The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets that sum to the total of the same amounts shown in the condensed consolidated statements of cash flows (dollars in thousands):

Gladstone Commercial Corporation is a real estate investment trust (“REIT”) that was incorporated under the General Corporation Law of the State of Maryland on February 14, 2003. We focus on acquiring, owning and managing primarily office and industrial properties. On a selective basis, we may make long term industrial and office mortgage loans; however, we do not have any mortgage loans currently outstanding. Subject to certain restrictions and limitations, our business is managed by Gladstone Management Corporation, a Delaware corporation (the “Adviser”), and administrative services are provided by Gladstone Administration, LLC, a Delaware limited liability company (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 other general expenses directly. Gladstone Commercial Corporation conducts substantially all of its operations through a subsidiary, Gladstone Commercial Limited Partnership, a Delaware limited partnership (the “Operating Partnership”).

All 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 generally accepted accounting principles (“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 statement 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, 2019,2020, as filed with the U.S. Securities and Exchange Commission on February 12, 2020.16, 2021. The results of operations for the three and six months ended June 30, 20202021 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. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, including the impact of extraordinary events such as the novel coronavirus (“COVID-19”) pandemic, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The preparation of our financial statements in accordance with 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 materially differ from these estimates. A summary of all of our significant accounting policies is provided in Note 1, “Organization, Basis of Presentation and Significant Accounting Policies,” to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019. On January 1, 2020, we completed the integration of the accounting records of certain of our triple net leased third-party asset managed properties into our accounting system and paid out of our operating bank accounts. For periods prior to January 1, 2020, we recorded property operating expenses and offsetting lease revenues for these certain triple net leased properties on a net basis. Beginning January 1, 2020, we are recording the property operating expenses and offsetting lease revenues for these triple net leased properties on a gross basis, as we have amended our process whereby we are paying operating expenses on behalf of our tenants and receiving reimbursement, whereas, previously these tenants were paying these expenses directly with limited insight provided to us.2020. There were no other material changes to our critical accounting policies during the three and six months ended June 30, 2020.2021.

In April 2020, the FASB issued a staff question-and-answer document, Topic 842 and Topic 840: Accounting for Lease Concessions related to the Effects of the COVID-19 Pandemic (“COVID-19 Q&A”), to address frequently asked questions pertaining to lease concessions arising from the effects of the COVID-19 pandemic. Existing lease guidance requires entities to determine if a lease concession was a result of a new arrangement reached with the tenant, which would be addressed under the lease modification accounting framework, or if a lease concession was under the enforceable rights and obligations within the existing lease agreement, which would not fall under the lease modification accounting framework. The COVID-19 Q&A clarifies that entities may elect to not evaluate whether lease-related relief granted in light of the effects of COVID-19 is a lease

modification, as long as the concession does not result in a substantial increase in rights of the lessor or obligations of the lessee. This election is available for concessions that result in the total payments required by the modified contract being substantially the same as or less than the total payments required by the original contract. At this time, we have granted rent deferrals to three tenants representing approximately 2% of total portfolio rents. The agreements with these tenants include current partial payment in exchange for rent deferrals of varying terms with deferred amounts to be paid by the respective tenant back to us, for the period starting in July 2020 and ending through March 2021. We have elected to not evaluate these leases under the lease modification accounting framework.

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 other general expenses directly. Both our Adviser and Administrator are affiliates of ours, as their parent company is owned and controlled by Mr. David Gladstone, our chairman and chief executive officer. NaN of our executive officers, Mr. Gladstone and Mr. Terry Lee Brubaker (our vice chairman and chief operating officer) serve as directors and executive officers of our Adviser and our Administrator. Our president, Mr. Robert Cutlip, also serves asis the executive vice president of commercial &and industrial real estate of our Adviser. Mr. Michael LiCalsi, our general counsel and secretary, also serves as our Administrator’s president, general counsel and secretary, as well as executive vice president of administration of our Adviser. We have entered into an advisory agreement with our Adviser, as amended from time to time (the “Advisory Agreement”), and an administration agreement with our Administrator (the “Administration Agreement”). The services and fees under the Advisory Agreement and Administration Agreement are described below. As of June 30, 20202021 and December 31, 2019, $3.32020, $3.1 million and $2.9$3.0 million, respectively, were collectively due to our Adviser and Administrator. Our entrance into the Advisory Agreement and each amendment thereto has been approved unanimously by our Board of Directors. Our Board of Directors reviews and considers renewing the agreements with our Adviser and Administrator each July. During their July 20202021 meeting, our Board of Directors amended and restated the Advisory Agreement and reviewed and renewed the Advisory Agreement and Administration Agreement for an additional year, through August 31, 2021.2022.

