GLADSTONE COMMERCIAL CORP 10-Q

Item 1. Financial Statements Gladstone Commercial Corporation Condensed Consolidated Balance Sheets (Dollars in Thousands, Except Share and Per Share Data) (Unaudited) June 30, 2025 December 31, 2024 ASSETS Real estate, at cost $ 1,347,152 $ 1,211,793 Less: accumulated depreciation 339,331 319,646 Total real estate, net 1,007,821 892,147 Lease intangibles, net 114,242 95,107 Real estate and related assets held for sale 2,801 4,363 Cash and cash equivalents 11,660 10,956 Restricted cash 4,240 4,118 Funds held in escrow 5,728 5,367 Right-of-use assets from operating leases 3,836 3,961 Right-of-use assets from finance leases, net 2,918 — Deferred rent receivable, net 46,352 45,324 Sales-type lease receivable, net — 18,618 Other assets 10,395 14,387 TOTAL ASSETS $ 1,209,993 $ 1,094,348 LIABILITIES, MEZZANINE EQUITY AND EQUITY LIABILITIES Mortgage notes payable, net $ 257,882 $ 269,579 Borrowings under Revolver 94,370 1,900 Borrowings under Term Loan A, Term Loan B and Term Loan C, net 348,294 347,948 Borrowings under unsecured Term Loan D, net 19,839 — Senior unsecured notes, net 74,006 73,958 Deferred rent liability, net 20,619 21,996 Operating lease liabilities 3,941 4,063 Finance lease liabilities 2,947 — Asset retirement obligation 5,222 5,061 Accounts payable and accrued expenses 19,950 13,198 Due to Adviser and Administrator (1) 3,011 2,540 Other liabilities 12,550 12,763 TOTAL LIABILITIES $ 862,631 $ 753,006 Commitments and contingencies (2) MEZZANINE EQUITY Series E and G redeemable preferred stock, net, par value $ 0.001 per share; $ 25 per share liquidation preference; 10,750,886 and 10,750,886 shares authorized; and 7,052,334 and 7,052,334 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively (3) $ 170,041 $ 170,041 TOTAL MEZZANINE EQUITY $ 170,041 $ 170,041 EQUITY Senior common stock, par value $ 0.001 per share; 950,000 shares authorized; and 386,723 and 389,190 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively (3) $ 1 $ 1 Common stock, par value $ 0.001 per share, 62,505,603 and 62,400,887 shares authorized; and 46,508,942 and 43,986,038 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively (3) 46 44 Series F redeemable preferred stock, par value $ 0.001 per share; $ 25 per share liquidation preference; 25,793,511 and 25,898,227 shares authorized and 836,429 and 914,553 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively (3) 1 1 Additional paid in capital 820,634 784,389 Accumulated other comprehensive income 4,303 10,648 Distributions in excess of accumulated earnings ( 647,794 ) ( 623,912 ) TOTAL STOCKHOLDERS' EQUITY $ 177,191 $ 171,171 OP Units held by Non-controlling OP Unitholders (3) 130 130 TOTAL EQUITY $ 177,321 $ 171,301 TOTAL LIABILITIES, MEZZANINE EQUITY AND EQUITY $ 1,209,993 $ 1,094,348 (1) Refer to Note 2 “Related-Party Transactions” (2) Refer to Note 7 “Commitments and Contingencies” (3) Refer to Note 8 “Equity and Mezzanine Equity” The accompanying notes are an integral part of these condensed consolidated financial statements. 4 Table of Contents Gladstone Commercial Corporation Condensed Consolidated Statements of Operations and Comprehensive Income (Dollars in Thousands, Except Share and Per Share Data) (Unaudited) For the three months ended June 30, For the six months ended June 30, 2025 2024 2025 2024 Operating revenues Lease revenue $ 39,533 $ 37,057 $ 77,034 $ 72,779 Total operating revenues $ 39,533 $ 37,057 $ 77,034 $ 72,779 Operating expenses Depreciation and amortization $ 14,249 $ 16,015 $ 27,492 $ 29,341 Property operating expenses 7,258 5,807 14,158 11,692 Base management fee (1) 1,640 1,516 3,207 3,051 Incentive fee (1) 709 1,245 1,348 2,416 Administration fee (1) 590 594 1,212 1,225 General and administrative 1,400 1,046 2,284 2,093 Impairment charge 9 — 9 493 Total operating expense before incentive fee waiver $ 25,855 $ 26,223 $ 49,710 $ 50,311 Incentive fee waiver (1) ( 709 ) ( 250 ) ( 709 ) ( 1,021 ) Total operating expenses $ 25,146 $ 25,973 $ 49,001 $ 49,290 Other income (expense) Interest expense $ ( 10,058 ) $ ( 9,463 ) $ ( 19,196 ) $ ( 18,960 ) Gain (loss) on sale of real estate, net 377 ( 47 ) 377 236 Gain on debt extinguishment, net — — — 300 Other (expense) income ( 72 ) 26 559 60 Total other expense, net $ ( 9,753 ) $ ( 9,484 ) $ ( 18,260 ) $ ( 18,364 ) Net income $ 4,634 $ 1,600 $ 9,773 $ 5,125 Net (income) loss (available) attributable to OP Units held by Non-controlling OP Unitholders ( 1 ) 11 ( 3 ) 9 Net income available to the Company $ 4,633 $ 1,611 $ 9,770 $ 5,134 Distributions attributable to Series E, F, and G preferred stock ( 3,085 ) ( 3,116 ) ( 6,193 ) ( 6,229 ) Distributions attributable to senior common stock ( 101 ) ( 105 ) ( 202 ) ( 211 ) Gain (loss) on extinguishment of Series F preferred stock, net 9 ( 4 ) ( 1 ) ( 7 ) Net income (loss) available (attributable) to common stockholders $ 1,456 $ ( 1,614 ) $ 3,374 $ ( 1,313 ) Income per weighted average share of common stock - basic & diluted Income (loss) available (attributable) to common stockholders $ 0.03 $ ( 0.04 ) $ 0.07 $ ( 0.03 ) Weighted average shares of common stock outstanding Basic and Diluted 46,219,663 40,311,476 45,417,792 40,157,479 Earnings per weighted average share of senior common stock $ 0.26 $ 0.26 $ 0.52 $ 0.52 Weighted average shares of senior common stock outstanding - basic 387,496 402,817 387,136 402,837 Comprehensive (loss) income Change in unrealized (loss) gain related to interest rate hedging instruments, net $ ( 2,344 ) $ 470 $ ( 6,360 ) $ 5,888 Other comprehensive (loss) income ( 2,344 ) 470 ( 6,360 ) 5,888 Net income $ 4,634 $ 1,600 $ 9,773 $ 5,125 Comprehensive income $ 2,290 $ 2,070 $ 3,413 $ 11,013 Comprehensive (income) loss (available) attributable to OP Units held by Non-controlling OP Unitholders ( 1 ) 11 ( 3 ) 9 Total comprehensive income available to the Company $ 2,289 $ 2,081 $ 3,410 $ 11,022 (1) Refer to Note 2 “Related-Party Transactions” The accompanying notes are an integral part of these condensed consolidated financial statements. 5 Table of Contents Gladstone Commercial Corporation Condensed Consolidated Statements of Cash Flows (Dollars in Thousands) (Unaudited) For the six months ended June 30, 2025 2024 Cash flows from operating activities: Net income $ 9,773 $ 5,125 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 27,492 29,341 Impairment charge 9 493 Gain on debt extinguishment, net — ( 300 ) Gain on sale of real estate, net ( 377 ) ( 236 ) Amortization of deferred financing costs 913 847 Amortization of deferred rent asset and liability, net ( 2,996 ) ( 3,575 ) Receipt of sales-type lease receivable 18,618 — Amortization of discount and premium on assumed debt, net 15 18 Asset retirement obligation expense 68 66 Amortization of right-of-use asset from operating leases and operating lease liabilities, net 3 4 Amortization of right-of-use asset finance lease liabilities, net 9 — Bad debt expense — 64 Operating changes in assets and liabilities Increase in other assets ( 1,374 ) ( 883 ) Increase in deferred rent receivable ( 1,207 ) ( 2,256 ) Increase in accounts payable and accrued expenses 4,149 1,146 Increase in amount due to Adviser and Administrator 471 1,085 Decrease in other liabilities ( 1,784 ) ( 1,588 ) Leasing commissions paid ( 250 ) ( 725 ) Net cash provided by operating activities $ 53,532 $ 28,626 Cash flows from investing activities: Acquisition of real estate and related intangible assets $ ( 153,067 ) $ ( 11,954 ) Improvements of existing real estate ( 7,182 ) ( 3,964 ) Proceeds from sale of real estate 4,846 21,052 Receipts from lenders for funds held in escrow — 2,513 Payments to lenders for funds held in escrow ( 361 ) ( 495 ) Receipts from tenants for reserves 934 608 Payments to tenants from reserves ( 998 ) ( 1,953 ) Deposits on future acquisitions ( 1,450 ) — Deposits applied against acquisition of real estate investments 1,450 — Net cash (used in) provided by investing activities $ ( 155,828 ) $ 5,807 Cash flows from financing activities: Proceeds from issuance of equity $ 38,954 $ 11,400 Offering costs paid ( 551 ) ( 196 ) Redemption of Series F preferred stock ( 2,383 ) ( 317 ) Payments for deferred financing costs ( 199 ) ( 43 ) Principal repayments on mortgage notes payable ( 11,988 ) ( 22,088 ) Borrowings from revolving credit facility 166,200 41,500 Repayments on revolving credit facility ( 73,730 ) ( 36,100 ) Borrowings on unsecured term loan 20,000 — Increase in security deposits 247 153 Distributions paid to common, senior common, preferred stock and Non-controlling OP Unitholders ( 33,428 ) ( 30,458 ) Net cash provided by (used in) financing activities $ 103,122 $ ( 36,149 ) Net increase (decrease) in cash, cash equivalents, and restricted cash $ 826 $ ( 1,716 ) Cash, cash equivalents, and restricted cash at beginning of period $ 15,074 $ 16,135 6 Table of Contents Cash, cash equivalents, and restricted cash at end of period $ 15,900 $ 14,419 SUPPLEMENTAL AND NON-CASH INFORMATION Unrealized (loss) gain related to interest rate hedging instruments, net $ ( 6,360 ) $ 5,888 Right-of-use asset from finance leases $ 2,938 $ — Finance lease liabilities $ ( 2,938 ) $ — Capital improvements and leasing commissions included in accounts payable and accrued expenses $ 7,682 $ 6,917 Increase in asset retirement obligation assumed in acquisition $ 93 $ — Dividends paid on Series F preferred stock via additional share issuances $ 248 $ 261 (1) Prior period conformed to current presentation. