Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the notes thereto contained elsewhere in this Form 10-K.
General
We are an externally-advised REIT that was incorporated under the General Corporation Law of the State of Maryland on February 14, 2003. We focus on acquiring, owning, and managing primarily industrial and office properties. 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
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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 20 years and built-in 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 private equity funds, real estate brokers and other third parties to locate properties for potential acquisition or to provide mortgage financing in an effort to build our portfolio. We target secondary growth markets that possess favorable economic growth trends, diversified industries, and growing population and employment.
All references to annualized generally accepted accounting principles (“GAAP”) rent are rents that each tenant pays in accordance with the terms of its respective lease reported evenly over the non-cancelable term of the lease.
As of February 18, 2026:
• we owned 151 properties totaling 17.7 million square feet of rentable space, located in 27 states;
• our occupancy rate was 99.1%;
• the weighted average remaining term of our mortgage debt was 2.5 years and the weighted average interest rate was 4.21%;
• the weighted average remaining term of our senior unsecured notes was 4.4 years, and the weighted average interest rate was 6.22%; and
• the average remaining lease term of the portfolio was 7.3 years.
Business Environment
The business environment stabilized late in 2025 as interest rate volatility eased. After holding its benchmark rate steady for much of the year, the Federal Reserve implemented a 25 basis point cut in each of September, October, and December, lowering the federal funds target range in aggregate by 75 basis points to 3.50% to 3.75% by year-end. Subsequent to year end, the Federal Reserve held rates unchanged. Lower short-term rates improved sentiment in commercial real estate late in the year, though financing conditions remained selective and transaction activity limited. Liquidity showed modest improvement in the fourth quarter of 2025, but pricing gaps persisted and activity varied by property type. We expect conditions to remain generally consistent with those experienced in the fourth quarter of 2025, with interest rates, access to debt capital, and transaction activity remaining key factors.
According to Cushman & Wakefield plc (“Cushman”), industrial demand strengthened through the fourth quarter of 2025, marking a second consecutive quarter with net absorption exceeding 50 million square feet. Fourth quarter of 2025 net absorption totaled 54.5 million square feet, representing a 29% increase year over year and contributing to total 2025 absorption of 176.8 million square feet, a 16.3% increase compared to the prior year. Nationwide industrial vacancy remained stable at 7.1% for the third consecutive quarter, signaling that demand continued to catch up with a moderating supply pipeline.
National industrial rent growth slowed to 1.5% year over year in the fourth quarter of 2025, the lowest growth rate since early 2020. While rent growth moderated, approximately 40% of U.S. markets continued to report positive year over year rent growth. According to Cushman, new construction deliveries totaled approximately 280 million square feet in 2025, the lowest annual level in eight years, reflecting reduced speculative development activity and a greater share of build to suit projects, which may support vacancy stabilization and rental growth over time.
We collected 100% of all outstanding base rent for calendar year 2025. We believe this reflects the strength of our credit underwriting and ongoing asset management. Our tenant base remains diversified, with limited exposure to tenants in the retail, hospitality, airlines, and oil and gas industries. As of December 31, 2025, our 151 properties were located across 27 states, which we believe helps limit exposure to regional economic, regulatory, or weather-related risks in any one geographic market or area. While we received rent modification requests from certain of our tenants in the past, and it is possible we may receive additional requests in the future, occupancy increased to 99.1% at December 31, 2025.
During 2025, we continued to strengthen our balance sheet and liquidity position. In October 2025, we amended, extended, and upsized our Credit Facility from $525.0 million to $600.0 million, with an option to further increase the facility to $850.0 million. Further, in December 2025, our Operating Partnership issued $85.0 million in a private placement of the 5.99% 2030 Notes. We believe we currently have adequate liquidity in the near term, and we believe that our cash on hand combined with the availability on our Credit Facility is sufficient to cover all near-term debt obligations and operating expenses and to continue our industrial property focused growth strategy. As of December 31, 2025, we had $73.6 million in available liquidity via our revolving credit facility and cash on hand and were in compliance with all of our debt covenants.
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We completed $207.9 million of industrial acquisitions during the year ended 2025, consisting of ten facilities totaling approximately 1.6 million square feet, with a weighted average capitalization rate of 8.88% and a weighted average lease term of 15.9 years at acquisition. We also renewed or extended approximately 1.2 million square feet of leases during the year ended 2025, and sold two properties.
Other Business Environment Considerations
Broader economic and geopolitical uncertainty due to recent world events and tariffs continues to influence tenant decision making, particularly for industrial users evaluating supply chain resiliency and domestic production needs. While shifts toward onshoring and advanced manufacturing may support long term industrial demand, these decisions typically require extended planning and capital investment and may take time to translate into leasing activity. These uncertain times create both risks and opportunities for us and our tenants, and we believe we are well-capitalized and positioned to take advantage. The environmental landscape remains unpredictable due to the increase in intensity of weather patterns, including hurricanes. We continue to monitor our properties and have not seen any significant impact to our properties in Florida, Georgia, North Carolina, South Carolina, Tennessee, and Texas from the recent hurricane season.
Operationally, we remain focused on maintaining high occupancy through lease renewals and releasing activity, managing upcoming lease expirations, and addressing upcoming debt maturities. At December 31, 2025, we had four partially vacant buildings and no fully vacant buildings. We continue to actively market the limited remaining vacant space and monitor tenant credit performance across the portfolio. We believe our lease expiration schedule for 2026 is manageable as it equates to 11.8% of annual lease revenue at December 31, 2025.
Our ability to make new investments depends on our access to capital and financing markets. While lending standards remain selective, we believe the Company maintains access to multiple sources of capital, including long-term unsecured notes in the private placement market, long-term mortgage loans secured by properties, bank facilities, and borrowings under our Credit Facility. We continue to evaluate financing options and capital allocation decisions with a focus on maintaining balance sheet flexibility and a conservative liquidity profile.
