Gladstone Commercial (GOOD) 8-K Results of Operations and Financial Condition

Exhibit 99.1

Gladstone Commercial Reports Results for the Fourth Quarter and Year Ended December 31, 2007

• During the fourth quarter 2007 completed 1 acquisition of 6 properties, for $19.5 million and during the full year 2007 completed 10 acquisitions of 15 properties for an aggregate investment of approximately $104.2 million.
• Reported fourth quarter 2007 funds from operations (“FFO”) of approximately $3.2 million, or $0.38 per share, compared to $2.3 million, or $0.28 per share, for the fourth quarter 2006, an increase of 36%.
• Reported full year 2007 FFO of approximately $12.5 million, or $1.46 per share, compared to $9.4 million, or $1.18 per share, for the full year 2006, an increase of 24%.

MCLEAN, Va.--(BUSINESS WIRE)--Gladstone Commercial Corp. (NASDAQ:GOOD) (the “Company”) today reported financial results for the quarter and year ended December 31, 2007. A description of FFO, a relative non–GAAP (“Generally Accepted Accounting Principles in the United States”) financial measure, is located at the end of the narrative portion of this news release. All per share references are to fully-diluted weighted average common shares, unless otherwise noted. For the year ended December 31, 2007, there were no options outstanding to dilute outstanding shares.

Net income available to common stockholders for the quarter ended December 31, 2007 increased approximately 1,100% per share to $439,675, or $0.052 per share, compared to $22,157, or $0.004 per share, for the same period one year ago.

Net income available to common stockholders for the year ended December 31, 2007 decreased approximately 11% per share to $2,046,479, or $0.24 per share, compared to $2,185,938, or $0.27 per share, for the same period one year ago. Net income results when compared to the same period last year were affected by increased expenses attributable to the acquisition of 14 properties and 1 leasehold interest during 2007, interest expense associated with leveraging the Company’s properties, dividends paid on the Company’s preferred stock and the gain on the sale of the Company’s two Canadian properties in July 2006, partially offset by increased revenues related to the 15 acquisitions. The per share numbers were impacted by the dilution of shares in 2006 related to the termination of the Company’s stock option plan and the corresponding exercise of stock options, which increased its outstanding shares by approximately 890,000 in 2006.

FFO for the quarter ended December 31, 2007 increased approximately 36% per share to $3.2 million, or $0.38 per share, compared to $2.3 million, or $0.28 per share, for the same period one year ago.

FFO for the year ended December 31, 2007 increased approximately 24% per share to $12.5 million, or $1.46 per share, compared to approximately $9.4 million, or $1.18 per share, for the same period one year ago. A reconciliation of net income, which the Company believes is the most directly comparable GAAP measure to FFO, is set forth below:

	For the three months ended December 31, 2007			For the three months ended December 31, 2006			For the year ended December 31, 2007			For the year ended December 31, 2006
Net income	$	1,463,113		$	895,844		$	6,140,229		$	4,372,828
Less: Dividends attributable to preferred stock		(1,023,438	)		(873,696	)		(4,093,750	)		(2,186,890	)
Net income available to common stockholders		439,675			22,148			2,046,479			2,185,938
Add: Real estate depreciation and amortization, including discontinued operations		2,806,109			2,271,021			10,528,458			8,349,474
Less: Gain on sale of real estate, net of taxes paid		-			-			(78,667	)		(1,106,590	)
FFO available to common stockholders	$	3,245,784		$	2,293,169		$	12,496,270		$	9,428,822
Weighted average shares outstanding - basic		8,565,264			8,052,148			8,565,264			7,827,781
Weighted average shares outstanding - diluted		8,565,264			8,196,605			8,565,264			7,986,690
Basic net income per weighted average common share	$	0.05		$	0.00		$	0.24		$	0.28
Diluted net income per weighted average common share	$	0.05		$	0.00		$	0.24		$	0.27
Basic FFO per weighted average common share	$	0.38		$	0.28		$	1.46		$	1.20
Diluted FFO per weighted average common share	$	0.38		$	0.28		$	1.46		$	1.18

For the year-ended December 31, 2007, the Company reported the following activity:

• Purchased 14 properties and 1 leasehold interest, which were all fully occupied, with approximately 930,000 square feet for an aggregate of approximately $104.2 million;
• Borrowed approximately $48.5 million, collateralized by security interests in 10 of its properties;
• Increased the availability under its line of credit from $75.0 million to $95.0 million; and
• Closed a one-year term loan with Key Bank National Association for $20.0 million.