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same amounts shown in the condensed consolidated statements of cash flows (dollars in thousands): For the six months ended June 30, 2025 2024 Cash and cash equivalents $ 11,660 $ 10,416 Restricted cash 4,240 4,003 Total cash, cash equivalents, and restricted cash shown in the consolidated statement of cash flows $ 15,900 $ 14,419 The accompanying notes are an integral part of these condensed consolidated financial statements. 7 Table of Contents Gladstone Commercial Corporation Notes to Condensed Consolidated Financial Statements (Unaudited) 1. Organization, Basis of Presentation and Significant Accounting Policies Gladstone Commercial Corporation is a real estate investment trust (“REIT”) that was incorporated under the General Corporation Law of the State of Maryland on February 14, 2003. We focus on acquiring, owning and managing primarily industrial and office properties. Subject to certain restrictions and limitations, our business is managed by Gladstone Management Corporation, a Delaware corporation (the “Adviser”), and administrative services are provided by Gladstone Administration, LLC, a Delaware limited liability company (the “Administrator”), each pursuant to a contractual arrangement with us. Our Adviser and Administrator collectively employ all of our personnel and pay their salaries, benefits, and general expenses directly. 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 June 30, 2025, we owned 143 properties totaling 17.0 million square feet across 27 states. All references herein to “we,” “our,” “us” and the “Company” mean Gladstone Commercial Corporation and its consolidated subsidiaries, except where it is made clear that the term means only Gladstone Commercial Corporation. Interim Financial Information Our interim financial statements are prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and in accordance with Article 10 of Regulation S-X. Accordingly, certain disclosures accompanying annual financial statements prepared in accordance with GAAP are omitted. The year-end balance sheet data presented herein was derived from audited financial statements but does not include all disclosures required by GAAP. In the opinion of our management, all adjustments, consisting solely of normal recurring accruals, necessary for the fair statement of financial statements for the interim period, have been included. The interim financial statements and notes thereto should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 18, 2025. The results of operations for the three and six months ended June 30, 2025 are not necessarily indicative of the results that may be expected for other interim periods or for the full 2025 fiscal year. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Significant Accounting Policies The preparation of our financial statements in accordance with GAAP requires management to make judgments that are subjective in nature and requires management to make certain estimates and assumptions. Application of these accounting policies involves the exercise of judgment regarding the use of assumptions as to future uncertainties, and as a result, actual results could materially differ from these estimates. A summary of all of our significant accounting policies is provided in Note 1, “Organization, Basis of Presentation and Significant Accounting Policies,” to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024. There were no material changes to our critical accounting policies during the three and six months ended June 30, 2025. Segment Reporting Our current business strategy includes one reporting segment: Real Estate Rental Operations. We generate revenues, earnings, net income, and cash flows through our single segment as follows: We collect rent from our customers through operating leases, including reimbursements for the majority of our property operating costs. We expect to generate earnings growth by increasing rents, maintaining high occupancy rates, and controlling expenses. The primary drivers of our revenue growth will be the rolling of in-place leases to current market rents when leases expire, and the acquisition of new properties. We believe our active portfolio management, combined with the skills of our asset management team will allow us to maximize net income across our portfolio. 8 Table of Contents Our Chief Operating Decision Maker (“CODM”) is our Chief Executive Officer. The CODM uses consolidated net income to make decisions about allocating resources to individual properties and assessing performance. The CODM will sometimes reference other metrics, including net operating income; however, as net income is the measure most consistent with the amounts disclosed in the consolidated financial statements, only consolidated net income is disclosed. Recently Issued Accounting Pronouncements In November 2024, the FASB issued ASU 2024-03, “Income Statement - Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses” (“ASU 2024-03”). ASU 2024-03 requires public entities to disaggregate specific types of expenses, including disclosures for depreciation, intangible asset amortization, and selling expenses. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, with prospective application required and retrospective application or early adoption permitted. We are currently evaluating the impact from adopting ASU 2024-03 on our consolidated financial statements and disclosures. 2. Related Party Transactions Gladstone Management and Gladstone Administration We are externally managed pursuant to contractual arrangements with our Adviser and our Administrator, which collectively employ all of our personnel and pay their salaries, benefits, and general expenses directly. Both our Adviser and Administrator are affiliates of ours, as their parent company is owned and controlled by Mr. David Gladstone, our chairman and chief executive officer. One of our executive officers, Mr. Gladstone, serves as a director and executive officer of our Adviser and our Administrator. Our president, Mr. Arthur “Buzz” Cooper, is also an executive vice president of commercial and industrial real estate of our Adviser. Mr. Michael LiCalsi, our chief administrative officer, co-general counsel, and co-secretary, also serves in the same roles for our Adviser and Administrator (in addition to serving as president of our Administrator). Mr. Erich Hellmold, our co-general counsel and co-secretary, also serves in the same roles for our Adviser and Administrator. We have entered into an advisory agreement with our Adviser, as amended from time to time (the “Advisory Agreement”), and an administration agreement with our Administrator (the “Administration Agreement”). The services and fees under the Advisory Agreement and Administration Agreement are described below. As of June 30, 2025 and December 31, 2024, $ 3.0 million and $ 2.5 million, respectively, was collectively due to our Adviser and Administrator, pursuant to the Advisory Agreement and Administration Agreement. Our entrance into the Advisory Agreement and each amendment thereto has been approved unanimously by our Board of Directors (“Board of Directors”). Our Board of Directors reviews and considers renewing the agreements with our Adviser and Administrator annually, typically during the month of July. During its July 2025 meeting, our Board of Directors reviewed and renewed the Administration Agreement for an additional year, through August 31, 2026. Base Management Fee The base management fee is payable quarterly in arrears and calculated at an annual rate of 0.425 % ( 0.10625 % per quarter) of the prior calendar quarter’s “Gross Tangible Real Estate,” defined in the Advisory Agreement as the current gross value of our property portfolio (meaning the aggregate of each property’s original acquisition price plus the cost of any subsequent capital improvements thereon). For the three and six months ended June 30, 2025, we recorded a base management fee of $ 1.6 million and $ 3.2 million, respectively. For the three and six months ended June 30, 2024, we recorded a base management fee of $ 1.5 million and $ 3.1 million, respectively. 