Shares of STAG Industrial, Inc. (STAG - Snapshot Report) gained 0.29% during the trading session on Jul 2, following the announcement of leasing and acquisition transactions for the second quarter of 2014 on Jul 1. We believe the deals are aimed at securing steady revenue growth opportunities and improving the company’s portfolio quality.
Simultaneously, this real estate investment trust (REIT) completed its first privately placed debt offering through issuance of 12-year Senior Guaranteed Notes worth $50 million. Also, through a “At the Market" stock offering program, STAG Industrial issued around 1.8 million shares that helped in reaping $41.8 million in gross proceeds and used it for reducing debt, funding buyout and for other corporate needs
Q2 Transactions Details
In second-quarter 2014, STAG Industrial inked lease deals for over 1.3 million square feet of space. It comprised new leases for around 210,000 square feet and renewal leases for about 1.1 million square feet of spaces. Tenant retention rate for the expiring leases was 35% in the second quarter.
Since the beginning of this year and as of Jul 1, STAG Industrial penned lease deals for approximately 2.6 million square feet of space. This consisted of 335,000 square feet of new and expansion leases and 2.3 million square feet of renewal leases. Tenant retention rate for STAG Industrial in the same time frame is 56%.
On the acquisition front, STAG Industrial bought nine industrial assets (spanning around 2.1 million square feet) for about $82 million, in the second quarter. Since the beginning of this year and as of Jul 1, the company has purchased 13 industrial properties (spanning approximately 3.1 million square feet) for around $119 million.
Moreover, in the second quarter, STAG Industrial has inked contracts for acquiring nine industrial buildings worth $96 million.
We remain encouraged with STAG Industrial’s leasing and acquisition activities and expect these to prove accretive to its earnings, going forward. Moreover, the improving industrial market fundamentals, higher consumer spending and rise in e-Commerce application are generating greater demand for logistics infrastructure and efficient distribution networks. Hence, we expect STAG Industrial to leverage on limited supply, which is expected to drive up profitability in the quarters to come.
STAG Industrial is scheduled to release its second-quarter 2014 results on Jul 30, after the closing bell. The Zacks Consensus Estimate for FFO for the quarter is pegged at 36 cents per share, representing a year-over-year growth of 8.59%.
STAG Industrial presently carries a Zacks Rank #3 (Hold). However, investors interested in the REIT industry may consider stocks like Chatham Lodging Trust (CLDT - Snapshot Report) , Parkway Properties Inc. (PKY - Snapshot Report) and Terreno Realty Corp. (TRNO - Snapshot Report) . All these stocks carry a Zacks Rank #1 (Strong Buy).
Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.