One Liberty Properties Signs Agreement to Purchase 236,000 Square Foot Industrial Property for $28.3 Million

Rhea-AI Summary

One Liberty Properties (NYSE: OLP) has announced a contract to acquire its fourth industrial property in 2024, a 236,324 square foot Class A industrial building in Council Bluffs, Iowa, for $28.3 million. This acquisition will bring OLP's total industrial property purchases in 2024 to over $73 million. The property, located in the Omaha, Nebraska MSA, has two tenants providing an annual base rent of approximately $1.9 million with a weighted average remaining lease term of 6.1 years. OLP plans to finance the purchase with available cash and a $17.0 million mortgage at 5.89% interest. The transaction is expected to close in September/October 2024.

Positive

• Acquisition of a large 236,324 sq ft Class A industrial property for $28.3 million
• Total industrial property acquisitions in 2024 exceed $73 million
• Annual base rent of $1.9 million from the new property
• Weighted average remaining lease term of 6.1 years
• Property located in a desirable logistics location near major interstates

Negative

• Increased debt with a new $17.0 million mortgage at 5.89% interest

Insights

Real Estate Investment Analyst

The acquisition of this 236,000 square foot industrial property in Council Bluffs, Iowa, for $28.3 million represents a significant move for One Liberty Properties (OLP). This purchase aligns with the company's strategy to expand its industrial real estate portfolio, which has seen substantial growth in 2024 with four properties added for over $73 million.

Key points to consider:

• Property Characteristics: The Class A warehouse, built in 2023, boasts modern features such as 32' clear height, concrete tilt-wall construction and 27 dock-high loading doors. These attributes make it attractive to potential tenants and could contribute to long-term value appreciation.
• Location Advantage: Situated in the Omaha MSA with proximity to major interstate highways, the property's location is strategically valuable for logistics and distribution operations.
• Tenant and Lease Structure: With two tenants providing an annual base rent of approximately $1.9 million and a weighted average remaining lease term of 6.1 years, the property offers stable cash flow. The 3.0% to 3.25% annual rent increases provide a hedge against inflation.
• Financing: The expected $17.0 million mortgage with a 5.89% interest rate (interest-only until 2029) allows OLP to leverage its capital efficiently. The 30-year amortization schedule after 2029 should provide manageable debt service.

This acquisition appears to be a solid addition to OLP's portfolio, potentially enhancing its cash flow stability and growth prospects in the industrial real estate sector.

Financial Analyst

One Liberty Properties' latest acquisition demonstrates a strategic focus on industrial real estate, a sector that has shown resilience and growth potential in recent years. Let's break down the financial implications:

• Investment Metrics: The $28.3 million purchase price for a property generating $1.9 million in annual base rent implies a cap rate of approximately 6.7%. This is relatively attractive in the current market environment, especially for a newly constructed Class A asset.
• Leverage Strategy: By utilizing a $17.0 million mortgage, OLP is employing a 60% loan-to-value ratio, which is conservative and allows for potential upside. The interest-only period until 2029 will maximize cash flow in the near term.
• Portfolio Impact: This acquisition, along with the other three industrial properties acquired in 2024, signifies a substantial expansion of OLP's industrial footprint. The total investment of over $73 million in 2024 alone indicates a significant shift in portfolio composition towards the industrial sector.
• Cash Flow Growth: The structured rent increases of 3.0% to 3.25% annually provide built-in revenue growth, which should outpace the fixed interest rate on the mortgage, potentially leading to expanding cash flows over time.

While the acquisition appears financially sound, investors should monitor how these new properties integrate into OLP's overall portfolio and their impact on the company's funds from operations (FFO) and dividend coverage ratios in the coming quarters.

Logistics and Supply Chain Expert

The acquisition of this industrial property in Council Bluffs, Iowa, by One Liberty Properties is a strategic move that capitalizes on several key trends in logistics and supply chain management:

• Location Advantages: Situated in the Omaha MSA, this property benefits from Omaha's reputation as a strong distribution hub. Its central location in the United States makes it ideal for both east-west and north-south distribution routes.
• Infrastructure Access: The proximity to the I-80/I-29 four-way interchange is crucial. I-80, as the second-largest East-West transcontinental freeway in the US, provides excellent connectivity from San Francisco to New York, making this location attractive for companies looking to optimize their supply chain networks.
• Modern Specifications: The 32' clear height, ESFR sprinklers and LED lighting are features that modern logistics operations require. These specifications allow for efficient vertical storage, improved fire safety and energy efficiency, all of which are increasingly important in today's logistics landscape.
• Market Trends: The industrial real estate sector, particularly warehousing and distribution centers, has seen strong demand driven by e-commerce growth and the need for resilient supply chains. This property's features and location position it well to capitalize on these trends.

