Gladstone Commercial Corporation (Nasdaq:GOOD) Grows Industrial Portfolio in 2023
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Insights
The strategic shift by Gladstone Commercial Corporation towards increasing its industrial exposure while divesting non-core office assets is indicative of a broader trend within the real estate investment trust (REIT) sector. Industrial properties, particularly in established markets like Chicago and Dallas/Fort Worth, have proven resilient, often driven by e-commerce growth and supply chain demands. The company's focus on properties with long weighted average lease terms (19.3 years) is a significant move, as it suggests stable long-term cash flows, which are attractive to investors looking for predictability in dividends.
Moreover, the reported net increase in same-store GAAP rent contributes positively to the REIT's financial health by potentially increasing the earnings before interest, taxes, depreciation and amortization (EBITDA). This, coupled with the full collection of cash-based rents, indicates strong operational performance, which could be a positive signal to shareholders and potential investors evaluating the company's financial stability and growth prospects.
From a financial perspective, the liquidity position of Gladstone Commercial Corporation, with $57.4 million available via revolving credit and cash on hand, is a critical factor in assessing the company's ability to fund future acquisitions and manage debt obligations. The issuance of common shares and Series F Cumulative Redeemable Preferred Stock, raising a combined total of approximately $9.7 million, reflects a strategic approach to capital raising that balances equity financing with debt. This approach can mitigate the risk of over-leveraging and maintain a healthy debt-to-equity ratio.
The exit from seven non-core markets and properties could be seen as a move to optimize the portfolio and concentrate on higher-performing assets, which may enhance the overall return on investment (ROI) for shareholders. It also implies a disciplined capital recycling strategy that is crucial for sustaining growth and managing risk in the real estate portfolio.
The transition towards a 60% industrial concentration of annualized straight-line rent represents a tactical adjustment in asset allocation that aligns with current market demands. This shift is significant when considering the competitive landscape of REITs, as it suggests an adaptation to market conditions that favor industrial real estate due to its lower volatility compared to office spaces, especially in a post-pandemic environment where office demand has seen fluctuations. By focusing on mission-critical assets, Gladstone Commercial is positioning itself to capitalize on the stability and growth potential of industrial properties.
However, it's important to monitor the potential risks associated with concentration in a single asset class. While industrial assets are currently performing well, diversification within a portfolio can mitigate risk should market conditions shift. Investors should consider the balance between the benefits of specialization in a high-performing sector against the risks of reduced diversification.
MCLEAN, VA / ACCESSWIRE / February 5, 2024 / Gladstone Commercial Corporation (Nasdaq:GOOD) ("Gladstone Commercial") is pleased to report another successful year of investing, leasing, and disposition activity in the net lease space. We continue to create shareholder value by increasing our industrial exposure and disposing of non-core office assets.
Acquisition Activity:
- We completed
$29.5 million in new acquisitions across five properties totaling 321,432 square feet. At closing, these five properties had a weighted average lease term of 19.3 years. The transactions were completed in established, growing industrial markets, including Chicago, Illinois, Dallas/Fort Worth, Texas, Lehigh Valley, Pennsylvania, and Indianapolis, Indiana. - We increased portfolio industrial concentration to
60% of annualized straight-line rent as of December 2023 (compared to56% as of December 2022).
Leasing and Disposition Activity:
- During 2023 we entered into 1,428,830 square feet of leases at 14 of our properties. These leases resulted in a more than
$1.2 million net increase in same-store GAAP rent. - We exited seven non-core markets and properties.
Additional Highlights:
- We collected
100% of cash-based rents during the year, generating substantial internal cash flow. - We raised net proceeds of
$4.1 million by issuing common shares through our at-the-market offering program and$5.6 million by issuing our Series F Cumulative Redeemable Preferred Stock. - As of December 31, 2023, we had
$57.4 million in available liquidity via our revolving credit facility and cash on hand.
Available Liquidity:
We begin 2024 with substantial liquidity, and we are well positioned to continue growing our portfolio of mission-critical assets. Please reach out to EJ Wislar, Ryan Carter, or Todd McDonald with any questions or investment opportunities.
About Gladstone Commercial (Nasdaq: GOOD)
Gladstone Commercial is a real estate investment trust focused on acquiring, owning and operating net leased industrial and office properties across the United States. As of September 30, 2023, Gladstone Commercial's real estate portfolio consisted of 135 properties located in 27 states, totaling approximately 17.2 million square feet. For additional information, please visit www.gladstonecommercial.com.
For Broker Submittals:
| Southeast/Northeast | South Central: |
| EJ Wislar | Todd Alan McDonald |
| Chief Investment Officer | Senior Vice President |
| (703) 462-1027 | (703) 287-5895 |
| EJ.Wislar@gladstonecompanies.com | Todd.McDonald@gladstonecompanies.com |
| Midwest/West | |
| Ryan Carter | |
| Executive Vice President | |
| (571) 451-0019 | |
| Ryan.Carter@gladstonecompanies.com |
Investor or Media Inquiries:
| Buzz Cooper | |
| President | |
| (703) 287-5815 | |
| Buzz.Cooper@gladstonecompanies.com | |
All statements contained in this press release, 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 similar expressions are intended to identify forward-looking statements. Readers should not rely upon forward-looking statements because the matters they describe are subject to known and unknown risks and uncertainties that could cause Gladstone Commercial'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 captions "Forward-Looking Statements" and "Risk Factors" of the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as filed with the SEC on February 22, 2023, and certain other filings made with the SEC. Gladstone Commercial cautions readers not to place undue reliance on any such forward-looking statements which speak only as of the date made. 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, except as required by law.
For further information:
Gladstone Commercial Corporation, (703) 287-5893
For Investor Relations inquiries related to any of the monthly dividend paying Gladstone funds, please visit www.gladstonecompanies.com.
SOURCE: Gladstone Commercial Corporation
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