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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2024
OR 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM                      TO                     
COMMISSION FILE NUMBER: 001-33097 
GLADSTONE COMMERCIAL CORPORATION
(Exact name of registrant as specified in its charter)
 
Maryland 02-0681276
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
1521 Westbranch Drive,Suite 100 22102
McLean,Virginia
(Address of principal executive offices) (Zip Code)
(703) 287-5800
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and formal fiscal year, if changed since last report) 
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.001 per shareGOODThe Nasdaq Stock Market LLC
6.625% Series E Cumulative Redeemable Preferred Stock, par value $0.001 per shareGOODNThe Nasdaq Stock Market LLC
6.00% Series G Cumulative Redeemable Preferred Stock, par value $0.001 per shareGOODOThe Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ☒  No  ☐
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Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer   Accelerated filer 
Non-accelerated filer   Smaller reporting company 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐ No  
The number of shares of the registrant’s common stock, $0.001 par value, outstanding as of May 6, 2024 was 40,054,308.
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GLADSTONE COMMERCIAL CORPORATION
FORM 10-Q FOR THE QUARTER ENDED
March 31, 2024
TABLE OF CONTENTS
 
  PAGE

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PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
Gladstone Commercial Corporation
Condensed Consolidated Balance Sheets
(Dollars in Thousands, Except Share and Per Share Data)
(Unaudited)
March 31, 2024December 31, 2023
ASSETS
Real estate, at cost$1,209,932 $1,221,364 
Less: accumulated depreciation304,000 299,662 
Total real estate, net905,932 921,702 
Lease intangibles, net97,663 101,048 
Real estate and related assets held for sale18,297 28,787 
Cash and cash equivalents10,451 11,985 
Restricted cash4,467 4,150 
Funds held in escrow5,334 7,515 
Right-of-use assets from operating leases4,143 4,889 
Deferred rent receivable, net41,912 41,006 
Other assets16,958 12,389 
TOTAL ASSETS$1,105,157 $1,133,471 
LIABILITIES, MEZZANINE EQUITY AND EQUITY
LIABILITIES
Mortgage notes payable, net$275,976 $295,853 
Borrowings under Revolver75,950 75,750 
Borrowings under Term Loan A, Term Loan B and Term Loan C, net367,430 367,258 
Deferred rent liability, net27,551 29,324 
Operating lease liabilities4,241 5,093 
Asset retirement obligation 4,961 4,928 
Accounts payable and accrued expenses14,256 13,588 
Liabilities related to assets held for sale676 676 
Due to Adviser and Administrator (1)2,922 2,556 
Other liabilities12,902 14,138 
TOTAL LIABILITIES$786,865 $809,164 
Commitments and contingencies (2)
MEZZANINE EQUITY
Series E and G redeemable preferred stock, net, par value $0.001 per share; $25 per share liquidation preference; 10,750,886 and 10,750,886 shares authorized; and 7,052,334 and 7,052,334 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively (3)
$170,041 $170,041 
TOTAL MEZZANINE EQUITY$170,041 $170,041 
EQUITY
Senior common stock, par value $0.001 per share; 950,000 shares authorized; and 402,817 and 406,425 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively (3)
$1 $1 
Common stock, par value $0.001 per share, 62,329,084 and 62,326,818 shares authorized; and 40,003,481 and 40,000,596 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively (3)
40 40 
Series F redeemable preferred stock, par value $0.001 per share; $25 per share liquidation preference; 25,970,030 and 25,972,296 shares authorized and 929,692 and 918,601 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively (3)
1 1 
Additional paid in capital730,465 730,256 
Accumulated other comprehensive income13,281 7,758 
Distributions in excess of accumulated earnings(596,475)(584,776)
TOTAL STOCKHOLDERS' EQUITY$147,313 $153,280 
OP Units held by Non-controlling OP Unitholders (3)938 986 
TOTAL EQUITY$148,251 $154,266 
TOTAL LIABILITIES, MEZZANINE EQUITY AND EQUITY$1,105,157 $1,133,471 
(1)Refer to Note 2 “Related-Party Transactions”
(2)Refer to Note 7 “Commitments and Contingencies”
(3)Refer to Note 8 “Equity and Mezzanine Equity”

The accompanying notes are an integral part of these condensed consolidated financial statements.
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Gladstone Commercial Corporation
Condensed Consolidated Statements of Operations and Comprehensive Income
(Dollars in Thousands, Except Share and Per Share Data)
(Unaudited) 
For the three months ended March 31,
20242023
Operating revenues
Lease revenue$35,721 $36,554 
Total operating revenues$35,721 $36,554 
Operating expenses
Depreciation and amortization$13,326 $14,704 
Property operating expenses5,884 6,727 
Base management fee (1)1,535 1,605 
Incentive fee (1)1,171  
Administration fee (1)630 565 
General and administrative1,047 1,063 
Impairment charge493  
Total operating expense before incentive fee waiver$24,086 $24,664 
Incentive fee waiver (1)(771) 
Total operating expenses $23,315 $24,664 
Other income (expense)
Interest expense$(9,497)$(8,828)
Gain on sale of real estate, net283  
Gain on debt extinguishment, net300  
Other income34 105 
Total other (expense), net$(8,880)$(8,723)
Net income $3,526 $3,167 
Net (income) loss (available) attributable to OP Units held by Non-controlling OP Unitholders(2)7 
Net income available to the Company$3,524 $3,174 
Distributions attributable to Series E, F, and G preferred stock(3,112)(3,022)
Distributions attributable to senior common stock(105)(109)
Loss on extinguishment of Series F preferred stock(3)(5)
Gain on repurchase of Series G preferred stock 3 
Net income available to common stockholders$304 $41 
Income per weighted average share of common stock - basic & diluted
Income available to common stockholders $0.01 $ 
Weighted average shares of common stock outstanding
Basic and Diluted40,003,481 39,922,359 
Earnings per weighted average share of senior common stock$0.26 $0.26 
Weighted average shares of senior common stock outstanding - basic 402,856 420,521 
Comprehensive income
Change in unrealized gain related to interest rate hedging instruments, net$5,417 $(5,895)
Other comprehensive income (loss)5,417 (5,895)
Net income $3,526 $3,167 
Comprehensive income (loss)$8,943 $(2,728)
Comprehensive (income) loss (available) attributable to OP Units held by Non-controlling OP Unitholders(2)7 
Total comprehensive income (loss) available to the Company$8,941 $(2,721)
 
(1)Refer to Note 2 “Related-Party Transactions”
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Gladstone Commercial Corporation
Condensed Consolidated Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)
For the three months ended March 31,
20242023
Cash flows from operating activities:
Net income$3,526 $3,167 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 13,326 14,704 
Impairment charge493  
Gain on debt extinguishment, net(300) 
Gain on sale of real estate, net(283) 
Amortization of deferred financing costs462 410 
Amortization of deferred rent asset and liability, net(1,615)(1,761)
Amortization of discount and premium on assumed debt, net9 11 
Asset retirement obligation expense33 31 
Amortization of right-of-use asset from operating leases and operating lease liabilities, net3 7 
Operating changes in assets and liabilities
Decrease in other assets1,752 924 
Decrease in deferred rent receivable(1,149)(938)
Decrease in accounts payable and accrued expenses(725)(502)
Increase (decrease) in amount due to Adviser and Administrator366 (899)
(Decrease) increase in other liabilities(550)166 
Leasing commissions paid(325)(401)
Net cash provided by operating activities$15,023 $14,919 
Cash flows from investing activities:
Improvements of existing real estate(822)(1,961)
Proceeds from sale of real estate18,625  
Receipts from lenders for funds held in escrow2,499 3,218 
Payments to lenders for funds held in escrow(318)(325)
Receipts from tenants for reserves402 451 
Payments to tenants from reserves(1,668) 
Deposits on future acquisitions(250)(709)
Net cash provided by investing activities$18,468 $674 
Cash flows from financing activities:
Proceeds from issuance of equity$189 $4,630 
Offering costs paid(14)(80)
Redemption of Series F preferred stock(58)(91)
Retirement of Senior Common stock (55)
Repurchase of Series G preferred stock (12)
Payments for deferred financing costs (70)
Principal repayments on mortgage notes payable(19,797)(5,002)
Borrowings from revolving credit facility19,900 13,000 
Repayments on revolving credit facility(19,700)(10,000)
Increase in security deposits(47) 
Distributions paid for common, senior common, preferred stock and Non-controlling OP Unitholders(15,181)(15,114)
Net cash used in financing activities$(34,708)$(12,794)
Net (decrease) increase in cash, cash equivalents, and restricted cash$(1,217)$2,799 
Cash, cash equivalents, and restricted cash at beginning of period$16,135 $15,992 
Cash, cash equivalents, and restricted cash at end of period$14,918 $18,791 
SUPPLEMENTAL AND NON-CASH INFORMATION
Tenant funded fixed asset improvements included in deferred rent liability, net$ $722 
Unrealized gain (loss) related to interest rate hedging instruments, net$5,417 $(5,895)
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Right-of-use asset from operating leases $(686)$ 
Operating lease liabilities$795 $ 
Capital improvements and leasing commissions included in accounts payable and accrued expenses$6,868 $2,350 
Dividends paid on Series F Preferred Stock via additional share issuances$131 $112 