Recent Developments
Sale Activity
During the year ended December 31, 2025, we continued to execute our capital recycling program, whereby we sold properties and redeployed proceeds to either fund property acquisitions in our target secondary growth markets, or repay outstanding debt. We expect to continue to execute our capital recycling plan and sell properties as reasonable disposition opportunities become available. During the year ended December 31, 2025, we sold two properties, located in Hickory, North Carolina and Oklahoma City, Oklahoma, which are summarized in the table below (dollars in thousands):
Aggregate Square Footage Sold
Aggregate Sales Price
Aggregate Sales Costs
Aggregate Impairment Charge for the Twelve Months Ended December 31, 2025
Aggregate Gain on Sale of Real Estate, net
On April 30, 2025, we completed the transaction to sell our 676,031 square foot property in Tifton, Georgia for $18.5 million, incurring $0.3 million in closing costs, which are included in other expense in the consolidated statements of operations and comprehensive income for the year ended December 31, 2025. During the year ended December 31, 2024, we recorded a sales-type lease receivable on this property and derecognized the carrying value of this property, recognizing a $3.9 million selling profit from sales-type lease, net, that was included in the gain on sale of real estate, net, in the consolidated statement of operations.
On January 12, 2026, we sold a portion of a land parcel at one of our Ocala, Florida properties for $2.0 million. We realized a $1.8 million gain on sale, net.
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Acquisition Activity
During the year ended December 31, 2025, we acquired 19 properties, which are summarized below (dollars in thousands):
Aggregate Square Footage
Weighted Average Remaining Lease Term at Time of Acquisition
Aggregate Purchase Price
Aggregate Capitalized Acquisition Expenses
Aggregate Annualized GAAP Fixed Lease Payments
15.9 years
Leasing Activity
During the year ended December 31, 2025, we executed 16 lease extensions and/or modifications, which are summarized below (dollars in thousands):
Aggregate Square Footage
Weighted Average Remaining Lease Term
Aggregate Annualized GAAP Fixed Lease Payments
Aggregate Tenant Improvement
Aggregate Leasing Commissions
7.6 years
(1) Weighted average remaining lease term is weighted according to the annualized GAAP rent earned by each lease. Our leases have remaining terms ranging from 0.7 years to 11.7 years.
During the year ended December 31, 2025, we had one lease termination, which is summarized below (dollars in thousands):
Aggregate Square Footage Reduced
Aggregate Accelerated Rent
Aggregate Accelerated Rent Recognized through December 31, 2025
Financing Activity
During the year ended December 31, 2025, we repaid two mortgages, collateralized by two properties, which are summarized below (dollars in thousands):
Aggregate Variable Rate Debt Repaid
Weighted Average Interest Rate on Variable Rate Debt Repaid
SOFR +
Aggregate Fixed Rate Debt Repaid
Weighted Average Interest Rate on Fixed Rate Debt Repaid
On May 30, 2025, the Operating Partnership entered into a Term Loan Agreement with KeyBank in connection with the $20.0 million Term Loan D. Term Loan D was unsecured and had a maturity date of May 30, 2027 and a SOFR spread ranging from 155 to 200 basis points throughout the life of the loan. The proceeds from Term Loan D were used to pay down the Revolver. As discussed below, we repaid the full principal balance of Term Loan D in connection with the Credit Facility amendment that occurred on October 10, 2025.
On September 18, 2025, we amended our Credit Facility, increasing our Revolver from $125.0 million to $155.0 million. We incurred fees of approximately $0.5 million in connection with the increase to our Credit Facility. The increased credit availability was used, in part, to fund a nine-property portfolio acquisition that closed on September 30, 2025.
On October 10, 2025, we amended, extended, and upsized our Credit Facility, increasing our Revolver from $155.0 million to $200.0 million (and its term to October 2029), decreasing the principal balance of Term Loan A from $160.0 million to $125.0 million (and extending its term to October 2029), increasing the principal balance of Term Loan B from $60.0 million to $143.3 million (and its term to February 2030), decreasing the principal balance of Term Loan C from $150.0 million to $131.7 million, and repaying the full principal balance of our Term Loan D. The SOFR spread increased by 10 basis points,
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ranging from 140 to 210 basis points for the Revolver and 135 to 205 basis points for the Term Loans, depending on our leverage. We incurred fees of approximately $4.2 million in connection with amending, extending, and upsizing our Credit Facility. The Credit Facility’s new (and current) bank syndicate is comprised of KeyBank, Fifth Third Bank, The Huntington National Bank, Bank of America, Synovus Bank, PNC Bank, Webster Bank, and S&T Bank.
On December 15, 2025, we and the Operating Partnership entered into a Note Purchase Agreement with the institutional investors named therein, to issue an aggregate $85.0 million of our 2030 Notes. The proceeds were used to repay the Revolver by $80.3 million.
Equity Activity
Common Stock ATM Program
On February 22, 2022, we entered into Amendment No. 1 to the At-the-Market Equity Offering Sales Agreement with sales agents Baird, Goldman Sachs, Stifel, Nicolaus & Company, Incorporated, (“Stifel”) BTIG, LLC, and Fifth Third, dated December 3, 2019 (together, the “Prior Common Stock Sales Agreement”). We terminated the Prior Common Stock Sales Agreement effective February 10, 2023 in connection with the expiration of our registration statement on Form S-3 (File No. 333-236143) (the “2020 Registration Statement”) on February 11, 2023.
On March 3, 2023, we entered into the 2023 Common Stock Sales Agreement, with the Common Stock Sales Agents. In connection with the 2023 Common Stock Sales Agreement, we filed prospectus supplements dated March 3, 2023 and March 7, 2023, to the prospectus dated November 23, 2022, with the SEC, for the offer and sale of an aggregate offering amount of $250.0 million of common stock. During the year ended December 31, 2025, we did not sell any shares of common stock under the 2023 Common Stock Sales Agreement.