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 new hurdle rate. However, in no event shall the incentive fee for a particular quarter exceed by 15.0 % (the cap) the average quarterly incentive fee paid by us for the previous four quarters (excluding quarters for which no incentive fee was paid). Core FFO, as defined in the Advisory Agreement, is GAAP net income (loss) available (attributable) to common stockholders, excluding the incentive fee, depreciation and amortization, any realized and unrealized gains, losses or other non-cash items recorded in net income (loss) available (attributable) to common stockholders for the period, and one-time events pursuant to changes in GAAP. 9 Table of Contents On January 10, 2023, the Company amended and restated the Advisory Agreement by entering into the Seventh Amended and Restated Investment Advisory Agreement between the Company and the Adviser (the “Seventh Amended Advisory Agreement”), as approved unanimously by our Board of Directors, including specifically, our independent directors. The Seventh Amended Advisory Agreement contractually eliminated the payment of the incentive fee for the quarters ended March 31, 2023 and June 30, 2023. The calculation of all other fees was unchanged. On July 11, 2023, the Company amended and restated the Advisory Agreement by entering into the Eighth Amended and Restated Investment Advisory Agreement between the Company and the Adviser (the “Eighth Amended Advisory Agreement”), as approved unanimously by our Board of Directors, including specifically, our independent directors. The Eighth Amended Advisory Agreement contractually eliminated the payment of the incentive fee for the quarters ended September 30, 2023 and December 31, 2023. In addition, the Eighth Amended Advisory Agreement also clarified that for any future quarter whereby an incentive fee would exceed by greater than 15 % the average quarterly incentive fee paid, the measurement would be versus the last four quarters where an incentive fee was actually paid. The calculation of all other fees was unchanged. For the three and six months ended June 30, 2025, we recorded an incentive fee of $ 0.7 million and $ 1.3 million, respectively, partially offset by credits related to non-contractual, unconditional, and irrevocable waivers issued by the Adviser of $ 0.7 million and $ 0.7 million, respectively. For the three and six months ended June 30, 2024, we recorded an incentive fee of $ 1.2 million and $ 2.4 million, respectively, partially offset by credits related to non-contractual, unconditional, and irrevocable waivers issued by the Adviser of $ 0.3 million and $ 1.0 million, respectively. Capital Gain Fee Under the Advisory Agreement, we will pay to the Adviser a capital gain-based incentive fee that will be calculated and payable in arrears as of the end of each fiscal year (or upon termination of the Advisory Agreement). In determining the capital gain fee, we will calculate aggregate realized capital gains and aggregate realized capital losses for the applicable time period. For this purpose, aggregate realized capital gains and losses, if any, equals the realized gain or loss calculated by the difference between the sales price of the property, less any costs to sell the property and the current gross value of the property (equal to the property’s original acquisition price plus any subsequent non-reimbursed capital improvements) of the disposed property. At the end of the fiscal year, if this number is positive, then the capital gain fee payable for such time period shall equal 15.0 % of such amount. No capital gain fee was recognized during the three and six months ended June 30, 2025 or 2024. Termination Fee The Advisory Agreement includes a termination fee clause whereby, in the event of our termination of the agreement without cause (with 120 days’ prior written notice and the vote of at least two-thirds of our independent directors), a termination fee would be payable to the Adviser equal to two times the sum of the average annual base management fee and incentive fee earned by the Adviser during the 24 -month period prior to such termination. A termination fee is also payable if the Adviser terminates the Advisory Agreement after we have defaulted and applicable cure periods have expired. The Advisory Agreement may also be terminated for cause by us (with 30 days’ prior written notice and the vote of at least two-thirds of our independent directors), with no termination fee payable. Cause is defined in the Advisory Agreement to include if the Adviser breaches any material provisions thereof, the bankruptcy or insolvency of the Adviser, dissolution of the Adviser and fraud or misappropriation of funds. Administration Agreement Under the terms of the Administration Agreement, we pay separately for our allocable portion of the Administrator’s overhead expenses in performing its obligations to us including, but not limited to, rent and our allocable portion of the salaries and benefits expenses of our Administrator’s employees, including, but not limited to, our chief financial officer, treasurer, chief compliance officer, co-general counsels and co-secretaries (Mr. LiCalsi also serves as our Administrator’s president, co-general counsel and co-secretary), and their respective staffs. Our allocable portion of the Administrator’s expenses are generally derived by multiplying our Administrator’s total expenses by the approximate percentage of time the Administrator’s employees perform services for us in relation to their time spent performing services for all companies serviced by our Administrator under contractual agreements. We believe that the methodology of allocating the Administrator’s total expenses by approximate percentage of time services were performed among all companies serviced by our Administrator more closely approximates fees paid for actual services performed. For the three and six months ended June 30, 2025, we recorded an 10 Table of Contents administration fee of $ 0.6 million and $ 1.2 million, respectively. For the three and six months ended June 30, 2024, we recorded an administration fee of $ 0.6 million and $ 1.2 million, respectively. Gladstone Securities Gladstone Securities, LLC (“Gladstone Securities”), is a privately held broker dealer registered with the Financial Industry Regulatory Authority (“FINRA”) and insured by the Securities Investor Protection Corporation (“SIPC”). Gladstone Securities is an affiliate of ours, as its parent company is owned and controlled by David Gladstone, our chairman and chief executive officer. Mr. Gladstone also serves on the board of managers of Gladstone Securities. Mortgage Financing Arrangement Agreement We entered into an agreement with Gladstone Securities, effective June 18, 2013, for it to act as our non-exclusive agent to assist us with arranging mortgage financing for our owned properties. In connection with this engagement, Gladstone Securities will, from time to time, continue to solicit the interest of various commercial real estate lenders or recommend to us third-party lenders offering credit products or packages that are responsive to our needs. We pay Gladstone Securities a financing fee in connection with the services it provides to us for securing mortgage financing on any of our properties. The amount of these financing fees, which are payable upon closing of the financing, are based on a percentage of the amount of the mortgage, generally ranging from 0.15 % to a maximum of 1.00 % of the mortgage obtained. The amount of the financing fees may be reduced or eliminated, as determined by us and Gladstone Securities, after taking into consideration various factors, including, but not limited to, the involvement of any third-party brokers and market conditions. We did not pay financing fees to Gladstone Securities during the three and six months ended June 30, 2025. We paid financing fees to Gladstone Securities of $ 9,233 