GLADSTONE COMMERCIAL CORP Management’s Discussion and Analysis of Financial Condition 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, 2021. 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”, “us”, “our” and the “Company” in this report mean
Gladstone Commercial Corporation and its consolidated subsidiaries, unless otherwise indicated or where the context indicates that the term refers 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 rents under generally accepted accounting principles (“GAAP”) are rents that each tenant pays in accordance with the terms of their respective lease and reported evenly over the non-cancellable term of the lease.

From August 1, 2022:

•we owned 135 properties totaling 16.9 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 3.7 years and the
weighted average interest rate was 4.24%; and
•the average remaining lease term of the portfolio was 7.0 years.

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Business Environment

Since the onset of the COVID-19 pandemic in March 2020, authorities throughout
the United States and the world have implemented widespread measures attempting
to contain its spread and impact, such as travel restrictions, quarantines, the
promotion of social distancing and limitations on business activity. Generally,
year to date 2022 has seen the lifting of certain restrictive measures that were
implemented during 2020 and 2021. These measures, and the pandemic generally,
have caused significant national and global economic disruption, including
disrupted business operations, including those of some of our tenants, and
continue to have an adverse effect on demand for office space in the short term,
including office utilization rates. Economic recovery in the United States and
various other regions of the world has continued, but may be threatened by the
continued adverse effects of COVID-19 and more significantly by continuing
inflationary conditions, rising interest rates and the impact of ongoing or
escalated geopolitical tensions and conflict.

The demand for industrial space has remained strong due to the continuing growth
of e-commerce and reshoring of manufacturing operations, but appears to be only
partially counterbalancing the adverse effects of COVID-19 on the commercial
real estate industry. However, product delivery delays caused by supply chain
disruption, and the apparent national labor shortage, have resulted in inflation
and higher costs for both industrial and office construction projects.
Industrial absorption increased on a nominal basis in 2021, compared to 2020,
according to research reports, and continues to be strong through the first
quarter of 2022, averaging approximately 130 million square feet of absorption
each quarter. Construction activity for the industrial sector remains strong, as
year-end 2021 estimates have approximately 500 million square feet of properties
under construction with over 30% of that space pre-leased. Research reports also
reflect that the office sector experienced negative absorption for each of the
previous four quarters. Office space available for sublease has increased and is
placing 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, coupled
with the threat of a near-term recession. The yield on the 10-year US Treasury
Note has increased significantly during the first half of 2022 to approximately
3%, which adversely affects interest rates on long-term financing. After
completing the 12th year of the current cycle, some national research firms are
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 24 months caused in part by inflation, the
ongoing COVID-19 pandemic, and geopolitical conditions, although the actual
timeline, impact and duration are unknown. See "Impact of COVID-19 on Our
Business," below.

From a more macroeconomic perspective, significant uncertainties remain associated with the current economic environment and the growing likelihood of a near-term recession.

Impact of COVID-19 on our business

The extent to which the COVID-19 pandemic and subsequent inflationary pressures
and supply chain disruption 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 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 August 1, 2022, we have collected 100% of all outstanding rent collections
for calendar year 2021 and the first half of 2022. In the past, we have received
rent modification requests from our tenants, and we may receive additional
requests in the future. There are no outstanding COVID-19 related rent
modifications in place.

We believe we currently have adequate liquidity in the near term, and we believe
the availability on our Credit Facility (defined in "Other Business Environment
Considerations" below) 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, will have
on our business, financial condition, liquidity, results of operations, funds
from operations or prospects, we
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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 are unknown, in relation to
recent world events, including inflation, supply chain disruptions, labor
shortages, rapidly rising interest rates, the ongoing COVID-19 pandemic and
associated government response in addition to any subsequent shift in policy,
geopolitical conditions, new regulations or the long-term impact of social and
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, 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 London Interbank Offered
Rate ("LIBOR"), although LIBOR is currently anticipated to be phased out by June
2023. LIBOR is expected to transition to a new standard rate, Secured Overnight
Financing 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 SOFR
becomes the standard benchmark for variable rate debt. During the transition
further changes or reforms to the determination of 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 seven partially
vacant buildings and two fully vacant buildings.

Our available vacant space at June 30, 2022 represents 2.7% of our total square
footage and the annual carrying costs on the vacant space, including real estate
taxes and property operating expenses, are approximately $4.2 million. We
continue to actively seek new tenants for these properties.

We believe our lease expiration schedule for the remainder of 2022 is quite
manageable, as it equates to only 4.3% of our lease revenue at June 30, 2022.
Property acquisitions since the beginning of 2019 have totaled nearly
$410.0 million and all transactions were industrial in nature, with a weighted
average lease term of 12.6 years and a current weighted average lease term today
of 10.5 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 $100.0 million senior unsecured revolving credit facility
("Revolver"), with KeyBank National Association ("KeyBank"), 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.

