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DATE

Feb. 19, 2026 at 8:30 a.m. ET

CALL PARTICIPANTS

  • Chairman and Chief Executive Officer — David Gladstone
  • President — Buzz Cooper
  • Chief Financial Officer — Gary Gerson
  • Chief Investment Officer — Catherine Gerkis

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TAKEAWAYS

  • Industrial portfolio acquisitions -- Acquired over $260,000,000 of industrial assets across 10 facilities totaling 1,600,000 square feet at an average cap rate of 8.88%, with a weighted average lease term of 15.9 years.
  • Industrial concentration -- Increased portfolio industrial concentration to 69% of annualized straight-line rent, up from 63% in 2024, with a near-term target of 70% stated by management.
  • Lease renewals and extensions -- Invested $21,000,000 into renewing or extending 1,200,000 square feet at 18 properties, driving a $2,100,000 net increase in GAAP rent.
  • Dispositions -- Sold two properties (one office, one industrial) and have an agreement to sell an additional industrial property in coming months.
  • Occupancy and rent collection -- Achieved portfolio occupancy of 99.1% and 100% collection of cash-based rents, with an average remaining lease term of 7.3 years.
  • Same-store lease revenue -- Recorded a 4% increase in same-store lease revenue driven by higher recovery revenue and rental rates.
  • Credit facility and private placement -- Amended and upsized syndicated bank credit from $500,000,000 to $600,000,000 and issued $85,000,000 of 5.99% senior unsecured notes due 2030 in a private placement.
  • Q4 operating results -- Total operating revenues of $43,500,000 and operating expenses of $26,400,000, compared to $37,400,000 and $25,000,000 respectively in 2024.
  • Non-GAAP funds from operations (FFO) and core FFO -- Q4 non-GAAP FFO and core FFO were $0.37 per share (up from $0.35 per share in 2024); full-year non-GAAP FFO and core FFO were $1.38 and $1.40 per share (down from $1.41 and $1.42 per share in 2024).
  • Debt profile -- As of year-end, 48% of debt was fixed, 47% was hedged floating rate, and 5% was revolving floating rate; average effective SOFR of 3.87%.
  • ATM equity activity -- Sold 4,400,000 shares of common stock via the ATM program, raising net proceeds of $61,000,000.
  • Liquidity position -- Available liquidity includes $4,000,000 in cash and $60,000,000 on the credit facility.
  • Dividend -- Common stock dividend maintained at $0.30 per share per quarter, $1.20 per year.
  • Acquisition pipeline and cap rates -- Carrying approximately $300,000,000 in potential transactions, with target cap rates in the 7.5%-8.5% range and an average "north of 9%" for recent deals.
  • Lease maturities -- Eight leases due in 2026 (half office, half industrial) representing 8% of straight-line rent; major lease with GM (3% of rent) matures at year-end.
  • Net asset growth -- Net assets increased from $1,100,000,000 to $1,250,000,000 driven by acquisitions and capital expenditures.
  • Termination fee -- Received a $1,000,000 lease termination fee in Q4, with no loss of occupancy as a new tenant immediately took possession.
  • Dividend payout ratio -- Gary Gerson confirmed targeting an approximately 85% core FFO payout ratio, aiming to lower it over time.

SUMMARY

Gladstone Commercial Corporation (GOOD +0.00%) emphasized an accelerated shift toward industrial property concentration, highlighted by material acquisitions and a target of 70% industrial rent allocation. Management outlined an active capital recycling strategy, including office divestitures and deployment of proceeds into industrial assets. Debt optimization was achieved through expansion and extension of credit facilities, as well as a private placement that management stated "allows us to decrease our cost of capital and simplify our balance sheet." The company’s lease maturity schedule was addressed in detail, indicating focused risk management over coming periods. Capital allocation discipline was reaffirmed through confirmation of an 85% core FFO payout ratio target and intent to moderate it.

