Gladstone Commercial Corporation Reports Results for the Second Quarter Ended June...

Gladstone Commercial Corporation Reports Results for the Second Quarter Ended June 30, 2008

-- Reported a 6.7% increase to our funds from operations ("FFO")
to approximately $3.4 million for the second quarter ended
June 30, 2008, from the same period last year.

-- Reported a 12.4% increase to our FFO to approximately $6.8
million for the six months ended June 30, 2008, from the same
period last year.

-- Completed the acquisition of one property for a total
investment of approximately $3.9 million, and extended the
terms on three of our leases.
MCLEAN, Va.--(Business Wire)--
Gladstone Commercial Corp. (NASDAQ:GOOD) (the "Company") today
reported financial results for the quarter ended June 30, 2008. A
description of FFO, a relative non-GAAP ("Generally Accepted
Accounting Principles in the United States") financial measure, is
located at the end of this news release. All per share references are
to fully-diluted weighted average common shares, unless otherwise
noted.

Net income available to common stockholders for the quarter ended
June 30, 2008 was approximately $0.2 million, or $0.02 per share,
compared to approximately $0.5 million, or $0.06 per share, for the
same period one year ago. Net income available to common stockholders
for the six months ended June 30, 2008 was approximately $0.6 million,
or $0.07 per share, compared to approximately $1.0 million, or $0.12
per share, for the same period one year ago. Net income results when
compared to the same period last year were negatively affected by
increased interest expense from the growing number of properties which
have long-term financing, coupled with the increase in the outstanding
balance on the Company's line of credit, and were partially offset by
the increase in the Company's portfolio of investments in the past
year and the corresponding increase in its revenues. Net income
results were also affected by a partial waiver of the incentive fee
for the three and six months ended June 30, 2008 of approximately $0.2
million and $0.7 million, respectively, compared to net income results
for the three and six months ended June 30, 2007, which included a
full waiver of the incentive fee of approximately $0.6 million and
$1.2 million, respectively, from the Company's adviser, Gladstone
Management Corporation.

FFO for the quarter ended June 30, 2008 was approximately $3.4
million, or $0.39 per share, compared to approximately $3.2 million,
or $0.37 per share, for the same period one year ago, an increase of
approximately 6.7%. FFO for the six months ended June 30, 2008 was
approximately $6.8 million, or $0.79 per share, compared to
approximately $6.0 million or $0.70 per share, for the same period one
year ago, an increase of approximately 12.4%. A reconciliation of net
income, which the Company believes is the most directly comparable
GAAP measure to FFO, is set forth below:

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For the three months For the six months ended
ended June 30, June 30,
------------------------- -------------------------
2008 2007 2008 2007
------------ ------------ ------------ ------------

Net income $ 1,219,445 $ 1,556,312 $ 2,636,148 $ 3,086,654
Less: Dividends
attributable to
preferred stock (1,023,437) (1,023,437) (2,046,875) (2,046,874)
------------ ------------ ------------ ------------
Net income
available to
common
stockholders 196,008 532,875 589,273 1,039,780

Add: Real estate
depreciation and
amortization 3,185,017 2,636,154 6,172,777 5,053,966
Less: Gain on sale
of real estate,
net of taxes paid - - - (78,667)
------------ ------------ ------------ ------------
FFO available to
common
stockholders $ 3,381,025 $ 3,169,029 $ 6,762,050 $ 6,015,079

Weighted average
shares
outstanding -
basic & diluted 8,565,264 8,565,264 8,565,264 8,565,264

Basic & diluted
net income per
weighted average
common share $ 0.02 $ 0.06 $ 0.07 $ 0.12
============ ============ ============ ============
Basic & diluted
FFO per weighted
average common
share $ 0.39 $ 0.37 $ 0.79 $ 0.70
============ ============ ============ ============

Dividends declared
per common share $ 0.38 $ 0.36 $ 0.75 $ 0.72
============ ============ ============ ============

Percentage of FFO
paid per common
share 95% 97% 95% 103%
============ ============ ============ ============
*T

At June 30, 2008, the Company owned 57 properties totaling
approximately 6.0 million square feet, and had one mortgage loan
outstanding for a total net investment of approximately $396.7
million. Currently, all of the Company's properties are fully leased
and all tenants and its borrower are paying as agreed.

