Gladstone Commercial Corporation Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Real Estate and Intangible Assets (Tables)

Real Estate and Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2024

Schedule of Components of Investments in Real Estate

The following table sets forth the components of our investments in real estate as of December 31, 2024 and 2023, respectively, excluding real estate held for sale as of December 31, 2024 (dollars in thousands):


	December 31, 2024		December 31, 2023
Real estate:
Land (1)	$	139,743	$	143,442
Building and improvements	1,017,534		1,020,661
Tenant improvements	54,516		57,261
Accumulated depreciation	(319,646)		(299,662)
Real estate, net	$	892,147	$	921,702

(1)This amount includes $2,711 of land value subject to land lease agreements which we may purchase at our option for a nominal fee.

Schedule of Properties Acquired

During the years ended December 31, 2024 and 2023, we acquired seven and five properties, respectively, which are summarized below (dollars in thousands):


Year Ended		Aggregate Square Footage	Weighted Average Lease Term	Aggregate Purchase Price		Aggregate Capitalized Acquisition Costs
December 31, 2024	(1)	316,727	20.8 years	$	27,357	$	570
December 31, 2023	(2)	321,432	19.3 years	$	30,018	$	528

(1)On May 7, 2024, we acquired a five-property, 142,125 square foot portfolio in Warfordsburg, Pennsylvania for $12.0 million. The property is fully leased to one tenant and had 25.1 years of remaining lease term at the time we acquired the property. On August 29, 2024, we acquired a 50,102 square foot property in Midland, Texas for $10.2 million. The property is fully leased to one tenant and had 15.0 years of remaining lease term at the time we acquired the property. On November 15, 2024, we acquired a 124,500 square foot property in St. Clair, Missouri for $5.2 million. The property is fully leased to one tenant and had 20.0 years of remaining lease term at the time we acquired the property.

(2)On April 14, 2023, we acquired a 76,089 square foot property in Riverdale, Illinois for $5.4 million. The property is fully leased to one tenant and had 20.0 years of remaining lease term at the time we acquired the property. On July 10, 2023, we acquired a 7,714 square foot property in Dallas-Fort Worth, Texas for $3.0 million. The property is fully leased to one tenant and had 9.9 years of remaining lease term at the time we acquired the property. On July 28, 2023, we acquired a 100,000 square foot property in Dallas-Fort Worth, Texas for $9.2 million. The property is fully leased to one tenant and had 20.0 years of remaining lease term at the time we acquired the property. On October 12, 2023, we acquired a 69,920 square foot property in Allentown, Pennsylvania for $7.9 million. The property is fully leased to one tenant and had 20.1 years of remaining lease term at the time we acquired the property. On November 3, 2023, we acquired a 67,709 square foot property in Indianapolis, Indiana for $4.6 million. The property is fully leased to one tenant and had 20.1 years of remaining lease term at the time we acquired the property.

Schedule of Fair Value of Acquired Assets and Liabilities Assumed

We determined the fair value of assets acquired and liabilities assumed related to the properties acquired during the years ended December 31, 2024 and 2023, respectively, as follows (dollars in thousands):


	Year ended December 31, 2024			Year ended December 31, 2023
Acquired assets and liabilities	Purchase price			Purchase price
Land	$	2,862		$	4,629
Building	18,919			19,726
Tenant Improvements	613			997
In-place Leases	1,921			1,642
Leasing Costs	2,580			2,733
Customer Relationships	527			684
Above Market Leases	90		(1)	—
Below Market Leases	(155)		(2)	(393)		(2)


Total Purchase Price	$	27,357		$	30,018

(1)This amount includes $90 of loans receivable included in Other assets on the consolidated balance sheets.

(2)This amount includes $155 and $393 of prepaid rent included in Other liabilities on the consolidated balance sheets, respectively.

Schedule of Future Operating Lease Payments from Tenants under Non-Cancelable Leases

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


Year	Tenant Lease Payments
2025	$	121,496
2026	117,748
2027	103,289
2028	90,869
2029	82,912
Thereafter	400,392
	$	916,706

Schedule of Future Sales-Type Lease Payments from Tenants under Non-Cancelable Leases

Future sales-types lease payments from tenants under non-cancelable leases and reasonably certain purchase options, for each of the five succeeding fiscal years and thereafter is as follows (dollars in thousands):


Year	Tenant Lease Payments
2025	$	19,722
2026	—
2027	—
2028	—
2029	—
Thereafter	—
	$	19,722
Difference between undiscounted cash flow and present value	1,086
Sales-type lease receivable	$	18,636

Schedule of Lease Revenue Reconciliation

The table below sets forth the allocation of lease revenue between fixed contractual lease payments and variable lease payments for the years ended December 31, 2024, 2023, and 2022, respectively (dollars in thousands):


	For the year ended December 31,
Lease revenue reconciliation	2024		2023		2022
Fixed lease payments	$	132,272	$	130,551	$	132,032
Variable lease payments	17,116		17,033		16,949
	$	149,388	$	147,584	$	148,981

Schedule of Carrying Value of Intangible Assets, Liabilities and Accumulated Amortization

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


	December 31, 2024				December 31, 2023
	Lease Intangibles		Accumulated Amortization		Lease Intangibles		Accumulated Amortization
In-place leases	$	96,392	$	(64,830)	$	98,615	$	(63,269)
Leasing costs	89,093		(48,963)		84,844		(46,096)
Customer relationships	60,377		(36,962)		63,185		(36,231)
	$	245,862	$	(150,755)	$	246,644	$	(145,596)
	Deferred Rent Receivable/(Liability)		Accumulated (Amortization)/Accretion		Deferred Rent Receivable/(Liability)		Accumulated (Amortization)/Accretion
Above market leases	$	13,718	$	(11,582)	$	13,431	$	(10,675)
Below market leases and deferred revenue	(56,616)		34,620		(59,411)		30,087

Schedule of Weighted Average Amortization Period for Intangible Assets Acquired and Liabilities Assumed

The weighted average amortization periods in years for the intangible assets acquired and liabilities assumed during the years ended December 31, 2024 and 2023, respectively, were as follows:


Intangible Assets & Liabilities	2024	2023
In-place leases	20.9	18.9
Leasing costs	20.9	18.9
Customer relationships	26.9	26.3
Above market leases	25.1	0.0
Below market leases	20.1	20.1
All intangible assets & liabilities	22.3	21.1

Schedule of Estimated Aggregate Amortization Expense

The estimated aggregate amortization expense to be recorded for in-place leases, leasing costs and customer relationships for each of the five succeeding fiscal years and thereafter is as follows, excluding real estate held for sale as of December 31, 2024 (dollars in thousands):


Year	Estimated Amortization Expense of In-Place Leases, Leasing Costs and Customer Relationships
2025	$	15,229
2026	13,546
2027	11,896
2028	9,744
2029	8,976
Thereafter	35,716
	$	95,107

Schedule of Estimated Aggregate Rental Income

The estimated aggregate rental income to be recorded for the amortization of both above and below market leases for each of the five succeeding fiscal years and thereafter is as follows, excluding real estate held for sale as of December 31, 2024 (dollars in thousands):


Year	Net Increase to Rental Income Related to Above and Below Market Leases (1)
2025	$	5,862
2026	3,771
2027	2,479
2028	2,468
2029	2,420
Thereafter	2,761
	$	19,761

(1)Does not include ground lease amortization of $99.