  • Pipeline size was reported at $300,000,000, with selection criteria described as "discerning," and management stressed preference for stabilizing longer weighted average lease terms through targeted acquisitions.
  • Evidence of rent mark-to-market opportunity was provided by the $2,100,000 increase in GAAP rent from renewals and extensions during portfolio repositioning efforts.
  • The company clarified that its recent $1,000,000 lease termination fee did not negatively impact occupancy rates, as stated by Gary Gerson: "Yes, it was. That was a termination fee. And we had a tenant that came right in after that tenant left. So the building is occupied, same level of occupancy. So there is no loss there. That—yes, that was a one-time fee."
  • Debt strategy relies on using the revolving facility for acquisitions, then executing private placement issuances, with mortgage roll-offs further enhancing unencumbered asset pools; Gary Gerson noted, "those off, we will then put those properties into the unencumbered pool, which will increase our availability."

INDUSTRY GLOSSARY

  • FFO: Funds from operations; a non-GAAP performance metric used by REITs, defined as net income plus depreciation and amortization of real estate assets, excluding gains or losses from property sales and impairment charges.
  • Core FFO: FFO further adjusted to remove certain nonrecurring revenues and expenses, used as an operating performance metric.
  • Cap rate: Capitalization rate; the ratio of annual net operating income from a property to its total purchase price, expressed as a percentage.
  • ATM program: At-the-market equity offering program, allowing shares to be sold incrementally into the secondary market to raise capital.
  • SOFR: Secured Overnight Financing Rate; a benchmark interest rate for dollar-denominated derivatives and loans.
  • Sale-leaseback: A transaction where a property is sold and then leased back to the seller, allowing continued operational use while extracting capital.
  • WALT: Weighted average lease term, representing the average remaining lease duration across the company’s asset portfolio.

Full Conference Call Transcript

Today, we will discuss FFO, which is funds from operations, a non-GAAP accounting term defined as net income, excluding the gains or losses from the sale of real estate and any impairment losses on property, plus depreciation and amortization of real estate assets. We may also discuss core FFO, which is generally FFO adjusted for certain other nonrecurring revenues and expenses. We believe these metrics can be a better indication of our operating results and allow better comparability of our period-over-period performance. Now let us turn the presentation to Buzz Cooper, Gladstone Commercial Corporation’s President.

David Gladstone: Thank you, Catherine, and thank you all for joining today’s call. We are pleased to update you on our results for the year ended 12/31/2025, our current portfolio, and our 2026 outlook. 2025 was a productive year for our portfolio. During the year, we acquired over $260,000,000 of industrial assets across 10 facilities totaling 1,600,000 square feet with a weighted average cap rate of 8.88%. At closing, these properties had a weighted average lease term of 15.9 years. We increased portfolio industrial concentration as a percent of annualized straight-line rent to 69% as of 12/31/2025, as compared to 63% at the same date in 2024.

We invested $21,000,000 in the existing portfolio towards renewing or extending 1,200,000 square feet of leases at 18 of our properties. These leases resulted in a $2,100,000 net increase in GAAP rent. We sold two properties consisting of one office and one industrial property and executed an agreement to sell another industrial property in the coming months. We amended, extended, and upsized our syndicated bank credit from $500,000,000 to $600,000,000 and closed on an $85,000,000 private placement at 5.99% senior unsecured notes due 12/15/2030.

As we have discussed in the past, we remain steadfast in several key focus areas: growing our industrial concentration, adding value in our existing portfolio through renewals, extensions, and strategic capital investments, and disposing of non-core assets and strategically redeploying those proceeds into quality industrial assets. By executing on these focus areas, we expect to achieve increased portfolio value, strong occupancy rates, streamlined rental growth across the portfolio, continue to delever, and decrease the cost of capital.

