In efforts to expand its property base in the targeted thriving markets, Gladstone Commercial (NASDAQ:GOOD) Corporation GOOD recently shelled out $11 million for the purchase of a 180,152-square-foot distribution building in Findlay, OH.
The transaction reflects Gladstone Commercial's strategy of achieving growth on buyouts of high-quality industrial assets leased out to tenants with strong credit profiles. Also, the average capitalization rate for the transaction is 8.4%.
Located on 10.2 acres in Findlay's Tall Timbers Industrial Park, this functional, high-volume distribution building is fully leased to American Plastics, a designer, manufacturer, and distributor of plastic-injection molded products catering to the household storage, garage storage and commercial cleaning end-markets. As of closing, the triple net lease with the tenant has roughly 14 years remaining.
The property is mission-critical for the tenant since its positioning is close to the latter's Ohio production facilities and it also serves the latter's largest blue-chip customers. With the property serving as a mission-critical to the tenant, coupled with a decent residual lease term and a strong tenant, the company is likely to enjoy stable revenues from the property.
Remarkably, Gladstone Commercial has been making encouraging moves to expand its footprint in robust growth markets. The above-mentioned buyout marks the company’s first acquisition in Findlay, a market along I-75. The move is apt, given the strong tailwinds that are driving the industrial real estate space.
According to Matt Tucker, executive vice president and head of the Northeast and Midwest Regions for Gladstone Commercial, “Findlay is a strong distribution location, supported by a number of household brands occupying manufacturing and distribution centers in Findlay.”
In fact, the industrial asset class is showing resilience amid the coronavirus pandemic with low vacancy rates, high asking rents and robust rent collections. There has been a notable increase in the e-commerce’s share of total retail sales, spurring demand for warehouse and distribution space.
Apart from the fast adoption of e-commerce, the industrial real estate space is anticipated to gain traction in the long run from a likely rise in the inventory levels of companies as a precaution for any supply-chain disruption.
This, in turn, will likely keep supporting the industrial landlords like Gladstone Commercial, Prologis (NYSE:PLD) PLD, Duke Realty (NYSE:DRE) Corp. DRE and Rexford Industrial Realty, Inc. REXR, among others to enjoy a favorable market environment.
Presently, Gladstone Commercial has a Zacks Rank #3 (Hold). Its shares have gained 13.9% over the past three months, outperforming the industry’s rally of 10.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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