Business Overview
Gladstone Commercial Corp (“Good” or “The Company”) is a real-estate investment trust (REIT) that primarily focuses on acquiring, owning, and managing single tenant and anchored multi-tenant industrial and office properties. The Company also has the capacity to make long-term industrial and commercial mortgage loans to companies of various industries across the United States. Gladstone’s investment portfolio consists of real-estate properties that are leased to tenants with small- to medium-sized unrated businesses and larger rated businesses, occupied by companies controlled by buyout funds, and are purchased from and leased back to businesses that are seeking to raise capital. As of June 30, 2025, Gladstone owned 143 properties totaling 17.0 million square feet, located in 27 states. GOOD IPO’d on the NASDAQ in 2003 under the trading symbol GOOD and is currently headquartered in McLean, Virginia.

Acquisitions are a key component of Gladstone’s business. Management is highly selective in its acquisitions, focusing on candidates with accretive returns that are in targeted growth markets and are accretive to the portfolio. As of 4Q24, GOOD’s total assets were ~$1.2B, increasing approximately 18% since 2017. In 2018, Gladstone began shifting its focus to acquiring industrial assets in attractive growth markets with long-term net leases to credit tenants. As of 1Q25, 65% of the portfolio is based in industrial assets, up from 39% at the end of FY19.

Gladstone is led by an extensively experienced management team with a combined industry experience of over 130 years. Management’s background involves buying, leasing, and owning office and industrial real estate, as well as a vast knowledge of lending and investing in middle market and larger operating companies. At the helm is founder and CEO David Gladstone who has extensive experience including commercial lending, investing, and buyout scenarios, and Buzz Cooper who has been with the Company for over 20 years and whose experience includes asset and property acquisitions, buying loans from RTC and making real estate backed loans. Market Strategy Gladstone has a market strategy driven by a highly diversified portfolio, stable income streams, selective underwriting, predictable cash flows from quality assets, and matching long-term leases with long-term fixed rate debt. These elements are crucial to GOOD’s investment philosophy and have allowed the Company to maintain a stable portfolio and strong balance sheet, which positions GOOD to continue making strategic acquisitions.
Highly Diversified Portfolio:
Gladstone prioritizes tenants that are diversified by geography, industry, property type, and by size, ranging from small private companies to large publicly traded corporations. These larger public tenants include General Motors (NYSE: GM), Automatic Data Processing, Inc. (NasdaqGS: ADP), and T-Mobile US, Inc. (NasdaqGS: TMUS). Midsize tenants occupying properties ranging from 30- 150K SF (office) and 75-500K SF (industrial) are the portfolio’s primary focus. GOOD’s tenants represent 20 different industries such as automotive, telecommunications, diversified services as well as building and real estate, which make up 16%, 9%, 11%, and 9% of the portfolio, respectively. Moreover, the group is geographically diverse, spreading across 27 U.S. states shown in exhibit 3.
This diversity has aided GOOD to maintain stability and mitigate risks.

Stable Income Streams:
The Company targets growth markets across the U.S. to accumulate assets in specific markets to create valuable portfolios. This strategy emphasizes submarkets with strong economic components, including population growth, a diverse industry base, constrained supply, and high barriers to entry. These promising growth markets present GOOD with a stable income stream that strengthens the portfolio.
Selective Underwriting:
Gladstone analyzes potential acquisitions by considering potential tenant strength based off financial statements, capital structures, credit ratings, management experience, industry fundamentals, and their ability to withstand downturns, as well as assessing markets poised for growth, asset quality, and focused transactions. This is a proven strategy that has led to consistently strong growth. As a result, GOOD’s occupancy is now at 98.7% and has never fallen below 95% since IPO in 2003.
Predictable Cash from Quality Assets:
The portfolio contains quality assets with flexible configurations that are critical to their tenants’ operations. Gladstone targets net leases with 7+ years remaining once acquired. These properties include single tenant and anchored multi-tenant office and industrial properties. Industrial properties have progressively become the management’s priority and now make up 65% of the portfolio. Historically, GOOD acquires triple net (NNN) leases, which requires tenants to pay rent, plus all of the taxes, property insurance and maintenance/repair costs. The advantages of triple net leases include consistent cash flows with predictable returns and higher yields than comparable assets. Matching Long-term Leases with Long-term Fixed Rate Debt: Gladstone mitigates the risk against the possibility of both another recession and increasing interest rates by matching long-term leases with long-term fixed debt. From this, management has focused on deleveraging and refinancing debt at lower rates. Net debt as a percentage of gross assets was 44.9% in 4Q24, decreasing 1,310bps since 2014. There are significant opportunities to create savings through refinancing debt. The proceeds from refinancing debt help fuel GOOD’s acquisition pipeline.