Recent Developments

Acquisition Activity

In the six months ended June 30, 2022we acquired seven industrial buildings located in Wilkesboro, North Carolina, Oklahoma City, Oklahoma,
Cleveland, Ohio, Fort Payne, Alabamaand Wilmington, North Carolinawhich are summarized below (in thousands of dollars):

                                     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
            742,303                     11.7 years            $      51,919          $        519          $          3,379          $     20,000




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Leasing Activity

During and after the six months ended June 30, 2022we signed six 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
             292,710                      10.1 years             $             3,187          $          3,823          $           1,107


On July 22, 2022we signed a lease for 41,225 square feet of vacant space in our Austin, TX ownership for 5.7 years.

In the six months ended June 30, 2022we had a lease termination, which is detailed below (in thousands of dollars):

Global Accelerated Rent

                                                                                    Recognized through June 30,
Aggregate Square Footage Reduced                Aggregate Accelerated Rent                     2022
                     155,984                  $                     2,138          $                      891



Financing Activity

In the six months ended June 30, 2022we paid off a mortgage, secured by four properties, which is detailed in the table below (in thousands of dollars):

                                       .
          Fixed Rate Debt Repaid       Interest Rate on Fixed Rate Debt Repaid
         $                14,812                                        6.10  %


On July 5, 2022have been paid $3.6 million in fixed rate mortgage debt, secured by property, at an interest rate of 5.05%.

On August 1, 2022have been paid $6.6 million in fixed rate mortgage debt, secured by property, at an interest rate of 4.53%.

In the six months ended June 30, 2022we have issued three mortgages, secured by seven properties, which are summarized in the table below (in thousands of dollars):

                                       .
                                                    Weighted Average 

Interest rate on fixed rate

     Aggregate Fixed Rate Debt Issued                                   Debt
$                                20,000    (1)                                            3.70  %


(1)We issued $10.0 million of fixed rate debt in connection with the
two-property portfolio acquired on May 4, 2022 with a maturity date of May 4,
2027. The interest rate is fixed at 4.0%. We issued $10.0 million of fixed rate
debt in connection with the three-property acquisition on May 12, 2022 with a
maturity date of June 1, 2032. The interest rate is fixed at 3.4%.

        Variable Rate Debt Issued            Interest Rate on Variable Rate 

Debt

       $                   15,000   (1)                 SOFR + 2.50%


(1)We issued $15.0 million of variable rate debt in connection with refinancing
mortgage debt at two properties with a new maturity date of April 27, 2024 and
interest rate of SOFR plus 2.50%.

During the six months ended June 30, 2022, we extended the maturity date of two
mortgages, collateralized by four properties, which is summarized in the table
below (dollars in thousands):

                                     Interest Rate on Fixed Rate Debt
   Fixed Rate Debt Extended                      Extended                              Extension Term
$                     3,585                                    5.13  %                    1.0 year


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  Variable Rate Debt Extended         Interest Rate on Variable Rate Debt Extended                Extension Term
$                      7,059                      LIBOR + 2.75%                                      1.0 year



On July 27, 2022, we extended the maturity date of $11.0 million in fixed rate
mortgage debt, collateralized by one property, for 1.0 year at an interest rate
of 5.50%.

Equity Activities

Common Stock ATM Program

During the six months ended June 30, 2022, we sold 1.5 million shares of common
stock, raising $31.7 million in net proceeds under our At-the-Market Equity
Offering Sales Agreements (the "Common Stock Sales Agreement") with sales agents
Robert W. Baird & Co. Incorporated, Goldman Sachs & Co. LLC, Stifel, Nicolaus &
Company, Incorporated, BTIG, LLC, and Fifth Third Securities, Inc. On February
22, 2022, we entered into Amendment No. 1 to our existing At-the-Market Equity
Offering Sales Agreement (the "Common Stock Sales Agreement"), dated December 3,
2019. The amendment permits shares of common stock to be issued pursuant to the
Common Stock Sales Agreement under the Company's Registration Statement on Form
S-3 (File No. 333-236143) and future registration statements on Form S-3 (the
"Common Stock ATM Program"). As of June 30, 2022, we had remaining capacity to
sell up to $35.5 million of common stock pursuant to the Common Stock ATM
Program under the 2020 Universal Shelf (as defined below).

Universal Shelf Record Statements

On January 29, 2020, we filed a 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. The 2020 Universal Shelf allows us to
issue up to $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") and
$63.0 million is reserved for our Common Stock ATM Program. As of June 30, 2022,
we had the ability to issue up to $658.7 million of securities under the 2020
Universal Shelf.

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 126,028 shares of our Series F Preferred Stock,
raising $2.9 million in net proceeds during the three and six months ended
June 30, 2022. As of June 30, 2022, we had remaining capacity to sell up to
$622.6 million of Series F Preferred Stock.

Non-controlling interest in Operational partnership

From June 30, 2022 and December 31, 2021we owned approximately 99.3% and 99.3%, respectively, of the outstanding operating partnership units in the
Operational partnership (“OP Units”). In the six months ended June 30, 2021we repurchased 246,039 OP Units for an equivalent amount of ordinary shares.

