Stag Industrial, Inc. · NYSE:STAG
Stag Industrial — Q3 2015 Earnings Presentation
24 slides from Stag Industrial's earnings presentation, December 2015
Slide 1: Investor Presentation & Supplemental Information, Third Quarter 2015
INVESTOR PRESENTATION & SUPPLEMENTAL INFORMATION UNAUDITED THIRD QUARTER 2015
Slide 2: Legal Notices
LEGAL NOTICES This presentation, together with other statements and information publicly disseminated by STAG Industrial, Inc. (the “Company”), contains certain forward‐looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities E
Slide 3: Property Photos
PROPERTY PHOTOS Smithfield, NC: 191,450 SF Clear Height: 26’ Golden, CO: 227,500 SF Clear Height: 32’ Year Built/Renovated/Expanded: 2001 Year Built/Renovated/Expanded: 1999/2006 Springfield, OH: 350,500 SF Clear Height: 28’ Hampstead, MD: 1,035,249 SF Clear Height: 32’ Year Built/Renovated/Expanded
Slide 4: Property Photos
PROPERTY PHOTOS Warrendale, PA: 148,065 SF Clear Height: 32’ Garland, TX: 253,900 SF Clear Height: 30’ (expansion) Year Built/Renovated/Expanded: 1999 Year Built/Renovated/Expanded: 1968/1989 Louisville, KY: 306,000 SF Clear Height: 24’ Lansing, MI: 231,000 SF Clear Height: 34’ Year Built/Renovated/
Slide 5: Company Overview
COMPANY OVERVIEW OUR BUSINESS STAG Industrial, Inc. (NYSE: STAG) is a real estate investment trust (REIT) focused on the acquisition, operation, and capitalization of a portfolio of single‐tenant, industrial properties located throughout the United States Founded in 2003, IPO in 2011 Goal of i
Slide 6: Company Overview: Snapshot
COMPANY OVERVIEW SNAPSHOT (SEPTEMBER 30, 2015) Square Feet 52.1 million Number of Buildings / States 281 / 37 # Tenants / Average Internal Credit Rating 256 / BB‐ Occupancy 95.7% Weighted Avg. Lease Term 4.1 years Weighted Avg. Rent $3.99 psf Winston Salem, NC: 385,000 SF Clear Height: 40’ Common Eq
Slide 7: Investment Thesis
INVESTMENT THESIS OBSERVATION Individual single‐tenant properties are persistently mispriced ‐ Binary risk creates high potential volatility in individual asset cash flows THEORY Through simple application of portfolio theory, risk can be changed ‐ Diversification mitigates risk while enhancing
Slide 8: Hybrid Platform
HYBRID PLATFORM INVESTING: PRIVATE EQUITY MODEL Focus on relative value Quantitative, probabilistic approach to valuation Link to probabilistic risk assessment model (“PRAM”) presentation: http://ir.stagindustrial.com/corporateprofile.aspx?iid=4263385 PRIVATE NET PORTFOLIO CONSTRUCTION: NET LE
Slide 9: Opportunity Set
OPPORTUNITY SET LARGE TARGET MARKET $250 BILLION $1 TRILLION STAG TARGET MARKET (1) TOTAL TARGET STAG'S SHARE OF TARGET MARKET IS LESS INDUSTRIAL MARKET THAN 1% MARKET (1) HISTORICALLY ATTRACTIVE ASSET CLASS TOTAL RETURN & STANDARD DEVIATION BY ASSET CLASS: 1996 ‐ 2015 (2) TOTAL RETURN & STANDARD DE
Slide 10: Portfolio Overview - Buildings
PORTFOLIO OVERVIEW ‐ BUILDINGS BUILDING TYPE SQUARE FOOTAGE ANNUALIZED BASE RENTAL REVENUE (1) BUILDING TYPE # of BUILDINGS AMOUNT % OCCUPANCY AMOUNT % Warehouse / Distribution 210 45,429,632 87.1% 95.7% $168,983,520 84.8% Light Manufacturing 50 5,562,993 10.7% 98.6% 20,671,630 10.4% Flex / Office 2
Slide 11: Industrial Real Estate Supply and Demand
INDUSTRIAL REAL ESTATE SUPPLY AND DEMAND INDUSTRIAL SUPPLY (1) INDUSTRIAL DEMAND (1) 100 20% 80 18% 120 60 16% Index from June 2005 Square Feet 000,000s 40 14% Availability % 110 20 12% 0 10% 100 ‐20 8% ‐40 COMPLETIONS 6% ‐60 NET ABSORPTION 4% 90 ‐80 AVAILABILITY 2% GDP INDUSTRIAL PRODUCTION INVENTO
Slide 12: Portfolio Overview - Location
PORTFOLIO OVERVIEW ‐ LOCATION BUILDING BY LOCATION SQUARE FOOTAGE ANNUALIZED BASE RENTAL REVENUE (1) BUILDING TYPE # of BUILDINGS AMOUNT % OCCUPANCY AMOUNT % Primary 54 10,564,464 20.3% 99.7% $41,691,985 20.9% Secondary 171 33,806,950 64.8% 94.6% 129,526,027 65.1% Tertiary 56 7,769,879 14.9% 94.7% 2
