(Former name, former address and formal fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares of the registrant’s Common Stock, $0.001 par value, outstanding as of ~~August 3,~~October 27, 2015 was ~~21,358,465.~~22,065,674.


	June 30, 2015			December 31, 2014			September 30, 2015			December 31, 2014
ASSETS
Real estate, at cost	$	763,831		$	722,565		$	761,458		$	722,565
Less: accumulated depreciation		102,243			92,133			104,877			92,133

Total real estate, net		661,588			630,432			656,581			630,432
Lease intangibles, net		106,893			98,814			105,963			98,814
Real estate and related assets held for sale, net		2,235			—			16,832			—
Mortgage note receivable		5,900			5,600			5,900			5,600
Cash and cash equivalents		3,297			8,599			3,730			8,599
Restricted cash		4,347			3,547			4,761			3,547
Funds held in escrow		12,377			11,096			10,936			11,096
Deferred rent receivable, net		24,992			21,728			25,098			21,728
Deferred financing costs, net		6,212			6,213			6,011			6,213
Other assets		2,499			1,765			2,671			1,765

TOTAL ASSETS	$	830,340		$	787,794		$	838,483		$	787,794

LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Mortgage notes payable	$	487,339		$	459,299		$	482,912		$	459,299
Borrowings under line of credit		45,200			43,300			55,500			43,300
Series C mandatorily redeemable preferred stock, par value $0.001 per share; $25 per share liquidation preference; 1,700,000 shares authorized; and 1,540,000 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively		38,500			38,500
Series C mandatorily redeemable preferred stock, par value $0.001 per share; $25 per share liquidation preference; 1,700,000 shares authorized; and 1,540,000 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively								38,500			38,500
Deferred rent liability, net		9,278			8,594			9,014			8,594
Asset retirement obligation		3,749			3,616			3,542			3,616
Accounts payable and accrued expenses		5,925			8,285			7,820			8,285
Liabilities related to assets held for sale		93			—			1,304			—
Due to Adviser and Administrator⁽¹⁾		1,683			916			1,820			916
Other liabilities		7,699			7,612			7,644			7,612

Total Liabilities	$	599,466		$	570,122		$	608,056		$	570,122

Commitments and contingencies⁽²⁾
STOCKHOLDERS’ EQUITY
Series A and B redeemable preferred stock, par value $0.001 per share; $25 per share liquidation preference; 2,300,000 shares authorized and 2,150,000 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively	$	2		$	2
Senior common stock, par value $0.001 per share; 7,500,000 shares authorized and 995,852 and 809,411 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively		1			1
Common stock, par value $0.001 per share, 38,500,000 shares authorized and 21,143,986 and 19,589,606 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively		21			20
Series A and B redeemable preferred stock, par value $0.001 per share; $25 per share liquidation preference; 2,300,000 shares authorized and 2,150,000 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively							$	2		$	2
Senior common stock, par value $0.001 per share; 7,500,000 shares authorized and 993,069 and 809,411 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively								1			1
Common stock, par value $0.001 per share, 38,500,000 shares authorized and 21,743,779 and 19,589,606 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively								22			20
Additional paid in capital		399,420			369,748			408,401			369,748
Notes receivable - employee		—			(375	)		—			(375	)
Distributions in excess of accumulated earnings		(168,570	)		(151,724	)		(177,999	)		(151,724	)

Total Stockholders’ Equity		230,874			217,672			230,427			217,672

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	830,340		$	787,794	��	$	838,483		$	787,794

The accompanying notes are an integral part of these condensed consolidated financial statements.


	For the three months ended June 30,						For the six months ended June 30,						For the three months ended September 30,						For the nine months ended September 30,
	2015			2014			2015			2014			2015			2014			2015			2014
Operating revenues
Rental revenue	$	20,012		$	17,620		$	39,300		$	34,205		$	20,653		$	18,368		$	59,953		$	52,573
Tenant recovery revenue		394			770			718			1,321			437			549			1,195			1,870
Interest income from mortgage note receivable		282			—			549			—			285			97			835			97

Total operating revenues		20,688			18,390			40,567			35,526			21,375			19,014			61,983			54,540

Operating expenses
Depreciation and amortization		8,947			6,871			17,154			13,591			9,006			7,516			26,160			21,107
Property operating expenses		1,178			1,302			2,139			2,632			1,612			1,202			3,752			3,834
Acquisition related expenses		255			859			451			970			138			233			589			1,202
Base management fee⁽¹⁾		866			666			1,717			1,291			872			741			2,589			2,031
Incentive fee⁽¹⁾		1,760			1,527			3,433			2,767			621			1,538			4,054			4,305
Administration fee⁽¹⁾		366			485			728			977			326			260			1,054			1,238
General and administrative		539			490			1,229			957			446			538			1,675			1,495
Impairment charge		—			—			—			13,958			622			280			622			14,238

Total operating expenses before credit to incentive fee		13,911			12,200			26,851			37,143			13,643			12,308			40,495			49,450

Credit to incentive fee⁽¹⁾		(1,316	)		(957	)		(2,500	)		(2,162	)		—			(851	)		(2,500	)		(3,013	)

Total operating expenses		12,595			11,243			24,351			34,981			13,643			11,457			37,995			46,437

Other income (expense)
Other expense
Interest expense		(6,999	)		(6,509	)		(13,770	)		(12,784	)		(7,142	)		(6,679	)		(20,912	)		(19,463	)
Distributions attributable to Series C mandatorily redeemable preferred stock		(686	)		(686	)		(1,372	)		(1,372	)		(686	)		(686	)		(2,057	)		(2,057	)
Gain on sale of real estate		—			1,240			—			1,240			—			—			—			1,240
Other income		23			27			51			74			—			37			11			111

Total other expense		(7,662	)		(5,928	)		(15,091	)		(12,842	)		(7,828	)		(7,328	)		(22,958	)		(20,169	)

Net income (loss)		431			1,219			1,125			(12,297	)
Net (loss) income														(96	)		229			1,030			(12,066	)

Distributions attributable to Series A and B preferred stock		(1,023	)		(1,023	)		(2,047	)		(2,047	)		(1,023	)		(1,023	)		(3,070	)		(3,070	)
Distributions attributable to senior common stock		(261	)		(110	)		(485	)		(210	)		(263	)		(137	)		(748	)		(347	)

Net (loss) income (attributable) available to common stockholders	$	(853	)	$	86		$	(1,407	)	$	(14,554	)
Net loss attributable to common stockholders													$	(1,382	)	$	(931	)	$	(2,788	)	$	(15,483	)

(Loss) income per weighted average share of common stock - basic & diluted
(Loss) income (attributable) available to common shareholders	$	(0.04	)	$	0.01		$	(0.07	)	$	(0.90	)
Loss per weighted average share of common stock - basic & diluted
Loss attributable to common shareholders													$	(0.06	)	$	(0.05	)	$	(0.13	)	$	(0.93	)

Weighted average shares of common stock outstanding
Basic		20,833,787			16,547,793			20,524,101			16,149,467			21,403,808			17,739,084			20,820,559			16,685,162

Diluted		20,833,787			16,894,973			20,524,101			16,149,467			21,403,808			17,739,084			20,820,559			16,685,162

Earnings per weighted average share of senior common stock	$	0.26		$	0.26		$	0.52		$	0.52		$	0.26		$	0.26		$	0.79		$	0.79

Weighted average shares of senior common stock outstanding - basic		995,852			421,312			928,323			404,243			993,069			518,592			948,347			438,196

The accompanying notes are an integral part of these condensed consolidated financial statements.


	For the six months ended June 30,						For the nine months ended September 30,
	2015			2014			2015			2014
Cash flows from operating activities:
Net income (loss)	$	1,125		$	(12,297	)	$	1,030		$	(12,066	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		17,154			13,591			26,160			21,107
Impairment charge		—			13,958			622			14,238
Gain on sale of real estate		—			(1,240	)		—			(1,240	)
Amortization of deferred financing costs		878			795			1,358			1,209
Amortization of deferred rent asset and liability, net		(270	)		(178	)		(394	)		(266	)
Amortization of discount and premium on assumed debt		(154	)		(114	)		(231	)		(190	)
Asset retirement obligation expense		76			(137	)		114			(96	)
Increase in other assets		(538	)		(372	)		(946	)		(322	)
Increase in deferred rent liability								—			311
Increase in deferred rent receivable		(1,843	)		(1,778	)		(3,034	)		(2,808	)
Increase (decrease) in accounts payable, accrued expenses, and amount due Adviser and Administrator		1,021			(1,004	)		1,045			(538	)
(Decrease) increase in other liabilities		(683	)		585			(315	)		238
Leasing commissions paid		(291	)		(765	)		(532	)		(898	)

Net cash provided by operating activities		16,475			11,044			24,877			18,679

Cash flows from investing activities:
Acquisition of real estate and related intangible assets		(58,248	)		(64,764	)		(71,248	)		(83,564	)
Improvements of existing real estate		(3,072	)		(2,934	)		(4,969	)		(5,416	)
Proceeds from sale of real estate		—			11,162			—			11,162
Issuance of mortgage note receivable		(300	)		—			(300	)		(5,600	)
Receipts from lenders for funds held in escrow		642			1,287			2,952			1,670
Payments to lenders for funds held in escrow		(1,924	)		(5,445	)		(2,792	)		(6,394	)
Receipts from tenants for reserves		2,037			1,519			3,068			2,484
Payments to tenants from reserves		(1,308	)		(3,423	)		(1,992	)		(3,892	)
(Increase) decrease in restricted cash		(800	)		1,935			(1,214	)		1,510
Deposits on future acquisitions		(1,600	)		(1,500	)		(1,700	)		(2,000	)
Deposits applied against acquisition of real estate investments		1,400			1,300			1,700			2,000

Net cash used in investing activities		(63,173	)		(60,863	)		(76,495	)		(88,040	)

Cash flows from financing activities:
Proceeds from issuance of equity		30,363			36,042			39,495			42,636
Offering costs paid		(742	)		(2,028	)		(892	)		(2,443	)
Borrowings under mortgage notes payable		51,819			27,535			61,059			33,635
Payments for deferred financing costs		(883	)		(633	)		(1,157	)		(711	)
Principal repayments on mortgage notes payable		(23,625	)		(4,182	)		(37,216	)		(6,085	)
Principal repayments on employee notes receivable		375			—			375			—
Borrowings from line of credit		56,400			44,250			73,200			67,250
Repayments on line of credit		(54,500	)		(43,000	)		(61,000	)		(46,050	)
Increase (decrease) in security deposits		108			(31	)		138			(103	)
Distributions paid for common, senior common and preferred stock		(17,919	)		(14,313	)		(27,253	)		(22,077	)

Net cash provided by financing activities		41,396			43,640			46,749			66,052

Net decrease in cash and cash equivalents		(5,302	)		(6,179	)		(4,869	)		(3,309	)
Cash and cash equivalents, beginning of period		8,599			8,546			8,599			8,546

Cash and cash equivalents, end of period	$	3,297		$	2,367		$	3,730		$	5,237

NON-CASH INVESTING AND FINANCING INFORMATION
Increase in asset retirement obligation	$	56		$	—		$	56		$	162

Fixed rate principal debt assumed in connection with acquisition	$	—		$	10,147		$	—		$	10,147

Senior common dividend issued in the dividend reinvestment program	$	52		$	87		$	53		$	142

Capital improvements included in accounts payable and accrued expenses	$	2,922		$	5,521		$	4,954		$	5,774

The accompanying notes are an integral part of these condensed consolidated financial statements.

Gladstone Commercial Corporation is a real estate investment trust, or REIT, that was incorporated under the General Corporation Laws of the State of Maryland on February 14, 2003, primarily for the purpose of investing in and owning net leased industrial, commercial and retail real property and selectively making long-term industrial and commercial mortgage loans. Subject to certain restrictions and limitations, our business is managed by Gladstone Management Corporation, a Delaware corporation, or the Adviser, and administrative services are provided by Gladstone Administration, LLC, a Delaware limited liability company, or the Administrator, each pursuant to a contractual arrangement with us. Our Adviser and Administrator collectively employ all of our personnel and pay their salaries, benefits, and general expenses directly. Gladstone Commercial Corporation conducts substantially all of its operations through a subsidiary, Gladstone Commercial Limited Partnership, a Delaware limited partnership, or the Operating Partnership.

All further references herein to “we,” “our,” “us” and the “Company” mean Gladstone Commercial Corporation and its consolidated subsidiaries, except where it is made clear that the term means only Gladstone Commercial Corporation.

Our interim financial statements are prepared in accordance with U.S. generally accepted accounting principles, or GAAP, for interim financial information and pursuant to the requirements for reporting on Form 10-Q and in accordance with Article 10 of Regulation S-X. Accordingly, certain disclosures accompanying annual financial statements prepared in accordance with GAAP are omitted. The year-end balance sheet data presented herein was derived from audited financial statements, but does not include all disclosures required by GAAP. In the opinion of our management, all adjustments, consisting solely of normal recurring accruals, necessary for the fair presentation of financial statements for the interim period, have been included. The interim financial statements and notes thereto should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2014, as filed with the U.S. Securities and Exchange Commission on February 18, 2015. The results of operations for the three and ~~six~~nine months ended ~~June~~September 30, 2015 are not necessarily indicative of the results that may be expected for other interim periods or for the full fiscal year.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could materially differ from those estimates.

The preparation of our financial statements in accordance with ~~Generally Accepted Accounting Principles in the U.S., or~~ 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 differ materially from these estimates. A summary of all of our significant accounting policies is provided in Note 1 to our condensed consolidated financial statements included in our 2014 Form 10-K. There were no material changes to our critical accounting policies during the ~~six~~nine months ended ~~June~~September 30, 2015.

In February 2015, the FASB issued ASU 2015-02, “Amendments to the Consolidation Analysis” (“ASU-2015-02”), which amends or supersedes the scope and consolidation guidance under existing GAAP. The new standard changes the way a reporting entity evaluates whether a) limited partnerships and similar entities should be consolidated, b) fees paid to decision makers or service provides are variable interests in a variable interest entity, or VIE, and c) variable interests in a VIE held by related parties require the reporting entity to consolidate the VIE. ASU 2015-02 also eliminates the VIE consolidation model based on majority exposure to variability that applied to certain investment companies and similar entities. We ~~are currently assessing the~~do not anticipate a material impact on our financial position, results of operations or cash flows from adopting this standard. ASU 2015-02 ~~which~~ is effective for annual and interim reporting periods beginning after December 15, ~~2015. Early~~2015, with early adoption is permitted.

In April 2015, the FASB issued ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs” (“ASU-2015-03”), which simplifies the presentation of debt issuance costs. We ~~are currently assessing the impact of ASU 2015-03 and~~ do not anticipate a material impact on our financial position, results of operations or cash flows from adopting this standard. ASU 2015-03 is effective for annual and interim reporting periods beginning after December 15, ~~2015. Early~~2015 with early adoption permitted.

In August 2015, the FASB issued ASU 2015-15, “Interest – Imputation of Interest (Subtopic 835-30)” (“ASU 2015-15”), which codifies an SEC staff announcement that entities are permitted to defer and present debt issuance costs related to line of credit arrangements as assets. We have assessed the impact of ASU 2015-15 and identified no impact on our financial position, results of operations or cash flows from adopting this standard. ASU 2015-15 was effective immediately.

In September 2015, the FASB issued ASU 2015-16, “Simplifying the Accounting for Measurement-Period Adjustments” (“ASU 2015-16”), pertaining to entities that have reported provisional amounts for items in a business combination for which the accounting is incomplete by the end of the reporting period in which the combination occurs and during the measurement period have an adjustment to provisional amounts recognized. The guidance requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. Any adjustments should be calculated as if the accounting had been completed at the acquisition date. We are currently assessing the impact of ASU 2015-16 do not anticipate a material impact on our financial position, results of operations or cash flows from adopting this standard. ASU 2015-16 is effective for annual and interim periods beginning after December 15, 2015 with early adoption permitted.

We are externally managed pursuant to contractual arrangements with our Adviser and our Administrator, which collectively employ all of our personnel and pay their salaries, benefits, and general expenses directly. Both our Adviser and Administrator are affiliates of ours, as their parent company is controlled by Mr. David Gladstone, our chairman and chief executive officer. We have an advisory agreement with our Adviser, and an administration agreement with our Administrator, or the Administration Agreement. The ~~management and administrative~~ services and fees under the advisory agreement and Administration Agreement are described below. At ~~June~~September 30, 2015 and December 31, 2014, ~~$1.7~~$1.8 million and $0.9 million, respectively, was collectively due to our Adviser and Administrator.

On July 24, 2015, we entered into an amended and restated advisory agreement, or the Amended Advisory Agreement, with the Adviser. Our entrance into the agreement was approved unanimously by our Board of Directors, including separate and unanimous approval by the independent directors on our ~~Board.~~Board of Directors.

Prior to its amendment and restatement on July 24, 2015, our then-existing advisory agreement with the Adviser, or the Former Advisory Agreement, provided for an annual base management fee equal to 2.0% of our common stockholders’ equity, which is our total stockholders’ equity, less the recorded value of any preferred stock and adjusted to exclude the effect of any unrealized gains, losses, or other items that do not affect realized net income (including impairment charges). Under the Former Advisory Agreement, for the three and six months ended June 30, 2015, we recorded a base management fee of $0.9 million and $1.7 million, respectively, and for the three and six months ended June 30, 2014, we recorded a base management fee of $0.7 million and $1.3 million, respectively.

Pursuant to the terms of the Amended Advisory Agreement, effective July 1, 2015, the calculation of the annual base management fee ~~shall equal~~equals 1.5% of our adjusted total stockholders’ equity, which is our total stockholders’ equity (before giving effect to the base management fee and incentive fee), adjusted to exclude the effect of any unrealized gains or losses that do not affect realized net income (including impairment charges) and adjusted for any one-time events and certain non-cash items (the later to occur for a given quarter only upon the approval of our Compensation Committee). The fee is calculated and accrued quarterly as 0.375% per quarter of such adjusted total stockholders’ equity figure.

~~The incentive fee under~~Prior to its amendment and restatement on July 24, 2015, our then-existing advisory agreement with the Adviser, or the Former Advisory Agreement, ~~rewarded the Adviser in circumstances where our quarterly FFO, before giving effect~~provided for an annual base management fee equal to ~~any incentive fee, or pre-incentive fee FFO, exceeded 1.75%, or~~

7.0% annualized, or the hurdle rate, of common stockholders’ equity. Funds from operations, or FFO, included any realized capital gains and capital losses, less any distributions paid on preferred stock and Senior Common Stock, but FFO did not include any unrealized capital gains or losses (including impairment charges). The Adviser received 100.0% of the amount of the pre-incentive fee FFO that exceeded the hurdle rate, but was less than 2.1875%2.0% of our common stockholders’ ~~equity. The Adviser also received an incentive fee~~equity, which was our total stockholders’ equity, less the recorded value of ~~20.0%~~any preferred stock and adjusted to exclude the effect of ~~the amount of our pre-incentive fee FFO~~any unrealized gains, losses, or other items that ~~exceeded 2.1875% of common stockholders’ equity.~~did not affect realized net income (including impairment charges).

