Gladstone Commercial Corporation Reports Results for the Second Quarter Ended June 30, 2025

Rhea-AI Summary

Gladstone Commercial (Nasdaq:GOOD) reported its Q2 2025 financial results, demonstrating solid performance with 100% rent collection and significant acquisition activity. The company achieved Core FFO of $16.1 million ($0.35 per share), representing a 5.4% increase from Q1 2025.

Key highlights include the acquisition of two fully-occupied facilities totaling 519,093 square feet for $79.3 million at an 8.88% cap rate, the strategic sale of two non-core properties for a combined $23.6 million, and maintaining a high occupancy rate of 98.7%. The company issued common stock through its ATM program, raising $10.4 million, and maintained its quarterly dividend at $0.30 per share.

Positive

• 100% rent collection maintained through Q2 2025 and July 2025
• Core FFO increased 5.4% to $16.1 million ($0.35 per share) quarter-over-quarter
• Successfully acquired two facilities for $79.3 million at attractive 8.88% cap rate
• High portfolio occupancy of 98.7%, up from 98.4% in previous quarter
• Strategic sale of non-core properties for $23.6 million, supporting capital recycling strategy

Negative

• Net income decreased 24% to $1.457 million from $1.917 million quarter-over-quarter
• Total debt increased 7.2% to $794.4 million from $740.7 million
• Operating expenses increased 5.4% to $25.1 million
• Total equity decreased 1.7% to $347.4 million

Insights

REIT Financial Analyst

GOOD reports solid Q2 with 5.4% revenue growth, 100% rent collection, and increased Core FFO to $0.35/share despite higher interest expenses.

Gladstone Commercial delivered strong Q2 2025 performance with total operating revenue increasing 5.4% quarter-over-quarter to $39.5 million. The company's Core FFO - the key metric for REITs - improved to $0.35 per share, a 2.9% increase from Q1's $0.34.

The growth stemmed primarily from their strategic acquisition of two fully-occupied facilities totaling 519,093 square feet for $79.3 million at an attractive cap rate of 8.88%. This acquisition strategy is particularly noteworthy in the current high interest rate environment, as cap rates exceeding 8% suggest accretive investments that should positively impact future earnings.

Portfolio quality remains exceptional with 98.7% occupancy and 100% rent collection throughout Q2 - a testament to their tenant credit underwriting in a challenging market. Management's capital recycling program continues executing well, with two non-core property sales completed this quarter generating $23.6 million in proceeds used to reduce leverage and fund growth-focused acquisitions.

While net income decreased 9.8% quarter-over-quarter to $4.6 million, this was largely attributable to higher interest expenses from increased variable rate debt, which rose 14.6%. The $0.30 quarterly dividend remains well-covered with a 85.7% payout ratio based on Core FFO.

Balance sheet management shows prudent leverage with $53.6 million increase in debt financing the $79.3 million acquisition, supplemented by $10.4 million raised through equity issuance. The company's focus on industrial properties in target growth markets, coupled with 2% annual same-store rent growth, positions them well despite macroeconomic headwinds.

Please note that the limited information that follows in this press release is not adequate to make an informed investment judgment.

MCLEAN, VA / ACCESS Newswire / August 6, 2025 / Gladstone Commercial Corporation (Nasdaq:GOOD) ("Gladstone Commercial" or the "Company") today reported financial results for the second quarter ended June 30, 2025. A description of funds from operations, or FFO, and Core FFO, both non-GAAP (generally accepted accounting principles in the United States) financial measures, are located at the end of this press release. All per share references are to fully-diluted weighted average shares of common stock and Non-controlling OP Units, unless otherwise noted. For further detail, please also refer to both the quarterly financial supplement and the Company's Quarterly Report on Form 10-Q, which can be retrieved from the Investors section of our website at www.gladstonecommercial.com.

