NEW YORK (TheStreet) -- Boston-based STAG Industrial (STAG) - Get Report announced this week the acquisition of a portfolio of 31 primarily single tenant industrial buildings for approximately $129 million. This portfolio increases STAG's total 2012 acquisition volume to about $343 million.
The portfolio, primarily warehouse and distribution facilities, is 91% leased to 29 different tenants and was purchased at a 9% plus cap rate. The buildings are in 10 different states and represent approximately 4.3 million square feet. With the addition of this portfolio, STAG's total square footage has increased by 63% since the end of 2011.
Less than 30 days later STAG announced (8-K filed Sept. 10) that it struck an agreement with
Bank of America
and other lenders for a senior unsecured revolving credit facility of up to $200 million (with an accordion of up to $300 million).
In addition, on Aug. 15 STAG closed its underwritten public offering of 9.2 million common shares. The company said that it intended to use the net proceeds to fund a portion of the anticipated $138.8 million purchase price of the STAG Investments II LLC portfolio or other acquisitions currently under contract; to repay indebtedness outstanding under its secured corporate revolving credit facility; to repay indebtedness outstanding under its
master loan; for general working capital purposes, or a combination of the above.
Free-Standing REITS Getting Busy
As I wrote in a previous article on
announced it was acquiring
American Realty Capital Trust
in a deal valued at $2.95 billion. When the deal closes in a few months, Realty Income will be the 18th largest REIT in the U.S., based on total pro forma equity market capitalization. It will be twice as large as the next largest net lease REIT.
Realty Income will finance the purchase by issuing $1.9 billion of common stock to American Realty Capital Trust shareholders. It will assume about $526 million in debt and immediately repay about $574 million of outstanding debt and transaction expenses.
In another article I wrote recently,
I detailed the recent merger of W. P. Carey & Co. LLC and Corporate Property Associates 15 Inc. --now one, W. P. Carey Inc. The new REIT now has more than $5 billion in net-leased real estate ($3.1 billion in equity market cap and $1.9 billion in debt).
Also, last week I wrote an article,
in which I recommended CapLease's (LSE)
preferred Series A issue that has a yield of 8.22%. As I wrote, the common shares have sky-rocketed over the last year (perhaps because of the muted risks of a tenant) and the company's year-over-year total return is an extraordinary 64.11%.
Another hidden gem in the free-standing sector is
American Realty Capital Properties
. Not to be confused with ARCT (mentioned above), the smaller sister, ARCP, has an interesting value proposition in that the company invests in older, more mature, triple-net properties leased to companies like
( FD) and
. The company started climbing in mid June (from $10.00 per share) and it has rocketed up to around $12.88 (closed last). That's a whopping 32% total return in just six months.
Sleep Well at Night Free-Standing REITs
Certainly most free-standing REIT investors are being rewarded for investing in safe, reliable, and consistent income streams. According to NAREIT, the free-standing sector has returned 20.9% year-to-date (Sept. 28) and the industrial sector has returned over 25% year to date. Both stand alone sectors beating out the all equity REIT total return average payout of 16.09%.
The sleep well at night (SWAN) investor is seeking a fundamentally safe investment strategy where principal preservation and sustainable income (and growth) are a must. Essentially, this type of investor is seeking a bond-type investment in a real estate wrapper.
Free-standing REITs provide this balanced approach and this low-risk & pain-free investment strategy will often enhance portfolio returns by reducing volatility associated with non dividend paying stocks while also compounding repeatable sources of income. Great investing requires the ability to generate sound returns and also control portfolio risk. That is why free-standing REITs offer an intelligent value proposition that is distinguished at least as much for their ability to control risk they are for generating returns.
As Howard Marks wrote in his book,
The Most Important Thing
, "When you boil it all down, it's the investor's job to intelligently bear risk for profit. Doing it well is what separates the best from the rest."
Source: SNL Financial
At the time of publication the author held no positions in any of the stocks mentioned.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.