Interview With Gladstone Commercial (Buy Rating Upgrade)

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Interview With Gladstone Commercial (Buy Rating Upgrade)

Earlier this year, we initiated a position in Modiv Industrial (MDV) and since then, it has already earned us a 36% return: 

Data by YCharts

Back then, we identified that Modiv could reprice at materially higher valuation multiple because it was in the process of transforming itself into an industrial REIT, but the market had slept on it. 

Shortly after, the company announced some major asset sales to buy more industrial assets and it completely rebranded itself, changing its name, logo, and even its website. 

This caused its valuation multiple to expand, pushing its share price more than 30% higher in just 9 months. 

I am bringing this up because I think that investors may be presented a similar opportunity with Gladstone Commercial (GOOD). 

It finds itself today in a very similar position as Modiv a year ago. It has been assets for years to redeploy the proceeds into industrial properties, and within 12-18 months, they now expect to generate 70%+ of their revenue from industrial net lease properties. 

We suspect that as they keep increasing their exposure to industrial properties and eventually complete a similar rebranding, they will achieve a materially higher valuation multiple, leading to strong returns for investors who buy it today. 

Right now, they are still priced at a substantial discount just like most other industrial REITs:

Today, we own a stake in the Series O preferred shares of the company and it has been a great investment for us so far. We invested in the shares about a year ago and it has earned us a ~35% return. 

Now, we are also interested in the common equity of the company. To learn more about it, we reached out to the company's management for an interview. We had the chance to talk with Arthur S. Cooper, President of Gladstone Commercial: 

Here are the main takeaways from our call with them: