One Liberty (OLP) Completes Asset Sale Worth $63M in 2023
One Liberty Properties, Inc. OLP recently provided an update on its disposition activity for 2023. The company noted that it has conducted the sale of 12 assets this year for a total of $63 million. Such moves highlight its prudent capital management practices and help preserve balance sheet strength, enabling it to capitalize on long-term growth opportunities.
Speaking of fourth-quarter 2023 sale transactions, One Liberty completed the earlier announced disposition of three restaurants and two retail properties for $23 million. It expects to recognize net proceeds of $19 million from the transaction and an aggregate gain of around $9 million.
These properties resulted in approximately $1.2 million of rental income and $305,000 of operating expenses in the nine months ended Sep 30, 2023. The expenses included $265,000 from depreciation and amortization.
OLP also divested its 50% equity interest in the joint venture, which owned a multi-tenant shopping center in Manahawkin, NJ, during the fourth quarter. The sale was carried out for $36.5 million, of which the company received $18.2 million.
The company deployed the net proceeds from the fourth-quarter dispositions to repay an outstanding balance of around $7.5 on its credit facility as of Dec 1, 2023. It expects to use the remaining $19 million of the proceeds for general working capital purposes and to acquire properties, reduce mortgage debt and repurchase shares of its common stock as and when market conditions permit.
The demand for industrial real estate space remains buoyant, given the growth in industries and an e-commerce boom. Also, companies’ endeavors to improve supply-chain efficiencies amid the rising demand for logistics infrastructure and efficient distribution networks have aided the need for such spaces.
Given this favorable industry trend, the real estate investment trust (REIT) continues to make significant strides in repositioning the portfolio as industrial-focused. In July 2023, it acquired a 177,040-square foot industrial distribution center located on 10.5 acres of land in a suburb of Columbia, SC, for $13.4 million.
The addition of strong assets to the company’s portfolio increases the scope for stable cash flow generation during periods of economic uncertainty. It contributes to creating long-term value for shareholders. OLP anticipates generating roughly $47 million, or 66% of the expected 2024 base rent from its industrial portfolio, which seems encouraging.
The REIT’s healthy balance sheet position is likely to support its growth endeavors. As of Dec 15, 2023, the company has $120 million of liquidity. This included $20 million of cash and cash equivalents (inclusive of the credit facility’s required $3 million average deposit maintenance balance) and $100 million available under its credit facility.
Shares of this Zacks Rank #3 (Hold) company have gained 16.8% in the past three months compared with the industry’s growth of 15.0%.
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Nonetheless, the stabilization of e-commerce sales growth and a high interest rate environment pose key near-term concerns for OLP’s industrial-focused portfolio.
Stocks to Consider
Some better-ranked stocks from the REIT sector are EastGroup Properties EGP, Stag Industrial STAG and Park Hotels & Resorts PK. While PK sports a Zacks Rank #1 (Strong Buy), EGP and STAG each carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for EastGroup Properties’ 2023 FFO per share has moved marginally upward in the past two months to $7.70.
The consensus estimate for Stag Industrial’s ongoing year’s FFO per share has increased 1.3% over the past two months to $2.28.
The consensus mark for Park Hotels & Resorts’ current-year FFO per share has moved marginally northward over the past month to $1.99.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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