Observer Lite: 5/13/2025

Summer slow down
Given the reduced pace of deal and other activity within the net lease sector as we approach summer months, issues of the namesake Net Lease Observer will spread out in release timeframe to ensure relevancy. Releases of the Observer Lite missives and Net Lease Leaders conversation series will continue as interesting happenings occur!

Feeding man’s best friend
Gladstone Commercial (NASDAQ: GOOD) disclosed the acquisition of a 304,000 square foot, newly constructed temperature controlled industrial facility in Germantown, WI for $62.7 million ($206/sq. ft.).

Leased to G&H Pets, LLC (no parent guaranty) through September 2044 with 2.5% annual rental escalations, the property was built in 2022, expanded in 2024, and produces premium freeze-dried raw pet food for dogs and cats currently sold under several brands. The tenant is the in-house manufacturing platform for California Pet Partners.

The facility includes specialized freezer and cooler storage and was built to support high-capacity pet food production and distribution. No cash cap rate was disclosed, although pricing as noted as an 8.7% GAAP (straight-line over the base term) yield. The Observer estimates the cash cap rate at 6.9% based on data disclosed.

Capital markets update
Brokerage JLL released a U.S. single tenant market update highlighting net lease activity for 1Q2025. Volume for the first quarter of the year was noted as down 18% versus the prior year period to $9 billion.

Industrial (+5%) represented the only property type experiencing an increase in volume versus 1Q24 while retail (-8%), office (-19%), and healthcare (-38%) all saw declines. Note, JLL data includes transactions larger than $5.0 million.

See the full report here:
JLL 1Q2025 Net Lease Capital Markets Report

ABCs of fitness
Private equity sponsor TSG Consumer Partners announced an agreement to acquire ‘high value low price’ gym chain EoS Fitness.

EoS operates over 175 gyms across the southwest, Texas, and Florida, with the website listing Georgia locations as coming soon.

New York-based lower middle market private equity group BRS & Co had sponsored EoS for the last 11 years (since an original investment in 2014).

Surging for change
Resurgent Realty Trust, a shareholder of Generation Income Properties (NASDAQ: GIPR), sent an open letter to Generation’s Board of Directors blasting the REIT’s urgent governance crisis and default risk.

Led by Jon Wheeler, Resurgent is offering a $10 million rescue capital injection and seeking immediate leadership change.

GIPR shares have declined 60% in the last and the company currently maintains an $8.7 million equity market capitalization.

Check out the juicy full letter here:
Resurgent Realty Trust Issues Open Letter to Generation

-Sean Hostert