Prologis Inc (PLD) – Stag Industrial Inc (STAG): One Company Leaping the Competition

First Industrial also recently acquired a vacant 509,000 square foot facility in Chicago. It’s also developing large new projects located in Los Angeles and the Inland Empire, Central Pennsylvania, and Houston.

The hot distribution markets

The Inland Empire handles about 75% of the goods imported through the ports of Los Angeles and Long Beach. In a recent article from The Wall Street Journal, a study indicated that of the 13.8 million square feet under construction, over 68% is speculative.

Prologis, DCT Industrial and First Industrial are major competitors in this market place, each having developed significant tracts of land to construct huge, modern distribution warehouses.

The WSJ article also points out that the widening of the Panama Canal — scheduled for completion in 2015 — would allow ships to bypass the ports of LA/Long Beach in the future. This will add another layer of risk for speculative development in the counties east of Los Angeles.

Predictably, STAG Industrial does not have a dog in this fight. STAG does not compete to develop Class A properties in primary markets, but it has been busy executing its acquisition strategy in secondary markets.

STAG Industrial’s acquisition activity

In July, STAG Industrial acquired two buildings, one warehouse and distribution facility, and one light manufacturing facility — containing a total of 250,100 square feet for approximately $10.8 million. These properties are located in Nashville, Tenn. and Tulsa, Okla.

In August, it acquired two warehouse and distribution facilities containing a total of 1.2 million square feet for approximately $53.7 million. These properties are located near Milwaukee, Wis. and Baltimore, Md.

The properties are 100% leased with a weighted average lease term remaining of over six years.

Investor takeaway

Focusing on secondary markets with very little competition is what allows STAG to grow so profitably. Since STAG has only been a public REIT for just over two years, it might be a little early in the game to crown them a growth and dividend superhero. However, there is no doubt that it is successfully executing a strategy that pays investors a handsome dividend to watch them grow.

The article 1 Company Leaping the Competition originally appeared on Fool.com and is written by Bill Stoller.

Bill Stoller has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

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