What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-07 compared with 2024-11-04 · 153 added, 255 removed, 277 unchanged (60% of the section changed)

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We are an externally advised real estate investment trust (“REIT”) that was incorporated under the General Corporation Law of the State of Maryland on February 14, 2003.

We focus on acquiring, owning, and managing primarily office and industrial properties.

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.

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Under a net lease, the tenant is required to pay most or all operating, maintenance, repair, and insurance costs and real estate taxes with respect to the leased property.

We actively communicate with buyout funds, real estate brokers and other third parties to locate properties for potential acquisition or to provide mortgage financing in an effort to build our portfolio.

We actively communicate with private equity funds, real estate brokers and other third parties to locate properties for potential acquisition or to provide mortgage financing in an effort to build our portfolio.

We target secondary growth markets that possess favorable economic growth trends, diversified industries, and growing population and employment.

All references to annualized generally accepted accounting principles (“GAAP”) rent are rents that each tenant pays in accordance with the terms of its respective lease reported evenly over the non-cancelable term of the lease.

As of November 4, 2024:

As of May 7, 2025:

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

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Business Environment

The commercial real estate sector faced uncertainty in the first half of 2024 followed by some normalization in the third quarter of 2024.

Although the Federal Reserve hinted at potential interest rate cuts at the end of 2023, higher than expected consumer price index data (as reported by the U.S.

Bureau of Labor Statistics for all urban consumers) delayed interest rate cuts until September 2024 when the Federal Reserve voted to lower the federal funds rate to 4.75% - 5.00%.

The lower federal funds rate was countered by a less positive than expected federal jobs report, causing treasury rates to increase since early October.

The prolonged period of interest rate volatility and higher interest rates slowed the mortgage market and consequently dampened acquisition activity.

As a result, real estate transaction volumes have remained low, with tightened credit standards and rising capital costs preventing many investors from entering the market.

Despite capital markets volatility, the industrial sector continues to demonstrate strong fundamentals, consistently outperforming other real estate categories.

Cushman & Wakefield plc (“Cushman”) reported healthy industrial activity in the third quarter of 2024, with overall U.S.

industrial net absorption of 29.4 million square feet, down from 46.3 million in the second quarter.

Also, according to Cushman, new leasing activity measured 139.6 million square feet, which was up 1.8% compared to the second quarter of 2024 and 8.0% higher than the 10-year pre-pandemic average.

Through September 2024, the U.S.

recorded 433.6 million square feet of new transactions, with the market on pace to surpass 500.0 million square feet for the 10th straight year.

Year-over-year, Cushman reports that industrial asking rents increased by 4.3% in the third quarter of 2024.

Notably, Cushman reports that seven markets recorded absorption gains exceeding 3.0 million square feet in the third quarter of 2024, with significant contributions from Dallas-Fort Worth (10.5 million square feet), Savannah (6.6 million square feet), and Houston (6.2 million square feet).

The office sector in the third quarter of 2024 continued to recover from post-COVID lows.

According to Jones Lang LaSalle Incorporated (“JLL”), the U.S.

office availability rate declined for the first time in five years during the third quarter of 2024.

In addition, office leasing over the past six months reflects 86% of pre-pandemic activity levels, and office attendance rates reached a post-pandemic record in the quarter.

Despite these positive indicators, office concessions remain high according to JLL, symbolizing a gradual return and market that still has room for improvement.

Interest rates have fluctuated due to ongoing concerns about inflation, with the future direction of the Federal Reserve’s rate changes remaining uncertain.

The yield on the 10-year U.S.

Treasury Note, which declined slightly in the third quarter of 2024, ended the quarter at 3.81%.

In addition to inflation and interest rates, we remain cognizant of the U.S.

November elections and developments around the globe, including in the Middle East and Ukraine, all of which will impact the macroeconomy.

Despite these uncertainties, we believe that we are well positioned to navigate the current business environment.

We collected 100% of all outstanding cash rents for the nine months ended September 30, 2024.

Interest rates and capital markets remained the primary talking points and activity drivers in 2024.

During 2024, the benchmark 10-year U.S.

Treasury yield moved within a range from 3.6% at the low end to 4.8% at the high end, ending the year at 4.5%.

During the first quarter of 2025, the 10-year U.S.

Treasury yield ranged between 4.2% and 4.8%.

The Federal Reserve interest rate cuts introduced more volatility to the market, and the timing of future cuts, if any, remains uncertain.

This volatility translated directly to capital markets and investment volume as sellers’ pricing expectations lagged real-time changes in rates, with activity picking up slightly in the fourth quarter of 2024 and the first quarter of 2025.

According to Cushman & Wakefield plc (“Cushman”), industrial leasing demand softened slightly in the first quarter of 2025 but remains active and resilient.

New leasing activity totaled just under 140 million square feet in completed deals during the first quarter of 2025, marking a 6.4% decline year over year.

In addition, according to Cushman, the U.S.

industrial sector absorbed 23.1 million square feet of positive absorption in the quarter, down from 42.4 million square feet, quarter over quarter, but on par when comparing year over year.

Finally, industrial rents increased 4.3% year over year, and completions trended lower for the third straight quarter.

The office market saw modest recovery in 2024 and continued signs of improvement in the first quarter of 2025.

According to Cushman, net absorption was negative in the first quarter of 2025, but the four-quarter rolling absorption total was its strongest in over two years, improving by 30% quarter over quarter and 48% year over year.

Net absorption in the first quarter of 2025 was positive for one third of U.S.

We collected 100% of all outstanding base rents for the three months ended March 31, 2025.

This is a testament to the strength of our credit underwriting and asset management teams.

We believe that we have a diverse tenant base, and specifically, we do not have significant exposure to tenants in the retail, hospitality, airlines, and oil and gas industries.

Additionally, our properties are located across 27 states, which we believe mitigates our exposure to regional economic and weather-related issues, including regulations or laws implemented by state and local governments in any one geographic market or area.

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

We believe we currently have adequate liquidity in the near term, and we believe the availability on our Credit Facility is sufficient to cover all near-term debt obligations and operating expenses and to continue our industrial growth strategy.

We are in compliance with all of our debt covenants as of September 30, 2024.

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

In addition, on August 18, 2022, we added a new $150.0 million term loan component.

Based on market observations and conversations we routinely have with lenders, we believe that credit continues to be available for well-capitalized borrowers.

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

We believe we currently have adequate liquidity in the near term, and believe that our cash on hand combined with the availability on our Credit Facility is sufficient to cover all near-term debt obligations and operating expenses and to continue our industrial growth strategy.

We are in compliance with all of our debt covenants as of March 31, 2025.

Based on market observations and conversations we routinely have with lenders, we believe that credit continues to be available for well-capitalized borrowers, as demonstrated by the Operating Partnership’s issuance, on December 18, 2024, of $75.0 million of senior unsecured notes in a private placement.

We continue to monitor our portfolio and intend to maintain a reasonably conservative liquidity position for the foreseeable future.