On March 26, 2024, we entered into the 2024 Common Stock Sales Agreement, which amended the 2023 Common Stock Sales Agreement and permits shares of common stock to be issued pursuant to the 2024 Common Stock Sales Agreement under the Company’s 2024 Registration Statement, and future registration statements on Form S-3. In connection with the 2024 Common Stock Sales Agreement, we filed a prospectus supplement with the SEC dated March 26, 2024, to the prospectus dated March 21, 2024, for the offer and sale of an aggregate offering amount of $250.0 million of common stock. On August 12, 2025, we entered into Amendment No. 2 (“Amendment No. 2”) to the 2024 Common Stock Sales Agreement which, among other things, (i) removed Baird as a Common Stock Sales Agent and (ii) added Huntington Securities, Inc. (“Huntington”) as a Common Stock Sales Agent. After giving effect to Amendment No. 2, the Common Stock Sales Agents are BofA, Goldman Sachs, KeyBanc, Fifth Third, and Huntington. In connection with Amendment No. 2, we filed a prospectus supplement with the SEC dated August 12, 2025, which updates and supplements the prospectus supplement dated March 26, 2024, for the offer and sale of an aggregate offering amount of $250.0 million of common stock under the 2024 Registration Statement. During the year ended December 31, 2025, we sold 4,412,814 shares of common stock, raising approximately $61.0 million in net proceeds under the 2024 Common Stock Sales Agreement, as amended.
Series E Preferred ATM Program
We previously had an At-the-Market Equity Offering Sales Agreement (the “Series E Preferred Stock Sales Agreement”) with sales agents Baird, Goldman Sachs, Stifel, Fifth Third, and U.S. Bancorp Investments, Inc., pursuant to which we could, from time to time, offer to sell shares of our Series E Preferred Stock, in an aggregate offering price of up to $100.0 million (the “Series E Preferred ATM Program”). We did not sell any shares of our Series E Preferred Stock pursuant to the Series E Preferred Stock Sales Agreement during the year ended December 31, 2025, as we terminated the Series E Preferred Stock Sales Agreement effective February 10, 2023 in connection with the expiration of the 2020 Registration Statement on February 11, 2023.
Universal Shelf Registration Statement
On January 29, 2020, we filed the 2020 Registration Statement. The 2020 Registration Statement was declared effective on February 11, 2020 and was in addition to the 2019 Registration Statement. The 2020 Registration Statement allowed us to issue up to an additional $800.0 million of securities. Of the $800.0 million of available capacity under our 2020 Registration Statement, approximately $636.5 million was reserved for the sale of Series F Preferred Stock. The 2020 Registration Statement expired on February 11, 2023.
On November 23, 2022, we filed the 2022 Registration Statement. There was no limit on the aggregate amount of the securities that we could offer pursuant to the 2022 Registration Statement.
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On March 13, 2024, we filed the 2024 Registration Statement, which was declared effective on March 21, 2024. The 2024 Registration Statement allows us to issue up to $1.3 billion of securities and replaced the 2022 Registration Statement.
Preferred Series F Continuous Offering
On February 20, 2020, we filed with the Maryland Department of Assessments and Taxation Articles Supplementary (i) setting forth the rights, preferences and terms of the Series F Preferred Stock and (ii) reclassifying and designating 26,000,000 shares of the Company’s authorized and unissued shares of common stock as shares of Series F Preferred Stock. The reclassification decreased the number of shares classified as common stock from 86,290,000 shares immediately prior to the reclassification to 60,290,000 shares immediately after the reclassification. We sold 15,700 shares of our Series F Preferred Stock, raising $0.4 million in net proceeds, pursuant to the 2024 Registration Statement, during the year ended December 31, 2025.
The primary offering of our Series F Preferred Stock terminated according to its terms on June 1, 2025. We expensed $0.3 million in prepaid offering costs due to the termination, which was included in general and administrative expenses in the condensed consolidated statements of operations.
Amendments to Operating Partnership Agreement
In connection with the authorization of the Series F Preferred Stock in February of 2020, the Operating Partnership controlled by the Company through its ownership of GCLP Business Trust II, the general partner of the Operating Partnership, adopted the Second Amendment to its Second Amended and Restated Agreement of Limited Partnership (collectively, the “Amendment”), as amended from time to time, establishing the rights, privileges and preferences of 6.00% Series F Cumulative Redeemable Preferred Units, a newly-designated class of limited partnership interests (the “Series F Preferred Units”). The Amendment provides for the Operating Partnership’s establishment and issuance of an equal number of Series F Preferred Units as are issued shares of Series F Preferred Stock by the Company in connection with the offering upon the Company’s contribution to the Operating Partnership of the net proceeds of the offering. Generally, the Series F Preferred Units provided for under the Amendment have preferences, distribution rights and other provisions substantially equivalent to those of the Series F Preferred Stock.
On June 23, 2021, the Operating Partnership adopted the Third Amendment to its Second Amended and Restated Agreement of Limited Partnership, including Exhibit SGP thereto (collectively, the “Third Amendment”), establishing the rights, privileges, and preferences of 6.00% Series G Cumulative Redeemable Preferred Units, a newly-designated class of limited partnership interests (the “Series G Term Preferred Units”). The Third Amendment provides for the Operating Partnership’s establishment and issuance of an equal number of Series G Term Preferred Units as are issued shares of Series G Preferred Stock by the Company in connection with the offering of Series G Preferred Stock upon the Company’s contribution to the Operating Partnership of the net proceeds of the offering of Series G Preferred Stock. Generally, the Series G Term Preferred Units provided for under the Third Amendment have preferences, distribution rights, and other provisions substantially equivalent to those of the Series G Preferred Stock.
On August 5, 2021, the Operating Partnership adopted the Fourth Amendment to its Second Amended and Restated Agreement of Limited Partnership, including Exhibit SGP thereto, to remove all references to the 7.00% Series D Cumulative Redeemable Preferred Units of the Partnership and update the rights, privileges, and preferences accordingly.
Amendments to the Advisory Agreement
On January 10, 2023, we amended and restated the Sixth Amended Advisory Agreement by entering into the Seventh Amended and Restated Investment Advisory Agreement between the Company and the Adviser (the “Seventh Amended Advisory Agreement”), as approved unanimously by our Board of Directors, including specifically, our independent directors. The Seventh Amended Advisory Agreement contractually eliminated the payment of the incentive fee for the quarters ended March 31, 2023 and June 30, 2023. The calculation of the other fees remained unchanged.
