1234006--2/28/2006--GLADSTONE_COMMERCIAL

related topics

{investment, property, distribution}

{tax, income, asset}

{loan, real, estate}

{provision, law, control}

{stock, price, share}

{operation, international, foreign}

{financial, litigation, operation}

{loss, insurance, financial}

{acquisition, growth, future}

{regulation, government, change}

{interest, director, officer}

{debt, indebtedness, cash}

{cost, regulation, environmental}

Our real estate investments may include special use and single tenant properties that may be difficult to sell or re-lease upon tenant defaults or early lease terminations. The inability of a tenant in a single tenant property to pay rent will reduce our revenues. 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, 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. Competition for the acquisition of real estate may impede our ability to make acquisitions or increase the cost of these acquisitions, which could adversely affect our operating results and financial condition. Most of our tenants are small and medium size businesses, which exposes us to additional risks unique to these entities. We may not have funding for future tenant improvements. Because we must distribute a substantial portion of our net income to qualify as a REIT, we will be largely dependent on third-party sources of capital to fund our future capital needs. Our real estate portfolio is concentrated in a limited number of properties, which subjects us to an increased risk of significant loss if any property declines in value or if we are unable to lease a property. Liability for uninsured losses could adversely affect our financial condition. Potential liability for environmental matters could adversely affect our financial condition. Our potential participation in joint ventures creates additional risk. Net leases may not result in fair market lease rates over time. Failure to hedge effectively against interest rate changes may adversely affect our results of operations. Foreign currency fluctuations may adversely affect our results of operations. 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. Our financial condition and results of operations depend on our Adviser s ability to effectively manage our future growth. We are dependent upon our key management personnel for our future success, particularly David Gladstone, Terry Lee Brubaker and George Stelljes III. Our rights and the rights of our stockholders to recover claims against our independent directors are limited, which could reduce our recovery and our stockholders recovery against them if they negligently cause us to incur losses. The limit on the number of shares of our capital stock a person may own may discourage a takeover. Certain provisions of Maryland law could restrict a change in control. Our staggered director terms could deter takeover attempts and adversely impact the price of our common stock. We may not qualify as a REIT for federal income tax purposes, which would subject us to federal income tax on our taxable income at regular corporate rates, thereby reducing the amount of funds available for paying distributions to our stockholders. We have not sought a ruling from the Internal Revenue Service that we qualify as a REIT, nor do we intend to do so in the future. Failure to make required distributions or to satisfy certain income requirements would subject us to tax. The IRS may treat sale-leaseback transactions as loans, which could jeopardize our REIT status. In order to maintain our REIT status, we may be forced to forego attractive investment opportunities, thereby hindering or delaying our meeting our investment objectives and potentially lowering returns to our stockholders. Legislative or regulatory action could adversely affect investors. There are special considerations for pension or profit-sharing trusts, Keogh Plans or individual retirement accounts whose assets are being invested in our common stock. If our Operating Partnership fails to maintain its status as a partnership for federal income tax purposes, its income may be subject to taxation. The market price and trading volume of our securities may be volatile. Shares of common stock eligible for future sale may have adverse effects on our share price. If our stockholders approve the proposed amended and restated advisory agreement with our Adviser, it is likely that a significant number of shares of stock issuable upon exercise of stock options, will be sold in the public market, which could have an adverse impact on the price of our common stock. If our stockholders approve the proposed amended and restated advisory agreement with our Adviser, it could have a material adverse effect on our results of operations.

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1234006--2/28/2006--GLADSTONE_COMMERCIAL_CORP