during the three and six months ended June 30, 2024, which are included in mortgage notes payable, net, in the condensed consolidated balance sheets, or 0.13 % of the mortgage principal secured. Our Board of Directors renewed the agreement for an additional year, through August 31, 2026, at its July 2025 meeting. Dealer Manager Agreement 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 6.00 % Series F Cumulative Redeemable Preferred Stock, par value $ 0.001 per share (the “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. Prior to the effectiveness of the Company’s Registration Statement on Form S-3 (File No. 333-277877) (the “2024 Registration Statement”), the Series F Preferred Stock was registered with the SEC pursuant to an automatic shelf registration statement on Form S-3 (File No. 333-268549), as amended and supplemented (the “2022 Registration Statement”), under the Securities Act of 1933, as amended, and was 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. During the years ended December 31, 2020, 2021 and 2022, the Series F Preferred Stock was registered with the SEC pursuant to a registration statement on Form S-3 (File No. 333-236143) (the “2020 Registration Statement”), and offered and sold pursuant to a prospectus supplement, dated February 20, 2020, and a base prospectus dated February 11, 2020. Under the Dealer Manager Agreement, Gladstone Securities, as dealer manager, provide certain sales, promotional and marketing services to us in connection with the Offering, and we pay 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”). No Selling Commissions or Dealer Manager Fee are paid with respect to shares sold pursuant to the DRIP. Gladstone Securities may, in its sole discretion, re-allow for payment of a portion of the Dealer Manager Fee to participating broker-dealers in support of the Offering. We paid fees of $ 4,950 and $ 0.03 million to Gladstone Securities during the three and six months ended June 30, 2025, respectively, in connection with the Offering. We paid fees of $ 0.04 million and $ 0.06 million to Gladstone Securities during the three and six months ended June 30, 2024, respectively, in connection with the Offering. 3. Earnings (Loss) Per Share of Common Stock The following tables set forth the computation of basic and diluted earnings (loss) per share of common stock for the three and six months ended June 30, 2025 and 2024. The operating partnership units in the Operating Partnership (“OP Units”) held by holders who do not control the Operating Partnership (“Non-controlling OP Unitholders”) (which may be redeemed for shares of common stock) have been excluded from the diluted earnings (loss) per share calculations, as these would be anti-dilutive. Net income (loss) figures are presented net of non-controlling interests in the income (loss) per share calculation. 11 Table of Contents We computed basic earnings (loss) per share for the three and six months ended June 30, 2025 and 2024 using the weighted average number of shares outstanding during the respective periods. The diluted earnings per share for the three and six months ended June 30, 2025 and 2024 would reflect additional shares of common stock related to our convertible senior common stock (the “Senior Common Stock”), if the effect of conversion would be dilutive, that would have been outstanding if such dilutive potential shares of common stock had been issued, as well as an adjustment to net income (loss) available (attributable) to common stockholders as applicable to common stockholders that would result from their assumed issuance (dollars in thousands, except per share amounts). For the three months ended June 30, For the six months ended June 30, 2025 2024 2025 2024 Calculation of basic and diluted earnings per share of common stock: Net income (loss) available (attributable) to common stockholders $ 1,456 $ ( 1,614 ) $ 3,374 $ ( 1,313 ) Denominator for basic and diluted weighted average shares of common stock (1) (2) 46,219,663 40,311,476 45,417,792 40,157,479 Basic and diluted earnings (loss) per share of common stock $ 0.03 $ ( 0.04 ) $ 0.07 $ ( 0.03 ) (1) The weighted average number of OP Units held by Non-controlling OP Unitholders was 39,474 for both the three and six months ended June 30, 2025 and 241,637 and 276,140 for the three and six months ended June 30, 2024, respectively. (2) We excluded convertible shares of Senior Common Stock of 328,559 and 342,247 from the calculation of diluted earnings (loss) per share for the three and six months ended June 30, 2025 and 2024, respectively, because these shares were anti-dilutive. 4. Real Estate and Intangible Assets Real Estate The following table sets forth the components of our investments in real estate as of June 30, 2025 and December 31, 2024, respectively, excluding real estate held for sale (dollars in thousands): June 30, 2025 December 31, 2024 Real estate: Land (1) $ 149,988 $ 139,743 Building and improvements 1,141,648 1,017,534 Tenant improvements 55,516 54,516 Accumulated depreciation ( 339,331 ) ( 319,646 ) Real estate, net $ 1,007,821 $ 892,147 (1) This amount includes $ 2,711 of land value subject to land lease agreements which we may purchase at our option for a nominal fee. Real estate depreciation expense on building and tenant improvements was $ 10.5 million and $ 20.3 million for the three and six months ended June 30, 2025, respectively. Real estate depreciation expense on building and tenant improvements was $ 10.2 million and $ 20.1 million for the three and six months ended June 30, 2024, respectively. Acquisitions We acquired ten industrial properties during the six months ended June 30, 2025, and acquired five properties during the six months ended June 30, 2024. The acquisitions are summarized below (dollars in thousands): 12 Table of Contents Six Months Ended Aggregate Square Footage Weighted Average Remaining Lease Term at Time of Acquisition Aggregate Purchase Price Aggregate Capitalized Acquisition Expenses June 30, 2025 (1) 874,871 14.3 years $ 153,067 $ 867 June 30, 2024 (2) 142,125 25.1 years $ 11,954 $ 267 (1) On February 19, 2025, we acquired a five -property, 215,474 square foot portfolio in Houston, Texas for $ 29.5 million. These properties are fully leased to one tenant and had 10.0 years of remaining lease term at the time we acquired the portfolio. On March 28, 2025, we acquired a 140,304 square foot property in Dallas-Fort Worth, Texas for $ 44.3 million. The property is fully leased to one tenant and had 11.3 years of remaining lease term at the time we acquired the property. On May 9, 2025, we acquired a 303,991 square foot property in Germantown, Wisconsin for $ 62.9 million. The property is fully leased to one tenant and had 19.4 years of remaining lease term at the time we acquired the property. On June 25, 2025, we acquired a three -property, 215,102 square foot portfolio in Harrison Township, Michigan for $ 16.5 million. These properties are fully leased to one tenant and had 10.0 years of remaining lease term at the time we acquired the portfolio. (2) On May 7, 2024, we acquired a five -property, 142,125 square foot portfolio in Warfordsburg, Pennsylvania for $ 12.0 million. These properties were fully leased to one tenant and had 25.1 years of remaining lease term at the time we acquired the portfolio. We determined the fair value of assets acquired and liabilities assumed related to the properties acquired during the six months ended June 30, 2025 and 2024 as follows (dollars in thousands): Six Months Ended June 30, 2025 Six Months Ended June 30, 2024 Acquired assets and liabilities Purchase price Purchase price Land $ 10,640 (1) $ 1,169 Building 117,074 7,990 Tenant Improvements 1,145 277 In-place Leases 10,376 917 Leasing Costs 11,595 1,386 Customer Relationships 4,285 125 Above Market Leases 67 90 (3) Below Market Leases ( 2,115 ) (2) — Total Purchase Price $ 153,067 $ 11,954 (1) The Dallas-Fort Worth, Texas property that we acquired is subject to a ground lease, therefore there is no land asset included on the condensed consolidated balance sheets. (2) This amount includes $ 250 of prepaid rent included in Other liabilities on the condensed consolidated balance sheets. (3) This amount includes $ 90 of loans receivable included in Other assets on the condensed consolidated balance sheets. Future Lease Payments Future operating lease payments from tenants under non-cancelable leases, excluding tenant reimbursement of expenses, for the six months ending December 31, 2025 and each of the five