Under the previous version of the Advisory Agreement (that which was in place prior to the most recent amendment on July 14, 2020), the calculation of the annual base management fee equaled 1.5% of our Total Equity, prior to the July 14, 2020 amendment, which iswas our total stockholders’ equity plus total mezzanine 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), 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), and adjusted to include operating partnership units in the Operating Partnership (“OP Units”) held by holders who do not control the Operating Partnership (“Non-controlling OP Unitholders”). The fee was calculated and accrued quarterly as 0.375% per quarter of such Total Equity figure.Equity. Our Adviser does not charge acquisition or disposition fees when we acquire or dispose of properties, as is common in other externally managed REITs; however, our Adviser may earn fee income from our borrowers, tenants or other sources.

On July 14, 2020, the Companywe amended and restated the Advisory Agreement by entering into the Sixth Amended and Restated Investment Advisory Agreement between the Companyus and the Adviser (the “Amended“Sixth Amended Advisory Agreement”). The Company’s entrance into the Amended Agreement was approved by its board of directors, including, specifically, unanimously by its independent directors. The Amended Agreement revised and, which replaced the previous calculation of the Base Management Fee, which was based on Total Equity,base management fee with a calculation based on Gross Tangible Real Estate. The revised Base Management Feebase management fee will be payable quarterly in arrears and shall be calculated at an annual rate of 0.425% (0.10625% per quarter) of the prior calendar quarter’s “Gross Tangible Real Estate,” defined in the Sixth Amended Advisory Agreement as the current gross value of the Company’sour property portfolio (meaning the aggregate of each property’s original acquisition price plus the cost of any subsequent capital improvements thereon). The calculation of the other fees in the AmendedAdvisory Agreement remain unchanged. The revised Base Management Feebase management fee calculation will beginbegan with the fee calculations for the quarter endingended September 30, 2020.

Pursuant to the Advisory Agreement, the calculation of the incentive fee rewards the Adviser in circumstances where our quarterly Core FFO (defined 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). We refer to this as the hurdle rate. The Adviser will receive 15.0% of the amount of our pre-incentive fee Core FFO that exceeds the 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 4 quarters (excluding quarters for which no incentive fee was paid). Core FFO (as defined in the Advisory Agreement) is 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.

For the three and six months ended June 30, 2021, we recorded an incentive fee of $1.0 million and $2.3 million, respectively, partially offset by credits related to unconditional voluntary and irrevocable waivers issued by the Adviser of $0.02 million and $0.02 million, respectively, resulting in a net incentive fee for the three and six months ended June 30, 2021 of $1.0 million and $2.3 million, respectively. For the three and six months ended June 30, 2020, we recorded an incentive fee of $1.1 million and $2.2 million, respectively. For the three and six months ended June 30, 2019, we recorded an incentive fee of $0.9 million and $1.8 million, respectively. The Adviser did 0t waive any portion of the incentive fee for the three and six months ended June 30, 2020 or 2019, respectively.2020.

Under the Advisory Agreement, we will pay to the Adviser a capital gain-based incentive fee that will be calculated and payable in arrears as of the end of each fiscal year (or upon termination of the Advisory 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 (equal to the property’s original acquisition price plus any subsequent non-reimbursed capital improvements) of the disposed property. 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. NaN capital gain fee was recognized during the three and six months ended June 30, 20202021 or 2019.2020.

The Advisory Agreement includes a termination fee clause 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 Advisory Agreement after we have defaulted and applicable cure periods have expired. The Advisory 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 thereof, the bankruptcy or insolvency of the Adviser, dissolution of the Adviser and fraud or misappropriation of funds.