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same amounts shown in the condensed consolidated statements of cash flows (dollars in thousands):
For the three months ended March 31,
20242023
Cash and cash equivalents$10,451 $14,286 
Restricted cash4,467 4,505 
Total cash, cash equivalents, and restricted cash shown in the consolidated statement of cash flows$14,918 $18,791 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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Gladstone Commercial Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Organization, Basis of Presentation and Significant Accounting Policies

Gladstone Commercial Corporation is a real estate investment trust (“REIT”) that was incorporated under the General Corporation Law of the State of Maryland on February 14, 2003. We focus on acquiring, owning and managing primarily industrial and office properties. Subject to certain restrictions and limitations, our business is managed by Gladstone Management Corporation, a Delaware corporation (the “Adviser”), and administrative services are provided by Gladstone Administration, LLC, a Delaware limited liability company (the “Administrator”), each pursuant to a contractual arrangement with us. Our Adviser and Administrator collectively employ all of our personnel and pay their salaries, benefits, and general expenses directly. Gladstone Commercial Corporation conducts substantially all of its operations through a subsidiary, Gladstone Commercial Limited Partnership, a Delaware limited partnership (the “Operating Partnership”).

All references herein to “we,” “our,” “us” and the “Company” mean Gladstone Commercial Corporation and its consolidated subsidiaries, except where it is made clear that the term means only Gladstone Commercial Corporation.

Interim Financial Information

Our interim financial statements are prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial information and pursuant to the requirements for reporting on Form 10-Q and in accordance with Article 10 of Regulation S-X. Accordingly, certain disclosures accompanying annual financial statements prepared in accordance with GAAP are omitted. The year-end balance sheet data presented herein was derived from audited financial statements but does not include all disclosures required by GAAP. In the opinion of our management, all adjustments, consisting solely of normal recurring accruals, necessary for the fair statement of financial statements for the interim period, have been included. The interim financial statements and notes thereto should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the U.S. Securities and Exchange Commission (the “SEC”) on February 21, 2024. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for other interim periods or for the full fiscal year.

Revision of Previously Issued Financial Statements

In connection with the preparation of the Company’s financial statements for the second quarter of 2023, we identified errors in the calculation of depreciation of tenant funded improvement assets at a number of the Company’s properties. The Company had depreciated these assets through a term that was different than their useful lives, the correction of which resulted in changes to depreciation expense, a non-cash amount, and net income. The correction of these errors had an immaterial impact on the Incentive Fee for each period presented and had no impact on any other Advisory fees. The identified errors were included in the Company's previously issued 2021 quarterly and annual financial statements, 2022 quarterly and annual financial statements, and quarterly financial statements for the three months ended March 31, 2023. The Company evaluated the errors and determined that the related impact was not material to the Consolidated Statements of Operations and Comprehensive Income, Consolidated Balance Sheets, Consolidated Statements of Cash Flows or Consolidated Statements of Equity for any period impacted. The Company has revised the previously issued Condensed Consolidated Statements of Operations and Comprehensive Income, Condensed Consolidated Balance Sheets, Condensed Consolidated Statements of Cash Flows and Stockholders’ Equity tables as of and for the three months ended March 31, 2023 to correct for such errors and these revisions are reflected in this Form 10-Q. The Company will also correct previously reported financial information for these errors in our future filings, as applicable. A summary of the corrections to the impacted financial statement line items to the Company’s previously issued Consolidated Statements of Operations and Comprehensive Income, Consolidated Balance Sheets, Consolidated Statements of Cash Flows and Consolidated Statements of Equity for each affected period is presented in Note 9, “Revision of Previously Issued Financial Statements.”

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

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Significant Accounting Policies

The preparation of our financial statements in accordance with GAAP requires management to make judgments that are subjective in nature and requires management to make certain estimates and assumptions. Application of these accounting policies involves the exercise of judgment regarding the use of assumptions as to future uncertainties, and as a result, actual results could materially differ from these estimates. A summary of all of our significant accounting policies is provided in Note 1, “Organization, Basis of Presentation and Significant Accounting Policies,” to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023. There were no material changes to our critical accounting policies during the three months ended March 31, 2024.

2. Related-Party Transactions

Gladstone Management and Gladstone Administration

We are externally managed pursuant to contractual arrangements with our Adviser and our Administrator, which collectively employ all of our personnel and pay their salaries, benefits, and general expenses directly. Both our Adviser and Administrator are affiliates of ours, as their parent company is owned and controlled by Mr. David Gladstone, our chairman and chief executive officer. Two of our executive officers, Mr. Gladstone and Mr. Terry Lee Brubaker (our chief operating officer) serve as directors and executive officers of our Adviser and our Administrator. Our president, Mr. Arthur “Buzz” Cooper, is also an executive vice president of commercial and industrial real estate of our Adviser. Mr. Michael LiCalsi, our general counsel and secretary, also serves as our Administrator’s president, general counsel and secretary, as well as executive vice president of administration of our Adviser. We have entered into an advisory agreement with our Adviser, as amended from time to time (the “Advisory Agreement”), and an administration agreement with our Administrator (the “Administration Agreement”). The services and fees under the Advisory Agreement and Administration Agreement are described below. As of March 31, 2024 and December 31, 2023, $2.9 million and $2.6 million, respectively, was collectively due to our Adviser and Administrator. 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 agreements with our Adviser and Administrator annually, typically during the month of July. During their July 2023 meeting, our Board of Directors reviewed and renewed the Administration Agreement for an additional year, through August 31, 2024 and simultaneously entered into the Eighth Amended and Restated Investment Advisory Agreement (the “Eighth Amended Advisory Agreement”).

Base Management Fee

On July 14, 2020, we amended and restated the Advisory Agreement, which replaced the previous calculation of the base management fee with a calculation based on Gross Tangible Real Estate. The revised base management fee is payable quarterly in arrears and calculated at an annual rate of 0.425% (0.10625% per quarter) of the prior calendar quarter’s “Gross Tangible Real Estate,” defined in the Advisory Agreement as the current gross value of our property portfolio (meaning the aggregate of each property’s original acquisition price plus the cost of any subsequent capital improvements thereon). The calculation of the other fees in the Advisory Agreement was unchanged.

For the three months ended March 31, 2024, we recorded a base management fee of $1.5 million. For the three months ended March 31, 2023, we recorded a base management fee of $1.6 million.

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

On January 10, 2023, the Company amended and restated the Advisory Agreement by entering into the Seventh Amended and Restated Investment Advisory Agreement between the Company and the Adviser (the “Seventh Amended Advisory Agreement”), as approved unanimously by our Board of Directors, including specifically, our independent directors. The
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Seventh Amended Advisory Agreement contractually eliminated the payment of the incentive fee for the quarters ended March 31, 2023 and June 30, 2023. The calculation of the other fees was unchanged.

On July 11, 2023, the Company entered into the Eighth Amended Advisory Agreement, as approved unanimously by our Board of Directors, including specifically, our independent directors. The Eighth Amended Advisory Agreement contractually eliminated the payment of the incentive fee for the quarters ended September 30, 2023 and December 31, 2023. In addition, the Eighth Amended Advisory Agreement also clarified that for any future quarter whereby an incentive fee would exceed by greater than 15% the average quarterly incentive fee paid, the measurement would be versus the last four quarters where an incentive fee was actually paid. The calculation of the other fees was unchanged.

For the three months ended March 31, 2024, we recorded an incentive fee of $1.2 million, partially offset by credits related to non-contractual, unconditional, and irrevocable waivers issued by the Advisor of $0.8 million. For the three months ended March 31, 2023, the contractually eliminated incentive fee would have been $1.1 million.