From June 30, 2022 and December 31, 2021there were 256,994 and 256,994 OP units outstanding held by holders who do not control the Operational partnership (“Non-Controlling PO 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 six months ended June 30, 2022, our largest tenant
comprised only 4.3% of total lease revenue. The table below reflects the
breakdown of our total lease revenue by tenant industry classification for the
three and six months ended June 30, 2022 and 2021 (dollars in thousands):

                                                                            For the three months ended June 30,                                                           For the six months ended June 30,
                                                                   2022                                           2021                                          2022                                           2021
                                                      Lease             Percentage of                                    Percentage of             Lease             Percentage of                                    Percentage of
Industry Classification                              Revenue            Lease Revenue            Lease Revenue           Lease Revenue            Revenue            Lease Revenue            Lease Revenue           Lease Revenue
Telecommunications                                 $   5,747                     15.8  %       $        5,580                     16.7  %       $  11,356                     15.8  %       $       11,165                     16.3  %
Healthcare                                             4,075                     11.2                   3,686                     11.0              9,275                     12.9                   5,453                      8.0
Automotive                                             4,640                     12.7                   2,732                      8.2              9,089                     12.6                   9,513                     14.0
Diversified/Conglomerate Services                      4,551                     12.5                   4,822                     14.5              8,059                     11.2                   7,933                     

11.7

Buildings and Real Estate                              2,315                      6.4                   2,289                      6.9              5,419                      7.5                   3,882                      

5.7

Diversified/Conglomerate Manufacturing                 2,795                      7.7                   1,883                      5.6              5,218                      7.3                   5,117                      7.5
Banking                                                2,610                      7.2                   2,576                      7.7              4,657                      6.5                   4,634                      6.8
Personal, Food & Miscellaneous Services                1,550                      4.3                   1,538                      4.7              3,097                      4.3                   4,014                      

5.9

Chemicals, Plastics & Rubber                           1,206                      3.3                   1,204                      3.6              2,787                      3.9                   2,953                      4.3
Information Technology                                 1,109                      3.0                   1,685                      5.0              2,411                      3.4                   2,292                      3.4
Beverage, Food & Tobacco                               1,407                      3.9                   1,477                      4.4              2,155                      3.0                   3,337                      4.9
Personal & Non-Durable Consumer Products               1,104                      3.0                     617                      1.8              1,963                      2.7                   1,235                      1.8
Machinery                                                975                      2.7                   1,033                      3.1              1,948                      2.7                   2,022                      3.0
Containers, Packaging & Glass                          1,009                      2.8                     617                      1.8              1,879                      2.6                   1,210                      1.8
Childcare                                                573                      1.6                     572                      1.7              1,145                      1.6                   1,146                      1.7
Printing & Publishing                                    229                      0.6                     519                      1.6                459                      0.6                     868                      1.3
Electronics                                              179                      0.5                     219                      0.7                406                      0.6                     402                      0.6
Education                                                202                      0.6                     201                      0.6                361                      0.5                     630                      0.9
Home & Office Furnishings                                123                      0.2                     121                      0.4                246                      0.3                     241                      0.4
Total                                              $  36,399                    100.0  %       $       33,371                    100.0  %       $  71,930                    100.0  %       $       68,047                    100.0  %



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The tables below reflect the breakdown of total lease revenue by state for the
three and six months ended June 30, 2022 and 2021 (dollars in thousands):

                                                                         Number of                                                         Number of
                          Lease Revenue                               Leases for the        Lease Revenue                               Leases for the
                          for the three                                three months         for the three                                three months
                          months ended          Percentage of         ended June 30,        months ended          Percentage of         ended June 30,
State                     June 30, 2022         Lease Revenue              2022             June 30, 2021         Lease Revenue              2021
Texas                     $    5,359                    14.7  %                14           $    3,302                     9.9  %                14
Florida                        4,230                    11.6                    9                4,197                    12.6                   10
Pennsylvania                   3,704                    10.2                   10                3,780                    11.3                   10
Ohio                           3,550                     9.8                   16                3,854                    11.5                   15
Georgia                        2,945                     8.1                   10                2,738                     8.2                    9
North Carolina                 2,146                     5.9                   10                1,629                     4.9                    7
Alabama                        1,763                     4.8                    6                1,692                     5.1                    5
Michigan                       1,608                     4.4                    6                1,585                     4.7                    6
South Carolina                 1,418                     3.9                    2                1,551                     4.6                    2
Utah                           1,326                     3.6                    3                1,937                     5.8                    4
All Other States               8,350                    23.0                   50                7,106                    21.4                   46
Total                     $   36,399                   100.0  %               136           $   33,371                   100.0  %               128



