What changed in this filing

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Item 1. Business

2025-02-18 compared with 2024-02-21 · 40 added, 32 removed, 231 unchanged (24% of the section changed)

27 unchanged sentences

We may sell some of our real estate assets when our Adviser determines that doing so would be advantageous to us and our stockholders.

In addition to cash on hand and cash from operations, we use funds from various other sources to finance our acquisitions and operations, including equity, our Credit Facility, mortgage financing and other sources that may become available from time to time.

In addition to cash on hand and cash from operations, we use funds from various other sources to finance our acquisitions and operations, including equity, our Credit Facility, mortgage financing, long-term private debt, and other sources that may become available from time to time.

We believe that moderate leverage is prudent and we aspire to become an investment grade borrower over time.

In addition to our use of leverage, we were active in the equity markets during 2023 by issuing shares of common stock under our common stock at-the-market program, pursuant to our At-the-Market Equity Offering Sales Agreement (the “Common Stock Sales Agreement”) with Robert W.

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

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

In addition to our use of leverage, we were active in the equity markets during 2024 by issuing shares of common stock under our common stock at-the-market program, pursuant to our current At-the-Market Equity Offering Sales Agreement (defined below as the 2024 Common Stock Sales Agreement) with BofA Securities, Inc.

(“BofA”), Goldman Sachs & Co.

LLC (“Goldman Sachs”), Robert W.

Incorporated (“Baird”), KeyBanc Capital Markets Inc.

(“KeyBanc”), and Fifth Third Securities, Inc.

(“Fifth Third”) (collectively the “Common Stock Sales Agents”).

We voluntarily redeemed all outstanding shares of our 7.00% Series D Cumulative Redeemable Preferred Stock, par value $0.001 per share (“Series D Preferred Stock”) on June 30, 2021, through raising proceeds from an underwritten public offering of Series G Preferred Stock.

We also issued shares of our Series F Preferred Stock through bimonthly closings of this registered non-traded continuous offering.

Although we did not sell any shares of our Series E Preferred Stock during the year ended December 31, 2023, we also had an at-the-market program for our Series E Preferred Stock during the period.

We terminated that program and the Common Stock Sales Agreement, effective February 10, 2023, in connection with the expiration of our registration statement on Form S-3 (File No.

We did not sell any shares of our Series E Preferred Stock during the year ended December 31, 2024, as we terminated that program and the Common Stock Sales Agreement, effective February 10, 2023, in connection with the expiration of our registration statement on Form S-3 (File No.

333-236143) (the “2020 Registration Statement”) on February 11, 2023.

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”).

On March 3, 2023, we entered into an At-the-Market Equity Offering Sales Agreement (the “2023 Common Stock Sales Agreement”), with the Common Stock Sales Agents.

In connection with the 2023 Common Stock Sales Agreement, we filed prospectus supplements dated March 3, 2023 and March 7, 2023, to the prospectus dated November 23, 2022, with the SEC, for the offer and sale of an aggregate offering amount of $250.0 million of common stock.

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 our 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 year ended December 31, 2024, we sold 3,699,597 shares of common stock, raising approximately $53.5 million in net proceeds under the 2024 Common Stock Sales Agreement.

Investment Policies

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We expect that some of our sale-leaseback transactions will be in conjunction with acquisitions, recapitalizations or other corporate transactions affecting our tenants.

In these transactions, we may act as one of several sources of financing by purchasing one or more properties from the tenant and by leasing it on a net basis to the tenant or its successor in interest.

In these transactions,

we may act as one of several sources of financing by purchasing one or more properties from the tenant and by leasing it on a net basis to the tenant or its successor in interest.

Our portfolio consists primarily of single-tenant industrial and office real property.

While we will continue to acquire select multi-tenant industrial and office properties, our primary focus is single-tenant industrial and office properties.

Generally, we

lease properties to tenants that our Adviser deems creditworthy under leases that will be full recourse obligations of our tenants or their affiliates.

Our primary focus currently and going forward is single-tenant industrial properties, although we may continue to acquire select multi-tenant industrial properties.

We may, from time to time, also acquire office properties, but this is not our primary focus.

Generally, we lease properties to tenants that our Adviser deems creditworthy under leases that will be full recourse obligations of our tenants or their affiliates.

We seek to obtain lease terms of approximately seven to 15 years with built-in rental increases.

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Our Adviser evaluates the financial capability of the tenant and its ability to perform per the terms of the lease, including obtaining certificates of insurance and verifying payment of real estate taxes on an annual basis.

Our Adviser will also examine the available operating results of prospective investment properties to determine whether or not projected rental levels are likely to be met.

Our Adviser will also examine

the available operating results of prospective investment properties to determine whether or not projected rental levels are likely to be met.

As further described below, our Adviser also evaluates the physical characteristics of a prospective property investment and comparable properties as well as the geographic location of the property in the particular market to ensure that the characteristics are favorable for re-leasing the property at approximately the same or higher rental rate should that necessity arise.

Our Adviser then computes the value of the property based on historical and projected operating results.

