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Gladstone Commercial Acquires Office Portfolio for $37.6M

Gladstone Commercial Corporation GOOD recently shelled out $37.6 million to acquire office portfolio in Columbus, OH and Salt Lake City, UT. The move is in sync with the company’s efforts to strengthen its presence in solid U.S. secondary growth markets with credit-worthy tenants.

The portfolio consists of two class-A office buildings, aggregating 204,587 square feet of space. This portfolio is entirely leased with Morgan Stanley Smith Barney Financing LLC (“MSSBF”) being the anchor tenant leasing 92% of the space. The weighted average lease term of the portfolio is 8.6 years. Notably, MSSBF is a major U.S. operating subsidiary of Morgan Stanley MS.

The three-story, 102,559 square-foot office building in Columbus is 84% leased to MSSBF, while the rest is occupied by privately-owned commercial bank — Congressional Bank. It is situated near Columbus’ I-270 beltway loop in the Easton submarket. On the other hand, the three-story, 102,028 square-foot office building in Salt Lake City is entirely leased to MSSBF. This building is close to the I-15 Freeway and a light rail station.

Both properties are in locations with live/work/play amenities and are likely to enjoy decent demand from office tenants, going forward. In fact, such locations reduce the distance between housing, workplaces, retail businesses, and other amenities and destinations. Hence, properties in such locations enable companies to grab the attention of people who prefer to live, work and play in the same area — a trend that drove development in several other cities in the United States.

As such for Gladstone Commercial, which is focused on acquiring, owning and operating net leased industrial and office properties across the United States, this acquisition is likely to be accretive to its earnings and drive long-term growth.

Shares of Gladstone Commercial have outperformed the industry it belongs to, year to date. This Zacks Rank #3 (Hold) company’s shares have gained 10.8%, while the industry recorded growth of 4.3% during this time frame.

Better-ranked stocks in the REIT space include Franklin Street Properties FSP, Columbia Property Trust CXP and Select Income REIT SIR. All three carry a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Franklin Street Properties’ Zacks Consensus Estimates for 2017 FFO per share remained unchanged at $1.05 over the past month. Its share price has ascended 9.8% in three months’ time.

Columbia Property Trust’s FFO per share estimates for the current year have moved up 2.7% to $1.15 in a month’s time. Its shares have gained 6.6% over the past three months.

Select Income REIT’s FFO per share estimates for 2017 remained unchanged at $2.70 over the past month. Its shares have rallied 10.2% in three months’ time.

Note: All EPS numbers presented in this report represent funds from operations (FFO) per share. FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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Morgan Stanley (MS): Free Stock Analysis Report
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