                                                                      Number of                                                      Number of
                          Lease Revenue                            Leases for the        Lease Revenue                            Leases for the
                           for the six                               six months           for the six                               six months
                          months ended          % of Lease         ended June 30,        months ended          % of Lease         ended June 30,
State                     June 30, 2022          Revenue                2022             June 30, 2021          Revenue                2021
Texas                     $   10,524                 14.6  %                14           $    7,431                 10.9  %                14
Florida                        8,467                 11.8                    9                8,418                 12.4                   10
Pennsylvania                   7,437                 10.3                   10                7,602                 11.2                   10
Ohio                           7,137                  9.9                   16                7,615                 11.2                   15
Georgia                        5,853                  8.1                   10                5,408                  7.9                    9
North Carolina                 4,033                  5.6                   10                3,482                  5.1                    7
Alabama                        3,319                  4.6                    6                3,277                  4.8                    5
Michigan                       3,215                  4.5                    6                3,158                  4.6                    6
South Carolina                 2,811                  3.9                    2                2,754                  4.0                    2
Utah                           2,648                  3.8                    3                3,827                  5.6                    4
All Other States              16,486                 22.9                   50               15,075                 22.3                   46
                          $   71,930                100.0  %               136           $   68,047                100.0  %               128


Our advisor 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. Arthur "Buzz" Cooper, our current sole president (as Mr. Bob Cutlip, our
previous other co-president with Mr. Cooper, retired on June 30, 2022), also
serves as 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. Cooper, all of our executive officers
and all of our directors serve as either directors or executive officers, or
both, of Gladstone Capital Corporation and Gladstone Investment Corporation. In
addition, with the exception of Mr. Cooper and Mr. Gerson, all of our executive
officers and all of our directors, serve as either directors or executive
officers, or both, of Gladstone
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Table of Land company. Mr. Cooper and Mr. Gerson do not make any material effort to help affiliates. In the future, our advisor may provide investment advisory services to other companies, both public and private.

Consulting 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. 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
2022 meeting, our Board of Directors reviewed and renewed the Advisory Agreement
and Administration Agreement for an additional year, through August 31, 2023.

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.

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.

Incentive bonus

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.
The Incentive Fee is used by the Adviser primarily for performance-based
compensation related to certain of its employees.

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Capital Gain Fee

Under the Advisory Agreement, we will pay to the Adviser a capital gain-based
incentive fee that will be calculated and payable in arrears as of the end of
each fiscal year (or upon termination of the Advisory Agreement). In determining
the capital gain fee, we will calculate aggregate realized capital gains and
aggregate realized capital losses for the applicable time period. For this
purpose, aggregate realized capital gains and losses, if any, equals the
realized gain or loss calculated by the difference between the sales price of
the property, less any costs to sell the property and the current gross value of
the property (equal to the property's original acquisition price plus any
subsequent non-reimbursed capital improvements) of the disposed property. At the
end of the fiscal year, if this number is positive, then the capital gain fee
payable for such time period shall equal 15.0% of such amount. No capital gain
fee was recognized during the three and six months ended June 30, 2022 or 2021.

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.

Significant Accounting Policies 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, 2021, filed by us with the U.S.
Securities and Exchange Commission (the "SEC") on February 15, 2022 (our "2021
Form 10-K"). There were no material changes to our critical accounting policies
or estimates during the six months ended June 30, 2022.

Operating results

The weighted average yield on our total portfolio, which was 7.6% and 8.0% as of
June 30, 2022 and 2021, 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.

                                       33

————————————————– ——————————

Table of Contents A comparison of our operating results for the three and six months ended
June 30, 2022 and 2021 is below (in thousands of dollars, except per share amounts):

                                                                        For 

the three months have ended June 30th,

                                                        2022                 2021             $ Change               % Change
Operating revenues
Lease revenue                                     $      36,399          $  33,371          $    3,028                      9.1  %
Total operating revenues                          $      36,399          $  33,371          $    3,028                      9.1  %
Operating expenses
Depreciation and amortization                     $      15,219          $  14,191          $    1,028                      7.2  %
Property operating expenses                               6,959              6,910                  49                      0.7  %
Base management fee                                       1,577              1,452                 125                      8.6  %
Incentive fee                                             1,339              1,039                 300                     28.9  %
Administration fee                                          399                338                  61                     18.0  %
General and administrative                                  958              1,073                (115)                   (10.7) %
Impairment charge                                         1,374                  -               1,374                    100.0  %
Total operating expense before incentive
fee waiver                                        $      27,825          $  25,003          $    2,822                     11.3  %
Incentive fee waiver                                          -                (16)                 16                   (100.0) %
Total operating expenses                          $      27,825          $  24,987          $    2,838                     11.4  %
Other (expense) income
Interest expense                                  $      (7,121)         $  (6,486)         $     (635)                     9.8  %

Other income                                                119                223                (104)                   (46.6) %
Total other expense, net                          $      (7,002)         $  (6,263)         $     (739)                    11.8  %
Net income                                        $       1,572          $   2,121          $     (549)                   (25.9) %
Distributions attributable to Series D, E,
F, and G preferred stock                                 (2,967)            (2,856)               (111)                     3.9  %
Series D Preferred Stock offering costs
write off                                                     -             (2,141)              2,141                   (100.0) %
Distributions attributable to senior common
stock                                                      (114)              (177)                 63                    (35.6) %

