STAG Industrial on Acquisition Binge

STAG Industrial, Inc. ( STAG - Snapshot Report ) , a real estate investment trust (REIT), has recently acquired three industrial buildings from an unnamed seller for $19.8 million. Spanning 518,838 square feet on an aggregate, two of the acquired properties are located in Mebane, North Carolina, while the other is located in Dallas, Georgia.

The acquired portfolio comprises of two warehouses and distribution facilities, and a light manufacturing facility. The properties are currently fully leased to Armacell LLC, which manufactures and distributes foam insulation products for mechanical insulation, air conditioning and refrigeration, duct work, and various other commercial and residential applications.

Earlier, during second quarter 2012, STAG Industrial had acquired a portfolio of 12 industrial buildings totaling 2.3 million square feet for $74.9 million. Consequently, total portfolio square footage increased to 20.4 million – a 49% rise since its initial public offering in April 2011. With the present transaction, the year-to-date tally for total acquisition cost has reached approximately $165 million.

Since its inception, STAG Industrial has diligently acquired individual Class B, single-tenant industrial properties throughout the U.S. The company specifically focuses on the secondary markets with purchase prices as low as $5 million.

The strategic investment objectives of the company hinge upon the fact that single-tenant properties usually require less expenditure to lease and operate than the multi-tenant ones. In addition, Class B industrial properties tend to have higher current returns and lower volatility than their Class A counterparts. Furthermore, secondary markets also generally have less occupancy and rental rate volatility than primary markets.

We presently have a Neutral recommendation for STAG Industrial, which currently has a Zacks #2 Rank that translates into a short-term Buy rating. We also have a Neutral recommendation and a Zacks #3 Rank (short-term Hold rating) for First industrial Realty Trust Inc. ( FR - Snapshot Report ) , one of the competitors of STAG Industrial.