GLADSTONE COMMERCIAL CORP Management Report and Analysis of Financial Position and Results of Operations (Form 10-Q)

All statements contained herein, other than historical facts, may constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"). These statements may relate to, among other
things, future events or our future performance or financial condition. In some
cases, you can identify forward-looking statements by terminology such as "may,"
"might," "believe," "will," "provided," "anticipate," "future," "could,"
"growth," "plan," "intend," "expect," "should," "would," "if," "seek,"
"possible," "potential," "likely" or the negative of such terms or comparable
terminology. These forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause our business, financial
condition, liquidity, results of operations, funds from operations or prospects
to be materially different from any future business, financial condition,
liquidity, results of operations, funds from operations or prospects expressed
or implied by such forward-looking statements. For further information about
these and other factors that could affect our future results, please see the
captions titled "Forward-Looking Statements" and "Risk Factors" in this report
and in our Annual Report on Form 10-K for the year ended December 31, 2020. We
caution readers not to place undue reliance on any such forward-looking
statements, which are made pursuant to the Private Securities Litigation Reform
Act of 1995 and, as such, speak only as of the date made. We undertake no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise, after the date of
this Quarterly Report on Form 10-Q.

All references to “we”, “our”, “our” and to the “Company” in this report mean
Gladstone Trading Company and its consolidated subsidiaries, unless otherwise indicated or where the context indicates that the term means only
Gladstone Trading Company.

General

We are an externally-advised real estate investment trust ("REIT") that was
incorporated under the General Corporation Law of the State of Maryland on
February 14, 2003. We focus on acquiring, owning, and managing primarily office
and industrial properties. Our properties are geographically diversified and our
tenants cover a broad cross section of business sectors and range in size from
small to very large private and public companies, many of which are corporations
that do not have publicly-rated debt. We have historically entered into, and
intend in the future to enter into, purchase agreements primarily for real
estate having net leases with remaining terms of approximately seven to 15 years
and contractual rental rate increases. Under a net lease, the tenant is required
to pay most or all operating, maintenance, repair and insurance costs and real
estate taxes with respect to the leased property.

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

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

From November 1, 2021:

•we owned 127 properties totaling 15.7 million square feet of rentable space,
located in 27 states;
•our occupancy rate was 97.5%;
•the weighted average remaining term of our mortgage debt was 3.9 years and the
weighted average interest rate was 4.19%; and
•the average remaining lease term of the portfolio was 7.2 years.

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Business Environment

In March 2020, the World Health Organization characterized COVID-19 as a
pandemic, and infection continues in the United States and many parts of the
world. The rapid spread of the coronavirus identified as COVID-19 resulted in
authorities throughout the United States and the world implementing widespread
measures attempting to contain the spread and impact of COVID-19, such as travel
bans and restrictions, quarantines, shelter in place orders, the promotion of
social distancing and limitations on business activity, including business
closures. These measures and the pandemic have caused a significant national and
global economic downturn, disrupted business operations, including those of
certain of our tenants, increased unemployment and underemployment levels, and
are expected to have an adverse effect on office demand for space in the short
term, at a minimum. The demand for industrial space has continued due to the
continuing growth of e-commerce and appears to be partially counterbalancing the
adverse effects of COVID-19 on the commercial real estate industry. However, the
rising cost of construction materials and product delivery delays caused by
supply chain disruption, and the apparent labor shortage we are facing
nationally, have resulting in inflation and higher costs for both office and
industrial construction projects. Industrial absorption increased on a nominal
basis in 2020, compared to 2019, according to research reports and continues to
be strong through the third quarter of 2021. Construction activity for the
industrial sector remains strong as third quarter 2021 estimates have
approximately $500.0 million of properties under construction with over 30% of
that space pre-leased. Investment sales volume across all product types, but
especially office and retail, in recent months is lower year over year, as
compared to 2020, as a direct result of COVID-19. Research reports also report
that the office sector experienced negative absorption for each of the first
three quarters of 2021 and office space available for sublease has placed
downward pressure on office rental rates.

Interest rates remain volatile in response to competing concerns about
inflationary pressures and the spread and effect of COVID-19 variants. The yield
on the 10 year US Treasury Note has increased by 77% since the beginning of the
year to its current 1.65%. Since the beginning of the second quarter, it has
ranged from 1.19% July and August to 1.73% at the beginning of April, a 54 basis
point, 45% swing. It has increased 39% since the beginning of August alone.
Despite this volatility, interest rates remain low by historical standards.
After completing the 11th year of the current cycle, some national research
firms had been estimating that both pricing and investment sales volume would be
peaking and the national economy would be slowing in the near term. Global
recessionary conditions may occur over the next 12-24 months as a direct result
of the COVID-19 pandemic, although the actual impact and duration are unknown.
See "Impact of COVID-19 on Our Business," below.

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

Impact of COVID-19 on our business

The extent to which the COVID-19 pandemic may impact our business, financial
condition, liquidity, results of operations, funds from operations or prospects
will depend on numerous evolving factors that we are not able to predict at this
time, including the duration and long-term scope of the pandemic; the adequate
production, distribution and acceptance of vaccinations; the spread and effect
of COVID-19 variants; governmental, business and individuals' actions that have
been and continue to be taken in response to the pandemic; the impact on
economic activity from the pandemic (such as the effect on market rental rates
and commercial real estate values) and actions taken in response; the effect on
our tenants and their businesses; the ability of our tenants to make their
rental payments; any closures of our tenants' properties; and our ability to
secure debt financing, service future debt obligations or pay distributions to
our stockholders. Any of these events could materially adversely impact our
business, financial condition, liquidity, results of operations, funds from
operations or prospects.

As of November 1, 2021, we have collected 100% of all outstanding September 2021
cash base rent obligations and approximately 100% of October 2021 cash base rent
obligations. We have received and may receive additional rent modification
requests in future periods from our tenants. However, we are unable to quantify
the outcomes of the negotiation of relief packages, the success of any tenant's
financial prospects or the amount of relief requests that we will ultimately
receive or grant. We believe that we have a diverse tenant base, and
specifically, we do not have significant exposure to tenants in the retail,
hospitality, airlines, and oil and gas industries. These industries, among
certain others, have generally been severely impacted by COVID-19. Additionally,
our properties are located across 27 states, which we believe mitigates our
exposure to economic issues, including as a result of COVID-19, in any one
geographic market or area. We also have a cap on industry sector concentration
to further diversify our portfolio and mitigate risk.

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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. We amended our
Credit Facility in 2019 to increase our borrowing capacity and extend its
maturity date. In addition, on February 11, 2021, we added a new $65.0 million
term loan component. We have had numerous conversations with lenders and credit
continues to be available for well capitalized borrowers. We continue to monitor
our portfolio and intend to maintain a reasonably conservative liquidity
position for the foreseeable future.

We will continue to actively monitor the situation and may take further actions
that alter our business operations as may be required by federal, state or local
authorities or that we determine are in the best interests of our personnel,
tenants and stockholders. While we are unable to determine or predict the
nature, duration or scope of the overall impact the COVID-19 pandemic, including
the recent spread of COVID-19 variants, will have on our business, financial
condition, liquidity, results of operations, funds from operations or prospects,
we believe that it is important to share where we stand today, how our response
to COVID-19 is progressing and how our operations and financial condition may
change as the fight against COVID-19 continues.