Capital Gain Fee

Under the Advisory Agreement, we will pay to the Adviser a capital gain-based incentive fee that will be calculated and payable in arrears as of the end of each fiscal year (or upon termination of the Advisory Agreement). In determining the capital gain fee, we will calculate aggregate realized capital gains and aggregate realized capital losses for the applicable time period. For this purpose, aggregate realized capital gains and losses, if any, equals the realized gain or loss calculated by the difference between the sales price of the property, less any costs to sell the property and the current gross value of the property (equal to the property’s original acquisition price plus any subsequent non-reimbursed capital improvements) of the disposed property. At the end of the fiscal year, if this number is positive, then the capital gain fee payable for such time period shall equal 15.0% of such amount. No capital gain fee was recognized during the three months ended March 31, 2024 or 2023.

Termination Fee

The Advisory Agreement includes a termination fee clause whereby, in the event of our termination of the agreement without cause (with 120 days’ prior written notice and the vote of at least two-thirds of our independent directors), a termination fee would be payable to the Adviser equal to two times the sum of the average annual base management fee and incentive fee earned by the Adviser during the 24-month period prior to such termination. A termination fee is also payable if the Adviser terminates the Advisory Agreement after we have defaulted and applicable cure periods have expired. The Advisory Agreement may also be terminated for cause by us (with 30 days’ prior written notice and the vote of at least two-thirds of our independent directors), with no termination fee payable. Cause is defined in the Advisory Agreement to include if the Adviser breaches any material provisions thereof, the bankruptcy or insolvency of the Adviser, dissolution of the Adviser and fraud or misappropriation of funds.

Administration Agreement

Under the terms of the Administration Agreement, we pay separately for our allocable portion of the Administrator’s overhead expenses in performing its obligations to us including, but not limited to, rent and our allocable portion of the salaries and benefits expenses of our Administrator’s employees, including, but not limited to, our chief financial officer, treasurer, chief compliance officer, 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 approximate percentage of time the Administrator’s employees perform services for us in relation to their time spent performing services for all companies serviced by our Administrator under contractual agreements. We believe that the methodology of allocating the Administrator’s total expenses by approximate percentage of time services were performed among all companies serviced by our Administrator more closely approximates fees paid to actual services performed. For the three months ended March 31, 2024, we recorded an administration fee of $0.6 million. For the three months ended March 31, 2023, we recorded an administration fee of $0.6 million.

Gladstone Securities

Gladstone Securities, LLC (“Gladstone Securities”), is a privately held broker dealer registered with the Financial Industry Regulatory Authority and insured by the Securities Investor Protection Corporation. Gladstone Securities is an affiliate of ours, as its parent company is owned and controlled by David Gladstone, our chairman and chief executive officer. Mr. Gladstone also serves on the board of managers of Gladstone Securities.

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Mortgage Financing Arrangement Agreement

We entered into an agreement with Gladstone Securities, effective June 18, 2013, for it to act as our non-exclusive agent to assist us with arranging mortgage financing for our owned properties. In connection with this engagement, Gladstone Securities will, from time to time, continue to solicit the interest of various commercial real estate lenders or recommend to us third-party lenders offering credit products or packages that are responsive to our needs. We pay Gladstone Securities a financing fee in connection with the services it provides to us for securing mortgage financing on any of our properties. The amount of these financing fees, which are payable upon closing of the financing, are based on a percentage of the amount of the mortgage, generally ranging from 0.15% to a maximum of 1.00% of the mortgage obtained. The amount of the financing fees may be reduced or eliminated, as determined by us and Gladstone Securities, after taking into consideration various factors, including, but not limited to, the involvement of any third-party brokers and market conditions. We did not pay financing fees to Gladstone Securities during the three months ended March 31, 2024 and 2023. Our Board of Directors renewed the agreement for an additional year, through August 31, 2024, at its July 2023 meeting.

Dealer Manager Agreement

On February 20, 2020, we entered into a dealer manager agreement, as amended on February 9, 2023 (together, the “Dealer Manager Agreement”), whereby Gladstone Securities acts as the exclusive dealer manager in connection with our offering (the “Offering”) of up to (i) 20,000,000 shares of 6.00% Series F Cumulative Redeemable Preferred Stock, par value $0.001 per share (the “Series F Preferred Stock”), on a “reasonable best efforts” basis (the “Primary Offering”), and (ii) 6,000,000 shares of Series F Preferred Stock pursuant to our distribution reinvestment plan (the “DRIP”) to those holders of the Series F Preferred Stock who participate in such DRIP. Prior to the effectiveness of the Company’s Registration Statement on Form S-3 (File No. 333-277877) (the “2024 Registration Statement”), the Series F Preferred Stock was registered with the SEC pursuant to an automatic shelf registration statement on Form S-3 (File No. 333-268549), as was amended and supplemented (the “2022 Registration Statement”), under the Securities Act of 1933, as amended, and was offered and sold pursuant to a prospectus supplement, dated February 9, 2023, and a base prospectus dated November 23, 2022 relating to the 2022 Registration Statement. During the years ended December 31, 2020, 2021 and 2022, the Series F Preferred Stock was registered with the SEC pursuant to a registration statement on Form S-3 (File No. 333-236143) (the “2020 Registration Statement”), and offered and sold pursuant to a prospectus supplement, dated February 20, 2020, and a base prospectus dated February 11, 2020.

Under the Dealer Manager Agreement, Gladstone Securities, as dealer manager, provides certain sales, promotional and marketing services to us in connection with the Offering, and we pay Gladstone Securities (i) selling commissions of 6.0% of the gross proceeds from sales of Series F Preferred Stock in the Primary Offering (the “Selling Commissions”), and (ii) a dealer manager fee of 3.0% of the gross proceeds from sales of Series F Preferred Stock in the Primary Offering (the “Dealer Manager Fee”). No Selling Commissions or Dealer Manager Fee are paid with respect to shares sold pursuant to the DRIP. Gladstone Securities may, in its sole discretion, re-allow a portion of the Dealer Manager Fee to participating broker-dealers in support of the Offering. We paid fees of $0.02 million to Gladstone Securities during the three months ended March 31, 2024 in connection with the Offering. We paid fees of $0.03 million to Gladstone Securities during the three months ended March 31, 2023 in connection with the Offering.

3. Earnings Per Share of Common Stock

The following tables set forth the computation of basic and diluted earnings per share of common stock for the three months ended March 31, 2024 and 2023. The operating partnership units in the Operating Partnership (“OP Units”) held by holders who do not control the Operating Partnership (“Non-controlling OP Unitholders”) (which may be redeemed for shares of common stock) have been excluded from the diluted earnings per share calculations, as there would be no effect on the amounts since the Non-controlling OP Unitholders’ share of earnings would also be added back to net income. Net income figures are presented net of such non-controlling interests in the earnings per share calculation.

We computed basic earnings per share for the three months ended March 31, 2024 and 2023 using the weighted average number of shares outstanding during the respective periods. Diluted earnings per share for the three months ended March 31, 2024 and 2023 reflects additional shares of common stock related to our convertible senior common stock (the “Senior Common Stock”), if the effect of conversion would be dilutive, that would have been outstanding if such dilutive potential shares of common stock had been issued, as well as an adjustment to net earnings attributable to common stockholders as applicable to common stockholders that would result from their assumed issuance (dollars in thousands, except per share amounts).

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For the three months ended March 31,
20242023
Calculation of basic earnings per share of common stock:
Net income available to common stockholders$304 $41 
Denominator for basic weighted average shares of common stock (1)40,003,481 39,922,359 
Basic earnings per share of common stock$0.01 $ 
Calculation of diluted earnings per share of common stock:
Net income available to common stockholders$304 $41 
Net earnings available to common stockholders plus assumed conversions (2)$304 $41 
Denominator for basic weighted average shares of common stock (1)40,003,481 39,922,359 
Effect of convertible Senior Common Stock (2)  
Denominator for diluted weighted average shares of common stock (2)40,003,481 39,922,359 
Diluted earnings per share of common stock$0.01 $ 
(1)The weighted average number of OP Units held by Non-controlling OP Unitholders was 310,643 for the three months ended March 31, 2024 and 391,468 for the three months ended March 31, 2023.
(2)We excluded convertible shares of Senior Common Stock of 342,247 and 345,687 from the calculation of diluted earnings per share for the three months ended March 31, 2024 and 2023, respectively, because they were anti-dilutive.

4. Real Estate and Intangible Assets

Real Estate

The following table sets forth the components of our investments in real estate as of March 31, 2024 and December 31, 2023, respectively, excluding real estate held for sale as of March 31, 2024 and December 31, 2023 (dollars in thousands):
March 31, 2024December 31, 2023
Real estate:
Land (1)$140,873 $143,442 
Building and improvements1,013,348 1,020,661 
Tenant improvements55,711 57,261 
Accumulated depreciation(304,000)(299,662)
Real estate, net$905,932 $921,702 
(1)This amount includes $4,436 of land value subject to land lease agreements which we may purchase at our option for a nominal fee.

