Gladstone Commercial (GOOD) Witnesses Solid Q4 Performance
Gladstone Commercial Corporation GOOD issued an update on its operating performance for the fourth quarter of 2023. The preliminary results highlight the robust demand for its properties, leading to healthy leasing activity, strong occupancy levels and solid rent collections. Also, acquisitions, backed by ample liquidity, are likely to support its growth in the upcoming period.
This real estate investment trust (REIT) specializes in acquiring, owning and operating net leased industrial and office properties. It invests in single-tenant and anchored multi-tenant net leased assets, with an emphasis on industrial products.
Given the solid demand for its properties, GOOD executed a new lease for 32,000 square feet of its Columbus, GA-based office property for a term of ten years. It also entered into a new 5.4-year lease for 8,041 square feet of its Fridley, MN, office property.
The REIT also extended several leases at its properties during the quarter, adding to portfolio stability. Notable ones include the ten-year lease on its 352,860 square feet industrial building located in Ottumwa, IA, and the ten-year lease on its 54,018 square feet industrial building in Canton, OH. It even extended the lease term on its 52,130 square feet office building in Ashburn, VA, by 10.3 years, bringing the new lease term to 13.5 years.
In 2023, GOOD extended or executed leases for 1,428,830 square feet with 15 tenants. The weighted average remaining lease term is 10.8 years. The annualized straight-line rent for these transactions increased 13% to $10.7 million.
As a result of this encouraging demand, the company ended 2023 with a portfolio occupancy of 96.8%. Moreover, it collected 100% of the cash base rents in the fourth quarter, underscoring the strength and stability of its tenant base.
The company continued with its expansion initiatives in the fourth quarter as well. In October 2023, it purchased a 70,000-square-foot industrial manufacturing facility in Allentown, PA, for $7.8 million. Notably, in November 2023, it acquired a 67,709-square-foot industrial manufacturing facility in Indianapolis, IN. Both properties have a 20-year absolute NNN lease, thus assuring a stable source of rental income for GOOD and making the buyouts a strategic fit.
On the disposition front, Gladstone Commercial sold two properties in the fourth quarter of 2023. One was a 146,483-square-foot office building in Columbia, SC, while the other was an industrial building in Blaine, MN, encompassing 92,275 square feet.
Per the update, the company continues to maintain ample liquidity and a strong capital structure, which will likely support its growth endeavors in the quarters ahead. Its available liquidity was around $54.3 million as of Dec 31, 2023, consisting of its revolving credit facility and cash on hand. GOOD also issued and sold 238,078 shares of its common stock for net proceeds of $4.1 million during 2023.
With a stable portfolio of assets in strong locations backed by credit-worthy tenants and a healthy financial position, Gladstone remains well-poised for growth. Its focus on building an industrial-based portfolio amid favorable industrial real estate market fundamentals augurs well. However, a choppy office real estate market amid persistent macroeconomic uncertainty and a high interest rate environment raises concerns for the company in the near term.
GOOD currently carries a Zacks Rank #4 (Sell).
The company’s shares have rallied 11.7% in the past three months compared with the industry’s growth of 18.8%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the REIT sector are Stag Industrial STAG and First Industrial Realty Trust FR, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Stag Industrial’s 2023 funds from operations (FFO) per share is pegged at $2.28, suggesting year-over-year growth of 3.2%.
The Zacks Consensus Estimate for First Industrial’s 2023 FFO per share stands at $2.43, indicating an increase of 6.6% from the year-ago reported figure.
Note: Anything related to earnings presented in this write-up represents FFO, a widely used metric to gauge the performance of REITs.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
First Industrial Realty Trust, Inc. (FR) : Free Stock Analysis Report
Stag Industrial, Inc. (STAG) : Free Stock Analysis Report
Gladstone Commercial Corporation (GOOD) : Free Stock Analysis Report
