STAG Industrial, Inc. (STAG) – a real estate investment trust (REIT) – recently announced its leasing and acquisition activity in the fourth quarter of 2012. Since its IPO in 2011, STAG Industrial has diligently acquired individual Class B, single-tenant industrial properties throughout the U.S. With the fourth-quarter acquisitions, the company’s year-to-date acquisition volume surged to $553 million.
Acquisitions
In December 2012, STAG acquired six industrial properties, spanning 1.4 million square feet, in separate transactions for around $55 million. Among the acquired properties, two are based in Georgia, two in Illinois, and one each in Ohio and Missouri. All the properties are fully occupied and have an average remaining lease term of over five years.
During the quarter, STAG acquired a total of 40 industrial properties, spanning 6.5 million square feet, for roughly $213 million. The acquisitions increased the company’s property base by 30% on a square-foot basis. Including this, the company completed total acquisitions worth $427 million in 2012. Presently, STAG's portfolio comprises 172 properties in 31 states spanning 29.4 million square feet.
STAG also inked a couple of deals during the fourth quarter to buy two properties for a total cost of $11 million. The transactions are yet to be closed, subject to customary closing conditions.
Leasing
During the quarter, STAG inked lease deals for properties spanning around 856,167 square feet, which includes approximately 184,814 square feet of new or expansion deals and 671,353 square feet of renewal deals. The tenant retention rate stood at 72% in the fourth quarter and 84% for full year 2012.
For the fourth quarter, the company’s occupancy rate decreased to 95.1% from 96.3% in the last quarter. The dip resulted from the acquisition of 401,147 square feet of vacant space along with the portfolio purchase made early in the fourth quarter.
Our Viewpoint
We remain impressed with the STAG’s acquisition spree throughout the fourth quarter. This will likely enhance the quality of its portfolio besides proving accretive to its earnings going forward. Concurrently, the company focuses on portfolio diversification through maintaining a mix of markets and tenants, which limits its exposure to any single tenant or geographic location. This augurs well for the company providing higher return and protection against volatility.
STAG Industrial currently holds a Zacks #2 Rank (implying a short-term Buy rating). One of its peers, Franklin Street Properties Corp. (FSP) holds a Zacks #1 Rank (Strong Buy).
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