Net loss attributable to common
stockholders and Non-controlling OP
Unitholders                                       $      (1,509)         $  (3,053)         $    1,544                    (50.6) %
Net loss attributable to common
stockholders and Non-controlling OP
Unitholders per weighted average share and
unit - basic & diluted                            $       (0.04)         $   (0.08)         $     0.04                    (50.0) %

FFO available to ordinary shareholders and holders of non-controlling OP units – basic (1) $15,084 $11,138 $3,946

                     35.4  %
FFO available to common stockholders and
Non-controlling OP Unitholders - diluted
(1)                                               $      15,198          $  11,315          $    3,883                     34.3  %
FFO available to common stockholders and
Non-controlling OP Unitholders - diluted,
as adjusted for comparability (1)                 $      15,198          $  13,456          $    1,742                     12.9  %
FFO per weighted average share of common
stock and Non-controlling OP Units - basic
(1)                                               $        0.39          $    0.30          $     0.09                     30.0  %
FFO per weighted average share of common
stock and Non-controlling OP Units -
diluted (1)                                       $        0.39          $    0.30          $     0.09                     30.0  %
FFO per weighted average share of common
stock and Non-controlling OP Units -
diluted, as adjusted for comparability (1)        $        0.39          $    0.36          $     0.03                      8.3  %


(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.

                                       34

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Contents

For the six months ended June 30th,

                                                        2022                 2021             $ Change               % Change
Operating revenues
Lease revenue                                     $      71,930          $  68,047          $    3,883                      5.7  %
Total operating revenues                          $      71,930          $  68,047          $    3,883                      5.7  %
Operating expenses
Depreciation and amortization                     $      29,907          $  30,901          $     (994)                    (3.2) %
Property operating expenses                              13,582             13,471                 111                      0.8  %
Base management fee                                       3,124              2,896                 228                      7.9  %
Incentive fee                                             2,679              2,274                 405                     17.8  %
Administration fee                                          861                634                 227                     35.8  %
General and administrative                                1,955              1,729                 226                     13.1  %
Impairment charge                                         1,374                  -               1,374                    100.0  %
Total operating expense before incentive
fee waiver                                        $      53,482          $  51,905          $    1,577                      3.0  %
Incentive fee waiver                                          -                (16)                 16                   (100.0) %
Total operating expenses                          $      53,482          $  51,889          $    1,593                      3.1  %
Other (expense) income
Interest expense                                  $     (13,706)         $ (13,650)         $      (56)                     0.4  %
Loss on sale of real estate, net                              -               (882)                882                   (100.0) %
Other income                                                223                534                (311)                   (58.2) %
Total other expense, net                          $     (13,483)         $ (13,998)         $      515                     (3.7) %
Net income                                        $       4,965          $   2,160          $    2,805                    129.9  %
Distributions attributable to Series D, E,
F, and G preferred stock                                 (5,913)            (5,703)               (210)                     3.7  %
Series D preferred stock offering costs
write off                                                     -             (2,141)              2,141                   (100.0) %
Distributions attributable to senior common
stock                                                      (230)              (364)                134                    (36.8) %
Loss on extinguishment of Series F
preferred stock                                              (5)                 -                  (5)                   100.0  %
Net loss attributable to common
stockholders and Non-controlling OP
Unitholders                                       $      (1,183)         $  (6,048)         $    4,865                    (80.4) %
Net loss attributable to common
stockholders and Non-controlling OP
Unitholders per weighted average share and
unit - basic & diluted                            $       (0.03)         $   (0.17)         $     0.14                    (82.4) %

FFO available to ordinary shareholders and holders of non-controlling OP units – basic (1) $30,098 $25,735 $4,363

                     17.0  %
FFO available to common stockholders and
Non-controlling OP Unitholders - diluted
(1)                                               $      30,328          $  26,099          $    4,229                     16.2  %
FFO available to common stockholders and
Non-controlling OP Unitholders - diluted,
as adjusted for comparability (1)                 $      30,328          $  28,240          $    2,088                      7.4  %
FFO per weighted average share of common
stock and Non-controlling OP Unit - basic
(1)                                               $        0.78          $    0.71          $     0.07                      9.9  %
FFO per weighted average share of common
stock and Non-controlling OP Unit - diluted
(1)                                               $        0.78          $    0.71          $     0.07                      9.9  %
FFO per weighted average share of common
stock and Non-controlling OP Unit -
diluted, as adjusted for comparability (1)        $        0.78          $    0.76          $     0.02                      2.6  %


(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, 2021, 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, 2020. 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, 2021.