For the three and ~~six~~nine months ended ~~June~~September 30, 2015, ~~pursuant to the terms of the Former Advisory Agreement~~ we recorded ~~an incentive~~a base management fee of ~~$1.8~~$0.9 million and ~~$3.4~~$2.6 million, respectively, ~~offset by credits related to unconditional, voluntary~~ and ~~irrevocable waivers issued by the Adviser of $1.3 million and $2.5 million, respectively, resulting in a net incentive fee~~ for the three and ~~six~~nine months ended ~~June 30, 2015, of $0.5 million and $0.9 million, respectively. For the three and six months ended June~~September 30, 2014, we recorded ~~an incentive~~a base management fee of ~~$1.5~~$0.7 million and ~~$2.8~~$2.0 million, respectively, offset by credits related to unconditional, voluntary and irrevocable waivers issued by the Adviser of $1.0 million and $2.2 million, respectively, resulting in a net incentive fee for the three and six months ended June 30, 2014, of $0.5 million and $0.6 million, respectively. Our Board of Directors accepted the Adviser’s offer to waive, on a quarterly basis, a portion of the incentive fee for the three and six months ended June 30, 2015, and 2014, in order to support the current level of distributions to our stockholders. This waiver cannot be recouped by the Adviser in the future.

Under the Amended Advisory Agreement, effective July 1, 2015, the calculation of the incentive fee was revised to reward the Adviser in circumstances where our quarterly Core FFO (defined ~~below)~~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 stockholders’ equity (after giving effect to the base management fee but before giving effect to the incentive fee)~~, or~~. 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 is defined as GAAP net income (loss) available 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 to common stockholders for the period, and one-time events pursuant to changes in GAAP.

The incentive fee under the Former Advisory Agreement rewarded the Adviser in circumstances where our quarterly FFO, before giving effect to any incentive fee, or pre-incentive fee FFO, exceeded 1.75%, or 7.0% annualized, or the hurdle rate, of common stockholders’ equity. Funds from operations, or FFO, included any realized capital gains and capital losses, less any distributions paid on preferred stock and Senior Common Stock, but FFO did not include any unrealized capital gains or losses (including impairment charges). The Adviser received 100.0% of the amount of the pre-incentive fee FFO that exceeded the hurdle rate, but was less than 2.1875% of our common stockholders’ equity. The Adviser also received an incentive fee of 20.0% of the amount of our pre-incentive fee FFO that exceeded 2.1875% of common stockholders’ equity.

For the three and nine months ended September 30, 2015, we recorded an incentive fee of $0.6 million and $4.1 million, respectively, offset by credits related to unconditional, voluntary and irrevocable waivers issued by the Adviser of $0.00 and $2.5 million, respectively, resulting in a net incentive fee for the three and nine months ended September 30, 2015, of $0.6 million and $1.6 million, respectively. For the three and nine months ended September 30, 2014, we recorded an incentive fee of $1.5 million and $4.3 million, respectively, offset by credits related to unconditional, voluntary and irrevocable waivers issued by the Adviser of $0.8 million and $3.0 million, respectively, resulting in a net incentive fee for the three and nine months ended September 30, 2014, of $0.7 million and $1.3 million, respectively. Our Board of Directors accepted the Adviser’s offer to waive, on a quarterly basis, a portion of the incentive fee for the six months covering January 1, 2015 through June 30, 2015, and for the three and nine months ended September 30, 2014, in order to support the current level of distributions to our stockholders. Due to the Amended Advisory agreement, the Advisor did not waive any portion of the incentive fee for the three months ended September 30, 2015. Waivers cannot be recouped by the Adviser in the future.

Under the Amended Advisory Agreement, effective July 1, 2015, 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 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 (which is calculated as the original acquisition price plus any subsequent non-reimbursed capital improvements). At the end of the fiscal year, if this number is positive, then the capital gain fee payable for such time period shall equal 15.0% of such amount. We did not incur a capital gain fee for the three and nine months ended September 30, 2015.

The Amended Advisory Agreement includes a termination fee ~~where,~~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 agreement after the Company has defaulted and applicable cure periods have expired. The 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 agreement to include if the Adviser breaches any material provisions of the agreement, the bankruptcy or insolvency of the Adviser, dissolution of the Adviser and fraud or misappropriation of funds.

Pursuant to the Administration Agreement, we pay for our allocable portion of the Administrator’s expenses in performing services to us, including, but not limited to, rent and the salaries and benefits of its personnel, including our chief financial officer, treasurer, chief compliance officer, general counsel and secretary (who also serves as our Administrator’s president), and their respective staffs. Prior to July 1, 2014, our allocable portion was generally derived by multiplying that portion of the Administrator’s expenses allocable to all funds managed by the Adviser by the percentage of our total assets at the beginning of each quarter in comparison to the total assets of all funds managed by the Adviser. As approved by our Board of Directors, effective July 1, 2014, our allocable portion of the Administrator’s expenses is 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. For the three and ~~six~~nine months ended ~~June~~September 30, 2015, we recorded an administration fee of ~~$0.4~~$0.3 million and ~~$0.7~~$1.1 million, respectively, and for the three and ~~six~~nine months ended ~~June~~September 30, 2014, we recorded an administration fee of ~~$0.5~~$0.3 million and ~~$1.0~~$1.2 million, respectively.

Gladstone Securities, LLC, or Gladstone Securities, is a privately held broker dealer registered with the Financial Industry Regulatory Authority and insured by the Securities Investor Protection Corporation. Gladstone Securities is an affiliate of ours, as its parent company is controlled by Mr. David Gladstone, our chairman and chief executive officer. Mr. Gladstone also serves on the board of managers of Gladstone Securities.

In connection with the offering of our Senior Common Stock (see Note 10, “Stockholders’ Equity,” for further details) we entered into a Dealer Manager Agreement, dated March 25, 2011, or the Dealer Manager Agreement, with Gladstone Securities pursuant to which Gladstone Securities agreed to act as our exclusive dealer manager in connection with the offering. The Dealer Manager Agreement terminated

according to its terms on March 28, 2015, requiring us to write-off $0.1 million of deferred offering costs to general and administrative expense. Pursuant to the terms of the Dealer Manager Agreement, Gladstone Securities was entitled to receive a sales commission in the amount of 7.0% of the gross proceeds of the shares of Senior Common Stock sold, plus a dealer manager fee in the amount of 3.0% of the gross proceeds of the shares of Senior Common Stock sold. Gladstone Securities, in its sole and absolute discretion, was permitted to re-allocate all of its selling commissions attributable to a participating broker-dealer and also re-allocate a portion of its dealer manager fee earned in respect of the proceeds generated by the participating broker-dealer to any participating broker-dealer as a non-accountable marketing allowance. In addition, we agreed to indemnify Gladstone Securities against various liabilities, including certain liabilities arising under the federal securities laws. We made approximately $0.3 million of payments during the three months ended March 31, 2015 and we made approximately ~~$0.1~~$0.3 million and $0.4 million of payments during ~~both~~ the three and ~~six~~nine months ended ~~June~~September 30, 2014, respectively, to Gladstone Securities pursuant to this agreement. All such payments are reflected as a component of Senior Common Stock costs as reflected in footnote 10.

We also entered into an agreement with Gladstone Securities, effective June 18, 2013, for it to act as our non-exclusive agent to assist us with arranging mortgage financing for properties we own. In connection with this engagement, Gladstone Securities may from time to time solicit the interest of various commercial real estate lenders or recommend to us third party lenders offering credit products or packages that are responsive to our needs. We pay Gladstone Securities a financing fee in connection with the services it

provides to us for securing mortgage financing on any of our properties. The amount of these financing fees, which are payable upon closing of the financing, are based on a percentage of the amount of the mortgage, generally ranging from 0.15% to a maximum of 1.0% of the mortgage obtained. The amount of the financing fees may be reduced or eliminated, as determined by us and Gladstone Securities, after taking into consideration various factors, including, but not limited to, the involvement of any third party brokers and market conditions. We paid financing fees to Gladstone Securities of ~~$0.1~~$0.02 million and $0.2 million during the three and ~~six~~nine months ended ~~June~~September 30, 2015, which are reflected as deferred financing costs in the condensed consolidated balance sheets, on total mortgages secured of ~~$40.5~~$9.2 million and ~~$55.1~~$64.3 million, or 0.3%. of total mortgages secured. We paid financing fees of $0.02 million and $0.1 million during the three and ~~six~~nine months ended ~~June~~September 30, 2014, on total mortgages secured of ~~$27.5~~$6.1 million and $33.6 million, or 0.3%. of total mortgages secured. The agreement is scheduled to terminate on August 31, 2016, unless renewed or earlier terminated pursuant to the provisions contained therein.

The following tables set forth the computation of basic and diluted ~~(loss) earnings~~loss per share of common stock for each of the three and ~~six~~nine months ended ~~June~~September 30, 2015 and 2014, respectively. We computed basic ~~(loss) earnings~~loss per share for the three and ~~six~~nine months ended ~~June~~September 30, 2015 and 2014, respectively, using the weighted average number of shares outstanding during the periods. Diluted ~~(loss) earnings~~loss per share for the three and ~~six~~nine months ended ~~June~~September 30, 2015 and 2014, reflects additional shares of common stock related to our convertible Senior Common Stock (if the effect would be dilutive), that would have been outstanding if dilutive potential shares of common stock had been issued, as well as an adjustment to net income available to common stockholders as applicable to common stockholders that would result from their assumed issuance (dollars in thousands, except per share amounts).


	For the three months ended September 30,						For the nine months ended September 30,
	2015			2014			2015			2014
Calculation of basic loss per share of common stock:
Net loss attributable to common stockholders	$	(1,382	)	$	(931	)	$	(2,788	)	$	(15,483	)
Denominator for basic weighted average shares of common stock		21,403,808			17,739,084			20,820,559			16,685,162

Basic loss per share of common stock	$	(0.06	)	$	(0.05	)	$	(0.13	)	$	(0.93	)

Calculation of diluted loss per share of common stock:
Net loss attributable to common stockholders	$	(1,382	)	$	(931	)	$	(2,788	)	$	(15,483	)

Net loss attributable to common stockholders plus assumed conversions (1)	$	(1,382	)	$	(931	)	$	(2,788	)	$	(15,483	)
Denominator for basic weighted average shares of common stock		21,403,808			17,739,084			20,820,559			16,685,162

Denominator for diluted weighted average shares of common stock (1)		21,403,808			17,739,084			20,820,559			16,685,162

Diluted loss per share of common stock	$	(0.06	)	$	(0.05	)	$	(0.13	)	$	(0.93	)

The following table sets forth the components of our investments in real estate as of ~~June~~September 30, 2015 and December 31, 2014 (dollars in thousands):


	June 30, 2015 ⁽¹⁾			December 31, 2014			September 30, 2015⁽¹⁾			December 31, 2014
Real estate:
Land	$	95,948		$	88,394		$	93,265		$	88,394
Building and improvements		620,924			593,155			620,794			593,155
Tenant improvements		46,959			41,016			47,399			41,016
Accumulated depreciation		(102,243	)		(92,133	)		(104,877	)		(92,133	)

Real estate, net	$	661,588		$	630,432		$	656,581		$	630,432

Real estate depreciation expense on the building and tenant improvement assets ~~was $5.5~~were $5.7 million and ~~$10.7~~$16.4 million for the three and ~~six~~nine months ended ~~June~~September 30, 2015, respectively, and ~~$4.6~~$4.9 million and ~~$9.0~~$13.8 million for the three and ~~six~~nine months ended ~~June~~September 30, 2014, respectively.

During the ~~six~~nine months ended ~~June~~September 30, 2015, we acquired ~~four~~five properties, which are summarized below (dollars in thousands):


Location	Acquisition Date		Square Footage (unaudited)		Lease Term		Renewal Options		Total Purchase Price		Acquisition Expenses		Annualized GAAP Rent		Debt Issued		Acquisition Date		Square Footage (unaudited)		Lease Term	Renewal Options	Total Purchase Price		Acquisition Expenses		Annualized GAAP Rent		Debt Issued
Richardson, TX⁽¹⁾		3/6/2015		155,984		9.5 Years		2 (5 years each)	$	24,700	$	104	$	2,708	$	14,573		3/6/2015		155,984	9.5 Years	2 (5 years each)	$	24,700	$	108	$	2,708	$	14,573
Birmingham, AL		3/20/2015		30,850		8.5 Years		1 (5 years)		3,648		71		333		N/A		3/20/2015		30,850	8.5 Years	1 (5 years)		3,648		76		333		N/A
Columbus, OH		5/28/2015		78,033		15.0 Years		2 (5 years each)		7,700		72		637		4,466		5/28/2015		78,033	15.0 Years	2 (5 years each)		7,700		72		637		4,466
Salt Lake City, UT⁽¹⁾		5/29/2015		86,409		6.5 Years		1 (5 years)		22,200		144		2,411		13,000		5/29/2015		86,409	6.5 Years	1 (5 years)		22,200		149		2,411		13,000
Atlanta, GA⁽²⁾																		7/15/2015		78,151	Multiple⁽²⁾	2 (5 years)		13,000		109		1,291		7,540

Total				351,276					$	58,248	$	391	$	6,089	$	32,039				429,427			$	71,248	$	514	$	7,380	$	39,579

In accordance with Accounting Standards Codification, or ASC, 805, “Business Combinations,” we determined the fair value of the acquired assets related to the ~~four~~five properties acquired during the ~~six~~nine months ended ~~June~~September 30, 2015, as follows (dollars in thousands):


	Land		Building		Tenant Improvements		In-place Leases		Leasing Costs		Customer Relationships		Above Market Leases		Below Market Leases			Total Purchase Price		Land		Building		Tenant Improvements		In-place Leases		Leasing Costs		Customer Relationships		Above Market Leases		Below Market Leases			Total Purchase Price
Richardson, TX	$	2,709	$	12,503	$	2,761	$	2,046	$	1,791	$	1,915	$	975	$	—		$	24,700	$	2,709	$	12,503	$	2,761	$	2,046	$	1,791	$	1,915	$	975	$	—		$	24,700
Birmingham, AL		650		1,683		351		458		146		360		—		—			3,648		650		1,683		351		458		146		360		—		—			3,648
Columbus, OH		1,338		3,511		1,547		1,144		672		567		—		(1,079	)		7,700		1,338		3,511		1,547		1,144		672		567		—		(1,079	)		7,700
Salt Lake City, UT		3,248		11,861		1,268		2,396		981		1,678		821		(53	)		22,200		3,248		11,861		1,268		2,396		981		1,678		821		(53	)		22,200
Atlanta, GA																					2,271		7,862		916		750		548		723		44		(114	)		13,000

	$	7,945	$	29,558	$	5,927	$	6,044	$	3,590	$	4,520	$	1,796	$	(1,132	)	$	58,248	$	10,216	$	37,420	$	6,843	$	6,794	$	4,138	$	5,243	$	1,840	$	(1,246	)	$	71,248

Below is a summary of the total revenue and earnings recognized on the ~~four~~five properties acquired during the ~~six~~nine months ended ~~June~~September 30, 2015 (dollars in thousands):


			For the three months ended June 30,					For the six months ended June 30,						For the three months ended September 30,					For the nine months ended September 30,
			2015					2015						2015					2015
Location	Acquisition Date		Rental Revenue		Earnings⁽¹⁾			Rental Revenue		Earnings⁽¹⁾		Acquisition Date		Rental Revenue		Earnings⁽¹⁾			Rental Revenue		Earnings⁽¹⁾
Richardson, TX		3/6/2015	$	657	$	90		$	839	$	328		3/6/2015	$	656	$	96		$	1,496	$	423
Birmingham, AL		3/20/2015		83		(22	)		94		106		3/20/2015		83		(22	)		177		84
Columbus, OH		5/28/2015		67		149			67		149		5/28/2015		177		18			244		166
Salt Lake City, UT		5/29/2015		207		278			207		278		5/29/2015		572		163			780		441
Atlanta, GA													7/15/2015		274		214			274		214

			$	1,014	$	495		$	1,207	$	861			$	1,762	$	469		$	2,971	$	1,328

The following table reflects pro-forma consolidated statements of operations as if the properties acquired during the three and ~~six~~nine months ended ~~June~~September 30, 2015 and the twelve months ended December 31, 2014, respectively were acquired as of January 1, 2014. The pro-forma earnings for the three and ~~six~~nine months ended ~~June~~September 30, 2015 and 2014 were adjusted to assume that acquisition-related costs were incurred as of the previous period (dollars in thousands, except per share amounts):


	For the three months ended June 30, (unaudited)						For the six months ended June 30, (unaudited)						For the three months ended September 30, (unaudited)						For the nine months ended September 30, (unaudited)
	2015			2014			2015			2014			2015			2014			2015			2014
Operating Data:
Total operating revenue	$	21,122		$	21,938		$	42,114		$	43,395		$	21,402		$	21,624		$	64,059		$	65,425
Total operating expenses		(12,697	)		(13,033	)		(25,113	)		(25,851	)		(13,539	)		(13,222	)		(38,651	)		(53,311	)
Other expenses		(7,775	)		(6,860	)		(15,495	)		(28,907	)⁽¹⁾		(7,820	)		(8,029	)		(23,485	)		(23,120	)⁽¹⁾

Net income (loss)		650			2,045			1,506			(11,363	)		43			373			1,923			(11,006	)
Dividends attributable to preferred and senior common stock		(1,284	)		(1,133	)		(2,532	)		(2,257	)		(1,286	)		(1,160	)		(3,818	)		(3,417	)

Net loss attributable to common stockholders	$	(634	)	$	912		$	(1,026	)	$	(13,620	)	$	(1,243	)	$	(787	)	$	(1,895	)	$	(14,423	)

Share and Per Share Data:
Basic (loss) earnings per share of common stock - pro forma	$	(0.03	)	$	0.06		$	(0.05	)	$	(0.84	)	$	(0.06	)	$	(0.04	)	$	(0.09	)	$	(0.86	)
Diluted (loss) earnings per share of common stock - pro forma	$	(0.03	)	$	0.05		$	(0.05	)	$	(0.84	)	$	(0.06	)	$	(0.04	)	$	(0.09	)	$	(0.86	)
Basic (loss) earnings per share of common stock - actual	$	(0.04	)	$	0.01		$	(0.07	)	$	(0.90	)	$	(0.06	)	$	(0.05	)	$	(0.13	)	$	(0.93	)
Diluted (loss) earnings per share of common stock - actual	$	(0.04	)	$	0.01		$	(0.07	)	$	(0.90	)	$	(0.06	)	$	(0.05	)	$	(0.13	)	$	(0.93	)
Weighted average shares outstanding-basic		20,833,787			16,547,793			20,524,101			16,149,467			21,403,808			17,739,084			20,820,559			16,685,162
Weighted average shares outstanding-diluted		20,833,787			16,894,973			20,524,101			16,149,467			21,403,808			17,739,084			20,820,559			16,685,162

On ~~April~~July 13, 2015 we executed a lease with a new tenant in our Raleigh, North Carolina property to occupy 86,886 square feet, representing 75.0% of the total square footage. The current tenant retained 18.0% of the space. Therefore, the building is approximately 93.0% occupied. The lease commenced on August 1, 2015 and will expire on December 31, 2027. The new lease provides for prescribed rent escalations over its life, with annualized straight line rents of approximately $0.5 million. The lease grants the tenant two extension options for an additional five years each. In connection with the execution of the lease, we provided $0.8 million in tenant improvements and $0.4 million in leasing commissions.