Other business environment considerations

The short-term and long-term economic implications of the Biden Administration's
economic program are unknown at this time, inclusive of any subsequent shift in
policy, new regulations or the long-term impact of infrastructure spending and
tax reform in the U.S. Finally, the continuing uncertainty surrounding the
ability of the federal government to address its fiscal condition in both the
near and long term, particularly with the ongoing discussions regarding
additional fiscal stimulus as well as other geopolitical issues relating to the
global economic slowdown has increased domestic and global instability. These
developments could cause interest rates and borrowing costs to be volatile,
which may adversely affect our ability to access both the equity and debt
markets and could have an adverse impact on our tenants as well.
All of our variable rate debt is based upon one-month LIBOR, although LIBOR is
currently anticipated to be phased out by June 2023. LIBOR is expected to
transition to a new standard rate, SOFR, which will incorporate repo data
collected from multiple data sets. The intent is to adjust the SOFR to minimize
differences between the interest that a borrower would be paying using LIBOR
versus what it will be paying using SOFR. We are currently monitoring the
transition, as we cannot assess whether SOFR will become a standard rate for
variable rate debt. Any further changes or reforms to the determination or
supervision of LIBOR may result in a sudden or prolonged increase or decrease in
reported LIBOR, which could have an adverse impact on the market for LIBOR-based
debt, or the value of our portfolio of LIBOR-indexed, floating-rate debt.

We 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 six partially
vacant buildings and two fully vacant buildings.

Our available vacant space at September 30, 2021 represents 2.3% of our total
square footage and the annual carrying costs on the vacant space, including real
estate taxes and property operating expenses, are approximately $2.6 million. We
continue to actively seek new tenants for these properties.

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 $100.0 million senior unsecured revolving credit facility
("Revolver"), with KeyBank National Association (serving as a revolving lender,
a letter of credit issuer and an administrative agent), which matures in July
2023, our $160.0 million term loan facility ("Term Loan A"), which matures in
July 2024 and our $65.0 million term loan facility ("Term Loan B"), which
matures in February 2026. We refer to the Revolver, Term Loan A and Term Loan B
collectively herein as the Credit Facility. While lenders' credit standards have
tightened, we continue to look to national and regional banks, insurance
companies and non-bank lenders, in addition to the collateralized mortgage
backed securities market ("CMBS"), to issue mortgages to finance our real estate
activities.

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Recent Developments

Sale Activity

During the nine months ended September 30, 2021, we continued to execute our
capital recycling program, whereby we sold properties outside of our core
markets and redeployed proceeds to either fund property acquisitions located in
our target secondary growth markets or repaid 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 nine months
ended September 30, 2021, we sold two non-core properties, located in Rancho
Cordova, California and Champaign, Illinois, which are summarized in the table
below (dollars in thousands):

 Aggregate Square Footage                                                                              Aggregate loss on Sale of
           Sold                   Aggregate Sales Price           Aggregate Sales Costs                     Real Estate, net
               81,758            $               5,473          $                  367                $                    (882)



Acquisition Activity

During the nine months ended September 30, 2021, we acquired eight industrial properties located in Findlay, Ohio, Baytown, Texas, Pacific, Missouri, and
Peru, Illinois, which are summarized below (dollars in thousands):

                                     Weighted Average                                   Aggregate               Aggregate
                                      Remaining Lease                                  Capitalized           Annualized GAAP
                                      Term at Time of            Aggregate             Acquisition             Fixed Lease           Aggregate Debt
  Aggregate Square Footage              Acquisition            Purchase Price           Expenses                Payments                 Issued
            367,716                     15.5 years            $      46,225          $        370          $          3,513          $      5,500



Leasing Activity

During and after the nine months ended September 30, 2021, we executed 14 leases, which are summarized below (in thousands of dollars):

                                                                 Aggregate 

annualized

                                       Weighted Average            GAAP Fixed Lease           Aggregate Tenant          Aggregate Leasing
   Aggregate Square Footage          Remaining Lease Term              Payments                  Improvement               Commissions
           1,486,870                       7.5 years             $           13,081          $          4,408          $           1,845


During the nine months ended September 30, 2021, we had eight lease contractions or terminations, which are summarized below (in thousands of dollars):

                                                                                             Aggregate Accelerated
                                                                                                Rent Recognized
 Aggregate Square Footage            Aggregate Square           Aggregate 

Accelerated Through September 30,

         Reduced                     Footage Remaining                   Rent                         2021
              497,369       (1)           26,220                $             2,865          $             1,977

(1) We signed leases with two replacement tenants for 211,408 square feet with no downtime.

Financing Activity

During the nine months ended September 30, 2021, we paid off a mortgage, secured by a property, which is summarized in the table below (in thousands of dollars):

          Fixed Rate Debt Repaid       Interest Rate on Fixed Rate Debt Repaid
         $                 4,470                        4.90%


At October 26, 2021, have been paid $ 3.2 million fixed rate debt, guaranteed by a building, at an interest rate of 4.92%.

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Table of Contents During the Nine Months Ended September 30, 2021, we issued a mortgage, secured by property, which is summarized below (in thousands of dollars):

            Fixed Rate Debt Issued          Interest Rate on Fixed Rate Debt
           $                 5,500    (1)                             3.24  %

(1) On January 22, 2021, we issued $ 5.5 million of variable rate debt swapped into fixed debt of 3.24% in the context of a real estate acquisition.

Legal regulations

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

Equity activities

Offering Series G Preferred Shares

On June 28, 2021, we completed an underwritten public offering of 4,000,000
shares of our newly designated 6.00% Series G Cumulative Redeemable Preferred
Stock ("Series G Preferred Stock") at a public offering price of $25.00 per
share, raising $100.0 million in gross proceeds and approximately $96.6 million
in net proceeds, after payment of underwriting discounts and commissions. We
used the net proceeds from this offering to voluntarily redeem all outstanding
shares of our 7.00% Series D Cumulative Redeemable Preferred Stock ("Series D
Preferred Stock").

Common Stock ATM Program

During the nine months ended September 30, 2021, we sold 1.2 million shares of
common stock, raising $24.1 million in net proceeds under our At-the-Market
Equity Offering Sales Agreements 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"), pursuant to which we may sell shares of our
common stock in an aggregate offering price of up to $250.0 million (the "Common
Stock ATM Program"). As of September 30, 2021, we had remaining capacity to sell
up to $159.4 million of common stock under the Common Stock ATM Program.

Redemption of Series D preferred shares

On June 30, 2021, we voluntarily redeemed all 3,509,555 outstanding shares of
our Series D Preferred Stock at a redemption price of $25.1458333 per share,
which represented the liquidation preference per share, plus accrued and unpaid
dividends through June 30, 2021, for an aggregate redemption price of
approximately $88.3 million. In connection with this redemption, we recognized a
$2.1 million decrease to net income available to common shareholders pertaining
to the original issuance costs incurred upon issuance of our Series D Preferred
Stock.

Preferred Series E ATM Program

We have an At-the-Market Equity Offering Sales Agreement (the "Series E
Preferred Stock Sales Agreement"), with sales agents Baird, Goldman Sachs,
Stifel, Fifth Third, and U.S. Bancorp Investments, Inc., pursuant to which we
may, from time to time, offer to sell shares of our Series E Preferred Stock in
an aggregate offering price of up to $100.0 million. We did not sell any shares
of our Series E Preferred Stock under the agreement during the nine months ended
September 30, 2021. As of September 30, 2021, we had remaining capacity to sell
up to $92.8 million of Series E Preferred Stock under the Series E Preferred
Stock Sales Agreement.