Real estate depreciation expense on building and tenant improvements was $9.8 million for the three months ended March 31, 2024. Real estate depreciation expense on building and tenant improvements was $10.6 million for the three months ended March 31, 2023.
Future Lease Payments

Future operating lease payments from tenants under non-cancelable leases, excluding tenant reimbursement of expenses, for the nine months ending December 31, 2024 and each of the five succeeding fiscal years and thereafter is as follows (dollars in thousands):

YearTenant Lease Payments
Nine Months Ending December 31, 2024$85,646 
2025112,521 
2026106,922 
202791,632 
202878,866 
202970,194 
Thereafter330,221 

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In accordance with the lease terms, substantially all operating expenses are required to be paid by the tenant directly, or reimbursed to us from the tenant; however, we would be required to pay operating expenses on the respective properties in the event the tenants fail to pay them.

Lease Revenue Reconciliation

The table below sets forth the allocation of lease revenue between fixed contractual payments and variable lease payments for the three months ended March 31, 2024 and 2023, respectively (dollars in thousands):

For the three months ended March 31,
Lease revenue reconciliation20242023$ Change% Change
Fixed lease payments$31,789 $32,141 $(352)(1.1)%
Variable lease payments3,932 4,413 (481)(10.9)%
$35,721 $36,554 $(833)(2.3)%

Intangible Assets

The following table summarizes the carrying value of intangible assets, liabilities and the accumulated amortization for each intangible asset and liability class as of March 31, 2024 and December 31, 2023, respectively, excluding real estate held for sale as of March 31, 2024 and December 31, 2023 (dollars in thousands):

March 31, 2024December 31, 2023
Lease Intangibles Accumulated Amortization Lease IntangiblesAccumulated Amortization
In-place leases$95,661 $(61,765)$98,615 $(63,269)
Leasing costs83,850 (46,253)84,844 (46,096)
Customer relationships61,274 (35,104)63,185 (36,231)
$240,785 $(143,122)$246,644 $(145,596)
Deferred Rent Receivable/(Liability)Accumulated (Amortization)/Accretion Deferred Rent Receivable/(Liability)Accumulated (Amortization)/Accretion
Above market leases$12,747 $(10,235)$13,431 $(10,675)
Below market leases and deferred revenue(59,326)31,775 (59,411)30,087 

Total amortization expense related to in-place leases, leasing costs and customer relationship lease intangible assets was $3.5 million for the three months ended March 31, 2024, and $4.1 million for the three months ended March 31, 2023, and is included in depreciation and amortization expense in the condensed consolidated statements of operations and comprehensive income.

Total amortization related to above-market lease values was $0.1 million for the three months ended March 31, 2024 and $0.2 million for the three months ended March 31, 2023, and is included in lease revenue in the condensed consolidated statements of operations and comprehensive income. Total amortization related to below-market lease values was $1.7 million for the three months ended March 31, 2024 and $1.9 million for the three months ended March 31, 2023, and is included in lease revenue in the condensed consolidated statements of operations and comprehensive income.

5. Real Estate Dispositions, Held for Sale and Impairment Charges

Real Estate Dispositions

We sold three properties during the three months ended March 31, 2024 and no properties during the three months ended March 31, 2023.

During the three months ended March 31, 2024, we continued to execute our capital recycling program, whereby we sold non-core properties. We expect to continue to execute our capital recycling plan and sell non-core properties as reasonable disposition opportunities become available, and use the sales proceeds to acquire properties in our target, secondary growth markets or pay down outstanding debt. During the three months ended March 31, 2024, we sold three non-core properties,
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located in Columbus, Ohio; Draper, Utah; and Richardson, Texas, which are summarized in the table below (dollars in thousands):

Aggregate Square Footage Sold Aggregate Sales PriceAggregate Sales CostsAggregate Impairment Charge for the Three Months Ended March 31, 2024Aggregate Gain on Sale of Real Estate, net
357,179 $19,523 $898 $493 $283 

Our dispositions during the three months ended March 31, 2024 were not classified as discontinued operations because they did not represent a strategic shift in operations, nor will such dispositions have a major effect on our operations and financial results. Accordingly, the operating results of these properties are included within continuing operations for all periods reported.

The table below summarizes the components of operating income from real estate and related assets disposed of during the three months ended March 31, 2024 and 2023 (dollars in thousands):

For the three months ended March 31,
20242023
Operating revenue$17 $1,701 
Operating expense768 (1)1,474 
Other income (expense), net357 (2)(208)
Income (expense) from real estate and related assets sold$(394)$19 
(1)Includes a $0.5 million impairment charge on one property.
(2)Includes a $0.3 million gain on sale of real estate, net, on the sale of three properties and a $0.3 million gain on debt extinguishment, net, on the sale of two of those properties.

Real Estate Held for Sale

At March 31, 2024, we had two properties classified as held for sale, located in Tifton, Georgia and Egg Harbor, New Jersey. We consider these assets to be non-core to our long term strategy. At December 31, 2023, we had three properties classified as held for sale, located in Richardson, Texas; Columbus, Ohio; and Tifton, Georgia.

The table below summarizes the components of the assets and liabilities held for sale at March 31, 2024 and December 31, 2023 reflected on the accompanying condensed consolidated balance sheets (dollars in thousands):

March 31, 2024December 31, 2023
Assets Held for Sale
Total real estate held for sale$17,029 $27,496 
Lease intangibles, net1,268 1,284 
Deferred rent receivable, net 7 
Total Assets Held for Sale$18,297 $28,787 
Liabilities Held for Sale
Deferred rent liability, net$676 $676 
Total Liabilities Held for Sale$676 $676 

Impairment Charges

We evaluated our portfolio for triggering events to determine if any of our held and used assets were impaired during the three months ended March 31, 2024 and did not recognize an impairment charge. We recognized an impairment charge of $0.5 million on one held for sale asset, located in Richardson, Texas during the three months ended March 31, 2024. In performing our held for sale assessment, the carrying value of this asset was above the fair value, less costs of sale. As a result, we impaired this property to equal the fair market value less costs of sale. We did not recognize an impairment charge during the three months ended March 31, 2023.

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6. Mortgage Notes Payable and Credit Facility

Our $125.0 million unsecured revolving credit facility (“Revolver”), $160.0 million term loan facility (“Term Loan A”), $60.0 million term loan facility (“Term Loan B”), and $150.0 million term loan facility (“Term Loan C”), are collectively referred to herein as the Credit Facility.

Our mortgage notes payable and Credit Facility as of March 31, 2024 and December 31, 2023 are summarized below (dollars in thousands):

Encumbered properties atCarrying Value atStated Interest Rates atScheduled Maturity Dates at
March 31, 2024March 31, 2024December 31, 2023March 31, 2024March 31, 2024
Mortgage and other secured loans:
Fixed rate mortgage loans45 $278,025 $298,122 (1)(2)
Premiums and discounts, net— (33)(42)N/AN/A
Deferred financing costs, mortgage loans, net— (2,016)(2,227)N/AN/A
Total mortgage notes payable, net45 $275,976 $295,853 (3)
Variable rate revolving credit facility84 (6)$75,950 $75,750 
SOFR + 1.50%
(4)8/18/2026
Total revolver84 $75,950 $75,750 
Variable rate term loan facility A— (6)$160,000 $160,000 
SOFR + 1.45%
(4)8/18/2027
Variable rate term loan facility B— (6)60,000 60,000 
SOFR + 1.45%
(4)2/11/2026
Variable rate term loan facility C— (6)150,000 150,000 
SOFR + 1.45%
(4)2/18/2028
Deferred financing costs, term loan facility— (2,570)(2,742)N/AN/A
Total term loan, netN/A$367,430 $367,258 
Total mortgage notes payable and credit facility129 $719,356 $738,861 (5)
(1)As of March 31, 2024, interest rates on our fixed rate mortgage notes payable varied from 2.80% to 6.63%.
(2)As of March 31, 2024, we had 39 mortgage notes payable with maturity dates ranging from June 18, 2024 through August 1, 2037.
(3)The weighted average interest rate on the mortgage notes outstanding as of March 31, 2024 was approximately 4.16%.
(4)As of March 31, 2024, Secured Overnight Financing Rate (“SOFR”) was approximately 5.34%.
(5)The weighted average interest rate on all debt outstanding as of March 31, 2024 was approximately 5.78%.
(6)The amount we may draw under our Credit Facility is based on a percentage of the fair value of a combined pool of 84 unencumbered properties as of March 31, 2024.
N/A - Not Applicable

Mortgage Notes Payable

As of March 31, 2024, we had 39 mortgage notes payable, collateralized by a total of 45 properties with a net book value of $460.7 million. We have limited recourse liabilities that could result from any one or more of the following circumstances: a borrower voluntarily filing for bankruptcy, improper conveyance of a property, fraud or material misrepresentation, misapplication or misappropriation of rents, security deposits, insurance proceeds or condemnation proceeds, or physical waste or damage to the property resulting from a borrower’s gross negligence or willful misconduct. As of March 31, 2024, we did not have any mortgages subject to recourse. We will also indemnify lenders against claims resulting from the presence of hazardous substances or activity involving hazardous substances in violation of environmental laws on a property. 