On August 28, 2015 we modified ~~the~~a lease with ~~the tenant occupying~~ one of our ~~properties located~~tenants in ~~Austin, Texas.~~our multi-tenant Indianapolis, Indiana property. The ~~modification provided the~~ tenant, ~~a termination option,~~ which ~~allows the tenant~~previously occupied 4,512 square feet, increased its square footage to ~~terminate~~6,903 square feet and extended their lease term an additional 3 years through September 2021. The original lease term would have expired in October 2018. This lease contains prescribed rent escalations over its ~~lease effective December 31, 2017, upon paying a termination penalty~~life with annualized straight line rents of approximately ~~$1.1~~$0.1 million, ~~on or before March 31, 2017. The lease is scheduled to otherwise terminate in June 2022. As~~ a ~~result of~~$0.03 million increase over the modification, the tenant forfeited its right to $0.5 million in tenant improvement allowance, provided in an earlier amendment. All other terms and conditions of the lease remain in full force and effect.

On April 29, 2015, we modified the lease with the anchor tenant occupying one of our properties located in Columbus, Ohio. The anchor tenant is currently occupying 92.0% of the property and the modification allows the anchor tenant to expand into the remaining space, currently occupied by another tenant through November 30, 2016. The lease term for the expansion space is coterminous with their current lease, and both leases expire on December 2023.previous lease. In connection with the ~~expansion~~extension of the lease and modification of certain of its terms, we provided $0.06 million in tenant improvements.

On September 18, 2015 we executed a lease with a tenant to occupy a portion of our previously vacant property located in Baytown, Texas. The lease is for 57.0% of the building, and is for a seven year term. The lease provides for prescribed rent escalations over its life, with annualized straight line rents of approximately $0.13 million. The tenant has two options to renew the lease for an additional period of five years each. In connection with the execution of the lease, we provided ~~approximately $0.1~~$0.2 million in tenant ~~improvements.~~improvements and $0.06 million in leasing commissions.

During the ~~six~~nine months ended ~~June~~September 30, 2014, we acquired ~~six~~eight properties, which are summarized in the table below (dollars in thousands):

Location
Acquisition Date Square Footage Lease
Term Renewal Options Total Purchase
Price Acquisition
Expenses Annualized GAAP
Rent Debt Issued &
Assumed
Allen, TX
3/27/2014    21,154    12 Years    4 (5 years each)    $ 5,525    $ 29    $ 570    $ 3,481
Colleyville, TX
3/27/2014    20,355    12 Years    4 (5 years each)    4,523    29    467    2,849
Rancho Cordova, CA
4/22/2014    61,358    10 Years    1 (5 year)    8,225    65    902    4,935
Coppell, TX
5/8/2014    21,171    12 Years    4 (5 years each)    5,838    22    601    3,816
Columbus, OH
5/13/2014    114,786    9.5 Years    N/A    11,800    65    1,278    N/A
Taylor, PA
6/9/2014    955,935    10 Years    4 (5 years each)    39,000    714    3,400    22,600

Total
1,194,759    $ 74,911    $ 924    $ 7,218    $ 37,681

In accordance with ASC 805, we determined the fair value of the acquired assets related to the ~~six~~eight properties acquired during the ~~six~~nine months ended ~~June~~September 30, 2014 as follows (in thousands):


																											Tenant		In-place				Customer		Above Market		Below Market			Premium on			Total Purchase
	Land		Building		Tenant Improvements		In-place Leases		Leasing Costs		Customer Relationships		Above Market Leases		Below Market Leases			Premium on Assumed Debt			Total Purchase Price		Land		Building		Improvements		Leases		Leasing Costs		Relationships		Leases		Leases			Assumed Debt			Price
Allen, TX	$	874	$	3,509	$	125	$	598	$	273	$	218	$	—	$	—		$	(72	)	$	5,525	$	874	$	3,509	$	125	$	598	$	273	$	218	$	—	$	—		$	(72	)	$	5,525
Colleyville, TX		1,277		2,307		117		486		220		181		—		(6	)		(59	)		4,523		1,277		2,307		117		486		220		181		—		(6	)		(59	)		4,523
Rancho Cordova, CA		752		5,898		278		473		546		278		—		—			—			8,225		752		5,898		278		473		546		278		—		—			—			8,225
Coppell, TX		1,448		3,221		128		636		293		230		—		—			(118	)		5,838		1,448		3,221		128		636		293		230		—		—			(118	)		5,838
Columbus, OH		990		6,080		1,937		823		719		990		261		—			—			11,800		990		6,080		1,937		823		719		990		261		—			—			11,800
Taylor, PA		3,102		24,449		956		6,171		1,452		2,870		—		—			—			39,000		3,102		24,449		956		6,171		1,452		2,870		—		—			—			39,000
Aurora, CO																								2,882		3,825		92		413		806		282		—		—			—			8,300
Indianapolis, IN																								502		5,334		1,088		1,990		741		732		126		(13	)		—			10,500

	$	8,443	$	45,464	$	3,541	$	9,187	$	3,503	$	4,767	$	261	$	(6	)	$	(249	)	$	74,911	$	11,827	$	54,623	$	4,721	$	11,590	$	5,050	$	5,781	$	387	$	(19	)	$	(249	)	$	93,711

Below is a summary of the total revenue and earnings recognized on the ~~six~~eight properties acquired during the three and ~~six~~nine months ended ~~June~~September 30, 2014 (dollars in thousands):


				For the three months ended June 30,						For the six months ended June 30,								For the three months ended September 30,						For the nine months ended September 30,
	Acquisition Date			2014						2014								2014						2014
Location			Rental Revenue			Earnings (1)			Rental Revenue			Earnings (1)			Acquisition Date		Rental Revenue			Earnings ⁽¹⁾			Rental Revenue			Earnings ⁽¹⁾
Allen, TX		3/27/2014		$	142		$	81		$	150		$	86		3/27/2014		$	143		$	101		$	293		$	167
Colleyville, TX		3/27/2014			117			67			123			71		3/27/2014			117			83			240			138
Rancho Cordova, CA		4/22/2014			173			65			173			65		4/22/2014			226			104			399			168
Coppell, TX		5/8/2014			89			52			89			52		5/8/2014			150			116			239			139
Columbus, OH(2)		5/13/2014			167			68			167			68		5/13/2014			311			115			479			184
Taylor, PA		6/9/2014			208			98			208			98		6/9/2014			850			395			1,058			493
Aurora, CO																7/1/2014			192			124			192			124
Indianapolis, IN⁽²⁾																9/3/2014			116			9			116			9
	Acquisition Date
				$	896		$	431		$	910		$	440				$	2,105		$	1,047		$	3,016		$	1,422

⁽²⁾	Rental revenue and earnings is reflective of aggregate rent and operating expenses among all tenants occupying the building.

The following table summarizes the carrying value of intangible assets, liabilities and the accumulated amortization for each intangible asset and liability class as of ~~June~~September 30, 2015 and December 31, 2014 respectively (in thousands):


	June 30, 2015⁽¹⁾					December 31, 2014					September 30, 2015⁽¹⁾					December 31, 2014
	Lease Intangibles		Accumulated Amortization			Lease Intangibles		Accumulated Amortization			Lease Intangibles		Accumulated Amortization			Lease Intangibles		Accumulated Amortization
In-place leases	$	65,177	$	(19,997	)	$	59,233	$	(17,379	)	$	65,642	$	(21,198	)	$	59,233	$	(17,379	)
Leasing costs		42,083		(13,038	)		38,305		(11,411	)		42,936		(13,803	)		38,305		(11,411	)
Customer relationships		45,777		(13,109	)		41,243		(11,177	)		46,230		(13,844	)		41,243		(11,177	)

	$	153,037	$	(46,144	)	$	138,781	$	(39,967	)	$	154,808	$	(48,845	)	$	138,781	$	(39,967	)


	Deferred Rent Receivable/(Liability)		Accumulated Amortization			Deferred Rent Receivable/(Liability)		Accumulated Amortization			Deferred Rent Receivable/(Liability)		Accumulated Amortization			Deferred Rent Receivable/(Liability)		Accumulated Amortization
Above market leases	$	9,548	$	(6,194	)	$	8,314	$	(6,384	)	$	9,591	$	(6,307	)	$	8,314	$	(6,384	)
Below market leases		17,071		(7,793	)		15,939		(7,345	)		16,946		(7,932	)		15,939		(7,345	)

	$	26,619	$	(13,987	)	$	24,253	$	(13,729	)	$	26,537	$	(14,239	)	$	24,253	$	(13,729	)

Total	$	179,656	$	(60,131	)	$	163,034	$	(53,696	)	$	181,345	$	(63,084	)	$	163,034	$	(53,696	)

Total amortization expense related to in-place leases, leasing costs and customer relationship lease intangible assets was ~~$3.4~~$3.3 million and ~~$6.4~~$9.7 million for the three and ~~six~~nine months ended ~~June~~September 30, 2015, respectively, and ~~$2.3~~$2.6 million and ~~$4.7~~$7.3 million for the three and ~~six~~nine months ended ~~June~~September 30, 2014, respectively, and is included in depreciation and amortization expense in the condensed consolidated statement of operations.

Total amortization related to above-market lease values was $0.1 million and $0.3 million for the three and nine months ended September 30, 2015, respectively, and $0.1 million and $0.2 million for the three and ~~six~~nine months ended ~~June~~September 30, ~~2015, respectively, and $0.1 million, for both the three and six months ended June 30, 2014.~~2014, respectively. Total amortization related to below-market lease values was $0.2 million and ~~$0.4~~$0.7 million for the three and ~~six~~nine months ended ~~June~~September 30, 2015, respectively, and $0.2 million and ~~$0.3~~$0.5 million for the three and ~~six~~nine months ended ~~June~~September 30, 2014, respectively.

The weighted average amortization periods in years for the intangible assets acquired and liabilities assumed during the ~~six~~nine months ended ~~June~~September 30, 2015 and 2014, respectively, were as follows:


Intangible Assets & Liabilities	2015		2014
In-place leases		11.5		10.2
Leasing costs		11.5		10.2
Customer relationships		16.1		14.6
Above market leases		17.2		9.3
Below market leases		13.5		9.9

All intangible assets & liabilities		12.9		11.5

As of ~~June~~September 30, 2015, we classified ~~one~~five of our properties, which are located in Columbus, ~~Ohio~~Ohio; Dayton, Ohio; Hialeah, Florida; Columbia, Missouri; and Birmingham, Alabama, as held for sale under the provisions of ASC 360-10, “Property, Plant, and Equipment,” which requires that the assets and liabilities of any such properties, be presented separately in our condensed consolidated balance sheet in the current period presented. WeIn each case, we either executed a purchase and sale agreement with ~~the~~a third party purchaser, ~~and~~or we have currently listed the property for sale with a third party broker. We anticipate ~~the sale~~all sales to close during the fourth quarter of 2015. ~~The~~With the exception of the Dayton, Ohio property, the respective agreed upon purchase price, net of expected costs to sell, is in excess of the carrying ~~value~~values of ~~the~~each property as of ~~June~~September 30, 2015, and thus the ~~property was~~properties were measured at ~~its~~their carrying value in our condensed consolidated balance sheet as of ~~June~~September 30, 2015 in accordance with ASC 360-10. The Dayton, Ohio property was determined to be impaired as of September 30, 2015, with further discussion below.

The table below summarizes the components of income from real estate and related assets held for sale (dollars in thousands):


	For the three months ended June 30,				For the six months ended June 30,				For the three months ended September 30,					For the nine months ended September 30,
	2015		2014		2015		2014		2015			2014		2015			2014
Operating revenue	$	86	$	77	$	169	$	154	$	505		$	623	$	1,626		$	1,732
Operating expense		9		20		23		43		744	⁽¹⁾		234		1,034	⁽¹⁾		556
Other expense		39		40		79		80		47			67		175			201

Income from real estate and related assets held for sale	$	38	$	17	$	67	$	31
(Loss) income from real estate and related assets held for sale									$	(286	)	$	322	$	417		$	975

The table below summarizes the components of the assets and liabilities held for sale reflected on the accompanying condensed consolidated balance sheet (dollars in thousands):


	June 30, 2015			September 30, 2015
ASSETS HELD FOR SALE
Real estate, at cost	$	2,795		$	19,271
Less: accumulated depreciation		(615	)		(3,680	)

Total real estate held for sale, net		2,180			15,591

Lease intangibles, net		17			153
Deferred rent receivable, net		30			1,046
Deferred financing costs, net		5			2
Other assets		3			40

TOTAL ASSETS HELD FOR SALE	$	2,235		$	16,832

LIABILITIES HELD FOR SALE
Deferred rent liability, net				$	141
Asset retirement obligation					245
Accounts payable and accrued expenses					51
Other liabilities		93			867

TOTAL LIABILITIES HELD FOR SALE	$	93		$	1,304

~~On April 14, 2015,~~We determined that our Dayton, Ohio property should be classified as held for sale during the third quarter of 2015. In determining a market value for this particular property we ~~closed a $0.3~~used the sales comparison approach. Subsequently, we identified that the fair value for this particular property was below the carrying value of this property as of September 30, 2015. Accordingly, we reduced the carrying value of this property to its estimated fair value, less cost to sell, and we recognized an impairment loss of $0.6 million ~~interim financing loan~~during the quarter ended September 30, 2015. We performed an analysis of our planned real estate dispositions and impaired property for the ~~acquisition~~quarter ended September 30, 2015 and determined that these properties should not be classified as discontinued operations as neither constituted a strategic shift in our operations in accordance with ASU 2014-08. We continue to monitor our portfolio for any other indicators of land to be used for continuing development of a medical center campus in Phoenix, Arizona. This loan is collateralized by proceeds from the future sale of the transitional care facility for which we provided a mortgage development loan on July 25, 2014. We will earn interest of 22.0% per annum through the maturity date, with all accrued interest and principal payable upon maturity. This loan matures upon the earlier of April 2016 or the sale of the transitional care facility, which is anticipated to occur in October 2015. We have recognized approximately $0.01 million in interest revenue during the three months ended June 30, 2015.impairment.

Our mortgage notes payable and line of credit as of ~~June~~September 30, 2015 and December 31, 2014 are summarized below (dollars in thousands):


			Carrying Value at												Carrying Value at
	Encumbered properties at June 30, 2015		June 30, 2015		December 31, 2014		Stated Interest Rates at June 30, 2015⁽⁴⁾			Scheduled Maturity Dates at June 30, 2015			Encumbered properties at September 30, 2015		September 30, 2015		December 31, 2014		Stated Interest Rates at September 30, 2015 ⁽⁴⁾			Scheduled Maturity Dates at September 30, 2015
Mortgage and Other Secured Loans:
Fixed rate mortgage loans		73	$	458,806	$	450,392		⁽¹	⁾		⁽²	⁾		71	$	452,866	$	450,392		(1	)		(2	)
Variable rate mortgage loans		7		27,980		8,200		⁽³	⁾		⁽²	⁾		8		29,570		8,200		(3	)		(2	)
Premiums and discounts (net)		N/A		553		707		N/A			N/A			N/A		476		707		N/A			N/A

Total Mortgage Notes Payable		80	$	487,339	$	459,299								79	$	482,912	$	459,299		(5	)

Variable rate Line of Credit		19		45,200		43,300		LIBOR + 2.75	%⁽³⁾		8/1/2017			20		55,500		43,300		LIBOR + 2.75	%⁽³⁾		8/1/2017

Total Mortgage Notes Payable and Line of Credit		99	$	532,539	$	502,599								99	$	538,412	$	502,599

As of ~~June~~September 30, 2015, we had 4446 mortgage notes payable, collateralized by a total of 8079 properties with a net book value of ~~$692.0~~$691.9 million. Gladstone Commercial Corporation has limited recourse liabilities that could result from any one or more of the following circumstances: a borrower voluntarily filing for bankruptcy, improper conveyance of a property, fraud or material misrepresentation, misapplication or misappropriation of rents, security deposits, insurance proceeds or condemnation proceeds, or physical waste or damage to the property resulting from a borrower’s gross negligence or willful misconduct. We will also indemnify lenders against claims resulting from the presence of hazardous substances or activity involving hazardous substances in violation of environmental laws on a property. ~~The weighted-average interest rate on the mortgage notes payable as of June 30, 2015 was 5.11%.~~

During the ~~six~~nine months ended ~~June~~September 30, 2015, we issued ~~four~~six long-term mortgages, collateralized by ~~five~~seven properties, which are summarized below (dollars in thousands):


Date of Issuance	Issuing Bank	Debt Issued		Interest Rate			Maturity Date			Amortization Period (months)		Issuing Bank	Debt Issued		Interest Rate			Maturity Date			Amortization Period (months)
3/6/2015	PNC Bank, NA	$	14,573		3.86	%		4/1/2025			300	PNC Bank, NA	$	14,573		3.86	%		4/1/2025			300
5/28/2015	FC Bank		4,466		3.75	%		6/1/2022			85	FC Bank		4,466		3.75	%		6/1/2022			85
6/16/2015	Guggenheim Partners		13,000		3.99	%		7/1/2045				Guggenheim Partners		13,000		3.99	%		7/1/2045
6/29/2015	Synovus Bank		19,780		LIBOR + 2.25	%		7/1/2018	⁽¹⁾			Synovus Bank		19,780		LIBOR + 2.25	%		7/1/2018	⁽¹⁾
7/1/2015												Synovus Bank		1,700		LIBOR + 2.25	%		7/1/2018	⁽²⁾
7/15/2015												Prudential Mortgage Capital Company		7,540		4.53	%		8/1/2022

		$	51,819										$	61,059

We made payments of ~~$0.4~~$0.3 million and ~~$0.9~~$1.2 million for deferred financing costs during the three and ~~six~~nine months ended ~~June~~September 30, 2015, respectively, and payments of ~~$0.4~~$0.1 million and ~~$0.8~~$0.7 million during the three and ~~six~~nine months ended ~~June~~September 30, 2014, respectively.