Our asset management team continues to effectively manage the existing portfolio, as evidenced by 100% collection of cash-based rents in the period and occupancy of 99.1% across the portfolio, average remaining lease term of 7.3 years, and a 4% same-store lease revenue increase compared to 2024. Each of these milestones is a testament to the mission-critical nature of the assets in our portfolio, the quality of tenant credits in our portfolio, and our underwriting capabilities. We are grateful to our lenders for their continued trust and partnership with us. These longstanding relationships are critical to our continued investment in the current portfolio and the addition of mission-critical industrial real estate going forward.

In short, our relationships with our tenants, capital market community, and our financial capacity have allowed us to execute upon our focus areas at a high level. Looking ahead to 2026, we remain focused on evaluating opportunities to acquire higher-quality industrial assets that are mission-critical to tenants and industries and accretive to our long-term strategy. As I mentioned a moment ago, we are working toward our near-term goal of 70% industrial annualized straight-line rent. We will look to achieve this goal and push past it in the coming year. While we do not have a timeline for the disposition of all of our office properties, we are keenly focused on growing the industrial concentration of our portfolio.

At the same time, we will continue to work with our existing tenants to extend leases, capture mark-to-market opportunities, and support tenant growth through targeted expansion, capital improvement initiatives, and build-to-suit opportunities. While we remain aware of the challenging office environment, we will be strategic and intentional in evaluating our specific portfolio, seeking opportune times to dispose of office and non-core industrial as part of our continued capital recycling efforts. With the availability via our increased line of credit, access to the private placement bond market, cash on hand, and the ATM, we are positioned to deploy capital into accretive industrial acquisitions and portfolio improvement. In closing, 2025 was a great year for the company.

The team is focused on continuing their efforts as we head into 2026. I will now turn the call over to Gary Gerson to review our financial results for the quarter and liquidity position. Thank you, Buzz, and good morning, everyone. I will start my remarks regarding our financial results this morning by reviewing our operating results for 2025. All per-share numbers referenced are based on fully diluted weighted average common shares. FFO and core FFO per share available to common stockholders were both $0.37 per share for the quarter. FFO and core FFO available to common stockholders during 2024 were both $0.35, respectively.

FFO and core FFO for the twelve months ended 12/31/2025 were $1.38 and $1.40 per share, respectively. FFO and core FFO for the same period in 2024 were $1.41 and $1.42 per share, respectively. Same-store lease revenue increased by 4% in the twelve months ended 12/31/2025 over the same period in 2024 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 12/31/2024, partially offset by a settlement received at one of our properties related to deferred maintenance in the prior period.

Our fourth quarter results reflect total operating revenues of $43,500,000 with operating expenses of $26,400,000, as compared to operating revenues of $37,400,000 and operating expenses of $25,000,000 for the same period in 2024. Operating revenues were higher in 2025 due to an increased portfolio size, increased recovery revenues, and higher rental rates. Expenses were higher in 2025 versus 2024, mainly due to the higher depreciation from a larger portfolio, partially offset by an impairment charge and crediting back all the incentive fee in 2024. At the end of the quarter, we had one industrial property and a portion of a land parcel held for sale.

During the quarter, we extended and upsized our bank credit facility to $400,000,000 in term loans and a $200,000,000 revolver. The revolving credit facility maturity was extended to October 2029, and the maturity dates for Term Loan A and Term Loan B components were extended until October 2029 and February 2030, respectively. The amended credit facility also provides the company with options to extend the maturity dates of the revolving line of credit and Term Loan C components until October 2030 and February 2029, respectively. The transaction was led by KeyBanc as joint lead arranger and book manager, as well as Bank of America, The Huntington National Bank, and Fifth Third Bank, National Association, as joint lead arrangers.

Synovus Bank and S&T also renewed their commitments. In addition, PNC Bank and Webster Bank both joined as lenders. In Q4, we also issued $85,000,000 of 5.99% senior secured notes due 12/30/2030 in the private placement market. Investors included Nuveen and New York Life. This is our second issuance in this market, which allows us to decrease our cost of capital and simplify our balance sheet. As of today, we have $27,600,000 of loan maturities in 2026. As of the end of the quarter, we had $37,400,000 in revolver borrowings outstanding.