During the three months ended March 31, 2024, we repaid two mortgages, collateralized by two properties, which are summarized in the table below (dollars in thousands):

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Fixed Rate Debt RepaidInterest Rate on Fixed Rate Debt Repaid
$17,674 5.05 %

We did not make any payments for deferred financing costs during the three months ended March 31, 2024. We made payments of $0.1 million for deferred financing costs during the three months ended March 31, 2023.

Scheduled principal payments of mortgage notes payable for the nine months ending December 31, 2024, and each of the five succeeding fiscal years and thereafter are as follows (dollars in thousands):
 
YearScheduled Principal Payments
Nine Months Ending December 31, 2024$14,253 
202527,084 
202635,069 
202795,073 
202837,108 
202920,911 
Thereafter48,527 
Total$278,025 (1)
(1)This figure does not include $(0.03) million of premiums and (discounts), net, and $2.0 million of deferred financing costs, which are reflected in mortgage notes payable, net on the condensed consolidated balance sheets.

We believe we will be able to address all mortgage notes payable maturing over the next 12 months through a combination of refinancing our existing indebtedness, cash from operations, proceeds from one or more equity offerings and availability on our Credit Facility.

Interest Rate Cap and Interest Rate Swap Agreements

We have entered into interest rate cap agreements that cap the interest rate on certain of our variable-rate debt and we have assumed or entered into interest rate swap agreements in which we hedged our exposure to variable interest rates by agreeing to pay fixed interest rates to our respective counterparty. We have adopted the fair value measurement provisions for our financial instruments recorded at fair value. The fair value guidance establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. Generally, we will estimate the fair value of our interest rate caps and interest rate swaps, in the absence of observable market data, using estimates of value including estimated remaining life, counterparty credit risk, current market yield and interest rate spreads of similar securities as of the measurement date. At March 31, 2024 and December 31, 2023, our interest rate cap agreements and interest rate swaps were valued using Level 2 inputs.

The fair value of the interest rate cap agreements is recorded in other assets on our accompanying condensed consolidated balance sheets. We record changes in the fair value of the interest rate cap agreements quarterly based on the current market valuations at quarter end. If the interest rate cap qualifies for hedge accounting, the change in the estimated fair value is recorded to accumulated other comprehensive income to the extent that it is effective, with any ineffective portion recorded to interest expense in our condensed consolidated statements of operations and comprehensive income. If the interest rate cap does not qualify for hedge accounting, or if it is determined the hedge is ineffective, any change in the fair value is recognized in interest expense in our consolidated statements of operations and comprehensive income. During the next 12 months, we estimate that an additional $4.6 million will be reclassified out of accumulated other comprehensive income into interest expense in our condensed consolidated statements of operations and comprehensive income, as a reduction to interest expense. The following table summarizes the interest rate caps at March 31, 2024 and December 31, 2023 (dollars in thousands):
 
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March 31, 2024December 31, 2023
Aggregate CostAggregate Notional AmountAggregate Fair ValueAggregate Notional AmountAggregate Fair Value
$99 (1)$60,000 $194 $65,000 $684 
(1)We have entered into various interest rate cap agreements on variable rate debt with SOFR caps ranging from 1.75% to 5.50%.

We have assumed or entered into interest rate swap agreements in connection with certain of our mortgage financings and Credit Facility, whereby we will pay our counterparty a fixed interest rate on a monthly basis and receive payments from our counterparty equivalent to the stipulated floating rate. The fair value of our interest rate swap agreements is recorded in other assets or other liabilities on our accompanying condensed consolidated balance sheets. We have designated our interest rate swaps as cash flow hedges, and we record changes in the fair value of the interest rate swap agreement to accumulated other comprehensive income on the condensed consolidated balance sheets. We have designated our interest rate swaps as cash flow hedges, and we record changes in the fair value of the respective interest rate swap agreement to accumulated other comprehensive income on the consolidated balance sheets. We record changes in fair value on a quarterly basis, using current market valuations at quarter end. The following table summarizes our interest rate swaps at March 31, 2024 and December 31, 2023 (dollars in thousands):

March 31, 2024December 31, 2023
Aggregate Notional AmountAggregate Fair Value AssetAggregate Fair Value Liability Aggregate Notional AmountAggregate Fair Value AssetAggregate Fair Value Liability
$361,381 $11,509 $(43)$361,676 $6,222 $(670)

The following table presents the impact of our derivative instruments in the condensed consolidated financial statements (dollars in thousands):

Amount of gain, net, recognized in Comprehensive Income
Three Months Ended March 31,
20242023
Derivatives in cash flow hedging relationships
Interest rate caps$(498)$(1,006)
Interest rate swaps5,915 (4,889)
Total$5,417 $(5,895)

The following table presents the reclassifications of our derivative instruments out of accumulated other comprehensive income into interest expense in the condensed consolidated financial statements (dollars in thousands):

Amount reclassified out of Accumulated Other Comprehensive Income
Three Months Ended March 31,
20242023
Interest rate caps$106 $263 
Total$106 $263 

The following table sets forth certain information regarding our derivative instruments (dollars in thousands):

Asset (Liability) Derivatives Fair Value at
Derivatives Designated as Hedging InstrumentsBalance Sheet LocationMarch 31, 2024December 31, 2023
Interest rate capsOther assets$194 $684 
Interest rate swapsOther assets11,509 6,222 
Interest rate swapsOther liabilities(43)(670)
Total derivative liabilities, net$11,660 $6,236 

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The fair value of all mortgage notes payable outstanding as of March 31, 2024 was $251.8 million, as compared to the carrying value stated above of $276.0 million. The fair value is calculated based on a discounted cash flow analysis, using management’s estimate of market interest rates on long-term debt with comparable terms and loan to value ratios. The fair value was calculated using Level 3 inputs of the hierarchy established by ASC 820, “Fair Value Measurements and Disclosures.”

Credit Facility

On August 18, 2022, we amended, extended and upsized our Credit Facility, increasing our Revolver from $100.0 million to $120.0 million (and its term to August 2026), adding the new $140.0 million Term Loan C, decreasing the principal balance of Term Loan B to $60.0 million and extending the maturity date of Term Loan A to August 2027. Term Loan C has a maturity date of February 18, 2028 and a SOFR spread ranging from 125 to 195 basis points, depending on our leverage. On September 27, 2022, we further increased the Revolver to $125.0 million and Term Loan C to $150.0 million, as permitted under the terms of the Credit Facility. We entered into multiple interest rate swap agreements on Term Loan C, which swap the interest rate to fixed rates from 3.15% to 3.75%. We incurred fees of approximately $4.2 million in connection with extending and upsizing our Credit Facility. The net proceeds of the transaction were used to repay the then-outstanding borrowings on the Revolver, pay off mortgage debt, and fund acquisitions. The Credit Facility’s current bank syndicate is comprised of KeyBank, Fifth Third Bank, The Huntington National Bank, Bank of America, Synovus Bank, United Bank, First Financial Bank, and S&T Bank.

As of March 31, 2024, there was $446.0 million outstanding under our Credit Facility, at a weighted average interest rate of approximately 6.80%, and no outstanding letters of credit. As of March 31, 2024, the maximum additional amount we could draw under the Credit Facility was $47.3 million. We were in compliance with all covenants under the Credit Facility as of March 31, 2024.

The amount outstanding under the Credit Facility approximates fair value as of March 31, 2024.

7. Commitments and Contingencies

Ground Leases

We are obligated as lessee under three ground leases. Future minimum rental payments due under the terms of these leases for the nine months ending December 31, 2024 and each of the five succeeding fiscal years and thereafter are as follows (dollars in thousands):

YearFuture Lease Payments Due Under Operating Leases
Nine Months Ending December 31, 2024$343 
2025457 
2026460 
2027467 
2028470 
2029470 
Thereafter3,359 
Total anticipated lease payments$6,026 
Less: amount representing interest(1,785)
Present value of lease payments$4,241 

Rental expense incurred for properties with ground lease obligations during the three months ended March 31, 2024 was $0.1 million and during the three months ended March 31, 2023 was $0.1 million. Our ground leases are treated as operating leases and rental expenses are reflected in property operating expenses on the condensed consolidated statements of operations and comprehensive income. Our ground leases have a weighted average remaining lease term of 13.9 years and a weighted average discount rate of 5.30%.