From a logistics perspective, this property offers the flexibility and efficiency that modern supply chain operations demand. Its strategic location and up-to-date specifications make it an attractive asset for companies looking to optimize their distribution networks, potentially ensuring long-term tenant demand and value appreciation for One Liberty Properties.

– Upon Closing Company Will Have Added Four Industrial Properties for Over $73 Million in 2024 –

GREAT NECK, N.Y., Aug. 01, 2024 (GLOBE NEWSWIRE) -- One Liberty Properties, Inc. (NYSE: OLP), a real estate investment trust focused on net leased properties, today announced it has entered into a contract to acquire, subject to due diligence review, its fourth industrial property in 2024. The property is a Class A concrete tilt-wall constructed 236,324 square foot industrial building located on approximately 23.5 acres in Council Bluffs, Iowa (the Omaha, Nebraska MSA), at a price of $28.3 million. This is the second property the Company will add in this location in 2024.

The property has two tenants providing for a current annual base rent of approximately $1.9 million (with annual increases ranging from 3.0% to 3.25%) with a weighted average remaining lease term of 6.1 years. The purchase price will be funded by available cash and a mortgage. One Liberty expects to obtain a $17.0 million mortgage that will mature in 2034, bearing an interest rate of 5.89% (interest only until 2029), and amortizing over 30 years. The transaction is expected to close in September/October.

Patrick J. Callan, Jr., President and Chief Executive Officer of One Liberty commented, “We are pleased that we will be able to increase the scope and quality of our industrial portfolio by acquiring this recently constructed industrial property in a desirable logistics location. Our disciplined approach has enabled us to add industrial assets in a manner that will contribute to the stability and growth of our cashflow in the coming years.”

The Class A warehouse was built in 2023 and features ample clear height of 32’, concrete tilt-wall construction, 27 dock high loading doors, LED lighting and ESFR sprinklers.  The property is located less than three miles from downtown Omaha, Nebraska in Council Bluffs, Iowa, which borders Nebraska.  Omaha is considered a strong distribution hub due to its central location with good proximity to infrastructure and interstates.  The building is directly adjacent to the I-80/I-29 four-way interchange providing excellent access to I-80, the second largest East-West transcontinental freeway in the US, which  connects San Francisco to the New York metropolitan area.

Forward Looking Statement:

Certain information contained in this press release, together with other statements and information publicly disseminated by One Liberty Properties, Inc. is forward looking within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended. We intend such forward looking statements to be covered by the safe harbor provision for forward looking statements contained in the Private Securities Litigation Reform Act of 1995 and include this statement for the purpose of complying with these safe harbor provisions. Forward looking statements, which are based on certain assumptions and describe our future plans, strategies and expectations, are generally identifiable by use of the words “may,” “will,” “could,” “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” or similar expressions or variations thereof. Information regarding important factors that could cause actual outcomes or other events to differ materially from any such forward looking statements appear in the Company's Annual Report on Form 10-K for the year ended December 31, 2023 and the reports filed with the Securities and Exchange Commission thereafter; in particular, the sections of such reports entitled “Cautionary Note Regarding Forward Looking Statements”, “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, included therein. In addition, estimates of rental income for 2024 exclude any related variable rent, anticipated property purchases, sales, financings and/or refinancings may not be completed during the period or on the terms indicated or at all, and estimates of gains from property sales or proceeds from financing or refinancing transactions are subject to adjustment, among other things, because actual closing costs may differ from the estimated costs. You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond the Company’s control and which could materially affect the Company’s results of operations, financial condition, cash flows, performance or future achievements or events.

About One Liberty Properties:

One Liberty is a self-administered and self-managed real estate investment trust incorporated in Maryland in 1982. The Company acquires, owns and manages a geographically diversified portfolio consisting primarily of industrial properties. Many of these properties are subject to long-term net leases under which the tenant is typically responsible for the property’s real estate taxes, insurance and ordinary maintenance and repairs.

Contact:
One Liberty Properties
Investor Relations
Phone: (516) 466-3100
www.1liberty.com

FAQ

What is the size and cost of the industrial property One Liberty Properties (OLP) is acquiring?

One Liberty Properties is acquiring a 236,324 square foot industrial property for $28.3 million.

Where is the new industrial property located that OLP is purchasing?

The property is located in Council Bluffs, Iowa, which is part of the Omaha, Nebraska MSA.

How much annual base rent will OLP receive from the new industrial property?

The property is expected to generate approximately $1.9 million in annual base rent.

How is One Liberty Properties (OLP) financing the $28.3 million industrial property purchase?

OLP plans to finance the purchase with available cash and a $17.0 million mortgage at 5.89% interest.

When is One Liberty Properties (OLP) expected to close the acquisition of the new industrial property?

The transaction is expected to close in September/October 2024.