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The geopolitical landscape remains fractured due to recent world events.

Many domestic manufacturing businesses seek to limit supply chain disruptions by bringing their operations back to the U.S.

The COVID-19 pandemic is behind us, but a level of work-from-home trends appear to be here to stay, which may affect demand for commercial real estate.

Many domestic manufacturing businesses seek to limit supply chain disruptions by bringing their operations back to the United States.

During the first quarter of 2025, the United States began a “reciprocal tariff” plan in an effort to increase the competitiveness of domestic manufacturing.

The short- and long-term impacts of such tariffs are yet to be known, but we feel we are well positioned in our industrial portfolio as we monitor the broader market conditions.

We expect that industrial demand will be further buoyed by government investment in infrastructure and advanced manufacturing operations.

The Federal Reserve recently indicated it does not expect additional rate increases and has indicated possible interest rate cuts, but the timing of those cuts is unknown.

On the office side, a level of work-from-home trends appears to be here to stay, but many employees are returning to the office, particularly following the presidential transition.

These uncertain times create both risks and opportunities for us and our tenants, and we believe we are well-capitalized and positioned to take advantage.

The environmental landscape remains unpredictable due to

the increase in intensity of weather patterns, including hurricanes.

We continue to monitor our properties and have not seen any significant impact to our properties in Florida, Georgia, North Carolina, South Carolina, and Tennessee from the recent hurricane season.

The environmental landscape remains unpredictable due to the increase in intensity of weather patterns, including hurricanes.

We continue to monitor our properties and have not seen any significant impact to our properties in Florida, Georgia, North Carolina, South Carolina, Tennessee, and Texas from the recent hurricane season.

We continue to focus on re-leasing vacant space, renewing upcoming lease expirations, re-financing upcoming loan maturities, and acquiring additional properties with associated long-term leases.

Currently, we have five partially vacant buildings and one fully vacant building.

Our available vacant space at September 30, 2024 represents 1.5% of our total square footage and the annual carrying costs on the vacant space, including real estate taxes and property operating expenses, are approximately $1.8 million.

Currently, we have four partially vacant buildings and one fully vacant building.

Our available vacant space at March 31, 2025 represented 1.6% of our total square footage and the annual carrying costs on the vacant space, including real estate taxes and property operating expenses, are approximately $2.0 million.

We continue to actively seek new tenants for these properties.

We believe our lease expiration schedule for the remainder of 2024 is manageable, as it equates to 1.8% of our lease revenue at September 30, 2024.

Property acquisitions since the beginning of 2020 have totaled $394.3 million and all but one transaction was industrial in nature, with a weighted average lease term of 14.0 years and a current weighted average lease term today of 10.8 years.

We believe our lease expiration schedule for the remainder of 2025 is manageable, as it equates to 2.5% of our lease revenue at March 31, 2025.

Property acquisitions since the beginning of 2020 have totaled $472.7 million and all but one transaction was industrial in nature, with a weighted average lease term of 13.6 years and a weighted average lease term of 10.4 years at the time of this filing.

Our ability to make new investments is highly dependent upon our ability to procure financing.

Our principal sources of financing generally include the issuance of equity securities, long-term mortgage loans secured by properties, borrowings under our $125.0 million senior unsecured revolving credit facility (“Revolver”), with KeyBank National Association (“KeyBank”), which matures in August 2026, our $160.0 million term loan facility (“Term Loan A”), which matures in August 2027, our $60.0 million term loan facility (“Term Loan B”), which matures in February 2026, and our $150.0 million term loan facility (“Term Loan C”) which matures in February 2028.

Our principal sources of financing generally include the issuance of equity securities, long-term unsecured notes in the private placement market, long-term mortgage loans secured by properties, borrowings under our $125.0 million senior unsecured revolving credit facility (“Revolver”), with KeyBank National Association (“KeyBank”), which matures in August 2026, our $160.0 million term loan facility (“Term Loan A”), which matures in August 2027, our $60.0 million term loan facility (“Term Loan B”), which matures in February 2026, our $150.0 million term loan facility (“Term Loan C”) which matures in February 2028, and our Operating Partnership’s $75.0 million senior unsecured notes (the “2029 Notes”) which mature in December 2029.

As of March 31, 2025, there was $40.0 million outstanding under Term Loan B.

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

While lenders’ credit standards have tightened, we continue to look to national and regional banks, insurance companies and non-bank lenders to make mortgage loans to finance our real estate activities.

While lenders’ credit standards have tightened, we continue to look to private credit institutions, national and regional banks, insurance companies and non-bank lenders to finance our real estate activities.

Recent Developments

Sale Activity

During the nine months ended September 30, 2024, we continued to execute our capital recycling program, whereby we sold non-core properties.

We expect to continue to execute our capital recycling program and sell non-core properties as reasonable disposition opportunities become available, and use the sales proceeds to acquire properties in our target, secondary growth markets or pay down outstanding debt.

During the nine months ended September 30, 2024, we sold six non-core properties, located in Columbus, Ohio;

Draper, Utah;

Richardson, Texas;

Egg Harbor, New Jersey;

Cumming, Georgia;

and Lawrenceville, Georgia, which are summarized in the table below (dollars in thousands):

Aggregate Square Footage Sold Aggregate Sales Price Aggregate Sales Costs Aggregate Impairment Charge for the Nine Months Ended September 30, 2024 Aggregate Gain on Sale of Real Estate, net

412,767 $ 36,325 $ 1,193 $ 493 $ 10,554

On April 1, 2025, we sold our 60,000 square foot property in Hickory, North Carolina for $5.1 million.

We realized a $0.4 million gain on sale.

On April 30, 2025, we completed the transaction to sell our 676,031 square foot property in Tifton, Georgia for $18.5 million, incurring $0.4 million in closing costs.

During the year ended December 31, 2024, we recorded a sales-type lease receivable related and derecognized the carry value of this property, recognizing a $3.9 million selling profit from sales-type lease, net, that was included in the gain on sale of real estate, net, in the consolidated statement of operations.

Acquisition Activity

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

Square Footage Lease Term Purchase Price Capitalized Acquisition Expenses Annualized GAAP Fixed Lease Payments

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

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

355,778 10.8 years $ 73,725 $ 475 $ 6,146

Leasing Activity

During and subsequent to the nine months ended September 30, 2024, we executed ten leases, 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

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

Aggregate Square Footage Weighted Average Remaining Lease Term Aggregate Annualized GAAP Fixed Lease Payments

67,709 3.0 years $ 309

During the nine months ended September 30, 2024, we had three lease terminations, which are summarized below (dollars in thousands):

Aggregate Square Footage Reduced Aggregate Accelerated Rent Aggregate Accelerated Rent Recognized through September 30, 2024

93,937 $ 589 $ 589

Financing Activity

During the nine months ended September 30, 2024, we repaid two mortgages, collateralized by two properties, which are summarized in the table below (dollars in thousands):

Fixed Rate Debt Repaid Interest Rate on Fixed Rate Debt Repaid

$ 17,674 5.05 %

On October 21, 2024, we fully repaid one mortgage with an outstanding balance of $14.8 million collateralized by two properties.

