Insights

1 Very Attractive Industrial Real Estate Stock

Despite two years of uneasiness in the real estate business, Stag Industrial (NYSE: STAG) has been a steady performer. In this video clip from “Ask Us Anything” on Motley Fool Live, recorded on June 14, Fool.com contributor Tyler Crowe discusses how appealing the industrial-focused REIT looks to investors.

Tyler Crowe: Right now, their same-store sales growth is 4.8% which doesn’t sound like much, but in the real estate business where you can raise your same-store portfolio by 4%, that’s pretty huge. But the ones that are really telling to me are down in the bottom of this table here where you have the cash-rent change.

This is basically like when they renew a lease, this is how much more they are getting than the old lease was previously getting. Right now their cash-rent changes are about 15%. In the real estate business, that is bonkers. If you can get a 7% lease rate increase, that is really good. But 15% on the first quarter, accelerating to 16% through the year.

If you noticed too, the lease terms are about 5-6 years, and so what happens there is you get this enormous buildup of years worth of leases that are going to be renewing year over year over year. So probably for the next 5-6 years, we’re going to see significant growth in leases because you have right now at this point things that were signed in 2018, 2017 that are now just barely starting to get to that release point.

So chances for increases on the cash rent for those is going up, and a lot of people are wanting to stay where they are. For the year, they are expecting 68% of their tenants to stay, which typically 50-55% is pretty good. So all of these things really point to an incredibly tight market for industrial real estate and, for a company that is putting up these numbers to be trading at pre-pandemic levels and currently with a dividend yield of 4.7%, that looks awfully attractive.

Tyler Crowe has positions in Stag Industrial. The Motley Fool has positions in and recommends Stag Industrial. The Motley Fool has a disclosure policy.

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