“We are proud of the fact that we were able to complete 15 acquisitions during the year, which was a 33% increase over the aggregate total investment of our 2006 acquisitions, despite the upheaval in the credit markets. Even though the credit markets are currently very tumultuous, we are confident that we will be able to continue to grow our portfolio during 2008 by securing alternative sources of financing. We remain excited about the opportunities that are currently available in the marketplace and our pipeline remains healthy,” said Chip Stelljes, President and Chief Investment Officer.

Subsequent to year end, the Company:

• Purchased two, fully occupied, properties with approximately 117,000 square feet for an aggregate of approximately $17.8 million; and
• Increased the monthly cash dividends on the common stock to $0.125 per share, declared a dividend of $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 January, February and March of 2008.

The financial statements attached below are without footnotes so readers should obtain and carefully review the Company’s Form 10-K for the year ended December 31, 2007, including the footnotes to the financial statements contained therein. The Company has filed the Form 10-K today with the Securities and Exchange Commission (“SEC”) and the Form 10-K 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 Thursday, February 28, 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 March 28, 2008. To hear the replay, please dial (877) 660-6853, access playback account 286 and use ID code 273773.

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-K for the year ended December 31, 2007, 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,” “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. The risk factors set forth in the Form 10-K 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.

Gladstone Commercial Corporation
Consolidated Balance Sheets
	December 31, 2007			December 31, 2006
ASSETS
Real estate, net of accumulated depreciation of $15,738,634 and $8,595,419, respectively	$	324,761,772		$	235,118,123
Lease intangibles, net of accumulated amortization of $7,560,928 and $4,175,685, respectively		28,989,556			23,416,696
Mortgage notes receivable		10,000,000			10,000,000
Cash and cash equivalents		1,356,408			36,005,686
Restricted cash		1,914,067			1,225,162
Funds held in escrow		1,401,695			1,635,819
Interest receivable – mortgage note		86,111			-
Interest receivable – employees		39,280			43,716
Deferred rent receivable		5,094,799			3,607,279
Deferred financing costs, net of accumulated amortization of $2,184,492 and $1,467,297, respectively		4,405,129			3,713,004
Prepaid expenses		522,348			521,290
Deposits on real estate		300,000			300,000
Accounts receivable		31,524			179,247
TOTAL ASSETS	$	378,902,689		$	315,766,022
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Mortgage notes payable	$	202,120,471		$	154,494,438
Short-term loan and borrowings under line of credit		24,400,000			-
Deferred rent liability		3,933,035			4,718,599
Asset retirement obligation liability		1,811,752			1,631,294
Accounts payable and accrued expenses		778,949			673,410
Due to adviser		784,301			183,042
Rent received in advance, security deposits and funds held in escrow		2,706,113			1,841,063
Total Liabilities		236,534,621			163,541,846
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		(2,769,923	)		(3,201,322	)
Distributions in excess of accumulated earnings		(25,513,703	)		(15,226,196	)
Total Stockholders’ Equity		142,368,068			152,224,176
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	378,902,689		$	315,766,022