Registration statements on the universal tray

On January 11, 2019, we filed a universal registration statement on Form S-3,
File No. 333-229209, and an amendment thereto on Form S-3/A on January 24, 2019
(collectively referred to as the "2019 Universal Shelf"). The 2019 Universal
Shelf became effective on February 13, 2019 and replaced our prior universal
shelf registration statement. The 2019 Universal Shelf allows us to issue up to
$500.0 million of securities. As of September 30, 2021, we had the ability to
issue up to $352.7 million of securities under the 2019 Universal Shelf.

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On January 29, 2020, we filed an additional universal registration statement on
Form S-3, File No. 333-236143 (the "2020 Universal Shelf"). The 2020 Universal
Shelf was declared effective on February 11, 2020 and is in addition to the 2019
Universal Shelf. The 2020 Universal Shelf allows us to issue up to an additional
$800.0 million of securities. Of the $800.0 million of available capacity under
our 2020 Universal Shelf, approximately $636.5 million is reserved for the sale
of our 6.00% Series F Cumulative Redeemable Preferred Stock, par value $0.001
per share (the "Series F Preferred Stock"). As of September 30, 2021, we had the
ability to issue up to $691.7 million of securities under the 2020 Universal
Shelf.

Series F Preferred Stock

On February 20, 2020, we filed with the SDAT 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 217,422 shares of our Series F
Preferred Stock, raising $4.9 million in net proceeds during the three and nine
months ended September 30, 2021. As of September 30, 2021, we had remaining
capacity to sell up to $628.2 million of Series F Preferred Stock.

Non-controlling interest in Operating partnership

As of September 30, 2021 and December 31, 2020, we owned approximately 99.3% and
98.6%, respectively, of the outstanding operating partnership units in the
Operating Partnership ("OP Units"). During the nine months ended September 30,
2021, we redeemed 246,039 OP Units for an equivalent amount of common stock.

From September 30, 2021 and December 31, 2020, there were 256,994 and 503,033 PO units in circulation held by the holders who do not control the Operating partnership (“Holders of non-controlling PO units”), respectively.

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Diversity of Our Portfolio

Gladstone Management Corporation, a Delaware corporation (our "Adviser"), seeks
to diversify our portfolio to avoid dependence on any one particular tenant,
industry or geographic market. By diversifying our portfolio, our Adviser
intends to reduce the adverse effect on our portfolio of a single
under-performing investment or a downturn in any particular industry or
geographic market. For the nine months ended September 30, 2021, our largest
tenant comprised only 2.8% 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, 2021 and 2020 (dollars in thousands):

                                                                           For the three months ended September 30,                                                       For the nine months ended September 30,
                                                                     2021                                           2020                                           2021                                           2020
                                                                          Percentage of                                    Percentage of                                Percentage of                                    Percentage of
Industry Classification                             Lease Revenue         Lease Revenue            Lease Revenue           Lease Revenue          Lease Revenue         Lease Revenue            Lease Revenue           Lease Revenue
Telecommunications                                  $    5,815                     16.7  %       $        5,598                     17.0  %       $   16,978                     16.8  %       $       16,748                     16.8  %
Diversified/Conglomerate Services                        4,631                     13.5                   4,124                     12.4              14,148                     13.8                  12,403                     12.4
Healthcare                                               3,786                     11.0                   4,077                     12.3              11,720                     11.4                  12,156                     12.1
Automotive                                               3,392                      9.9                   3,445                     10.4               8,845                      8.6                  11,137                     11.1
Banking                                                  2,597                      7.6                   2,530                      7.6               7,713                      7.5                   7,445                      7.4
Buildings and Real Estate                                2,331                      6.8                   2,401                      7.2               6,968                      6.8                   6,794                      6.8
Diversified/Conglomerate Manufacturing                   1,866                      5.4                   1,694                      5.1               5,748                      5.6                   4,562                      

4.5

Personal, Food & Miscellaneous Services                  1,540                      4.5                   1,507                      4.5               5,552                      5.4                   4,513                      4.5
Information Technology                                   1,673                      4.9                   1,754                      5.3               5,011                      4.9                   5,193                      5.2
Beverage, Food & Tobacco                                 1,497                      4.4                   1,065                      3.2               4,450                      4.3                   3,033                      3.0
Chemicals, Plastics & Rubber                             1,208                      3.5                     900                      2.7               3,499                      3.4                   2,747                      2.7
Machinery                                                  970                      2.8                     934                      2.8               2,991                      2.9                   3,235                      3.2
Containers, Packaging & Glass                              777                      2.3                     338                      1.0               1,985                      1.9                   1,412                      

1.4

Personal & Non-Durable Consumer Products                   617                      1.8                     614                      1.9               1,852                      1.8                   1,838                      1.8
Childcare                                                  573                      1.7                     557                      1.7               1,718                      1.7                   1,671                      1.7
Printing & Publishing                                      571                      1.7                     348                      1.1               1,439                      1.4                   1,028                      1.0
Electronics                                                166                      0.5                     936                      2.8                 796                      0.8                   3,403                      3.4
Education                                                  203                      0.6                     199                      0.6                 606                      0.6                     607                      0.6
Home & Office Furnishings                                  121                      0.4                     121                      0.4                 362                      0.4                     362                      0.4
Total                                               $   34,334                    100.0  %       $       33,142                    100.0  %       $  102,381                    100.0  %       $      100,287                    100.0  %



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The tables below reflect the breakdown of total lease revenue by state for the
three and nine months ended September 30, 2021 and 2020 (dollars in thousands):

                          Lease Revenue                                Number of Leases        Lease Revenue                                Number of Leases
                          for the three                                  for the three         for the three                                  for the three
                           months ended                                  months ended           months ended                                  months ended
                          September 30,          Percentage of           September 30,         September 30,          Percentage of           September 30,
State                          2021              Lease Revenue               2021                   2020              Lease Revenue               2020
Florida                   $     4,191                    12.2  %                 10            $     4,120                    12.4  %                 11
Pennsylvania                    3,807                    11.1                    10                  3,491                    10.5                     9
Texas                           3,801                    11.1                    15                  4,847                    14.6                    15
Ohio                            3,671                    10.7                    15                  3,429                    10.3                    14
Georgia                         2,757                     8.0                     9                  2,684                     8.1                     9
Utah                            1,935                     5.6                     4                  2,006                     6.1                     4
Alabama                         1,634                     4.8                     5                    897                     2.7                     3
Michigan                        1,609                     4.7                     6                  1,573                     4.7                     6
North Carolina                  1,604                     4.7                     7                  1,546                     4.7                     8
South Carolina                  1,408                     4.1                     2                  1,230                     3.7                     2
All Other States                7,917                    23.0                    48                  7,319                    22.2                    47
Total                     $    34,334                   100.0  %                131            $    33,142                   100.0  %                128