succeeding fiscal years and thereafter is as follows (dollars in thousands): Year Tenant Lease Payments Six Months Ending December 31, 2025 $ 65,974 2026 129,683 2027 115,101 2028 102,685 2029 94,919 2030 82,851 Thereafter 447,204 13 Table of Contents In accordance with the lease terms, substantially all operating expenses are required to be paid by the tenant directly, or reimbursed to us from the tenant; however, we would be required to pay operating expenses on the respective properties in the event the tenants fail to pay them. Lease Revenue Reconciliation The table below sets forth the allocation of lease revenue between fixed contractual payments and variable lease payments for the three and six months ended June 30, 2025 and 2024, respectively (dollars in thousands): For the three months ended June 30, Lease revenue reconciliation 2025 2024 $ Change % Change Fixed lease payments $ 34,328 $ 33,084 $ 1,244 3.8 % Variable lease payments 5,205 3,973 1,232 31.0 % $ 39,533 $ 37,057 $ 2,476 6.7 % For the six months ended June 30, Lease revenue reconciliation 2025 2024 $ Change % Change Fixed lease payments $ 66,775 $ 64,874 $ 1,901 2.9 % Variable lease payments 10,259 7,905 2,354 29.8 % $ 77,034 $ 72,779 $ 4,255 5.8 % Sales-Type Leases During the six months ended June 30, 2025, we had one lease classified as a sales-type lease. We recorded a sales-type lease receivable of $ 18.5 million in the condensed consolidated balance sheets, net of $ 0.02 million in allowance for credit loss. For the three and six months ended June 30, 2025, the interest income earned from sales-type leases of $ 0.1 million and $ 0.5 million, respectively, was included in other income in the condensed consolidated statements of operations. There was no sales-type lease activity in the three and six months ended June 30, 2024. In developing the expected credit loss, we reviewed the tenant’s credit rating, which is AA- stable, performed a collectability analysis, and confirmed they were current on payments as of June 30, 2025. On April 1, 2025, the tenant exercised their purchase option provided in their lease agreement with us. The sale transaction was completed on April 30, 2025, resulting in the realization of the sales-type lease receivable from the condensed consolidated balance sheets. Refer to see Note 5, “Real Estate, Held for Sale and Impairment Charges” for additional detail. Intangible Assets The following table summarizes the carrying value of intangible assets, liabilities and the accumulated amortization for each intangible asset and liability class as of June 30, 2025 and December 31, 2024, respectively, excluding real estate held for sale (dollars in thousands): June 30, 2025 December 31, 2024 Lease Intangibles Accumulated Amortization Lease Intangibles Accumulated Amortization In-place leases $ 106,392 $ ( 67,206 ) $ 96,392 $ ( 64,830 ) Leasing costs 100,601 ( 51,853 ) 89,093 ( 48,963 ) Customer relationships 64,374 ( 38,066 ) 60,377 ( 36,962 ) $ 271,367 $ ( 157,125 ) $ 245,862 $ ( 150,755 ) Deferred Rent Receivable/(Liability) Accumulated (Amortization)/Accretion Deferred Rent Receivable/(Liability) Accumulated (Amortization)/Accretion Above market leases $ 11,843 $ ( 9,887 ) $ 13,718 $ ( 11,582 ) Below market leases and deferred revenue ( 58,482 ) 37,863 ( 56,616 ) 34,620 14 Table of Contents Total amortization expense related to in-place leases, leasing costs and customer relationship lease intangible assets was $ 3.8 million and $ 7.2 million for the three and six months ended June 30, 2025, respectively, and $ 5.8 million and $ 9.3 million for the three and six months ended June 30, 2024, respectively, and is included in depreciation and amortization expense in the condensed consolidated statements of operations and comprehensive income. Total amortization related to above-market lease values was $ 0.1 million and $ 0.2 million for the three and six months ended June 30, 2025, respectively, and $ 0.1 million and $ 0.3 million for the three and six months ended June 30, 2024, respectively, and is included in lease revenue in the condensed consolidated statements of operations and comprehensive income. Total amortization related to below-market lease values was $ 1.6 million and $ 3.2 million for the three and six months ended June 30, 2025, respectively, and $ 2.1 million and $ 3.8 million for the three and six months ended June 30, 2024, respectively, and is included in lease revenue in the condensed consolidated statements of operations and comprehensive income. We acquired ten industrial properties during the six months ended June 30, 2025, and acquired five industrial properties during the six months ended June 30, 2024. The weighted average amortization periods in years for the intangible assets acquired and liabilities assumed during the six months ended June 30, 2025 and 2024, were as follows: Intangible Assets & Liabilities June 30, 2025 June 30, 2024 In-place leases 13.9 25.1 Leasing costs 13.9 25.1 Customer relationships 18.6 25.1 Above market leases 19.4 25.1 Below market leases 10.7 0.0 All intangible assets & liabilities 15.1 25.1 5. Real Estate Dispositions, Held for Sale and Impairment Charges Real Estate Dispositions We sold one property and completed the sale transaction related to one property during the six months ended June 30, 2025 and sold four properties during the six months ended June 30, 2024. During the six months ended June 30, 2025, we continued to execute our capital recycling program, whereby we sell properties outside of our core markets and redeploy proceeds to either fund property acquisitions in our target secondary growth markets, or repay outstanding debt. We expect to continue to execute our capital recycling plan and sell non-core properties as reasonable disposition opportunities become available. During the six months ended June 30, 2025, we sold one non-core property, located in Hickory, North Carolina, which is summarized in the table below (dollars in thousands): Aggregate Square Footage Sold Aggregate Sales Price Aggregate Sales Costs Aggregate Gain on Sale of Real Estate, net 60,000 $ 5,050 $ 310 $ 377 On April 30, 2025, we completed the transaction to sell our 676,031 square foot property in Tifton, Georgia for $ 18.5 million, incurring $ 0.3 million in closing costs, which are included in other expense in the condensed consolidated statement of operations for the three and six months ended June 30, 2025. During the year ended December 31, 2024, we recorded a sales-type lease receivable on this property and derecognized the carrying 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. Our disposition during the six months ended June 30, 2025 was not classified as discontinued operations because it did not represent a strategic shift in operations, nor will it have a major effect on our operations and financial results. Accordingly, the operating results of this property are included within continuing operations for all periods reported. The table below summarizes the components of operating income from the real estate and related assets disposed of during the three and six months ended June 30, 2025 and 2024 (dollars in thousands): 15 Table of Contents For the three months ended June 30, For the six months ended June 30, 2025 2024 2025 2024 Operating revenue $ — $ 279 $ 291 $ 558 Operating expense — 60 19 145 Other income (expense), net 377 (1) — 377 (1) — Income (expense) from real estate and related assets sold $ 377 $ 219 $ 649 $ 413 (1) Includes a $ 0.4 million gain on sale of real estate, net, from one property sale. Real Estate Held for Sale At June 30, 2025, we had one property classified as held for sale, located in Oklahoma City, Oklahoma. We consider this asset to be non-core to our long-term strategy. At December 31, 2024, we had two properties classified as held for sale, located in Tifton, Georgia and Hickory, North Carolina, and which have been sold as described above. The table below summarizes the components of the assets and liabilities held for sale at June 30, 2025 and December 31, 2024, reflected on the accompanying condensed consolidated balance sheets (dollars in thousands): June 30, 2025 December 31, 2024 Assets Held for Sale Total real estate held for sale $ 2,801 $ 4,337 Lease intangibles, net — 26 Total Assets Held for Sale $ 2,801 $ 4,363 Impairment Charges We evaluated our portfolio for triggering events to determine if any of our held and used assets were impaired during the six months ended June 30, 2025 and did not recognize an impairment charge. We