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Operating Revenues

                                                    For the three months ended June 30,
                                                           (Dollars in Thousands)
Lease Revenues                                 2022                  2021        $ Change      % Change
Same Store Properties               $      28,742                 $ 28,460      $    282          1.0  %
Acquired & Disposed Properties              3,475                    1,444         2,031        140.7  %
Properties with Vacancy                     4,182                    3,467           715         20.6  %

                                    $      36,399                 $ 33,371      $  3,028          9.1  %



                                                    For the six months ended June 30,
                                                         (Dollars in Thousands)
Lease Revenues                               2022                 2021        $ Change      % Change
Same Store Properties               $     57,124               $ 57,729      $   (605)        (1.0) %
Acquired & Disposed Properties             6,193                  2,866         3,327        116.1  %
Properties with Vacancy                    8,613                  7,452         1,161         15.6  %

                                    $     71,930               $ 68,047      $  3,883          5.7  %



Lease revenues consist of rental income and operating expense recoveries earned
from our tenants. Lease revenues from same store properties increased for the
three months ended June 30, 2022, primarily due to accelerated rent recognized
during the three months ended June 30, 2022 from one tenant that terminated
their lease early. Lease revenues from same store properties decreased for the
six months ended June 30, 2022, primarily due to accelerated rent recognized
during the six months ended June 30, 2021 from two tenants that terminated their
leases early, partially offset by increased rent from lease amendments executed
subsequent to June 30, 2021. We fully re-leased the space from the two
terminations with no downtime. Lease revenues increased for acquired and
disposed of properties for the three and six months ended June 30, 2022, as
compared to the three and six months ended June 30, 2021, because we acquired 16
properties subsequent to June 30, 2021. This increase was partially offset by a
loss of lease revenues from one property we sold subsequent to June 30, 2021.
Lease revenues increased for our properties with vacancy for the three and six
months ended June 30, 2022 due to vacant space being leased.

Functionnary costs

Depreciation and amortization expense increased for the three months ended June
30, 2022, as compared to the three months ended June 30, 2021, due to an
increase in depreciation and amortization expense on the 16 properties acquired
subsequent to June 30, 2021. Depreciation and amortization expense decreased for
the six months ended June 30, 2022, as compared to the six months ended June 30,
2021, primarily due to accelerated depreciation and amortization related to two
tenants with early lease terminations during the six months ended June 30, 2021,
partially offset by an increase in depreciation and amortization expense on the
16 properties we acquired subsequent to June 30, 2021.

                                                                     For 

the three months have ended June 30th,

                                                                           (Dollars in Thousands)
Property Operating Expenses                         2022                  2021             $ Change               % Change
Same Store Properties                         $        4,344          $   4,349          $       (5)                    (0.1) %
Acquired & Disposed Properties                           436                235                 201                     85.5  %
Properties with Vacancy                                2,179              2,326                (147)                    (6.3) %

                                              $        6,959          $   6,910          $       49                      0.7  %



                                                      For the six months ended June 30,
                                                           (Dollars in Thousands)
Property Operating Expenses                    2022                  2021        $ Change       % Change
Same Store Properties               $       8,622                 $  8,482      $     140          1.7  %
Acquired & Disposed Properties                629                      560             69         12.3  %
Properties with Vacancy                     4,331                    4,429            (98)        (2.2) %

                                    $      13,582                 $ 13,471      $     111          0.8  %



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Property operating expenses consist of franchise taxes, property management
fees, insurance, ground lease payments, property maintenance and repair expenses
paid on behalf of certain of our properties. The decrease in property operating
expenses for same store properties for the three months ended June 30, 2022,
from the comparable 2021 period, is a result of reduced real estate tax expense
during the period, partially offset by general cost increases due to the
inflationary environment during the three months ended June 30, 2022. The
increase in property operating expenses for same store properties for the six
months ended June 30, 2022, from the comparable 2021 period, is a result of
general cost increases due to the inflationary environment during the six months
ended June 30, 2022. The increase in property operating expenses for acquired
and disposed of properties for the three and six months ended June 30, 2022, as
compared to the three and six months ended June 30, 2021, is primarily a result
of our 16 property acquisitions subsequent to June 30, 2021, partially offset by
the sale of one property subsequent to June 30, 2021. The decrease in property
operating expenses for properties with vacancy for the three and six months
ended June 30, 2022, as compared to the three and six months ended June 30,
2021, is a result of reduced real estate tax expense during the period,
partially offset by general cost increases due to the inflationary environment
during the three and six months ended June 30, 2022.

The base management fee paid to the Adviser increased for the three and six
months ended June 30, 2022, as compared to the three and six months ended
June 30, 2021, due to an increase in Gross Tangible Real Estate over the three
and six months ended June 30, 2022 as compared to the increase in Gross Tangible
Real Estate during the three and six months ended June 30, 2021. 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 six months
ended June 30, 2022, as compared to the three and six months ended June 30,
2021, due to a higher pre-incentive fee Core FFO. The increase in Core FFO is a
result of an increase in operating revenues. The calculation of the incentive
fee is described in detail above in "Advisory and Administration Agreements."

Administration fees paid to the administrator have increased for the three and six month periods ended June 30, 2022compared to the three and six month periods ended
June 30, 2021, due to our administrator incurring higher costs attributed to us. The calculation of administration fees is described in detail above in the section “Advisory and administration agreements”.

General and administrative expenses decreased for the three months ended June
30, 2022, as compared to the three months ended June 30, 2021, primarily as a
result of a decrease in legal costs. General and administrative expenses
increased for the six months ended June 30, 2022, as compared to the six months
ended June 30, 2021, primarily as a result of an increase in accounting fees and
shareholder related expenses, partially offset by a decrease in legal costs.

