Generation Income Properties Inc: Newly Listed REIT With Safe 9.1% Yield
GIPR Stock Has 55% Upside
Generation Income Properties Inc (NASDAQ:GIPR) is a recently listed real estate investment trust (REIT) that operates in the sweet spot of the real estate sector: single-tenant retail, industrial, and office properties.
During the COVID-19 pandemic, some retail properties fared better than others. One was the clear winner: stand-alone retail properties leased to investment-grade tenants. This includes banks, grocery stores, pharmacies, and convenience stores.
The appeal of single-tenant commercial properties is the security and stability provided by strong covenants and long-term triple net leases. Triple net leases cover longer periods than other leases and include built-in annual rent increases. On top of that, the tenant is responsible for paying utilities, property tax, insurance, and most maintenance costs.
The landlord basically just collects rent cheques. And that’s pretty much what Generation Income Properties Inc does.
The Tampa, FL-based company manages a diverse portfolio of retail, industrial, and office properties with lease terms that have less than 10 years remaining. By purchasing shorter-term lease terms for investment-grade properties in higher-density markets, Generation Income Properties is able to provide above-market returns. (Source: “About GIPR,” Generation Income Properties Inc, last accessed February 1, 2022.)
With a market cap of $15.1 million, Generation Income Properties Inc isn’t huge (yet). It currently owns 12 properties in Illinois, Virginia, Florida, North Carolina, and Colorado.
The REIT’s tenants include 7-Eleven Inc., Starbucks Corporation (NASDAQ:SBUX), Pratt & Whitney, and La-Z-Boy Incorporated (NYSE:LZB).
In November 2021, Generation Income Properties announced that it had acquired three single-tenant retail buildings in Austin, TX for $8.0 million. The three buildings are occupied by 7-Eleven Inc. (Source: “Generation Income Properties Announces Agreement for Pending 7-Eleven Portfolio Acquisition,” Generation Income Properties Inc, November 11, 2021.)
The three properties have an average of approximately nine years remaining in their initial leasehold terms, with the option for the tenant to renew for two five-year periods. There’s an average of four years remaining on the initial ground lease term, with the option for the company to renew for three five-year periods.
The leasehold portfolio has an annual base rental income of approximately $1.1 million, with annual ground rent of approximately $511,000.
Strong Q3 Results
In the third quarter of 2021, Generation Income Properties reported revenue of $1.0 million, an 18.5% increase over the $850,000 recorded in the same period of the previous year. (Source: “Generation Income Properties Announces Third Quarter 2021 Financial and Operating Results,” Generation Income Properties Inc, November 15, 2021.)
For the third quarter of 2021, the REIT reported net income of $456,000, or $0.49 per share, compared to a loss of $555,000, or $1.06 per share, in the same period of 2020. Its core funds from operations were $205,356, compared to $36,425 in the third quarter of 2020.
During the third quarter of 2021, Generation Income Properties uplisted to the Nasdaq and invested $3.5 million in two properties. It has an investment pipeline of approximately $140.0 million, which is in various stages of development.
Generation Income Properties Inc also sold a 15,000-square-foot single-tenant “Walgreens” store for approximately $5.2 million on August 31, 2021, the proceeds of which were used to pay down debt.
David Sobelman, CEO, noted, “This is a transformative time for GIPR. Following the closing of our underwritten public offering in early September, our team focused squarely on deploying the offering proceeds to generate returns for our shareholders. Since then, we placed six properties under contract, including one [umbrella partnership real estate investment trust] transaction.” (Source: Ibid.)
Generation Income Properties Inc Initiates Monthly Distributions
Generation Income Properties Inc’s net income of $0.49 per share was more than enough to cover its monthly dividend of $0.54 per share, for a yield of 9.1%.
While Generation Income Properties stock is newly listed on the Nasdaq, the company has been around since 2015. This has given Wall Street analysts more than enough time to evaluate its underlying strength. And their outlook is bullish, with an average 12-month price target for GIPR stock of $11.00 per share, which at its current price represents upside of 55%.
And it’s on its way. Despite the stock market meltdown in 2022, Generation Income Properties stock is already up by 14.3% year-to-date.
Chart courtesy of StockCharts.com
The Lowdown on Generation Income Properties Stock
As mentioned earlier, Generation Income Properties Inc is a small but growing REIT focused on investment-grade single-tenant commercial properties.
The company’s market cap is only $15.1 million, but it has an investment pipeline of about $140.0 million. This means Generational Income Properties’ portfolio should get significantly larger over the coming quarters. That should help juice the company’s income and boost GIPR stock’s already-high monthly dividends.