Gladstone Commercial Reports Results for the First Quarter Ended March 31, 2008

Gladstone Commercial Corp. (NASDAQ:GOOD) (the "Company”) today reported financial results for the quarter ended March 31, 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 March 31, 2008 was $393,265, or $0.05 per share, compared to $506,905, or $0.06 per share, for the same period one year ago. Net income results when compared to the same period last year were affected by interest expense from the increased number of properties which have long-term financing coupled with the results from discontinued operations, partially offset by the increase in our portfolio of investments in the past year and the corresponding increase in our revenues. Net income results for the quarter ended March 31, 2008 include a partial waiver of the incentive fee of approximately $562,000, compared to net income results for the quarter ended March 31, 2007, which included a full waiver of the incentive fee of approximately $586,000, from the Company’s Adviser, Gladstone Management Corporation. FFO for the quarter ended March 31, 2008 was $3,381,025, or $0.39 per share, compared to $2,924,717, or $0.34 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 threemonths endedMarch 31, 2008 For the threemonths endedMarch 31, 2007   Net income $ 1,416,702 $ 1,530,342 Less: Dividends attributable to preferred stock   (1,023,437 )   (1,023,437 ) Net income available to common stockholders 393,265 506,905   Add: Real estate depreciation and amortization   2,987,760     2,417,812   FFO available to common stockholders $ 3,381,025 $ 2,924,717     Weighted average shares outstanding - basic & diluted 8,565,264 8,565,264   Basic & diluted net income per weighted average common share $ 0.05   $ 0.06   Basic & diluted FFO per weighted average common share $ 0.39   $ 0.34   First quarter highlights: Purchased three properties, which were all fully occupied, with approximately 390,000 square feet for an aggregate purchase price of approximately $33.2 million; 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 January, February, and March 2008. "Our first quarter results were positively impacted by the three acquisitions completed during the quarter. Even though the credit markets continue to be tumultuous, we expect that we will be able to continue to grow our portfolio during the remainder of 2008 by securing alternative sources of financing. We remain excited about the opportunities that are currently available in the marketplace and our pipeline remains robust,” said Chip Stelljes, President and Chief Investment Officer. Subsequent to quarter end, the Company: Purchased one fully-occupied property, with approximately 75,000 square feet for an aggregate purchase price of approximately $3.9 million; 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 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 March 31, 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, May 7, 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 June 7, 2008. To hear the replay, please dial (877) 660-6853, access playback account 286 and use ID code 282350. 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 March 31, 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. 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 (Unaudited)     March 31,2008 December 31,2007   ASSETS Real estate, net of accumulated depreciation of $17,842,267 and $15,738,634, respectively $ 353,335,334 $ 324,761,772 Lease intangibles, net of accumulated amortization of $8,445,057 and $7,560,928, respectively 31,079,739 28,989,556 Mortgage notes receivable 10,000,000 10,000,000 Cash and cash equivalents 1,335,884 1,356,408 Restricted cash 2,409,065 1,914,067 Funds held in escrow 1,538,551 1,401,695 Deferred rent receivable 5,575,368 5,094,799 Deferred financing costs, net of accumulated amortization of $2,433,815 and $2,184,492, respectively 4,191,740 4,405,129 Prepaid expenses and other assets   1,717,397     979,263     TOTAL ASSETS $ 411,183,078   $ 378,902,689     LIABILITIES AND STOCKHOLDERS’ EQUITY   LIABILITIES Mortgage notes payable $ 201,736,050 $ 202,120,471 Short-term loan and borrowings under line of credit 59,050,000 24,400,000 Deferred rent liability 3,736,644 3,933,035 Asset retirement obligation liability 2,101,655 1,811,752 Accounts payable and accrued expenses 693,112 778,949 Due to adviser 788,428 784,301 Obligation under capital lease 225,067 - Rent received in advance, security deposits and funds held in escrow   3,302,629     2,706,113     Total Liabilities   271,633,585     