recognized an impairment charge of $ 0.01 million on our one held for sale asset during the six months ended June 30, 2025. In performing our held for sale assessment, the carrying value of this asset was above the fair value, less costs of sale. As a result, we impaired this property to equal the fair market value less costs of sale. We did not recognize an impairment charge on our held and used assets during the six months ended June 30, 2024. We recognized an impairment charge of $ 0.5 million on one held for sale asset, located in Richardson, Texas, during the six months ended June 30, 2024. In performing our held for sale assessment, the carrying value of this asset was above the fair value, less costs of sale. As a result, we impaired this property to equal the fair market value less costs of sale. 16 Table of Contents 6. Mortgage Notes Payable, Credit Facility, Unsecured Term Loan, and Senior Unsecured Notes Our $ 125.0 million unsecured revolving credit facility (“Revolver”), $ 160.0 million term loan facility (“Term Loan A”), $ 60.0 million term loan facility (“Term Loan B”), and $ 150.0 million term loan facility (“Term Loan C”), are collectively referred to herein as the “Credit Facility”. Our mortgage notes payable, Credit Facility, our Operating Partnership’s $ 20.0 million unsecured term loan (“Term Loan D”), and our Operating Partnership’s $ 75.0 million senior unsecured notes (the “2029 Notes”) as of June 30, 2025 and December 31, 2024 are summarized below (dollars in thousands): Encumbered properties at Carrying Value at Stated Interest Rates at Scheduled Maturity Dates at June 30, 2025 June 30, 2025 December 31, 2024 June 30, 2025 June 30, 2025 Mortgage and other secured loans: Fixed rate mortgage loans 44 $ 259,516 $ 264,243 (1) (2) Variable rate mortgage loans — — 7,260 SOFR + 2.25 % (3) (2) Premiums and discounts, net — 6 ( 8 ) N/A N/A Deferred financing costs, mortgage loans, net — ( 1,640 ) ( 1,916 ) N/A N/A Total mortgage notes payable, net 44 $ 257,882 $ 269,579 (4) Variable rate revolving credit facility 96 (6) $ 94,370 $ 1,900 SOFR + 1.35 % (3) 8/18/2026 Total revolver 96 $ 94,370 $ 1,900 Variable rate term loan facility A — (6) $ 160,000 $ 160,000 SOFR + 1.30 % (3) 8/18/2027 Variable rate term loan facility B — (6) 40,000 40,000 SOFR + 1.30 % (3) 2/11/2026 Variable rate term loan facility C — (6) 150,000 150,000 SOFR + 1.30 % (3) 2/18/2028 Deferred financing costs, term loan facility — ( 1,706 ) ( 2,052 ) N/A N/A Total term loan, net N/A $ 348,294 $ 347,948 Variable rate term loan D — $ 20,000 $ — SOFR + 1.55 % (3) 5/30/2027 Deferred financing costs, term loan D — ( 161 ) — N/A N/A Total unsecured term loan, net N/A $ 19,839 $ — Senior unsecured notes — $ 75,000 $ 75,000 6.47 % 12/18/2029 Deferred financing costs, senior unsecured notes — ( 994 ) ( 1,042 ) N/A N/A Total senior unsecured notes, net N/A $ 74,006 $ 73,958 Total mortgage notes payable, credit facility, unsecured term loan, and senior unsecured notes 140 $ 794,391 $ 693,385 (5) (1) As of June 30, 2025, interest rates on our fixed rate mortgage notes payable varied from 2.80 % to 6.63 %. (2) As of June 30, 2025, we had 39 mortgage notes payable with maturity dates ranging from September 30, 2025 through August 1, 2037. (3) As of June 30, 2025, the Secured Overnight Financing Rate (“SOFR”) was approximately 4.45 %. (4) The weighted average interest rate on the mortgage notes outstanding as of June 30, 2025 was approximately 4.22 %. (5) The weighted average interest rate on all debt outstanding as of June 30, 2025 was approximately 5.33 %. (6) The amount we may draw under our Credit Facility is based on a percentage of the fair value of a combined pool of 96 unencumbered properties as of June 30, 2025. N/A - Not Applicable 17 Table of Contents Mortgage Notes Payable As of June 30, 2025, we had 39 mortgage notes payable, collateralized by a total of 44 properties with a net book value of $ 423.8 million. We have limited recourse liabilities that could result from any one or more of the following circumstances: a borrower voluntarily filing for bankruptcy, improper conveyance of a property, fraud or material misrepresentation, misapplication or misappropriation of rents, security deposits, insurance proceeds or condemnation proceeds, or physical waste or damage to the property resulting from a borrower’s gross negligence or willful misconduct. As of June 30, 2025, we did not have any mortgages subject to recourse. From time to time, we also indemnify lenders against claims resulting from the presence of hazardous substances or activity involving hazardous substances in violation of environmental laws on a property. During the six months ended June 30, 2025, we repaid one mortgage, collateralized by one property, which is summarized in the table below (dollars in thousands): Aggregate Variable Rate Debt Repaid Weighted Average Interest Rate on Variable Rate Debt Repaid $ 7,181 SOFR + 2.25 % We made payments of $ 0.2 million for deferred financing costs during both the three and six months ended June 30, 2025. We made payments of $ 0.04 million for deferred financing costs during both the three and six months ended June 30, 2024. Scheduled principal payments of mortgage notes payable for the six months ending December 31, 2025, and each of the five succeeding fiscal years and thereafter, are as follows (dollars in thousands): Year Scheduled Principal Payments Six Months Ending December 31, 2025 $ 7,929 2026 35,368 2027 95,399 2028 37,433 2029 34,869 2030 33,528 Thereafter 14,990 Total $ 259,516 (1) (1) This figure does not include $ 6,378 of premiums and (discounts), net, and $ 1.6 million of deferred financing costs, which are reflected in mortgage notes payable, net on the condensed consolidated balance sheets. We believe we will be able to address all mortgage notes payable maturing over the next 12 months through a combination of refinancing our existing indebtedness, cash from operations, proceeds from one or more equity offerings and availability on our Credit Facility. Interest Rate Cap and Interest Rate Swap Agreements We have entered into interest rate cap agreements that cap the interest rate on certain of our variable-rate debt and we have assumed or entered into interest rate swap agreements in which we hedged our exposure to variable interest rates by agreeing to pay fixed interest rates to our respective counterparty. We have adopted the fair value measurement provisions for our financial instruments recorded at fair value. The fair value guidance establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. Generally, we will estimate the fair value of our interest rate caps and interest rate swaps, in the absence of observable market data, using estimates of value including estimated remaining life, counterparty credit risk, current market yield and interest rate spreads of similar securities as of the measurement date. At June 30, 2025 and December 31, 2024, our interest rate cap agreements and interest rate swaps were valued using Level 2 inputs. The fair value of the interest rate cap agreements is recorded in other assets on our accompanying condensed consolidated balance sheets. We record changes in the fair value of the interest rate cap agreements quarterly based on the current market 18 Table of Contents valuations at quarter end. If the interest rate cap qualifies for hedge accounting, then the change in the estimated fair value is recorded to accumulated other comprehensive income to the extent that it is effective, with any ineffective portion recorded to interest expense in our condensed consolidated statements of operations and comprehensive income. If the interest rate cap does not qualify for hedge accounting, or if it is determined the hedge is ineffective, then any change in the fair value is recognized in interest expense in our consolidated statements of operations and comprehensive income. During the next 12 months, we estimate that an additional $ 1.0 million will be reclassified out of accumulated other comprehensive income into interest expense in our condensed consolidated statements of operations and comprehensive income, as a reduction to interest expense. The following table summarizes the interest rate caps at June 30, 2025 and December 31, 2024 (dollars in thousands): June 30, 2025 December 31, 2024 Aggregate Cost Aggregate Notional Amount Aggregate Fair Value Aggregate Notional Amount Aggregate Fair Value $ — (1) $ — $ — $ 60,000 $ — (1) We entered into an interest rate cap agreement on variable