Scheduled principal payments of mortgage notes payable for the remainder of 2015, and each of the five succeeding fiscal years and thereafter are as follows (dollars in thousands):


Year	Scheduled Principal Payments			Scheduled Principal Payments
Six Months ending December 31, 2015	$	19,282	⁽¹⁾
Three Months ending December 31, 2015				$	5,749	⁽¹⁾
2016		100,110			100,279
2017		68,873			69,049
2018		39,205			40,908
2019		35,603			35,738
2020		7,688			7,828
Thereafter		216,025			222,885

	$	486,786	⁽²⁾	$	482,436	⁽²⁾

On ~~June 29,~~July 1, 2015, through a wholly-owned subsidiary, we ~~refinanced~~repaid our ~~$19.1~~$11.3 million mortgage ~~loan,~~on our Canton, Dayton, and Akron, Ohio properties. The mortgage was originally set to mature on September 1, 2015. ~~This note had an original interest rate of 5.3% and was collateralized by security interests in our Charlotte, North Carolina and Duncan, South Carolina properties.~~ We borrowed ~~$19.8~~$1.7 million ~~in the refinancing~~ pursuant to a long-term note payable from Synovus ~~Bank.~~Bank to refinance a portion of this debt. The new loan is variable rate ~~in which the interest rate resets monthly~~ and ~~is calculated as the one month London Interbank Offered Rate, or LIBOR, plus a margin of 2.25%. Subsequent to the end of the quarter,~~ we entered into an interest rate cap ~~agreement~~ with Synovus Bank ~~which caps~~to hedge against the variability of the LIBOR rate, at ~~3.0%. As~~a cost of ~~June 30, 2015,~~approximately $0.07 million through July 1, 2018. We will receive payments from Synovus Bank if the one month LIBOR ~~was 0.19%~~rate increases above 3.0%. ~~The new note has a maturity date of July 1, 2018, with one, two-year extension option.~~

We have entered into an interest rate cap ~~agreement with Wells Fargo~~agreements that caps the interest rate on ~~the note~~certain of our notes payable ~~for our Champaign, Illinois property at a certain interest rate~~ when one-month LIBOR is in excess of 3.0%. The fair value of the interest rate cap ~~agreement~~agreements is recorded in ~~Other~~other assets on our accompanying condensed consolidated balance sheets. We record changes in the fair value of the interest rate cap ~~agreement~~agreements quarterly based on the current market valuations at quarter end as ~~Other income (loss)~~interest expense on our accompanying condensed consolidated statements of operations. Generally, we will estimate the fair value of our interest rate ~~cap using estimates of value provided by the counterparty and our own assumptions~~caps, in the absence of observable market data, using estimates of value including estimated remaining life, counterparty credit risk, current market yield and interest rate spreads of similar securities as of the measurement date. At ~~June~~September 30, 2015 and December 31, 2014, our interest rate cap ~~agreement was~~agreements were valued using Level 3 inputs. The following table summarizes the key terms of each interest rate cap agreement (dollars in thousands):


																					As of September 30,							As of December 31,
																					2015							2014
								As of June 30, 2015				As of December 31, 2014				LIBOR Cap			Maturity Date		Notional Amount			Cost		Fair Value		Notional Amount		Cost		Fair Value
Interest Rate Cap	Notional Amount		LIBOR Cap			Maturity Date		Cost		Fair Value		Cost		Fair Value		LIBOR Cap			Maturity Date							Fair Value		Notional Amount		Cost		Fair Value
November 26, 2013	$	8,200		3.00	%		Dec-16	$	31	$	—	$	31	$	4
Nov-13																	3.00	%		Dec-16	Notional Amount		$	Cost	8,200	$	31	$	—	$	8,200	$	31	$	4
Jul-15																	3.00	%		Jul-18		21,370			68		19		—		—		—

																					$	29,570		$	99	$	19	$	8,200	$	31	$	4

The fair value of all mortgage notes payable outstanding as of ~~June~~September 30, 2015 was ~~$498.6~~$495.6 million, as compared to the carrying value stated above of ~~$486.8~~$482.9 million. The fair value is calculated based on a discounted cash flow analysis, using ~~interest rates based on~~ management’s estimate of market interest rates on long-term debt with comparable terms and loan to value ratios. The fair value was calculated using Level 3 inputs of the hierarchy established by ASC 820, “Fair Value Measurements and Disclosures.”

The amount outstanding under the Line of Credit approximates fair value as of September 30, 2015, because the debt is subject to a variable interest rate, determined by market forces, as well as a recently renewed interest rate spread.

In August 2013, we procured a ~~$60.0 million~~ senior unsecured revolving credit facility, or the Line of Credit, ~~which was expanded to $75.0 million in November 2014,~~ with KeyBank National Association (serving as a revolving lender, a letter of credit issuer and an administrative agent) ~~and added Citizens Bank of Pennsylvania and Comerica Banks as additional lenders.~~

~~The~~. On October 5, 2015, we expanded our Line of Credit ~~initially~~to $85.0 million and extended the maturity date 1-year through August 2018, with a 1-year extension option through August 2019. We also added a $25.0 million 5-year term loan facility, which matures in ~~August 2017; however, we have a one-year extension option subject to~~October 2020. The interest rate on the ~~payment~~revolving line of ~~an extension fee equal to~~credit was also reduced by 25 basis points onat each of the ~~initial maturity date~~leverage tiers and ~~certain other customary conditions.~~the total maximum commitment under the two facilities was increased from $100.0 million to $150.0 million. We also added 3 new lenders to the bank syndicate, which is now comprised of KeyBank, Comerica Banks, Fifth Third Bank, US Bank and Huntington Bank. We were subject to payment of $0.5 million for the modification of the agreement.

As of ~~June~~September 30, 2015, there was ~~$45.2~~$55.5 million outstanding under our Line of Credit at an interest rate of approximately 2.94% and $3.9 million outstanding under letters of credit at a weighted average interest rate of 2.75%. As of ~~August 3,~~October 27, 2015, the maximum additional amount we could draw was ~~$9.2~~$13.8 million. We were in compliance with all covenants under the Line of Credit as of ~~June~~September 30, 2015.

In February 2012, we completed a public offering of 1,540,000 shares of 7.125% Series C Cumulative Term Preferred Stock, par value $0.001 per share, or the Term Preferred Stock, at a public offering price of $25.00 per share. Gross proceeds of the offering totaled $38.5 million and net proceeds, after deducting offering expenses borne by us, were $36.7 million. On or after January 31, 2016, we may redeem the shares at a redemption price of $25.00 per share, plus any accumulated and unpaid dividends to and including the date of redemption. The shares of the Term Preferred Stock have a mandatory redemption date of January 31, 2017.

The fair value of our Term Preferred Stock as of ~~June~~September 30, 2015, was ~~$39.3~~$39.5 million, as compared to the carrying value stated above of $38.5 million. The fair value is calculated based on the closing share price as of ~~June~~September 30, 2015 of ~~$25.52.~~$25.68. The fair value was calculated using Level 1 inputs of the hierarchy established by ASC 820, “Fair Value Measurements and Disclosures.”

We are obligated as lessee under four ground leases. Future minimum rental payments due under the terms of these leases for the remainder of 2015 and each of the five succeeding years and thereafter, are as follows (dollars in thousands):


			For the year ended December 31,																For the year ended December 31,
Location	Lease End Date		2015		2016		2017		2018		2019		2020		Thereafter		Lease End Date		2015		2016		2017		2018		2019		2020		Thereafter
Tulsa, OK		Apr-21	$	85	$	169	$	169	$	169	$	169	$	169	$	85		Apr-21	$	42	$	169	$	169	$	169	$	169	$	169	$	85
Dartmouth, MA		May-36		87		174		174		174		174		174		3,126		May-36		44		174		174		174		174		174		3,126
Springfield, MA		Feb-30		43		86		89		90		90		90		884		Feb-30		21		86		89		90		90		90		884
Salt Lake City, UT		Nov-40		14		30		30		31		32		33		853		Nov-40		7		30		30		31		32		33		853

			$	229	$	459	$	462	$	464	$	465	$	466	$	4,948			$	114	$	459	$	462	$	464	$	465	$	466	$	4,948

Expenses recorded in connection to rental expense incurred for the properties listed above during both the three months ended ~~June~~September 30, 2015 and 2014 and the ~~six~~nine months ended ~~June~~September 30, 2015 and 2014 were $0.1 million, and ~~$0.2~~$0.3 million, respectively. Rental expenses are reflected in property operating expenses on the condensed consolidated statements of operations.

The following table summarizes the changes in our stockholders’ equity for the ~~six~~nine months ended ~~June~~September 30, 2015 (dollars in thousands):


																			Distributions in Excess of Accumulated Earnings				Total Stockholders’ Equity				Shares Issued																			Notes			Distributions in
	Shares Issued												Additional Paid in Capital			Notes Receivable from Employees										Preferred			Senior Common		Common		Preferred			Senior Common			Common			Additional Paid in			Receivable from			Excess of Accumulated				Total Stockholders’
	Preferred Stock		Senior Common Stock		Common Stock		Preferred Stock		Senior Common Stock		Common Stock					Notes Receivable from Employees						Stock						Stock		Stock		Stock			Stock			Stock			Capital			Employees			Earnings			Equity
Balance at December 31, 2014		2,150,000		809,411		19,589,606	$	2	$	1	$	20	Additional Paid in Capital		$	369,748		$		(375	)			$	(151,724	)	$	217,672		2,150,000		809,411			19,589,606		$	2		$	1		$	20		$	369,748		$	(375	)		$	(151,724	)	$	217,672

Issuance of senior common stock and common stock, net		—		186,441		1,554,380		—		—		1		29,672			—			—				29,673				—		183,658		2,154,173			—			—			2			38,653			—			—				38,655
Distributions declared to common, senior common and preferred stockholders		—		—		—		—		—		—		—			—			(17,971	)			(17,971	)			—		—		—			—			—			—			—			—			(27,305	)			(27,305	)
Principal repayments of employee notes receivable		—		—		—		—		—		—		—			375			—				375				—		—		—			—			—			—			—			375			—				375
Net income		—		—		—		—		—		—		—			—			1,125				1,125				—		—		—			—			—			—			—			—			1,030				1,030

Balance at June 30, 2015		2,150,000		995,852		21,143,986	$	2	$	1	$	21	$	399,420		$	—		$	(168,570	)		$	230,874
Balance at September 30, 2015																												2,150,000		993,069		21,743,779		$	2		$	1		$	22		$	408,401		$	—		$	(177,999	)		$	230,427

Our Board of Directors declared the following distributions per share for the three and ~~six~~nine months ended ~~June~~September 30, 2015 and 2014:


	For the three months ended June 30,				For the six months ended June 30,				For the three months ended September 30,				For the nine months ended September 30,
	2015		2014		2015		2014		2015		2014		2015		2014
Common Stock	$	0.375	$	0.375	$	0.75	$	0.75	$	0.375	$	0.375	$	1.125	$	1.125
Senior Common Stock		0.2625		0.2625		0.525		0.525		0.2625		0.2625		0.7875		0.7875
Series A Preferred Stock		0.4843749		0.4843749		0.9687498		0.9687498		0.4843749		0.4843749		1.4531247		1.4531247
Series B Preferred Stock		0.4688		0.4688		0.9375		0.9375		0.4688		0.4688		1.4063		1.4063
Series C Preferred Stock		0.4453		0.4453		0.8906		0.8906		0.4453		0.4453		1.3359		1.3359

OnIn September 2, 2014 we entered into an open market sale agreement, or the ATM Program, with Cantor Fitzgerald & Co., or Cantor Fitzgerald, pursuant to which we may, from time to time, offer to sell shares of our common stock with an aggregate sales price of up to $100.0 million on the open market through Cantor Fitzgerald, acting as sales agent and/or principal. During the ~~six~~nine months ended ~~June~~September 30, 2015, we raised approximately ~~$27.2~~$36.2 million in net proceeds under the ATM Program. As of ~~June~~September 30, 2015, ~~under the existing program,~~ we have sold a total of ~~3.4~~4.0 million shares with aggregate gross proceeds of ~~$60.1~~$69.3 million, and have a remaining capacity to sell up to ~~$39.9~~$30.7 million of common stock under the ATM ~~Program with Cantor Fitzgerald.~~Program.

In March 2011, we commenced an offering of an aggregate of 3,500,000 shares of our Senior Common Stock, par value $0.001 per share, at a price to the public of $15.00 per share, of which 3,000,000 shares were intended to be offered pursuant to the primary offering and 500,000 shares were intended to be offered pursuant to our senior common distribution reinvestment plan, or the DRIP. ~~We elected not to extend this~~This offering ~~which~~ terminated according to its terms on March 28, 2015. During the three months ended March 31, 2015, we sold 189,052 shares of our Senior Common Stock at $15.00 per share and issued 5,134 shares of our Senior Common Stock under the Dividend Reinvestment Plan, or DRIP, program. The

net proceeds, after deducting the underwriting discount and commission, were $2.6 million. At the conclusion of the offering on March 28, 2015, we had sold 927,994 shares of Senior Common Stock, for gross proceeds of $13.9 million, and issued an additional 27,038 shares of Senior Common Stock under the DRIP program.

The following table is a summary of the note issued to an employee of the Adviser for the exercise of stock options (dollars in thousands). The note, and all corresponding interest, was repaid in full on May 7, 2015:

The employee stock option program terminated in 2006. In accordance with ASC 505-10-45-2, “Equity,” receivables from employees for the issuance of capital stock to employees prior to the receipt of cash payment should be reflected in the balance sheet as a reduction to stockholders’ equity. Therefore, this note was recorded as a full recourse loan to the employee and is included in the equity section of the accompanying condensed consolidated balance sheets.

On July 1, 2015, through a wholly-owned subsidiary, we repaid our $11.3 million mortgage on our Canton, Dayton, and Akron, Ohio properties. The mortgage was originally set to mature on September 1, 2015. We borrowed $1.7 million pursuant to a long-term note payable from Synovus bank to refinance a portion of this debt. The new loan is variable rate and we entered into an interest rate cap with Synovus Bank to hedge against the variability of the LIBOR rate, at a cost of approximately $0.07 million through July 1, 2018. We will receive payments from Synovus Bank if the one month LIBOR rate increases above 3.0%.

~~On July 13,~~October 2, 2015 we ~~executed~~modified a lease with ~~a new tenant~~one of our tenants in our ~~Raleigh, North Carolina property to occupy 86,886~~multi-tenant Indianapolis, Indiana property. This tenant, occupying 1,427 square feet, ~~75.0% of the total square footage.~~extended their lease term an additional three years through March 31, 2019. The ~~current tenant will retain 18.0% of the space and the building will be approximately 93.0% occupied. The~~original lease ~~will commence on August 1, 2015 and will expire~~term would have expired on December 31, ~~2027. The new~~2015. This lease ~~provides for~~contains prescribed rent escalations over its life with annualized straight line rents of approximately ~~$0.5~~$0.02 million. The lease grants the tenant two extension options for an additional five years each. In connection with the execution of the lease, we will pay $0.8 million in tenant improvements, and anticipate paying $0.4 million in leasing commissions.

On ~~July 14,~~October 13, 2015, our Board of Directors declared the following monthly distributions:

Senior Common Stock Distributions

Payable to the

Holders of Record

During the Month of:

Payment Date

Distribution per Share

Payment Date

Distribution per Share

July

August 7, 2015

0.0875

August

September 8, 2015

0.0875

September

October 7, 2015

0.0875

October

November 6, 2015

0.0875

November

December 7, 2015

0.0875

December

January 8, 2016

0.0875

Total

0.2625

On ~~July 15,~~October 20, 2015 we acquired a ~~78,151~~90,626 square foot ~~single-tenant, office building~~industrial facility located in the Atlanta, Georgia suburb of Villa Rica for ~~$13.0~~$6.6 million, excluding related acquisition expenses of $0.1 million. We funded this acquisition with existing cash on hand and the issuance of ~~$7.5~~$3.8 million of mortgage debt on the property. ~~The~~This property is 100% leased to one tenant ~~leased 54,836 square feet of the property~~ for 718 years, ~~and the remaining 23,315 square feet for 15 years. The tenant has~~with 2 options to renew ~~both leases~~this lease for an additional 5 years each. The lease provides for prescribed rent escalations over its life with annualized straight line rents of ~~$1.3~~$0.6 million. The average cap rate on this acquisition is ~~9.9%~~9.2%.

On July 24, 2015, we entered into the Amended Advisory Agreement, which revised the calculation of the annual base management and annual incentive fee and also added a capital gains fee and a termination fee, effective July 1, 2015. Please refer to footnote 2 for a detailed explanation of these changes.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

All statements contained herein, other than historical facts, may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements may relate to, among other things, future events or our future performance or financial condition. In some cases, you can identify forward-looking statements by terminology such as “may,” “might,” “believe,” “will,” “provided,” “anticipate,” “future,” “could,” “growth,” “plan,” “intend,” “expect,” “should,” “would,” “if,” “seek,” “possible,” “potential,” “likely” or the negative of such terms or comparable terminology. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our business, financial condition, liquidity, results of operations, funds from operations or prospects to be materially different from any future business, financial condition, liquidity, results of operations, funds from operations or prospects expressed or implied by such forward-looking statements. For further information about these and other factors that could affect our future results, please see the captions titled “Forward-Looking Statements” and “Risk Factors” in this report and in our Annual Report on Form 10-K for the year ended December 31, 2014. We caution readers not to place undue reliance on any such forward-looking statements, which are made pursuant to the Private Securities Litigation Reform Act of 1995 and, as such, speak only as of the date made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this Quarterly Report on Form 10-Q.

All references to “we,” “our,” “us” and the “Company” in this Report mean Gladstone Commercial Corporation and its consolidated subsidiaries, except where the context indicates that the term means only Gladstone Commercial Corporation.

We are an externally-advised real estate investment trust, or REIT, that was incorporated under the General Corporation Law of the State of Maryland on February 14, 2003, primarily for the purpose of investing in and owning net leased industrial, commercial and retail real property and selectively making long-term industrial and commercial mortgage loans. Our portfolio of real estate is leased to a wide cross section of tenants ranging from small businesses to large public companies, many of which are corporations that do not have publicly-rated debt. We have historically entered into, and intend in the future to enter into, purchase agreements for real estate having triple net leases with terms of approximately 107 to 15 years and built in rental rate increases. Under a triple net lease, the tenant is required to pay all operating, maintenance and insurance costs and real estate taxes with respect to the leased property. We actively communicate with buyout 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 currently own ~~101~~102 properties totaling ~~11.1~~11.2 million square feet, which have a total gross and net carrying value, including intangible assets and properties held for sale, of ~~$945.9~~$943.1 million and ~~$796.7~~$784.9 million, respectively. We also currently have two mortgage loan receivables outstanding for an aggregate of $5.9 ~~million.~~million, for which we earn interest of 22.0% per annum through the maturity date. These loans mature upon the earlier of April 2016 or the sale of the underlying property, which is anticipated to occur in December 2015. We expect these mortgage loan receivables to be paid in full during the fourth quarter 2015.