                          Lease Revenue                               Number of Leases        Lease Revenue                               Number of Leases
                          for the nine                                  for the nine          for the nine                                  for the nine
                          months ended                                  months ended          months ended                                  months ended
                          September 30,         Percentage of           September 30,         September 30,         Percentage of           September 30,
State                         2021              Lease Revenue               2021                  2020              Lease Revenue               2020
Florida                   $   12,614                    12.3  %                 10            $   12,549                    12.5  %                 11
Pennsylvania                  11,409                    11.1                    10                10,272                    10.2                     9
Ohio                          11,284                    11.0                    15                10,569                    10.5                    14
Texas                         11,232                    11.0                    15                15,081                    15.0                    15
Georgia                        8,167                     8.0                     9                 7,616                     7.6                     9
Utah                           5,763                     5.6                     4                 5,941                     5.9                     4
North Carolina                 5,084                     5.0                     7                 4,547                     4.5                     8
Alabama                        4,911                     4.8                     5                 2,694                     2.7                     3
Michigan                       4,765                     4.7                     6                 4,718                     4.7                     6
South Carolina                 4,162                     4.1                     2                 3,628                     3.6                     2
All Other States              22,990                    22.4                    48                22,672                    22.8                    47
                          $  102,381                   100.0  %                131            $  100,287                   100.0  %                128



Our Adviser and Administrator

Our Adviser is led by a management team with extensive experience purchasing
real estate and originating mortgage loans. Our Adviser and Gladstone
Administration, LLC, a Delaware limited liability company (our "Administrator")
are controlled by Mr. David Gladstone, who is also our chairman and chief
executive officer. Mr. Gladstone also serves as the chairman and chief executive
officer of both our Adviser and Administrator, as well as president and chief
investment officer of our Adviser. Mr. Terry Lee Brubaker, our vice chairman and
chief operating officer, is also the vice chairman and chief operating officer
of our Adviser and Administrator and assistant secretary of our Adviser.
Mr. Robert Cutlip, our president, also serves as the executive vice president of
commercial and industrial real estate of our Adviser. Our Administrator employs
our chief financial officer, treasurer, chief compliance officer, general
counsel and secretary, 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. With the exception of Mr. Gary Gerson, our chief financial officer,
Mr. Jay Beckhorn, our treasurer, and Mr. Robert Cutlip, our president, all of
our executive officers and all of our directors serve as either directors or
executive officers, or both, of Gladstone Capital Corporation and Gladstone
Investment Corporation. In addition, with the exception of Mr. Cutlip and Mr.
Gerson, all of our executive officers and all of our directors, serve as either
directors or executive officers,
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or both, of Gladstone Land Corporation. Mr. Cutlip and Mr. Gerson 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.

Board and administration agreements

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 other 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. Two
of our executive officers, Mr. Gladstone and Mr. Terry Brubaker (our vice
chairman and chief operating officer) serve as directors and executive officers
of our Adviser and our Administrator. Our president, Mr. Robert Cutlip, is the
executive vice president of commercial and industrial real estate of our
Adviser. Mr. Michael LiCalsi, our general counsel and secretary, also serves as
our Administrator's president, general counsel and secretary. 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.

Under the terms of the Advisory Agreement, we are responsible for all expenses
incurred for our direct benefit. Examples of these expenses include legal,
accounting, interest, directors' and officers' insurance, stock transfer
services, stockholder-related fees, consulting and related fees. In addition, we
are also responsible for all fees charged by third parties that are directly
related to our business, which include real estate brokerage fees, mortgage
placement fees, lease-up fees and transaction structuring fees (although we may
be able to pass all or some of such fees on to our tenants and borrowers). Our
entrance into the Advisory Agreement and each amendment thereto has been
approved unanimously by our Board of Directors. Our Board of Directors reviews
and considers renewing the agreement with our Adviser each July. During its July
2021 meeting, our Board of Directors reviewed and renewed the Advisory Agreement
and Administration Agreement for an additional year, through August 31, 2022.

Basic management fees

On July 14, 2020, we amended and restated the previous Advisory Agreement by
entering into the Sixth Amended and Restated Investment Advisory Agreement
between us and the Adviser (the "Sixth Amended Advisory Agreement"). The Sixth
Amended Advisory Agreement replaced the previous calculation of the base
management fee with a calculation based on Gross Tangible Real Estate. The
revised base management fee will be 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 Sixth Amended 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). The calculation of the other fees in
the Amended Agreement remain unchanged. The revised base management fee
calculation began with the fee calculations for the quarter ended September 30,
2020.

Under the version of the Advisory Agreement in place prior to the July 14, 2020
amendment and restatement, the calculation of the annual base management fee
equaled 1.5% of our Total Equity, which was our total stockholders' equity plus
total mezzanine equity (before giving effect to the base management fee and
incentive fee), adjusted to exclude the effect of any unrealized gains or losses
that do not affect realized net income (including impairment charges), adjusted
for any one-time events and certain non-cash items (the later to occur for a
given quarter only upon the approval of our Compensation Committee), and
adjusted to include OP Units held by Non-controlling OP Unitholders. The fee was
calculated and accrued quarterly as 0.375% per quarter of such Total Equity
amount.

Our Adviser does not charge acquisition or disposition fees when we acquire or
dispose of properties as is common in other externally managed REITs; however,
our Adviser may earn fee income from our borrowers, tenants or other sources.

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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. However, in no event shall the incentive fee for a
particular quarter exceed by 15.0% (the cap) the average quarterly incentive fee
paid by us for the previous four quarters (excluding quarters for which no
incentive fee was paid). Core FFO (as defined in the Advisory Agreement) is GAAP
net income (loss) available to common stockholders, excluding the incentive fee,
depreciation and amortization, any realized and unrealized gains, losses or
other non-cash items recorded in net income (loss) available to common
stockholders for the period, and one-time events pursuant to changes in GAAP.

Capital gain costs

Under the Advisory Agreement, we will pay to the Adviser a capital gain-based
incentive fee that will be calculated and payable in arrears as of the end of
each fiscal year (or upon termination of the Advisory Agreement). In determining
the capital gain fee, we will calculate aggregate realized capital gains and
aggregate realized capital losses for the applicable time period. For this
purpose, aggregate realized capital gains and losses, if any, equals the
realized gain or loss calculated by the difference between the sales price of
the property, less any costs to sell the property and the current gross value of
the property (equal to the property's original acquisition price plus any
subsequent non-reimbursed capital improvements) of the disposed property. At the
end of the fiscal year, if this number is positive, then the capital gain fee
payable for such time period shall equal 15.0% of such amount. No capital gain
fee was recognized during the three and nine months ended September 30, 2021 or
2020.

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 agreement after the Company has defaulted
and applicable cure periods have expired. The 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 agreement to include if the Adviser breaches any material
provisions of the agreement, 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 our 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, general counsel and secretary (who also serves as our
Administrator's president, general counsel and 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 appropriate
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.

Main accounting conventions and estimates

The preparation of our financial statements in accordance with GAAP requires
management to make judgments that are subjective in nature to make certain
estimates and assumptions. Application of these accounting policies involves the
exercise of judgment regarding the use of assumptions as to future
uncertainties, and as a result, actual results could materially differ from
these estimates. A summary of all of our significant accounting policies is
provided in Note 1 to our consolidated financial statements in our Annual Report
on Form 10-K for the year ended December 31, 2020, filed by us with the U.S.
Securities and Exchange Commission (the "SEC") on February 16, 2021 (our "2020
Form 10-K"). There were no material changes to our critical accounting policies
or estimates during the nine months ended September 30, 2021.