Letters of Credit

As of March 31, 2024, there were no outstanding letters of credit.

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8. Equity and Mezzanine Equity

Stockholders’ Equity

The following table summarizes the changes in our equity for the three months ended March 31, 2024 and 2023 (dollars in thousands):
 
Three Months Ended March 31,
20242023
Senior Common Stock
Balance, beginning of period$1 $1 
Issuance of senior common stock, net  
Balance, end of period$1 $1 
Common Stock
Balance, beginning of period$40 $39 
Issuance of common stock, net 1 
Balance, end of period$40 $40 
Series F Preferred Stock
Balance, beginning of period$1 $1 
Issuance of Series F preferred stock, net  
Redemption of Series F preferred stock, net  
Balance, end of period$1 $1 
Additional Paid in Capital
Balance, beginning of period$730,256 $721,327 
Issuance of common stock and Series F preferred stock, net197 4,385 
Redemption of Series F preferred stock, net55 86 
Retirement of senior common stock, net  52 
Adjustment to OP Units held by Non-controlling OP Unitholders resulting from changes in ownership of the Operating Partnership(43)24 
Balance, end of period$730,465 $725,874 
Accumulated Other Comprehensive Income
Balance, beginning of period$7,758 $11,640 
Comprehensive income (loss)5,417 (5,895)
Reclassification into interest expense106 263 
Balance, end of period$13,281 $6,008 
Distributions in Excess of Accumulated Earnings
Balance, beginning of period$(584,776)$(529,104)
Distributions declared to common, senior common, and preferred stockholders(15,220)(15,108)
Redemption of Series F preferred stock, net(3)(5)
Net income available to the Company3,524 3,174 
Balance, end of period$(596,475)$(541,042)
Total Stockholders' Equity
Balance, beginning of period$153,280 $203,904 
Issuance of common stock and Series F preferred stock, net197 4,386 
Redemption of Series F preferred stock, net52 81 
Retirement of senior common stock, net 52 
Distributions declared to common, senior common, and preferred stockholders(15,220)(15,108)
Comprehensive income (loss)5,417 (5,895)
Reclassification into interest expense106 263 
Adjustment to OP Units held by Non-controlling OP Unitholders resulting from changes in ownership of the Operating Partnership(43)24 
Net income available to the Company3,524 3,174 
Balance, end of period$147,313 $190,882 
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Non-Controlling Interest
Balance, beginning of period$986 $1,790 
Distributions declared to Non-controlling OP Unit holders(93)(118)
Adjustment to OP Units held by Non-controlling OP Unitholders resulting from changes in ownership of the Operating Partnership43 (24)
Net income (loss) available (attributable) to OP units held by Non-controlling OP Unitholders2 (7)
Balance, end of period$938 $1,641 
Total Equity$148,251 $192,523 

Distributions

We paid the following distributions per share for the three months ended March 31, 2024 and 2023:

For the three months ended March 31,
20242023
Common Stock and Non-controlling OP Units$0.30 $0.30 
Senior Common Stock0.2625 0.2625 
Series E Preferred Stock0.414063 0.414063 
Series F Preferred Stock0.375 0.375 
Series G Preferred Stock0.375 0.375 

Recent Activity

Common Stock ATM Programs

On February 22, 2022, we entered into Amendment No. 1 to our At-the-Market Equity Offering Sales Agreement with sales agents Robert W. Baird & Co. Incorporated (“Baird”), Goldman Sachs & Co. LLC (“Goldman Sachs”), Stifel, Nicolaus & Company, Incorporated (“Stifel”), BTIG, LLC, and Fifth Third Securities, Inc. (“Fifth Third”), dated December 3, 2019 (together, the “Prior Common Stock Sales Agreement”). The amendment permitted shares of common stock to be issued pursuant to the Prior Common Stock Sales Agreement under the 2020 Registration Statement, and future registration statements on Form S-3. We terminated the Prior Common Stock Sales Agreement effective as of February 10, 2023 in connection with the expiration of the 2020 Registration Statement on February 11, 2023.

On March 3, 2023, we entered into an At-the-Market Equity Offering Sales Agreement (the “2023 Common Stock Sales Agreement”), with BofA Securities, Inc. (“BofA”), Goldman Sachs, Baird, KeyBanc Capital Markets Inc. (“KeyBanc”), and Fifth Third (collectively the “Common Stock Sales Agents”). In connection with the 2023 Common Stock Sales Agreement, we filed prospectus supplements dated March 3, 2023 and March 7, 2023, to the prospectus dated November 23, 2022, with the SEC, for the offer and sale of an aggregate offering amount of up to $250.0 million of common stock. During the three months ended March 31, 2024, we did not sell any shares of common stock under the 2023 Common Stock Sales Agreement.

On March 26, 2024, we entered into Amendment No. 1 to the 2023 Common Stock Sales Agreement (the “2024 Common Stock Sales Agreement”). The amendment permitted shares of common stock to be issued pursuant to the 2024 Common Stock Sales Agreement under the 2024 Registration Statement, and future registration statements on Form S-3. In connection with the 2024 Common Stock Sales Agreement, we filed a prospectus supplement dated March 26, 2024, to the prospectus dated March 21, 2024, with the SEC, for the offer and sale of an aggregate offering amount of $250.0 million of common stock. During the three months ended March 31, 2024, we did not sell any shares of common stock under the 2024 Common Stock Sales Agreement.

Mezzanine Equity

Our 6.625% Series E Cumulative Redeemable Preferred Stock (“Series E Preferred Stock”), and our 6.00% Series G Cumulative Redeemable Preferred Stock (“Series G Preferred Stock”) are classified as mezzanine equity in our condensed consolidated balance sheets because both are redeemable at the option of the shareholder upon a change of control of greater than 50%. A change in control of our company, outside of our control, is only possible if a tender offer is accepted by over 90% of our shareholders. All other change in control situations would require input from our Board of Directors. In addition, our
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Series E Preferred Stock and Series G Preferred Stock are redeemable at the option of the applicable shareholder in the event a delisting event occurs. We will periodically evaluate the likelihood that a delisting event or change of control of greater than 50% will take place, and if we deem this probable, we will adjust the Series E Preferred Stock, and Series G Preferred Stock presented in mezzanine equity to their redemption value, with the offset to gain (loss) on extinguishment. We currently believe the likelihood of a change of control of greater than 50%, or a delisting event, is remote.

Universal Shelf Registration Statements

On November 23, 2022, we filed the 2022 Registration Statement. There was no limit on the aggregate amount of the securities that we could offer pursuant to the 2022 Registration Statement.

On March 13, 2024, we filed the 2024 Registration Statement, which was declared effective on March 21, 2024. The 2024 Registration Statement allows us to issue up to $1.3 billion of securities and replaces the 2022 Registration Statement.

Series F Preferred Stock

On February 20, 2020, we filed with the Maryland Department of Assessments and Taxation Articles Supplementary (i) setting forth the rights, preferences and terms of the Series F Preferred Stock and (ii) reclassifying and designating 26,000,000 shares of our authorized and unissued shares of common stock as shares of Series F Preferred Stock. The reclassification decreased the number of shares classified as common stock from 86,290,000 shares immediately prior to the reclassification to 60,290,000 shares immediately after the reclassification. We sold 7,580 shares of our Series F Preferred Stock, raising $0.2 million in net proceeds, during the three months ended March 31, 2024.

Non-controlling Interest in Operating Partnership

As of March 31, 2024 and December 31, 2023, we owned approximately 99.2% and 99.2%, respectively, of the outstanding OP Units.

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

As of March 31, 2024 and December 31, 2023, there were 310,643 and 310,643 outstanding OP Units held by Non-controlling OP Unitholders, respectively.