Under the terms of the Administration Agreement, we pay separately for our allocable portion of the Administrator’s overhead expenses in performing its obligations to us including, but not limited to, rent and our allocable portion of the salaries and benefits expenses of our Administrator’s employees, including, but not limited to, our chief financial officer, treasurer, chief compliance officer, general counsel and secretary Michael LiCalsi (who also serves as our Administrator’s president, general counsel and secretary), and their respective staffs. Our allocable portion of the Administrator’s expenses are 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. We believe this approach helpsthat the 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 by us to actual services performed byperformed. For the Administrator for us.three and six months ended June 30, 2021, we recorded an administration fee of $0.3 million and $0.6 million, respectively. For the three and six months ended June 30, 2020, we recorded an administration fee of $0.4 million and $0.8 million, respectively. For the three and six months ended June 30, 2019, we recorded an administration fee of $0.4 million and $0.8 million, respectively.

Gladstone Securities, LLC (“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 owned and controlled by David Gladstone, our chairman and chief executive officer. Mr. Gladstone also serves on the board of managers of Gladstone Securities.

We 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 will, from time to time, continue to 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%1.00% 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 did not0t pay financing fees to Gladstone Securities during the three months ended June 30, 2021, but we paid financing fees to Gladstone Securities of $14,000 during the six months ended June 30, 2021, which are included in mortgage notes payable, net, in the condensed consolidated balance sheets, or 0.25% of the mortgage principal secured. We did 0t pay financing fees to Gladstone Securities during the three months ended June 30, 2020, but we paid financing fees to Gladstone Securities of $0.09 million$89,637 during the six months ended June 30, 2020, which are included in mortgage notes payable, net, in the condensed consolidated balance sheets, or 0.25%, of the mortgage principal secured and/or extended. We paid financing fess to Gladstone Securities of $0.08 million and $0.10 million during the three and six months ended June 30, 2019, respectively, which are included in mortgage notes payable, net, in the condensed consolidated balance sheets, or 0.21% and 0.20%, respectively, of the mortgage principal secured and/or extended.secured. Our Board of Directors renewed the agreement for an additional year, through August 31, 2021,2022, at its July 20202021 meeting.

On February 20, 2020 we entered into a dealer manager agreement (the “Dealer Manager Agreement”), withwhereby Gladstone Securities (the “Dealer Manager”), wherebywill act as the Dealer Manager will serve as our exclusive dealer manager in connection with our offering (the “Offering”) of up to (i) 20,000,000 shares of 6.00% Series F Cumulative Redeemable Preferred Stock, of the Company, par value $0.001 per share (the “Series F Preferred Stock”), on a “reasonable best efforts” basis (the “Primary Offering”), and (ii) 6,000,000 shares of Series F Preferred Stock pursuant to our distribution reinvestment plan (the “DRIP”) to those holders of the Series F Preferred Stock who participate in such DRIP. The Series F Preferred Stock is registered with the SEC pursuant to a registration statement on Form S-3 (File No. 333-236143), as the same may be amended and/or supplemented (the “Registration Statement”), under the Securities Act of 1933, as amended, and will be offered and sold pursuant to a prospectus supplement, dated February 20, 2020, and a base prospectus dated February 11, 2020 relating to the Registration Statement (the “Prospectus”).

Under the Dealer Manager Agreement, the Dealer ManagerGladstone Securities, as dealer manager, will provide certain sales, promotional and marketing services to the Companyus in connection with the Offering, and the Companywe will pay the Dealer ManagerGladstone Securities (i) selling commissions of 6.0% of the gross proceeds from sales of Series F Preferred Stock in the Primary Offering (the “Selling Commissions”), and (ii) a dealer manager fee of 3.0% of the gross proceeds from sales of Series F Preferred Stock in the Primary Offering (the “Dealer Manager Fee”). No Selling Commissions or Dealer Manager Fee shall be paid with respect to Sharesshares sold pursuant to the DRIP. The Dealer ManagerGladstone Securities may, in its sole discretion, reallow a portion of the Dealer Manager Fee to participating broker-dealers in support of the Offering. We paid fees of $0.1 million to Gladstone Securities during the six months ended June 30, 2021 in connection with the Offering.