Looking at our debt profile, as of December 31, 48% was fixed, 47% was hedged floating rate, and 5% was floating rate, which is the amount drawn on our revolving credit facility. As of December 31, our effective average SOFR was 3.87%. Our outstanding bank term loans are all hedged to maturity with interest rate swaps. We continue to monitor interest rates closely and update our hedging strategy as needed. During the twelve months ended 12/31/2025, we sold 4,400,000 shares of common stock under our ATM program, raising net proceeds of $61,000,000. We continue to manage our equity activity to ensure that we have sufficient liquidity for upcoming capital requirements and new acquisitions.

Taking in the year as a whole, we increased net assets from $1,100,000,000 to $1,250,000,000, which was the result of the net portfolio acquisitions and revenue-generating portfolio CapEx during the year. As of today, we have approximately $4,000,000 in cash and $60,000,000 of availability under our line of credit. We encourage you to review our quarterly financial supplement posted on our website, which provides more detailed financial and portfolio information for the quarter. Our common stock dividend is $0.30 per share per quarter, or $1.20 per year. And now I will turn the program back to David Gladstone. Thank you, Gary.

That was a good report, and it is a good one from Buzz, and Catherine did her part as well. The team has performed very well overall in a very nice quarter indeed that we have for our shareholders. As you heard today, in summary, during the fourth quarter, we amended and extended our bank credit facility, which is now $600,000,000. We issued $85,000,000 at 5.99% senior unsecured notes in the private placement marketplace. For 2025, we acquired $260,000,000 of properties as we are gradually becoming a fully industrial real estate investment trust, increased our industrial percentage

Catherine Gerkis: and annual straight-line rent to 69%, and here is one you always love to hear, increased occupancy

David Gladstone: to 99.1%. That is, we have got almost 100% of our stuff leased out. Well, Gladstone Commercial Corporation’s team is growing the real estate that we own at a good pace, and the team is doing a great job managing the properties we own, especially during these challenging times. We do not have a lot of industrial property that is somehow related to the Internet or to the M&A that is going on this time, but we certainly hope to hit some of those big numbers that are out there. Our team of strong professionals continues to pursue potential quality properties.

On the list of acquisitions they are reviewing, we have a good strong list of acquisitions that we are looking through. Okay. I am going to stop here and let the operator come in and help us listen to some of the questions that people always ask us.

Operator: Thank you. Ladies and gentlemen, the floor is now open for questions. The first question is coming from David Storms of Stonegate. Please go ahead.

David Gladstone: Thank you for taking my questions. I wanted to start with the occupancy. It looks like the occupancy remained the same, so you did lose a tenant. I was just hoping to get a little more color on what happened. David, nice to talk with you. Relative to the occupancy, we are at an all-time high, if you will, since 2019. We renewed a tenant and have increased our occupancy, and obviously, the portfolio management team has done a great job relative to that. We see continuing maintaining that occupancy. Certainly, there will be some fluctuations as we add property or dispose of property.

Craig Gerald Kucera: Understood. I appreciate that. And then one more. I know you mentioned that you are looking to get the portfolio up to 70% industrial. You do not have a timeline for that. Just curious as to what you are seeing in the transaction environment and if anything has changed now that we have a little more clarity about the income and Fed chair and the potential plans to reduce the Fed’s balance sheet. It is a very competitive market.

David Gladstone: And almost every day, you see somebody else coming into the space of triple net. We play in the middle market, and our value add is underwriting middle market credits. We are not playing in the high range, if you will, both size as well as A-rated credits. So we are working hard at adding good properties, good tenancy, focused upon the quality of the tenant and quality of the real estate, not just going for the highest return. So we are going to be very discerning as it relates to what we are going to put on our books and what we are going to chase.