rate debt with a SOFR cap of 5.50 %. This cap matured in March 2025. We have assumed or entered into interest rate swap agreements in connection with certain of our mortgage financings and Credit Facility, whereby we will pay our counterparty a fixed interest rate on a monthly basis and receive payments from our counterparty equivalent to the stipulated floating rate. The fair value of our interest rate swap agreements is recorded in other assets or other liabilities on our accompanying condensed consolidated balance sheets. We have designated our interest rate swaps as cash flow hedges, and we record changes in the fair value of the interest rate swap agreement to accumulated other comprehensive income on the condensed consolidated balance sheets. We have designated our interest rate swaps as cash flow hedges, and we record changes in the fair value of the respective interest rate swap agreement to accumulated other comprehensive income on the consolidated balance sheets. We record changes in fair value on a quarterly basis, using current market valuations at quarter end. The following table summarizes our interest rate swaps at June 30, 2025 and December 31, 2024 (dollars in thousands): June 30, 2025 December 31, 2024 Aggregate Notional Amount Aggregate Fair Value Asset Aggregate Fair Value Liability Aggregate Notional Amount Aggregate Fair Value Asset Aggregate Fair Value Liability $ 359,821 $ 3,742 $ ( 1,157 ) $ 360,484 $ 8,965 $ ( 19 ) The following table presents the impact of our derivative instruments in the condensed consolidated financial statements (dollars in thousands): Amount of (loss) gain, net, recognized in Comprehensive Income Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Derivatives in cash flow hedging relationships Interest rate caps $ — $ ( 131 ) $ — $ ( 629 ) Interest rate swaps ( 2,344 ) 601 ( 6,360 ) 6,517 Total $ ( 2,344 ) $ 470 $ ( 6,360 ) $ 5,888 The following table presents the reclassifications of our derivative instruments out of accumulated other comprehensive income into interest expense in the condensed consolidated financial statements (dollars in thousands): Amount reclassified out of Accumulated Other Comprehensive Income Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Interest rate caps $ — $ 8 $ 15 $ 113 Total $ — $ 8 $ 15 $ 113 The following table sets forth certain information regarding our derivative instruments (dollars in thousands): 19 Table of Contents Asset (Liability) Derivatives Fair Value at Derivatives Designated as Hedging Instruments Balance Sheet Location June 30, 2025 December 31, 2024 Interest rate caps Other assets $ — $ — Interest rate swaps Other assets 3,742 8,965 Interest rate swaps Other liabilities ( 1,157 ) ( 19 ) Total derivative liabilities, net $ 2,585 $ 8,946 The fair value of all mortgage notes payable outstanding as of June 30, 2025 was $ 241.1 million, as compared to the carrying value stated above of $ 257.9 million. The fair value is calculated based on a discounted cash flow analysis, using management’s estimate of market interest rates on long-term debt with comparable terms and loan to value ratios. The fair value was calculated using Level 3 inputs of the hierarchy established by ASC 820, “Fair Value Measurements and Disclosures.” Credit Facility On August 18, 2022, we amended, extended and upsized our Credit Facility, increasing our Revolver from $ 100.0 million to $ 120.0 million (and its term to August 2026), adding the new $ 140.0 million Term Loan C, decreasing the principal balance of Term Loan B to $ 60.0 million and extending the maturity date of Term Loan A to August 2027. Term Loan C has a maturity date of February 18, 2028 and a SOFR spread ranging from 125 to 195 basis points, depending on our leverage. On September 27, 2022, we further increased the Revolver to $ 125.0 million and Term Loan C to $ 150.0 million, as permitted under the terms of the Credit Facility. We entered into multiple interest rate swap agreements on Term Loan C, which swap the interest rate to fixed rates from 3.15 % to 3.75 %. We incurred fees of approximately $ 4.2 million in connection with extending and upsizing our Credit Facility. The net proceeds of the transaction were used to repay the then-outstanding borrowings on the Revolver, pay off mortgage debt, and fund acquisitions. 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 June 30, 2025, there was $ 444.4 million outstanding under our Credit Facility, at a weighted average interest rate of approximately 5.76 %, and $ 2.1 million outstanding letters of credit, at a weighted average interest rate of 1.35 %. As of June 30, 2025, the maximum additional amount we could draw under the Credit Facility was $ 27.0 million. We were in compliance with all covenants under the Credit Facility as of June 30, 2025. Unsecured Term Loan D On May 30, 2025, the Operating Partnership entered into a Term Loan Agreement with KeyBank in connection with the $ 20.0 million Term Loan D. Term Loan D is unsecured and has a maturity date of May 30, 2027 and a SOFR spread ranging from 155 to 200 basis points throughout the life of the loan. The amount outstanding approximates fair value as of June 30, 2025. The proceeds were used to pay down the Revolver. The amount outstanding under the Credit Facility and Term Loan D approximates fair value as of June 30, 2025. Senior Unsecured Notes 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 June 30, 2025. The proceeds were used to pay down Term Loan B by $ 20.0 million and the Revolver by $ 55.0 million. 7. Commitments and Contingencies Ground Leases We are obligated as lessee under four ground leases. Future minimum rental payments due under the terms of these leases for the six months ending December 31, 2025 and each of the five succeeding fiscal years and thereafter are as follows (dollars in thousands): 20 Table of Contents Year Future Lease Payments Due Under Operating Leases Six Months Ending December 31, 2025 $ 228 2026 460 2027 467 2028 470 2029 470 2030 385 Thereafter 2,974 Total anticipated lease payments $ 5,454 Less: amount representing interest ( 1,513 ) Present value of lease payments $ 3,941 Year Future Lease Payments Due Under Finance Leases Six Months Ending December 31, 2025 $ 77 2026 172 2027 178 2028 178 2029 178 2030 178 Thereafter 7,098 Total anticipated lease payments $ 8,059 Less: amount representing interest ( 5,112 ) Present value of lease payments $ 2,947 Rental expense incurred for properties with ground lease obligations during the three and six months ended June 30, 2025 was $ 0.1 million and $ 0.2 million, respectively. Rental expense incurred for properties with ground lease obligations during the three and six months ended June 30, 2024 was $ 0.1 million and $ 0.1 million, respectively. Three of our ground leases are treated as operating leases and rental expenses are reflected in property operating expenses on the condensed consolidated statements of operations and comprehensive income. One of our ground leases is treated as a finance lease and rental expense is reflected in interest expenses on the condensed consolidated statements of operations and comprehensive income. Our ground leases have a weighted average remaining lease term of 22.8 years and a weighted average discount rate of 5.79 %. Letters of Credit As of June 30, 2025, there were $ 2.1 million outstanding letters of credit related to mortgage requirements at our Maitland, Florida properties. 