Slide 13: Proprietary Risk Assessment Model
PROPRIETARY RISK ASSESSMENT MODEL OBSERVATION Real estate evaluation performed with imperfect information Arbitrary decision rules influence and ultimately hinder integrity of the investment evaluation process CONVENTIONAL CASH FLOW MODEL IS OVERLY SIMPLISTIC General absence of probability aro
Slide 14: Acquisition Process
ACQUISITION PROCESS SELECTIVITY DISCIPLINE 1,000+ TRANSACTIONS CONSIDERED All markets All building types All credit profiles All lease terms 350 UNDERWRITTEN 200 OFFERS MADE 43 CLOSED ACQUIRED $429 MILLION OF INDUSTRIAL ASSETS IN 2014 13
Slide 15: Portfolio Construction
PORTFOLIO CONSTRUCTION FREE CASH FLOW NET OPERATING INCOME SINGLE TENANT INDUSTRIAL ASSET ACQUISITION CASH FLOW ($000s) SINGLE TENANT INDUSTRIAL ASSET ACQUISITION CASH FLOW ($000s) $1,200 $1,200 $1,000 $1,000 $800 $800 SINGLE ASSET $600 $600 $400 $400 $200 $200 $0 $0 1 2 3 4 5 6 7 8 9 10 11 12 13 14
Slide 16: Valuation
VALUATION VALUATION COMPONENTS (000's except per share data) (1) Run Rate Annualized Cash Net Operating Income $186,404 Consolidated Debt $860,318 Preferred Equity $139,000 Total Shares & Units Outstanding 71,551 Annualized Monthly Dividend Rate (annual) $1.38 Portfolio Square Feet 52,141 VALUATION
Slide 17: Capital Structure
CAPITAL STRUCTURE LIQUIDITY SEPTEMBER 30, 2015 Debt Capacity (1)(2) $672 mm COMMON Immediate Availability (1) $479 mm DEBT, 37% EQUITY, 57% CASH FLOW COVERAGE Net Debt / Run Rate Adj. EBITDA Annualized (1) 5.0x Interest Coverage Ratio 4.6x LEVERAGE Net Debt / Total Real Estate Cost Basis 41.0% Debt
Slide 18: Impact of Potential Interest Rate Increase
IMPACT OF POTENTIAL INTEREST RATE INCREASE EXISTING PORTFOLIO IMPACT (‐) Revaluation of existing portfolio due to increase in capitalization rates as cost of debt and equity rise (+) Increase in rental rates as inflation permeates the rental market ‐ 4.1 year average lease term (1) (+) Capital struc
Slide 19: Portfolio Diversification
PORTFOLIO DIVERSIFICATION # STATE ABR % (1) # TENANT ABR % (1) # INDUSTRY ABR % (1) 1 Ohio 8.6% 1 XPO Logistics 2.7% 1 Air Freight & Logistics 11.8% 2 Illinois 8.4% 2 Deckers Outdoor 2.0% 2 Automotive 11.8% 3 North Carolina 8.0% 3 Solo Cup 1.9% 3 Ind Equip., Comp. & Metal 11.3% 4 Pennsylvania 6.3% 4
Slide 20: Summary
SUMMARY OPPORTUNITY Persisting market inefficiency Large, stable asset class Fragmented ownership HYBRID PLATFORM Hybrid approach: ‐ Private Equity: Quantitative, probabilistic, cash flow approach to relative value ‐ Net Lease: Portfolio diversification mitigates risk and enhances returns ‐
Slide 21: Definitions
INDUSTRIAL DEFINITIONS
Slide 22: Non-GAAP Financial Measures & Other Definitions
NON‐GAAP FINANCIAL MEASURES & OTHER DEFINITIONS Non‐GAAP Financial Measures and Other Definitions Adjusted Earnings before Interest, Taxes, Depreciation, and Amortization (Adjusted EBITDA): We define Adjusted EBITDA as net income (loss) (computed in accordance with GAAP) before interest, tax, deprec
Slide 23: Non-GAAP Financial Measures & Other Definitions
NON‐GAAP FINANCIAL MEASURES & OTHER DEFINITIONS Non‐GAAP Financial Measures and Other Definitions (continued) Debt Capacity: We define Debt Capacity as the aggregate undrawn nominal commitments under the Company’s debt instruments. Funds from Operations (FFO), Core FFO, and Adjusted FFO (AFFO): We d
Slide 24: Non-GAAP Financial Measures & Other Definitions
NON‐GAAP FINANCIAL MEASURES & OTHER DEFINITIONS Non‐GAAP Financial Measures and Other Definitions (continued) Net operating income (NOI), Cash NOI, and Run Rate Cash NOI: We define NOI as rental income, including reimbursements, less property expenses and real estate taxes, which excludes depreciati