Gladstone Commercial Corporation
Consolidated Statements of Operations
	For the three months ended December 31, 2007			For the three months ended September 30, 2007			For the three months ended June 30, 2007			For the three months ended March 31, 2007
Operating revenues
Rental income	$	8,634,634		$	8,024,305		$	7,732,322		$	7,078,036
Interest income from mortgage notes receivable		255,556			255,555			252,778			250,000
Tenant recovery revenue		79,502			80,648			94,468			55,735
Total operating revenues		8,969,692			8,360,508			8,079,568			7,383,771
Operating expenses
Depreciation and amortization		2,806,109			2,668,383			2,636,154			2,417,812
Property operating expenses		224,517			204,972			215,483			176,818
Base management fee		445,783			459,202			471,091			482,044
Incentive fee		667,688			677,104			633,805			585,768
Administration fee		244,902			175,852			210,126			207,018
Professional fees		182,870			118,371			174,677			149,431
Insurance		42,866			53,943			58,697			58,635
Directors fees		54,250			66,250			54,250			54,250
Stockholder related expenses		28,660			40,991			75,361			99,617
Asset retirement obligation expense		29,936			29,440			28,942			28,160
General and administrative		23,881			17,452			23,960			37,706
Total operating expenses before credit from Adviser		4,751,462			4,511,960			4,582,546			4,297,259
Credit to incentive fee		(575,033	)		(526,991	)		(633,805	)		(585,768	)
Total operating expenses		4,176,429			3,984,969			3,948,741			3,711,491
Other income (expense)
Interest income from temporary investments		28,859			33,105			63,269			229,016
Interest income - employee loans		52,443			52,728			56,458			60,422
Other income		19,720			9,896			9,817			8,414
Interest expense		(3,427,198	)		(2,920,270	)		(2,702,612	)		(2,514,461	)
Total other income (expense)		(3,326,176	)		(2,824,541	)		(2,573,068	)		(2,216,609	)
Income from continuing operations		1,467,087			1,550,998			1,557,759			1,455,671
Discontinued operations
Income from discontinued operations		(3,783	)		5,975			(1,503	)		(4,001	)
Net realized (loss) gain from foreign currency transactions		(191	)		33,487			56			7
Gain on sale of real estate		-			-			-			-
Taxes on sale of real estate		-			-			-			78,667
Total discontinued operations		(3,974	)		39,462			(1,447	)		74,673
Net income		1,463,113			1,590,460			1,556,312			1,530,344
Dividends attributable to preferred stock		(1,023,438	)		(1,023,438	)		(1,023,437	)		(1,023,437	)
Net income available to common stockholders	$	439,675		$	567,022		$	532,875		$	506,907
Earnings per weighted average common share - basic
Income from continuing operations (net of dividends attributable to preferred stock)	$	0.05		$	0.07		$	0.06		$	0.05
Discontinued operations		0.00			0.00			0.00			0.01
Net income available to common stockholders	$	0.05		$	0.07		$	0.06		$	0.06
Earnings per weighted average common share - diluted
Income from continuing operations (net of dividends attributable to preferred stock)	$	0.05		$	0.07		$	0.06		$	0.05
Discontinued operations		0.00			0.00			0.00			0.01
Net income available to common stockholders	$	0.05		$	0.07		$	0.06		$	0.06
Weighted average shares outstanding
Basic		8,565,264			8,565,264			8,565,264			8,565,264
Diluted		8,565,264			8,565,264			8,565,264			8,565,264

Gladstone Commercial Corporation
Consolidated Statements of Operations
	For the year ended December 31,
		2007			2006			2005
Operating revenues
Rental income	$	31,469,297		$	23,964,035		$	10,853,903
Interest income from mortgage notes receivable		1,013,889			1,845,231			1,915,795
Tenant recovery revenue		310,353			136,280			111,808
Total operating revenues		32,793,539			25,945,546			12,881,506
Operating expenses
Depreciation and amortization		10,528,458			8,297,174			3,521,128
Property operating expenses		821,790			645,792			406,277
Base management fee		1,858,120			2,902,053			2,118,040
Incentive fee		2,564,365			-			-
Administration fee		837,898			-			-
Professional fees		625,349			953,066			563,205
Insurance		214,141			211,562			196,657
Directors fees		229,000			140,000			96,219
Stockholder related expenses		244,629			311,049			215,907
Asset retirement obligation expense		116,478			129,142			-
General and administrative		102,999			82,847			67,607
Stock option compensation expense		-			394,411			-
Total operating expenses before credit from Adviser		18,143,227			14,067,096			7,185,040
Credit to incentive fee		(2,321,597	)		-			-
Total operating expenses		15,821,630			14,067,096			7,185,040
Other income (expense)
Interest income from temporary investments		354,249			76,772			126,826
Interest income - employee loans		222,051			125,788			21,041
Other income		47,847			380,915			-
Interest expense		(11,564,541	)		(9,104,894	)		(2,333,376	)
Total other expense		(10,940,394	)		(8,521,419	)		(2,185,509	)
Income from continuing operations		6,031,515			3,357,031			3,510,957
Discontinued operations
(Loss) income from discontinued operations		(3,312	)		112,145			309,545
Net realized income (loss) from foreign currency transactions		33,359			(202,938	)		(6,278	)
Net unrealized loss from foreign currency transactions		-			-			(212,279	)
Gain on sale of real estate		-			1,422,026			-
Taxes refunded (paid) on sale of real estate		78,667			(315,436	)		-
Total discontinued operations		108,714			1,015,797			90,988
Net income		6,140,229			4,372,828			3,601,945
Dividends attributable to preferred stock		(4,093,750	)		(2,186,890	)		-
Net income available to common stockholders	$	2,046,479		$	2,185,938		$	3,601,945
Earnings per weighted average common share - basic
Income from continuing operations (net of dividends attributable to preferred stock)	$	0.23		$	0.15		$	0.46
Discontinued operations		0.01			0.13			0.01
Net income available to common stockholders	$	0.24		$	0.28		$	0.47
Earnings per weighted average common share - diluted
Income from continuing operations (net of dividends attributable to preferred stock)	$	0.23		$	0.14		$	0.46
Discontinued operations		0.01			0.13			0.01
Net income available to common stockholders	$	0.24		$	0.27		$	0.47
Weighted average shares outstanding
Basic		8,565,264			7,827,781			7,670,219
Diluted		8,565,264			7,986,690			7,723,220