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Results of Operations

The weighted average yield on our total portfolio, which was 7.9% and 8.2% as of
September 30, 2021 and 2020, 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, 2021 and 2020 is below (dollars in thousands, except per share amounts):

                                                                       For 

the three months have ended September 30,

                                                        2021                  2020             $ Change                % Change
Operating revenues
Lease revenue                                     $       34,334          $  33,142          $    1,192                        3.6  %
Total operating revenues                          $       34,334          $  33,142          $    1,192                        3.6  %
Operating expenses
Depreciation and amortization                     $       14,760          $  13,798          $      962                        7.0  %
Property operating expenses                                6,807              6,590                 217                        3.3  %
Base management fee                                        1,472              1,418                  54                        3.8  %
Incentive fee                                              1,266              1,128                 138                       12.2  %
Administration fee                                           382                361                  21                        5.8  %
General and administrative                                   811                775                  36                        4.6  %
Impairment charge                                              -              1,184              (1,184)                    (100.0) %

Total operating expenses                          $       25,498          $  25,254          $      244                        1.0  %
Other (expense) income
Interest expense                                  $       (6,688)         $  (6,444)         $     (244)                       3.8  %
Gain on sale of real estate, net                               -              1,196              (1,196)                    (100.0) %
Other income                                               2,350                204               2,146                    1,052.0  %
Total other expense, net                          $       (4,338)         $  (5,044)         $      706                      (14.0) %
Net income                                        $        4,498          $   2,844          $    1,654                       58.2  %
Distributions attributable to Series D, E,
F, and G preferred stock                                  (2,868)            (2,771)                (97)                       3.5  %

Distributions attributable to senior common
stock                                                       (170)              (203)                 33                      (16.3) %
Net income (loss) available (attributable)
to common stockholders and Non-controlling
OP Unitholders                                    $        1,460          $    (130)         $    1,590                   (1,223.1) %
Net income (loss) available (attributable)
to common stockholders and Non-controlling
OP Unitholders per weighted average share
and unit - basic & diluted                        $         0.04          $  (0.004)         $    0.044                   (1,100.0) %
FFO available to common stockholders and
Non-controlling OP Unitholders - basic (1)        $       16,220          $  13,656          $    2,564                       18.8  %
FFO available to common stockholders and
Non-controlling OP Unitholders - diluted
(1)                                               $       16,390          $  13,859          $    2,531                       18.3  %

FFO per weighted average share of common
stock and Non-controlling OP Units - basic
(1)                                               $         0.44          $    0.39          $     0.05                       12.8  %
FFO per weighted average share of common
stock and Non-controlling OP Units -
diluted (1)                                       $         0.44          $    0.39          $     0.05                       12.8  %


(1)Refer to the "Funds from Operations" section below within the Management's
Discussion and Analysis section for the definition of FFO and FFO adjusted for
comparability.

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Contents

                                                                       For 

the nine months have ended September 30,

                                                        2021                  2020             $ Change              % Change
Operating revenues
Lease revenue                                     $      102,381          $ 100,287          $   2,094                       2.1  %
Total operating revenues                          $      102,381          $ 100,287          $   2,094                       2.1  %
Operating expenses
Depreciation and amortization                     $       45,661          $  42,076          $   3,585                       8.5  %
Property operating expenses                               20,278             19,098              1,180                       6.2  %
Base management fee                                        4,369              4,219                150                       3.6  %
Incentive fee                                              3,540              3,301                239                       7.2  %
Administration fee                                         1,016              1,194               (178)                    (14.9) %
General and administrative                                 2,540              2,406                134                       5.6  %
Impairment charge                                              -              2,905             (2,905)                   (100.0) %
Total operating expense before incentive
fee waiver                                        $       77,404          $  75,199          $   2,205                       2.9  %
Incentive fee waiver                                         (16)                 -                (16)                    100.0  %
Total operating expenses                          $       77,388          $  75,199          $   2,189                       2.9  %
Other (expense) income
Interest expense                                  $      (20,338)         $ (20,411)         $      73                      (0.4) %
(Loss) gain on sale of real estate, net                     (882)             1,184             (2,066)                   (174.5) %
Other income                                               2,884                209              2,675                   1,279.9  %
Total other expense, net                          $      (18,336)         $ (19,018)         $     682                      (3.6) %
Net income                                        $        6,657          $   6,070          $     587                       9.7  %
Distributions attributable to Series D, E,
F, and G preferred stock                                  (8,571)            (8,137)              (434)                      5.3  %
Series D preferred stock offering costs
write off                                                 (2,141)                 -             (2,141)                    100.0  %
Distributions attributable to senior common
stock                                                       (534)              (615)                81                     (13.2) %
Net loss attributable to common
stockholders and Non-controlling OP
Unitholders                                       $       (4,589)         $  (2,682)         $  (1,907)                     71.1  %
Net loss attributable to common
stockholders and Non-controlling OP
Unitholders per weighted average share and
unit - basic & diluted                            $        (0.13)         $   (0.08)         $   (0.05)                     62.5  %
FFO available to common stockholders and
Non-controlling OP Unitholders - basic (1)        $       41,954          $  41,115          $     839                       2.0  %
FFO available to common stockholders and
Non-controlling OP Unitholders - diluted
(1)                                               $       42,488          $  41,730          $     758                       1.8  %
FFO available to common stockholders and
Non-controlling OP Unitholders - diluted,
as adjusted for comparability (1)                 $       44,629          $  41,730          $   2,899                       6.9  %
FFO per weighted average share of common
stock and Non-controlling OP Unit - basic
(1)                                               $         1.15          $    1.20          $   (0.05)                     (4.2) %
FFO per weighted average share of common
stock and Non-controlling OP Unit - diluted
(1)                                               $         1.14          $    1.19          $   (0.05)                     (4.2) %
FFO per weighted average share of common
stock and Non-controlling OP Unit -
diluted, as adjusted for comparability (1)        $         1.20          $    1.19          $    0.01                       0.8  %


(1)Refer to the "Funds from Operations" section below within the Management's
Discussion and Analysis section for the definition of FFO and FFO adjusted for
comparability.

Same Store Analysis

For the purposes of the following discussion, same store properties are
properties we owned as of January 1, 2020, which have not been subsequently
vacated, or disposed of. Acquired and disposed of properties are properties
which were acquired, disposed of or classified as held for sale at any point
subsequent to December 31, 2019. 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, 2020.

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Operating Revenues

                                                                  For the 

three months ended September 30,

                                                                           (Dollars in Thousands)
Lease Revenues                                      2021                  2020             $ Change               % Change
Same Store Properties                         $       28,076          $  27,480          $      596                      2.2  %
Acquired & Disposed Properties                         3,783              2,664               1,119                     42.0  %
Properties with Vacancy                                2,475              2,998                (523)                   (17.4) %

                                              $       34,334          $  33,142          $    1,192                      3.6  %



                                                                   For the

nine months completed September 30,

                                                                           (Dollars in Thousands)
Lease Revenues                                      2021                  2020             $ Change               % Change
Same Store Properties                         $       85,011          $  82,211          $    2,800                      3.4  %
Acquired & Disposed Properties                        10,233              7,197               3,036                     42.2  %
Properties with Vacancy                                7,137             10,879              (3,742)                   (34.4) %

                                              $      102,381          $ 100,287          $    2,094                      2.1  %



Lease revenues consist of rental income and operating expense recoveries earned
from our tenants. Lease revenues from same store properties increased for the
three and nine months ended September 30, 2021, primarily due to increased lease
revenue from the amortization of tenant funded improvements, coupled with
accelerated rent from tenants that have terminated their leases early. One of
the tenants that terminated early will remain in the building through October
2022, and we fully re-leased the space from two terminations with no downtime.
Lease revenues increased for acquired and disposed of properties for the three
and nine months ended September 30, 2021, as compared to the three and nine
months ended September 30, 2020, because we acquired 11 properties subsequent to
September 30, 2020. This increase was partially offset by a loss of lease
revenues from six properties we sold subsequent to September 30, 2020. Lease
revenues decreased for our properties with vacancy for the three and nine months
ended September 30, 2021 due to increased vacancy in our portfolio.