Summary Information (dollars in thousands, except share and per share data):

		As of and for the three months ended
		June 30, 2025					March 31, 2025					$ Change				% Change
Operating Data:
Total operating revenue		$	39,533				$	37,501				$	2,032				5.4	%
Total operating expenses			(25,146	)	(1)			(23,858	)				(1,288	)			5.4	%
Other expense, net			(9,753	)	(2)			(8,507	)				(1,246	)			14.6	%
Net income		$	4,634				$	5,136				$	(502	)			(9.8)	%
Less: Dividends attributable to preferred stock			(3,085	)				(3,108	)				23				(0.7)	%
Less: Dividends attributable to senior common stock			(101	)				(101	)				-				-	%
Add/Less: Gain (loss) on extinguishment of Series F preferred stock, net			9					(10	)				19				(190.0)	%
Net income available to common stockholders and Non-controlling OP Unitholders		$	1,457				$	1,917				$	(460	)			(24.0)	%
Add: Real estate depreciation and amortization			14,249					13,243					1,006				7.6	%
Add: Impairment charge			9					-					9				100.0	%
Less: Gain on sale of real estate, net			(377	)				-					(377	)			100.0	%
Funds from operations available to common stockholders and Non-controlling OP Unitholders - basic		$	15,338				$	15,160				$	178				1.2	%
Add: Convertible senior common distributions			101					101					-				-	%
Funds from operations available to common stockholders and Non-controlling OP Unitholders - diluted		$	15,439				$	15,261				$	178				1.2	%
Funds from operations available to common stockholders and Non-controlling OP Unitholders - basic		$	15,338				$	15,160				$	178				1.2	%
Add: Write off prepaid offering costs			305					-					305				100.0	%
Add: Asset retirement obligation expense			34					34					-				-	%
Add: Closing costs on sale			336					-					336				100.0	%
Core funds from operations available to common stockholders and Non-controlling OP Unitholders - basic		$	16,013				$	15,194				$	819				5.4	%
Add: Convertible senior common distributions			101					101					-				-	%
Core funds from operations available to common stockholders and Non-controlling OP Unitholders - diluted		$	16,114				$	15,295				$	819				5.4	%
Share and Per Share Data:
Net income available to common stockholders and Non-controlling OP Unitholders - basic and diluted		$	0.03				$	0.04				$	(0.01	)			(25.0)	%
FFO available to common stockholders and Non-controlling OP Unitholders - basic		$	0.33				$	0.34				$	(0.01	)			(2.9)	%
FFO available to common stockholders and Non-controlling OP Unitholders - diluted		$	0.33				$	0.34				$	(0.01	)			(2.9)	%
Core FFO available to common stockholders and Non-controlling OP Unitholders - basic		$	0.35				$	0.34				$	0.01				2.9	%
Core FFO available to common stockholders and Non-controlling OP Unitholders - diluted		$	0.35				$	0.34				$	0.01				2.9	%
Weighted average shares of common stock and Non-controlling OP Units outstanding - basic			46,259,137					44,646,486					1,612,651				3.6	%
Weighted average shares of common stock and Non-controlling OP Units outstanding - diluted			46,587,696					44,975,890					1,611,806				3.6	%
Cash dividends declared per common share and Non-controlling OP Unit		$	0.30				$	0.30				$	-				-	%
Financial Position
Real estate, before accumulated depreciation		$	1,350,523		(3)		$	1,287,663		(4)		$	62,860				4.9	%
Total assets		$	1,209,993				$	1,160,443				$	49,550				4.3	%
Mortgage notes payable, net, borrowings under revolver, borrowings under term loan, net, borrowings under unsecured term loan, net, and senior unsecured notes, net		$	794,391				$	740,746				$	53,645				7.2	%
Total equity and mezzanine equity		$	347,362				$	353,393				$	(6,031	)			(1.7)	%
Properties owned			143		(3)			141		(4)			2				1.4	%
Square feet owned			17,038,727		(3)			17,255,665		(4)			(216,938	)			(1.3)	%
Square feet leased			98.7	%				98.4	%				0.3	%			0.3	%

(1) Includes a $0.01 million impairment charge recognized on one property during the three months ended June 30, 2025.
(2) Includes a $0.4 million gain on sale, net, from the sale of one property during the three months ended June 30, 2025.
(3) Includes one property classified as held for sale of $3.4 million and 56,000 square feet.
(4) Includes two properties classified as held for sale of $8.1 million and 736,031 square feet, in the aggregate.