Other income and expenses

Interest expense increased for the three and six months ended June 30, 2022, as
compared to the three and six months ended June 30, 2021. This increase was
primarily a result of increased interest costs on variable rate debt, as global
interest rates have increased to counteract growing inflation.

We did not sell any properties during the six months ended June 30, 2022, and as
a result, incurred no gain or loss. Loss on sale of real estate, net, for the
three and six months ended June 30, 2021, is attributable to two non-core office
assets located in Rancho Cordova, California and Champaign, Illinois, being sold
during the period.

Other income decreased for the quarters and six months ended June 30, 2022compared to the three and six month periods ended June 30, 2021primarily due to waived sales charges we earned in the three and six months ended June 30, 2021.

Net loss attributable to common shareholders and holders of non-controlling PO units

Net loss attributable to common stockholders and Non-controlling OP Unitholders
decreased for the three and six months ended June 30, 2022, as compared to the
three and six months ended June 30, 2021, primarily due to the increase in
operating revenues due to asset acquisition activity during and subsequent to
June 30, 2021, partially offset by an increase in interest expense due to higher
borrowing costs on variable rate debt due to global interest rate expansion.

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Liquidity and Capital Resources

Insight

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 June 30, 2022, was $29.1 million,
consisting of approximately $10.7 million in cash and cash equivalents and
available borrowing capacity of $18.4 million under our Credit Facility. Our
available borrowing capacity under the Credit Facility increased to $34.6
million as of August 1, 2022.

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

During the six months ended June 30, 2022, we raised net proceeds of $31.7
million of common equity under our Common Stock ATM Program at a net weighted
average per share price of $20.84. 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 six months ended June 30, 2022. We raised net
proceeds of $2.9 million from sales of our Series F Preferred Stock during the
six months ended June 30, 2022.

As of August 1, 2022, we had the ability to raise up to $650.7 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 $650.7 million of available capacity under our 2020 Universal
Shelf, approximately $28.0 million is reserved for additional sales under our
Common Stock ATM Program, and approximately $622.2 million is reserved for the
sale of our Series F Preferred Stock as of August 1, 2022. We expect to continue
to use our Common Stock ATM Program as a source of liquidity for the remainder
of 2022.

Debt Capital

As of June 30, 2022, we had 54 mortgage notes payable in the aggregate principal
amount of $465.8 million, collateralized by a total of 70 properties with a
remaining weighted average maturity of 3.7 years. The weighted-average interest
rate on the mortgage notes payable as of June 30, 2022 was 4.18%.

We continue to see banks and non-bank lenders willing to issue mortgages. Therefore, we focus on obtaining mortgages through regional banks, non-bank lenders and the CMBS market.

As of June 30, 2022, we had mortgage debt in the aggregate principal amount of
$72.9 million payable during the remainder of 2022 and $83.6 million payable
during 2023. The 2022 principal amount payable includes both amortizing
principal payments and six balloon principal payments due during the remaining
six months of 2022. We anticipate being able to refinance our mortgages that
come due during 2022 and 2023 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.

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Operating Activities

Net cash provided by operating activities during the six months ended June 30,
2022, was $34.6 million, as compared to net cash provided by operating
activities of $34.4 million for the six months ended June 30, 2021. This change
was primarily a result of an increase in operating revenues from our 16 property
acquisitions completed subsequent to June 30, 2021, partially offset by an
increase in interest expense due to higher interest rates on variable rate debt.
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.

Investing activities

Net cash used in investing activities during the six months ended June 30, 2022,
was $57.8 million, which primarily consisted of seven property acquisitions,
coupled with capital improvements performed at certain of our properties. Net
cash used in investing activities during the six months ended June 30, 2021, was
$17.1 million, which primarily consisted of two 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 provided in financing activities during the six months ended June 30,
2022, was $25.3 million, which primarily consisted of the issuance of $35.3
million of common and preferred equity, partially offset by the repayment of
$22.0 million of outstanding mortgage debt, and distributions paid to common,
senior common and preferred shareholders. Net cash used in financing activities
for the six months ended June 30, 2021, was $14.1 million, which primarily
consisted of $10.9 million of mortgage principal repayments, and distributions
paid to common, senior common and preferred shareholders, partially offset by
$5.5 million in new mortgage borrowings coupled with the issuance of $120.8
million of equity.

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 June 30, 2022, 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 June 30, 2022, there was $272.0 million outstanding under our Credit
Facility at a weighted average interest rate of approximately 3.68% and $19.5
million outstanding under letters of credit at a weighted average interest rate
of 1.90%. As of August 1, 2022, the maximum additional amount we could draw
under the Credit Facility was $34.6 million. We were in compliance with all
covenants under the Credit Facility as of June 30, 2022.

For more information on the impact of COVID-19 on our liquidity and capital resources, see Impact of COVID-19 on our business under Business environment.

