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Gladstone Buys Industrial Asset, Grows Indianapolis Portfolio

Zacks Equity Research

Gladstone Commercial Corporation GOOD recently announced the acquisition of an industrial property in Indianapolis, IN, for $5.2 million. The move is in sync with the company’s efforts to fortify its portfolio on high-quality assets in thriving markets with credit-worthy tenants.

The 64,800-square-foot industrial building is fully leased to three tenants — Shambaugh & Son, LP, which is a wholly-owned subsidiary of investment grade rated EMCOR Group, Inc., GW Services, LLC and Insta-Clean, LLC. — with a weighted average lease term of 7.2 years.

For all three tenants, the property offers functional warehouse and distribution space as well as functional office space for the anchor tenant, Shambaugh. In fact, 70.4% of the building is being occupied by Shambaugh, which has emerged as the largest MEP construction services contractor in Indiana, and the third largest specialty contractor in the United States. Shambaugh’s weighted average remaining lease term is 8.5 years.

Moreover, located in the large and established industrial park, Indianapolis’ Park 100, this property enjoys solid access to labor and major transportation routes. These are likely to ensure steady returns from the property.

Notably, Gladstone Commercial has been making encouraging moves to bolster its property base in the Indianapolis market, in a bid to bank on the upbeat market trends. In fact, the latest acquisition marks the company’s fourth purchase in the market, and the third industrial acquisition in Indianapolis, over the past year. Also, it marks the company’s second industrial buyout in Indianapolis’ Park 100 during the same time frame.

As part of its capital-recycling program, the company is aimed at selling of non-core assets and use proceeds to de-lever its portfolio as well as acquire properties in the stronger target-growth markets. Gladstone Commercial’s acquisition pipeline and closings over the trailing 12-month period look good for its industrial properties.

The portfolio expansion will likely help fuel growth, as high consumer spending, e-commerce boom and a healthy job market are spurring demand for the industrial real estate category. This is highly encouraging for Gladstone Commercial and other REITs, including Duke Realty Corp. DRE, Prologis PLD and Rexford Industrial Realty, Inc. REXR.

As such for Gladstone Commercial, which is focused on investments in mission-critical facilities occupied by middle market to investment-grade businesses located in growing markets, the latest acquisition will likely be accretive to its earnings and drive long-term growth. Nevertheless, rising supply remain concerns for the industrial real estate market.

This Zacks Rank #3 (Hold) company’s shares have rallied 0.9%, while the industry recorded growth of 2% in the past six months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.



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