As industrial REITs continue to focus on recovering from the economic crisis, STAG Industrial, Inc. (NYSE: STAG), a newly public REIT, is making its mark in class B properties in secondary markets throughout the United States. The company’s primary markets are Indiana (11 properties), Ohio (11 properties) North Carolina (nine properties) and Michigan (eight properties).
Formerly known as STAG Capital Partners, the predecessor company has been around since 2004. STAG Industrial, Inc. closed on its initial public offering in April 2011 and generated $205 million in gross proceeds. The offering included 13,750,000 shares of common stock priced at $13 per share.
With so much focus on higher-end properties in top-tier markets, STAG executives are happy to stick to their market niche. Secondary markets often have less occupancy and rental rate volatility than primary markets when it comes to the industrial sector, according to STAG executives.
“STAG has seen the bottom of the downturn in fundamentals in our markets, and our tenant retention thus far this year is 100 percent,” said Brad Shepherd, vice president of finance & investor relations.
“Any leases that have come up for expiration have been renewed. As far as our portfolio goes, we are definitely seeing an improvement,” he said.
The company’s top tenants by revenue include names like International Paper, Bank of America, ConAgra Foods and Chrysler.
However, while retention has increased and domestic consumption is working its way back up, Shepherd said that the economy has played a role in the pace in which the industrial spaces are getting leased.
“Because of the economy tenants seem to really take their time in making a decision, because to some degree the competition isn’t there; they are not afraid of losing their space to someone else and will take their time,” he said.
STAG’s portfolio is comprised of 93 properties spread across 26 states with approximately 14.2 million rentable square feet. Its properties include warehouse/distribution, manufacturing and flex/office buildings.
Shepherd said that the company focuses on class B properties because they tend to have higher returns and lower volatility than class A properties.
Additionally, the company places an emphasis on single-tenant properties. The rationale behind that focus is that they usually require less expenditure for leasing, operating and capital costs per property than many of the multi-tenant properties, according to Shepherd.
In Acquisition Mode
After completing its IPO in April 2011, the company has now turned its sights on bolstering its holdings through an aggressive acquisition plan, Shepherd said.
In July, the company announced it had acquired two industrial properties for $17.9 million. They included a 101,500 square foot manufacturing and distribution facility in Texas and a 420,690 square foot warehouse and distribution facility in Oregon.
At the same time, it closed on a $65 million acquisition mortgage loan with CIGNA. It will be used to fund future acquisitions by the company.
STAG’s first acquisition since going public was a 231,000 square foot manufacturing and distribution facility in Michigan. It was purchased for $14.1 million.
A Symbol for STAG
Traded on the New York Stock Exchange under the ticker symbol ”STIR” for the first several months after its offering, the company announced in June 2011 that it was changing the ticker symbol to the more industry recognizable ”STAG.”
Shepherd said that when STAG first went public, that ticker name wasn’t available.
“When we originally went public the New York Stock Exchange wouldn’t let us use STAG because it was part of another symbol; shortly after that they changed the rules,” Shepherd said.
Benjamin Butcher, STAG’s chairman, president and CEO, said in a release that the new ticker symbol makes the company easily identifiable and should help resonate better with investors.
“Our tenants, vendors and investing public know us as STAG, and now our ticker symbol will reflect that as well,” he said.