Bob Cutlip, president of Gladstone Commercial Corp. (NASDAQ: GOOD), joined REIT.com for a video interview during REITWeek 2015: NAREIT’s Investor Forum, held in New York.
Gladstone Commercial invests in and owns net lease industrial, commercial and retail assets and makes long-term industrial and commercial mortgage loans.
As of the first quarter of 2015, Gladstone had posted 14 consecutive quarters in which it closed at least one acquisition. Cutlip explained that the momentum was due in part to its regional managers based in the south, west and east of the country.
Cutlip explained that the company’s regional leaders have built up “tremendous networks” with investment sales brokers. “We’re seeing deals that make sense,” he said.
Another key to maintaining acquisitions momentum is ensuring that the regional leaders all have deals at various stages of processing, including initial review, letter of intent, contract due diligence and closing. Such a system ensures that “we’re constantly closing deals,” Cutlip said.
He underscored the importance of Gladstone’s underwriting team that looks at the property, its location and tenant credit in order to ensure a long-term stable cash flow.
Cutlip also commented on the attraction of secondary growth markets. Gladstone’s size, he explained, means that it looks at non-investment-grade tenants and middle market tenants who like secondary markets. Cutlip said that because Gladstone is able to underwrite tenant credit, it feels comfortable purchasing several assets in a secondary city because “at some point you do sell.” Multiple assets are likely to attract institutional buyers, Cutlip said.
“In the end, we get a lower cap rate and better margins for shareholders,” he said.
Looking across the company’s portfolio, Cutlip noted that after a solid performance from industrial assets, office assets have been performing well during the last two years.