Operating Expenses

Depreciation and amortization increased for the three and nine months ended
September 30, 2021, as compared to the three and nine months ended September 30,
2020, due to depreciation on capital projects completed subsequent to the three
and nine months ended September 30, 2020, coupled with depreciation on the 11
properties acquired subsequent to September 30, 2020. This increase was
partially offset by decreased depreciation on the six properties sold subsequent
to September 30, 2020.

                                                                  For the 

three months ended September 30,

                                                                           (Dollars in Thousands)
Property Operating Expenses                         2021                  2020             $ Change               % Change
Same Store Properties                         $        4,704          $   4,617          $       87                      1.9  %
Acquired & Disposed Properties                           269                462                (193)                   (41.8) %
Properties with Vacancy                                1,834              1,511                 323                     21.4  %

                                              $        6,807          $   6,590          $      217                      3.3  %



                                                                   For the

nine months completed September 30,

                                                                           (Dollars in Thousands)
Property Operating Expenses                         2021                  2020             $ Change               % Change
Same Store Properties                         $       13,789          $  13,871          $      (82)                    (0.6) %
Acquired & Disposed Properties                           902              1,318                (416)                   (31.6) %
Properties with Vacancy                                5,587              3,909               1,678                     42.9  %

                                              $       20,278          $  19,098          $    1,180                      6.2  %



Property operating expenses consist of franchise taxes, property management
fees, insurance, ground lease payments, property maintenance and repair expenses
paid on behalf of certain of our properties. The increase in property operating
expenses for same store properties for the three months ended September 30,
2021, from the comparable 2020 period, is a result of increased insurance
premiums for our same store portfolio. The decrease in property operating
expenses for same store properties for the
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nine months ended September 30, 2021, from the comparable 2020 period, is a
result of decreased property operating expenses incurred on behalf of our
tenants due to COVID-19 restrictions that were initially instituted during late
March 2020, but relaxed during the second quarter of 2021. Prior to March 2020,
our tenants were operating at full capacity with no operating restrictions,
while in 2021, many tenants are working towards full occupancy. The increase in
property operating expenses for acquired and disposed of properties for the
three and nine months ended September 30, 2021, as compared to the three and
nine months ended September 30, 2020, is primarily a result of increased
property operating expenses from 11 properties acquired subsequent to
September 30, 2020, partially offset by a reduction of operating expenses from
six properties sold subsequent to September 30, 2020. The increase in property
operating expenses for properties with vacancy for the three and nine months
ended September 30, 2021, as compared to the three and nine months ended
September 30, 2020, is a result of increased vacancy in our portfolio.

The base management fee paid to the Adviser increased for the three and nine
months ended September 30, 2021, as compared to the three and nine months ended
September 30, 2020, due to an increase in Gross Tangible Real Estate over the
three and nine months ended September 30, 2021 as compared to the increase in
Total Shareholders' Equity and Gross Tangible Real Estate during the three and
nine months ended September 30, 2020. The calculation of the base management fee
is described in detail above in "Advisory and Administration Agreements."

The incentive fee paid to the Adviser increased for the three and nine months
ended September 30, 2021, as compared to the three and nine months ended
September 30, 2020, due to a higher pre-incentive fee Core FFO. The increase in
Core FFO is a result of an increase in operating revenues, coupled with an
increase in other income due to legal settlements of $2.4 million, net. The
calculation of the incentive fee is described in detail above in "Advisory and
Administration Agreements."

The administration fee paid to the Administrator increased for the three months
ended September 30, 2021, as compared to the three months ended September 30,
2020, due to our Administrator incurring greater costs that are allocated to us.
The administration fee paid to the Administrator decreased for the nine months
ended September 30, 2021, as compared to the nine months ended September 30,
2020, due to our Administrator incurring fewer costs that are allocated to us.
The calculation of the administration fee is described in detail above in
"Advisory and Administration Agreements."

General and administrative expenses increased for the three and nine months ended September 30, 2021, compared to the three and nine months ended
September 30, 2020primarily due to an increase in legal fees, professional service fees and shareholder-related expenses.

We did not recognize an impairment charge during the three and nine months ended
September 30, 2021. During the three months ended September 30, 2020, we
recognized impairment charges on our Rancho Cordova, California and Champaign,
Illinois assets, after our impairment testing determined the fair market value
of these properties was below our respective carrying value, and the respective
carrying value was unrecoverable. During the nine months ended September 30,
2020, we recognized impairment charges on our Rancho Cordova, California,
Champaign, Illinois and Blaine, Minnesota assets, after our impairment testing
determined the fair market value of these properties was below our respective
carrying value, and the respective carrying value was unrecoverable.

Other income and expenses

Interest expense increased for the three months ended September 30, 2021, as
compared to the three months ended September 30, 2020. This increase was
primarily a result of us having higher outstanding balances on our Credit
Facility. Interest expense decreased for the nine months ended September 30,
2021, as compared to the nine months ended September 30, 2020. This decrease was
primarily a result of a decrease in interest rates on our LIBOR based variable
rate debt, as the nine months ended September 30, 2021 had lower average LIBOR
due to central banks having accommodating monetary policy, due to the COVID-19
pandemic, as compared to the nine months ended September 30, 2020.

Loss on sale of real estate, net, for the nine months ended September 30, 2021,
is attributable to two non-core office assets located in Rancho Cordova,
California and Champaign, Illinois, being sold during the period. Gain on sale
of real estate, net, for the nine months ended September 30, 2020 is
attributable to one non-core office asset located in Charlotte, North Carolina
and one non-core industrial asset located in Maple Heights, Ohio being sold
during the period.

Other income increased for the three and nine months ended September 30, 2021,
as compared to the three and nine months ended September 30, 2020, primarily due
to $2.4 million, net, legal settlements.

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Table of contents Net income (loss) available (attributable) to holders of common shares and holders of units of non-controlling POs

Net income available to common stockholders and Non-controlling OP Unitholders
increased for the three months ended September 30, 2021, as compared to the
three months ended September 30, 2020, primarily due to the increase in
operating revenues due to asset acquisition activity during and subsequent to
September 30, 2020, coupled with an increase in other income from $2.4 million,
net, in legal settlements. Net loss attributable to common stockholders and
Non-controlling OP Unitholders increased for the nine months ended September 30,
2021, as compared to the nine months ended September 30, 2020, primarily due to
a loss on sale of real estate, net from two property sales, coupled with writing
off Series D Preferred Stock offering costs in connection with the voluntary
redemption of all outstanding shares of our Series D Preferred Stock, partially
offset by an increase in operating revenues due to asset acquisition activity
during and subsequent to September 30, 2020.

Liquidity and capital resources

Overview

Our sources of liquidity include cash flows from operations, cash and cash
equivalents, borrowings under our Credit Facility and issuing additional equity
securities. Our available liquidity as of September 30, 2021, was $36.3 million,
consisting of approximately $10.2 million in cash and cash equivalents and
available borrowing capacity of $26.1 million under our Credit Facility. Our
available borrowing capacity under the Credit Facility increased to $28.2
million as of November 1, 2021.