In addition, each property that we propose to purchase is appraised by an

independent appraiser.

In addition, each property that we propose to purchase is appraised by an independent appraiser.

These appraisals may take into consideration, among other things, the terms and conditions of the particular lease transaction and the conditions of the credit markets at the time the purchase is negotiated, as well as a value assessment of like properties in the market.

9 unchanged sentences

• Credit Enhancement.

Our Adviser may also seek to enhance the likelihood of a tenant’s lease obligations being satisfied through a cross-default with other tenant obligations, a letter of credit or a guaranty of lease obligations from each tenant’s corporate parent.

We believe that this type of credit enhancement, if obtained, provides us with additional financial security.

21 unchanged sentences

Use of Leverage

In addition to cash on hand and cash from operations, we use funds from various other sources to finance our acquisitions and operations, including common and preferred equity, our Credit Facility, mortgage financing and other sources that may become available from time to time.

In addition to cash on hand and cash from operations, we use funds from various other sources to finance our acquisitions and operations, including common and preferred equity, our Credit Facility, mortgage financing, long-term private debt, and other sources that may become available from time to time.

We believe that moderate leverage is prudent and we aspire to achieve an investment grade rating over time.

16 unchanged sentences

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

As of December 31, 2023, there was $445.8 million outstanding under our Credit Facility at a weighted average interest rate of approximately 6.84% and $2.0 million outstanding under letters of credit at a weighted average interest rate of 1.50%.

As of December 31, 2024, there was $351.9 million outstanding under our Credit Facility at a weighted average interest rate of approximately 5.79% and no outstanding letters of credit.

On December 18, 2024, we and the Operating Partnership entered into a Note Purchase Agreement with the institutional investors named therein, in connection with a private placement of $75.0 million of 6.47% senior unsecured notes, maturing on December 18, 2029 (the “2029 Notes”).

Conflict of Interest Policy

6 unchanged sentences

• engage in any other transaction with any of our directors, officers or our Adviser’s employees, or any entity in which any of our directors, officers or our Adviser’s employees has an interest of more than 5% (except that our Adviser may lease office space in a building that we own, provided that the rental rate under the lease is determined by our independent directors to be at a fair market rate).

Our policy also prohibits us from purchasing any real property owned by or co-investing with our Adviser, any of its affiliates or any business in which our Adviser or any of its subsidiaries have invested, except that we may lease property to existing and prospective portfolio companies of current or future affiliates, such as our affiliated publicly-traded funds Gladstone Capital Corporation (“Gladstone Capital”), Gladstone Land Corporation (“Gladstone Land”), or Gladstone Investment Corporation (“Gladstone Investment”), and other entities advised by our Adviser, so long as that entity does not control the portfolio company and the transaction is approved by both companies’ board of directors.

Our policy also prohibits us from purchasing any real property owned by or co-investing with our Adviser, any of its affiliates or any business in which our Adviser or any of its subsidiaries have invested, except that we may lease property to existing and prospective portfolio companies of current or future affiliates, such as our affiliated publicly-traded funds Gladstone Capital Corporation (“Gladstone Capital”), Gladstone Land Corporation (“Gladstone Land”), Gladstone Investment Corporation (“Gladstone Investment”), or Gladstone Alternative Income Fund (“Gladstone Alternative”), and other entities advised by our Adviser, so long as that entity does not control the portfolio company and the transaction is approved by both companies’ board of directors.

If we decide to change this policy on co-investments with our Adviser or its affiliates, we will seek our stockholders’ approval.

4 unchanged sentences

Code of Ethics

We have adopted a code of ethics and business conduct applicable to all personnel of our Adviser and Administrator that complies with the guidelines set forth in Item 406 of Regulation S-K of the Securities Act of 1933, as amended.

We have adopted a code of ethics and business conduct (a “Code”) applicable to all personnel of our Adviser and Administrator performing services on our behalf that complies with the guidelines set forth in Item 406 of Regulation S-K of the Securities Act of 1933.

This code establishes procedures for personal investments, restricts certain transactions by such personnel and requires the reporting of certain transactions and holdings by such personnel.

8 unchanged sentences

David Gladstone, our chairman and chief executive officer, is also the chairman, chief executive officer and the controlling stockholder of our Adviser and our Administrator.

Terry Lee Brubaker, our chief operating officer, also serves in the same capacities for our Adviser and our Administrator.

Arthur “Buzz” Cooper, our president, is also an executive managing director of our Adviser.

1 unchanged sentence

This investment committee is currently comprised of Messrs.

Gladstone, Brubaker, and Cooper, Laura Gladstone, who is a managing director of our Adviser, and John Sateri, who is also a managing director of our Adviser.

We believe that the review process of our investment committee gives us a competitive advantage over other REITs because of the substantial experience that its members possess and their unique perspective in evaluating the blend of corporate credit, real estate and lease terms that collectively provide an acceptable risk for our investments.

Gladstone and Cooper, Laura Gladstone, who is a managing director of our Adviser, and John Sateri, who is also a managing director of our Adviser and President of Gladstone Alternative.

