Gladstone Commercial (GOOD) Buys Oklahoma Industrial Facility

March 23, 2022 | James Sprow | Blue Vault

In a bid to expand its property base in targeted thriving markets, Gladstone Commercial Corporation GOOD recently invested $5.9 million to purchase a 56,000-square-foot industrial facility in Oklahoma City, OK. This marks the company’s second industrial acquisition in Oklahoma.

The sale/leaseback transaction reflects Gladstone Commercial’s strategy of expanding on buyouts of high-quality industrial assets in strong growth corridors leased to tenants with solid credit profiles.

Located on three acres, this property is fully leased to Made By Influence LLC, with seven years of remaining absolute NNN lease term. The tenant uses the industrial manufacturing warehouse for producing branded apparel and other custom products. It is also used for short-term storage before the final product is dispatched to national retail outlets or directly to consumers. Thus, the property will generate stable revenues for the company as it is functional and mission-critical to the tenant, with a decent residual lease term and a strong tenant.

The acquisition of properties in Gladstone Commercial’s targeted growth markets augurs well for long-term growth. In February, GOOD acquired an 80,000-square-foot industrial facility on 9.2 acres in Wilkesboro, NC for $7.4 million.

Moreover, Gladstone Commercial has been witnessing active leasing, aiding solid occupancy, healthy rental collections and ample liquidity to back its acquisitions and growth efforts. As of Feb 28, 2022, Gladstone Commercial’s portfolio occupancy was 97.2% due to successful leasing activities. Moreover, Gladstone Commercial collected 100% of the February cash base rent. Healthy levels of rental receipts have enabled GOOD to maintain its dividend rate.

Blue Vault reports monthly on the nontraded preferred stock issued by Gladstone Commercial.

In its recent 8-K filing, Gladstone Commercial highlighted the following for fiscal year 2021:

• Acquired properties: Purchased 11 fully-occupied industrial properties, with an aggregate of approximately 0.9 million square feet of rental space, for $99.7 million, at a weighted averagecap rate of 7.03%;

• Sold properties: Sold three non-core properties as part of our capital recycling strategy for $9.5 million;

• Collected 100% of 2021 base rent: Collected 100% of 2021 base rental charges owed to us throughout the COVID-19 pandemic;

• Issued preferred stock: Issued 4,000,000 shares of our 6.00% Series G Preferred Stock, raising net proceeds of approximately $96.6 million;

• Redeemed Series D Preferred Stock: Redeemed all of our 7.00% Series D Preferred Stock for a total redemption payment of approximately $88.3 million;

• Issued common stock under ATM Program: Issued 1.8 million shares for net proceeds of $36.6 million;

• Issued Series F Preferred Stock: Issued 302,007 shares of our 6.00% Series F Preferred Stock for net proceeds of $6.9 million;

• Amended and upsized credit facility: Added a new $65.0 million term loan component to our credit facility with a five year maturity date;

• Issued new debt: Borrowed $21.5 million in fixed rate and swapped to fixed rate mortgage debt at a weighted average interest rate of 3.4%, with maturity dates ranging from December 21, 2028 to February 15, 2031;

• Repaid debt: Repaid $7.7 million in fixed rate mortgage debt, with a weighted average interest rate of 4.9%, with cash on hand and borrowings from our line of credit and repaid $7.5 million of variable rate mortgage debt at an interest rate of LIBOR plus 2.50%;

• Leased vacant space: Leased 675,096 square feet of previously vacant space with lease terms ranging from 5.2 to 12.5 years at five of our properties;

• Renewed leases: Renewed 883,654 square feet with remaining lease terms ranging from 0.3 to 13.6 years at 10 of our properties;

• Increased common stock cash distribution: Increased monthly cash distribution per common share from $0.12515 to $0.125275, starting in October 2021; and

• Paid distributions: Paid monthly cash distributions for the year totaling $1.502175 per share on our common stock and Non-controlling OP Units, $0.8749998 per share on our Series D Preferred Stock, $1.656252 per share on our Series E Preferred Stock, $1.50 per share on our Series F Preferred Stock, $0.75 per share on our Series G Preferred Stock, and $1.05 per share on our senior common stock. The Series D Preferred Stock cash distributions reflect prorated distributions through the date of redemption. The Series G Preferred Stock cash distributions reflect prorated distributions from the initial offering date.

Sources: Zacks Equity Research, SEC