This mortgage had a fixed rate of 4.04%.

During the nine months ended September 30, 2024, we extended the maturity date of one mortgage, collateralized by one property, which is summarized in the table below (dollars in thousands):

Variable Rate Debt Extended Interest Rate on Variable Rate Debt Extended Extension Term

$ 7,386 SOFR + 2.25% 1.3 years

On October 21, 2024, we issued $15.2 million of fixed rate mortgage debt, collateralized by two properties, at an interest rate of 5.60% and a maturity date of August 31, 2029.

On April 30, 2025, we fully repaid one mortgage with an outstanding balance of $7.2 million collateralized by one property.

This mortgage had a variable interest rate of SOFR + 2.25%.

Equity Activities

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

During the nine months ended September 30, 2024, we did not sell any shares of common stock under the 2023 Common Stock Sales Agreement.

During the three months ended March 31, 2025, we did not sell any shares of common stock under the 2023 Common Stock Sales Agreement.

On March 26, 2024, we entered into Amendment No.

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In connection with the 2024 Common Stock Sales Agreement, we filed a prospectus supplement with the SEC dated March 26, 2024, to the prospectus dated March 21, 2024, for the offer and sale of an aggregate offering amount of $250.0 million of common stock.

During the nine months ended September 30, 2024, we sold 3,450,500 shares of common stock, raising approximately $49.5 million in net proceeds under the 2024 Common Stock Sales Agreement.

During the three months ended March 31, 2025, we sold 1,770,581 shares of common stock, raising approximately $27.7 million in net proceeds under the 2024 Common Stock Sales Agreement.

Universal Shelf Registration Statements

On November 23, 2022, we filed an automatic shelf registration statement on Form S-3 (File No.

333-268549) (the “2022 Registration Statement”).

There was no limit on the aggregate amount of the securities that we could offer pursuant to the 2022 Registration Statement.

On March 13, 2024, we filed the 2024 Registration Statement, which was declared effective on March 21, 2024.

The 2024 Registration Statement allows us to issue up to $1.3 billion of securities and replaces the 2022 Registration Statement.

The 2024 Registration Statement allows us to issue up to $1.3 billion of securities and replaced the 2022 Registration Statement.

Series F Preferred Stock Continuous Offering

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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 30,180 shares of our Series F Preferred Stock, raising $0.7 million in net proceeds, during the nine months ended September 30, 2024.

We sold 13,500 shares of our Series F Preferred Stock, raising $0.3 million in net proceeds, during the three months ended March 31, 2025.

Non-controlling Interest in Operating Partnership

Gladstone Commercial Corporation conducts substantially all of its operations through a subsidiary, Gladstone Commercial Limited Partnership, a Delaware limited partnership (the “Operating Partnership”).

As of September 30, 2024 and December 31, 2023, we owned approximately 99.9% and 99.2%, re spectively, of the outstanding operating partnership units in the Operating Partnership (“OP Units”).

During the nine months ended September 30, 2024, we redeemed 271,169 OP Units for an equivalent amount of common stock.

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

As of March 31, 2025 and December 31, 2024, we owned approximately 99.9% and 99.9%, respectively, of the outstanding operating partnership units in the Operating Partnership (“OP Units”).

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

Diversity of Our Portfolio

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By diversifying our portfolio, our Adviser intends to reduce the adverse effect on our portfolio of a single under-performing investment or a downturn in any particular industry or geographic market.

For the nine months ended September 30, 2024, our largest tenant comprised only 4.3% of total lease revenue.

The table below reflects the breakdown of our total lease revenue by tenant industry classification for the three and nine months ended September 30, 2024 and 2023 (dollars in thousands):

For the three months ended September 30, For the nine months ended September 30,

2024 2023 2024 2023

Industry Classification Lease Revenue Percentage of Lease Revenue Lease Revenue Percentage of Lease Revenue Lease Revenue Percentage of Lease Revenue Lease Revenue Percentage of Lease Revenue

Diversified/Conglomerate Services $ 7,704 19.7 % $ 4,588 12.6 % $ 17,541 15.9 % $ 13,780 12.3 %

For the three months ended March 31, 2025, our largest tenant comprised only 5.4% of total lease revenue.

The table below reflects the breakdown of our total lease revenue by tenant industry classification for the three months ended March 31, 2025 and 2024 (dollars in thousands):

For the three months ended March 31,

Industry Classification Lease Revenue Percentage of Lease Revenue Lease Revenue Percentage of Lease Revenue

Automotive $ 5,532 14.7 % $ 5,302 14.8 %

Diversified/Conglomerate Services 5,244 14.0 4,627 13.0

Buildings and Real Estate 3,818 10.2 2,534 7.1

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Banking 2,269 6.1 2,314 6.5

Machinery 1,836 4.9 1,608 4.5

Healthcare 1,833 4.9 2,225 6.2

Personal & Non-Durable Consumer Products 1,829 4.9 1,916 5.4

Machinery 2,000 5.1 1,487 4.1 5,477 4.9 4,305 3.9

Beverage, Food & Tobacco 1,511 4.0 1,464 4.1

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Printing & Publishing 266 0.7 266 0.7

Oil & Gas 248 0.7 — —

Education 126 0.3 133 0.4

Home & Office Furnishings 123 0.3 123 0.3

Oil & Gas 91 0.2 — — 91 0.1 — —

Total $ 37,501 100.0 % $ 35,721 100.0 %

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

State Lease Revenue for the three months ended September 30, 2024 Percentage of Lease Revenue Number of Leases for the three months ended September 30, 2024 Lease Revenue for the three months ended September 30, 2023 Percentage of Lease Revenue Number of Leases for the three months ended September 30, 2023

Pennsylvania $ 7,084 18.1 % 11 $ 3,640 10.0 % 9

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

State Lease Revenue for the three months ended March 31, 2025 Percentage of Lease Revenue Number of Leases for the three months ended March 31, 2025 Lease Revenue for the three months ended March 31, 2024 Percentage of Lease Revenue Number of Leases for the three months ended March 31, 2024

Texas $ 5,328 14.2 % 17 $ 4,526 12.7 % 14

Florida 4,268 10.9 9 4,236 11.6 9

Ohio 3,089 7.9 15 3,660 10.0 16

Georgia 2,976 7.6 9 3,109 8.5 11

North Carolina 2,372 6.0 10 2,398 6.6 10

Alabama 2,170 5.5 6 2,168 5.9 6

Colorado 1,872 4.8 4 1,869 5.1 4

Michigan 1,745 4.4 6 1,638 4.5 6

Indiana 1,190 3.0 10 1,053 2.9 10

All Other States 7,755 19.8 38 8,183 22.5 42

Total $ 39,235 100.0 % 133 $ 36,464 100.0 % 137

State Lease Revenue for the nine months ended September 30, 2024 Percentage of Lease Revenue Number of Leases for the nine months ended September 30, 2024 Lease Revenue for the nine months ended September 30, 2023 Percentage of Lease Revenue Number of Leases for the nine months ended September 30, 2023

Pennsylvania 5,246 14.0 11 3,736 10.5 10

Texas 13,854 12.4 15 13,607 12.2 14

Florida 4,386 11.7 9 4,254 11.9 9

Ohio 3,085 8.2 15 3,187 8.9 15

Georgia 9,295 8.3 9 9,007 8.1 11

North Carolina 2,397 6.4 9 2,332 6.5 10

Georgia 2,206 5.9 9 2,956 8.3 11

Alabama 2,169 5.8 6 2,160 6.0 6

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Gladstone also serves as the chairman and chief executive officer of both our Adviser and Administrator, as well as president and chief investment officer of our Adviser.