Second Quarter Activity:

• Collected 100% of cash rents: Collected 100% of cash rents due during April, May, and June;

• Acquired properties: Purchased two fully-occupied facilities, with an aggregate of 519,093 square feet of rental space, for $79.3 million, at a weighted average cap rate of 8.88%;

• Sold properties: Sold one non-core office property as part of our capital recycling strategy for $5.1 million and completed the sale transaction on one non-core industrial property for $18.5 million;

• Renewed space: Renewed 55,308 square feet with a remaining lease term of 0.8 years at one of our properties;

• Issued common stock under ATM Program: Issued 750,426 shares of common stock under our at-the-market ("ATM") program for net proceeds of $10.4 million;

• Issued Series F Preferred Stock: Issued 2,200 shares of our Series F Preferred Stock for net proceeds of $0.1 million;

• Repaid debt: Repaid $7.2 million in variable rate mortgage debt at an interest rate of SOFR + 2.25%; and

• Paid distributions: Paid monthly cash distributions for the quarter totaling $0.30 per share on our common stock and Non-controlling OP Units, $0.414063 per share on our Series E Preferred Stock, $0.375 per share on our Series F Preferred Stock, $0.375 per share on our Series G Preferred Stock, and $0.2625 per share on our senior common stock.

Second Quarter 2025 Results: Core FFO available to common shareholders and Non-controlling OP Unitholders for the three months ended June 30, 2025 was $16.1 million, a 5.4% increase when compared to the three months ended March 31, 2025, equaling $0.35 per share. Core FFO increased primarily due to higher revenues from year to date acquisitions and a lower net incentive fee, partially offset by an increase in interest expense from higher outstanding variable rate debt and higher general and administrative expenses.

Net income available to common stockholders and Non-controlling OP Unitholders for the three months ended June 30, 2025 was $1.5 million, or $0.03 per share, compared to net income available to common stockholders and Non-controlling OP Unitholders for the three months ended March 31, 2025 of $1.9 million, or $0.04 per share. In the Summary Information table above, we provide a reconciliation of Core FFO to net income (which we believe is the most directly comparable GAAP measure to Core FFO) for the three months ended June 30, 2025 and March 31, 2025, a computation of basic and diluted Core FFO per weighted average share of common stock and Non-controlling OP Unit, and basic and diluted net income per weighted average share of common stock and Non-controlling OP Unit.

Subsequent to the end of the quarter:

• Collected 100% of July cash rents: Collected 100% of cash rents due in July;

• Leased or renewed space: Leased or renewed 143,844 square feet with remaining lease terms ranging from 5.3 to 11.4 years at two of our properties;

• Issued common stock under ATM Program: Issued 50,540 shares of common stock under our ATM program for net proceeds of $0.7 million; and

• Declared distributions: Declared monthly cash distributions for July, August, and September 2025, totaling $0.30 per share on our common stock and Non-controlling OP Units, $0.414063 per share on our Series E Preferred Stock, $0.375 per share on our Series F Preferred Stock, $0.375 per share on our Series G Preferred Stock, and $0.2625 per share on our senior common stock.

Comments from Gladstone Commercial's President, Buzz Cooper: "Our financial results reflect consistent performance and stabilized revenues from our tremendous same store property occupancy, rent collection and growth, accretive real estate investments made during 2024 and 2025, our ability to renew tenants, and our deleveraging. We have continued our capital recycling program, whereby we have sold non-core assets and used the proceeds to de-lever our portfolio, as well as acquire properties in our target growth markets. We have successfully exited two non-core assets thus far in 2025, and we have additional non-core assets we anticipate selling over the next one to two years that we believe will result in capital gains. We will continue to opportunistically sell non-core assets and redeploy the proceeds into stronger target growth markets with a focus on industrial investment opportunities. While we expect to face challenges due to the lingering effects of the pandemic, significant inflation with a corresponding increase in interest rates, and the geo-political and economic issues arising from international wars, we feel strongly about the depth of our tenant credit underwriting. We have collected 100% of the first two quarters' cash rents and 100% of July cash rents. We anticipate our tenants will successfully navigate the current economic climate and will be able to continue operating successfully when economic normalcy returns fully. Despite economic uncertainty, so far during 2025, we renewed or newly leased 266,861 square feet of property with six tenants. We are actively marketing our remaining vacant space and currently anticipate positive outcomes. We expect to continue to have access to the debt and equity markets, as necessary, for added liquidity. We believe our same store rents, which have increased by 2% annually in recent years, should continue to rise as we grow, and we will continue to primarily focus on investing in our target markets, with an emphasis on industrial properties and actively managing our portfolio."

Conference Call: Gladstone Commercial will hold a conference call on Thursday, August 7, 2025, at 8:30 a.m. Eastern Time to discuss its earnings results. Please call (877) 407-9045 to enter the conference call. An operator will monitor the call and set a queue for questions. A conference call replay will be available beginning one hour after the call and will be accessible through August 14, 2025. To hear the replay, please dial (877) 660-6853 and use playback conference number 13754186. The live audio broadcast of the Company's quarterly conference call will also be available on the investors section of our website, www.gladstonecommercial.com.