On July 11, 2023, the Company then entered into the Eighth Amended Advisory Agreement, as approved unanimously by our Board of Directors, including specifically, our independent directors. The Eighth Amended Advisory Agreement contractually eliminated the payment of the incentive fee for the quarters ended September 30, 2023 and December 31, 2023. In addition, the Eighth Amended Advisory Agreement also clarified that for any future quarter whereby an incentive fee would exceed by greater than 15% of the average quarterly incentive fee paid, the measurement would be versus the last four quarters where an incentive fee was actually paid. The calculation of the other fees remained unchanged.
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For the years ended December 31, 2023, the contractually eliminated incentive fee would have been $4.6 million.
Non-controlling Interests in Operating Partnership
As of December 31, 2025 and 2024, we owned approximately 99.9% and 99.9%, respectively, of the outstanding OP Units. During the year ended December 31, 2024, we redeemed 271,169 OP units for an equivalent amount of common stock.
The Operating Partnership is required to make distributions on each OP Unit in the same amount as those paid on each share of the Company’s common stock, with the distributions on the OP Units held by the Company being utilized to make distributions to the Company’s common stockholders.
As of December 31, 2025 and 2024, there were 39,474 and 39,474 outstanding OP Units held by Non-controlling OP Unitholders, respectively.
Our Adviser and Administrator
The Adviser is led by a management team with extensive experience purchasing real estate and originating mortgage loans. Our Adviser and Administrator are controlled by Mr. 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. Mr. Cooper, our president, 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, and co-general counsels and co-secretaries (one of whom also serves as our Administrator’s president, co-general counsel, and co-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 and Gladstone Investment, both publicly-traded business development companies, Gladstone Land, a publicly-traded REIT that primarily invests in farmland, and Gladstone Alternative, a non-diversified, closed-end management investment company that operates as an “interval fund” that is also our affiliate. With the exception of Mr. Gerson, our chief financial officer, Jay Beckhorn, our treasurer, and Mr. Cooper, our president, all of our executive officers and all of our directors serve as either directors or executive officers, or both, of Gladstone Capital, Gladstone Investment, and Gladstone Alternative. In addition, with the exception of Messrs. Cooper and Gerson, all of our executive officers and all of our directors, serve as either directors or executive officers, or both, of Gladstone Land. Messrs. Cooper and Gerson generally spend all of their time focused on the Company, and do not put forth any material efforts in assisting affiliated companies. In the future, our Adviser may provide investment advisory services to other companies, both public and private.
Advisory and Administration Agreements
Many of the services performed by our Adviser and Administrator in managing our day-to-day activities are summarized below. This summary is provided to illustrate the material functions which our Adviser and Administrator perform for us pursuant to the terms of the Advisory Agreement with our Advisor and an administration agreement with our Administrator (the “Administration Agreement”).
Advisory Agreement
Under the terms of the Eighth Amended Advisory Agreement, we continue to be 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 some or all of such fees on to our tenants and borrowers). Our entrance into the Advisory Agreement and each amendment thereto (including the Eighth Amended Advisory Agreement) has been approved unanimously by our Board of Directors. Our Board of Directors reviews and considers renewing the agreement with our Adviser annually, typically during the month of July. During its July 2025 meeting, our Board of Directors reviewed and renewed the Advisory Agreement and Administration Agreement for an additional year, through August 31, 2026.
Base Management Fee
On July 14, 2020, the Company entered into the Sixth Amended Advisory Agreement, which replaced the previous calculation of the Base Management Fee. Under the Sixth Amended Advisory Agreement, the Base Management Fee is payable quarterly
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in arrears and shall be 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 agreement as the current gross value of the Company’s 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 remained unchanged. The revised Base Management Fee calculation began with the fee calculations for the quarter ended September 30, 2020.
On January 10, 2023, we amended and restated the Sixth Amended Advisory Agreement, by entering into the Seventh Amended Advisory Agreement, which was approved unanimously by our Board of Directors, including specifically, our independent directors. The Seventh Amended Advisory Agreement contractually eliminated the payment of the incentive fee, as applicable, for the quarters ended March 31, 2023 and June 30, 2023. The calculation of the other fees remained unchanged.
On July 11, 2023, we then entered into the Eighth Amended Advisory Agreement, as approved unanimously by our Board of Directors, including specifically, our independent directors. The Eighth Amended Advisory Agreement contractually eliminated the payment of the incentive fee for the quarters ended September 30, 2023 and December 31, 2023. In addition, the Eighth Amended Advisory Agreement also clarified that for any future quarter whereby an incentive fee would exceed by greater than 15% of the average quarterly incentive fee paid, the measurement would be versus the last four quarters where an incentive fee was actually paid. The calculation of the other fees remained unchanged.
Incentive Fee
Pursuant to the Advisory Agreement, the calculation of the incentive fee rewards the Adviser in circumstances where our quarterly Core FFO (defined at the end of this paragraph), before giving effect to any incentive fee, or pre-incentive fee Core FFO, exceeds 2.0% quarterly, or 8.0% annualized, of adjusted total equity (after giving effect to the base management fee but before giving effect to the incentive fee). We refer to this as the new hurdle rate. The Adviser will receive 15.0% of the amount of our pre-incentive fee Core FFO that exceeds the new hurdle rate. However, in no event shall the incentive fee for a particular quarter exceed by 15.0% (the cap) the average quarterly incentive fee paid by us for the previous four quarters (excluding quarters for which no incentive fee was paid). Core FFO (as defined in the Advisory Agreement) is GAAP net income (loss) available (attributable) to common stockholders, excluding the incentive fee, depreciation and amortization, any realized and unrealized gains, losses or other non-cash items recorded in net income (loss) available (attributable) to common stockholders for the period, and one-time events pursuant to changes in GAAP.
Capital Gain Fee
Under the Advisory Agreement, we will pay to the Adviser a capital gains-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 fee payable for such time period shall equal 15.0% of such amount. No capital fee was recognized during the years ended December 31, 2025, 2024, and 2023.
