1. Gladstone Commercial Corporation
Quarterly Review
for the period ended September 30, 2012

2. Legal Disclaimer
This presentation may include forward-looking statements. These forward-looking
statements include comments with respect to our objectives and strategies, and the results
of our operations and our business.
However, by their nature, these forward-looking statements involve numerous assumptions,
uncertainties and opportunities, both general and specific. The risk exists that these
statements may not be fulfilled. We caution readers of this presentation not to place undue
reliance on these forward-looking statements as a number of factors could cause future
company results to differ materially from these statements.
Forward-looking statements may be influenced in particular by factors such as fluctuations
in interest rates and stock indices, the effects of competition in the areas in which we
operate, and changes in economic, political, regulatory and technological conditions. We
caution that the foregoing list is not exhaustive.
When relying on forward-looking statements to make decisions, investors should carefully
consider the aforementioned factors as well as other uncertainties and events.
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3. Overview
• Gladstone Commercial Corporation
• Real Estate Investment Trust (REIT) with publicly traded common and
three preferred stocks and registered, non-listed senior common stock
• Common stock (NASDAQ: GOOD)
• Preferred stock (NASDAQ: GOODN, GOODO, GOODP)
• Focused on acquiring and holding single tenant, net-leased properties
• Went public in 2003 and have never lowered or missed paying a
scheduled dividend
• Current dividend is $1.50 per common share per year, paid monthly at
$0.125 cents per share
• Common stock current yield of 8.1% (as of November 1, 2012)
• Managed by Gladstone Management Corporation (a registered
investment adviser with the SEC) – a billion dollar fund manager
• One of a family of funds known as The Gladstone Companies
(www.gladstone.com)
Disclaimer: Past performance is not an indication of future performance
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4. What is Gladstone Commercial?
• A publicly traded equity Real Estate Investment Trust (REIT)
formed to invest in and own net leased industrial, commercial,
medical and retail real property
• Net leased properties are properties in which the tenant pays
rent plus pays for the upkeep, insurance and taxes on the
property
• The company seeks to:
• Own quality properties with great tenants
• Obtain current income from rents
• Pay monthly distributions to stockholders
• A company operated by an experienced management team, as
discussed in the following slides
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5. Experienced Management Team
David Gladstone, Chairman Bob Cutlip, President
• Over 25 years of experience investing in • Over 25 years commercial real estate
mid-sized and small private businesses operations experience
• Current Chairman and CEO of all three • Past Managing Director at Sealy &
Company, LLC, where he led the
Gladstone funds, public companies #7, Southeast & Mid Atlantic operations for
#8 and #9 in his career a vertically integrated real estate
• Past Chairman of Allied Capital operating company
Commercial (REIT) and Allied Capital • Past EVP of First Industrial Realty Trust
and American Capital when they were where he directed the acquisition and
successful development business activities in 26
markets in North America
• Past board member of Capital • Past Regional EVP of Duke-Weeks
Automotive REIT Realty, responsible for development,
• MBA from Harvard Business School, acquisitions and operations of the Mid-
MA from American University, BA from Atlantic region
University of Virginia • Past National Chairman of National
Association of Industrial and Office
Properties
• MBA from University of Southern
California, MS in Civil Engineering from
Vanderbilt University, BA in Civil
Engineering from U.S. Air Force
Academy
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6. Experienced Management Team
Terry Brubaker Chip Stelljes David Dullum
• Chief Operating Officer of all • Chief Investment Officer of all • Currently President of Gladstone
funds funds Investment (GAIN), a buyout
• More than 25 years experience in • Currently President of Gladstone fund
managing businesses Capital (GLAD), a lending • More than 25 years experience in
• Currently COO and head of all company portfolio investing
portfolio management for all • More than 25 years experience in • Currently head of Gladstone
three Gladstone public funds portfolio investing Investment and seeking
• Previously on the acquisition • Currently CIO and head of all mezzanine and buyout
team of James River Corp., as it investing for all Gladstone public opportunities