The following tables set forth the computation of basic and diluted (loss) earningsloss per share of common stock for the three and six months ended June 30, 20202021 and 2019.2020. The OP Units held by Non-controlling OP Unitholders (which may be redeemed for shares of common stock) have been excluded from the diluted (loss) earningsloss per share calculations, as there would be no effect on the amounts since the Non-controlling OP Unitholders’ share of (loss) incomeloss would also be added back to net (loss) income.loss. Net (loss) incomeloss figures are presented net of such non-controlling interests in the (loss) earningsloss per share calculation.

We computed basic (loss) earningsloss per share for the three and six months ended June 30, 20202021 and 20192020 using the weighted average number of shares outstanding during the respective periods. Diluted (loss) earningsloss per share for the three and six months ended June 30, 20202021 and 20192020 reflects additional shares of common stock related to our convertible senior common stock (the “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 (loss) income (attributable) availableloss attributable to common stockholders as applicable to common stockholders that would result from their assumed issuance (dollars in thousands, except per share amounts).

The following table sets forth the components of our investments in real estate as of June 30, 20202021 and December 31, 2019,2020, excluding real estate held for sale as of June 30, 2020 and December 31, 2019, respectively2020 (dollars in thousands):

We acquired 2 properties during the three and six months ended June 30, 2019, respectively.

We determined the fair value of assets acquired and liabilities assumed related to the properties acquired during the six months ended June 30, 2021 and 2020, and 2019respectively, as follows (dollars in thousands):

Future operating lease payments from tenants under non-cancelable leases, excluding tenant reimbursement of expenses, for the six months ending December 31, 20202021 and each of the five succeeding fiscal years and thereafter is as follows (dollars in thousands):

In accordance with the lease terms, substantially all of our real estate leasing arrangements as operating leases. A majority of our leasesexpenses are subjectrequired to fixed rental increases, but a small subset of our lease portfolio has variable lease payments that are drivenbe paid by the consumer price index. Many of our tenants have renewal options in theirtenant directly, or reimbursed to us from the tenant; however, we would be required to pay operating expenses on the respective leases, but we seldom include option periodsproperties in the determination of lease term, as we generally will not enter into leasing arrangements with bargain renewal options. A small number ofevent the tenants have termination options.fail to pay them.

The table below sets forth the allocation of lease revenue between fixed contractual payments and variable lease payments for the three and six months ended June 30, 20202021 and 2019,2020, respectively (dollars in thousands):

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 30, 20202021 and December 31, 2019,2020, excluding real estate held for sale as of June 30, 2020 and December 31, 2019, respectively2020 (dollars in thousands):

Total amortization expense related to in-place leases, leasing costs and customer relationship lease intangible assets was $4.7 million and $10.7 million for the three and six months ended June 30, 2021, respectively, and $5.0 million and $10.1 million for the three and six months ended June 30, 2020, respectively, and $4.5 million and $9.5 million for the three and six months ended June 30, 2019, respectively, and is included in depreciation and amortization expense in the condensed consolidated statements of operations and comprehensive income.

Total amortization related to above-market lease values was $0.2 million and $0.4 million for the three and six months ended June 30, 2020,2021, respectively, and $0.2 million and $0.5$0.4 million for the three and six months ended June 30, 2019,2020, respectively, and is included in lease revenue in the condensed consolidated statements of operations and comprehensive income. Total amortization related to below-market lease values was $0.8 million and $2.4 million for the three and six months ended June 30, 2021, respectively, and $0.7 million and $1.4 million for the three and six months ended June 30, 2020, respectively, and $0.6 million and $1.2 million for the three and six months ended June 30, 2019, respectively, and is included in lease revenue in the condensed consolidated statements of operations and comprehensive income.

The weighted average amortization periods in years for the intangible assets acquired and liabilities assumed during the six months ended June 30, 2021 and 2020, and 2019respectively, were as follows:

During the six months ended June 30, 2020,2021, we continued to execute our capital recycling program, whereby we sellsold properties outside of our core markets and redeployredeployed proceeds to either fund property acquisitions in our target secondary growth markets, or repay outstanding debt. We expect to continue to execute our capital recycling plan and sell non-core properties as reasonable disposition opportunities become available. On February 20, 2020,During the six months ended June 30, 2021, we sold 12 non-core property,properties, located in Charlotte, North Carolina,Rancho Cordova, California and Champaign, Illinois, which is detailedare summarized in the table below (dollars in thousands):