Termination Fee
The Advisory Agreement includes a termination fee clause whereby, in the event of our termination of the agreement without cause (with 120 days’ prior written notice and the vote of at least two-thirds of our independent directors), a termination fee would be payable to the Adviser equal to two times the sum of the average annual base management fee and incentive fee earned by the Adviser during the 24-month period prior to such termination. A termination fee is also payable if the Adviser terminates the Advisory Agreement after the Company has defaulted and applicable cure periods have expired. The Advisory Agreement may also be terminated for cause by us (with 30 days’ prior written notice and the vote of at least two-thirds of our independent directors), with no termination fee payable. Cause is defined in the Advisory Agreement to include if the Adviser breaches any material provisions of the agreement, the bankruptcy or of the Adviser, of the Adviser and or 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
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compliance officer, chief administrative officer, co-general counsels and co-secretaries (one of whom also serves as our Administrator’s president), and their respective staffs. Our allocable portion of the Administrator’s expenses are generally derived by multiplying our Administrator’s total expenses by the approximate percentage of time the Administrator’s employees perform services for us in relation to their time spent performing services for all companies serviced by our Administrator under contractual agreements. We believe that the methodology of allocating the Administrator’s total expenses by approximate percentage of time services were performed among all companies serviced by our Administrator more closely approximates fees paid to actual services performed.
Critical Accounting 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, “Organization, Basis of Presentation and Significant Accounting Policies,” to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, as well as a summary of recently issued accounting pronouncements and their expected impact to our current and future financial statements. There were no material changes to our critical accounting policies during the year ended December 31, 2025.
Allocation of Purchase Price
When we acquire real estate with an existing lease, we allocate the purchase price to (i) the acquired tangible assets and liabilities, consisting of land, building, tenant improvements and long-term debt and (ii) the identified intangible assets and liabilities, consisting of the value of above-market and below-market leases, in-place leases, unamortized lease origination costs, tenant relationships and capital lease obligations. We allocate the fair values in accordance with Accounting Standard Codification 360, Property Plant and Equipment. All expenses related to the acquisition are capitalized and allocated among the identified assets.
Our Adviser estimates value using methods similar to those used by independent appraisers (e.g., discounted cash flow analysis). Factors considered by management in its analysis include an estimate of carrying costs during hypothetical expected lease-up periods, considering current market rental rates and costs to execute similar leases. Our Adviser also considers information obtained about each property as a result of our pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of the tangible and intangible assets and liabilities acquired. In estimating carrying costs, management also includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at market rates during the hypothetical expected lease-up periods, which primarily range from nine to 18 months, depending on specific local cap rates and discount rates. Our Adviser also estimates costs to execute similar leases, including leasing commissions, legal and other related expenses to the extent that such costs are not already incurred in connection with a new lease origination as part of the transaction. Our Adviser also considers the nature and extent of our existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and management’s expectations of lease renewals (including those existing under the terms of the lease agreement), among other factors. A change in any of the assumptions above, which are very subjective, could have a material impact on our results of operations.
The allocation of the purchase price directly affects the following in our consolidated financial statements:
• the amount of purchase price allocated to the various tangible and intangible assets and liabilities on our balance sheet;
• the amounts allocated to the value of above-market and below-market lease values are amortized to rental income over the remaining non-cancelable terms of the respective leases. The amounts allocated to all other tangible and intangible assets are amortized to depreciation or amortization expense. Thus, depending on the amounts allocated between land and other depreciable assets, changes in the purchase price allocation among our assets could have a material impact on our FFO, a metric which is used by many REIT investors to evaluate our operating performance; and
• the period of time over which tangible and intangible assets are depreciated varies greatly, and thus, changes in the amounts allocated to these assets will have a direct impact on our results of operations. Intangible assets are generally amortized over the respective life of the leases, which normally range from 10 to 15 years. Also, we depreciate our buildings for a period of time up to 39 years, but do not depreciate our land. These differences in timing could have a material impact on our results of operations.
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Real Estate Impairment Evaluation - Held and Used
We periodically review the carrying value of each property to determine if circumstances that indicate impairment in the carrying value of the investment exist or that depreciation periods should be modified. In determining if impairment exists, our Adviser considers such factors as our tenants’ payment histories, the financial condition of our tenants, including calculating the current leverage ratios of tenants, the likelihood of lease renewal, business conditions in the industries in which our tenants operate, whether the fair value of our real estate has decreased and whether our hold period has shortened. If any of the factors above indicate the possibility of impairment, we prepare a projection of the undiscounted future cash flows, without interest charges, of the specific property and determine if the carrying amount of such property is recoverable. In preparing the projection of undiscounted future cash flows, we estimate cap rates, market rental rates, and tenant improvement allowances using information that we obtain from market comparability studies and other comparable sources, and apply the undiscounted cash flows against our expected holding period. If impairment were indicated, the carrying value of the property would be written down to its estimated fair value based on our estimate of the property’s discounted future cash flows using market derived cap rates, discount rates and market rental rates applied our expected hold period. Any material changes to the estimates and assumptions used in this analysis could have a significant impact on our results of operations, as the changes would impact our determination of whether is deemed to have occurred and the amount of that we would recognize.
Using the methodology discussed above, we evaluated our entire portfolio, as of December 31, 2025, for any impairment indicators and performed an impairment analysis on select properties that had an indication of impairment. See Note 4 - Real Estate Dispositions, Held for Sale, and Impairment Charges - Impairment Charges of the accompanying consolidated financial statements.
We will continue to monitor our portfolio for any other indicators of impairment.
Results of Operations
The weighted average yield on our total portfolio, which was 8.5% and 8.6% at December 31, 2025 and 2024, respectively, is calculated by taking the annualized straight-line rents plus operating expense recoveries, reflected as lease revenue on our 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 or other types of existing indebtedness.