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Contractual Obligations

The following table reflects our material contractual obligations as of June 30,
2022 (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)                  $ 737,777          $         155,582 

$299,510 $162,069 $120,616 Interest on debt securities (2)

                                      84,289                     26,104             33,723             16,188                       8,274
Operating Lease Obligations (3)           9,029                        491                986                996                       6,556
Purchase Obligations (4)                  8,081                      4,310              3,771                  -                           -
                                      $ 839,176          $         186,487          $ 337,990          $ 179,253          $          135,446


(1)Debt obligations represent borrowings under our Revolver, which represents
$47.0 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 June 30, 2022. This figure does not
include $(0.1) million of premiums and (discounts), net and $3.7 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 June 30, 2022.
(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 11 of our
properties.

Off-balance sheet arrangements

We had no significant off-balance sheet arrangements at June 30, 2022.

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.

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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 six months ended June 30, 2022 and 2021,
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 June 30,           For the six months ended June 30,
                                                   (Dollars in Thousands, Except for Per        (Dollars in Thousands, Except for Per
                                                               Share Amounts)                               Share Amounts)
                                                         2022                  2021                   2022                  2021
Calculation of basic FFO per share of common
stock and Non-controlling OP Unit
Net income                                         $       1,572          $ 

2,121 $4,965 $2,160
Less: distributions attributable to preferred and first common shares

                         (3,081)               (3,033)                (6,143)               (6,067)
Less: Series D preferred stock offering
costs write off                                                -                (2,141)                     -                (2,141)
Less: Loss on extinguishment of Series F
preferred stock                                                -                     -                     (5)                    -
Net income (loss) available (attributable)
to common stockholders and Non-controlling
OP Unitholders                                     $      (1,509)         $     (3,053)         $      (1,183)         $     (6,048)
Adjustments:
Add: Real estate depreciation and
amortization                                       $      15,219          $ 

14,191 $29,907 $30,901
Add: Impairment charge

                                     1,374                     -                  1,374                     -
Add: Loss on sale of real estate, net                          -                     -                      -                   882

FFO available to common stockholders and
Non-controlling OP Unitholders - basic             $      15,084          $ 

11,138 $30,098 $25,735
Weighted average common shares outstanding – basic

                                                 38,745,751            36,394,767             38,326,531            36,056,317
Weighted average Non-controlling OP Units
outstanding                                              256,994               256,994                256,994               377,975
Total common shares and Non-controlling OP
Units                                                 39,002,745            36,651,761             38,583,525            36,434,292
Basic FFO per weighted average share of
common stock and Non-controlling OP Unit           $        0.39          $       0.30          $        0.78          $       0.71
Calculation of diluted FFO per share of
common stock and Non-controlling OP Unit
Net income                                         $       1,572          $ 

2,121 $4,965 $2,160
Less: distributions attributable to preferred and first common shares

                         (3,081)               (3,033)                (6,143)               (6,067)
Less: Series D preferred stock offering
costs write off                                                -                (2,141)                     -                (2,141)
Less: Loss on extinguishment of Series F
preferred stock                                                -                     -                     (5)                    -
Net income (loss) available (attributable)
to common stockholders and Non-controlling
OP Unitholders                                     $      (1,509)         $     (3,053)         $      (1,183)         $     (6,048)
Adjustments:
Add: Real estate depreciation and
amortization                                       $      15,219          $ 

14,191 $29,907 $30,901
Add: Impairment charge

                                     1,374                     -                  1,374                     -
Add: Income impact of assumed conversion of
senior common stock                                          114                   177                    230                   364
Add: Loss on sale of real estate, net                          -                     -                      -                   882

FFO available to common stockholders and
Non-controlling OP Unitholders plus assumed
conversions                                        $      15,198          $ 

11,315 $30,328 $26,099
Weighted average common shares outstanding – basic

                                                 38,745,751            36,394,767             38,326,531            36,056,317
Weighted average Non-controlling OP Units
outstanding                                              256,994               256,994                256,994               377,975
Effect of convertible senior common stock                363,246               558,038                363,246               558,038
Weighted average common shares and
Non-controlling OP Units outstanding -
diluted                                               39,365,991            37,209,799             38,946,771            36,992,330
Diluted FFO per weighted average share of
common stock and Non-controlling OP Unit           $        0.39          $       0.30          $        0.78          $       0.71
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                                        $      15,198          $ 

11,315 $30,328 $26,099
Add: Series D Preferred Share Offering Cost Reduction

                                                      -                 2,141                      -                 2,141
FFO available to common stockholders and
Non-controlling OP Unitholders plus assumed
conversions, as adjusted for comparability         $      15,198          $     13,456          $      30,328          $     28,240
Weighted average common shares and
Non-controlling OP Units outstanding -
diluted                                               39,365,991            37,209,799             38,946,771            36,992,330
Diluted FFO per weighted average share of
common stock and Non-controlling OP Unit, as
adjusted for comparability                         $        0.39          $ 

0.36 $0.78 $0.76
Distributions declared per common share and non-controlling OP share

                  $     0.37620          $    0.37545          $     0.75240          $    0.75090



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