 Gladstone Commercial Corporation
Public Non-Listed Senior Common Stock Offering
Dealer Manager: Gladstone Securities, LLC
Filed pursuant to Rule 433
Registration Statement No. 333-190931 |
 Forward-Looking Statements
This free writing prospectus has been prepared for informational
purposes
only from information supplied by Gladstone Commercial Corporation.
All statements contained in this free writing prospectus, 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. Words such
as “anticipates,”
“expects,”
“intends,”
“plans,”
“believes,”
“seeks,”
“estimates”
and variations of these words and other similar expressions are
intended to identify forward-looking statements. Readers
should not rely upon forward- looking statements because the
matters that they describe are subject to known and unknown
risks and uncertainties that could cause Gladstone Commercial
Corporation’s business, financial condition, liquidity,
results of operations, funds from operations or prospects to
differ materially from those expressed in or implied by such
statements. Such risks and uncertainties are disclosed under
the caption “Risk Factors” in the prospectus
supplement and the accompanying prospectus for the offering to
which this free writing prospectus relates, in Gladstone
Commercial Corporation’s most recent Annual Report on Form
10-K, in Gladstone Commercial Corporation’s Quarterly
Reports on Form 10-Q and in the other information that Gladstone
Commercial Corporation
files with the SEC. Other than as required by
applicable law, Gladstone Commercial Corporation shall have no
obligation or undertaking to update or revise any forward
looking statements to reflect any change in expectations,
results or events. 1 |
 Free Writing Prospectus
Neither the Securities and Exchange Commission, or SEC, nor any state
securities commission has approved or disapproved of these
securities or passed upon the accuracy or the adequacy of this free
writing prospectus, the prospectus supplement or the accompanying
prospectus. Any representation to the contrary is a criminal
offense. This free writing prospectus only relates to the
securities of Gladstone Commercial Corporation described in the
prospectus supplement, dated September 24, 2013, as amended from time to time, and the
accompanying prospectus, dated September 24, 2013, that was included
in Gladstone Commercial Corporation’s registration
statement on Form S-3 (File No. 333-190931) which was filed with the SEC on
August 30, 2013. This free writing prospectus should be read in
conjunction with the prospectus supplement and the
accompanying prospectus. To view the prospectus supplement and
the accompanying prospectus which relate to this offering, click
the following link:
or
on
the
website that relates to this offering at
www.GladstoneCommercial.info. Gladstone Commercial
Corporation’s central index key on the SEC’s Web site is 0001234006.
Gladstone Commercial Corporation has filed a registration statement,
including a prospectus and a prospectus supplement, with the
SEC for the offering to which this communication relates. Before you
invest, you should read the prospectus and the prospectus supplement
in that registration statement and other documents Gladstone
Commercial Corporation has filed with the SEC for more complete
information about Gladstone Commercial Corporation and this offering.
You may obtain these documents for
free
by
visiting
EDGAR
on
the
SEC
Web
site
at
www.sec.gov
or
by
clicking
on
the
links
above.
Alternatively,
Gladstone
Commercial
Corporation,
any
underwriter
or
any
dealer
participating
in
the
offering will arrange to send to you the prospectus and prospectus
supplement if you request it by contacting Gladstone
Securities, LLC, 1521 Westbranch Drive, Suite 100, McLean, VA 22102; Attention:
Investor Relations or by calling 1 (703) 287-5893.
2 |
 Risk Factors
3
Risks Relating to Our Senior Common Stock and this Offering:
There is no established public trading market for shares of Senior
Common Stock, and we have no plans to list these shares on a
national securities exchange. We established the offering price
of shares of Senior Common Stock on an arbitrary basis, and, as a result, the actual value of
your investment may be substantially less than what you pay.
The calculation of the Exchange Ratio could result in a deterrent to
your exchanging shares of Senior Common Stock for shares of
Listed Common Stock if shares of Listed Common Stock are trading at lower levels at the time that you desire to
exchange your shares.
Your ability to redeem shares of Senior Common Stock pursuant to
our share redemption program is limited to the proceeds
generated by our distribution reinvestment plan, and the share
redemption program may be amended, suspended or terminated by
our Board at any time without stockholder approval. If you do
not agree with the decisions of our Board, then you will not be able to influence changes in our policies and
operations
because
holders
of
shares
of
Senior
Common
Stock
will
generally
have
no
voting
rights.