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A comparison of our operating results for the year ended December 31, 2025 and 2024 is below (dollars in thousands, except per share amounts):
For the year ended December 31,
$ Change
% Change
Operating revenues
Lease revenue
Total operating revenues
Operating expenses
Depreciation and amortization
Property operating expenses
Base management fee
Incentive fee
Administration fee
General and administrative
Impairment charge
Total operating expense before incentive fee waiver
Incentive fee waiver
Total operating expenses
Other (expense) income
Interest expense
Gain on sale of real estate, net
Gain on debt extinguishment, net
Other income
Total other expense, net
Net income
Distributions attributable to Series E, F, and G preferred stock
Distributions attributable to senior common stock
Gain (loss) on extinguishment of Series F preferred stock
Net income available to common stockholders and Non-controlling OP Unitholders
Net income available to common stockholders and Non-controlling OP Unitholders per weighted average share and unit - basic & diluted
FFO available to common stockholders and Non-controlling OP Unitholders - basic (1)
FFO available to common stockholders and Non-controlling OP Unitholders - diluted (1)
FFO per weighted average share of common stock and Non-controlling OP Unit - basic (1)
FFO per weighted average share of common stock and Non-controlling OP Unit - diluted (1)
(1) Refer to the “Funds from Operations” section below within the Management’s Discussion and Analysis section for the definition of FFO and FFO, as adjusted for comparability.
Same Store Analysis
For the purposes of the following discussion, same store properties are properties we owned as of January 1, 2024, which have not been subsequently vacated or disposed. Acquired and disposed properties are properties which were either acquired, disposed of or classified as held for sale at any point subsequent to December 31, 2023. Properties with vacancy are properties that were fully vacant or had greater than 5% vacancy, based on square footage, at any point subsequent to January 1, 2024.
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Operating Revenues
For the year ended December 31,
(Dollars in Thousands)
Lease Revenues
$ Change
% Change
Same Store Properties
Acquired & Disposed Properties
Properties with Vacancy
Lease revenues consist of rental income and operating expense recoveries earned from our tenants. Lease revenues from same store properties increased for the year ended December 31, 2025, due to an increase in recovery revenue from property operating expenses and an increase in rental rates from leasing activity subsequent to the year ended December 31, 2024, partially offset by a settlement received at one of our properties related to deferred maintenance in the prior period. Lease revenues increased for acquired and disposed of properties for the year ended December 31, 2025, as compared to the year ended December 31, 2024, primarily due to an increase in recovery revenue from property expenses and an increase in rental rates on the 19 properties acquired subsequent to December 31, 2024. Lease revenues decreased for properties with vacancy for the year ended December 31, 2025, mainly due to a loss of rental revenue from increased vacancy, partially offset by an increase in variable lease payments.
Operating Expenses
Depreciation and amortization expense increased for the year ended December 31, 2025, as compared to the year ended December 31, 2024, due to an increase in depreciation and amortization expense on the 19 properties acquired subsequent to December 31, 2024. This was partially offset by the reduced depreciation and amortization expense from the nine property sales during and subsequent to December 31, 2024.
For the year ended December 31,
(Dollars in Thousands)
Property Operating Expenses
$ Change
% Change
Same Store Properties
Acquired & Disposed Properties
Properties with Vacancy
Property operating expenses consist of franchise taxes, management fees, insurance, ground lease payments, property maintenance and repair expenses paid on behalf of tenants at certain of our properties. Property operating expenses increased for same store properties for the year ended December 31, 2025, as compared to the year ended December 31, 2024, as a result of general cost increases due to the inflationary environment and increased repair expenses during the year. The decrease in property operating expenses on acquired and disposed of properties for the year ended December 31, 2025, as compared to the year ended December 31, 2024, is a result of a decrease in property operating expenses in relation to properties held for sale or sold during the year that were fully or partially vacant. The increase in property operating expenses for properties with vacancy for the year ended December 31, 2025, as compared to the year ended December 31, 2024, is a result of general cost increases due to the inflationary environment.
The base management fee paid to the Adviser increased for the year ended December 31, 2025, as compared to the year ended December 31, 2024, due to an increase in gross tangible real estate, the main component of the base management fee calculation under the Eighth Amended Advisory Agreement, from property acquisitions and capital projects. The calculation of the base management fee is described in detail above within “Advisory and Administration Agreements.”
The net incentive fee paid to the Adviser decreased for the year ended December 31, 2025, as compared to the year ended December 31, 2024, due to the Adviser unconditionally waiving a larger portion of the incentive fee during the prior period. The calculation of the incentive fee is described in detail above within “Advisory and Administration Agreements.”
The administration fee paid to the Administrator increased slightly for the year ended December 31, 2025, as compared to the year ended December 31, 2024. The slight increase is a result of our Administrator incurring greater costs that are allocated to
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the Company. The calculation of the administration fee is described in detail above within “ Advisory and Administration Agreements.”
General and administrative expenses increased for the year ended December 31, 2025, as compared to the year ended December 31, 2024, primarily as a result of an increase in professional fee expenses, partially offset by a decrease in travel and advertising expenses.
We recorded an impairment charge during the year ended December 31, 2025 on one property, as we had determined the carrying value of this property was in excess of the fair market value and not recoverable. Accordingly, we impaired this property to fair market value. We recorded an impairment charge on three properties during the year ended December 31, 2024.
Other Income and Expenses
Interest expense increased for the year ended December 31, 2025, as compared to the year ended December 31, 2024. This increase is primarily the result of increased interest costs on variable rate debt, as a result of larger amounts drawn on the Credit Facility, writing off deferred financing fees as part of the credit facility amendment, and new interest expense on the 2029 Notes and 2030 Notes.
The gain on sale of real estate, net, during the year ended December 31, 2025 is a result of the sale of two properties. The gain on sale of real estate, net, during the year ended December 31, 2024 was a result of the sale of seven properties and a selling profit from sales-type leases related to one lease. The gain on debt extinguishment, net, during the year ended December 31, 2024 was recognized in conjunction with two of our sales.
Other income increased during the year ended December 31, 2025, as compared to the year ended December 31, 2024, mainly due to nonrecurring income items that occurred during the year ended December 31, 2025.
Net Income Available to Common Stockholders and Non-controlling OP Unitholders
Net income available to common stockholders and Non-controlling OP Unitholders decreased for the year ended December 31, 2025, as compared to the year ended December 31, 2024, primarily due to the gain on sale, net, from the prior period coupled with an increase in interest expense and depreciation expense in the current period. This was partially offset by an increase in recovery revenue from property expenses, an increase in rental rates from leasing activity, a decrease in the net incentive fee payable to the Adviser, and higher impairment charges in the prior period.