About Gladstone Commercial: Gladstone Commercial Corporation is a real estate investment trust focused on acquiring, owning, and operating net leased industrial and office properties across the United States. Further information can be found at www.gladstonecommercial.com.

About the Gladstone Companies: Information on the business activities of the Gladstone family of funds can be found at www.gladstonecompanies.com.

Investor Relations: For Investor Relations inquiries related to any of the monthly distribution-paying Gladstone family of funds, please visit www.gladstonecompanies.com.

Non-GAAP Financial Measures:

FFO: The National Association of Real Estate Investment Trusts ("NAREIT") developed FFO as a relative non-GAAP supplemental measure of operating performance of an equity REIT to recognize that income-producing real estate historically has not depreciated on the 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 determined in accordance with GAAP and should not be considered an alternative to net income as an indication of its performance or to cash flow from operations as a measure of liquidity or ability to make distributions. The Company believes that FFO per share provides investors with an additional context for evaluating its financial performance and as a supplemental measure to compare it to other REITs; however, comparisons of its FFO to the FFO of other REITs may not necessarily be meaningful due to potential differences in the application of the NAREIT definition used by such other REITs.

Core FFO: Core FFO is FFO adjusted for certain items that are not indicative of the results provided by the Company's operating portfolio and affect the comparability of the Company's period-over-period performance. These items include the adjustment for acquisition related expenses, gains or losses from early extinguishment of debt and any other non-recurring expense adjustments. Although the Company's calculation of Core FFO differs from NAREIT's definition of FFO and may not be comparable to that of other REITs, the Company believes it is a meaningful supplemental measure of its operating performance. Accordingly, Core FFO should be considered a supplement to net income computed in accordance with GAAP as a measure of our performance.

The Company's presentation of FFO, as defined by NAREIT, or presentation of Core FFO, does not represent cash flows from operating activities determined in accordance with GAAP and should not be considered an alternative to net income as an indication of its performance or to cash flow from operations as a measure of liquidity or ability to make distributions.

The statements in this press release regarding the forecasted stability of Gladstone Commercial's income, its ability, plans or prospects to re-lease its unoccupied properties, and grow its portfolio are "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. These forward-looking statements inherently involve certain risks and uncertainties, although they are based on Gladstone Commercial's current plans that are believed to be reasonable as of the date of this press release. Factors that may cause actual results to differ materially from these forward-looking statementsinclude, but are not limited to, Gladstone Commercial's ability to raise additional capital; availability and terms of capital and financing, both to fund its operations and to refinance its indebtedness as it matures; downturns in the current economic environment; the performance of its tenants; the impact of competition on its efforts to renew existing leases or re-lease space; and significant changes in interest rates.Additional factors that could cause actual results to differ materially from those stated or implied by its forward-looking statements are disclosed under the caption "Risk Factors" of its Form 10-K for the fiscal year ended December 31, 2024, as filed with the SEC on February 18, 2025, and other reports filed with the SEC.Gladstone Commercial cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made.Gladstone Commercial undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

CONTACT:

Gladstone Commercial Corporation
(703) 287-5893

SOURCE: Gladstone Commercial Corporation

View the original press release on ACCESS Newswire

FAQ

What were Gladstone Commercial's (GOOD) Q2 2025 earnings results?

Gladstone reported Core FFO of $16.1 million ($0.35 per share), up 5.4% from Q1. Net income was $1.457 million ($0.03 per share), with total operating revenue of $39.5 million.

How much property did Gladstone Commercial acquire in Q2 2025?

Gladstone acquired two fully-occupied facilities totaling 519,093 square feet for $79.3 million, at a weighted average cap rate of 8.88%.

What is Gladstone Commercial's (GOOD) current dividend payment?

Gladstone maintains a monthly cash distribution that totals $0.30 per share quarterly on common stock and Non-controlling OP Units.

What is Gladstone Commercial's current occupancy rate?

As of Q2 2025, Gladstone's portfolio occupancy rate was 98.7%, an increase from 98.4% in the previous quarter.

How successful was Gladstone's rent collection in Q2 2025?

Gladstone achieved 100% collection of cash rents during April, May, and June 2025, and maintained this performance in July.