Gladstone Commercial (GOOD) risk factors, FY2025 10-K

Risks related to our business and properties

1. 01Certain of our tenants may be unable to pay rent, which could adversely affect our cash available to make distributions to our stockholders37% rewritten
2. 02We are subject to the credit risk of our tenants, which in the event of bankruptcy, could adversely affect our results of operations
3. 03We may be unable to renew leases, lease vacant space or re-lease space as leases expire, which could adversely affect our business and our ability to make distributions to our stockholders
4. 04Net leases may not result in fair market lease rates over time, thereby failing to maximize income and distributions to our stockholders
5. 05Multi-tenant properties expose us to additional risks, such as increasing operating expenses and difficulty funding suitable replacement tenants
6. 06Illiquidity of certain of our real estate investments may make it difficult for us to sell properties in response to market conditions and could harm our financial condition and ability to make distributions to our stockholders
7. 07Many of our tenants are lower middle market businesses, which exposes us to additional risks specific to these entities
8. 08Our real estate investments have a limited number of tenants and are concentrated in a limited number of industries, which subjects us to an increased risk of significant loss if any one of these tenants is unable to pay or if particular industries experience downturns36% rewritten
9. 09The inability of a tenant in a single tenant property to pay rent will reduce our revenues and increase our carrying costs of the building
10. 10Liability for uninsured losses or significant increases in our insurance premiums could adversely affect our financial condition
11. 11We could incur significant costs related to government regulation and private litigation over environmental matters
12. 12We could be exposed to liability and remedial costs related to environmental matters25% rewritten
13. 13Our properties may be subject to impairment charges, which could adversely affect our results of operations

Risks related to our financing

1. 14Capital markets and economic conditions can materially affect our financial condition and results of operations, the value of our equity securities, and our ability to sustain the payment of distributions at current levels
2. 15Our Credit Facility contains various covenants which, if not complied with, could accelerate our repayment obligations, thereby materially and adversely affecting our liquidity, financial condition, results of operations and ability to pay distributions to stockholders
3. 16Because our business strategy relies on external financing, we may be negatively affected by restrictions on additional borrowings, and the risks associated with leverage, including our debt service obligations
4. 17We face liquidity, credit, and performance risks related to “balloon payments” and refinancing
5. 18We mortgage our properties, which subjects us to the risk of foreclosure in the event of non-payment
6. 19We face a risk from the fact that certain of our properties are cross-collateralized
7. 20A change in the value of our assets could cause us to experience a cash shortfall or be in default of our loan covenants
8. 21Interest rate fluctuations may adversely affect our results of operations
9. 22Adverse changes in our credit ratings could negatively affect our financing activity
10. 23The 2029 Notes, the 2030 Notes, and certain of our other secured loans contain, and any other future indebtedness we incur may contain, various covenants, including business activity restrictions, and the failure to comply with those covenants could materially adversely affect us

Risks related to the real estate industry

1. 24We are subject to certain risks associated with real estate ownership and borrowing which could reduce the value of our investments
2. 25Competition for real estate may impede our ability to make acquisitions or may increase the cost of these acquisitions
3. 26Our ownership of properties through ground leases exposes us to risks which are different than those resulting from our ownership of fee title to other properties

Risks related to our Adviser and Administrator

1. 27We are dependent upon our key personnel, who are employed by our Adviser or Administrator, as applicable, for our future success, particularly David Gladstone, Arthur “Buzz” Cooper and Gary Gerson
2. 28Our success depends on the performance of our Adviser and if our Adviser makes inadvisable investment or management decisions, our operations could be materially adversely impacted
3. 29We may have conflicts of interest with our Adviser and other affiliates
4. 30Our termination of the Advisory Agreement without cause would require payment of a termination fee
5. 31Our Adviser is not obligated to provide a waiver of the incentive fee, which could negatively impact our earnings and our ability to maintain our current level of, or increase, distributions to our stockholders29% rewritten

Risks Related to Qualification and Operation as a REIT

1. 32If we fail to qualify as a REIT, our operations and distributions to stockholders would be adversely impacted
2. 33We may need to incur additional borrowings to meet the REIT minimum distribution requirement and to avoid excise tax
3. 34Complying with the REIT requirements may cause us to forgo otherwise attractive opportunities or liquidate otherwise attractive investments
4. 35To the extent that our distributions represent a return of capital for tax purposes, you could recognize an increased capital gain upon a subsequent sale of your stock
5. 36We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our securities
6. 37Complying with the REIT requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities
7. 38Ownership limitations may restrict or prevent stockholders from engaging in certain transfers of our common stock
8. 39Our charter stipulates that any acquisition of shares that would result in our disqualification as a REIT under the Code shall be void to the fullest extent permitted under applicable law
9. 40We operate as a holding company dependent upon the assets and operations of our subsidiaries, and because of our structure, we may not be able to generate the funds necessary to make dividend payments on our capital stock

Other risks

1. 41We are subject to restrictions that may discourage a change of control. Certain provisions contained in our articles of incorporation and Maryland law may prohibit or restrict a change of control
2. 42Market conditions could adversely affect the market price and trading volume of our securities
3. 43Shares of common and preferred stock eligible for future sale may have adverse effects on the respective share price
4. 44Compliance or failure to comply with laws requiring access to our properties by disabled persons could result in substantial cost
5. 45Our Board of Directors may change our investment policy without stockholders’ approval
6. 46Our rights and the rights of our stockholders to take action against our directors and officers are limited
7. 47We may enter into tax protection agreements in the future if we issue OP Units in connection with the acquisition of properties, which could limit our ability to sell or otherwise dispose of certain properties
8. 48Our redemption of OP Units could result in the issuance of a large number of new shares of our common stock and/or force us to expend significant cash, which may limit our funds necessary to make distributions on our common stock
9. 49Our ability to pay distributions is limited by the requirements of Maryland law
10. 50Legislative or regulatory tax changes related to REITs could materially and adversely affect us
11. 51We are exposed to the potential impacts of climate change, which may result in unanticipated losses that could affect our business and financial condition