We believe that the review process of our investment committee gives us a competitive advantage over other REITs because of the substantial experience that its

members possess and their unique perspective in evaluating the blend of corporate credit, real estate and lease terms that collectively provide an acceptable risk for our investments.

Our Adviser’s board of directors has empowered our investment committee to authorize and approve our investments, subject to the terms of the Advisory Agreement.

21 unchanged sentences

Our Adviser and Administrator also engage in other business ventures and, as a result, their resources are not dedicated exclusively to our business.

However, under the Advisory Agreement, our Adviser is required to devote sufficient resources to the administration of our affairs to discharge its obligations

under the agreement.

For example, our Adviser and Administrator also serve as the external adviser or administrator, respectively, to Gladstone Capital and Gladstone Investment, both publicly traded business development companies affiliated with us, Gladstone Land, a publicly traded agricultural REIT that is also our affiliate, and Gladstone Alternative, a non-diversified, closed-end management investment company that operates as an “interval fund” that is also our affiliate.

However, under the Advisory Agreement, our Adviser is required to devote sufficient resources to the administration of our affairs to discharge its obligations under the agreement.

The Advisory Agreement is not assignable or transferable by either us or our Adviser without the consent of the other party, except that our Adviser may assign the Advisory Agreement to an affiliate for whom our Adviser agrees to guarantee its obligations to us.

12 unchanged sentences

On February 20, 2020 we entered into a dealer manager agreement, as amended on February 9, 2023 (together, the “Dealer Manager Agreement”), whereby Gladstone Securities acts as the exclusive dealer manager in connection with our offering (the “Offering”) of up to (i) 20,000,000 shares of our Series F Preferred Stock on a “reasonable best efforts” basis (the “Primary Offering”), and (ii) 6,000,000 shares of Series F Preferred Stock pursuant to our distribution reinvestment plan (the “DRIP”) to those holders of the Series F Preferred Stock who participate in such DRIP.

The Series F Preferred Stock is registered with the SEC pursuant to a registration statement on Form S-3 (File No.

333-268549), as the same may be amended and/or supplemented (the “2022 Registration Statement”), under the Securities Act of 1933, as amended, and are offered and sold pursuant to a prospectus supplement, dated February 9, 2023, and a base prospectus dated November 23, 2022 relating to the 2022 Registration Statement (the “Prospectus”).

During the years ended December 31, 2021, 2022 and 2023, the Series F Preferred Stock was registered with the SEC pursuant to the 2020 Registration Statement, and offered and sold pursuant to a prospectus supplement, dated February 20, 2020, and a base prospectus dated February 11, 2020.

The Series F Preferred Stock was previously registered with the SEC pursuant to a registration statement on Form S-3 (File No.

333-268549), as the same may be amended and/or supplemented (the “2022 Registration Statement”), under the Securities Act, and are offered and sold pursuant to a prospectus supplement, dated February 9, 2023, and a base prospectus dated November 23, 2022 relating to the 2022 Registration Statement.

The Series F Preferred Stock is currently registered with the SEC pursuant to a registration statement on Form S-3 (File No.

333-277877), as the same may be amended and/or supplemented (the “2024 Registration Statement”), under the Securities Act, and is offered and sold pursuant to a prospectus supplement dated May 1, 2024, and a base prospectus dated March 21, 2024 relating to the 2024 Registration Statement (the “Prospectus”).

During the years ended December 31, 2022, and 2023, the Series F Preferred Stock was registered with the SEC pursuant to the 2022 Registration Statement, and offered and sold pursuant to a prospectus supplement, dated February 9, 2023, and a base prospectus dated November 23, 2022.

During the year ended December 31, 2024, the Series F Preferred Stock was registered with the SEC pursuant to the 2024 Registration Statement, and offered and sold pursuant to a prospectus supplement, dated May 1, 2024, and a base prospectus dated March 21, 2024.

Under the Dealer Manager Agreement, Gladstone Securities, as dealer manager, provides certain sales, promotional and marketing services to the Company in connection with the Offering, and the Company pays Gladstone Securities (i) selling commissions of 6.0% of the gross proceeds from sales of Series F Preferred Stock in the Primary Offering (the “Selling Commissions”), and (ii) a dealer manager fee of 3.0% of the gross proceeds from sales of Series F Preferred Stock in the Primary Offering (the “Dealer Manager Fee”).

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Available Information

Copies of our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and amendments, if any, to those reports filed or furnished with the Securities and Exchange Commission (the “SEC”), pursuant to Section 13(a) or 15(d) of the Securities Exchange Act are available free of charge through the investors section of our website at www.GladstoneCommercial.com as soon as practicable after such reports have been filed or furnished to the SEC.

Copies of our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements and amendments, if any, to those reports filed or furnished with the SEC, pursuant to Section 13(a) or 15(d) of the Securities Exchange Act are available free of charge through the investors section of our website at www.GladstoneCommercial.com as soon as practicable after such reports have been filed or furnished to the SEC.

Information on our website should not be considered part of this Form 10-K.

2 unchanged sentences

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 1. Business