Gladstone Commercial Corporation
Consolidated Statements of Cash Flows
	For the year ended December 31,
		2007			2006			2005
Cash flows from operating activities:
Net income	$	6,140,229		$	4,372,828		$	3,601,945
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization, including discontinued operations		10,528,458			8,349,474			3,651,119
Amortization of deferred financing costs, including discontinued operations		717,195			1,207,198			260,099
Amortization of deferred rent asset		253,496			253,496			178,070
Amortization of deferred rent liability		(785,564	)		(696,261	)		-
Asset retirement obligation expense, including discontinued operations		116,478			139,074			-
Stock compensation		-			394,411			-
Increase in mortgage notes payable due to change in value of foreign currency		-			202,066			209,395
Value of building acquired in excess of mortgage note satisfied, applied to interest income		-			(335,701	)		-
Gain on sale of real estate		-			(1,422,026	)		-
(Increase) decrease in mortgage interest receivable		(86,111	)		70,749			(5,954	)
Decrease (increase) in employee interest receivable		4,436			(43,716	)		4,792
Increase in deferred rent receivable		(1,741,016	)		(1,270,159	)		(562,133	)
Decrease (increase) in prepaid expenses and other assets		146,665			(89,913	)		(425,120	)
Increase in accounts payable, accrued expenses, and amount due adviser		625,398			196,294			359,537
Increase in rent received in advance		176,145			268,037			133,798
Net cash provided by operating activities		16,095,809			11,595,851			7,405,548
Cash flows from investing activities:
Real estate investments		(105,599,587	)		(48,339,307	)		(117,531,731	)
Proceeds from sales of real estate		-			2,102,567			-
Issuance of mortgage note receivable		-			-			(10,000,000	)
Principal repayments on mortgage notes receivable		-			44,742			81,902
Net payments to lenders for reserves held in escrow		(1,338,904	)		(3,346,216	)		(1,041,292	)
(Decrease) increase in restricted cash		(688,905	)		749,274			(513,761	)
Deposits on future acquisitions		(2,110,000	)		(900,000	)		(2,686,000	)
Deposits applied against real estate investments		2,110,000			1,200,000			1,986,000
Refunds of deposits on real estate		-			-			150,000
Net cash used in investing activities		(107,627,396	)		(48,488,940	)		(129,554,882	)
Cash flows from financing activities:
Proceeds from share issuance		-			65,089,026			-
Redemption of shares for payment of taxes		-			(457,634	)		-
Offering costs		-			(2,654,279	)		-
Borrowings under mortgage notes payable		48,521,690			68,055,000			61,419,179
Principal repayments on mortgage notes payable		(895,657	)		(604,318	)		(70,479	)
Principal repayments on employee notes receivable from sale of common stock		431,399			914			17,718
Borrowings from short-term loan and line of credit		65,500,000			71,400,400			85,460,000
Repayments on line of credit		(41,100,000	)		(114,960,400	)		(41,900,000	)
Increase in reserves from tenants		1,885,361			1,574,464			158,646
Increase in security deposits		376,572			427,951			355,115
Payments for deferred financing costs		(1,409,320	)		(3,242,881	)		(2,021,115	)
Dividends paid for common and preferred		(16,427,736	)		(13,469,627	)		(8,283,860	)
Net cash provided by financing activities		56,882,309			71,158,616			95,135,204
Net (decrease) increase in cash and cash equivalents		(34,649,278	)		34,265,527			(27,014,130	)
Cash and cash equivalents, beginning of period		36,005,686			1,740,159			28,754,289
Cash and cash equivalents, end of period	$	1,356,408		$	36,005,686		$	1,740,159
Cash paid during period for interest	$	10,693,440		$	8,045,342		$	2,014,236
NON-CASH INVESTING ACTIVITIES
Increase in asset retirement obligation	$	180,458		$	1,631,294		$	-
Additions to real estate included in accounts payable, accrued expenses, and amount due adviser	$	81,400		$	-		$	-
NON-CASH FINANCING ACTIVITIES
Fixed rate debt assumed in connection with acquisitions	$	4,506,689		$	30,129,654		$	-
Assumption of mortgage notes payable by buyer	$	-		$	4,846,925		$	-
Notes receivable issued in exchange for common stock associated with the exercise of employee stock options	$	-		$	2,769,954		$	75,000
Acquisition of building in satisfaction of mortgage note receivable	$	-		$	11,316,774		$	-

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