The strength of the global economy and the U.S. economy in particular, continues to be uncertain and volatile, and we remain cautious about a sustained long-term economic recovery. Vacancy rates have decreased for both office and industrial properties in most markets as increased user demand with restrained new construction activity has led to improved conditions. In fact, vacancy rates in many markets have been reduced to levels seen at the latest peak before the recession and rental rates have increased in many primary and secondary markets. Construction activity ~~particularly~~ for both office and industrial properties is on the rise, ~~as a result of increased demand for facilities to satisfy the increased demand in the e-commerce sector. However,~~however, vacancy rates in certain secondary markets are still higher than pre-recession levels, as job growth has yet to return to all areas of the country even though the national unemployment rate has dropped over the past 12 months. ~~Interest~~While interest rates have increased since the beginning of the year, ~~but~~property financing costs are still ~~remain~~ at ~~historic lows.~~low levels. This ~~continued low interest rate~~ environment ~~is leading~~has led to ~~increasing~~increased competition for new

~~for new~~ acquisitions. In addition, the uncertainty surrounding the ability of the federal government to address its fiscal condition in both the near and long term as well as international geo-political issues has increased domestic and global economic instability. These developments and our government’s credit concerns in general, could cause interest rates and borrowing costs to rise, which may negatively impact our ability to access both the debt and equity markets on favorable terms. In addition, a further decrease to the U.S. credit rating could create broader financial turmoil and uncertainty, which may weigh heavily on our stock price. Continued adverse economic conditions could have a material adverse effect on one or more of our tenants, or our business, financial condition and results of operations.

We continue to focus on re-leasing vacant space, renewing upcoming lease maturities and acquiring additional properties. Currently, we have ~~three~~two fully vacant buildings located in ~~Baytown, Texas,~~ Newburyport, Massachusetts and Dayton, Ohio and ~~two~~three partially vacant buildings located in Bolingbrook, ~~Illinois~~Illinois; Baytown, Texas; and Burnsville, Minnesota. Our ~~Baytown, Texas tenant vacated upon its lease termination in April 2013, our~~ Newburyport, Massachusetts tenant vacated upon its lease termination in April 2015 and our Dayton, Ohio tenant vacated upon its lease termination in June 2015. Our ~~Bolingbrook, Illinois tenant vacated upon their lease termination in December 2014~~Dayton, Ohio property is currently marketed for sale and we ~~have a partial space tenant for~~anticipate selling this property ~~which took occupancy in December 2014.~~ during the fourth quarter.

We originally had 12 leases expiring in ~~2015, and~~2015: we have successfully extended the leases for 78 of these tenants, 1and the properties associated with 2 of these leases have been classified as held for sale. Of the remaining two properties, one is currently vacant and the other is in ~~negotiation~~lease extension negotiations with the current tenant, and 1 in which we agreed to sell the property to a third party. The Newburyport, Massachusetts, and Dayton, Ohio tenants have vacated, per the discussion above, and we have been notified that the remaining tenant in our Maple Heights, Ohio property will leave at the end of this year.sub-tenant. We are in direct lease negotiations with a sub-tenant in the Maple Heights, Ohio property for a significant percentage of the building. We are aggressively pursuing new tenants for all of these properties, which comprise less than 3% of our projected 2015 rental income, 50% of which does not terminate until December 2015. While we originally had 12 leases expiring in 2015, we only have 3 leases expiring in 2016, and we anticipate executing lease extensions for 2 of these properties with 2016 lease expirations by the end of 2015. We only have 6 expiring leases in 2017 and 43 expiring leases in 2018, which are each less than 2%2.0% of annualized rents for each respective year.

Our available vacant space at ~~June~~September 30, 2015 comprises less than ~~3.0%~~2.12% of our total square footage and the annual carrying costs, including real estate taxes and property operating expenses, are approximately ~~$0.7~~$1.9 million. We continue to actively seek new tenants for these properties.

Our ability to make new investments is highly dependent upon our ability to procure external financing. Our principal sources of external financing generally include the issuance of equity securities, long-term mortgage loans secured by properties and borrowings under our line of credit, or the Line of Credit. Long-term mortgages are readily obtainable. The collateralized mortgage backed securities, or CMBS, market remains very active but uncertainty with regard to interest rates together with the inability to enter into early interest rate lock agreements makes the CMBS market less predictable. We continue to look to regional banks, insurance companies and other non-bank lenders, in addition to the CMBS market to issue mortgages to finance our real estate activities.

In addition to obtaining funds through borrowing, we have been active in the equity markets during 2015. We have issued shares of common stock through our at-the-market program, or ATM Program, pursuant to our open market sale agreement with Cantor Fitzgerald & Co., or Cantor Fitzgerald, discussed in more detail below.

~~Phoenix, Arizona:~~On April 14, 2015, we closed a $0.3 million interim financing loan for the acquisition of land to be used for continuing development of a medical center campus in Phoenix, Arizona. This loan is collateralized by proceeds from the future sale of the transitional care facility for which we provided a mortgage development loan on July 25, 2014. We will earn interest of 22.0% per annum through the maturity date, with all accrued interest and principal payable upon maturity. This loan matures upon the earlier of April 2016 or the sale of the transitional care facility, which we anticipate to occur in October 2015.

~~Columbus, Ohio:~~On May 28, 2015, we acquired a 78,033 square foot office building located in Columbus, Ohio for $7.7 million, excluding related acquisition expenses of $0.1 million. We funded this acquisition with existing cash on hand and the issuance of $4.5 million of mortgage debt on the property. The tenant has leased the property for 15 years and has 2 options to renew the lease for an additional 5 years each. The lease provides for prescribed rent escalations over its life, with annualized straight line rents of $0.64 million. The average cap rate on this acquisition is 8.3%.

~~Salt Lake City, Utah:~~On May 29, 2015, we acquired an 86,409 square foot office building located in Salt Lake City, Utah for $22.2 million, excluding related acquisition expenses of $0.1 million. We funded this acquisition with existing cash on hand, and the issuance of $13.0 million of mortgage debt on the property. The tenant has leased the property for 6.5 years and has 1 option to renew the lease for an additional 5 years. The lease provides for prescribed rent escalations over its life, with annualized straight line gross rents of $2.4 million. The average cap rate on this acquisition is 8.0%.

Atlanta, Georgia: On July 15, 2015 we acquired a 78,151 square foot office building located in Atlanta, Georgia for $13.0 million, excluding related acquisition expenses of $0.1 million. We funded this acquisition with existing cash on hand and the issuance of $7.5 million of mortgage debt on the property. The tenant has leased 54,836 square feet for 7 years, and 23,315 square feet for 15 years. The tenant has 2 options to renew both leases for an additional 5 years each. The ~~lease provides~~leases provide for prescribed rent escalations over its life with annualized straight line rents of $1.3 million. The average cap rate on this acquisition is 9.9%.

Villa Rica, Georgia: On October 20, 2015 we acquired a 90,626 square foot industrial facility located in the Atlanta, Georgia suburb of Villa Rica for $6.6 million, excluding related acquisition expenses of $0.1 million. We funded this acquisition with existing cash on hand and the issuance of $3.8 million of mortgage debt on the property. This property is 100% leased to one tenant for 18 years, with 2 options to renew this lease for an additional 5 years each. The lease provides for prescribed rent escalations over its life with annualized straight line rents of $0.6 million. The average cap rate on this acquisition is 9.2%.

Columbus, Ohio:On February 20, 2015, we entered into a purchase and sale agreement with ~~a third party~~the sub tenant to ~~acquire~~sell our Columbus, Ohio property for $2.8 million, an amount greater than the current carrying value of the property. The lease on this property ~~is scheduled to terminate~~terminated in ~~October~~September 2015 and we executed a new lease with the ~~current~~sub tenant, ~~has notified us~~who currently occupies the property, through the date of ~~its plan to vacate.~~the sale. We anticipate the sale to be completed in November 2015. We considered this asset to be non-core to our long term strategy, and we will re-deploy the proceeds from this sale into future acquisitions.

Q2Dayton, Ohio: On September 1, 2015 we listed this property for sale. We determined the fair value of this property was below our carrying value of $0.9 million, and we recognized an impairment loss during the three and nine months ended September 30, 2015 of $0.6 million. We consider this asset to be non-core to our long term strategy, and we will re-deploy the proceeds from the sale into future acquisitions.

Hialeah, Florida: On September 10, 2015, we listed this property for sale. We considered this asset to be non-core to our long term strategy, and we will re-deploy the proceeds from this sale into future acquisitions.

Birmingham, Alabama and Columbia, Missouri:We are negotiating a letter of intent with the current tenant to sell two of the three properties they are currently leasing in Birmingham, Alabama and Columbia, Missouri, for $4.1 million, an amount greater than the current carrying value on the respective properties. We anticipate the sale to be completed in November 2015. We considered this asset to be non-core to our long term strategy, and we will re-deploy the proceeds from this sale into future acquisitions.

~~FC Bank:~~On May 28, 2015, through a wholly-owned subsidiary, we borrowed $4.5 million pursuant to a long-term note payable from FC Bank, a division of CNB Bank. The note accrues interest at a fixed rate of 3.75% per year and has a maturity date of June 1, 2022. The fixed rate resets to the applicable treasury rate index plus 3.0% per year on June 1, 2020 and June 1, 2021. We used the proceeds from the note to acquire the property in Columbus, Ohio described above on the same date.

~~Guggenheim Partners:~~On June 16, 2015, through a wholly-owned subsidiary, we borrowed $13.0 million pursuant to a long-term note payable from Guggenheim Partners, which is collateralized by a security interest in our Salt Lake City, Utah property. The note accrues interest at a fixed rate of 3.99% per year and has a maturity date of July 1, 2045. We used the proceeds from the note to repay a portion of outstanding debt on our line of credit.

~~Synovus Bank:~~ On June 29, 2015, through a wholly-owned subsidiary, we refinanced our $19.1 million mortgage at an interest rate of 5.3% collateralized by security interests in our Charlotte, North Carolina and Duncan, South Carolina properties. That mortgage was originally set to mature on September 1, 2015. We borrowed $19.8 million pursuant to a long-term note payable from Synovus Bank. The new loan is variable rate, in which the interest rate resets monthly and is calculated as the one month London Interbank Offered Rate, or LIBOR, plus a margin of 2.25%. Subsequent to the end of the quarter, we entered into an interest rate cap agreement with Synovus Bank, which caps LIBOR to 3.0%. As of June 30, 2015, one month LIBOR was 0.19%. The new note has a maturity date of July 1, 2018, with one, two-year extension option at the behest of the borrower.

Synovus Bank: On July 1, 2015, through a wholly-owned subsidiary, we repaid our $11.3 million mortgage on our Canton, Dayton, and Akron, Ohio properties that was originally set to mature on September 1, 2015. We borrowed $1.7 million pursuant to a long-term note payable from Synovus Bank to refinance a portion of this debt. The new loan is variable rate and we entered into an interest rate cap with Synovus Bank to hedge against the variability of the LIBOR rate, at a cost of approximately $0.07 million through July 1, 2018. We will receive payments from Synovus Bank if the one month LIBOR rate increases above 3.0%.

Prudential Mortgage Capital Company:On July 15, 2015, through a wholly-owned subsidiary, we borrowed $7.5 million pursuant to a long-term note payable from Prudential Mortgage Capital Company, which is collateralized by a security interest in our Atlanta, Georgia property. The note accrues interest at a fixed rate of 4.53% per year, and has a maturity date of August 1, 2022. We used the proceeds from the note to acquire the property in Atlanta, Georgia described above on the same date.

Q2KeyBank Line of Credit: On October 5, 2015, we expanded our Line of Credit to $85.0 million and extended the maturity date one year through August 2018, with a one year extension option through August 2019. We also added a $25.0 million 5-year term loan facility, which matures in October 2020. The interest rate on the revolving line of credit was also reduced by 25 basis points at each of the leverage tiers and the total maximum commitment under the two facilities was increased from $100.0 million to $150.0 million. We also added 3 new lenders to the bank syndicate. The bank group is now comprised of KeyBank, Comerica Banks, Fifth Third Bank, US Bank and Huntington Bank. We were subject to payment of $0.5 million for the modification of the agreement.

Keybank National Association:On October 20, 2015 through a wholly-owned subsidiary, we borrowed $3.8 million pursuant to a long-term note payable from Keybank National Association, which is collateralized by a security interest in our Villa Rica, Georgia property. The note accrues interest at a fixed rate of 4.59% per year, and has a maturity date of November 1, 2025. We used the proceeds from the note to acquire the property in Villa Rica, Georgia described above on the same date.

~~Austin, Texas~~: On April, 28 2015, we modified the lease with the tenant occupying one of our properties located in Austin, Texas. The modification provided the tenant a termination option, which allows the tenant to terminate its lease effective December 31, 2017, upon paying a termination penalty of approximately $1.1 million on or before March 31, 2017. The lease is scheduled to otherwise terminate in June 2022. Under this modification, the tenant forfeited its right to $0.5 million in tenant improvement allowance, provided in an earlier amendment. All other terms and conditions of the lease remain in full force and effect.

~~Columbus, Ohio~~: On April 29, 2015, we modified the lease with the anchor tenant occupying one of our properties located in Columbus, Ohio. The anchor tenant is currently occupying 92% of the property and the modification allows the anchor tenant to expand into the remaining space, currently occupied by another tenant through November 30, 2016. The lease term for the expansion space is coterminous with their current lease, and both leases expire on December 2023. In connection with the expansion of the lease and modification of certain terms of the lease, we provided approximately $0.1 million in tenant improvements.

Raleigh, North Carolina: On July 13, 2015 we executed a lease with a new tenant in our Raleigh, North Carolina property to occupy 86,886 square feet, ~~75%~~representing 75.0% of the total square ~~footage, which the~~footage. The current tenant ~~will vacate on July 31, 2015.~~retained 18.0% of the space. Therefore, the building is approximately 93.0% occupied. The lease ~~will commence~~commenced on August 1, 2015 and will expire on December 31, 2027. The new lease provides for prescribed rent escalations over its life, with annualized straight line rents of approximately $0.5 million. The lease grants the tenant two extension options ~~to extend the lease~~ for an additional five years each. In connection with the execution of the lease, we will pay $0.8 million in tenant improvements, and ~~anticipate paying~~ $0.4 million in leasing commissions. ~~The total~~

Indianapolis, Indiana:On August 28, 2015 we modified a lease with one of our tenants in our multi-tenant Indianapolis, Indiana property. This tenant, previously occupying 4,512 square feet, added an additional suite to its lease, increasing its leased square footage to 6,903. The tenant also extended their lease term an additional 3 years through September 2021. The original lease term would have expired in ~~this~~October 2018. This lease contains prescribed rent escalations over its life with annualized straight line rents of approximately $0.1 million, a $0.03 million increase over the previous lease. In connection with the extension of the lease and modification of certain of its terms, we provided $0.06 million in tenant improvements.

Baytown, Texas:On September 18, 2015 we executed a lease with a tenant to occupy a portion of our previously vacant property located in Baytown, Texas. The lease is for 57.0% of the building, and is ~~116,129~~for a seven year term. The lease provides for prescribed rent escalations over its life, with annualized straight line rents of approximately $0.13 million. The tenant has two options to renew the lease for an additional period of five years each. In connection with the execution of the lease, we provided $0.2 million in tenant improvements and $0.06 million in leasing commissions.

Indianapolis, Indiana:On October 2, 2015 we modified a lease with one of our tenants in our multi-tenant Indianapolis, Indiana property. This tenant, occupying 1,427 square feet, ~~and after execution~~extended their lease term an additional three years through March 31, 2019. The original lease term would have expired on December 31, 2015. This lease contains prescribed rent escalations over its life with annualized straight line rents of ~~this lease, the building will be~~ approximately ~~93% occupied.~~$0.02 million.

The equity issuances summarized below were issued under our universal shelf registration statement (File No. 333-190931) that was effective and on file with the Securities and Exchange Commission at the time of each respective issuance.

ATM Program: During the ~~six~~nine months ended ~~June~~September 30, 2015, we sold ~~1.6~~2.2 million shares, raising an aggregate of ~~$27.2~~$36.2 million in net proceeds under our ATM Program with Cantor Fitzgerald. Proceeds from these sales were used to acquire real estate, repay indebtedness and for other general corporate purposes. Under the ATM Program we may, from time to time, offer to sell shares of our common stock with an aggregate sales price of up to $100.0 million on the open market through Cantor Fitzgerald, as agent, or to Cantor Fitzgerald, as principal, based upon our instructions (including any price, time or size limits or other customary parameters or conditions that we may

raised ~~$62.7~~$72.9 million in net proceeds under the ATM Program from September 2014 to date. Sales of shares of our common stock through our ATM Program are executed by means of ordinary brokers’ transactions on the NASDAQ Global Select Market, or the NASDAQ, or otherwise at market prices, in privately negotiated transactions, crosses or block transactions, as may be agreed between us and Cantor Fitzgerald, including a combination of any of these transactions. Proceeds from this offering were used to acquire real estate and for general corporate purposes.

Senior Common Program: During the ~~six~~nine months ended ~~June~~September 30, 2015, we sold 189,052 shares of our Senior Common Stock at $15.00 per share and issued 5,134 shares of our Senior Common Stock under the associated Dividend Reinvestment Plan, or DRIP, program. The net proceeds, after deducting the underwriting discount and commission, were $2.6 million. This offering terminated according to its terms on March 28, 2015, and we wrote-off $0.1 million of deferred offering costs related to such termination. Proceeds from this offering were used to acquire real estate and for general corporate purposes.

