Equity Research Project for BU Finance and Investment Club

1. Investment Research Presentation
Month Day, 20XX
1
STAG Industrial
NYSE: STAG
Sector: Real Estate II
Senior Analysts: Shengkun Ma, Marcela Vega
Junior Analysts: Julia Chang, Alyssa Nguyen,
Tyler Reinhardt, Benjamin Smith, Eli Elman,
Chin-An Kuo, Ziying Zhong
Spring 2017

2. 2
Valuation Summary
REIT’sRecommendation Summary
STAG Industrial, Inc.
Company (Ticker) STAG
Current Trading Price (04-15-2017) $ 25.93
Recommendation Hold
Target Price $ 29.01
Upside Potential 11.9%
Recommendation HOLD

3. 3
Agenda
REIT’s
Industry Definition & Breakdown
Company Overview
Revenue Generation Model
Industry & Company Trends
Risk Analysis
Comparables & DCF Valuation
Summary/Recommendation

4. 4
Industry Definition
REIT’s
• A REIT is a type of security investing in real estate through mortgages and property.
• REITs are either Equity, Mortgage, or Hybrid
• Industrial REITs are equity REITs that own and manage industrial facilities and rent
space in those properties to tenants.
• Most industrial REITs focus on specific types of properties, such as distribution
centers and warehouses.
Source: STAG Industrial 10k, REIT.com, Google Finance
STAG Industrial
NYSE: STAG
First Industrial Realty Trust
NYSE: FR
DCT Industrial Trust
NYSE: DCT
Rexford Industrial Realty
NYSE: REXR
Monmouth Real Estate
Investment
NYSE: MNR
EastGroup Properties
NYSE: EGP

5. 5
Industry Breakdown
REIT’s
Industry (Industrial REITS) Breakdown by
Market Cap
REITs
$1,075,000 Mil
Equity REITs
$990,594.9 Mil
Industrial
REITs
$60,479.8
Mil
Gramercy
Property Trust
5%
Liberty
Property
Trust
10%
Monmouth
Real Estate
2%
ProLogis
45%
STAG Industrial
3%
Private Industrial
REITs
14%
Terreno Realty
2%
Rexford
Industrial Realty
3%
First Industrial
Realty
5%
EastGroup
Properties
4%
DCT
Industrial
7%
Source: REIT.com, InvestSnips

6. 6
REIT’s
Key Takeaway
Favorable shifts in political and economical environments increases demand,
and thus allows for healthy portfolio growth
• Favorable shifts in political environment:
- Foreign Investment in Real Property Tax Act (FIRPTA)
increased the amount of REIT stock that a foreign
person may hold from 5 percent to 10 percent during
the past year.
- Additional capital from abroad in light of U.K.’s Brexit
vote
 London enjoys substantial capital base in real
estate company, but uncertainty has investors
looking for opportunities in U.S.
• Favorable shifts in economical environment:
- Labor market has a positive outlook which stimulates
rental revenue.
- Consumer confidence in highest level since 2004
- Rising wages from overseas manufacturing countries
drives attractiveness of US as consumer confidence
increases.
- Increased demand from E-commerce lead to increase
in demand of warehouses.
Industry Trends: Shifts in political and economical environments favor industrial REIT growth
Source: Bloomberg.com, University of Michigan

7. 7
Company Overview
REIT’s
STAG Industrial (STAG)
Market Cap $2.1 billion
2016 Revenue $224 million
Property Count 314
Average Occupancy 95.7%
Rentable Square Ft 60.9 million
Credit Rating (Fitch) BBB/Stable
Outlook
$50
$90
$130
$170
$210
$250
$290
2012 2013 2014 2015 2016
Revenue(inmillions)
Revenue Growth
STAG Industrial, Inc. is a Boston
based real estate investment trust
focused on the acquisition and
operation of single tenant,
industrial properties throughout
the United States.
• Fully-integrated acquisition, leasing
and asset management platform
• Focus on industrial real estate: large
and established tenants with stable
income
• No single tenant accounting for more
than 3.1% of total rental revenue
• No single industry accounting for
more than 13.6% of total rental
revenue
Source: STAG 10k, Seeking Alpha

8. 8
Revenue Generation Model
REIT’s
Retained Cash Flow
Completed
Properties
Financing
Acquisition &
Development
Sales & Leasing
Issuance of Equity
& Debt
Sale of Properties
Partially
Completed
Properties
Land
Sale of Properties
Acquisition Streams Revenue Streams
Rent Collection

9. 9
Company Trends Overview
REIT’s
Impact of
Strategic
Acquisitions
Advantageous
Exposure to
Automotive
Industry