9. Revision of Previously Issued Financial Statements

As discussed in Note 1, the Company identified errors in its calculation of the depreciation of certain tenant funded improvement assets at a number of its properties. A summary of the corrections to the impacted financial statement line items in the Company’s previously issued Condensed Consolidated Statements of Operations and Comprehensive Income, Condensed Consolidated Statements of Cash Flows and the Stockholders’ Equity tables for the quarter ended March 31, 2023, which was presented in a previously filed Quarterly Report on Form 10-Q, is as follows:
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Condensed Consolidated Statements of Operations and Comprehensive Income
Three Months Ended March 31, 2023
As Previously ReportedAdjustmentsAs Revised
Operating expenses
Depreciation and amortization$15,474 $(770)$14,704 
Total operating expenses$25,434 $(770)$24,664 
Net income$2,397 $770 $3,167 
Net income available to the Company$2,404 $770 $3,174 
Net loss attributable to common stockholders$(729)$770 $41 
Loss per weighted average share of common stock - basic & diluted
Loss attributable to common shareholders$(0.02)$0.02 $ 
Comprehensive income
Net income$2,397 $770 $3,167 
Total comprehensive loss attributable to the Company$(3,491)$770 $(2,721)

Stockholders’ Equity
Three Months Ended March 31, 2023
As Previously ReportedAdjustmentsAs Revised
Distributions in Excess of Accumulated Earnings
Balance, beginning of period$(530,228)$1,124 $(529,104)
Net income attributable to the Company2,404 770 3,174 
Balance, end of period$(542,937)$1,895 $(541,042)
Total Stockholders' Equity
Balance, beginning of period$202,780 $1,124 $203,904 
Net income attributable to the Company2,404 770 3,174 
Balance, end of period$188,987 $1,895 $190,882 
Total Equity$190,628 $1,895 $192,523 

Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 2023
As Previously ReportedAdjustmentsAs Revised
Cash flows from operating activities:
Net income$2,397 $770 $3,167 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization15,474 (770)14,704 

10. Subsequent Events

Distributions

On April 9, 2024, our Board of Directors declared the following monthly distributions for the months of April, May and June of 2024:

 
Record DatePayment DateCommon Stock and Non-controlling OP Unit Distributions per ShareSeries E Preferred Distributions per ShareSeries G Preferred Distributions per Share
April 19, 2024April 30, 2024$0.10 $0.138021 $0.125 
May 17, 2024May 31, 20240.10 0.138021 0.125 
June 19, 2024June 28, 20240.10 0.138021 0.125 
$0.30 $0.414063 $0.375 
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Senior Common Stock Distributions
Payable to the Holders of Record During the Month of:Payment DateDistribution per Share
AprilMay 6, 2024$0.0875 
MayJune 5, 20240.0875 
JuneJuly 5, 20240.0875 
$0.2625 

Series F Preferred Stock Distributions
Record DatePayment DateDistribution per Share
April 22, 2024May 3, 2024$0.125 
May 23, 2024June 5, 20240.125 
June 25, 2024July 5, 20240.125 
$0.375 

Equity Activity

Subsequent to March 31, 2024 and through May 6, 2024, we raised $0.7 million in net proceeds from the sale of 50,827 shares of common stock under our 2024 Common Stock Sales Agreement.

Sale Activity

On April 30, 2024, we sold our 29,257 square foot property in Egg Harbor, New Jersey for $2.6 million. We realized a $0.05 million loss on sale.
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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

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, 2023. 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.

This Quarterly Report includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. We have not independently verified the information contained in such sources.

All references to “we,” “our,” “us” and the “Company” in this Report mean Gladstone Commercial Corporation and its consolidated subsidiaries, except where otherwise noted or where the context indicates that the term means only Gladstone Commercial Corporation.

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

As of May 6, 2024:
 
we owned 131 properties totaling 16.7 million square feet of rentable space, located in 27 states;
our occupancy rate was 98.9%;
the weighted average remaining term of our mortgage debt was 3.9 years and the weighted average interest rate was 4.16%; and
the average remaining lease term of the portfolio was 6.9 years.

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Business Environment

The commercial real estate sector continued to face uncertainty and volatility in the first quarter of 2024. Although the Federal Reserve hinted at potential rate cuts at the end of 2023, higher than expected CPI data, as reported by the U.S. Bureau of Labor Statistics for all urban consumers, during the first quarter of 2024 has led to a rise in long-term interest rates. This increase has slowed the mortgage market and consequently dampened acquisition activity. As a result, real estate transaction volumes have remained low, with tightened credit standards and rising capital costs preventing many investors from entering the market.

Despite capital markets volatility, the industrial sector continues to demonstrate strong fundamentals, consistently outperforming other real estate categories. Cushman & Wakefield plc (“Cushman”) reported healthy leasing activity in the first quarter of 2024, with transactions amounting to 128.7 million square feet, a 3% increase over the 10-year pre-pandemic average (2010-2019). Net absorption fell quarter over quarter from 48 million square feet to 14 million square feet, but the four-quarter rolling average of 42 million square feet remains in Cushman’s range for 2024. Although new completions continue to exceed net absorption, leading to a rise in the overall vacancy rate, the vacancy rate of 5.8% in Q1 2024 remains below the historical average of 7.0% according to Cushman. Year-over-year, Cushman reports that industrial rents increased by 6%, compared to 10% in 2023 and 20% in 2022. Notably, Cushman reports that eight markets recorded net occupancy gains exceeding 1.0 million square feet in Q1 2024, with significant contributions from Houston (5.1 million square feet), Savannah (3.6 million square feet), Chicago (2.8 million square feet), and Austin (2.4 million square feet). Cushman further notes that the construction pipeline has decreased by 10% since the end of 2023 and is down 40% year-over-year as developers pull back, particularly in speculative builds, due to slowing demand for space and rising interest rates. According to Cushman, this represents the lowest level of future construction activity in three years.

The office sector in Q1 2024 showed mixed outcomes according to Jones Lang LaSalle Incorporated (“JLL”). Despite improvements in demand, JLL reports that the market still struggles with high negative net absorption, primarily driven by significant space reductions from major occupiers. JLL reports that the overall vacancy rate increased to 21.9%, reflecting ongoing challenges and that development activity has slowed considerably, with new office supply groundbreakings dropping to less than 300,000 square feet, the lowest recorded in nearly 40 years, which points to limited future deliveries. JLL notes that this slowdown, combined with robust inventory removals and conversions, suggests potential stabilization and a move towards market equilibrium in the upcoming years.

Interest rates have been fluctuating due to ongoing concerns about inflation, with the future direction of Federal Reserve rate hikes remaining uncertain. The yield on the 10-year U.S. Treasury Note, which has risen steadily since the beginning of 2022, ended the first quarter of 2024 at 4.21%.

Despite these macro-economic challenges, we believe that we are well positioned to navigate the current business environment.

We collected 100% of all outstanding cash rents for the three months ended March 31, 2024. In the past, we have received rent modification requests from our tenants, and we may receive additional requests in the future. However, we are unable to quantify the outcomes of the negotiation of relief packages, the success of any tenant’s financial prospects or the amount of relief requests that we will ultimately receive or grant. We believe that we have a diverse tenant base, and specifically, we do not have significant exposure to tenants in the retail, hospitality, airlines, and oil and gas industries. Additionally, our properties are located across 27 states, which we believe mitigates our exposure to economic issues, including regulations or laws implemented by state and local governments, in any one geographic market or area.

We believe we currently have adequate liquidity in the near term, and we believe the availability on our Credit Facility is sufficient to cover all near-term debt obligations and operating expenses and to continue our industrial growth strategy. We are in compliance with all of our debt covenants as of March 31, 2024. We amended our Credit Facility in 2019 to increase our borrowing capacity and extend its maturity date. In addition, on August 18, 2022, we added a new $150.0 million term loan component. Based on market observations and conversations we routinely have with lenders, we believe that credit continues to be available for well-capitalized borrowers. We continue to monitor our portfolio and intend to maintain a reasonably conservative liquidity position for the foreseeable future.

Other Business Environment Considerations

The geopolitical landscape remains fractured due to recent world events. Many domestic manufacturing businesses seek to limit supply chain disruptions by bringing their operations back to the U.S. The COVID-19 pandemic is largely behind us, but a level of work-from-home trends appear to be here to stay. Industrial demand will be further buoyed by government investment in infrastructure and advanced manufacturing operations. The Federal Reserve recently indicated it does not expect additional rate
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increases, but the timing of an easing cycle remains unknown. These uncertain times create both risks and opportunities for us and our tenants, and we believe we are well-capitalized and positioned to take advantage.

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 four partially vacant buildings and no fully vacant buildings. Our available vacant space at March 31, 2024 represents 1.1% of our total square footage and the annual carrying costs on the vacant space, including real estate taxes and property operating expenses, are approximately $1.8 million. We continue to actively seek new tenants for these properties.

We believe our lease expiration schedule for the remainder of 2024 is manageable, as it equates to 4.8% of our lease revenue at March 31, 2024. Property acquisitions since the beginning of 2020 have totaled $372.7 million and all but one transaction was industrial in nature, with a weighted average lease term of 13.6 years and a current weighted average lease term today of 10.7 years.