Our Adviser seeks to diversify our portfolio to avoid dependence on any one particular tenant, industry or geographic market. By diversifying our portfolio, our Adviser intends to reduce the adverse effect on our portfolio of a single under-performing investment or a downturn in any particular industry or geographic market. For the nine months ending September 30, 2015, our largest tenant comprised only 6.0% of total rental income. The table below reflects the breakdown of our total rental income by tenant industry classification for the three and ~~six~~nine months ended ~~June~~September 30, 2015 and 2014, respectively (dollars in thousands):


	For the three months ended June 30,										For the six months ended June 30,										For the three months ended September 30,										For the nine months ended September 30,
	2015					2014					2015					2014					2015					2014					2015					2014
Industry Classification	Rental Income		Percentage of Rental Income			Rental Income		Percentage of Rental Income			Rental Income		Percentage of Rental Income			Rental Income		Percentage of Rental Income			Rental Income		Percentage of Rental Income			Rental Income		Percentage of Rental Income			Rental Income		Percentage of Rental Income			Rental Income		Percentage of Rental Income
Healthcare																					$	3,302		16.0	%	$	2,287		12.5	%	$	9,129		15.2	%	$	6,199		11.7	%
Telecommunications	$	3,200		16.1	%	$	3,269		18.6	%	$	6,329		16.3	%	$	6,338		18.5	%		3,200		15.5			3,115		17.0			9,528		15.9			9,453		18.0
Healthcare		3,187		15.9			2,037		11.6			5,828		14.8			3,912		11.4
Automobile		2,635		13.2			2,220		12.6			5,270		13.4			4,516		13.2			2,635		12.8			2,006		10.9			7,907		13.2			6,522		12.3
Personal, Food & Miscellaneous Services		1,576		7.9			1,331		7.6			3,153		8.0			2,663		7.8			1,576		7.6			1,333		7.3			4,730		7.9			3,996		7.6
Diversified/Conglomerate Services																						1,186		5.7			1,162		6.3			3,524		5.9			1,992		3.8
Electronics		1,202		6.0			1,377		7.8			2,402		6.1			2,755		8.1			1,139		5.5			1,659		9.0			3,539		5.9			4,414		8.4
Diversified/Conglomerate Services		1,170		5.8			519		2.9			2,337		5.9			830		2.4
Diversified/Conglomerate Manufacturing		1,010		5.0			1,090		6.2			2,053		5.2			2,006		5.9			1,099		5.3			934		5.1			3,152		5.3			2,940		5.6
Chemicals, Plastics & Rubber		789		3.9			836		4.7			1,578		4.0			1,675		4.9			789		3.8			792		4.3			2,367		3.9			2,467		4.7
Machinery		772		3.9			620		3.5			1,544		3.9			1,203		3.5			772		3.7			675		3.7			2,317		3.9			1,878		3.6
Beverage, Food & Tobacco		679		3.4			749		4.3			1,427		3.6			1,497		4.4
Personal & Non-Durable Consumer Products		657		3.3			651		3.7			1,316		3.3			1,302		3.8			656		3.2			651		3.5			1,972		3.3			1,953		3.7
Information Technology																						572		2.8			—		0.0			780		1.3			—		—
Banking																						563		2.7			291		1.6			1,142		1.9			868		1.7
Childcare		556		2.8			494		2.8			1,112		2.8			654		1.9			556		2.7			555		3.0			1,667		2.8			1,209		2.3
Buildings and Real Estate		548		2.7			542		3.1			1,095		2.8			1,084		3.2			548		2.7			547		3.0			1,643		2.7			1,631		3.1
Beverage, Food & Tobacco																						525		2.5			749		4.1			1,953		3.3			2,246		4.3
Containers, Packaging & Glass		521		2.6			521		3.0			1,042		2.7			1,042		3.0			521		2.5			521		2.8			1,563		2.6			1,563		3.0
Printing & Publishing		391		2.0			460		2.6			782		2.0			920		2.7			391		1.9			477		2.6			1,170		2.0			1,397		2.7
Oil & Gas		327		1.6			319		1.8			654		1.7			638		1.9			327		1.6			318		1.7			981		1.6			956		1.8
Banking		289		1.4			288		1.6			578		1.5			577		1.7
Information Technology		207		1.0			—		0.0			207		0.5			—		—
Education		164		0.8			164		0.9			328		0.8			328		1.0			164		0.8			164		0.9			492		0.8			492		0.9
Home & Office Furnishings		132		0.7			133		0.8			265		0.7			265		0.8			132		0.7			132		0.7			397		0.6			397		0.8

	$	20,012		100.0	%	$	17,620		100.0	%	$	39,300		100.0	%	$	34,205		100.0	%	$	20,653		100.0	%	$	18,368		100.0	%	$	59,953		100.0	%	$	52,573		100.0	%

The table below reflects the breakdown of total rental income by state for the three and ~~six~~nine months ended ~~June~~September 30, 2015 and 2014, respectively (dollars in thousands):


	For the three months ended June 30, 2015							For the three months ended June 30, 2014							For the three months ended September 30, 2015							For the three months ended September 30, 2014
State	Rental Revenue		% of Base Rent			Number of Leases		Rental Revenue		% of Base Rent			Number of Leases		Rental Revenue		% of Base Rent			Number of Leases		Rental Revenue		% of Base Rent			Number of Leases
Texas	$	3,686		18.4	%		11	$	3,083		17.5	%		10	$	3,690		17.9	%		11	$	3,028		16.5	%		10
Ohio		2,563		12.8			17		2,485		14.1			16		2,621		12.7			17		2,576		14.0			16
Pennsylvania		1,655		8.3			6		1,015		5.8			6		1,655		8.0			6		1,654		9.0			6
North Carolina		1,308		6.5			7		1,248		7.1			7		1,397		6.8			7		1,308		7.1			7
South Carolina		1,115		5.6			2		1,116		6.3			2		1,115		5.4			2		1,115		6.1			2
Michigan		1,074		5.4			4		657		3.7			2		1,074		5.2			4		443		2.4			2
Georgia																992		4.8			5		942		5.1			4
Minnesota		819		4.1			3		1,158		6.6			4		819		4.0			3		1,002		5.5			4
Colorado		813		4.1			3		376		2.1			1		813		3.9			3		568		3.1			2
New Jersey		798		4.0			4		794		4.5			4
All Other States		6,181		30.9			37		5,688		32.3			27		6,477		31.3			38		5,732		31.2			35

Total	$	20,012		100.0	%		94	$	17,620		100.0	%		79	$	20,653		100.0	%		96	$	18,368		100.0	%		88


	For the six months ended June 30, 2015							For the six months ended June 30, 2014							For the nine months ended September 30, 2015							For the nine months ended September 30, 2014
State	Rental Revenue		% of Base Rent			Number of Leases		Rental Revenue		% of Base Rent			Number of Leases		Rental Revenue		% of Base Rent			Number of Leases		Rental Revenue		% of Base Rent			Number of Leases
Texas	$	6,896		17.5	%		11	$	5,618		16.4	%		10	$	10,588		17.7	%		11	$	8,646		16.4	%		10
Ohio		5,052		12.9			17		4,804		14.0			16		7,675		12.8			17		7,380		14.0			16
Pennsylvania		3,312		8.4			6		1,821		5.3			6		4,967		8.3			6		3,475		6.6			6
North Carolina		2,646		6.7			7		2,458		7.2			7		4,044		6.8			7		3,766		7.2			7
South Carolina		2,231		5.7			2		2,231		6.5			2		3,346		5.6			2		3,346		6.4			2
Michigan		2,147		5.5			4		1,393		4.1			2		3,221		5.4			4		1,836		3.5			2
Minnesota		1,637		4.2			3		2,338		6.8			4		2,456		4.1			3		3,340		6.4			4
Colorado		1,626		4.1			3		752		2.2			1		2,438		4.1			3		1,320		2.5			2
New Jersey		1,598		4.1			4		1,586		4.6			4
Georgia																2,429		4.1			5		2,379		4.5			4
All Other States		12,155		31.0			37		11,204		49.1			27		18,789		31.1			38		17,085		32.5			35

Total	$	39,300		100.0	%		94	$	34,205		100.0	%		79	$	59,953		100.0	%		96	$	52,573		100.0	%		88

Our 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. David 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. Terry Lee Brubaker, our vice chairman and chief operating officer, is also the vice chairman and chief operating officer of our Adviser. Mr. Robert Cutlip, our president, is also an executive managing director of our Adviser. Gladstone Administration, LLC, or our Administrator, employs our chief financial officer, treasurer, chief compliance officer, general counsel and secretary (who also serves as our Administrator’s president) and their respective staffs. Mr. Gladstone is also the chairman and chief executive officer of our Administrator and Mr. Brubaker is the vice chairman and chief operating officer of our Administrator.

Our Adviser and Administrator also provide investment advisory and administrative services, respectively, to certain of our affiliates, including, but not limited to, Gladstone Capital Corporation and Gladstone Investment Corporation, both publicly-traded business development companies, as well as Gladstone Land Corporation, a publicly-traded REIT that primarily invests in farmland. With the exception of Ms. Danielle Jones, our chief financial officer, Mr. Jay Beckhorn, our treasurer, and Mr. Robert Cutlip, our president, all of our executive officers and all of our directors serve as either directors or executive officers, or both, of Gladstone Capital Corporation and Gladstone Investment Corporation, two of our affiliates. In addition, with the exception of ~~our president~~Mr. Cutlip and ~~our chief financial officer,~~Ms. Jones, all of our executive officers and all of our directors, serve as either directors or executive officers, or both, of Gladstone Land Corporation, an affiliate of ours. In the future, our Adviser may provide investment advisory services to other companies, both public and private.

We are externally managed pursuant to contractual arrangements with our Adviser and our Administrator. Our Adviser and Administrator employ all of our personnel and pay their payroll, benefits and general expenses directly. We have an investment advisory agreement with our Adviser, and an administration agreement with our Administrator, or the Administration Agreement.

Under the terms of the advisory agreement, we are responsible for all expenses incurred for our direct benefit. Examples of these expenses include legal, accounting, interest on short-term debt and mortgages, tax preparation, 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).

The calculation of the annual base management fee was revised to equal 1.5% of our total stockholders’ equity, ~~before~~(before giving effect to the base management and incentive ~~fee,~~fee), adjusted to exclude the effect of any unrealized gains or losses that do not affect realized net income (including impairment charges) and adjusted for any one-time events and certain non-cash items (only after approval of our Compensation Committee), or adjusted total stockholders’ equity. The fee is calculated and accrued quarterly as 0.375% per quarter of such adjusted total stockholders’ equity figure.

The calculation of the annual incentive fee was revised to reward the Adviser if our quarterly Core FFO (defined below), before giving effect to any incentive fee, or pre-incentive fee Core FFO, exceeds 2.0%, or 8.0% annualized, of adjusted total stockholders’ equity (after giving effect to the base management fee but before giving effect to the incentive fee), or the new hurdle rate. The Adviser receives ~~15%~~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 the average quarterly incentive fee paid by us for the previous four quarters by greater than 15.0% (excluding quarters for which no incentive fee was paid). Core FFO is defined as GAAP net income (loss) available to common stockholders, excluding the incentive fee, depreciation and amortization, any unrealized gains, losses or other non-cash items recorded in net income (loss) available to common stockholders for the period, and one-time events pursuant to changes in GAAP.

A capital gains-based incentive fee was instituted that is calculated and payable in arrears as of the end of each fiscal year (or upon termination). 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 (which is calculated as the original acquisition price plus any subsequent non-reimbursed capital improvements). At the end of the fiscal year, if this number is positive, then the capital gain fee payable for such time period shall equal 15.0% of such amount.

The Amended Advisory Agreement includes a termination fee where, in the event of a termination 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 agreement after the Company has defaulted and applicable cure periods have expired. The agreement may also be terminated for cause (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 agreement to include if the Adviser breaches any material provisions of the Agreement, the bankruptcy or insolvency of the Adviser, dissolution of the Adviser and fraud or misappropriation of funds.

Management believes ~~this amendment brings our advisory agreement nearer to~~ the ~~current market practice and expects it~~Amended Advisory Agreement will facilitate our growth of FFO and distributions to stockholders in the future. Management also believes that ~~with~~ this ~~advisory~~ agreement we will allow us to become more competitive in sourcing and retaining talented investment and operations professionals at the Adviser.

Pursuant to the Administration Agreement, we pay for our allocable portion of our Administrator’s overhead expenses incurred while performing its obligations to us, including, but not limited to, rent and the salaries and benefits expenses of our personnel, including our chief financial officer, treasurer, chief compliance officer, general counsel and secretary (who also serves as our Administrator’s president), and their respective staffs. Prior to July 1, 2014, our allocable portion was generally derived by multiplying that portion of the Administrator’s expenses allocable to all funds managed by the Adviser by the percentage of our total assets at the beginning of each quarter in comparison to the total assets of all funds managed by

the Adviser. As approved by our Board of Directors, effective July 1, 2014, our allocable portion of the Administrator’s expenses is 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. Management believes that this 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.

The preparation of our financial statements in accordance with Generally Accepted Accounting Principles in the U.S., or GAAP, requires management to make judgments that are subjective in nature in order 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 to our consolidated financial statements in our 2014 Form 10-K. There were no material changes to our critical accounting policies during the ~~six~~nine months ended ~~June~~September 30, 2015.

The ~~weighted-average~~weighted average yield on our total portfolio, which was ~~8.8%~~8.7% and 9.0% as of ~~June~~September 30, 2015 and ~~June 30,~~ 2014, respectively, is calculated by taking the annualized straight-line rents, reflected as rental income on our condensed consolidated statements of operations, of each acquisition as a percentage of the acquisition cost. The ~~weighted-average~~weighted average yield does not account for the interest expense incurred on the mortgages placed on our properties.

A comparison of our operating results for the three and ~~six~~nine months ended ~~June~~September 30, 2015 and 2014 is below (dollars in thousands, except per share amounts):


	For the three months ended June 30,												For the three months ended September 30,
	2015			2014			$ Change			% Change			2015			2014			$ Change			% Change
Operating revenues
Rental revenue	$	20,012		$	17,620		$	2,392			14	%	$	20,653		$	18,368		$	2,285			12	%
Tenant recovery revenue		394			770			(376	)		-49	%		437			549			(112	)		-20	%
Interest income from mortgage note receivable		282			—			282			NM			285			97			188			NM

Total operating revenues		20,688			18,390			2,298			13			21,375			19,014			2,361			12

Operating expenses
Depreciation and amortization		8,947			6,871			2,076			30	%		9,006			7,516			1,490			20	%
Property operating expenses		1,178			1,302			(124	)		-10	%		1,612			1,202			410			34	%
Acquisition related expenses		255			859			(604	)		-70	%		138			233			(95	)		-41	%
Base management fee		866			666			200			30	%		872			741			131			18	%
Incentive fee		1,760			1,527			233			15	%		621			1,538			(917	)		-60	%
Administration fee		366			485			(119	)		-25	%		326			260			66			25	%
General and administrative		539			490			49			10	%		446			538			(92	)		-17	%
Impairment charge														622			280			342			122	%

Total operating expenses before credit to incentive fee		13,911			12,200			1,711			14	%		13,643			12,308			1,335			11	%

Credit to incentive fee		(1,316	)		(957	)		(359	)		38	%		—			(851	)		851			-100	%

Total operating expenses		12,595			11,243			1,352			12	%		13,643			11,457			2,186			19	%

Other income (expense)
Other expense
Interest expense		(6,999	)		(6,509	)		(490	)		8	%		(7,142	)		(6,679	)		(463	)		7	%
Distributions attributable to Series C mandatorily redeemable preferred stock		(686	)		(686	)		—			0	%		(686	)		(686	)		—			0	%
Gain on sale of real estate		—			1,240			(1,240	)		-100	%
Other income		23			27			(4	)		-15	%		—			37			(37	)		-100	%

Total other expense		(7,662	)		(5,928	)		(1,734	)		29	%		(7,828	)		(7,328	)		(500	)		7	%

Net income		431			1,219			(788	)		-65	%
Net (loss) income														(96	)		229			(325	)		-142	%

Distributions attributable to Series A and B preferred stock		(1,023	)		(1,023	)		—			0	%		(1,023	)		(1,023	)		—			0	%
Distributions attributable to senior common stock		(261	)		(110	)		(151	)		137	%		(263	)		(137	)		(126	)		92	%

Net (loss) income (attributable) available to common stockholders	$	(853	)	$	86		$	(939	)		-1092	%
Net loss attributable to common stockholders													$	(1,382	)	$	(931	)	$	(451	)		48	%

Net loss (income) attributable (available) to common stockholders per weighted average share of common stock - diluted	$	(0.04	)	$	0.01		$	(0.05	)		-962	%
Net loss attributable to common stockholders per weighted average share of common stock - basic & diluted													$	(0.06	)	$	(0.05	)	$	(0.01	)		19	%

FFO available to common stockholders	$	8,094		$	5,717		$	2,377			42	%	$	8,246		$	6,865		$	1,381			20	%

FFO per weighted average share of common stock - diluted	$	0.37		$	0.34		$	0.04			12	%	$	0.37		$	0.38		$	(0.01	)		-3	%


	For the six months ended June 30,												For the nine months ended September 30,
	2015			2014			$ Change			% Change			2015			2014			$ Change			% Change
Operating revenues
Rental revenue	$	39,300		$	34,205		$	5,095			15	%	$	59,953		$	52,573		$	7,380			14	%
Tenant recovery revenue		718			1,321			(603	)		-46	%		1,195			1,870			(675	)		-36	%
Interest income from mortgage note receivable		549			—			549			NM			835			97			738			NM

Total operating revenues		40,567			35,526			5,041			14	%		61,983			54,540			7,443			14	%

Operating expenses
Depreciation and amortization		17,154			13,591			3,563			26	%		26,160			21,107			5,053			24	%
Property operating expenses		2,139			2,632			(493	)		-19	%		3,752			3,834			(82	)		-2	%
Acquisition related expenses		451			970			(519	)		-54	%		589			1,202			(613	)		-51	%
Base management fee		1,717			1,291			426			33	%		2,589			2,031			558			27	%
Incentive fee		3,433			2,767			666			24	%		4,054			4,305			(251	)		-6	%
Administration fee		728			977			(249	)		-25	%		1,054			1,238			(184	)		-15	%
General and administrative		1,229			957			272			28	%		1,675			1,495			180			12	%
Impairment charge		—			13,958			(13,958	)		-100	%		622			14,238			(13,616	)		-96	%

Total operating expenses before credit to incentive fee		26,851			37,143			(10,292	)		-28	%		40,495			49,450			(8,955	)		-18	%

Credit to incentive fee		(2,500	)		(2,162	)		(338	)		16	%		(2,500	)		(3,013	)		513			-17	%

Total operating expenses		24,351			34,981			(10,630	)		-30	%		37,995			46,437			(8,442	)		-18	%

Other income (expense)
Other expense
Interest expense		(13,770	)		(12,784	)		(986	)		8	%		(20,912	)		(19,463	)		(1,449	)		7	%
Distributions attributable to Series C mandatorily redeemable preferred stock		(1,372	)		(1,372	)		—			0	%		(2,057	)		(2,057	)		—			0	%
Gain on sale of real estate		—			1,240			(1,240	)		-100	%		—			1,240			(1,240	)		-100	%
Other income		51			74			(23	)		-31	%		11			111			(100	)		-90	%

Total other expense		(15,091	)		(12,842	)		(2,249	)		18	%		(22,958	)		(20,169	)		(2,789	)		14	%

Net income (loss)		1,125			(12,297	)		13,422			-109	%		1,030			(12,066	)		13,096			-109	%

Distributions attributable to Series A and B preferred stock		(2,047	)		(2,047	)		—			0	%		(3,070	)		(3,070	)		—			0	%
Distributions attributable to senior common stock		(485	)		(210	)		(275	)		131	%		(748	)		(347	)		(401	)		116	%

Net loss attributable to common stockholders	$	(1,407	)	$	(14,554	)	$	13,147			-90	%	$	(2,788	)	$	(15,483	)	$	12,695			-82	%

Net loss attributable to common stockholders per weighted average share of common stock—diluted	$	(0.07	)	$	(0.90	)	$	0.83			-92	%
Net loss attributable to common stockholders per weighted average share of common stock - basic & diluted													$	(0.13	)	$	(0.93	)	$	0.79			-85	%

FFO available to common stockholders	$	15,747		$	11,755		$	3,992			34	%	$	23,994		$	18,622		$	5,372			29	%

FFO per weighted average share of common stock—diluted	$	0.74		$	0.71		$	0.03			4	%
FFO per weighted average share of common stock - diluted													$	1.11		$	1.09		$	0.02			2	%

For the purposes of the following discussion, same store properties are properties we owned as of January 1, 2014, which have not been subsequently expanded, vacated, or disposed of. Acquired and disposed of properties are properties which were either acquired or disposed of at any point subsequent to December 31, 2013. One property was expanded subsequent to January 1, 2014. Vacant properties are properties that were fully or partially vacant at any point subsequent to January 1, 2014.