10. 10
Trend 1: Strategic acquisitions lead to a highly diversified portfolio with increasing returns
• STAG leadership stated a goal of 25% annual portfolio
growth
- Goal focused on leveraging small acquisition
opportunities across industries
- 64% of properties in the secondary market,
24.2% primary market, 11.8% tertiary market
• Highly selective acquisition model - offers made on
17.1% of all 1,250+ properties evaluated; 3.3% closed
• Highly diversified portfolio with 314 buildings across
37 states
• Average 7% capitalization rate on properties
• Above average & rising 95.8% occupancy rate
• Stable 70% retention rate
Increased acquisition of highly diversified small
investments ensure increasing return for STAG
Industrials
Source: STAG 10k, Seeking Alpha
-0.2
-0.1
0
0.1
0.2
Historical Monthly Returns: 2012-2017
STAG Russell 2000 S&P 500
94.7%
95.6%
95.8%
96%
96.2%
93.5%
94.0%
94.5%
95.0%
95.5%
96.0%
96.5%
0
100
200
300
400
2014 2015 2016 2017 2018
Growth in Buildings and Occupancy Rate
Buildings Occupancy Rate
74%
82%
59%
70% 70% 70%
0%
20%
40%
60%
80%
100%
2011 2012 2013 2014 2015 2016
Retention Rate Stabilization

11. 11
REIT’s
Source: STAG 10k, stagindustrials.com, Seeking Alpha
Trend 2: Outsized automotive exposure proves advantageous for Trump Administration’s Pro-Growth Policies
STAG’s business model is well-positioned
to benefit from growing U.S. automotive
manufacturing
• Potential increases in demand from automotive
sector given Trump Administration’s Pro-Growth
Policies
- Ford decides to cancel plans for $1.6 billion
factory in Mexico to invest $700 million in
Michigan
- Toyota announces $600 million expansion in
Indiana and $10 billion over the next five
years in U.S. operations
• Automotive industry accounts for 13.6% of
STAG’s total rental revenue
• STAG has Original Equipment Manufacturer
(OEM) relationships with Ford, Toyota, BMW,
Chrysler, GM and Hyundai
186
179
201
178
173 172
181
185
195 196
150
160
170
180
190
200
210
$-
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Recovering US Automotive Industry
Establishment Revenue
Automotive
14%
Ind Equip,
Comp & Metal
11%
Air Freight &
Logistics
11%
Containers &
Packaging
9%
Food &
Beverages
9%
Retail
7%
Personal
Products
7%
Household
Durables
5%
Building
Services
5%
Non-Profit/
Government
4%
Other
18%
Revenue Breakdown by Industry

12. 12
Risks
REIT’s
• Lack of liquidity limits the ability to react to economical shifts
• Potential liquidity disruptions could affect financing for the company
Less liquidity in real
estate investments
• If mortgage debt is unavailable at reasonable rates, company may not be
able to finance or refinance acquisitions
• Unsuccessful hedging strategy could reduce overall return on investments
Interest rate increases
• Government could decrease spending due to deficits
• Economic downturn could result in low occupancy rates
• Adverse market conditions may affect operating activities
Adverse economic
conditions could harm
profitability
Industrial REITs face many risks tied to market conditions. Likely interest rate hikes
may affect STAG’s property acquisition strategy; however, STAG’s main competitors
in the secondary markets would be greater affected by such increases.
Key Takeaway

13. 13
Comparables Analysis
REIT’s
Company Ticker EV Market Cap Revenue FFO AFFO EBITDA P/FFO P/AFFO EV/EBITDA
STAG Industrials STAG 1,987.2 1,835.8 250.2 101.5 118.3 146.5 18.1x 15.5x 13.6x
First Industrial Realty, Inc. FR 4,665.3 3,144.9 378.0 174.0 176.0 216.7 18.1x 17.9x 21.5x
EastGroup Properties, Inc. EGP 3,551.5 2,404.5 253.0 131.2 135.0 165.5 18.3x 17.8x 21.5x
Monmouth Real Estate
Investment Corporation MNR 1,784.1 934.2 94.9 13.9 14.8 82.0 67.5x 63.3x 21.8x
DCT Industrial Trust, Inc. DCT 5,949.8 4,302.8 392.8 214.0 214.7 266.7 20.1x 20.0x 22.3x
Rexford Industrial Realty, Inc. REXR 2,138.6 1,454.5 126.2 53.4 55.0 75.2 27.3x 26.5x 28.5x
High 67.5x 63.3x 28.5x
Mean 28.2x 26.8x 22.5x
Median 19.2x 19.0x 21.6x
Low 18.1x 15.5x 19.5x
P/AFFO
LTM AFFO $118.34
Implied Price Target $31.68
Upside (Downside) % 22.2%
EV/EBITDA
LTM EBITDA $146.50
Implied Price Target $48.45
Upside (Downside) % 86.9%
P/FFO
LTM FFO $101.51
Implied Price Target $27.55
Upside (Downside) % 6.2%

14. 14
DCF Valuation
REIT’s
Perpetuity Growth Method
Growth Rate 2.20%
Undiscounted TEV $1,779.61
Discounted TEV $1,138.95
DCF Value $1,379.44
Equity Value $1,228.06
Share Price $17.35
Implied Exit Multiple 7.49x
Exit Multiple Method
EBITDA Multiple 13.60x
Undiscounted TEV $3,229.71
Discounted TEV $2,067.02
DCF Value $2,307.51
Equity Value $2,156.13
Share Price $30.45
Implied Growth Rate 5.29%
Forecasted
2017 2018 2019 2020 2021
EBIT $26.51 $29.56 $32.30 $34.96 $37.72
- Taxes 0 0 0 0 0
$26.51 $29.56 $32.30 $34.96 $37.72
+ D&A 141.34 156.89 170.91 184.50 198.61
- CAPEX (112.18) (167.46) (119.48) (200.05) (118.39)
- Δ in NWC 2.37 5.95 6.35 6.46 6.33
Unlevered FCF $58.04 $24.94 $90.07 $25.88 $124.26
Net Present Value $240.49
Key Assumptions
• Cost of Debt: 3.37%
• Cost of Equity: 9.87%
• WACC: 9.34%
• Terminal Growth Rate: 2.20%
• Exit Multiple: 13.60x
• Assumed increasing Capex due to
property acquisitions

15. 15
Recommendation Summary
Recommendation Summary
STAG Industrial, Inc.
Company (Ticker) STAG
Current Trading Price (04-15-2017) $ 25.93
Recommendation Hold
Target Price $ 29.01
Upside Potential 11.9%
Valuation Summary
Method Price Weight
Discounted Cash Flow
Perpetuity Growth Method $ 17.35 20%
Exit Multiple Method $ 30.45 20%
Comparable Company Analysis
P/FFO $ 27.55 30%
P/AFFO $ 31.68 20%
EV/EBITDA $ 48.45 10%
Target Price $ 29.01 100%
Recommendation HOLD
• Buy if price drops below $25.22
• Company in a good position for
potential growth

16. 16
Thank You

17. 17
Appendix: Income Statement
Historical Forecasted
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Revenue 84.1 133.9 173.8 218.6 250.2 282.1 313.2 341.1 368.3 396.4
% growth 59.3% 29.8% 25.8% 14.5% 12.7% 11.0% 8.9% 8.0% 7.6%
COGS (excl. D&A) - - - - - - - - - -
% of Revenue 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Gross Profit 84.1 133.9 173.8 218.6 250.2 282.1 313.2 341.1 368.3 396.4
% Margin 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
SG&A (32.3) (45.3) (67.0) (105.4) (103.7) (113.11) (125.6) (136.8) (147.7) (158.9)
% of Revenue 38.43% 33.84% 38.55% 48.21% 41.44% 40.09% 40.09% 40.09% 40.09% 40.09%
EBITDA 51.8 88.6 106.8 113.2 146.5 169.0 187.6 204.4 220.6 237.5
% Margin 61.6% 66.2% 61.4% 51.8% 58.6% 59.9% 59.9% 59.9% 59.9% 59.9%
Depreciation (42.4) (67.6) (88.1) (110.4) (125.4) (141.34) (156.89) (170.91) (184.50) (198.61)
Amort. of Intangibles - - - - - - - - - -
Total D&A (42.4) (67.6) (88.1) (110.4) (125.4) (141.3) (156.9) (170.9) (184.5) (198.6)
Other Operating Expenses (0.3) (0.6) (0.8) (1.0) (1.1) (1.1) (1.1) (1.1) (1.1) (1.1)
Total Operating Expenses (75.1) (113.5) (155.9) (216.9) (230.3) (255.6) (283.6) (308.8) (333.3) (358.7)
Operating Income (EBIT) 9.0 20.4 17.9 1.8 19.9 26.5 29.6 32.3 35.0 37.7
% Margin 10.7% 15.2% 10.3% 0.8% 8.0% 9.4% 9.4% 9.5% 9.5% 9.5%
Interest Expense (16.1) (20.3) (25.1) (36.1) (42.9) (47.69) (52.99) (58.88) (65.42) (72.69)
Interest Income 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Net Interest Inc. (Exp) (16.1) (20.3) (25.1) (36.1) (42.9) (47.7) (53.0) (58.9) (65.4) (72.7)
Other Non-Operating Income (0.7) - (0.7) - (3.3) - - - - -
EBT Excl. Unusual Items (7.8) 0.1 (7.8) (34.3) (26.2) (21.2) (23.4) (26.6) (30.4) (35.0)
% Margin -9.3% 0.1% -4.5% -15.7% -10.5% -7.5% -7.5% -7.8% -8.3% -8.8%
Gain on Sale of Rental Property 0.2 5.3 2.8 5.0 61.8 61.8 61.8 75.0 75.0 85.0
EBT Incl. Unusual Items (7.6) 5.4 (5.0) (29.3) 35.6 40.7 38.4 48.4 44.6 50.0
Income Tax Expense - - - - - - - - - -
Earnings from Cont. Ops (7.6) 5.4 (5.0) (29.3) 35.6 40.7 38.4 48.4 44.6 50.0
Earnings from Discounted Ops. (2.6) (0.5) - - - - - - - -
Extraord Item & Acct. Change - - - - - - - - - -
Net Income to Company (10.2) 4.9 (5.0) (29.3) 35.6 40.7 38.4 48.4 44.6 50.0
Minority Int. in Earnings - - - - - - - - - -
Net Income (10.2) 4.9 (5.0) (29.3) 35.6 40.7 38.4 48.4 44.6 50.0
% Margin -12.1% 3.7% -2.9% -13.4% 14.2% 14.4% 12.3% 14.2% 12.1% 12.6%
EPS $(0.16) $0.34 $0.11 $(0.28) 0.70 $0.66 $0.63 $0.75 $0.70 $0.77

18. 18
Appendix: Balance Sheet
Historical Forecasted
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Cash And Equivalents 19.0 6.7 23.9 12.0 12.2 33.1 14.7 34.0 24.6 60.7
Accounts Receivable 9.4 13.8 16.8 21.5 25.2 28.8 32.0 34.8 37.6 40.4
Other Recievables 1.6 11.6 17.6 13.2 15.9 18.6 20.7 22.5 24.3 26.2
Total Receivables 10.9 25.4 34.4 34.7 41.1 47.4 52.6 57.3 61.9 66.6
Inventory - - - - - - - - - -
Prepaid Exp. - - - - - - - - - -
Other Current Assets 5.5 10.7 7.9 10.3 11.1 11.1 11.1 11.1 11.1 11.1
Total Current Assets 35.4 42.8 66.2 57.0 64.4 91.6 78.4 102.4 97.6 138.4
Gross Property, Plant & Equipment 1,010.2 1,389.2 1,809.9 2,188.7 2,541.7 2,653.8 2,821.3 2,940.8 3,140.8 3,259.2
Accumulated Depreciation (46.2) (166.9) (251.8) (348.7) (424.9) (566.2) (723.1) (894.0) (1,078.5) (1,277.1)
Net Property, Plant & Equipment 964.1 1,222.4 1,558.1 1,840.0 2,116.8 2,087.6 2,098.2 2,046.8 2,062.3 1,982.1
Long-term Investments - - - - - - - - - -
Goodwill 4.9 4.9 4.9 4.9 4.9 4.9 4.9 4.9 4.9 4.9
Other Intangibles - - - - - - - - - -
Due from related parties 0.8 0.2 0.1 - - - - - - -
Other Long-Term Assets - - - - - - - - - -
Total Assets 1,005.2 1,270.2 1,629.3 1,901.9 2,186.1 2,184.1 2,181.5 2,154.1 2,164.8 2,125.5
Accounts Payable 12.1 18.6 21.6 25.7 35.4 45.0 55.0 65.0 75.0 85.0
Dividends Payable 11.3 5.2 7.4 8.2 9.7 10.6 11.8 12.8 13.9 14.9
Curr. Income Taxes Payable - - - - - - - - - -
Security Deposits 5.7 9.0 11.5 14.6 15.2 15.80 15.80 15.80 15.80 15.80
ST Debt - - - - - - - - - -
Other Current Liabilities 0.5 - 0.9 3.8 2.4 - - - - -
Total Current Liabilities 29.6 32.7 41.3 52.3 62.8 71.4 82.6 93.6 104.7 115.7
Long Term Debt 479.2 556.1 686.3 980.2 1,036.1 1,036.1 1,036.1 1,036.1 1,036.1 1,036.1
Capital Leases & Current Portion - - - - - - - - - -
Unearned Revenue, Non-Current - - - - - - - - - -
Def. Tax Liability, Non-Curr. - - - - - - - - - -
Other Non-Current Liabilities 6.9 6.9 10.2 11.4 20.3 20.3 20.3 20.3 20.3 20.3
Total Liabilities 515.6 595.8 737.7 1,043.9 1,119.2 1,127.9 1,139.1 1,150.1 1,161.1 1,172.2
Common Stock 0.4 0.4 0.6 0.7 0.8 0.8 0.8 0.8 0.8 0.8
Preferred Stock 69.0 139.0 139.0 139.0 145.0 145.0 145.0 145.0 145.0 145.0
Additional Paid In Capital 419.6 577.0 928.2 1,017.4 1,293.7 1,293.7 1,293.7 1,293.7 1,293.7 1,293.7
Retained Earnings (61.0) (116.9) (203.2) (332.3) (411.0) (421.6) (435.4) (473.9) (474.2) (524.6)
Treasury Stock - - - - - - - - - -
Comprehensive Inc. and Other (0.4) 3.4 (0.5) (2.4) (1.5) (1.5) (1.5) (1.5) (1.5) (1.5)
Total Common Equity 427.6 603.0 864.2 822.5 1,027.0 1,016.4 1,002.6 964.2 963.9 913.4
Minority Interest 61.9 71.5 27.4 35.4 39.9 39.9 39.9 39.9 39.9 39.9
Total Equity 489.5 674.6 891.5 857.9 1,066.9 1,056.3 1,042.5 1,004.1 1,003.8 953.3
Total Liabilities and Equity 1,005.1 1,270.3 1,629.3 1,901.7 2,186.2 2,184.2 2,181.6 2,154.2 2,164.9 2,125.5
Balance Check OK OK OK OK OK OK OK OK OK OK

19. 19
Appendix: Sensibility Tables
DCF - Perpetuity Growth Sensitivity
WACC
– 7.8% 8.3% 8.8% 9.34% 9.8% 10.3% 10.8% 11.3%
Terminal
GrowthRate
3.2% $28.05 $24.89 $22.30 $20.15 $18.33 $16.78 $15.44 $14.27
2.7% $25.33 $22.69 $20.49 $18.64 $17.06 $15.69 $14.50 $13.46
2.2% $23.08 $20.85 $18.96 $17.35 $15.95 $14.74 $13.68 $12.74
1.7% $21.21 $19.28 $17.64 $16.22 $14.98 $13.90 $12.94 $12.09
1.2% $19.61 $17.94 $16.49 $15.23 $14.12 $13.15 $12.28 $11.50
0.7% $18.24 $16.77 $15.48 $14.36 $13.36 $12.47 $11.68 $10.97
DCF - EV/EBITDA Exit Multiple Sensitivity
WACC
– 7.8% 8.3% 8.8% 9.34% 9.8% 10.3% 10.8% 11.3%
Terminal
EBITDAMultiple
15.6 x $37.14 $36.32 $35.52 $34.75 $33.99 $33.26 $32.54 $31.85
14.6 x $34.84 $34.07 $33.33 $32.60 $31.89 $31.21 $30.54 $29.88
13.6 x $32.54 $31.83 $31.13 $30.45 $29.80 $29.15 $28.53 $27.92
12.6 x $30.24 $29.58 $28.93 $28.31 $27.70 $27.10 $26.53 $25.96
11.6 x $27.94 $27.33 $26.74 $26.16 $25.60 $25.05 $24.52 $24.00
10.6 x $25.64 $25.08 $24.54 $24.01 $23.50 $23.00 $22.52 $22.04
CompCo - Price/FFO Sensitivity
Implied Share Price
$27.55 #REF!
Price/FFO
Multiple
$21.22 $30.42
$20.22 $28.98
$19.22 $27.55
$18.22 $26.12
$17.22 $24.68
$16.22 $23.25
CompCo - Price/AFFO Sensitivity
Implied Share Price
$31.68 $31.68
Price/AFFO
Multiple
$20.95 $35.03
$19.95 $33.35
$18.95 $31.68
$17.95 $30.01
$16.95 $28.34
$15.95 $26.67
CompCo - EV/EBITDA Sensitivity
Implied Share Price
$48.45 #REF!
EV/EBITDA
Multiple
$23.64 $52.59
$22.64 $50.52
$21.64 $48.45
$20.64 $46.38
$19.64 $44.32
$18.64 $42.25