Future capital needs

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

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. 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. We further believe that
our cash flow from operations coupled with the financing capital available to us
in the future are sufficient to fund our long-term liquidity needs.

Equity

At June 28, 2021, we completed a firm takeover bid of 4,000,000 shares of our newly designated Series G preferred shares at a takeover price of $ 25.00 per action, increasing $ 100.0 million in gross product and approximately $ 96.6 million in net income, after payment of discounts and subscription fees. We have used the net proceeds of this offering to voluntarily redeem all of the outstanding shares of our Series D preferred shares.

On June 30, 2021, we voluntarily redeemed all 3,509,555 outstanding shares of
our Series D Preferred Stock at a redemption price of $25.1458333 per share,
which represented the liquidation preference per share, plus accrued and unpaid
dividends through June 30, 2021, for an aggregate redemption price of
approximately $88.3 million. In connection with this redemption, we recognized a
$2.1 million decrease to net income available to common shareholders pertaining
to the original issuance costs incurred upon issuance of our Series D Preferred
Stock.

During the nine months ended September 30, 2021, we raised net proceeds of $24.1
million of common equity under our Common Stock ATM Program at a net weighted
average per share price of $20.08. We used these proceeds to fund acquisitions,
pay down outstanding debt and for other general corporate purposes. We did not
sell any of our Series E Preferred Stock under our Series E Preferred Stock
Sales Agreement during the nine months ended September 30, 2021. We raised net
proceeds of $4.9 million from sales of our Series F Preferred Stock during the
nine months ended September 30, 2021.

From November 1, 2021, we had the opportunity to go up to $ 344.5 million additional equity through the sale and issue of securities listed on the Plateau Universel 2019, as part of one or more future public offers. Of $ 344.5

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million of available capacity under our 2019 Universal Shelf, approximately
$151.2 million is reserved for additional sales under our Common Stock ATM
Program, and approximately $92.8 million is reserved for additional sales under
our Series E Preferred Stock Sales Agreement as of November 1, 2021. We expect
to continue to use our at-the-market programs as a source of liquidity for the
remainder of 2021.

As of November 1, 2021, we had the ability to raise up to $690.8 million of
additional equity capital through the sale and issuance of securities that are
registered under the 2020 Universal Shelf, in one or more future public
offerings. Of the $690.8 million of available capacity under our 2020 Universal
Shelf, approximately $627.3 million is reserved for the sale of our Series F
Preferred Stock as of November 1, 2021.

Debt capital

As of September 30, 2021, we had 53 mortgage notes payable in the aggregate
principal amount of $451.0 million, collateralized by a total of 68 properties
with a remaining weighted average maturity of 3.9 years. The weighted-average
interest rate on the mortgage notes payable as of September 30, 2021 was 4.19%.

We continue to see banks and non-bank lenders ready to issue mortgages. Therefore, we focus on securing mortgages from regional banks, non-bank lenders and the CMBS market.

As of September 30, 2021, we had mortgage debt in the aggregate principal amount
of $13.6 million payable during the remainder of 2021 and $105.8 million payable
during 2022. The 2021 principal amount payable includes both amortizing
principal payments and two balloon principal payments due during the remaining
three months of 2021. We anticipate being able to refinance our mortgages that
come due during 2021 and 2022 with a combination of new mortgage debt,
availability under our Credit Facility and the issuance of additional equity
securities. In addition, we have raised substantial equity under our
at-the-market programs and plan to continue to use these programs.

Operating activities

Net cash provided by operating activities during the nine months ended
September 30, 2021, was $53.7 million, as compared to net cash provided by
operating activities of $52.4 million for the nine months ended September 30,
2020. This change was primarily a result of an increase in operating revenues
from our 11 property acquisitions completed subsequent to September 30, 2020,
coupled with $2.4 million, net, in legal settlements, partially offset by an
increase in unreimbursed property operating expenses, due to higher portfolio
vacancy. The majority of cash from operating activities is generated from the
lease revenues that we receive from our tenants. We utilize this cash to fund
our property-level operating expenses and use the excess cash primarily for debt
and interest payments on our mortgage notes payable, interest payments on our
Credit Facility, distributions to our stockholders, management fees to our
Adviser, Administration fees to our Administrator and other entity-level
operating expenses.

Investment activities

Net cash used in investing activities during the nine months ended September 30,
2021, was $46.0 million, which primarily consisted of eight property
acquisitions, coupled with capital improvements performed at certain of our
properties, partially offset by proceeds from the sale of two properties. Net
cash used in investing activities during the nine months ended September 30,
2020, was $73.0 million, which primarily consisted of six property acquisitions,
coupled with capital improvements performed at certain of our properties,
partially offset by proceeds from the sale of two properties.

Fundraising activities

Net cash used in financing activities during the nine months ended September 30,
2021, was $8.6 million, which primarily consisted of the repayment of $14.3
million of outstanding mortgage debt, redemption of our Series D Preferred
Stock, repayment of $51.8 million, net, on our Revolver, and distributions paid
to common, senior common and preferred shareholders, partially offset by the
issuance of $130.0 million of common and preferred equity, borrowings from our
new Term Loan B of $65.0 million, and the issuance of $5.5 million of new
mortgage debt. Net cash provided by financing activities for the nine months
ended September 30, 2020, was $24.4 million, which primarily consisted of $35.9
million in new mortgage borrowings coupled with the issuance of $39.6 million of
equity, partially offset by $31.7 million of mortgage principal repayments, and
distributions paid to common, senior common and preferred shareholders.
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Credit facility

On July 2, 2019, we amended, extended and upsized our Credit Facility, expanding
Term Loan A from $75.0 million to $160.0 million, and increasing our Revolver
from $85.0 million to $100.0 million. Term Loan A has a maturity date of July 2,
2024, and the Revolver has a maturity date of July 2, 2023. The interest rate
for the Credit Facility is equal to LIBOR plus a spread ranging from 125 to 215
basis points depending on our leverage. We entered into multiple interest rate
cap agreements on Term Loan A, which cap LIBOR ranging from 2.50% to 2.75%, to
hedge our exposure to variable interest rates. The bank syndicate is comprised
of KeyBank, Fifth Third Bank, U.S. Bank National Association, The Huntington
National Bank, Goldman Sachs Bank USA, and Wells Fargo Bank, National
Association.

On February 11, 2021, we added Term Loan B, a new $65.0 million term loan
component to our Credit Facility. Term Loan B has a maturity date of
February 11, 2026 and a LIBOR floor of 25 basis points plus a spread ranging
from 140 to 225 basis points depending on our leverage. We entered into multiple
interest rate cap agreements on Term Loan B, which cap LIBOR from 1.50% to
1.75%. We incurred fees of approximately $0.5 million in connection with issuing
Term Loan B. As of September 30, 2021, there was $65.0 million outstanding under
Term Loan B, and we used all net proceeds to repay all outstanding borrowings on
the Revolver.

As of September 30, 2021, there was $227.1 million outstanding under our Credit
Facility at a weighted average interest rate of approximately 1.97% and $18.7
million outstanding under letters of credit at a weighted average interest rate
of 1.90%. As of November 1, 2021, the maximum additional amount we could draw
under the Credit Facility was $28.2 million. We were in compliance with all
covenants under the Credit Facility as of September 30, 2021.

For a discussion of the impact of COVID-19 on our liquidity and capital resources, see the Impact of COVID-19 on Our Business section under Business Environment.