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

Arthur “Buzz” Cooper, our president, also serves as executive vice president of commercial and industrial real estate of our Adviser.

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Michael LiCalsi (who also serves as our Administrator’s president, general counsel, and secretary, as well as executive vice president of administration of our Adviser) and their respective staffs.

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

Our Adviser and Administrator also provide investment advisory and administrative services, respectively, to certain of our affiliates, including, but not limited to, Gladstone Capital Corporation and Gladstone Investment Corporation, both publicly-traded business development companies, Gladstone Land Corporation, a publicly-traded REIT that primarily invests in farmland, and Gladstone Alternative Income Fund, a non-diversified, closed-end management company that operates as an “interval fund” that is also our affiliate.

With the exception of Mr.

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Jay Beckhorn, our treasurer, and Mr.

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

Cooper, all of our executive officers and all of our directors serve as either directors or executive officers, or both, of Gladstone Capital Corporation, Gladstone Investment Corporation, and Gladstone Alternative Income Fund.

In addition, with the exception of Messrs.

Cooper and Gerson, all of our executive officers and all of our directors, serve as either directors or executive officers, or both, of Gladstone

Land Corporation.

Cooper and Gerson do not put forth any material efforts in assisting affiliated companies.

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

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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Incentive Fee

Pursuant to the Advisory Agreement, the calculation of the incentive fee rewards the Adviser in circumstances where our quarterly Core FFO (defined at the end of this paragraph), before giving effect to any incentive fee, or pre-incentive fee Core FFO, exceeds 2.0% quarterly, or 8.0% annualized, of adjusted total stockholders’ equity (after giving effect to the base management fee but before giving effect to the incentive fee).

We refer to this as the hurdle rate.

The Adviser will receive 15.0% of the amount of our pre-incentive fee Core FFO that exceeds the hurdle rate.

Pursuant to the Advisory Agreement, the calculation of the incentive fee rewards the Adviser in circumstances where our quarterly Core FFO (defined at the end of this paragraph), before giving effect to any incentive fee, or pre-incentive fee Core FFO, exceeds 2.0% quarterly, or 8.0% annualized, of adjusted total equity (after giving effect to the base management fee but

before giving effect to the incentive fee).

We refer to this as the new hurdle rate.

The Adviser will receive 15.0% of the amount of our pre-incentive fee Core FFO that exceeds the new hurdle rate.

However, in no event shall the incentive fee for a particular quarter exceed by 15.0% (the cap) the average quarterly incentive fee paid by us for the previous four quarters (excluding quarters for which no incentive fee was paid).

Core FFO (as defined in the Advisory Agreement) is GAAP net (loss) income (attributable) available to common stockholders, excluding the incentive fee, depreciation and amortization, any realized and unrealized gains, losses or other non-cash items recorded in net (loss) income (attributable) available to common stockholders for the period, and one-time events pursuant to changes in GAAP.

Core FFO (as defined in the Advisory Agreement) is GAAP net income (loss) available (attributable) to common stockholders, excluding the incentive fee, depreciation and amortization, any realized and unrealized gains, losses or other non-cash items recorded in net income (loss) available (attributable) to common stockholders for the period, and one-time events pursuant to changes in GAAP.

On January 10, 2023, we amended and restated the Advisory Agreement by entering into the Seventh Amended Advisory Agreement, as approved unanimously by our Board of Directors, including specifically, our independent directors.

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At the end of the fiscal year, if this number is positive, then the capital gain fee payable for such time period shall equal 15.0% of such amount.

No capital gain fee was recognized during the three and nine months ended September 30, 2024 or 2023.

No capital gain fee was recognized during the three months ended March 31, 2025 or 2024.

Termination Fee

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The preparation of our financial statements in accordance with GAAP requires management to make judgments that are subjective in nature to make certain estimates and assumptions.

Application of these accounting policies involves the exercise of judgment regarding the use of assumptions as to future uncertainties, and as a result, actual results could materially differ from these estimates.

Application of these accounting policies involves the exercise of judgment regarding the use of assumptions as to future uncertainties, and as a result, actual results could materially differ

from these estimates.

A summary of all of our significant accounting policies is provided in Note 1 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2024, filed by us with the U.S.

Securities and Exchange Commission (the “SEC”) on February 18, 2025 (our “2024 Form 10-K”).

There were no material changes to our critical accounting policies or estimates during the nine months ended September 30, 2024.

There were no material changes to our critical accounting policies or estimates during the three months ended March 31, 2025.

Results of Operations

The weighted average yield on our total portfolio, which was 8.5% and 8.0% as of September 30, 2024 and 2023, respectively, is calculated by taking the annualized straight-line rents plus operating expense recoveries, reflected as lease revenue on our condensed consolidated statements of operations and other comprehensive income, less property operating expenses, of each acquisition since inception, as a percentage of the acquisition cost plus subsequent capital improvements.

The weighted average yield does not account for the interest expense incurred on the mortgages placed on our properties.

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

For the three months ended September 30,

The weighted average yield on our total portfolio, which was 8.5% and 8.5% as of March 31, 2025 and 2024, respectively, is calculated by taking the annualized straight-line rents plus operating expense recoveries, reflected as lease revenue on our condensed consolidated statements of operations and other comprehensive income, less property operating expenses, of each acquisition since inception, as a percentage of the acquisition cost plus subsequent capital improvements.

The weighted average yield does not account for the interest expense incurred on the mortgages placed on our properties or other types of existing indebtedness.