grew from $200 million to $7 funds, reviewing hundreds of • Experienced in investing, due
billion in revenues opportunities and supervising the diligence, reviewing hundreds of
• Group VP of two operating due diligence process on each new opportunities and reviewing
divisions at James River with new investment each new investment
2,300 employees, $440 million in • Past EVP at Allied Capital, • Past partner of New England
revenue and 14 locations making loans and investments in Partners, a small buyout fund
• After James River, was CEO of middle market companies located in Boston and
two businesses with 800 • Past manager of Camden Partners Washington, DC
employees, $250 million in and Columbia Capital funds, • Past partner of Frontenac
revenue and 4 locations investing in communications, Company for over 14 years in
• Former consultant with healthcare and business services Chicago, investing in many mid-
McKinsey & Company • MBA from University of Virginia market businesses in the Midwest
• MBA from Harvard Business Business School; BA Degree in • MBA from Stanford; BS in
School; BSE in Aeronautical Economics from Vanderbilt Engineering from Georgia Tech
Engineering from Princeton University
University
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7. Experienced Management Team
Seasoned Professional Real Estate Officers
• Buzz Cooper, Managing Director
• Over 25 years of investing experience in real estate
• Former principal of Allied Commercial Corporation REIT, where his
responsibilities ranged from buying loans from RTC and banks to making real
estate backed loans
• Chris Massey, Managing Director
• Over 20 years experience in commercial real estate investment and
management
• Managed a $450 million institutional grade real estate portfolio for Kennedy
Associates, a $6 billion pension fund advisor and prior to that with JE Robert
• Matt Tucker, Director
• Over 15 years experience of investing experience in real estate
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8. Experienced Management Team
David Gladstone Bob Cutlip Terry Brubaker Chip Stelljes Dave Dullum
Chairman & CEO President Chief Operating Officer Chief Investment Officer Sr. Managing Director
25+ Years Experience 25+ Years Experience 25+ Years Experience 25+ Years Experience 25+ Years Experience
Managing Directors and Directors*
Buzz Cooper Lud Kimbrough John Sateri Greg Bowie Blair Gertmenian
25+ Years Experience 25+ Years Experience 24 Years Experience 11 Years Experience 11 Years Experience
Chris Massey John Freal Jennifer Simpson M. Kipp Kranbuhl Erika Highland
20 Years Experience 25+ Years Experience 14 Years Experience 15 Years Experience 12 Years Experience
Bob Pierce David Meier Chris Daniel Chris Lee Kyle Largent
25+ Years Experience 25+ Years Experience 21 Years Experience 12 Years Experience 11 Years Experience
Laura Gladstone Matt Tucker Michael Beckett
13 Years Experience 15 Years Experience 18 Years Experience
Over 20 professionals concentrating on sourcing, due diligence and portfolio management and 15 professionals in reporting
*Directors noted here are not members of the funds’ boards of directors, rather, these are junior Managing Director positions of the Adviser
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9. What We Do
Buy real estate and lease it on a triple net lease (NNN) basis
• Tenant initially owns real estate and their business is growing and the
underlying real estate has equity value
• We buy the property and lease it back to tenant for use in the business
• The lease has annual rental increases, NNN meaning that the tenant
pays for upkeep, taxes, insurance, etc.
• The tenant receives the money it had invested in the real estate to now
invest in the business
• We get a long-term lease with income from monthly rent payments to
pass on to our shareholders as monthly distributions
• We also buy property that is owned by a landlord and leased on a
NNN basis to a tenant so we become the new landlord/owner.
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10. What is a Triple Net-Leased Property?
• Tenants pay rent to the landlord and the tenant assumes all obligations for
maintenance of the property; including paying taxes, insurance and structural
repairs
• Typically, these are free-standing buildings with a single tenant
• Properties may be used for a variety of purposes (commercial, office,
medical, industrial, warehouse, retail)
• Usually, the building or the location is integral to the business operations and
the business can’t be easily moved or the building replicated
• Business owners elect to lease their properties as a financing decision – and to
maximize their returns by focusing their capital on the operating business,
leaving the predictable and lower returns of real estate ownership to the
landlord
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11. What makes the Triple Net-Leased properties
a compelling investment?
