Monmouth Real Estate Value Stock - Dividend - Research Selection
Market price: 17,59 USD
Monmouth Real Estate Investment Corp Fundamental data and company key figures of the share
|Annual reports in USD|
|Net operating cash flow||98.829.000|
|Free cash flow||-82.428.000|
|Liabilities & Shareholders equity||1.939.780.000|
|Diluted shares outstanding||98.164.000|
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|Market Capitalization||1.726.704.768,00 USD|
|Raw Data Source||US GAAP in Millionen USD|
Description of the company
Narrative Description of Business
The Company’s primary business is the ownership of real estate. Its investment focus is to own well-located, modern, single tenant, industrial buildings, leased primarily to investment-grade tenants or their subsidiaries on long-term net leases. In addition, the Company owns a portfolio of REIT investment securities which the Company generally limits to no more than approximately 10% of its undepreciated assets (which is the Company’s total assets excluding accumulated depreciation).
At September 30, 2016, the Company held investments in ninety-nine properties totaling approximately 16,010,000 square feet with an occupancy rate of 99.6% (See Item 2 for a detailed description of the properties). These properties are located in thirty states: Alabama, Arizona, Colorado, Connecticut, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Mississippi, Missouri, Nebraska, New Jersey, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Virginia, Washington and Wisconsin. All of these properties are wholly-owned with the exception of the two properties in New Jersey in which the Company owns a majority interest. All properties in which the Company has investments are leased on a net basis except an industrial park in Monaca (Pittsburgh), Pennsylvania and the shopping center located in Somerset, New Jersey.
During fiscal 2016, the Company purchased eight industrial properties totaling approximately 1,830,000 square feet with net-leased terms ranging from ten to fifteen years resulting in a weighted average lease maturity of 12.3 years. Approximately 1,567,000 square feet, or 86%, is leased to FedEx Ground Package System, Inc., a subsidiary of FedEx Corporation (FDX). The purchase price for the eight properties was approximately $210,747,000 and they are located in Colorado, Florida, Kansas, Kentucky, Louisiana, North Carolina, Pennsylvania and Washington. These eight properties generate annualized rental income over the life of their leases of approximately $14,076,000. The funds for these eight acquisitions were provided by eight property level mortgage loans totaling $141,586,000, draws on an unsecured line of credit facility and cash on hand. The eight mortgages have a weighted average interest rate of 3.85% and a weighted average maturity of 14.9 years.
Subsequent to the fiscal yearend, on October 17, 2016, the Company purchased a newly constructed 338,584 square foot industrial building located in Hamburg, NY, which is in the Buffalo Metropolitan Statistical Area (MSA). The building is 100% net-leased to FedEx Ground Package System, Inc. for fifteen years through March 2031. The purchase price was $35,100,000. The Company obtained a 15 year fully-amortizing mortgage loan of $23,500,000 at a fixed interest rate of 4.03%. Annual rental revenue over the remaining term of the lease averages approximately $2,308,000.
In addition, subsequent to the fiscal yearend, on October 1, 2016, a 50,741 square foot expansion of a building leased to FedEx Ground Package System, Inc. located in Edinburg, TX was substantially completed for a cost of approximately $4,988,000, resulting in a new 10 year lease which extended the prior lease expiration date from September 2021 through September 2026. In addition, the expansion resulted in an increase in annual rent effective from the date of completion of approximately $499,000 from approximately $598,000, or $5.27 per square foot, to approximately $1,097,000, or $6.68 per square foot.
On October 27, 2016, the Company sold its only vacant building, (which increased our occupancy rate from 99.6% to 100.0%), consisting of a 59,425 square foot industrial building situated on 4.78 acres located in White Bear Lake, MN for approximately $4,272,000, which is the Company’s approximate U.S. GAAP net book carrying value.
The industrial properties purchased, expanded and sold during fiscal 2017 to date increased our current total leasable square feet to approximately 16,340,000 and increased our occupancy rate to 100.0%.