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

For the three months ended March 31,

2025 2024 $ Change % Change

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Gain on sale of real estate, net — 283 (283) (100.0) %

Gain on debt extinguishment, net — 300 (300) (100.0) %

Other income 631 34 597 1,755.9 %

3 unchanged sentences

Distributions attributable to senior common stock (101) (105) 4 (3.8) %

Gain (loss) on extinguishment of Series F preferred stock 2 (1) 3 (300.0) %

Net income (loss) available (attributable) to common stockholders and Non-controlling OP Unitholders $ 8,511 $ (1,416) $ 9,927 (701.1) %

Net income (loss) available (attributable) to common stockholders and Non-controlling OP Unitholders per weighted average share and unit - basic & diluted $ 0.20 $ (0.04) $ 0.24 (600.0) %

Loss on extinguishment of Series F preferred stock (10) (3) (7) 233.3 %

Net income available to common stockholders and Non-controlling OP Unitholders $ 1,917 $ 306 $ 1,611 526.5 %

Net income available to common stockholders and Non-controlling OP Unitholders per weighted average share and unit - basic & diluted $ 0.04 $ 0.01 $ 0.03 300.0 %

FFO available to common stockholders and Non-controlling OP Unitholders - basic (1) $ 15,160 $ 13,542 $ 1,618 11.9 %

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FFO per weighted average share of common stock and Non-controlling OP Units - diluted (1) $ 0.34 $ 0.34

$ 0.05 15.2 %

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

For the nine months ended September 30,

2024 2023 $ Change % Change

Operating revenues

Lease revenue $ 112,013 $ 111,675 $ 338 0.3 %

Total operating revenues $ 112,013 $ 111,675 $ 338 0.3 %

Operating expenses

Depreciation and amortization $ 42,683 $ 44,125 $ (1,442) (3.3) %

Property operating expenses 18,373 20,286 (1,913) (9.4) %

Base management fee 4,580 4,808 (228) (4.7) %

Incentive fee 3,562 — 3,562 100.0 %

Administration fee 1,950 1,734 216 12.5 %

General and administrative 3,064 3,437 (373) (10.9) %

Impairment charge 5,043 13,577 (8,534) (62.9) %

Total operating expense before incentive fee waiver $ 79,255 $ 87,967 $ (8,712) (9.9) %

Incentive fee waiver (1,417) — (1,417) 100.0 %

Total operating expenses $ 77,838 $ 87,967 $ (10,129) (11.5) %

Other income (expense)

Interest expense $ (28,259) $ (27,845) $ (414) 1.5 %

Gain on sale of real estate, net 10,554 4,245 6,309 148.6 %

Gain on debt extinguishment, net 300 — 300 100.0 %

Other income 73 262 (189) (72.1) %

Total other expense, net $ (17,332) $ (23,338) $ 6,006 (25.7) %

Net income $ 16,843 $ 370 $ 16,473 4,452.2 %

Distributions attributable to Series E, F, and G preferred stock (9,334) (9,179) (155) 1.7 %

Distributions attributable to senior common stock (317) (323) 6 (1.9) %

Loss on extinguishment of Series F preferred stock (4) (12) 8 (66.7) %

Gain on repurchase of Series G preferred stock — 3 (3) (100.0) %

Net income (loss) available (attributable) to common stockholders and Non-controlling OP Unitholders $ 7,188 $ (9,141) $ 16,329 (178.6) %

Net income (loss) available (attributable) to common stockholders and Non-controlling OP Unitholders per weighted average share and unit - basic & diluted $ 0.17 $ (0.23) $ 0.40 (173.9) %

FFO available to common stockholders and Non-controlling OP Unitholders - basic (1) $ 44,060 $ 44,316 $ (256) (0.6) %

FFO available to common stockholders and Non-controlling OP Unitholders - diluted (1) $ 44,377 $ 44,639 $ (262) (0.6) %

FFO per weighted average share of common stock and Non-controlling OP Unit - basic (1) $ 1.07 $ 1.10 $ (0.03) (2.7) %

FFO per weighted average share of common stock and Non-controlling OP Unit - diluted (1) $ 1.07 $ 1.10

$ (0.03) (2.7) %

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

Same Store Analysis

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“Acquired & disposed properties” are properties which were acquired, disposed of or classified as held for sale at any point subsequent to December 31, 2023.

“Properties with vacancy” are properties that were fully vacant or had greater than 5.0% vacancy, based on square footage, at any point subsequent to January 1, 2023.

“Properties with vacancy” are properties that were fully vacant or had greater than 5.0% vacancy, based on square footage, at any point subsequent to December 31, 2023.

Operating Revenues

For the three months ended September 30,

(Dollars in Thousands)

Lease Revenues 2024 2023 $ Change % Change

Same Store Properties $ 32,847 $ 29,798 $ 3,049 10.2 %

Acquired & Disposed Properties 2,078 2,304 (226) (9.8) %

Properties with Vacancy 4,310 4,362 (52) (1.2) %

$ 39,235 $ 36,464 $ 2,771 7.6 %

For the nine months ended September 30,

For the three months ended March 31,

(Dollars in Thousands)

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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 three months ended September 30, 2024, as compared to the three months ended September 30, 2023, due to a settlement received at one of our properties related to deferred maintenance.

Lease revenues from same store properties increased for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, due to a settlement received at one of our properties related to deferred maintenance, partially offset by accelerated rent attributable to a lease termination during the nine months ended September 30, 2023.

Lease revenues decreased for acquired and disposed of properties for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, primarily due to the loss of variable lease payments from the eight property sales subsequent to September 30, 2023, minimally offset by lease revenue from the eight properties acquired subsequent to September 30, 2023.

Lease revenues decreased for acquired and disposed of properties for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, primarily due to the loss of variable lease payments from the eight property sales subsequent to September 30, 2023, minimally offset by lease revenue from the eight properties acquired subsequent to September 30, 2023 and accelerated rent attributable to a lease termination on a property that was sold during the nine months ended September 30, 2024.

Lease revenues decreased for our properties with vacancy for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, mainly due to a loss of rental revenue from increased vacancy, partially offset by an increase in variable lease payments.

Lease revenues increased for our properties with vacancy for the nine months ended September 30, 2024 from the comparable 2023 period, due to an increase in variable lease payments.

Lease revenues from same store properties increased for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, due to an increase in recovery revenue from property expenses and an increase in rental rates from leasing activity subsequent to the three months ended March 31, 2024.

Lease revenues decreased for acquired and disposed of properties for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, primarily due to the loss of rental and variable lease payments from the seven property sales during and subsequent to March 31, 2024, minimally offset by lease revenue from the 13 properties acquired subsequent to March 31, 2024.

Lease revenues decreased for our properties with vacancy for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, mainly due to a loss of rental revenue from increased vacancy, partially offset by an increase in variable lease payments.

Operating Expenses

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

Depreciation and amortization expense decreased for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, due to the reduced depreciation and amortization expense from the eight property sales subsequent to September 30, 2023.

For the three months ended September 30,

(Dollars in Thousands)

Property Operating Expenses 2024 2023 $ Change % Change

Same Store Properties $ 4,306 $ 3,938 $ 368 9.3 %

Acquired & Disposed Properties 164 900 (736) (81.8) %

Properties with Vacancy 2,211 1,983 228 11.5 %

$ 6,681 $ 6,821 $ (140) (2.1) %

For the nine months ended September 30,

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

For the three months ended March 31,

(Dollars in Thousands)

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Property operating expenses consist of franchise taxes, property management fees, insurance, ground lease payments, property maintenance and repair expenses paid on behalf of certain of our properties.

