Gladstone Commercial Still A Buy, But Analyst Lowers Expectations Due To Occupancy Slump

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  • EF Hutton analyst Gaurav Mehta reiterated a Buy rating on the shares of Gladstone Commercial Corp. GOODlowering the price target to $15 from $18.
  • While steady rent collection has been a solid catalyst, the analyst remains particularly cautious about decreasing occupancy rates of the real estate investment trust in the first quarter of FY23 from the last quarter.
  •  In 1Q, rent collection was strong at 100%, but occupancy declined sequentially to 95.9% (-90bps), the analyst noted.
  • The company has 2.7% of leases (by annualized straight-line rents) expiring in 2023, followed by 4.6% lease expiration in 2024. 
  • The analyst flagged that the company's growth could be impacted if it cannot source new acquisitions. 
  • Accordingly, Mehta lowered the core funds from operations, or FFO/share estimate to $1.45 from $1.50 for 2023 and to $1.46 from $1.47 for 2024.
  • The company collected 100% of its rents quarter-to-date (as ofApril).
  • Price Action: GOOD shares are trading lower by 0.86% at $11.58 on the last check Friday.
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