In addition to the property purchased subsequent to the fiscal yearend, we have entered into agreements to purchase eight new build-to-suit, industrial buildings that are currently being developed in Florida, Michigan, North Carolina, Ohio and South Carolina totaling approximately 2,099,000 square feet, each with net-leased terms ranging between ten to fifteen years with a weighted average lease maturity of 13.3 years. Approximately 1,267,000 square feet, or 60%, is leased to FDX and its subsidiaries. The purchase price for the eight properties is approximately $212,373,000. Subject to satisfactory due diligence and other customary closing conditions and requirements, we anticipate closing these eight transactions during fiscal 2017 and fiscal 2018. In connection with five of the eight properties, the Company has entered into commitments to obtain five mortgages totaling $101,204,000 at fixed rates ranging from 3.60% to 4.20%, with a weighted average interest rate of 3.83%. Each of these mortgages will be a fifteen year, fully-amortizing loan. The Company may make additional acquisitions in fiscal 2017 and fiscal 2018, and the funds for these acquisitions may come from mortgages, draws on our unsecured line of credit facility, cash on hand, sale of marketable securities, other bank borrowings, proceeds from the Dividend Reinvestment and Stock Purchase Plan (DRIP), private placements and public offerings of additional common or preferred stock or other securities. To the extent that funds or appropriate properties are not available, fewer acquisitions will be made.
Currently, the Company derives its income primarily from real estate rental operations. Rental and Reimbursement Revenue (excluding Lease Termination Income in fiscal 2016, 2015 and 2014 of $-0-, $238,625 and $1,182,890, respectively) was $94,916,110, $77,775,497 and $64,672,341 for the years ended September 30, 2016, 2015 and 2014, respectively. Total assets were $1,229,758,028 and $915,991,942 as of September 30, 2016 and 2015, respectively.
As of September 30, 2016, the Company had approximately 16,010,000 square feet of property, of which approximately 7,584,000 square feet, or 47%, consisting of fifty-three separate stand-alone leases, were leased to FDX and its subsidiaries, (6% to FDX and 41% to FDX subsidiaries). These properties are located in twenty-four different states. As of September 30, 2016, the only tenants that leased 5% or more of the Company’s total square footage were FDX and its subsidiaries and Milwaukee Electric Tool Corporation, which leased approximately 862,000 square feet, comprising approximately 5% of the Company’s rental space.
During fiscal 2016, the only tenant that accounted for 5% or more of the Company’s rental and reimbursement revenue was FDX (including its subsidiaries). The Company’s rental and reimbursement revenue from FDX and its subsidiaries for the fiscal years ended September 30, 2016, 2015 and 2014, respectively, totaled approximately $52,793,000, $41,954,000 and $35,007,000, or 56% (7% from FDX and 49% from FDX subsidiaries), 54% (8% from FDX and 46% from FDX subsidiaries) and 54% (10% from FDX and 44% from FDX subsidiaries), of total rent and reimbursement revenues.
In addition to real estate property holdings, the Company held $73,604,894 in marketable REIT securities at September 30, 2016, representing 5.3% of the Company’s undepreciated assets (which is the Company’s total assets excluding accumulated depreciation). These liquid real estate holdings are not included in calculating the tenant concentration ratios above and therefore further enhance the Company’s diversification. As a result, the securities portfolio provides the Company with additional liquidity, diversification, income and serves as a proxy for real estate when more favorable risk adjusted returns are not available.
The Company’s weighted-average lease expiration was 7.4 and 7.2 years as of September 30, 2016 and 2015, respectively, and its average annualized rent per occupied square foot as of September 30, 2016 and 2015 was $5.72 and $5.48, respectively. The Company’s occupancy rate as of September 30, 2016 and 2015 was 99.6% and 97.7%, respectively. Subsequent to fiscal yearend, on October 27, 2016, the Company sold its only vacant building for $4,272,000 which increased our occupancy rate to 100.0%.