A discussion of the results of operations for the year ended December 31, 2023 is found in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 18, 2025, which is available free of charge on the SEC's website at www.sec.gov and on the investors section of our website at www.GladstoneCommercial.com.
Liquidity and Capital Resources
Overview
Our sources of liquidity include cash flows from operations, cash and cash equivalents, borrowing capacity under our Revolver and through issuance of additional equity securities. Our available liquidity as of December 31, 2025, was $73.6 million, including $10.8 million in cash and cash equivalents and an available borrowing capacity of $62.8 million under our Revolver. Our available borrowing capacity under the Revolver decreased to $60.0 million as of February 18, 2026.
Future Capital Needs
We actively seek conservative investments that we expect are likely to produce income to allow us to pay distributions to our stockholders and Non-controlling OP Unitholders. We intend to use the proceeds received from future equity raised and debt capital borrowed to continue to invest in industrial properties, which is our strategic focus, or to a lessor extent, office real property, 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, bank debt, and long-term private debt, refinance maturing debt and fund our current operating costs. Our long-term liquidity needs include proceeds necessary to grow and maintain our portfolio of investments.
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We believe that our available liquidity is sufficient to fund our distributions to stockholders, pay the debt service costs, and fund our current operating costs in the near term. We also believe we will be able to refinance our mortgage debt, bank debt, and long-term private debt as they mature. 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, is sufficient to fund our long-term liquidity needs.
Equity Capital
The following table summarizes net proceeds raised from our various equity sales during the year ended December 31, 2025 (dollars in thousands, except for share price):
Net Proceeds
Number of Shares Sold
Weighted Average Share Price
Common Stock ATM Program
Series F Preferred Stock Continuous Public Offering (1)
(1) The primary offering of our Series F Preferred Stock terminated according to its terms on June 1, 2025.
As of February 18, 2026, we had the ability to raise up to $1.0 billion of additional equity capital through the sale and issuance of securities that are registered under the 2024 Registration Statement, in one or more future public offerings. We expect to continue to use our 2024 Common Stock Sales Agreement as a source of liquidity in 2026.
Debt Capital
As of December 31, 2025, we had 38 mortgage notes payable in the aggregate principal amount of $251.6 million, collateralized by a total of 44 properties with a remaining weighted average maturity of 2.7 years. The weighted-average interest rate on the mortgage notes payable as of December 31, 2025 was 4.21%.
We continue to see banks and other non-bank lenders willing to issue mortgages for properties comparable to those held in our portfolio on terms that are commercially reasonable. Consequently, we remain focused on obtaining mortgages through insurance companies, regional banks, non-bank lenders and, to a lesser extent, the commercial mortgage backed securities market.
As of December 31, 2025, we had mortgage debt in the aggregate principal amount of $35.4 million payable during 2026 and $95.4 million payable during 2027. The 2026 principal amounts payable include both amortizing principal payments and five balloon principal payments. We anticipate being able to refinance our mortgages that come due during 2026 and 2027 with a combination of new mortgage debt, availability under our Credit Facility, the issuance of long-term unsecured notes in the private placement market, the issuance of additional equity securities under our 2024 Common Stock Sales Agreement, the sale and issuance of other equity securities that are registered under the 2024 Registration Statement, or the sale and issuance of unregistered equity or debt securities. We have successfully repaid $10.3 million of mortgage debt over the past 12 months through property sales or by generating additional availability by adding properties to our unsecured pool under our Credit Facility.
As of December 31, 2025, we also had $75.0 million of the 2029 Notes outstanding and $85.0 million of the 2030 Notes outstanding.
Operating Activities
Net cash provided by operating activities during the year ended December 31, 2025, was $88.2 million, as compared to net cash provided by operating activities of $57.0 million for the year ended December 31, 2024. This change was primarily a result of an increase in operating revenues due to acquisitions and leasing activity, partially offset by an increase in interest expense due to larger amounts drawn on the Credit Facility, the 2029 Notes, and the 2030 Notes. The majority of cash from operating activities is generated from the rental payments and operating expense recoveries 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, interest payments on our unsecured notes, distributions to our
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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 year ended December 31, 2025, was $221.4 million, which primarily consisted of the acquisition of 19 properties, coupled with the capital improvements performed at certain of our properties, partially offset by proceeds from the sale of real estate. Net cash used in investing activities during the year ended December 31, 2024, was $1.7 million, which primarily consisted of the acquisition of seven properties, coupled with the capital improvements performed at certain of our properties, partially offset by proceeds from the sale of real estate.
Financing Activities
Net cash provided by financing activities during the year ended December 31, 2025, was $134.7 million, which primarily consisted of proceeds from our common and preferred equity offerings, mortgage borrowings, net increase in Credit Facility borrowings, and borrowings under unsecured notes, partially offset by the repayment of outstanding mortgage debt, redemptions of Series F Preferred Stock, and distributions paid to our stockholders and Non-controlling OP Unitholders. Net cash used in financing activities during the year ended December 31, 2024, was $56.3 million, which primarily consisted of proceeds from our common and preferred equity offerings, mortgage borrowings, and borrowings under unsecured notes, partially offset by the repayment of outstanding mortgage debt, net decrease in Credit Facility borrowings, and distributions paid to our stockholders and Non-controlling OP Unitholders.
Credit Facility
On August 7, 2013, we procured the Revolver, with KeyBank (serving as a revolving lender, a letter of credit issuer and an administrative agent) for $60.0 million. On October 5, 2015, we added the $25.0 million Term Loan A. On February 11, 2021, we added the $65.0 million Term Loan B. On August 18, 2022, we added the new $140.0 million Term Loan C. The Credit Facility’s bank syndicate was then comprised of KeyBank, Fifth Third Bank, The Huntington National Bank, Bank of America, Synovus Bank, United Bank, First Financial Bank, and S&T Bank.