	For the three months ended June 30,										For the three months ended September 30,
	(Dollars in Thousands)										(Dollars in Thousands)
Rental Revenues	2015		2014		$ Change			% Change			2015		2014		$ Change			% Change
Same Store Properties	$	14,808	$	15,261	$	(453	)		-3.0	%	$	14,828	$	15,036	$	(208	)		-1.4	%
Acquired & Disposed Properties		4,342		1,488		2,854			191.8	%		5,107		2,362		2,745			116.2	%
Expanded Properties		357		205		152			74.1	%		357		260		97			37.3	%
Vacant Properties		505		666		(161	)		-24.2	%		361		710		(349	)		-49.2	%

	$	20,012	$	17,620	$	2,392			13.6	%	$	20,653	$	18,368	$	2,285			12.4	%


	For the six months ended June 30,										For the nine months ended September 30,
	(Dollars in Thousands)										(Dollars in Thousands)
Rental Revenues	2015		2014		$ Change			% Change			2015		2014		$ Change			% Change
Same Store Properties	$	29,649	$	30,310	$	(661	)		-2.2	%	$	44,342	$	45,213	$	(871	)		-1.9	%
Acquired & Disposed Properties		7,858		2,170		5,688			262.1	%		12,964		4,531		8,433			186.1	%
Expanded Properties		714		373		341			91.4	%		1,072		633		439			69.4	%
Vacant Properties		1,079		1,352		(273	)		-20.2	%		1,575		2,196		(621	)		-28.3	%

	$	39,300	$	34,205	$	5,095			14.9	%	$	59,953	$	52,573	$	7,380			14.0	%

Rental revenue from same store properties decreased slightly for the three and ~~six~~nine months ended ~~June~~September 30, 2015, primarily due to reduced rental rates on lease extensions ~~modifications to two leases with tenants experiencing operational difficulties,~~ and ~~from two tenants that vacated the premises, one of whom relocated to another state due to economic incentives.~~modifications. Rental revenue increased for acquired and disposed properties for the three and ~~six~~nine months ended ~~June~~September 30, 2015, as compared to the three and ~~six~~nine months ended ~~June~~September 30, 2014, because we acquired eight properties subsequent to ~~June~~September 30, 2014, combined with a full three and ~~six~~nine month period of revenue in 2015 for properties acquired during and subsequent to the ~~six~~nine months ended ~~June~~September 30, 2014.


	For the three months ended June 30,										For the three months ended September 30,
	(Dollars in Thousands)										(Dollars in Thousands)
Tenant Recovery Revenue	2015		2014		$ Change			% Change			2015		2014		$ Change			% Change
Same Store Properties	$	201	$	267	$	(66	)		-24.7	%	$	178	$	155	$	23			14.8	%
Acquired & Disposed Properties		180		495		(315	)		-63.6	%		197		270		(73	)		-27.0	%
Expanded Properties		2		3		(1	)		-33.3	%		3		3		—			0.0	%
Vacant Properties		11		5		6			120.0	%		59		121		(62	)		-51.2	%

	$	394	$	770	$	(376	)		-48.8	%	$	437	$	549	$	(112	)		-20.4	%


	For the six months ended June 30,										For the nine months ended September 30,
	(Dollars in Thousands)										(Dollars in Thousands)
Tenant Recovery Revenue	2015		2014		$ Change			% Change			2015		2014		$ Change			% Change
Same Store Properties	$	419	$	362	$	57			15.7	%	$	554	$	432	$	122			28.2	%
Acquired & Disposed Properties		242		945		(703	)		-74.4	%		441		1,215		(774	)		-63.7	%
Expanded Properties		6		3		3			100.0	%		9		6		3			50.0	%
Vacant Properties		51		11		40			363.6	%		191		217		(26	)		-12.0	%

	$	718	$	1,321	$	(603	)		-45.6	%	$	1,195	$	1,870	$	(675	)		-36.1	%

The decrease in same store tenant recovery revenues for the three months ended June 30, 2015 as compared to the three months ended June 30, 2014 is a result of a one-time adjustment related to a modified gross lease recorded in June 2014, coupled with vacancy settlement recoveries received in June 30, 2014. The increase in same store tenant recovery revenues for the ~~six~~three and nine months ended ~~June~~September 30, 2015, as compared to the ~~six~~three and nine months ended ~~June~~September 30, 2014, is a result of increased recoveries from tenants subject to ~~base year stops on modified~~ gross leases. The ~~adjustment increased both~~decrease in tenant recovery revenues on acquired and ~~property operating expenses, resulting in no impact to net income. During~~disposed of properties for the ~~six~~three and nine months ended ~~June~~September 30, 2015, as compared to the three and nine months ended September 30, 2014, ~~we recovered operating expenses from~~is a result of a lack of tenant recovery revenues in 2015 associated with our Roseville, Minnesota property, which ~~vacated one of our buildings, but continued~~was conveyed to ~~pay rent and operating expenses through their lease termination date of June 30, 2015.~~the lender in a deed-in-lieu transaction during 2014.

Interest income from mortgage notes receivable increased for the three and ~~six~~nine months ended ~~June~~September 30, 2015, as compared to the three and ~~six~~nine months ended ~~June~~September 30, 2014, because of interest earned on a mortgage development loan issued in July 2014 that was ~~not~~partially outstanding during the three and ~~six~~nine months ended ~~June~~September 30, 2014.


	For the three months ended June 30,									For the three months ended September 30,
	(Dollars in Thousands)									(Dollars in Thousands)
Depreciation and Amortization	2015		2014		$ Change		% Change			2015		2014		$ Change		% Change
Same Store Properties	$	6,352	$	6,036	$	316		5.2	%	$	6,223	$	6,139	$	84		1.4	%
Acquired & Disposed Properties		2,031		530		1,501		283.2	%		2,393		1,076		1,317		122.4	%
Expanded Properties		79		32		47		146.9	%		79		32		47		146.9	%
Vacant Properties		485		273		212		77.7	%		311		269		42		15.6	%

	$	8,947	$	6,871	$	2,076		30.2	%	$	9,006	$	7,516	$	1,490		19.8	%


	For the six months ended June 30,									For the nine months ended September 30,
	(Dollars in Thousands)									(Dollars in Thousands)
Depreciation and Amortization	2015		2014		$ Change		% Change			2015		2014		$ Change		% Change
Same Store Properties	$	12,580	$	12,070	$	510		4.2	%	$	18,784	$	18,188	$	596		3.3	%
Acquired & Disposed Properties		3,659		855		2,804		328.0	%		6,051		1,932		4,119		213.2	%
Expanded Properties		158		65		93		143.1	%		237		97		140		144.3	%
Vacant Properties		757		601		156		26.0	%		1,088		890		198		22.2	%

	$	17,154	$	13,591	$	3,563		26.2	%	$	26,160	$	21,107	$	5,053		23.9	%

Depreciation and amortization increased slightly for same store properties for the three and ~~six~~nine months ended ~~June~~September 30, 2015 as compared to the three and ~~six~~nine months ended ~~June~~September 30, 2014 due to depreciation on capital projects which were completed subsequent to ~~June~~September 30, 2014, coupled with amortization on leasing commissions for renewed leases with 2015 expirations. Depreciation and amortization expenses increased for acquired and disposed of properties during the three and ~~six~~nine months ended ~~June~~September 30, 2015, as compared to the three and ~~six~~nine months ended ~~June~~September 30, 2014, because of the eight properties acquired subsequent to ~~June~~September 30, 2014 and the inclusion of a full three and ~~six~~nine month period of depreciation and amortization recorded in 2015 for 11eight properties acquired during ~~and subsequent to~~ the ~~six~~nine months ended ~~June~~September 30, 2014.


	For the three months ended June 30,										For the three months ended September 30,
	(Dollars in Thousands)										(Dollars in Thousands)
Property Operating Expenses	2015		2014		$ Change			% Change			2015		2014		$ Change			% Change
Same Store Properties	$	491	$	571	$	(80	)		-14.0	%	$	604	$	494	$	110			22.3	%
Acquired & Disposed Properties		551		684		(133	)		-19.4	%		698		530		168			31.7	%
Expanded Properties		3		2		1			50.0	%		1		3		(2	)		-66.7	%
Vacant Properties		133		45		88			195.6	%		309		175		134			76.6	%

	$	1,178	$	1,302	$	(124	)		-9.5	%	$	1,612	$	1,202	$	410			34.1	%


	For the six months ended June 30,										For the nine months ended September 30,
	(Dollars in Thousands)										(Dollars in Thousands)
Property Operating Expenses	2015		2014		$ Change			% Change			2015		2014		$ Change			% Change
Same Store Properties	$	1,017	$	1,058	$	(41	)		-3.9	%	$	1,540	$	1,458	$	82			5.6	%
Acquired & Disposed Properties		892		1,436		(544	)		-37.9	%		1,590		1,966		(376	)		-19.1	%
Expanded Properties		8		5		3			60.0	%		9		8		1			12.5	%
Vacant Properties		222		133		89			66.9	%		613		402		211			52.5	%

	$	2,139	$	2,632	$	(493	)		-18.7	%	$	3,752	$	3,834	$	(82	)		-2.1	%

Property operating expenses consist of franchise taxes, management fees, insurance, ground lease payments, property maintenance and ~~overhead~~repair expenses paid on behalf of certain of our properties. The ~~decrease~~increase in property operating expenses for same store properties is primarily a result of ~~a one-time adjustment~~increases in expenses associated with tenants subject to gross leases. We have also recognized additional tenant recovery revenue related to ~~a modified gross lease recorded during~~these additional incurred expenses. The increase in property operating expenses for acquired and disposed of properties for the three months ended ~~June~~September 30, 2015, as compared to the three months ended September 30, 2014, ~~during which we adjusted property operating expenses and associated recovery revenues. This one-time adjustment did not impact net income.~~is primarily due to our acquisition of two properties subject to gross leases subsequent to September 30, 2014. The decrease in property operating expenses for acquired and disposed of properties for the nine months ended September 30, 2015 as compared to the nine months ended September 30, 2014 is primarily ~~because of~~ a lack of operating expenses in 2015 associated with our Roseville, Minnesota property, which was conveyed to the lender in a deed-in-lieu transaction during 2014.

Acquisition related expenses primarily consist of legal fees and fees incurred for third-party reports prepared in connection with potential acquisitions and our due diligence analyses related thereto. Acquisition related expenses decreased for the three and ~~six~~nine months ended ~~June~~September 30, 2015, as compared to the three and ~~six~~nine months ended ~~June~~September 30, 2014, due to smaller acquisition volume over these comparable periods. During the ~~six~~nine months ended ~~June~~September 30, 2015, we acquired ~~four~~five properties ~~respectively,~~ as compared to the ~~six~~nine months ended ~~June~~September 30, 2014, where we acquired ~~six~~eight properties.

The base management fee paid to the Adviser increased for the three and ~~six~~nine months ended ~~June~~September 30, 2015, as compared to the three and ~~six~~nine months ended ~~June~~September 30, 2014, due to an increase in both total and common stockholders’ equity, the main ~~component~~components of both the ~~calculation.~~amended and previous calculations. The amended calculation became effective July 1, 2015. 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 three months ended September 30, 2015, as compared to the three months ended September 30, 2014, because of an amendment in the calculation of the incentive fee, which became effective July 1, 2015. The revised calculation of the incentive fee is described in detail above within “Advisory and Administration Agreements.” The net incentive fee paid to the Adviser increased for the ~~three and six~~nine months ended ~~June~~September 30, 2015, as compared to the ~~three and six~~nine months ended ~~June~~September 30, 2014 because of an increase in pre-incentive fee FFO. The increase in pre-incentive fee FFO was primarily due to an increase in rental revenues from the properties acquired during the three and ~~six~~nine months ended ~~June~~September 30, ~~2015, in conjunction with a decrease in property operating expenses during~~2015.

The administration fee paid to the Administrator increased for the three ~~and six~~months ended ~~June~~September 30, 2015 as compared to the three ~~and six~~ months ended ~~June~~September 30, 2014 primarily due to a growth in personnel costs at the reasons stated above. The incentive fee credit increased slightly for the three and six months ended June 30, 2015, as compared to the three and six months ended June 30, 2014, because of an increase in common distributions paid on the shares issued during the past 12 months partially offset by lower expenses at our vacant properties. The calculation of the incentive fee is described in detail above within ~~“Advisory and Administration Agreements.”~~

Administrator. The administration fee paid to the Administrator decreased for the ~~three and six~~nine months ended ~~June~~September 30, 2015, as compared to the ~~three and six~~nine months ended ~~June~~September 30, 2014. The decrease for the nine month period was driven primarily by a change in the way the Administrator allocates all of its fees to affiliated companies serviced by the Administrator such that the fee is generally now based upon the percentage of time employees of the Administrator spend on our matters in relation to time spent on other companies serviced by our Administrator versus the prior methodology, whereby we were generally allocated the fee based upon our total assets in relation to other funds managed by our Administrator. That change went into effect July 1, 2014. We anticipate our future administration fees to be lower than in 2014 under the new methodology. The calculation of the administration fee is described in detail above within“Advisory and Administration Agreements.”

General and administrative expenses ~~increased~~decreased for the three ~~and six~~ months ended ~~June~~September 30, 2015, as compared to the three ~~and six~~ months ended ~~June~~September 30, 2014, primarily as a result of ~~an increase~~a decrease in professional fees from the ~~write-off~~write off of approximately $0.1 million in legal fees upon termination of our previous At the Market program in August 2014. General and administrative expenses increased for the nine months ended September 30, 2015, as compared to the nine months ended September 30, 2014, primarily as a result of the increase in professional fees ~~related~~due to the growth in the scope of our ~~terminated Senior Common stock program.~~portfolio, coupled with an increase in bank service fees incurred to obtain lender approval to change our asset managers to three nationally recognized firms.

NoThe impairment charge ~~was~~ recognized during the three and nine months ended ~~June~~September 30, 2015 ~~and 2014, respectively, and~~is a result of the ~~six months ended June 30, 2015.~~impairment of our Dayton, Ohio property. Impairment recognized during the ~~six~~three and nine months ended ~~June~~September 30, 2014 was a result of the impairment of our Roseville, Minnesota property.

Interest expense increased for the three and ~~six~~nine months ended ~~June~~September 30, 2015, as compared to the three and ~~six~~nine months ended ~~June~~September 30, 2014. This increase was primarily a result of interest on the ~~$76.4~~$80.0 million of mortgage debt issued ~~and assumed~~ in the past 12 months, partially offset by reduced interest expense on our long-term financings from amortizing and balloon principal payments made during the past 12 ~~months.~~months coupled with reduced interest expense associated with lower interest rates achieved on the two mortgages we refinanced during 2015.

We ~~did~~have not ~~recognize a gain on sale~~sold any properties during the three and ~~six~~nine months ended ~~June~~September 30, 2015. The gain on sale of real estate during the ~~three and six~~nine months ended ~~June~~September 30, 2014 is a result of the sale of our property located in Sterling Heights, Michigan in June 2014.

Other income decreased during the three and ~~six~~nine months ended ~~June~~September 30, 2015, as compared to the three and ~~six~~nine months ended ~~June~~September 30, 2014, because of ~~a decrease in management fees collected from certain of our tenants, coupled with~~ the repayment of the employee note outstanding in May 2015.

Net ~~(Loss) Income (Attributable) Available~~Loss Attributable to Common Stockholders

Net loss attributable to common stockholders increased for the three months ended ~~June~~September 30, 2015, as compared to the net ~~income available~~loss attributable to common stockholders for the three months ended ~~June~~September 30, 2014, primarily because of the ~~gain on sale~~impairment charge recognized from the ~~Sterling Heights, Michigan~~Dayton, Ohio property ~~recognized~~ in ~~June 2014.~~September 2015, coupled with increased interest expense and depreciation expense, offset by an increase in rental income from the properties acquired over the past 12 months. Net loss attributable to common stockholders decreased for the ~~six~~nine months ended ~~June~~September 30, 2015, as compared to the ~~six~~nine months ended ~~June~~September 30, 2014, primarily because of the impairment charge recognized from the Roseville, Minnesota property in June 2014 offset by increased interest expense, depreciation expense, and an increase in rental income from the properties acquired over the past 12 months.

Our sources of liquidity include cash flows from operations, cash and cash equivalents, borrowings under our Line of Credit, obtaining mortgages on our unencumbered properties and issuing additional equity securities. Our available liquidity, ~~at June 30,~~as of October 27, 2015, was ~~$14.4~~$17.8 million, including ~~$3.3~~$4.0 million in cash and cash equivalents and an available borrowing capacity of ~~$11.1~~$13.8 million under our Line of Credit.

We actively seek conservative investments that are likely to produce income to pay distributions to our stockholders. We intend to use the proceeds received from future equity raised and debt capital borrowed to continue to invest in industrial, commercial and retail real property, make mortgage loans, or pay down outstanding borrowings under our Line of Credit. 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 and on borrowings under our Line of Credit, and fund our current operating costs. In addition, we are required to have sufficient liquidity, beginning August 31, 2016, if our $38.5 million Term Preferred Stock has not been extended or replaced to comply with our first amended and restated Line of Credit agreement. We plan to refinance our Term Preferred Stock with equity in advance of this date. Our long-term liquidity needs include proceeds necessary to grow and maintain our portfolio of investments.

We believe that our available liquidity is sufficient to fund our distributions to stockholders, pay the debt service costs on our existing long-term mortgages and borrowings under our Line of Credit and fund our current operating costs in the near term. 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. Historically, our Adviser has provided such partial credits to our management fees on a quarterly basis. We further believe that our cash flow from operations coupled with the financing capital available to us in the future are sufficient to fund our long-term liquidity needs.

To date, in 2015, we have raised net proceeds of ~~$30.7~~$40.9 million of common equity under our ATM program with Cantor Fitzgerald at a weighted average share price of ~~$17.65.~~$16.76. Furthermore, we raised ~~$2.5~~$2.6 million in net proceeds of senior common ~~equity.~~equity, which was terminated according to its terms on March 28, 2015. We used these proceeds to acquire additional real estate and for general corporate purposes.

As of ~~August 3,~~October 27, 2015, we have the ability to raise up to ~~$165.7~~$155.4 million of additional equity capital through the sale and issuance of securities that are registered under our universal shelf registration statement on Form S-3 (File No. 333-190931), or the Universal Shelf, in one or more future public offerings. Of the ~~$165.7~~$155.4 million of available capacity under our Universal Shelf, ~~$36.3~~$26.0 million of common stock is reserved for additional sales under our ATM Program. We will use our existing ATM program as a source of liquidity for the remainder of 2015.

As of ~~June~~September 30, 2015, we had mortgage notes payable in the aggregate principal amount of ~~$484.8~~$482.9 million, ~~excluding~~including mortgage notes payable on real estate assets held for sale, collateralized by a total of 8046 properties with a remaining weighted average maturity of ~~5.6~~5.46 years. The weighted-average interest rate on the mortgage notes payable as of ~~June~~September 30, 2015 was ~~5.11%~~5.1%.

We continue to see banks and other non-bank lenders willing to issue mortgages. Consequently, we are focused on obtaining mortgages through regional banks, non-bank lenders and the CMBS market.