Property Sectors Sensitivity to the Economy
• Higher return relative to lower risk
• Reasonably predictable returns due to tenant Higher Risk
responsibilities and long term leases
Lodging
Decreasing
Increasing
• Opportunity for growth in cash flow and Office
valuation due to contractual rent increases
Industrial
• Ability to access debt financing due to
Self Storage
predictable cash flows
Multi-Family
• Growth in rent and ownership of real assets
Regional Malls
helps to hedge against inflation
Strip Centers
• Opportunity to add value at a time of
Triple Net-Lease
acquisition through proper negotiation and
Student Housing
underwriting
Healthcare
Lower Risk
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12. Growth Strategy
• Acquisitions:
• Focused on acquisitions of individual properties for $5 to $30 million
• Continue to diversify our portfolio of properties by geography, tenant and
industry
• Many opportunities today
• Debt:
• Maintain an approximate 65% of mortgage debt on each property to 35%
equity (approximate 2 to 1 ratio)
• Develop consistent and efficient sources of permanent mortgage
financing
• Expand our line of credit, as needed
• Equity:
• Continue to raise funds through common and preferred stock offerings
• Attract more individual investors and some “buy and hold” institutional
investors
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13. Market Opportunity
Our strategy is to be a strong player in this triple-net segment
• Provide real estate liquidity for small and middle market
companies that are not rated
• Use our existing deal flow from strategic relationships with
LBO funds and senior lenders
• Concentrate on conventional real estate with leases to quality
tenants
• Provide real estate liquidity for medium or larger business that
have a high credit rating
• Use our relationships with real estate brokers to find these
opportunities
• Buy and hold our properties and do not sell unless circumstances
dictate
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14. Good Market Opportunity
Areas Where Opportunities Exist to Own Properties
• Light manufacturing
• Manufacturing of small products (plastic closures, disposable tableware)
• Specialty manufacturing
• Special purpose buildings with a conditional use permit (paper manufacturing, commercial
bakery)
• Established software companies
• With large amount of computer equipment (data center)
• Offices
• Headquarter offices of the business (electronics, telecommunications)
• Business services
• Service companies with logistic services (consumer products)
• Medical services/Healthcare
• Buildings used to deliver medical services (medical practice)
• Warehouses
• Supply chain entities on long-term leases
• Specialty retailing
• Special purpose retail outlets (drug stores)
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15. We have not invested in the following:
• Hotels/Lodging
• Self Storage
• Multi-family Apartments
• Single family homes
• Regional Malls
• Strip Center Malls
• Student Housing
• Hospitals
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16. Our Business Model
Characteristics of Our Leases as of September 30, 2012
• Long Term Leases: Typically 10 to 15 years (most leases come due after 2019)
• Lease Escalations: CPI (with minimums) or fixed escalations
• Good Investment Returns: Current yield or “weighted average cap rate” on our
properties was 9.3%
• Low Overhead: Pure triple-net lease with few responsibilities (such as the roof)
• Flexible: Provide funding for additions to the building
• Protective Covenants: If the business is sold we expect to re-negotiate the lease
• Credit Enhancement: Cross guarantee and corporate guarantee of the lease
Disclaimer: Past performance is not an indication of future performance
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17. How Do We Underwrite Deals and Mitigate Risk?
• Achieve Above Market Returns:
• Underwrite numerous deals, but ultimately invest in only those that fit our model
• Seek credit worthy tenants
• Underwrite the tenant as if we are making a loan to them or seeking their own equity
• Underwrite the real estate as if the tenant will vacate the property at the end of the lease
• Focus where there is less buying competition from individuals or institutional buyers
• Protect The Downside:
• Diversify by industry, geography and tenant
• Focus on recession resistant businesses
• Look for long-term leases
• Match each long-term lease with a long-term mortgage
• Buy existing properties with tenants that have an operating track record and substantial
cash flow from operations
• Focus on real estate fundamentals, without relying purely on tenant credit
• Analyze financial strength of tenant operator and augment with credit enhancements,
where possible
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18. Dual-Focused Underwriting Process
Due Diligence on the Tenant Due Diligence on the Real Estate
• Detailed underwriting of the • MAI Appraisal on each property
business
• Visit to review property
• Review tenant financial statements
and projections • Call brokers in the area to verify the
value of similar properties
• Prove out the cash flow of the
business • Phase I or II environmental report and
sometimes buy environmental liability
• Investigate the management of the insurance
business
• Structural report to assure the building
• Determine the risk rating and the is structurally sound
probability of default
• Review the title report to assure there
are no deed problems
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19. When our Leases Expire
Lease expirations as a percentage of the total annualized
rents being received as of September 30, 2012
60%
50%
40%
30%
20%
10%
0%
2012 2013 2014 2015 2016 2017 2018 2019 After
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20. Largest Tenants
Largest tenants as a percentage of the total annualized
rents being received as of September 30, 2012
Company A - 6.7%
Company B - 4.2%
Company C - 3.9%
Company D - 3.5%
Company E - 3.2%
Company F - 2.9%
Company G - 2.7%
Company H - 2.6%
Company I - 2.5%
Company J - 2.4%
All remaining tenants - 65.4%
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21. Character of our Debt as of September 30, 2012
• Long-term mortgage on each property for the term of the lease on the property
• Asset coverage ratio of our mortgages is 59.4% of cost of all properties to mortgages
outstanding
• Weighted average remaining term of our mortgages is 6.3 years
• Each property is held in a separate, bankruptcy remote LLC or LP
• Only $2,000,000 of our mortgages are guaranteed by our parent company
• Line of credit for $75,000,000 up for renewal in December 2013
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22. When our mortgages come due
Mortgage Debt Maturing as of
September 30, 2012
$ Millions
90
80
70
60
50
40
30
20
10
0
2012 2013 2014 2015 2016 2017 2018 2019 Thereafter
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23. Portfolio Diversification as of September 30, 2012
% of Total Rental Income
Telecommunications - 14%
Electronics - 13%
Healthcare - 10%
Diversified/Conglomerate Manufacturing - 7%
Chemicals, Plastics & Rubber - 6%
Beverage, Food & Tobacco - 6%
Personal & Non-Durable Consumer Products - 5%
Containers, Packaging & Glass - 5%
Machinery - 5%
Buildings and Real Estate - 4%
Printing & Publishing - 4%
Education - 4%
Personal, Food & Miscellaneous Services - 4%
Automobile - 3%
Oil & Gas - 3%
Diversified/Conglomerate Services - 3%
Banking - 2%
Childcare - 1%
Home & Office Furnishings - 1%
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24. Geographic Diversification as of September 30, 2012
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25. Source of Properties to Buy
• Approximately 80% from real estate brokers
• From leveraged buy-out funds who buy a business but do
not want to own the real estate
• From developers who build the property and then want to
sell it
• From tenants who want us to “build to suit”
• Banks wishing to sell properties
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26. Track Record: Gladstone Commercial
• Common stock traded on NASDAQ (GOOD)
• Paying $0.125 per common share per month, or $1.50 per common share per year
• Never missed or reduced a dividend since inception
• As of November 1, 2012, the company has paid 94 consecutive monthly common stock
dividends. Prior to paying distributions on a monthly basis, the company paid five
consecutive quarterly dividends.