On September 18, 2025, we amended our Credit Facility, increasing our Revolver from $125.0 million to $155.0 million. We incurred fees of approximately $0.5 million in connection with the increase to our Credit Facility. The increased credit availability was used, in part, to fund a nine-property portfolio acquisition that closed on September 30, 2025.
On October 10, 2025, we amended, extended, and upsized our Credit Facility, increasing our Revolver from $155.0 million to $200.0 million (and its term to October 2029), decreasing the principal balance of Term Loan A from $160.0 million to $125.0 million (and extending its term to October 2029), increasing the principal balance of Term Loan B from $60.0 million to $143.3 million (and its term to February 2030), decreasing the principal balance of Term Loan C from $150.0 million to $131.7 million, and repaying the full principal balance of Term Loan D. The SOFR spread increased by 10 basis points, ranging from 140 to 210 basis points for the Revolver and 135 to 205 basis points for the Term Loans, depending on our leverage. We incurred fees of approximately $4.2 million in connection with amending, extending, and upsizing our Credit Facility. The Credit Facility’s new (and current) bank syndicate is comprised of KeyBank, Fifth Third Bank, The Huntington National Bank, Bank of America, Synovus Bank, PNC Bank, Webster Bank, and S&T Bank.
As of December 31, 2025, there was $437.4 million outstanding under our Credit Facility at a weighted average interest rate of approximately 5.42%, and $2.1 million outstanding letters of credit, at a weighted average interest rate of 1.60%. As of February 18, 2026, the maximum additional amount we could draw under the Credit Facility was $60.0 million. We were in compliance with all covenants under the Credit Facility as of December 31, 2025.
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Contractual Obligations
The following table reflects our material contractual obligations as of December 31, 2025 (dollars 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)
Interest on Debt Obligations (2)
Operating Lease Obligations (3)
Finance Lease Obligations (4)
Purchase Obligations (5)
(1) Debt obligations represent borrowings under our Revolver, which represents $37.4 million of the debt obligation due in 2029, Term Loan A, which represents $125.0 million of the debt obligation due in 2029, Term Loan B, which represents $143.3 million of the debt obligation due in 2030, Term Loan C, which represents $131.7 million of the debt obligation due in 2028, the 2029 Notes, which represents $75.0 million of the debt obligation due in 2029, the 2030 Notes, which represents $85.0 million of the debt obligation due in 2030, and mortgage notes payable that were outstanding as of December 31, 2025. This figure does not include $0.02 million of premiums and (discounts), net, and $5.5 million of deferred financing costs, net, which are reflected in mortgage notes payable, net, borrowings under Term Loan A, Term Loan B, Term Loan C, net, and senior unsecured notes, net, on the consolidated balance sheet.
(2) Interest on debt obligations includes estimated interest on our borrowings under our Revolver, Term Loan A, Term Loan B, Term Loan C, senior unsecured notes, and mortgage notes payable. The balance and interest rate on our Revolver and Term Loan A, Term Loan B, Term Loan C is variable; thus, the interest payment obligation calculated for purposes of this table was based upon rates and balances as of December 31, 2025.
(3) Operating lease obligations represent the ground lease payments due on three of our properties.
(4) Finance lease obligations represent the ground lease payments due on one of our properties.
(5) Purchase obligations consist of tenant and capital improvements at ten of our properties.
Off-Balance Sheet Arrangements
We did not have any material off-balance sheet arrangements as of December 31, 2025.
Funds from Operations
The National Association of Real Estate Investment Trusts (“NAREIT”) developed 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 and holders of Non-controlling interests in the Operating Partnership (“Non-controlling OP Unitholders”) is FFO adjusted to subtract preferred share and Senior Common Stock share distributions. We believe that net income available to common stockholders is the most directly comparable GAAP measure to FFO available to the aggregate of our common stockholders and Non-controlling OP Unitholders.
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 and Non-controlling OP Unitholders divided by the number of weighted average shares of the aggregate of shares of common stock and OP Units held by Non-controlling OP Unitholders outstanding and FFO available to common stockholders and Non-controlling OP Unitholders divided by the number of weighted average shares of the aggregate of shares of common stock and OP Units held by Non-controlling OP Unitholders outstanding on a
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diluted basis, respectively, during a period. 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.
The following table provides a reconciliation of our FFO and FFO as adjusted for comparability for the years ended December 31, 2025 and 2024 to the most directly comparable GAAP measure, net income, and a computation of basic and diluted FFO per weighted average total share:
For the twelve months ended December 31,
(Dollars in Thousands, Except for Per Share Amounts)
Calculation of basic FFO per share of common stock and Non-controlling OP Unit
Net income
Less: Distributions attributable to preferred and senior common stock
Add/Less: Gain (loss) on extinguishment of Series F preferred stock, net
Net income available to common stockholders and Non-controlling OP Unitholders
Adjustments:
Add: Real estate depreciation and amortization
Add: Impairment charge
Less: Gain on sale of real estate, net
Less: Gain on debt extinguishment, net
FFO available to common stockholders and Non-controlling OP Unitholders - basic
Weighted average common shares outstanding - basic
Weighted average Non-controlling OP Units outstanding
Weighted average common shares and Non-controlling OP Units
Basic FFO per weighted average share of common stock and Non-controlling OP Unit
Calculation of diluted FFO per share of common stock and Non-controlling OP Unit
Net income
Less: Distributions attributable to preferred and senior common stock
Add/Less: Gain (loss) on extinguishment of Series F preferred stock, net
Net income available to common stockholders and Non-controlling OP Unitholders
Adjustments:
Add: Real estate depreciation and amortization
Add: Impairment charge
Add: Income impact of assumed conversion of senior common stock
Less: Gain on sale of real estate, net
Less: Gain on debt extinguishment, net
FFO available to common stockholders and Non-controlling OP Unitholders plus assumed conversions
Weighted average common shares outstanding - basic
Weighted average Non-controlling OP Units outstanding
Effect of convertible senior common stock
Weighted average common shares and Non-controlling OP Units outstanding - diluted
Diluted FFO per weighted average share of common stock and Non-controlling OP Unit
Distributions declared per share of common stock and Non-controlling OP Unit
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