We have mortgage debt in the aggregate principal amount of ~~$8.0~~$5.7 million payable during the remainder of 2015 and ~~$97.6~~$100.3 million payable during 2016, ~~excluding~~including balloon payments on real estate assets held for sale. The 2015 principal amounts payable include both amortizing principal payments and one balloon principal payment due in ~~the second half of the year.~~December 2015. The 2016 principal amounts payable include both amortizing principal payments and nine balloon principal payments due throughout 2016. We anticipate being able to refinance our mortgages that come due during 2015 and 2016 with a combination of new mortgage debt and the issuance of additional equity securities.

Net cash provided by operating activities during the ~~six~~nine months ended ~~June~~September 30, 2015, was ~~$16.5~~$24.9 million, as compared to net cash provided by operating activities of ~~$11.0~~$18.7 million for the ~~six~~nine months ended ~~June~~September 30, 2014. This increase was primarily a result of an increase in rental income received from the properties acquired induring the past 12 months, partially offset by the increase in general and administrative expenses, as ~~a result of~~well as the base management and incentive fees due to increased activity in our portfolio. 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 Line of Credit, distributions to our stockholders, management fees to our Adviser, Administration fees to our Administrator and other entity-level operating expenses.

Net cash used in investing activities during the ~~six~~nine months ended ~~June~~September 30, 2015, was ~~$63.2~~$76.5 million, which primarily consisted of the acquisition of ~~four~~five properties and tenant improvements performed at certain of our properties, as compared to net cash used in investing activities during the ~~six~~nine months ended ~~June~~September 30, 2014, of ~~$60.9~~$88.0 million, which primarily consisted of the acquisition of six properties, ~~coupled with~~the issuance of the mortgage note receivable and tenant improvements performed at certain of our ~~properties.~~properties, partially offset by proceeds from sale of real estate.

Net cash provided by financing activities during the ~~six~~nine months ended ~~June~~September 30, 2015, was ~~$41.4~~$46.7 million, which primarily consisted of proceeds from the sale of common stock and proceeds from the issuance of mortgage notes payable, partially offset by the distributions paid to our stockholders and principal repayments on mortgage notes payable. Net cash provided by financing activities for the ~~six~~nine months ended ~~June~~September 30, 2014, was ~~$43.6~~$66.1 million, which primarily consisted of distributions paid to our stockholders and principal repayments on mortgage notes payable, partially offset by proceeds from the sale of common stock.

In August 2013, we procured ~~our $60.0 million~~a senior unsecured revolving credit facility, or the Line of Credit, ~~which was expanded to $75.0 million in November 2014,~~ with KeyBank National Association (serving as a revolving lender, a letter of credit issuer and an administrative agent) ~~and added Citizens Bank of Pennsylvania as an additional lender. Comerica Bank was subsequently added as another lender in December 2013. In March 2014,~~. On October 5, 2015, we ~~amended~~expanded our Line of Credit to ~~extend~~$85.0 million and extended the maturity date ~~by one year to~~1-year through August ~~2017.~~2018, with a 1-year extension option through August 2019. We also ~~modified certain terms under~~added a $25.0 million 5-year term loan facility, which matures in October 2020. The interest rate on the ~~Line~~revolving line of ~~Credit, including the calculation of the total asset value and unencumbered asset value. The applicable LIBOR margins were~~credit was also reduced by 25 basis points at each ~~pricing level. As a result~~ of ~~these modifications,~~ the ~~availability~~leverage tiers and the total maximum commitment under ~~our Line~~the two facilities was increased from $100.0 million to $150.0 million. We also added 3 new lenders to the bank syndicate, which is now comprised of ~~Credit increased by $1.3 million.~~

~~The Line of Credit initially matures in August 2017; however, we have a one-year extension option~~KeyBank, Comerica Banks, Fifth Third Bank, US Bank and Huntington Bank. We were subject to ~~the~~ payment of ~~an extension fee equal to 25 basis points on~~$0.5 million for the ~~initial maturity date and certain other customary conditions.~~modification of the agreement.

As of ~~June~~September 30, 2015, there was ~~$45.2~~$55.5 million outstanding under our Line of Credit at an interest rate of approximately 2.94% and $3.9 million outstanding under letters of credit at a weighted average interest rate of 2.75%. As of ~~August 3,~~October 27, 2015, the maximum additional amount we could draw under our Line of Credit was ~~$9.2~~$13.8 million. We were in compliance with all covenants under the Line of Credit as of ~~June~~September 30, 2015.

The following table reflects our material contractual obligations as of ~~June~~September 30, 2015 (in thousands):


	Payments Due by Period										Payments Due by Period
Contractual Obligations	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years		Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
Debt Obligations⁽¹⁾	$	570,486	$	94,231	$	200,051	$	56,286	$	219,918	$	576,436	$	82,930	$	221,450	$	47,165	$	224,891
Interest on Debt Obligations⁽²⁾		116,811		26,173		35,672		24,025		30,941		112,580		25,583		34,222		24,017		28,758
Operating Lease Obligations⁽³⁾		7,493		459		924		931		5,179		7,378		459		925		931		5,063
Purchase Obligations⁽⁴⁾		2,510		2,510		—		—		—		4,168		3,017		1,151		—		—

Total	$	697,300	$	123,373	$	236,647	$	81,242	$	256,038	$	700,562	$	111,989	$	257,748	$	72,113	$	258,712

We did not have any off-balance sheet arrangements as of ~~June~~September 30, 2015.

The National Association of Real Estate Investment Trusts, or 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 and 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 is FFO adjusted to subtract distributions made to holders of preferred and senior common stock. We believe that net income available to common stockholders is the most directly comparable GAAP measure to FFO available to common stockholders.

Basic funds from operations per share, or Basic FFO per share, and diluted funds from operations per share, or Diluted FFO per share, is FFO available to common stockholders divided by the number of weighted average shares of common stock outstanding and FFO available to common stockholders divided by the number of weighted average shares of common stock outstanding on a diluted basis, respectively, during a period. We believe that FFO available to common stockholders, Basic FFO per share and Diluted FFO per share are useful to investors because they provide investors with a further context for evaluating our FFO results in the same manner that investors use net income and earnings per share, or EPS, in evaluating net income available to common stockholders. In addition, because most REITs provide FFO available to common stockholders, Basic FFO and Diluted FFO per share information to the investment community, we believe these are useful supplemental measures when comparing us to other REITs. 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 available to common stockholders for the three and ~~six~~nine months ended ~~June~~September 30, 2015 and 2014, respectively, to the most directly comparable GAAP measure, net income available to common stockholders, and a computation of basic and diluted FFO per weighted average share of common stock:


	For the three months ended June 30,						For the six months ended June 30,						For the three months ended September 30,						For the nine months ended September 30,
	(Dollars in Thousands, Except for Per Share Amounts)						(Dollars in Thousands, Except for Per Share Amounts)						(Dollars in Thousands, Except for Per Share Amounts)						(Dollars in Thousands, Except for Per Share Amounts)
	2015			2014			2015			2014			2015			2014			2015			2014
Net income (loss)	$	431		$	1,219		$	1,125		$	(12,297	)
Net (loss) income													$	(96	)	$	229		$	1,030		$	(12,066	)
Less: Distributions attributable to preferred and senior common stock		(1,284	)		(1,133	)		(2,532	)		(2,257	)		(1,286	)		(1,160	)		(3,818	)		(3,417	)

Net (loss) income (attributable) available to common stockholders	$	(853	)	$	86		$	(1,407	)	$	(14,554	)
Net loss attributable to common stockholders													$	(1,382	)	$	(931	)	$	(2,788	)	$	(15,483	)
Adjustments:
Add: Real estate depreciation and amortization		8,947			6,871			17,154			13,591			9,006			7,516			26,160			21,107
Add: Impairment charge		—			—			—			13,958			622			280			622			14,238
Less: Gain on sale of real estate		—			(1,240	)		—			(1,240	)		—			—			—			(1,240	)

FFO available to common stockholders	$	8,094		$	5,717		$	15,747		$	11,755		$	8,246		$	6,865		$	23,994		$	18,622
Weighted average common shares outstanding—basic		20,833,787			16,547,793			20,524,101			16,149,467
Weighted average common shares outstanding—diluted		21,664,386			16,894,973			21,299,103			16,482,075
Weighted average common shares outstanding - basic														21,403,808			17,739,084			20,820,559			16,685,162
Weighted average common shares outstanding - diluted														22,232,251			18,168,757			21,612,141			17,047,325
Basic FFO per weighted average share of common stock	$	0.39		$	0.35		$	0.77		$	0.73		$	0.39		$	0.39		$	1.15		$	1.12

Diluted FFO per weighted average share of common stock	$	0.37		$	0.34		$	0.74		$	0.71		$	0.37		$	0.38		$	1.11		$	1.09

Distributions declared per share of common stock	$	0.375		$	0.375		$	0.75		$	0.75		$	0.375		$	0.375		$	1.125		$	1.125

Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. The primary risk that we believe we are and will be exposed to is interest rate risk. Certain of our leases contain escalations based on market indices, and the interest rate on our Line of Credit is variable. Although we seek to mitigate this risk by structuring such provisions of our loans and leases to contain a minimum interest rate or escalation rate, as applicable, these features do not eliminate this risk. To that end, we have entered into a derivative ~~contract with Wells Fargo~~contracts to cap interest rates for ~~the~~our variable rate ~~note payable on~~notes payable. For details regarding our ~~Champaign, Illinois property. We paid a fee~~rate cap agreements seeNote 6 – Mortgage Notes Payable and Line of ~~$0.03 million to cap LIBOR rates at 3.0%, to limit our exposure to interest rates on this note payable.~~Credit.

To illustrate the potential impact of changes in interest rates on our net income for the quarter ended ~~June~~September 30, 2015, we have performed the following analysis, which assumes that our balance sheet remains constant and that no further actions beyond a minimum interest rate or escalation rate are taken to alter our existing interest rate sensitivity.

The following table summarizes the annual impact of a 1%, 2% and 3% increase in the one month LIBOR as of ~~June~~September 30, 2015. As of ~~June~~September 30, 2015, our effective average LIBOR was ~~0.19%~~0.193%; thus, a 1%, 2% or 3% decrease could not occur.


	(Dollars in Thousands)					(Dollars in Thousands)
Interest Rate Change	Increase to Interest Expense		Net Decrease to Net Income			Increase to Interest Expense		Net Decrease to Net Income
1% Increase to LIBOR	$	742	$	(742	)	$	863	$	(863	)
2% Increase to LIBOR		1,484		(1,484	)		1,725		(1,725	)
3% Increase to LIBOR		2,184		(2,184	)		2,546		(2,546	)

As of ~~June~~September 30, 2015, the fair value of our mortgage debt outstanding, ~~excluding~~including real estate held for sale, was ~~$496.1~~$495.6 million. Interest rate fluctuations may affect the fair value of our debt instruments. If interest rates on our debt instruments, using rates at ~~June~~September 30, 2015, had been one percentage point higher or lower, the fair value of those debt instruments on that date would have decreased or increased by ~~$19.2~~$18.8 million and ~~$20.7~~$20.2 million, respectively.

In the future, we may be exposed to additional effects of interest rate changes, primarily as a result of our Line of Credit or long-term mortgage debt, which we use to maintain liquidity and fund expansion of our real estate investment portfolio and operations. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings and cash flows and to lower overall borrowing costs. To achieve these objectives, we will borrow primarily at fixed rates or variable rates with the lowest margins available and, in some cases, with the ability to convert variable rates to fixed rates. We may also enter into derivative financial instruments such as interest rate swaps and caps in order to mitigate the interest rate risk on a related financial instrument. We will not enter into derivative or interest rate transactions for speculative purposes.

In addition to changes in interest rates, the value of our real estate is subject to fluctuations based on changes in local and regional economic conditions and changes in the creditworthiness of lessees and borrowers, all of which may affect our ability to refinance debt, if necessary.

As of ~~June~~September 30, 2015, our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, the chief executive officer and chief financial officer, concluded that our disclosure controls and procedures were effective as of ~~June~~September 30, 2015 in providing a reasonable level of assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable SEC rules and forms, including providing a reasonable level of assurance that information required to be disclosed by us in such reports is accumulated and communicated to our management, including our chief executive officer and our chief financial officer, as appropriate to allow timely decisions regarding required disclosure. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated can provide only reasonable assurance of necessarily achieving the desired control objectives, and management was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

There were no changes in our internal control over financial reporting that occurred during the quarter ended ~~June~~September 30, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us.

Our business is subject to certain risks and events that, if they occur, could adversely affect our financial condition and results of operations and the trading price of our securities. For a discussion of these risks, please refer to the ~~risk below and the~~ section captioned “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2014, filed by us with the U.S. Securities and Exchange Commission on February 18, ~~2015.~~

~~Terminating~~2015 and our Quarterly Report on Form 10-Q for the ~~Amended Advisory Agreement without cause requires payment of a substantial termination fee.~~

~~Termination of~~quarter ended June 30, 2015, filed by us with the ~~Amended Advisory Agreement~~U.S. Securities and Exchange Commission on August 3, 2015. There are no material changes to risks associated with our ~~Adviser without cause would be difficult and costly. We may only terminate~~business or investment in our securities from those previously set forth in the agreement without cause (as defined therein) upon 120 days’ prior written notice and after the affirmative vote of at least two-thirds of our independent directors. Furthermore, if we default under the agreement and any applicable cure period has expired, the Adviser may terminate the agreement. In each of the foregoing cases, we will be required to pay the Adviser a termination fee equal to two times the sum of the average base management fee and incentive fee earned by our Adviser during the 24-month period prior to such termination. This provision increases the cost to us of terminating the Amended Advisory Agreement and adversely affects our ability to terminate our Adviser without cause. Additionally, depending on the amount of the fee, if incurred, it could adversely affect our ability to pay distributions to our common, preferred and senior common stockholders.reports described above.



101.INS***		XBRL Instance Document

101.SCH***		XBRL Taxonomy Extension Schema Document

101.CAL***		XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB***		XBRL Taxonomy Extension Label Linkbase Document

101.PRE***		XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF***		XBRL Definition Linkbase

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


MARYLAND		02-0681276
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1521 WESTBRANCH DRIVE, SUITE 100 MCLEAN, VIRGINIA		22102
(Address of principal executive offices)		(Zip Code)


				PAGE
PART I		FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets as of ~~June~~September 30, 2015 and December 31, 2014		3

	Condensed Consolidated Statements of Operations for the three and ~~six~~nine months ended ~~June~~September 30, 2015 and 2014		4

	Condensed Consolidated Statements of Cash Flows for the ~~six~~nine months ended ~~June~~September 30, 2015 and 2014		5

	Notes to Condensed Consolidated Financial Statements		6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		22

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		39

Item 4.	Controls and Procedures		40

~~Item 4.~~	~~Controls and Procedures~~		41

~~PART II~~	PART II OTHER INFORMATION

Item 1.	Legal Proceedings		4241

Item 1A.	Risk Factors		4241

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		4241

Item 3.	Defaults Upon Senior Securities		4241

Item 4.	Mine Safety Disclosures		4241

Item 5.	Other Information		4241

Item 6.	Exhibits		4241

SIGNATURES			4544


Date Issued	Outstanding Balance of Employee Loan at June 30, 2015		Outstanding Balance of Employee Loan at December 31, 2014		Maturity Date of Note		Interest Rate on Note
Nov 2006	$	—	$	375		Nov 2015		8.15	%


Record Date	Payment Date	Common Stock Distributions per Share		Series A Preferred Distributions per Share		Series B Preferred Distributions per Share		Series C Preferred Distributions per Share
July 24, 2015	August 4, 2015	$	0.125	$	0.1614583	$	0.15625	$	0.1484375
August 20, 2015	August 31, 2015		0.125		0.1614583		0.15625		0.1484375
September 21, 2015	September 30, 2015		0.125		0.1614583		0.15625		0.1484375

Total		$	0.375	$	0.4843749	$	0.46875	$	0.4453125


					Lease				Total Purchase		Acquisition		Annualized Straight			Debt Issued &
Location	Acquisition Date		Square Footage		Term	Renewal Options			Price		Expenses		Line Rent			Assumed
Allen, TX		3/27/2014		21,154	12 Years		4 (5 years each)		$	5,525	$	33	$	570		$	3,481
Colleyville, TX		3/27/2014		20,355	12 Years		4 (5 years each)			4,523		33		467			2,849
Rancho Cordova, CA⁽⁴⁾		4/22/2014		61,358	10 Years		1 (5 year)			8,225		73		902			4,935
Coppell, TX		5/8/2014		21,171	12 Years		4 (5 years each)			5,838		26		601			3,816
Columbus, OH		5/13/2014		114,786	9.5 Years ⁽¹⁾		N/A	⁽¹⁾		11,800		70		1,278	⁽³⁾		N/A
Taylor, PA		6/9/2014		955,935	10 Years		4 (5 years each)			39,000		730		3,400			22,600
Aurora, CO		7/1/2014		124,800	15 Years		2 (5 years each)			8,300		91		768			N/A
Indianapolis, IN⁽⁴⁾		9/3/2014		86,495	11.5 Years ⁽²⁾		2 (5 years each)	⁽²⁾		10,500		58		1,504	⁽³⁾		6,100

Total				1,406,054					$	93,711	$	1,114	$	9,490		$	43,781


Exhibit Number		Exhibit Description

3.1		Articles of Restatement of the Registrant, incorporated by reference to Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-33097), filed April 30, 2012.

3.2		Bylaws of the Registrant, incorporated by reference to Exhibit 3.2 to the Registrant’s Registration Statement on Form S-11 (File No. 333-106024), filed June 11, 2003.

3.3		First Amendment to Bylaws of the Registrant, incorporated by reference to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K (File No. 001-33097), filed July 10, 2007.

4.1		Form of Certificate for Common Stock of the Registrant, incorporated by reference to Exhibit 4.1 to Pre-Effective Amendment No. 2 to the Registrant’s Registration Statement on Form S-11 (File No. 333-106024), filed August 8, 2003.

4.2		Form of Certificate for 7.75% Series A Cumulative Redeemable Preferred Stock of the Registrant, incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-A12G (File No. 000-50363), filed January 19, 2006.

4.3		Form of Certificate for 7.50% Series B Cumulative Redeemable Preferred Stock of the Registrant, incorporated by reference to Exhibit 4.2 to the Registrant’s Form 8-A12B (File No. 001-33097), filed October 19, 2006.

4.4		Form of Certificate for 7.125% Series C Cumulative Term Preferred Stock of the Registrant, incorporated by reference to Exhibit 4.4 to the Registrant’s Form 8-A12B (File No. 001-33097), filed January 31, 2012.

10.1		Amended and Restated Investment Advisory Agreement between the Registrant and Gladstone Management Corporation, dated July 24, 2015, incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K (File No. 001-33097), filed July 17, 2015.

11		Computation of Per Share Earnings from Operations (included in the notes to the unaudited financial statements contained in this Report).

12		Statements re: computation of ratios (filed herewith).

31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).


	Gladstone Commercial Corporation

Date: ~~August 3,~~October 27, 2015	By:	/s/ Danielle Jones
		Danielle Jones
		Chief Financial Officer

Date: ~~August 3,~~October 27, 2015	By:	/s/ David Gladstone
		David Gladstone
		Chief Executive Officer and Chairman of the Board of Directors

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company