Our ability to make new investments is highly dependent upon our ability to procure financing. Our principal sources of financing generally include the issuance of equity securities, long-term mortgage loans secured by properties, borrowings under our $125.0 million senior unsecured revolving credit facility (“Revolver”), with KeyBank National Association (“KeyBank”), which matures in August 2026, our $160.0 million term loan facility (“Term Loan A”), which matures in August 2027, our $60.0 million term loan facility (“Term Loan B”), which matures in February 2026, and our $150.0 million term loan facility (“Term Loan C”) which matures in February 2028. We refer to the Revolver, Term Loan A, Term Loan B and Term Loan C collectively herein as the Credit Facility. While lenders’ credit standards have tightened, we continue to look to national and regional banks, insurance companies and non-bank lenders to make mortgage loans to finance our real estate activities.

Recent Developments

Sale Activity

During the three months ended March 31, 2024, we continued to execute our capital recycling program, whereby we sold non-core properties. We expect to continue to execute our capital recycling plan and sell non-core properties as reasonable disposition opportunities become available, and use the sales proceeds to acquire properties in our target, secondary growth markets or pay down outstanding debt. During the three months ended March 31, 2024, we sold three non-core properties, located in Columbus, Ohio; Draper, Utah; and Richardson, Texas, which are summarized in the table below (dollars in thousands):

Aggregate Square Footage Sold Aggregate Sales PriceAggregate Sales CostsAggregate Impairment Charge for the Three Months Ended March 31, 2024Aggregate Gain on Sale of Real Estate, net
357,179 $19,523 $898 $493 $283 

On April 30, 2024, we sold our 29,257 square foot property in Egg Harbor, New Jersey for $2.6 million. We realized a $0.05 million loss on sale.

Leasing Activity

During and subsequent to the three months ended March 31, 2024, we executed three leases, which are summarized below (dollars in thousands):

Aggregate Square Footage Weighted Average Remaining Lease TermAggregate Annualized GAAP Fixed Lease PaymentsAggregate Tenant ImprovementAggregate Leasing Commissions
740,948 6.4 years$3,030 $834 $341 

Financing Activity

During the three months ended March 31, 2024, we repaid two mortgages, collateralized by two properties, which are summarized in the table below (dollars in thousands):

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Fixed Rate Debt RepaidInterest Rate on Fixed Rate Debt Repaid
$17,674 5.05 %

Equity Activities

Common Stock ATM Programs

On February 22, 2022, we entered into Amendment No. 1 to our At-the-Market Equity Offering Sales Agreement with sales agents Robert W. Baird & Co. Incorporated (“Baird”), Goldman Sachs & Co. LLC (“Goldman Sachs”), Stifel, Nicolaus & Company, Incorporated (“Stifel”), BTIG, LLC, and Fifth Third Securities, Inc. (“Fifth Third”), dated December 3, 2019 (together, the “Prior Common Stock Sales Agreement”). The amendment permitted shares of common stock to be issued pursuant to the Prior Common Stock Sales Agreement under the Company’s Registration Statement on Form S-3 (File No. 333-236143) (the “2020 Registration Statement”), and future registration statements on Form S-3. We terminated the Prior Common Stock Sales Agreement effective as of February 10, 2023 in connection with the expiration of the 2020 Registration Statement on February 11, 2023.

On March 3, 2023, we entered into an At-the-Market Equity Offering Sales Agreement (the “2023 Common Stock Sales Agreement”), with BofA Securities, Inc. (“BofA”), Goldman Sachs, Baird, KeyBanc Capital Markets Inc. (“KeyBanc”), and Fifth Third (collectively the “Common Stock Sales Agents”). In connection with the 2023 Common Stock Sales Agreement, we filed prospectus supplements dated March 3, 2023 and March 7, 2023, to the prospectus dated November 23, 2022, with the SEC, for the offer and sale of an aggregate offering amount of $250.0 million of common stock. During the three months ended March 31, 2024, we did not sell any shares of common stock under the 2023 Common Stock Sales Agreement.

On March 26, 2024, we entered into Amendment No. 1 to the 2023 Common Stock Sales Agreement (the “2024 Common Stock Sales Agreement”). The amendment permitted shares of common stock to be issued pursuant to the 2024 Common Stock Sales Agreement under the Company’s Registration Statement on Form S-3 (File No. 333-277877) (the “2024 Registration Statement”), and future registration statements on Form S-3. In connection with the 2024 Common Stock Sales Agreement, we filed a prospectus supplement dated March 26, 2024, to the prospectus dated March 21, 2024, with the SEC, for the offer and sale of an aggregate offering amount of $250.0 million of common stock. During the three months ended March 31, 2024, we did not sell any shares of common stock under the 2024 Common Stock Sales Agreement.

Universal Shelf Registration Statements

On November 23, 2022, we filed an automatic shelf registration statement on Form S-3 (File No. 333-268549) (the “2022 Registration Statement”). There was no limit on the aggregate amount of the securities that we could offer pursuant to the 2022 Registration Statement.

On March 13, 2024, we filed the 2024 Registration Statement, which was declared effective on March 21, 2024. The 2024 Registration Statement allows us to issue up to $1.3 billion of securities and replaces the 2022 Registration Statement.

Series F Preferred Stock Continuous Offering

On February 20, 2020, we filed with the Maryland Department of Assessments and Taxation Articles Supplementary (i) setting forth the rights, preferences and terms of the Series F Preferred Stock and (ii) reclassifying and designating 26,000,000 shares of our authorized and unissued shares of common stock as shares of Series F Preferred Stock. The reclassification decreased the number of shares classified as common stock from 86,290,000 shares immediately prior to the reclassification to 60,290,000 shares immediately after the reclassification. We sold 7,580 shares of our Series F Preferred Stock, raising $0.2 million in net proceeds, during the three months ended March 31, 2024.

Non-controlling Interest in Operating Partnership

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

As of March 31, 2024 and December 31, 2023, there were 310,643 and 310,643 outstanding OP Units held by holders who do not control the Operating Partnership (“Non-controlling OP Unitholders”), 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 three months ended March 31, 2024, our largest tenant comprised only 4.3% of total lease revenue. The table below reflects the breakdown of our total lease revenue by tenant industry classification for the three months ended March 31, 2024 and 2023 (dollars in thousands):

For the three months ended March 31,
20242023
Industry ClassificationLease RevenuePercentage of Lease RevenueLease RevenuePercentage of Lease Revenue
Automotive$5,302 14.8 %$5,140 14.2 %
Diversified/Conglomerate Services4,627 13.0 4,529 12.4 
Telecommunications4,493 12.6 4,940 13.5 
Buildings and Real Estate2,534 7.1 2,304 6.3 
Diversified/Conglomerate Manufacturing2,464 6.9 2,636 7.2 
Personal, Food & Miscellaneous Services2,348 6.6 2,347 6.4 
Banking2,314 6.5 2,336 6.4 
Healthcare2,225 6.2 3,348 9.2 
Personal & Non-Durable Consumer Products1,916 5.4 1,882 5.1 
Machinery1,608 4.5 1,369 3.7 
Beverage, Food & Tobacco1,464 4.1 1,402 3.8 
Chemicals, Plastics & Rubber1,318 3.7 1,365 3.7 
Containers, Packaging & Glass1,156 3.2 983 2.7 
Childcare573 1.6 573 1.6 
Information Technology570 1.6 573 1.6 
Electronics287 0.8 272 0.7 
Printing & Publishing266 0.7 229 0.6 
Education133 0.4 203 0.6 
Home & Office Furnishings123 0.3 123 0.3 
Total$35,721 100.0 %$36,554 100.0 %

The tables below reflect the breakdown of total lease revenue by state for the three months ended March 31, 2024 and 2023 (dollars in thousands):

StateLease Revenue for the three months ended March 31, 2024Percentage of Lease RevenueNumber of Leases for the three months ended March 31, 2024Lease Revenue for the three months ended March 31, 2023Percentage of Lease RevenueNumber of Leases for the three months ended March 31, 2023
Texas$4,526 12.7 %14 $4,781 13.1 %13 
Florida4,254 11.9 4,117 11.3 
Pennsylvania3,736 10.5 10 3,736 10.2 10 
Ohio3,187 8.9 15 3,661 10.0 16 
Georgia2,956 8.3 11 2,924 8.0 10 
North Carolina2,332 6.5 10 2,302 6.3 10 
Alabama2,160 6.0 2,236 6.1 
Colorado1,869 5.2 1,870 5.1 
Michigan1,632 4.6 1,599 4.4 
Indiana1,188 3.3 11 1,044&