Real estate investment trust (REIT) Gladstone Commercial Corp. (GOOD) announced the equity offering of around 1.4 million shares at $18.15 each. The company also granted the underwriters an option to buy up to an additional 0.2 million shares. The offering is anticipated to complete on Nov 25, 2013, upon fulfillment of customary closing conditions.
Gladstone Commercial expects to utilize the net proceeds from the offering in ongoing and future asset acquisitions, paying back debt and meeting other corporate needs. Notably , as of Sep 30, 2013 outstanding debt stood at $0.5 billion that comprise of mortgage notes payable, term preferred stock and borrowings under the line of credit.
Oppenheimer & Co Inc., a unit of Oppenheimer Holdings Inc. (OPY) is the lead manager while Jefferies LLC and Janney Montgomery Scott LLC are acting as the joint book-running managers for the offering.
We believe that though the offering will result in share dilution for the company, the payment of debt is encouraging as it will reduce interest expenses. Also, strategic investments will help Gladstone Commercial enhance its portfolio quality.
Earlier in November, Gladstone Commercial reported its third-quarter 2013 results with adjusted FFO (fund from operations) per share of 38 cents, missing the Zacks Consensus Estimate by 2 cents. However, it was in line with the year-ago quarter.
Results were adversely affected by an increase in total operating expenses. However, top-line growth and the acquisition of two fully occupied properties were the positives. As of Sep 30, 2013 total assets stood at $666.4 million.
Gladstone Commercial currently has a Zacks Rank #3 (Hold). However, other REIT –equity trust stocks worth considering include The GEO Group, Inc. (GEO) and Sabra Health Care REIT, Inc. (SBRA). Both the stocks carry a Zacks Rank #1 (Strong Buy).
Note: Funds from operations, a widely accepted and reported measure of REITs performance, are derived by adding depreciation, amortization and other non-cash expenses to net income.
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