Our charter contains restrictions on the ownership and transfer of
shares of our capital stock, and these restrictions may inhibit
your ability to sell your shares of Senior Common Stock promptly, or
at all. Our Dealer Manager is one of our affiliates, and,
therefore, an investor in shares of Senior Common Stock would not have the
benefit of an independent underwriter who has performed an independent
due diligence review. Highly
leveraged
tenants
and
borrowers
may
be
unable
to
pay
rent
or
make
mortgage
payments,
which
could
adversely
affect
our cash available to make distributions to holders of our Senior
Common Stock. An investment in shares of Senior Common Stock involves substantial risks. You
should purchase our securities only if you can afford a complete loss of your
investment. Please read and consider the risk factors in the prospectus supplement and
prospectus before purchasing any securities. The most significant risk factors include: |
 Risk Factors (continued)
Risks Relating to Our Company and Our Operations
Our business strategy relies heavily on external financing, which may
expose us to risks associated with leverage such as
restrictions on additional borrowing and payment of distributions to stockholders, risks
associated
with
balloon
payments,
and
risk
of
loss
of
our
equity
upon
foreclosure.
We are subject to certain risks associated with real estate ownership
and lending which could reduce the value of our investments,
including but not limited to, changes in the general economic climate; changes in
local conditions such as an oversupply of space or reduction in demand
for real estate; changes in interest rates and the availability
of financing; competition from other available space; and changes in laws and
governmental regulations, including those governing real estate usage,
zoning and taxes. Our
properties
may
be
subject
to
impairment
charges,
which
could
adversely
affect
our
results
of
operations.
Illiquidity
of
real
estate
investments
may
make
it
difficult
for
us
to
sell
properties
in
response
to
market
conditions
and
our
properties
may
include
special
use
and
single
or
multi-tenant
properties
that
may
be
difficult to sell or re-lease upon tenant defaults or early lease
terminations which could harm our financial condition and
ability to make distributions. Our
real
estate
investments
have
a
limited
number
of
tenants,
many
of
which
are
small-
and
medium-sized
businesses, and are concentrated in a limited number of industries,
which subjects us to an increased risk of significant
loss
if
any
one
of
these
tenants
is
unable
to
pay
or
if
particular
industries
experience
downturns.
4 |
 Risk Factors (continued)
Risks
Relating
to
Our
Company
and
Our
Operations
(continued
from
previous
slide)
We may be unable to renew leases, lease vacant space or re-lease
space as leases expire, which could adversely affect our
business and our ability to make distributions to our stockholders.
We
may
enter
into
sale-leaseback
transactions,
whereby
we
would
purchase
a
property
and
then
lease
the
same
property
back
to
the
person
from
whom
we
purchased
it.
If
a
sale-leaseback
transaction
is
re-
characterized in a tenant’s bankruptcy proceeding, our financial
condition could be adversely affected. We are dependent upon
our key management personnel, who are employed by our Adviser, for our future
success, particularly David Gladstone, Terry Lee Brubaker, and Robert
Cutlip. Our
success
depends
on
the
performance
of
our
Adviser
and
if
our
Adviser
makes
inadvisable
investment
or management decisions, our operations could be materially adversely
impacted. We may have conflicts of interest with our Adviser
and other affiliates, including but not limited to the
following conflicts: (i) our Adviser may realize substantial
compensation on account of its activities on our behalf,
and
may,
therefore,
be
motivated
to
approve
acquisitions
solely
on
the
basis
of
increasing
compensation to itself; (ii) we may experience competition with our
affiliates for financing transactions; (iii) our Adviser may
earn fee income from our borrowers or tenants; and (iv) our Adviser and other
affiliates could compete for the time and services of our officers and
directors. If
we
fail
to
qualify
as
a
REIT,
our
operations
and
dividends
to
stockholders
would
be
adversely
impacted.