Craig Gerald Kucera: That is great color. Thank you. I will get back in queue.

David Gladstone: Well, David, if I could, relative just thinking through it on your question, the first question, we did have a tenant with a fee we received that may be answering your question relative to the payment as well as the effect on occupancy at that point, but we did have a fee received.

Craig Gerald Kucera: Understood. Thank you.

David Gladstone: Next question.

Operator: Thank you. Our next question is coming from John James Massocca of B. Riley Securities. Please go ahead.

David Gladstone: Good morning, John. Sorry if I missed this maybe earlier in the call. What is the size of the pipeline today, and I guess as you think about

John James Massocca: maybe cap rates in the pipeline or how cap rates are trending? Where do those stand today? And maybe where do you think they are going to trend over the course of the year?

David Gladstone: Thank you, John. And we are continually looking at somewhere in the neighborhood of $300,000,000 in transactions. Obviously, we would love to do them all. We cannot do them all. We will not do them all. Cap rates generally from where we are competing are at a floor of 7.5%, and certainly, for us, we look between 7.5%–8.5% as realistic. But the competition is great. One of our, again, value-adds, as we always say, is our underwriting capability, plus we are able to purchase all cash, so we are also competitive in the market. It is a little slow coming out of the gate in 2025 as it relates to opportunities, but we do see that picking up currently.

John James Massocca: And maybe kind of cap rate ranges is roughly where you are kind of seeing those today for your target assets?

David Gladstone: Going in 7.5% and up, with an average cap rate north of 9%. Okay. And then in

John James Massocca: of the in-place portfolio, how are you looking at kind of lease maturities over the course of the year? I know you have a relatively sizable one at the very end of the year, but anything else that is kind of noteworthy before then or even maybe in early 2027?

David Gladstone: Sure. Happy to address that. And as mentioned previously, the property management team has done a great job. We have been in contact with every tenancy that is coming due in the next two years. We have eight in 2026. Half are office, half are industrial. Of that, it represents a total of approximately 8% of straight-line rent.

But in our discussions with the tenancy and as we have projected out with some agreements in place relative to waiting, just having a signed document, or their ability within their lease to just automatically have a right to exercise, we are concentrating on two out of those eight because six of them have been, in all honesty, we believe very, very much in the barn. But we have certainly our asset in Austin where GM is the tenant, which represents approximately 3% of our straight-line rent, does lease mature at the end of the year.

The team is in place and has created a plan that we are going to work relative to leasing, of which we have two tours here in the coming week of approximately 50,000 square feet each. But one way or the other, that property will be taken care of. And the other is

Craig Gerald Kucera: an industrial—excuse me—office building of which we do have two tours as well.

David Gladstone: That lease matures in 2026. And two full-building users are touring in the next two weeks. As it relates to 2027, we have 14; again, half are office, half are industrial. Of those, we are very confident that all but three are, for lack of a better word, perhaps not—do not want to say not going to happen—but we do not have the clarity we wish. But again, that only represents 1.2% of the straight-line rent of those maturities. Others again have the right to extend, and we have every confidence they will, and have been in contact with them, but their notice date is not yet upon us—upon them—so they have not given us notice.

And we are diligently working the other small amount of approximately 85,000 square feet in 2027.

John James Massocca: Okay. And then last one for me on the balance sheet. How are you thinking about the need for additional debt capital given some of the activity at quarter end? I mean, does that provide, do you think, sufficient runway for what your kind of target acquisitions are for the year? Or should we be looking for any kind of additional activity in debt markets? And I guess, how would you maybe look to spread that between either term loan debt or additional kind of private placement or even mortgage debt? John, this is Gary.

