• Market Rent Growth: 3.2% through September 30, with a full-year expectation of approximately 4%.
• Cash Leasing Spreads: Achieved 24.1% for 2025 leasing commitments.
• Core FFO per Share: $0.60 for the quarter, a 1.7% increase compared to the previous year.
• Cash Available for Distribution: $88 million for the third quarter.
• Net Debt to Adjusted EBITDA: 5.1x at quarter end.
• Liquidity: $974 million at quarter end.
• Same Store Cash NOI Growth: 4.4% for the quarter and 6.1% year-to-date.
• Acquisition Volume: $113 million for the third quarter, including a 5-property portfolio for $78.1 million.
• Annual Same Store Cash NOI Guidance: Increased to a range of 5.25% to 5.5%.
• G&A Expectations: Decreased to a range of $49 million to $50 million.
• Core FFO Guidance: Revised to a range of $2.38 to $2.40 per share.

• Warning! GuruFocus has detected 7 Warning Signs with STAG.

Release Date: October 30, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Stag Industrial Inc (NYSE:STAG) reported strong operating results for the third quarter, with stable absorption and contracting industrial supply pipeline.
• The company achieved a cash leasing spread of 24.1% for 38% of the square feet expected to be leased in 2025, indicating strong leasing activity.
• Acquisition volume for the third quarter totaled $113 million, with a noticeable acceleration in activity post-Labor Day.
• Core FFO per share increased by 1.7% compared to the third quarter of last year, reflecting financial growth.
• Same Store Cash NOI growth was 4.4% for the quarter and 6.1% year-to-date, leading to an increase in annual guidance.

Negative Points

• American Tire Distributors, a tenant representing 1% of annualized base rent, filed for Chapter 11 bankruptcy, creating uncertainty.
• The acquisition market's momentum is subject to interest rate fluctuations and seller expectations, which could impact future growth.
• The company experienced a $1.4 million credit loss through September 30, indicating some tenant financial challenges.
• There is a potential risk of occupancy loss, with a guidance of 25 basis points average occupancy loss for the year.
• Election uncertainty is causing delays in decision-making in the leasing market, potentially affecting future leasing activity.

Q & A Highlights

Q: What factors are contributing to the increased activity in the acquisition market for STAG Industrial? A: William Crooker, President, CEO, and Director, explained that the acquisition market has seen increased activity due to pent-up seller demand and stabilized interest rates, which have reduced bid-ask spreads. This has led to more properties being available on the market. STAG's acquisition pipeline is robust, with a significant portion consisting of individual assets across various markets. The pace of acquisitions will depend on interest rates and seller expectations, but the company is optimistic about its current acquisition momentum.

Q: How is STAG Industrial managing competition in the acquisition market? A: William Crooker noted that STAG competes with both large institutional private equity and smaller regional players. The company often has a cost of capital advantage and benefits from its reputation and surety of close, which can be appealing to sellers. This allows STAG to secure deals even if they are not the highest bidder.

Q: What is the status of leasing for STAG's Greenville/Spartanburg development assets? A: William Crooker stated that the Greenville/Spartanburg assets are expected to be leased by Q3 2025. The market has strong demand drivers, and while there has been some excess supply, it is being absorbed. The company has seen a fair amount of activity on these buildings and remains confident in their lease-up timeline.

Q: Are there any significant known move-outs or occupancy changes expected for STAG Industrial? A: William Crooker confirmed that there are no material known move-outs expected at this point in the year. While there are leases rolling in the back half of the year, there is no indication of significant non-retentions.

Q: How is STAG Industrial addressing the potential impact of American Tire Distributors' bankruptcy on its portfolio? A: William Crooker mentioned that American Tire Distributors' leases are generally at market rates, and the facilities are actively utilized. The company is monitoring the situation closely, but there is no significant impact on guidance for the year. The outcome will depend on the tenant's evaluation of their distribution network and lease affirmations or rejections.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.