Contractual obligations

The following table reflects our significant contractual obligations at
September 30, 2021 (in thousands):

                                                                               Payments Due by Period
Contractual Obligations                  Total             Less than 1 Year          1-3 Years          3-5 Years           More than 5 Years
Debt Obligations (1)                  $ 678,102          $          77,270 

$ 315,006 $ 131,644 $ 154,182 Interest on debt securities (2)

                                      79,887                     21,829             31,785             16,746                       9,527
Operating Lease Obligations (3)           9,395                        488                985                980                       6,942
Purchase Obligations (4)                  4,561                      3,116              1,445                  -                           -
                                      $ 771,945          $         102,703          $ 349,221          $ 149,370          $          170,651


(1)Debt obligations represent borrowings under our Revolver, which represents
$2.1 million of the debt obligation due in 2023, our Term Loan A, which
represents $160.0 million of the debt obligation due in 2024, our Term Loan B,
which represents $65.0 million of the debt obligation due in 2026 and mortgage
notes payable that were outstanding as of September 30, 2021. This figure does
not include $(0.1) million of premiums and (discounts), net and $3.9 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 and Term Loan A and Term Loan B is variable; thus, the
interest payment obligation calculated for purposes of this table was based upon
rates and balances as of September 30, 2021.
(3)Operating lease obligations represent the ground lease payments due on four
of our properties.
(4)Purchase obligations consist of tenant and capital improvements at nine of
our properties.

Off-balance sheet provisions

We had no material off-balance sheet arrangements at September 30, 2021.

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  Table of Contents
Funds from Operations

The National Association of Real Estate Investment Trusts ("NAREIT") developed
Funds from Operations ("FFO") as a relevant non-GAAP supplemental measure of
operating performance of an equity REIT to recognize that income-producing real
estate historically has not depreciated on the same basis determined under GAAP.
FFO, as defined by NAREIT, is net income (computed in accordance with GAAP),
excluding gains or losses from sales of property and impairment losses on
property, plus depreciation and amortization of real estate assets, and after
adjustments for unconsolidated partnerships and joint ventures.

FFO does not represent cash flows from operating activities in accordance with
GAAP, which, unlike FFO, generally reflects all cash effects of transactions and
other events in the determination of net income. FFO should not be considered an
alternative to net income as an indication of our performance or to cash flows
from operations as a measure of liquidity or ability to make distributions.
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. 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.

We also present FFO available to our common stockholders and Non-controlling OP
Unitholders as adjusted for comparability as an additional supplemental measure,
as we believe it is more reflective of our core operating performance, and
provides investors and analysts an additional measure to compare our performance
across reporting periods on a consistent basis by excluding items that we do not
believe are indicative of our core operating performance. FFO as adjusted for
comparability is generally calculated as FFO available to common stockholders
and Non-controlling OP Unitholders, excluding certain non-recurring and non-cash
income and expense adjustments, which management believes are not reflective of
the results within our operating real estate portfolio.

The following table provides a reconciliation of our FFO available to common
stockholders for the three and nine months ended September 30, 2021 and 2020,
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:

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                                                    For the three months ended September
                                                                    30,                         For the nine months ended September 30,
                                                   (Dollars in Thousands, Except for Per         (Dollars in Thousands, Except for Per
                                                               Share Amounts)                               Share Amounts)
                                                         2021                  2020                   2021                   2020
Calculation of basic FFO per share of common
stock and Non-controlling OP Unit
Net income                                         $       4,498          $ 

2,844 $ 6,657 $ 6,070
Less: Distributions attributable to preferred and first common shares

                         (3,038)               (2,974)                 (9,105)               (8,752)
Less: Series D preferred stock offering
costs write off                                                -                     -                  (2,141)                    -
Net income (loss) available (attributable)
to common stockholders and Non-controlling
OP Unitholders                                     $       1,460          $       (130)         $       (4,589)         $     (2,682)
Adjustments:
Add: Real estate depreciation and
amortization                                       $      14,760          $ 

13 798 $ 45,661 $ 42,076
Add: Depreciation charge

                                         -                 1,184                       -                 2,905
Add: Loss on sale of real estate, net                          -                     -                     882                     -
Less: Gain on sale of real estate, net                         -                (1,196)                      -                (1,184)
FFO available to common stockholders and
Non-controlling OP Unitholders - basic             $      16,220          $ 

13 656 $ 41,954 $ 41,115
Weighted average common shares outstanding – basic

                                                 36,768,779            34,075,147              36,296,414            33,884,007
Weighted average Non-controlling OP Units
outstanding                                              256,994               503,033                 337,205               502,435
Total common shares and Non-controlling OP
Units                                                 37,025,773            34,578,180              36,633,619            34,386,442
Basic FFO per weighted average share of
common stock and Non-controlling OP Unit           $        0.44          $       0.39          $         1.15          $       1.20
Calculation of diluted FFO per share of
common stock and Non-controlling OP Unit
Net income                                         $       4,498          $ 

2,844 $ 6,657 $ 6,070
Less: Distributions attributable to preferred and first common shares

                         (3,038)               (2,974)                 (9,105)               (8,752)
Less: Series D preferred stock offering
costs write off                                                -                     -                  (2,141)                    -
Net income (loss) available (attributable)
to common stockholders and Non-controlling
OP Unitholders                                     $       1,460          $       (130)         $       (4,589)         $     (2,682)
Adjustments:
Add: Real estate depreciation and
amortization                                       $      14,760          $ 

13 798 $ 45,661 $ 42,076
Add: Depreciation charge

                                         -                 1,184                       -                 2,905
Add: Income impact of assumed conversion of
senior common stock                                          170                   203                     534                   615
Add: Loss on sale of real estate, net                          -                     -                     882                     -
Less: Gain on sale of real estate, net                         -                (1,196)                      -                (1,184)
FFO available to common stockholders and
Non-controlling OP Unitholders plus assumed
conversions                                        $      16,390          $ 

13 859 $ 42,488 $ 41,730
Weighted average common shares outstanding – basic

                                                 36,768,779            34,075,147              36,296,414            33,884,007
Weighted average Non-controlling OP Units
outstanding                                              256,994               503,033                 337,205               502,435
Effect of convertible senior common stock                532,785               641,430                 532,785               641,430
Weighted average common shares and
Non-controlling OP Units outstanding -
diluted                                               37,558,558            35,219,610              37,166,404            35,027,872
Diluted FFO per weighted average share of
common stock and Non-controlling OP Unit           $        0.44          $       0.39          $         1.14          $       1.19
Calculation of diluted FFO per share of
common stock and Non-controlling OP Unit, as
adjusted for comparability
FFO available to common stockholders and
Non-controlling OP Unitholders plus assumed
conversions                                        $      16,390          $ 

13 859 $ 42,488 $ 41,730
Add: Series D preferred share offering fees are written off

                                                      -                     -                   2,141                     -
FFO available to common stockholders and
Non-controlling OP Unitholders plus assumed
conversions, as adjusted for comparability         $      16,390          $     13,859          $       44,629          $     41,730
Weighted average common shares and
Non-controlling OP Units outstanding -
diluted                                               37,558,558            35,219,610              37,166,404            35,027,872
Diluted FFO per weighted average share of
common stock and Non-controlling OP Unit, as
adjusted for comparability                         $        0.44          $ 

$ 0.39 1.20 $ 1.19
Distributions declared per ordinary share and share of non-controlling PO

                  $     0.37545          $    0.37545          $      1.12635          $    1.12635



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