To the extent that our distributions represent a return of capital for
tax purposes, you could recognize an increased capital gain
upon a subsequent sale of your stock. 5 |
 Offering Summary: Senior Common Stock
6
Issuer:
Gladstone Commercial Corporation
Current Status:
A
public reporting company with 17,715,958 shares
of Listed Common Stock outstanding (symbol:
GOOD) Security Offered:
Senior Common Stock (registered, non-listed)
Distribution Preference:
Distribution payments have a senior preference over
Listed Common Stock but are subordinate to
Preferred Stock
Distribution Rate:
$1.05 per share per annum, declared daily and
paid at the rate of $0.0875 per share per month
Please note: distributions are not guaranteed
Offer Price:
$15 per share
Shares Offered:
3,000,000 shares in primary offering and 500,000
shares pursuant to distribution reinvestment plan
Minimum Purchase:
200 shares having an aggregate minimum purchase
price of $3,000
The information on this page is accurate as of August 8, 2014. Past
performance is not indicative of future results. |
 Offering Summary: Senior Common Stock (continued)
Initial Liquidity:
Non-listed, but with limited liquidity through
share redemption program based upon cash
proceeds generated by distribution
reinvestment plan
Conversion Liquidity:
Holders of Senior Common Stock have the right to
convert into shares of Listed Common Stock five
years after the date on which shares of Senior
Common Stock were originally purchased
Conversion Ratio:
Purchase price ($15.00) divided by the
greatest of:
(i) the closing trading price of Listed Common
Stock on the date on which shares of Senior
Common Stock were originally issued,
(ii) the book value per share of the Listed
Common Stock as determined as of the date on
which shares of Senior Common Stock were
originally issued, or
(iii) $13.68
7 |
 The Importance of Being Senior to Listed Common
Please Note: Distributions on Senior Common Stock have preference
over those paid on Listed Common Stock, but are subordinate to
those paid on existing and future series of Preferred
Stock 8 |
 Additional Information
Annual
distributions
to
be
paid
on
3
million
shares
of
Senior
Common
Stock
would be $3.15 million
Total distributions paid to Listed Common Stockholders for the year
ended December 31, 2013 were $19.7 million
The
distribution
on
the
Listed
Common
Stock
was
$0.125
per
month
or
$1.50
for
the last 12 months
Cumulative: Distributions paid on shares of Senior Common Stock cannot
be decreased and are cumulative
Successful track record of not reducing distributions on Listed Common
Stock since inception in 2003
Please note: distributions are not guaranteed
Valuation: The value of shares of Senior Common Stock will be published
every quarter beginning with the quarter ending September 30,
2014 Not Callable: Shares of Senior Common Stock are generally not
callable prior to September 1, 2017
The information on this page is accurate as of August 8, 2014. Past
performance is not indicative of future results. 9
|
 Fees & Expenses
If Gladstone Commercial sells 3,000,000 shares of the Senior Common
Stock in the primary offering, 11% of the proceeds will be used
to pay sales commissions, dealer manager fees, and other
offering expenses Gladstone Commercial pays its affiliated
investment adviser, Gladstone Management Corporation:
—
(i) an advisory fee of 2% of total stockholders’
equity less the value of
any preferred shares, and
—
(ii) a performance-based incentive fee
10 |
 What kind of REIT is Gladstone Commercial?
Gladstone Commercial is a publicly-traded equity REIT incorporated
in 2003 to purchase
commercial
and
industrial
properties
that
are
leased
to
tenants
pursuant
to
triple
net
leases
(e.g.,
the
tenant
pays
taxes,
insurance
and
maintenance)
Gladstone Commercial files annual and quarterly reports, proxy
statements and other information with the SEC, issues press
releases, conducts quarterly earnings calls with stockholders and
has a full-scale investor relations department that utilizes
a publicly-available investor relations website Owns 93
properties in the US: —
purchase price was $826 million
—
geographically diversified in 23 states
—
diversified by property type in 17 distinct tenant industries
—
diversified by 80 different tenants
—
97% occupied and paying as agreed
The information on this page is accurate as of August 8, 2014.
