021.

This figure does not include $(0.1) million of premiums and (discounts), net, and $3.8 million of deferred financing costs, net, which are reflected in mortgage notes payable, net, borrowings under Revolver, and borrowings under Term Loan A and Term Loan B, net, on the consolidated balance sheet.

(2) Interest on debt obligations includes estimated interest on our borrowings under our Revolver, Term Loan A, Term Loan B and mortgage notes payable.

The balance and interest rate on our Revolver and Term Loan A and Term Loan B is variable;

thus, the interest payment obligation calculated for purposes of this table was based upon rates and balances as of December 31, 2021.

(3) Operating lease obligations represent the ground lease payments due on four of our properties.

(4) Purchase obligations consist of tenant and capital improvements at seven of our properties.

(4) Purchase obligations consist of tenant and capital improvements at 10 of our properties.

Off-Balance Sheet Arrangements

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Distributions attributable to preferred and senior common stock (12,186) (11,789)

Net income (loss) available (attributable) to common stockholders and Non-controlling OP Unitholders $ 3,196 $ (4,847)

Series D preferred stock offering costs write off (2,141) —

Net (loss) income (attributable) available to common stockholders and Non-controlling OP Unitholders $ (4,594) $ 3,196

Real estate depreciation and amortization 60,311 55,424

Impairment charge — 3,621

Loss on sale of real estate, net 1,148 —

Gain on sale of real estate, net — (8,096)

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Distributions attributable to preferred and senior common stock (12,186) (11,789)

Net income (loss) available (attributable) to common stockholders and Non-controlling OP Unitholders $ 3,196 $ (4,847)

Series D preferred stock offering costs write off (2,141) —

Net (loss) income (attributable) available to common stockholders and Non-controlling OP Unitholders $ (4,594) $ 3,196

Real estate depreciation and amortization 60,311 55,424

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Income impact of assumed conversion of senior common stock 698 816

Loss on sale of real estate, net 1,148 —

Gain on sale of real estate, net — (8,096)

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FFO available to common stockholders and Non-controlling OP Unitholders plus assumed conversions $ 57,563 $ 54,961

Series A and B preferred stock offering costs write off — 2,674

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 $ 59,704 $ 54,961

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis