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Free-Standing REITs: Separating the Best from the Rest

Tickers in this article: STAG ARCT O LSE ARCP
NEW YORK ( TheStreet) -- Boston-based STAG Industrial (STAG) 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 (BAC) 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 Wells Fargo (WFC) 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 The Street , I Can't Believe It! What an O-mazing Dividend Machine , Realty Income (O) announced it was acquiring American Realty Capital Trust (ARCT) 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, W. P. Carey Traditionally 'Investing for the Long Run' 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, This Small Cap REIT Is a Diamond in the Rough in which I recommended CapLease's (LSE) 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%.