• Common stock yield at 8.1% (as of November 1, 2012)
• Distributions were an 83% return of capital in 2011
• Estimated Net Common Book Value (book value with depreciation added) is $14.52
per share
• Raised $25 million through a Series A Preferred stock offering at 7.75% yield and $28
million through a Series B Preferred stock at 7.5% yield paid monthly
• Recently raised $38.5 million of Series C term preferred stock at 7.125% yield,
monthly pay
• Has over $480 million invested in 78 wholly-owned properties
• All existing tenants paying as agreed and buildings are 98.8% leased (2 buildings
vacant)
Disclaimer: Past performance is not an indication of future performance
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27. FFO - Earnings
Funds From Operations did not decline during
• 2005 = $7,253,000 the worst recession in recent history (2008-2010)
$ millions
18
• 2006 = $9,428,000 16
14
• 2007 = $12,496,000
12
• 2008 = $13,524,000 10
8
• 2009 = $13,521,000 6
4
• 2010 = $14,078,000
2
• 2011 = $15,707,000 0
2004 2005 2006 2007 2008 2009 2010 2011
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28. Shareholder Focused
• Maintain the monthly distribution and grow when earnings
(FFO) are secure
• Emphasis on stability first and growth second
• Liquidity: Shareholder may buy or sell the stock in the market
• Quarterly reports and calls to shareholders
• Robust informational website (www.gladstonecommercial.com)
and notifications by e-mail and press releases
• Shareholder dividend reinvestment plan for common stock
• Audited by PricewaterhouseCoopers LLP
• Shareholder service to answer questions by calling (866) 366-
5745
• Adviser with strong reputation (www.gladstone.com)
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29. Highlights
• Experienced Management Team: Operating team of 50+ professionals has a
successful track record of underwriting private businesses as tenants and
NNN real estate
• Conservative dual underwriting strategy: Focused on the cash flow of the
business tenant’s operations and the value of the real estate
• Successful CEO: Has a “brand name” reputation demonstrated by the
success of nine public companies and multiple REITS
• Business Model: Emphasis on deal flow from strategic relationships with
bankers, LBO funds and real estate intermediaries
• Market Opportunity: Right time in the business cycle to buy properties
• Focused on steady cash flows: Rental streams from tenants to drive
distributions to our shareholders
• Management is Invested: Management and directors own the stock
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30. How to invest: 4 ways
• Common stock: “GOOD”
– As of November 1, 2012, yield is 8.1%
– Dividend is $1.50 per year but paid monthly
• Permanent preferred stock: “GOODP” or “GOODO”
– Yield is approximately 7.5%
– Paid before common and senior common stocks and is cumulative
– Not convertible and not required to be redeemed
• Term preferred stock: “GOODN”
– Yield is approximately 7.125%
– Paid before common and senior common stock and is cumulative
– Not convertible but redeemed on January 31, 2017
• Senior common stock: contact Pat Ferrer (678-447-1607)
– Yield is 7%
– Paid after preferred and before common stock and is cumulative
– Convertible in five years into common at the price of the common the day
purchased
Disclaimer: Past performance is not an indication of future performance
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31. Other Information
• Website for Gladstone Commercial
• www.gladstonecommercial.com
• Contains much more information about our company
and the properties we own
• Website for our adviser
• www.gladstonemanagement.com
• About other funds managed by the adviser
• www.gladstone.com
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