The increase in property operating expenses for same store properties for the three and nine months ended September 30, 2024, from the comparable 2023 period, was a result of general cost increases due to the inflationary environment during the three and nine months ended September 30, 2024.

The decrease in property operating expenses for acquired and disposed of properties for the three and nine months ended September 30, 2024, from the comparable 2023 period, is a result of a decrease in property operating expenses from the eight property sales subsequent to September 30, 2023, minimally offset by the property operating expense from the eight properties acquired subsequent to September 30, 2023.

The increase in property operating expenses for properties with vacancy for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, is a result of increased repair expense.

The decrease in property operating expenses for properties with vacancy for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, is a result of a lower reduction in real estate taxes due to successful appeals as compared to the prior period.

The base management fee paid to the Adviser decreased for the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023, due to a decrease in Gross Tangible Real Estate over the three and nine months ended September 30, 2024 from property sales as compared to Gross Tangible Real Estate during the three and nine months ended September 30, 2023.

The increase in property operating expenses for same store properties for the three months ended March 31, 2025, from the comparable 2024 period, was a result of general cost increases due to the inflationary environment during the three months ended March 31, 2025.

The decrease in property operating expenses for acquired and disposed of properties for the three months ended March 31, 2025, from the comparable 2024 period, is a result of a decrease in property operating expenses from the seven property sales during and subsequent to March 31, 2024, minimally offset by the property operating expense from the 13 properties acquired subsequent to March 31, 2024.

The increase in property operating expenses for properties with vacancy for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, is a result of increased maintenance expense.

The base management fee paid to the Adviser increased slightly for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, due to an increase in Gross Tangible Real Estate over the three months ended March 31, 2025 from property acquisitions as compared to Gross Tangible Real Estate during the three months ended March 31, 2024.

The calculation of the base management fee is described in detail above in subheading “Advisory and Administration Agreements.”

The incentive fee paid to the Adviser increased for the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023, due to the payment of the incentive fee being contractually eliminated for the quarters ended March 31, 2023 through September 30, 2023, as outlined in the Seventh Amended Advisory Agreement and Eighth Amended Advisory Agreement.

We recorded an incentive fee, which was partially waived, during the three and nine months ended September 30, 2024.

The net incentive fee paid to the Adviser increased for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, due to the Adviser waiving a portion of the incentive fee for the three months ended March 31, 2024.

The Adviser did not wave the incentive fee during the three months ended March 31, 2025.

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

The administration fee paid to the Administrator increased for the three and nine months ended September 30, 2024, as compared to the three and nine months ended September 30, 2023, due to our Administrator incurring greater costs that are allocated to us.

The administration fee paid to the Administrator decreased slightly for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, due to our Administrator allocating a smaller portion of expenses to us.

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

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

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

Other Income and Expenses

Interest expense decreased for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023.

This decrease was primarily a result of costs associated with the maturity of several interest rate caps in the previous period.

Interest expense increased for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023.

This increase was primarily a result of increased interest costs on variable rate debt, as global interest rates increased through most of the period in reaction to growing inflation, partially offset with costs associated with the maturity of several interest rate caps in the prior period.

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

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

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

Interest expense decreased for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024.

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

We did not sell any properties during the three months ended March 31, 2025.

We sold three non-core office properties during the three months ended March 31, 2024, and as a result, incurred a gain on sale of real estate, net, and a gain on debt extinguishment, net.

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

Net Income Available to Common Stockholders and Non-controlling OP Unitholders

Net income available to common stockholders and Non-controlling OP Unitholders increased for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, primarily due to settlement revenue related to deferred maintenance in the current period, higher impairment charges in the prior period, and a gain on sale, net, during the current period.

This was partially offset by the incentive fee payable to the Adviser accrued in the current period, which was contractually eliminated in the prior period.

Net income available to common stockholders and Non-controlling OP Unitholders increased for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, primarily due to a decrease in depreciation and amortization as well as property operating expenses from the eight property sales subsequent to September 30, 2023, higher impairment charges in the prior period, and a gain on sale, net, during the current period.

This was partially offset by the incentive fee payable to the Adviser accrued in the current period, which was contractually eliminated in the prior period.

Net income available to common stockholders and Non-controlling OP Unitholders increased for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, primarily due to an increase in recovery revenue from property expenses, an increase in rental rates from leasing activity, no impairment charge in the current period, and lower interest expense in the period.

This was partially offset by a higher net incentive fee payable to the Adviser accrued in the current period and no gain on sale, net, and gain on debt extinguishment, net.

Liquidity and Capital Resources

Our sources of liquidity include cash flows from operations, cash and cash equivalents, borrowings under our Credit Facility, and additional issuances of equity and/or debt securities.

Our available liquidity as of September 30, 2024 was $80.7 million, consisting of approximately $10.5 million in cash and cash equivalents and available borrowing capacity of $70.2 million under our Credit Facility.

Our available borrowing capacity under the Credit Facility increased to $73.5 million as of November 4, 2024.

Our available liquidity as of March 31, 2025 was $80.5 million, consisting of approximately $10.4 million in cash and cash equivalents and available borrowing capacity of $70.1 million under our Credit Facility.

Our available borrowing capacity under the Credit Facility increased to $80.6 million as of May 7, 2025.

Future Capital Needs

We actively seek conservative investments that we expect are likely to produce income to pay distributions to our stockholders.

We intend to use the proceeds received from future equity raised and debt capital borrowed to continue to invest in industrial and office real property, make mortgage loans, or pay down outstanding borrowings under our Revolver.

We actively seek conservative investments that we expect are likely to produce income to allow us to pay distributions to our stockholders and Non-controlling OP Unitholders.

We intend to use the proceeds received from future equity raised and debt capital borrowed to continue to invest in industrial properties, which is our strategic focus, or to a lesser extent, office real property, or pay down outstanding borrowings under our Revolver.

Accordingly, to ensure that we are able to effectively execute our business strategy, we routinely review our liquidity requirements and continually evaluate all potential sources of liquidity.

Our short-term liquidity needs include proceeds necessary to fund our distributions to stockholders, pay the debt service costs on our existing long-term mortgages, refinance 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, bank debt, and long-term private debt, refinance maturing debt and fund our current operating costs.

Our long-term liquidity needs include proceeds necessary to grow and maintain our portfolio of investments.

We believe that our available liquidity is sufficient to fund our distributions to stockholders, pay the debt service costs on our existing long-term mortgages and fund our current operating costs in the near term.

We also believe we will be able to refinance our mortgage debt as it matures.

We believe that our available liquidity is sufficient to fund our distributions to stockholders, pay debt service costs, and fund our current operating costs in the near term.

We also believe we will be able to refinance our mortgage debt, bank debt, and long-term private debt as they mature.

Additionally, to satisfy our short-term obligations, we may request credits to our management fees that are issued from our Adviser, although our Adviser is under no obligation to provide any such credits, either in whole or in part.

