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New Distribution Channel Has Opened, Landy Says

06/21/2013 | By Allen Kenney

Michael Landy, president and CEO of Monmouth Real Estate Investment Corp. (NYSE: MNR), joined REIT.com for a CEO Spotlight video interview in Chicago at REITWeek 2013: NAREIT’s Investor Forum.

Landy discussed the expansion of his company’s property portfolio.

“There’s no question that, as a public company, it’s important to gain certain critical mass,” Landy said. “Having said that, our focus has always been on quality, rather than growing indiscriminately. We have a lot of skin in the game. We’re conservative stewards of capital. We’ve been growing steadily, because it has been an opportune time to grow, but there are periods when it pays to sit on the sidelines.”

Landy also talked about a possible “sweet spot” in terms of portfolio size. Monmouth’s portfolio is currently at 9.2 million square feet, and the company has a total market capitalization of $850 million.

“We have deals in the pipeline that will get us to 11 million square feet, keeping with our focus of long-term leases to investment-grade tenants,” he said. “These deals will get us over the billion-dollar threshold, so the sweet spot would probably be north of a billion dollars. We feel that at north of a billion dollars, we can get an investment-grade rating. We have a very strong balance sheet that has investment-grade metrics. Our income streams are secured by investment-grade tenants. So, it only behooves Monmouth that we become investment-grade ourselves. When we get to that point, I think that will be the next step.”

Landy offered his outlook on the space demands of tenants.

“Historically, a warehouse or distribution center was situated so that it could service several dozen stores in a certain geographic radius,” he said. “What has changed all that is that now, as a result of e-commerce, there is another distribution channel that has opened up. In addition to serving the couple dozen stores in a geographic radius, there are thousands of customers that you now have to service directly. People are ordering directly through their iPhones and their tablets and computers, and it is single goods that have to be packaged, sorted and put on a FedEx truck. It’s a whole other channel.”