Second quarter highlights:

-- Purchased one fully-occupied property comprised of
approximately 75,000 square feet for a purchase price of
approximately $3.9 million;

-- Extended the terms on three leases for additional periods
ranging from three to five years; and

-- Declared monthly cash dividends of $0.125 per share on the
common stock, $0.1614583 per share on the Series A Preferred
Stock, and $0.15625 per share on the Series B Preferred Stock,
for each of the months of April, May and June of 2008.

"Although our second quarter results were positively impacted by
the four transactions completed thus far in 2008, we are disappointed
by the current pace of acquisitions. Our pipeline continues to be
stronger than ever, but because of the instability of the financial
markets, transactions are taking longer than expected to close. The
credit markets continue to be tumultuous, but given our visibility
into current opportunities, we are confident that we will be able to
continue to grow our portfolio this year with solid, long-term
investments and secure alternative sources of financing. We remain
optimistic about the prospects for the remainder of the year," said
Chip Stelljes, President and Chief Investment Officer.

Subsequent to quarter end, the Company:

-- Declared monthly cash dividends of $0.125 per share on the
common stock, $0.1614583 per share on the Series A Preferred
Stock, and $0.15625 per share on the Series B Preferred Stock,
for each of the months of July, August and September 2008.

The financial statements attached below are without footnotes so
readers should obtain and carefully review the Company's Form 10-Q for
the quarter ended June 30, 2008, including the footnotes to the
financial statements contained therein. The Company has filed the Form
10-Q today with the Securities and Exchange Commission ("SEC") and the
Form 10-Q can be retrieved from the SEC's website at www.sec.gov or
the Company's website at www.GladstoneCommercial.com.

The Company will hold a conference call on Wednesday, August 6,
2008 at 8:30 a.m. ET to discuss its earnings results. Please call
(877) 407-8031 to enter the conference. An operator will monitor the
call and set a queue for the questions.

The conference call replay will be available two hours after the
call and will be available through September 6, 2008. To hear the
replay, please dial (877) 660-6853, access playback account 286 and
use ID code 292109.

Gladstone Commercial Corporation is a publicly traded real estate
investment trust ("REIT") that focuses on investing in and owning
triple-net leased industrial, commercial and retail real estate
properties and selectively making long-term mortgage loans. Additional
information can be found at www.GladstoneCommercial.com.

For further information, contact Kerry Finnegan at 703-287-5893.

NON-GAAP FINANCIAL MEASURE

Funds from Operations

The National Association of Real Estate Investment Trusts
("NAREIT") developed FFO as a relative non-GAAP supplemental measure
of operating performance of an equity REIT in order to recognize that
income-producing real estate historically has not depreciated on the
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, 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 determined in accordance with GAAP and should not be
considered an alternative to net income as an indication of the
Company's performance or to cash flow from operations as a measure of
liquidity or ability to make distributions.

The Company believes that FFO per share provides investors with a
further context for evaluating the Company's financial performance and
as a supplemental measure to compare the Company to other REITs;
however, comparisons of the Company's FFO to the FFO of other REITs
may not necessarily be meaningful due to potential differences in the
application of the NAREIT definition used by such other REITs. To
learn more about FFO please refer to the Form 10-Q for the quarter
ended June 30, 2008, as filed with the SEC today.

This press release may include statements that 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, including statements with regard to
the future performance of the Company, the closing of any transaction
and the Company's ability to secure alternative sources of financing.
Words such as "may," "continue," "will," "believes," "anticipates,"
"intends," "expects," "projects," "estimates" and "future" or similar
expressions are intended to identify forward-looking statements. These
forward-looking statements inherently involve certain risks and
uncertainties, although they are based on the Company's current plans,
expectations and beliefs that are believed to be reasonable as of the
date of this press release. Factors that may cause the Company's
actual results, levels of activity, performance or achievements to be
materially different from any future results, levels of activity,
performance or achievements expressed or implied by such
forward-looking statements include, among others, those factors listed
under the caption "Risk Factors" of the Company's Annual Report on
Form 10-K for the year ended December 31, 2007, as filed with the SEC
on February 27, 2008 and the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 2008, as filed on August 5, 2008 . The
risk factors set forth in the Form 10-K and Form 10-Q under the
caption "Risk Factors" are specifically incorporated by reference into
this press release. All forward-looking statements are based on
current plans, expectations and beliefs and speak only as of the date
of such statements. The Company undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a result
of new information, future events or otherwise.

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Gladstone Commercial Corporation
Consolidated Balance Sheets
(Unaudited)

June 30, 2008 December 31, 2007
----------------- -----------------

ASSETS
Real estate, net of accumulated
depreciation of $20,102,084 and
$15,738,634, respectively $ 356,463,038 $ 324,761,772
Lease intangibles, net of
accumulated amortization of
$9,370,270 and $7,560,928,
respectively 30,253,544 28,989,556
Mortgage notes receivable 10,000,000 10,000,000
Cash and cash equivalents 1,775,274 1,356,408
Restricted cash 2,604,830 1,914,067
Funds held in escrow 1,856,708 1,401,695
Deferred rent receivable 6,121,058 5,094,799
Deferred financing costs, net of
accumulated amortization of
$2,690,249 and $2,184,492,
respectively 3,955,834 4,405,129
Prepaid expenses and other assets 1,215,463 979,263
----------------- -----------------

TOTAL ASSETS $ 414,245,749 $ 378,902,689
================= =================

LIABILITIES AND STOCKHOLDERS'
EQUITY

LIABILITIES
Mortgage notes payable $ 201,346,692 $ 202,120,471
Short-term loan and borrowings
under line of credit 64,550,000 24,400,000
Deferred rent liability 3,540,254 3,933,035
Asset retirement obligation
liability 2,120,183 1,811,752
Accounts payable and accrued
expenses 944,723 778,949
Due to adviser 1,321,987 784,301
Obligation under capital lease 229,223 -
Rent received in advance, security
deposits and funds held in escrow 3,519,217 2,706,113
----------------- -----------------

Total Liabilities 277,572,279 236,534,621
----------------- -----------------

STOCKHOLDERS' EQUITY
Redeemable preferred stock, $0.001
par value; $25 liquidation
preference; 2,300,000 shares
authorized and 2,150,000 shares
issued and outstanding 2,150 2,150
Common stock, $0.001 par value,
17,700,000 shares authorized and
8,565,264 shares issued and
outstanding 8,565 8,565
Additional paid in capital 170,640,979 170,640,979
Notes receivable - employees (2,629,846) (2,769,923)
Distributions in excess of
accumulated earnings (31,348,378) (25,513,703)
----------------- -----------------

Total Stockholders' Equity 136,673,470 142,368,068
----------------- -----------------

TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 414,245,749 $ 378,902,689
================= =================
*T

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Gladstone Commercial Corporation
Consolidated Statements of Operations
(Unaudited)

For the three months For the six months ended
ended June 30, June 30,
------------------------- -------------------------
2008 2007 2008 2007
------------ ------------ ------------ ------------
Operating revenues
Rental income $ 9,922,018 $ 7,732,322 $19,111,483 $14,810,358
Interest income
from mortgage
notes
receivable 218,805 252,778 457,102 502,778
Tenant recovery
revenue 84,635 94,468 170,354 150,203
------------ ------------ ------------ ------------
Total
operating
revenues 10,225,458 8,079,568 19,738,939 15,463,339
------------ ------------ ------------ ------------

Operating expenses
Depreciation
and
amortization 3,185,017 2,636,154 6,172,777 5,053,966
Property
operating
expenses 203,858 218,139 445,426 392,301
Base management
fee 419,857 471,091 851,725 953,135
Incentive fee 801,832 633,805 1,506,499 1,219,573
Administration
fee 274,541 210,126 486,737 417,144
Professional
fees 147,065 174,667 244,727 324,108
Insurance 41,797 58,697 83,594 117,332
Directors fees 52,251 54,250 106,500 108,500
Stockholder
related
expenses 102,775 75,361 229,198 174,978
Asset
retirement
obligation
expense 32,764 28,942 63,232 57,102
General and
administrative 18,536 21,314 33,167 61,668
------------ ------------ ------------ ------------
Total
operating
expenses
before
credit from
Adviser 5,280,293 4,582,546 10,223,582 8,879,807
------------ ------------ ------------ ------------

Credit to
incentive fee (173,697) (633,805) (736,052) (1,219,573)
------------ ------------ ------------ ------------
Total
operating
expenses 5,106,596 3,948,741 9,487,530 7,660,234
------------ ------------ ------------ ------------