1 unchanged sentence

Equity Capital

During the nine months ended September 30, 2024, we raised net proceeds of $49.5 million of common equity under the 2024 Common Stock Sales Agreement.

We raised net proceeds of $0.7 million from sales of our Series F Preferred Stock during the nine months ended September 30, 2024.

As of November 4, 2024, we had the ability to raise up to $1.0 billion of additional equity capital through the sale and issuance of securities that are registered under the 2024 Registration Statement, in one or more future public offerings.

During the three months ended March 31, 2025, we raised net proceeds of $27.7 million of common equity under the 2024 Common Stock Sales Agreement.

We raised net proceeds of $0.3 million from sales of our Series F Preferred Stock during the three months ended March 31, 2025.

As of May 7, 2025, we had the ability to raise up to $1.0 billion of additional equity capital through the sale and issuance of securities that are registered under the 2024 Registration Statement, in one or more future public offerings.

We expect to continue to use our 2024 Common Stock Sales Agreement as a source of liquidity for the remainder of 2025.

As of September 30, 2024, we had 39 mortgage notes payable in the aggregate principal amount of $273.4 million, collateralized by a total of 45 properties with a remaining weighted average maturity of 3.5 years.

The weighted-average interest rate on the mortgage notes payable as of September 30, 2024 was 4.23%.

As of March 31, 2025, we had 40 mortgage notes payable in the aggregate principal amount of $269.1 million, collateralized by a total of 45 properties with a remaining weighted average maturity of 3.3 years.

The weighted-average interest rate on the mortgage notes payable as of March 31, 2025 was 4.29%.

We continue to see banks and other non-bank lenders willing to issue mortgages for properties comparable to those held in our portfolio on terms that are commercially reasonable.

Consequently, we remain focused on obtaining mortgages through insurance companies, regional banks, non-bank lenders and, to a lesser extent, the commercial mortgage-backed securities market.

As of September 30, 2024, we had mortgage debt in the aggregate principal amount of $2.4 million payable during the remainder of 2024 and $34.3 million payable during 2025.

The 2024 principal amount payable includes amortizing principal payments only, as there are no balloon principal payments due during the remaining three months of 2024.

We anticipate being able to refinance our mortgages that come due during 2025 with a combination of new mortgage debt, availability under our Credit Facility, the issuance of additional equity securities under our 2024 Common Stock Sales Agreement, the sale and issuance of other equity securities (including our Series F Preferred Stock) that are registered under the 2024 Registration Statement, or the sale and issuance of unregistered equity or debt securities.

As of March 31, 2025, we had mortgage debt in the aggregate principal amount of $17.5 million payable during the remainder of 2025 and $35.4 million payable during 2026.

The 2025 principal amount payable includes both amortizing principal payments and two balloon principal payments due during the remaining nine months of 2025.

We anticipate being able to refinance our mortgages that come due during 2026 with a combination of new mortgage debt, availability under our Credit Facility, the issuance of long-term unsecured notes in the private placement market, the issuance of additional equity securities under our 2024 Common Stock Sales Agreement, the sale and issuance of other equity securities (including our Series F Preferred Stock) that are registered under the 2024 Registration Statement, or the sale and issuance of unregistered equity or debt securities.

Operating Activities

Net cash provided by operating activities during the nine months ended September 30, 2024, was $34.2 million, as compared to net cash provided by operating activities of $48.5 million for the nine months ended September 30, 2023.

Net cash provided by operating activities during the three months ended March 31, 2025, was $17.7 million, as compared to net cash provided by operating activities of $15.0 million for the three months ended March 31, 2024.

The majority of cash from operating activities is generated from the lease revenues that we receive from our tenants.

1 unchanged sentence

Investing Activities

Net cash provided by investing activities during the nine months ended September 30, 2024, was $8.6 million, which primarily consisted of proceeds from six property sales coupled with lender release of funds from escrow and tenant reserve payments, partially offset by six property acquisitions and capital improvements performed at certain of our properties.

Net cash used in investing activities during the nine months ended September 30, 2023, was $3.6 million, which primarily consisted of two property acquisitions, coupled with capital improvements performed at certain of our properties, partially offset by proceeds from five property sales.

Net cash used in investing activities during the three months ended March 31, 2025, was $75.6 million, which primarily consisted of six property acquisitions, capital improvements performed at certain of our properties, and deposits paid for future acquisitions.

Net cash provided by investing activities during the three months ended March 31, 2024, was $18.5 million, which primarily consisted of proceeds from three property sales, offset by capital improvements performed at certain of our properties.

Financing Activities

Net cash used in financing activities during the nine months ended September 30, 2024, was $44.4 million, which primarily consisted of $24.4 million of mortgage principal repayments, net borrowings on our credit facility, Series F Preferred Stock redemptions, and distributions paid to common, senior common and preferred shareholders, partially offset by the issuance of $50.9 million of equity.

Net cash used in financing activities for the nine months ended September 30, 2023, was $38.8 million, which primarily consisted of $57.6 million of mortgage debt repayments, and distributions paid to common, senior common and preferred shareholders, partially offset by the issuance of $9.8 million of equity, issuances of $9.0 million of new mortgage debt, and net borrowings on our Credit Facility.

Net cash provided by financing activities during the three months ended March 31, 2025, was $58.2 million, which primarily consisted of the issuance of $28.4 million of equity and net borrowings on our credit facility, partially offset by $2.4 million of mortgage principal repayments and distributions paid to common, senior common and preferred shareholders.

Net cash used in financing activities for the three months ended March 31, 2024, was $34.7 million, which primarily consisted of $19.8 million of mortgage debt repayments, and distributions paid to common, senior common and preferred shareholders, partially offset by the issuance of $0.2 million of equity and net borrowings on our Credit Facility.

Credit Facility

6 unchanged sentences

The Credit Facility’s current bank syndicate is comprised of KeyBank, Fifth Third Bank, The Huntington National Bank, Bank of America, Synovus Bank, United Bank, First Financial Bank, and S&T Bank.

As of September 30, 2024, there was $423.3 million outstanding under our Credit Facility at a weighted average interest rate of approximately 6.27% and no outstanding letters of credit.

As of November 4, 2024, the maximum additional amount we could draw under the Credit Facility was $73.5 million.

We were in compliance with all covenants under the Credit Facility as of September 30, 2024.

As of March 31, 2025, there was $401.3 million outstanding under our Credit Facility at a weighted average interest rate of approximately 5.72% and $2.1 million outstanding letters of credit, at a weighted average interest rate of 1.35%.

As of May 7, 2025, the maximum additional amount we could draw under the Credit Facility was $80.6 million.

We were in compliance with all covenants under the Credit Facility as of March 31, 2025.

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 the 2029 Notes.

The amount outstanding approximates fair value as of March 31, 2025.

The proceeds were used to pay down Term Loan B by $20.0 million and the Revolver by $55.0 million.

