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Monmouth Real Estate (MNR) on Buyout Spree, Buys $96.7M Asset

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Monmouth Real Estate Investment Corporation (MNR - Free Report) has been on a buyout spree with a focus to add long-term leased properties and expand its portfolio.  In fact, recently, the company reported the acquisition of an industrial building spanning 657,518 square feet of space.

The company shelled out $96.7 million for the purchase of the property that is situated at 3150 Highway 42 in Locust Grove, GA. The property is net-leased to Home Depot U.S.A., Inc. for 20 years. This ensures steady rental revenues for Monmouth Real Estateover the long term.

Notably, the building sits on around 130 acres and with a land-to-building ratio of roughly nine times, the company has ample scope for future development to drive accretive growth. Per management, with the addition of the newly-developed facility, Monmouth Real Estate’s weighted average building age is now 9.5 years, and represents the youngest portfolio in the Industrial REIT sector. This also indicates that the company will likely have to spend less on near-term renovations on such assets, thereby, reducing capital expenditure.

Markedly, through steady purchases of high-quality assets, the company has more than doubled its portfolio over the past five years. In fact, this transaction marks its second high-quality acquisition in the first quarter, positioning it well for fiscal 2021.

Additionally, earlier this month, Monmouth Real Estate announced the acquisition of an industrial property situated on a piece of land of roughly 100 acres in Columbus, OH for $73.3 million. The property, spanning an area of about 487,900 square feet, is located at 8341 Industrial Parkway, Plain City. It is net-leased for 15 years to Delaware-based FedEx Ground Packaging System, Inc. (Read more: Monmouth Real Estate Buys Industrial Property in Ohio)

Management noted, “A common misconception is that all industrial real estate provides a linkage to the digital economy, but in fact, a new type of industrial real estate has been designed specifically to serve the computer-driven supply chain. These smart, highly-automated facilities are uniquely equipped to handle omni-channel distribution.”

Shares of Monmouth Real Estate have appreciated 20.5%, against the industry’s decline of 5.3% over the past year.

 


Nevertheless, the pandemic’s adverse impacts on the economy might thwart the demand for spaces to some extent in the near term. Rent relief and deferrals for tenants are likely to be concerning as well. Also, a surplus supply is a headwind for the industrial real estate market.

Currently, the company carries a Zacks Rank #5 (Strong Sell).

Stocks to Consider

CubeSmart’s (CUBE - Free Report) Zacks Consensus Estimate for 2020 funds from operations (FFO) per share has moved up marginally to $1.66 in the past month. The company currently carries a Zacks Rank of 2 (Buy).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Extra Space Storage Inc’s (EXR - Free Report) FFO per share estimates for the current year have been revised marginally upward to $5.10 in the past month. The company carries a Zacks Rank of 2, currently.

City Office REIT, Inc.’s (CIO - Free Report) Zacks Consensus Estimate for ongoing-year FFO per share has moved 5.3% north to $1.20 in two months’ time. The company has a Zacks Rank of 2 at present.

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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