David Gladstone: Really the way we look at debt right now, our kind of goal is to use our revolving credit facility to acquire properties and then clean up that facility with an issuance

Gary Gerson: in the private placement market. And so that is what we have done in the last two years. That is what we intend to do going forward. As you know, we have a couple of mortgages coming due. And once those—once we pay those off, we will then put those properties into the unencumbered pool, which will increase our availability. So right now our liquidity is about $60,000,000 on the credit facility that we expect to go up over time. Given new properties, we have plenty of room under the facility to grow our availability. So I think right now that is our general look on debt going forward.

David Gladstone: Okay. I appreciate all that color. That is it for me.

John James Massocca: Thank you. Thank you.

David Gladstone: Okay. Next question.

Operator: Thank you. Next question is coming from Craig Gerald Kucera of Loop Capital Markets. Please go ahead.

Craig Gerald Kucera: Hey, good morning, guys. Good morning. So I think last—

Catherine Gerkis: good morning. I think last quarter, you mentioned that you were working on a couple of transactions that

Craig Gerald Kucera: you thought might close in the fourth quarter. Are those still in the mix, or are those transactions you do not think you are going to execute on?

David Gladstone: We have one that we believe we can hopefully get done by the end of this quarter. Still some diligence work to do on that. So yes, some bled over. Did have one fall out. Actually, the seller pulled back on it, I believe. So we are hopeful of one, and a pickup in activity into the second quarter.

Craig Gerald Kucera: Got it. And can you give us a sense of the dollar amount that might close here in the first quarter?

David Gladstone: I would say it is in the range of $10,000,000.

Craig Gerald Kucera: Okay. That is helpful. And you mentioned a fee earlier. I know we had a discussion about this last quarter about some lease termination income or accelerated rent. Was that recognized here in the fourth quarter at about $1,000,000?

Gary Gerson: Yes, it was. That was a termination fee. And we had a tenant that came right in after that tenant left. So the building is occupied, same level of occupancy. So there is no loss there. That—yes, that was a one-time fee.

Craig Gerald Kucera: Got it. I appreciate that. Another for me. I guess just thinking about the incentive waiver

John James Massocca: philosophically, I mean, looking at it, it looks like the board is sort of targeting maybe

Gary Gerson: core FFO payout ratio of something around

Craig Gerald Kucera: you know, 85% plus or minus. Is that how we should think about that? Or, you know, is there any color that you think you can give us on that?

Gary Gerson: I mean, that is reasonable. I think going forward, we would like to lower that going forward, but I think it is a reasonable assumption, yes.

Craig Gerald Kucera: Okay. That is it for me. Thank you. Appreciate it.

David Gladstone: Thank you. We have another question.

Operator: Our next question is a follow-up from David Storms of Stonegate. Please go ahead. Mr. Storms, your line is live.

Craig Gerald Kucera: Apologies. Thank you for taking my follow-up question here. I just wanted to ask one around average lease terms. It looks like they are trickling up to the mid-sevens. Is this by design? Is this something that you are seeing in the market? Maybe just adding more color on that. Sure, Dave. And obviously, the longer WALT, the better.

David Gladstone: So we do look at transactions that allow for that. It gives us more stability within the portfolio. And so, yes, we will look at transactions seven years and up, prefer fifteen and up, of course, leads to our wheelhouse of sale-leaseback transactions. So yes, the longer we can do, the better.

Craig Gerald Kucera: Thank you very much.

David Gladstone: Thank you. Okay. Do we have any more questions?

Operator: We are showing no additional questions at this time. Mr. Gladstone, I turn it back to you for closing comments.

David Gladstone: Well, thank you very much. And that was pretty puny in terms of number of questions. We would like more questions from our folks out there. Really makes a meeting go faster and easier and straight to the point for all of these. So thank you all for calling in, but save up your questions for the next meeting. At the end of this call, thank you. Thank you.

Operator: Ladies and gentlemen, this concludes today’s event. You may disconnect your lines and log off the webcast at this time and enjoy the rest of your day.