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 (2,769,791 ) (2,769,923 ) Distributions in excess of accumulated earnings   (28,332,410 )   (25,513,703 )   Total Stockholders’ Equity   139,549,493     142,368,068     TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 411,183,078   $ 378,902,689   Gladstone Commercial Corporation Consolidated Statements of Operations (Unaudited)     For the three months ended March 31,   2008     2007   Operating revenues Rental income $ 9,189,465 $ 7,078,036 Interest income from mortgage notes receivable 238,297 250,000 Tenant recovery revenue   85,719     55,735   Total operating revenues   9,513,481     7,383,771     Operating expenses Depreciation and amortization 2,987,760 2,417,812 Property operating expenses 241,568 174,176 Base management fee 431,868 482,044 Incentive fee 704,667 585,768 Administration fee 212,196 207,018 Professional fees 97,662 149,431 Insurance 41,797 58,634 Directors fees 54,250 54,250 Stockholder related expenses 126,423 99,617 Asset retirement obligation expense 30,468 28,160 General and administrative   14,631     40,351   Total operating expenses before credit from Adviser   4,943,290     4,297,261     Credit to incentive fee   (562,355 )   (585,768 ) Total operating expenses   4,380,935     3,711,493     Other income (expense) Interest income from temporary investments 9,548 229,016 Interest income - employee loans 52,144 60,422 Other income 9,296 8,414 Interest expense   (3,753,604 )   (2,514,461 ) Total other expense   (3,682,616 )   (2,216,609 )   Income from continuing operations   1,449,930     1,455,669     Discontinued operations Loss from discontinued operations (33,228 ) (4,001 ) Net realized income from foreign currency transactions - 7 Taxes refunded on sale of real estate   -     78,667   Total discontinued operations   (33,228 )   74,673     Net income   1,416,702     1,530,342     Dividends attributable to preferred stock   (1,023,437 )   (1,023,437 )   Net income available to common stockholders $ 393,265   $ 506,905     Earnings per weighted average common share - basic & diluted Income from continuing operations (net of dividends attributable to preferred stock) $ 0.05 $ 0.05 Discontinued operations   0.00     0.01     Net income available to common stockholders $ 0.05   $ 0.06     Weighted average shares outstanding- basic & diluted   8,565,264     8,565,264   Gladstone Commercial Corporation Consolidated Statements of Cash Flows (Unaudited)     For the three months endedMarch 31,   2008     2007     Cash flows from operating activities: Net income $ 1,416,702 $ 1,530,342 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,987,760 2,417,812 Amortization of deferred financing costs 249,323 164,462 Amortization of deferred rent asset and liability (133,017 ) (133,017 ) Asset retirement obligation expense 30,468 28,160 Increase in prepaid expenses and other assets (76,011 ) (119,112 ) Increase in deferred rent receivable (543,943 ) (370,227 ) (Decrease) increase in accounts payable, accrued expenses, and amount due adviser (81,710 ) 289,942 Increase in rent received in advance   101,518     79,357   Net cash provided by operating activities   3,951,090     3,887,719     Cash flows from investing activities: Real estate investments (33,167,003 ) (41,778,821 ) Increase in funds held in escrow related to acquisition (762,123 ) - Net payments to lenders for reserves held in escrow (547,624 ) (214,107 ) Increase in restricted cash (494,998 ) (129,799 ) Deposits on future acquisitions (1,300,000 ) (610,000 ) Deposits applied against real estate investments   1,400,000     460,000   Net cash used in investing activities   (34,871,748 )   (42,272,727 )   Cash flows from financing activities: Borrowings under mortgage notes payable - 13,775,000 Principal repayments on mortgage notes payable (384,421 ) (194,961 ) Principal repayments on employee notes receivable from sale of common stock 132 25,012 Borrowings from line of credit 36,150,000 - Repayments on line of credit (1,500,000 ) - Increase in reserves from tenants 548,856 346,542 Increase in security deposits 356,910 - Payments for deferred financing costs (35,934 ) (378,745 ) Dividends paid for common and preferred   (4,235,409 )   (4,106,932 ) Net cash provided by financing activities   30,900,134     9,465,916     Net decrease in cash and cash equivalents (20,524 ) (28,919,092 )   Cash and cash equivalents, beginning of period 1,356,408 36,005,686     Cash and cash equivalents, end of period $ 1,335,884   $ 7,086,594     NON-CASH INVESTING ACTIVITIES   Increase in asset retirement obligation $ 259,435   $ 92,143