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The 2016 principal amounts payable include $92 million of principal payments due on nine mortgages that mature  during the year. We anticipate being able to refinance these mortgages with a combination of new mortgages and some equity. We intend to decrease the amount of mortgages on these re-financings to continue our strategy of reducing our overall leverage. 

## FINANCIAL RESULTS 

Our 2014 Core Funds from Operations, or Core FFO, was approximately $27.5 million, or $1.55 per share, which was a 32.6% increase over total Core FFO from the prior year. Our 2014 results reflect the additional income from the 11 properties acquired during the year coupled with lower property operating expenses at certain of our vacant prop- erties. This additional income was partially offset by an increase in interest expense from mortgages issued during the year plus an increase in general and administrative expenses related to the adjustment of a deferred rent balance for a tenant whereby the lease was modified during 2014. 

At year end, our total assets increased to $788 million, up 14% from 2013. The amounts outstanding under long- term mortgages plus the amount outstanding on our line of credit increased to $503 million, up 12% from 2013. Our stockholders’ equity increased by 19% to $218 million. We believe our balance sheet remains strong as we continue our strategy to reduce our overall leverage. To this end we decreased the loan amount to the value of the real estate on new debt issued during 2014 to 60% from 68% in 2012. 

## CAPITAL MARKETS 

We were very active in the capital markets this year, issuing 3.9 million shares of common stock through one overnight offering and our at-the-market stock issuance programs (ATM). These two methods resulted in net pro- ceeds of $66 million. Our current ATM program is a very cost-efficient way for us to access the capital markets in order to fund our acquisitions. 

## DIVIDENDS 

O u r m o n t h l y d i s t r i b u t i o n d u r i n g 2 0 1 4 w a s $ 0 . 1 2 5 p e r common share, or $1.50 for the year. In January 2015, our board of directors maintained the monthly distribution of $0.125 per common share for each of the months January, February and March 2015. 

W e a r e p r o u d o f t h e f a c t h a t w e h a v e n e v r s k i p e d , reduced or deferred a monthly distribution since our incep- tion in 2003. As of February 27, 2015, we have paid 122  consecutive monthly cash distributions to our common stockholders, 110 consecutive monthly cash distributions to our Series A preferred stockholders, 101 consecutive monthly cash distributions to our Series B preferred stockholders and 

37 consecutive monthly cash distributions to our Series C preferred stockholders. 

As an owner of real estate, we are required to record depreciation on our properties. This depreciation and other items, such as impairment losses, shelter a portion of our distributions from income taxes. Therefore, in 2014, 100.0% of the distributions on our common stock were a tax-free return of capital. While the distribution is tax-free, this return of capital will reduce a stockholder’s cost basis in the stock, which may result in a larger capital gains tax when the stock is sold. Our website, www.GladstoneCommercial.com, has more information on this subject, but please consult your tax adviser for complete details. 

## OUTLOOK 

Our team is focused on improving our results in 2015 by leasing our vacant square footage and acquiring addi- tional quality office and industrial properties on a consistent, measured basis. While there are no guarantees about the future, continuation of our monthly distributions to stock- holders is paramount to our investment strategy. In addition we have a great team that believes strongly in the highest ethical standards and service to stockholders. 

We are very hopeful about the future and believe 2015 will be another great year. We invite stockholders to attend our Annual Stockholders’ Meeting on May 7, 2015, at the Hilton Hotel McLean Tyson’s Corner, 7920 Jones Branch Drive, in McLean, Virginia. We also invite you to visit our website, www.GladstoneCommercial.com, and sign up for email notices to keep up with our company’s activities. You can also now follow us on Facebook at “The Gladstone Companies,” and on Twitter at “GladstoneComps.” 

Best wishes and thank you for your continued support. 

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