The Company competes with other investors in real estate for attractive investment opportunities. These investors include other equity real estate investment trusts, limited partnerships, syndications and private investors, among others. Competition in the market areas in which the Company operates is significant and affects the Company’s ability to acquire or expand properties, occupancy levels, rental rates, and operating expenses of certain properties. Management has built relationships with merchant builders which have historically provided the Company with investment opportunities that fit the Company’s investment policy. The amount of new construction of industrial properties on the national level has been increasing the past four years following several years of historically low levels of new supply. These levels of new supply, although increasing, continue to be below historical norms. Driven to a large extent by the rampant growth in ecommerce sales, demand for industrial space remains very strong, driving national occupancy rates to an all-time high of 95% currently. For further discussion of potential impact of competitive conditions on our business, see Item 1A: Risk Factors below.
The Company continues to invest in marketable securities of other REITs, which the Company generally limits to no more than approximately 10% of its undepreciated assets, (which is the Company’s total assets excluding accumulated depreciation). The Company from time to time may purchase these securities on margin when the dividend and interest yields exceed the cost of the funds. As of September 30, 2016 and 2015, there were no draws against the margin. The REIT securities portfolio, to the extent not pledged to secure borrowings, provides the Company with additional liquidity and additional income. Such securities are subject to risks arising from adverse changes in market rates and prices, primarily interest rate risk relating to debt securities and market price risk relating to equity securities. From time to time, the Company may use derivative instruments to mitigate interest rate risk, however, this has not occurred during any periods presented. At September 30, 2016 and 2015, the Company had $73,604,894 and $54,541,237, respectively, of securities available for sale. The unrealized net gain (loss) on securities available for sale at September 30, 2016 and 2015 was $12,942,267 and $(5,441,603), respectively, resulting in an increase for the fiscal year of $18,383,870. For the fiscal years ended September 30, 2016, 2015 and 2014, the Company’s net realized gains from the sale of securities were $4,398,599, $805,513 and $2,166,766, respectively.
On September 13, 2016, the Company issued 5,400,000 shares of a 6.125% Series C Cumulative Redeemable Preferred Stock (Series C Preferred Stock) at an offering price of $25.00 per share in an underwritten public offering. The Company received net proceeds from the offering, after deducting the underwriting discount and other estimated offering expenses, of approximately $130,543,000. On September 15, 2016, the Company used $45,000,000 of such net proceeds from the offering to reduce the amounts outstanding under its unsecured line of credit facility (the “Facility”) and on October 14, 2016, the Company used $53,493,750 of such net proceeds from the offering to redeem all of the 2,139,750 issued and outstanding shares of its 7.625% Series A Cumulative Redeemable Preferred Stock (7.625% Series A Preferred Stock). In addition, on October 14, 2016, the Company used $498,540 of such net proceeds from the offering to pay all dividends, accrued and unpaid, to and including the redemption date of the 7.625% Series A Preferred Stock. The Company intends to use the remaining proceeds to reduce the amounts outstanding under its Facility and to purchase properties and fund expansions of its existing properties in the ordinary course of business and for general corporate purposes.
On September 14, 2016, the Company announced that it intended to redeem all 2,139,750 issued and outstanding shares of its 7.625% Series A Preferred Stock. As discussed above, the Company redeemed the 7.625% Series A Preferred Stock on October 14, 2016 at a redemption price of $25.00 per share, plus all dividends accrued and unpaid to and including the redemption date, in an amount equal to $0.23299 per share. As of September 30, 2016, the outstanding 7.625% Series A Preferred Stock has been reclassified out of stockholder’s equity and is reflected as a liability at redemption value and has recognized a deemed dividend of $2,942,149 on the Company’s consolidated statement of income for the fiscal year ended September 30, 2016, which represents the difference between redemption value and carrying value net of original deferred issuance costs.