Industry Overview
U.S. equity REITs experienced reduction in funds from operations (FFO) as a result of the Covid-19 pandemic. However, REITs quickly rebounded and even surpassed pre-pandemic levels. This plays into the fact that REITs historically outperform private real estate and the overall market during and after recessions, shown in exhibit 5. Companies across all industries have instituted return-to-work policies after a movement to work from home in 2020, which will increase broad occupancy rates going forward and thus lead to stronger leasing and operational performance for REITs going forward.

As of 4Q24, the most recent quarter with data, occupancy rates in the industrial sector are the highest amongst all industries at ~94.0%. Despite a plateau in starts and sales due to higher rates and economic uncertainty, industrial occupancy has persisted, and long-term demand remains positive. Comparatively, office space development has declined and there is a record high of office properties being demolished, redeveloped, or converted. The pivot to industrials properties bodes well for GOOD going forward as the Company continues to transition its portfolio to a higher concentration in industrial properties.

Risks
As with any investment, there are certain risks associated with GOODs operations as well as with the surrounding economic and regulatory environments common to the real estate industry. Competition – GOOD operates in a highly competitive industry with low barriers to entry. The Company competes with other REITs and lenders, some of whom have greater access to financial resources. Should GOOD lose out on quality properties in potential growth markets to its
competitors, its operations and ability to grow its portfolio are at risk.
Interest Rates – High interest rates have historically impacted the value of real estate. Considering REITs are significantly sensitive to volatile movements in interest rates as a result of their leverage, GOOD could see a reduction in the value of its assets as well as a rise in the cost of debt should rates remain volatile.
Tenants – Weakening economic conditions could cause GOOD’s tenants to be unable to meet lease obligations. Any failure to meet these obligations would result in a significant impact on GOOD’s operations.
Geography – The locations of GOOD’s geographic markets pose environmental and economic risks. Immobile hard assets are subject to environmental disasters such as forest fires, tornadoes, and earthquakes which could damage the properties.

VALUATION SUMMARY
We use a combination of comp analysis, reNAV per share analysis, and a Perpetual Growth Model based on the most recent FFO Payout Ratio to frame our valuation of GOOD. When we average these valuation methods it returns a valuation range of $14.84 to $16.86 with a mid-point of $15.84.

Finally, we look at a perpetual growth model to account for the recent reduction in dividends. Even when we apply the LTM reduced FFO payout ratio of 90% to our forward estimated FY26 FFO we still expect a payout per share of at least $1.32 which when used in a perpetual growth model returns a valuation range of $14.61 to $18.27 with a mid-point of $16.44. This conservative valuation approach still results in a premium to current price of 11.9% to 39.9% with a mid-point of 25.9%.

IMPORTANT DISCLOSURES AND DISCLAIMER
(a) The research analyst and/or a member of the analyst’s household do not have a financial interest in the debt or equity securities of the subject company.
(b) The research analyst responsible for the preparation of this report has not received compensation that is based upon Stonegate’s investment banking revenues.
(c) Stonegate or any affiliate have not managed or co-managed a public offering of securities for the subject company in the last twelve months, received investment banking compensation from the subject company in the last 12 months, nor expects or receive or intends or seek compensation for investment banking services from the subject company in the next three months.
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Regulation Analyst Certification:
I, Dave Storms, CFA, hereby certify that all views expressed in this report accurately reflect my personal views about the subject company or companies and its or their securities. I also certify that no part of my compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in this report.

For Additional Information Contact:
Stonegate Capital Partners, Inc.
Dave Storms, CFA
Dave@stonegateinc.com
214-987-4121

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