Past performance is not indicative of future results. 11
|
 Executive Management Team
12
Disclaimer: Past performance is not an indication of future
performance Bob Cutlip, President
Terry Brubaker, Chief Operating Officer
Over 25 years of experience investing in mid-sized and small
private businesses Current Chairman and CEO of all four
Gladstone funds, public companies #7, #8, #9 and #10 in his career
Former Chairman of Allied Capital Commercial (REIT) and Allied Capital
and American Capital when they were successful
Former board member of Capital Automotive REIT
MBA from Harvard Business School, MA from American University, BA from
University of Virginia Over 25 years commercial real estate
operations experience Former Managing Director at Sealy &
Company, LLC, where he led the Southeast & Mid Atlantic operations
for a vertically integrated real estate operating company
Former EVP of First Industrial Realty Trust where he directed the
acquisition and development business activities in 26 markets in
North America Former Regional EVP of Duke-Weeks Realty,
responsible for development, acquisitions and operations of the
Mid-Atlantic region Former 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
Over 25 years of experience in managing businesses
Currently COO and head of portfolio management for all four Gladstone
public funds Previously on the acquisition team of James River
Corp., as it grew from $200 million to $7 billion in revenues
Former group VP of two operating divisions at James River with 2,300
employees, $440 million in revenue and 14 locations
After
James
River,
was
CEO
of
two
businesses
with
800
employees,
$250
million
in
revenue
and
4
locations
Former consultant with McKinsey & Company
MBA from Harvard Business School; BSE in Aeronautical Engineering from
Princeton University David Gladstone, Chairman and CEO
|
 Senior GOOD Leadership Team
13
Matt Tucker, Managing Director, Northeast and Midwest Regions
Buzz Cooper, Senior Managing Director, South and Southeast Regions
Andrew White, Managing Director, Western Region
More than 60 professionals as part of the Gladstone Team
Disclaimer: Past performance is not an indication of future
performance Manages regional acquisition and asset management
activities; joined Gladstone in August of 2013 Over 25
years of experience of real estate investing experience Formerly
held senior positions with MetLife Real Estate Investments, ING Realty Partners, Berwind
Property Group and MIG Real Estate
Manages regional acquisition and asset management activities; over 12
years with Gladstone Over 25 years of real estate investing
experience Former principal of Allied Commercial Corporation
REIT, where his responsibilities ranged from buying loans from
RTC and banks to making real estate backed loans Manages
regional acquisition and asset management activities; over 9 years with Gladstone
Over 15 years experience of real estate investing experience
Formerly held investment and advisory positions with Liquid Realty
Partners, SG Capital Partners and Chase Securities Inc.
|
 Dual Focus on Tenant and Real Estate Underwriting
14
Conduct an MAI Appraisal on each
property
Site visit to review property
Survey brokers in the area to verify
the value of similar properties
Phase I or II environmental report
and sometimes purchase
environmental liability insurance
Conduct a Property Assessment to
assure the building is structurally
sound
Zoning and title report to assure that
there are no deed problems
Due Diligence on the Real Estate
Detailed underwriting of the
tenant’s business
Review tenant’s financial
statements and projections
Prove out the cash flow of the
tenant’s business
Evaluate the management of the
tenant’s business
Determine the tenant’s risk rating
and the probability of default
using a proprietary tenant risk
rating system
Due Diligence on the Tenant |
 Investment Strategy
15
National operation: Expanding across the U.S. for opportunities and
diversification Key
real
estate:
Own
properties
that
are
key
to
the
tenants’
operations
and
that
have favorable configuration and location traits
Middle market tenants: Use the Gladstone team’s credit methods to
underwrite middle market tenants to achieve better than market
returns Investment Criteria:
•
Transaction
Size:
$5MM
-
$50MM
•
Property Type: Single tenant and anchored multi-tenant
industrial, office and medical properties
•
Transaction Type: Third party acquisition, sale-leaseback,
build-to-suit JV, build-to-suit forward
purchase •
Lease Terms: NNN; term of 7+ years
•
Location: Strong markets in the path of growth
Disclaimer: Past performance is not an indication of future
performance |
 16
Geographic Diversity of Gladstone Commercial’s Properties
The information on this page is accurate as of August 8, 2014.
|
 Gladstone Commercial’s Focus on Certain Industries
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 or regional 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
•
Logistics operations or distribution centers with long-term
leases •
Specialty retailing
•
Special purpose retail outlets (drug stores)
17 |
 18
Tenant Mix
(as a % of Total Rent)
Tenant Industry Mix
(as a % of Total Rent)
No significant concentration in any tenant or in any industry.