8. Equity and Mezzanine Equity Stockholders’ Equity The following table summarizes the changes in our equity for the three and six months ended June 30, 2025 and 2024 (dollars in thousands): Three Months Ended June 30, Six Months Ended June 30, 2025 2024 2025 2024 Senior Common Stock Balance, beginning of period $ 1 $ 1 $ 1 $ 1 Issuance of senior common stock, net — — — — Balance, end of period $ 1 $ 1 $ 1 $ 1 Common Stock 21 Table of Contents Balance, beginning of period $ 45 $ 40 $ 44 $ 40 Issuance of common stock, net 1 1 2 1 Balance, end of period $ 46 $ 41 $ 46 $ 41 Series F Preferred Stock Balance, beginning of period $ 1 $ 1 $ 1 $ 1 Issuance of Series F preferred stock, net — — — — Redemption of Series F preferred stock, net — — — — Balance, end of period $ 1 $ 1 $ 1 $ 1 Additional Paid in Capital Balance, beginning of period $ 811,915 $ 730,465 $ 784,389 $ 730,256 Issuance of common stock and Series F preferred stock, net 6,912 10,648 33,883 10,845 Redemption of OP Units — 3,865 — 3,865 Redemption of Series F preferred stock, net 1,812 255 2,382 310 Adjustment to OP Units held by Non-controlling OP Unitholders resulting from changes in ownership of the Operating Partnership ( 5 ) ( 3,119 ) ( 20 ) ( 3,162 ) Balance, end of period $ 820,634 $ 742,114 $ 820,634 $ 742,114 Accumulated Other Comprehensive Income Balance, beginning of period $ 6,647 $ 13,281 $ 10,648 $ 7,758 Comprehensive (loss) income ( 2,344 ) 470 ( 6,360 ) 5,888 Reclassification into interest expense — 8 15 113 Balance, end of period $ 4,303 $ 13,759 $ 4,303 $ 13,759 Distributions in Excess of Accumulated Earnings Balance, beginning of period $ ( 635,393 ) $ ( 596,475 ) $ ( 623,912 ) $ ( 584,776 ) Distributions declared to common, senior common, and preferred stockholders ( 17,045 ) ( 15,341 ) ( 33,653 ) ( 30,560 ) Redemption of Series F preferred stock, net 11 ( 4 ) 1 ( 7 ) Net income available to the Company 4,633 1,611 9,770 5,134 Balance, end of period $ ( 647,794 ) $ ( 610,209 ) $ ( 647,794 ) $ ( 610,209 ) Total Stockholders' Equity Balance, beginning of period $ 183,216 $ 147,313 $ 171,171 $ 153,280 Issuance of common stock and Series F preferred stock, net 6,913 10,649 33,885 10,846 Redemption of OP Units — 3,865 — 3,865 Redemption of Series F preferred stock, net 1,823 251 2,383 303 Distributions declared to common, senior common, and preferred stockholders ( 17,045 ) ( 15,341 ) ( 33,653 ) ( 30,560 ) Comprehensive (loss) income ( 2,344 ) 470 ( 6,360 ) 5,888 Reclassification into interest expense — 8 15 113 Adjustment to OP Units held by Non-controlling OP Unitholders resulting from changes in ownership of the Operating Partnership ( 5 ) ( 3,119 ) ( 20 ) ( 3,162 ) Net income available to the Company 4,633 1,611 9,770 5,134 Balance, end of period $ 177,191 $ 145,707 $ 177,191 $ 145,707 Non-Controlling Interest Balance, beginning of period $ 136 $ 938 $ 130 $ 986 Distributions declared to Non-controlling OP Unit holders ( 12 ) ( 67 ) ( 23 ) ( 160 ) Redemptions of OP Units — ( 3,865 ) — ( 3,865 ) Adjustment to OP Units held by Non-controlling OP Unitholders resulting from changes in ownership of the Operating Partnership 5 3,119 20 3,162 Net income (loss) available (attributable) to OP Units held by Non-controlling OP Unitholders 1 ( 11 ) 3 ( 9 ) Balance, end of period $ 130 $ 114 $ 130 $ 114 Total Equity $ 177,321 $ 145,821 $ 177,321 $ 145,821 Distributions We paid the following distributions per share for the three and six months ended June 30, 2025 and 2024: 22 Table of Contents For the three months ended June 30, For the six months ended June 30, 2025 2024 2025 2024 Common Stock and Non-controlling OP Units $ 0.30 $ 0.30 $ 0.60 $ 0.60 Senior Common Stock 0.2625 0.2625 0.5250 0.5250 Series E Preferred Stock 0.414063 0.414063 0.828126 0.828126 Series F Preferred Stock 0.375 0.375 0.750 0.750 Series G Preferred Stock 0.375 0.375 0.750 0.750 Recent Activity Common Stock ATM Programs On February 22, 2022, we entered into Amendment No. 1 to our At-the-Market Equity Offering Sales Agreement with sales agents Robert W. Baird & Co. Incorporated (“Baird”), Goldman Sachs & Co. LLC (“Goldman Sachs”), Stifel, Nicolaus & Company, Incorporated (“Stifel”), BTIG, LLC, and Fifth Third Securities, Inc. (“Fifth Third”), dated December 3, 2019 (together, the “Prior Common Stock Sales Agreement”). The amendment permitted shares of common stock to be issued pursuant to the Prior Common Stock Sales Agreement under the 2020 Registration Statement, and future registration statements on Form S-3. We terminated the Prior Common Stock Sales Agreement effective as of February 10, 2023 in connection with the expiration of 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”). 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 up to $ 250.0 million of common stock. During the six months ended June 30, 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. 1 to the 2023 Common Stock Sales Agreement (the “2024 Common Stock Sales Agreement”). The amendment permitted shares of common stock to be issued pursuant to the 2024 Common Stock Sales Agreement under the 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 six months ended June 30, 2025, we sold 2,521,007 shares of common stock, raising approximately $ 38.0 million in net proceeds under the 2024 Common Stock Sales Agreement. Mezzanine Equity Our 6.625 % Series E Cumulative Redeemable Preferred Stock (“Series E Preferred Stock”), and our 6.00 % Series G Cumulative Redeemable Preferred Stock (“Series G Preferred Stock”) are classified as mezzanine equity in our condensed consolidated balance sheets because both are redeemable at the option of the shareholder upon a change of control of greater than 50 %. A change in control of our Company, outside of our control, is only possible if a tender offer is accepted by over 90 % of our shareholders. All other change in control situations would require input from our Board of Directors. In addition, our Series E Preferred Stock and Series G Preferred Stock are redeemable at the option of the applicable shareholder in the event a delisting event occurs. We will periodically evaluate the likelihood that a delisting event or change of control of greater than 50 % will take place, and if we deem this probable, we will adjust the Series E Preferred Stock, and Series G Preferred Stock presented in mezzanine equity to their redemption value, with the offset to gain (loss) on extinguishment. We currently believe the likelihood of a change of control of greater than 50 %, or a delisting event, is remote. Universal Shelf Registration Statements On March 13, 2024, we filed the 2024 Registration Statement, which was declared effective on March 21, 2024. The 2024 Registration Statement allows us to issue up to $ 1.3 billion of securities and replaced the 2022 Registration Statement. 23 Table of Contents Series F Preferred Stock On February 20, 2020, we filed with the Maryland Department of Assessments and Taxation Articles Supplementary (i) setting forth the rights, preferences and terms of the Series F Preferred Stock and (ii) reclassifying and designating 26,000,000 shares of our authorized and unissued shares of common stock as shares of Series F Preferred Stock. The reclassification decreased the number of shares classified as common stock from 86,290,000 shares immediately prior to the reclassification to 60,290,000 shares immediately after the reclassification. We sold 15,700 shares of our Series F Preferred Stock, raising $ 0.4 million in net proceeds, during the six months ended June 30, 2025. The primary offering of our Series F Preferred Stock terminated according to its terms on June 1, 2025. We expensed $ 0.3 million in prepaid offering costs due to the termination, which was included in general and administrative expenses in the condensed consolidated statements of operations. Non-controlling Interest in Operating Partnership As of June 30, 2025 and December 31, 2024, we owned approximately 99.9 % and 99.9 %, re spectively, of the outstanding OP Units. The Operating Partnership is required to make distributions on each OP Unit in the same amount as those paid on each share of our common stock, with the distributions on the OP Units held by us being utilized to make distributions to our common stockholders. As of June 30, 2025 and December 31, 2024, there were 39,474 and 39,474 outstanding OP Units held by Non-controlling OP Unitholders, respectively. 9. Subsequent Events Distributions On July 10, 2025, our Board of Directors declared the following monthly distributions for the months of July, August and September of 2025: Record Date Payment Date Common Stock and Non-controlling OP Unit Distributions per Share Series E Preferred Distributions per Share Series G Preferred Distributions per Share July 21, 2025 July 31, 2025 $ 0.10 $ 0.138021 $ 0.125 August 20, 2025 August 29, 2025 0.10 0.138021 0.125 September 22, 2025 September 30, 2025 0.10 0.138021 0.125 $ 0.30 $ 0.414063 $ 0.375 Senior Common Stock Distributions Payable to the Holders of Record During the Month of: Payment Date Distribution per Share July August 4, 2025 $ 0.0875 August September 5, 2025 0.0875 September October 3, 2025 0.0875 $ 0.2625 Series F Preferred Stock Distributions Record Date Payment Date Distribution per Share July 25, 2025 August 4, 2025 $ 0.125 August 27, 2025 September 5, 2025 0.125 September 24, 2025 October 3, 2025 0.125 $ 0.375 24 Table of Contents Equity Activity Subsequent to June 30, 2025 and through August 6, 2025, we raised $ 0.7 million in net proceeds from the sale of 50,540 shares of common stock under our 2024 Common Stock Sales Agreement. 25 Table of Contents