Citybizlist Baltimore - July 29, 2010
Readying the stage for an IPO launch, Stag Industrial Inc. is sizing up $450 million of potential acquisitions while making plans for an opening play that calls for the purchase of 26 properties for $165 million from an affiliate fund and 75 properties in exchange for partnership units.
By year's end, the Boston-based investment group plans to be operating as a REIT. Through various affiliates, Stag owns 101 properties in 24 states, all single-tenant assets leased to 84 companies with an average weighted in-place lease term of five years, according to an SEC filing. The portfolio is 93.7 percent leased to 84 tenants.
Stag's 10 largest tenants are Bank of America, with five leases; Busche Enterprises, eight; Thyssen Krupp, four; Ohio Wholesale, two; and Verizon New England, American Beverage, Stream International, Woodbridge Venture, Brown Group and Wausau Paper, all with one location apiece. The companies' 25 locations account for 3.46 million square feet of the Stag portfolio and generate $14.35 million of annualized rent, which represents 27.9 percent of the portfolio's total rent revenue.
Stag Industrial will target acquisitions in secondary markets in the U.S. in the $5 million to $20 million range. Of those in its sights, 74 percent of properties are warehouse/distribution; 17 percent are manufacturing; and 9 percent are flex/office. "We believe that a significant portion of the 14 billion square feet of industrial space in the United States falls within our target investment criteria and that there will be ample supply of suitable acquisition opportunities," according to the SEC filing.
Stag Industrial is being formed to acquire the assets and operations of its predecessor business, which has deployed more than $1.2 billion to acquire in excess of 200 properties since 2003. The assets were bought through four private equity funds: SCP Green LLC (Fund I) , Fund II, Fund III and Fund IV.
All Fund I properties were sold in 2006. The following year, Fund II sold 16 properties and still owns 91. Stag Industrial will be seeded by 26 properties from Fund II. Fund II's remaining portfolio will not be transferred and will continue operations as-is, but not make any additional acquisitions going forward.
Funds III and VI will contribute 75 properties in formation transactions in exchange for common units. Also after the IPO launch, Stag Industrial will acquire another 890,891 square feet in three vacant properties, with Fund III retaining ownership. The new REIT will be given five years to exercise a purchase option.
Following the REIT's formation, the funds and affiliate Stag GI will make no additional acquisitions. With the proceeds of its offering, Stag Industrial plans to use about $58.3 million to satisfy principal mortgage debt secured by the properties being transferred.
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