Highly Diversified Tenant Mix
Disclaimer: Past performance is not an indication of future
performance As of 8/8/14
Company A -
7%
Company B -
4%
Company C -
3%
Company D -
3%
Company E -
3%
Company F -
3%
Company G -
2%
Company H -
2%
Company I -
2%
Company J
-
2%
All remaining tenants -
69%
Telecommunications -
19%
Automobile -
13%
Healthcare, Education & Childcare -
11%
Electronics -
8%
Personal, Food & Miscellaneous Services -
8%
Diversified/Conglomerate Manufacturing -
6%
Chemicals, Plastics & Rubber -
5%
Beverage, Food & Tobacco -
4%
Personal & Non-Durable Consumer Products -
4%
Machinery -
4%
Buildings and Real Estate -
3%
Containers, Packaging & Glass -
3%
Printing & Publishing -
3%
Diversified/Conglomerate Services -
2%
Childcare -
2%
Oil & Gas -
2%
Banking -
2%
Education -
1%
Home & Office Furnishings -
1% |
 Target Asset Mix –
46% Office / 42% Industrial
19
Current Portfolio Mix
(as a % of Total Rent)
Office and industrial buildings touch most industries in the US and
facilitate diversification. Disclaimer: Past performance is not an
indication of future performance As of 6/30/14
42%
46%
8%
4%
Industrial
Office
Medical Office
Retail |
 Select Properties
General Motors Company
$57.0MM transaction
One of the 4 nationwide new Innovation Centers
320,000 SF office building in the Austin Technology Corridor
Debt upgraded to investment grade following the purchase
ViaSat, Inc.
$18.0MM transaction
A $1.3BN supplier of space and mobile communications systems for
commercial and defense users
Mission critical 100,000 SF facility including Network Operations
Center
Located in the Denver Inverness Office Park
20
Disclaimer: Past performance is not an indication of future
performance |
 Select Properties
Lear Corporation
$3.4MM transaction
170,000 SF manufacturing and distribution center
Forward purchase of a build-to-suit project
Less than one mile from Mercedes-Benz 3.7MM SF auto
assembly plant in Vance, Alabama
PTC Inc.
$14.4MM transaction
$1.3BN software supplier to the supply chain industry
92,000 SF mission critical R&D and data center facility
Located in the Minneapolis Lexington Preserve Business
Park
21
Disclaimer: Past performance is not an indication of future
performance |
 Highlights
•
Strong Growth Profile Over 24 Months
–
48% Increase in Total Assets
–
50% Increase in Total FFO
–
64% Increase in Total Common Market Capitalization
•
Strong Historic and Current Returns
–
Since 2009, Exceeded the cumulative FTSE NAREIT Office/Industrial Index
by 53%
•
Excellent Shareholder–Aligned Team Performance
–
Remained 97% Occupied, Rent-Paying Through the Recent
Recession –
Never Lowered the Dividend nor Missed a Payment
–
Tenured
Core
Leadership
Team
Delivering
Consistent,
High
Quality
Results
22
Disclaimer: Past performance is not an indication of future
performance |
 Senior Common Stock Highlights
7%
Annual
Yield:
Distribution
rate
of
$1.05
per
share
per
annum
Monthly
Distributions:
Paid
at
the
rate
of
$0.0875
per
share
per
month
Please note: distributions are not guaranteed
Distribution
Preference:
Distribution
payment
preference
over
Listed
Common
Stock
but
subordinate
to
existing
and
future
series
of
Preferred
Stock
Assets
in
Place:
Company
has
rent
paying
buildings
in
place
Experienced
Management:
More
than
50
people
on
management
team
Conversion
Liquidity:
Holders
of
Senior
Common
Stock
have
the
option
to
convert
into shares of Listed Common Stock after five-years
Conditional
Liquidity:
Quarterly
repurchase
of
shares
of
Senior
Common
Stock
limited by cash proceeds generated by the reinvestment plan
Valuation:
The
value
of
shares
of
Senior
Common
Stock
will
be
published
every
quarter beginning with the quarter ending September 30, 2014
23 |