STAG Industrial (STAG) Q3 Earnings call transcript Oct 30, 2024
2min read STAG Industrial, a leading real estate investment trust (REIT) focused on the acquisition, ownership, and operation of industrial real estate, recently held its third quarter 2024 earnings call, offering investors a comprehensive update on the company's financial performance and strategic outlook. The call, led by CEO William Crooker and CFO Matt Pinard, provided insights into the company's operational efficiency, market trends, and future growth prospects.
Strong Operational Performance and Market Conditions
STAG Industrial reported another quarter of robust operational results, with the industrial supply pipeline continuing to contract and absorption remaining stable in many markets. Availability and vacancy are approaching a trough, but the company anticipates that the inflection point will not occur until the back half of 2025. The market rent growth for the portfolio stands at 3.2% through September 30, keeping the company on track for full-year market rent growth of approximately 4%.
Active Leasing Market and Acquisition Activity
The leasing market remains active, with tenants committing to space. The company has already leased 38% of the square footage it expects to lease in 2025, achieving cash leasing spreads of 24.1%. This level of leasing is on a similar pace to last year. Additionally, the acquisition market has regained momentum in the third quarter, with activity noticeably accelerating post-Labor Day. Acquisition volume for the third quarter totaled $113 million, consisting of 6 buildings with cash and straight-line cap rates of 6.7% and 7.2%, respectively.
Financial Highlights and Guidance
Core FFO per share for the quarter was $0.60, an increase of 1.7% compared to the third quarter of last year. Cash available for distribution for the third quarter totaled $88 million, with $75 million retained after dividends paid through September 30. Net debt to annualized run rate adjusted EBITDA was 5.1x, and liquidity stood at $904 million at quarter end. The company commenced 20 leases totaling 3.3 million square feet, generating cash and straight-line leasing spreads of 24.6% and 34.3%, respectively.
Strategic Initiatives and Development
STAG Industrial is actively pursuing development opportunities, with over 2.1 million square feet of activity across 9 buildings in the US. The company has closed on a 5-acre land site for a 76,000 square foot building, and a single asset joint venture with a national developer for a 284,000 square foot distribution facility capable of accommodating up to 2 tenants. Both projects are located in the North Valley submarket of Reno, which has experienced robust tenant demand and rent growth.
Challenges and Opportunities
The earnings call also touched upon challenges and opportunities, such as the voluntary bankruptcy filing of American Tire Distributors, which operates within 7 of the company's facilities, representing 1% of its annualized base rent or approximately $6.1 million. The company is monitoring the situation closely and has updated its guidance accordingly. Additionally, the company discussed the impact of election uncertainty on its business, with larger tenants delaying decision-making in the leasing market.
Conclusion
STAG Industrial's third quarter 2024 earnings call highlighted the company's strong operational performance, strategic initiatives, and robust financial health. The company's focus on acquiring and developing high-quality industrial real estate, coupled with its strategic positioning in key markets, positions it well for future growth. The company's ability to navigate challenges, such as the impact of American Tire Distributors' bankruptcy and election uncertainty, underscores its resilience and adaptability. Overall, STAG Industrial remains a compelling investment opportunity for investors seeking exposure to the industrial real estate sector.