Other income
(expense)
Interest income
from temporary
investments 6,689 63,269 16,237 292,285
Interest income
- employee
loans 50,852 56,458 102,996 116,880
Other income 39,697 9,817 48,993 18,231
Interest
expense (3,996,249) (2,702,612) (7,749,853) (5,217,073)
------------ ------------ ------------ ------------
Total other
expense (3,899,011) (2,573,068) (7,581,627) (4,789,677)
------------ ------------ ------------ ------------

Income from
continuing
operations 1,219,851 1,557,759 2,669,782 3,013,428
------------ ------------ ------------ ------------

Discontinued
operations
Loss from
discontinued
operations (406) (1,503) (33,634) (5,504)
Net realized
income from
foreign
currency
transactions - 56 - 63
Taxes refunded
on sale of
real estate - - - 78,667
------------ ------------ ------------ ------------
Total
discontinued
operations (406) (1,447) (33,634) 73,226
------------ ------------ ------------ ------------

Net income 1,219,445 1,556,312 2,636,148 3,086,654
------------ ------------ ------------ ------------

Dividends
attributable to
preferred stock (1,023,437) (1,023,437) (2,046,875) (2,046,874)
------------ ------------ ------------ ------------

Net income
available to
common
stockholders $ 196,008 $ 532,875 $ 589,273 $ 1,039,780
============ ============ ============ ============

Earnings per
weighted average
common share -
basic & diluted
Income from
continuing
operations
(net of
dividends
attributable
to preferred
stock) $ 0.02 $ 0.06 $ 0.07 $ 0.11
Discontinued
operations 0.00 0.00 0.00 0.01
------------ ------------ ------------ ------------

Net income
available to
common
stockholders $ 0.02 $ 0.06 $ 0.07 $ 0.12
============ ============ ============ ============

Weighted
average
shares
outstanding-
basic &
diluted 8,565,264 8,565,264 8,565,264 8,565,264
============ ============ ============ ============
*T

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Gladstone Commercial Corporation
Consolidated Statements of Cash Flows
(Unaudited)

For the six months ended
June 30,
---------------------------
2008 2007
------------- -------------

Cash flows from operating activities:
Net income $ 2,636,148 $ 3,086,654
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 6,172,777 5,053,966
Amortization of deferred financing
costs 505,757 333,174
Amortization of deferred rent asset
and liability (266,034) (266,034)
Accretion of obligation under capital
lease 4,156 -
Asset retirement obligation expense 63,232 57,102
Increase in prepaid expenses and other
assets (286,200) (235,916)
Increase in deferred rent receivable (1,153,008) (796,530)
Increase in accounts payable, accrued
expenses, and amount due adviser 703,460 414,610
Increase in rent received in advance 122,341 90,057
------------- -------------
Net cash provided by operating
activities 8,502,629 7,737,083
------------- -------------

Cash flows from investing activities:
Real estate investments (38,667,763) (53,035,069)
Net payments to lenders for reserves
held in escrow (1,211,600) (868,679)
Increase in restricted cash (690,763) (244,588)
Deposits on future acquisitions (1,650,000) (810,000)
Deposits applied against real estate
investments 1,700,000 810,000
------------- -------------
Net cash used in investing
activities (40,520,126) (54,148,336)
------------- -------------

Cash flows from financing activities:
Borrowings under mortgage notes payable - 28,015,000
Principal repayments on mortgage notes
payable (773,779) (385,070)
Principal repayments on employee notes
receivable from sale of common stock 140,077 400,142
Borrowings from line of credit 45,150,000 4,200,000
Repayments on line of credit (5,000,000) (4,200,000)
Increase in reserves from tenants 1,035,544 818,745
Increase in security deposits 411,806 140,525
Payments for deferred financing costs (56,462) (688,025)
Dividends paid for common and preferred (8,470,823) (8,213,865)
------------- -------------
Net cash provided by financing
activities 32,436,363 20,087,452
------------- -------------

Net increase (decrease) in cash and cash
equivalents 418,866 (26,323,801)

Cash and cash equivalents, beginning of
period 1,356,408 36,005,686

------------- -------------
Cash and cash equivalents, end of period $ 1,775,274 $ 9,681,885
============= =============

NON-CASH INVESTING ACTIVITIES

Increase in asset retirement obligation $ 245,199 $ 121,084
------------- -------------
*T

Gladstone Commercial Corp.
Kerry Finnegan, 703-287-5893

Copyright Business Wire 2008