Contractual Obligations

The following table reflects our material contractual obligations as of September 30, 2024 (dollars in thousands):

The following table reflects our material contractual obligations as of March 31, 2025 (dollars in thousands):

Payments Due by Period

3 unchanged sentences

Operating Lease Obligations (3) 5,569 457 931 932 3,249

Finance Lease Obligations (3) 8,098 155 356 356 7,231

Purchase Obligations (4) 13,298 11,412 1,886 — —

$ 884,095 $ 110,855 $ 557,917 $ 182,309 $ 33,014

(1) Debt obligations represent borrowings under our Revolver, which represents $53.3 million of the debt obligation due in 2026, our Term Loan A, which represents $160.0 million of the debt obligation due in 2027, our Term Loan B, which represents $60.0 million of the debt obligation due in 2026, our Term Loan C, which represents $150.0 million of the debt obligation due in 2028 and mortgage notes payable that were outstanding as of September 30, 2024.

This figure does not include $(0.02) million of premiums and (discounts), net and $4.0 million of deferred financing costs, net, which are reflected in mortgage notes payable, net and borrowings under Term Loan, net on the condensed consolidated balance sheets.

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

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

thus, the interest payment obligation calculated for purposes of this table was based upon rates and balances as of September 30, 2024.

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

(1) Debt obligations represent borrowings under our Revolver, which represents $51.3 million of the debt obligation due in 2026, Term Loan A, which represents $160.0 million of the debt obligation due in 2027, Term Loan B, which represents $40.0 million of the debt obligation due in 2026, Term Loan C, which represents $150.0 million of the debt obligation due in 2028, the 2029 Notes, which represents $75.0 million of the debt obligation due in 2029, and mortgage notes payable that were outstanding as of March 31, 2025.

This figure does not include $(0.001) million of premiums and (discounts), net and $4.7 million of deferred financing costs, net, which are reflected in mortgage notes payable, net, borrowings under

Term Loan A, Term Loan B, Term Loan C, net, and senior unsecured notes, net, on the condensed consolidated balance sheets.

(2) Interest on debt obligations includes estimated interest on borrowings under our Revolver, Term Loan A, Term Loan B, Term Loan C, the 2029 notes, and mortgage notes payable.

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

thus, the interest payment obligation calculated for purposes of this table was based upon rates and balances as of March 31, 2025.

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

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

Off-Balance Sheet Arrangements

We did not have any material off-balance sheet arrangements as of September 30, 2024.

We did not have any material off-balance sheet arrangements as of March 31, 2025.

Funds from Operations

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Comparison of FFO, using the NAREIT definition, to similarly titled measures for other REITs may not necessarily be meaningful due to possible differences in the application of the NAREIT definition used by such REITs.

FFO available to common stockholders is FFO adjusted to subtract distributions made to holders of preferred stock and senior common stock.

We believe that net income available to common stockholders is the most directly comparable GAAP measure to FFO available to common stockholders.

Basic funds from operations per share (“Basic FFO per share”), and diluted funds from operations per share (“Diluted FFO per share”), is FFO available to common stockholders divided by the number of weighted average shares of common stock outstanding and FFO available to common stockholders divided by the number of weighted average shares of common stock outstanding on a diluted basis, respectively, during a period.

FFO available to common stockholders and holders of Non-controlling interests in the Operating Partnership (“Non-controlling OP Unitholders”) is FFO adjusted to subtract distributions made to holders of preferred stock and senior common stock.

We believe that net income available to common stockholders is the most directly comparable GAAP measure to FFO available to common stockholders and Non-controlling OP Unitholders.

Basic funds from operations per share (“Basic FFO per share”), and diluted funds from operations per share (“Diluted FFO per share”), is FFO available to common stockholders and Non-controlling OP Unitholders divided by the number of weighted average shares of the aggregate of shares of common stock and OP Units held by Non-controlling OP Unitholders outstanding and FFO available to common stockholders and Non-controlling OP Unitholders divided by the number of weighted average shares of the aggregate of shares of common stock and OP Units held by Non-controlling OP Unitholders outstanding on a diluted basis, respectively, during a period.

We believe that FFO available to common stockholders, Basic FFO per share and Diluted FFO per share are useful to investors because they provide investors with a further context for evaluating our FFO results in the same manner that investors use net income and earnings per share (“EPS”), in evaluating net income available to common stockholders.

In addition, because most REITs provide FFO available to common stockholders, Basic FFO and Diluted FFO per share information to the investment community, we believe these are useful supplemental measures when comparing us to other REITs.

We believe that net income is the most directly comparable GAAP measure to

FFO, Basic EPS is the most directly comparable GAAP measure to Basic FFO per share, and that Diluted EPS is the most directly comparable GAAP measure to Diluted FFO per share.

The following table provides a reconciliation of our FFO available to common stockholders for the three and nine months ended September 30, 2024 and 2023, respectively, to the most directly comparable GAAP measure, net income available to common stockholders, and a computation of basic and diluted FFO per weighted average share of common stock:

For the three months ended September 30, For the nine months ended September 30,

(Dollars in Thousands, Except for Per Share Amounts) (Dollars in Thousands, Except for Per Share Amounts)

2024 2023 2024 2023

We believe that net income is the most directly comparable GAAP measure to FFO, Basic EPS is the most directly comparable GAAP measure to Basic FFO per share, and that Diluted EPS is the most directly comparable GAAP measure to Diluted FFO per share.

The following table provides a reconciliation of our FFO available to common stockholders for the three months ended March 31, 2025 and 2024, respectively, to the most directly comparable GAAP measure, net income available to common stockholders, and a computation of basic and diluted FFO per weighted average share of common stock:

For the three months ended March 31,

(Dollars in Thousands, Except for Per Share Amounts)

Calculation of basic FFO per share of common stock and Non-controlling OP Unit

1 unchanged sentence

Distributions attributable to preferred and senior common stock (3,209) (3,217)

Gain (loss) on extinguishment of Series F preferred stock, net 2 (1) (4) (12)

Gain on repurchase of Series G preferred stock — — — 3

Net income (loss) available (attributable) to common stockholders and Non-controlling OP Unitholders $ 8,511 $ (1,416) $ 7,188 $ (9,141)

Loss on extinguishment of Series F preferred stock, net (10) (3)

Net income available to common stockholders and Non-controlling OP Unitholders $ 1,917 $ 306

Real estate depreciation and amortization $ 13,243 $ 13,326

10 unchanged sentences

Distributions attributable to preferred and senior common stock (3,209) (3,217)

Gain (loss) on extinguishment of Series F preferred stock, net 2 (1) (4) (12)

Gain on repurchase of Series G preferred stock — — — 3

Net income (loss) available (attributable) to common stockholders and Non-controlling OP Unitholders $ 8,511 $ (1,416) $ 7,188 $ (9,141)

Loss on extinguishment of Series F preferred stock, net (10) (3)

Net income available to common stockholders and Non-controlling OP Unitholders $ 1,917 $ 306

Real estate depreciation and amortization $ 13,243 $ 13,326

11 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-Q

Item 2. Management’s Discussion and Analysis