Core Insights - The article emphasizes the importance of a hybrid investment strategy that combines classic dividend growth stocks with Business Development Companies, REITs, and Closed End Funds to enhance investment income while achieving total returns comparable to traditional index funds [1]. Group 1: Investment Strategy - The company advocates for a diversified approach to investing, focusing on high-quality dividend stocks and assets that provide long-term growth potential [1]. - A hybrid system is proposed, which balances growth and income, allowing investors to capture total returns on par with the S&P 500 [1].

Core Viewpoint - STAG Industrial, Inc. has signed a new lease for 102,060 square feet of warehouse and distribution space, indicating strong demand for its industrial properties [1][2]. Group 1: Lease Details - The new 30-month lease is with a wholesale apparel and promotional product distributor, starting on April 1, 2025, and includes annual rent escalations of 3.5% [2]. - The asset at 452 Casual Drive in Wellford, SC, is now 69% leased, contributing to an overall lease-up rate of 51% for the company's completed development portfolio [2]. Group 2: Company Overview - STAG Industrial, Inc. is a real estate investment trust focused on acquiring, owning, and operating industrial properties across the United States [3]. - As of December 31, 2024, the company's portfolio includes 591 buildings in 41 states, totaling approximately 116.6 million rentable square feet [3]. Group 3: Management Commentary - The Executive Vice President of Real Estate Operations highlighted the transaction as a demonstration of the strength of STAG's development platform and operational capabilities, emphasizing a mutually beneficial outcome for both the company and the tenant [3].

Core Viewpoint - STAG Industrial, Inc. has not provided significant benefits to shareholders from its acquisition strategy, leading to a hold recommendation in September 2024 [1]. Company Analysis - The company has a focus on sustainable profitability and value-oriented criteria for investments, indicating a conservative long-term investment approach [1]. - The analyst emphasizes a fundamental, bottom-up research methodology, including detailed analysis of financial statements and earnings calls to assess the company's competitive position [1]. Investment Position - The analyst holds a beneficial long position in STAG shares, indicating confidence in the company's potential despite the previous hold recommendation [2].

Financial Data and Key Metrics Changes - Core FFO per share for Q4 was $0.61, representing a 4.8% increase compared to 2023 [21] - Cash available for distribution totaled $370 million in 2024, with approximately $95 million of free cash flow retained after dividends [21] - Same-store cash NOI grew 4.4% for the quarter and achieved record same-store cash NOI growth of 5.8% for the year [22] Business Line Data and Key Metrics Changes - Leasing activity has reaccelerated, with 23 leases totaling 2.4 million square feet commenced during the quarter, generating cash and straight-line leasing spreads of 19.4% and 34.9%, respectively [22] - The company has already leased 70% of the operating portfolio square feet expected for 2025, achieving cash leasing spreads of 23.8% [11][22] Market Data and Key Metrics Changes - The national industrial leasing demand in 2024 was muted compared to recent years, but many markets remain healthy with increased tenant demand [8][9] - The strongest market rent growth was observed in non-coastal and manufacturing markets [10] Company Strategy and Development Direction - The company anticipates the acquisition market will gain momentum as the year progresses, with acquisition volume guidance ranging from $350 million to $650 million [26] - A joint venture development partnership was entered to construct approximately 400,000 square feet across two buildings in the Charlotte market, with an expected stabilized yield of 7% [19] Management's Comments on Operating Environment and Future Outlook - Management noted that the supply pipeline continues to contract, with deliveries down over 30%, and this trend is expected to continue in 2025 [8] - There is uncertainty regarding tariffs, with tenants expressing that it is too early to determine the impact on their operations [47][48] Other Important Information - The company sold two buildings for aggregate proceeds of $29 million during the quarter, with one building sold in January for $67 million [16][17] - Approximately 2.5 million square feet of development activity is ongoing across 11 buildings in the U.S., with 50% of the space under construction already leased [18] Q&A Session Summary Question: Leasing and spreads for Q4 were lower, what is the outlook for 2025? - Management indicated that Q4 leasing spreads were affected by fixed-rate renewal options, and excluding those, spreads would have been 34%. They expect 2025 spreads to be around 24-25% [32][33] Question: Can you discuss the yields in the development portfolio? - Management expects mid-sixes for stabilization on the Tampa assets and noted that leasing activity in Spartanburg is increasing [36][38] Question: What are the trends in the private transaction market? - Management observed a pause in the private market but expects an uptick in transaction activity as the year progresses [52][55] Question: How is the company planning for development starts in 2025? - Management is optimistic about development starts and is looking for additional opportunities in strong markets [76][77] Question: How does the 70% of renewals completed compare historically? - Management stated that the 70% completion rate is consistent with previous years, indicating no significant change in strategy [80][81]

STAG Industrial (STAG) Q4 2024 Earnings Call February 13, 2025 10:00 AM ET Company Participants Steve Xiarhos - Vice President - Capital Markets & Investor RelationsWilliam Crooker - CEO, President & DirectorMatts Pinard - CFOVince Tibone - Managing Director and Head of US Industrial & Mall ResearchMichael Chase - Executive VP & Chief Investment OfficerJohn Kim - Managing Director - US Real EstateBrendan Lynch - Director Conference Call Participants Craig Mailman - Managing Director & Equity Research Analys ...

Group 1 - Stag Industrial (STAG) reported quarterly funds from operations (FFO) of $0.61 per share, exceeding the Zacks Consensus Estimate of $0.60 per share, and up from $0.58 per share a year ago, representing an FFO surprise of 1.67% [1] - The company achieved revenues of $199.33 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 3.46%, compared to year-ago revenues of $183.31 million [2] - Stag has consistently outperformed consensus FFO and revenue estimates over the last four quarters [2] Group 2 - The stock has gained approximately 4.1% since the beginning of the year, outperforming the S&P 500's gain of 3.2% [3] - The future performance of Stag's stock will largely depend on management's commentary during the earnings call and the outlook for FFO [4][6] - Current consensus FFO estimate for the upcoming quarter is $0.60 on revenues of $196.33 million, and for the current fiscal year, it is $2.47 on revenues of $806.1 million [7] Group 3 - The Zacks Industry Rank indicates that the REIT and Equity Trust - Other sector is currently in the bottom 33% of over 250 Zacks industries, which may negatively impact stock performance [8] - The estimate revisions trend for Stag is currently unfavorable, resulting in a Zacks Rank 4 (Sell) for the stock, suggesting expected underperformance in the near future [6]

Core Insights - Stag Industrial reported strong Q4 2024 results, exceeding earnings and revenue estimates, with a Core FFO per share of $0.61 and revenue of $199.3 million, reflecting an 8.7% year-over-year growth [2][3][6] Financial Performance - Core FFO per share increased by 5.2% from $0.58 in Q4 2023 to $0.61 in Q4 2024 [3][6] - Revenue rose to $199.3 million, surpassing the expected $193 million, and up from $183.3 million in the previous year [2][3][7] - Net income attributable to common stockholders was $50.9 million, a 22.1% increase from $41.7 million in Q4 2023 [3] - Cash NOI for the quarter was reported at $155.5 million, up 8.6% from $143.1 million year-over-year [3] Business Strategy - Stag Industrial focuses on acquiring and managing single-tenant industrial properties across the U.S., aiming for a diversified portfolio to mitigate risks [4] - The company has been expanding its portfolio through acquisitions, enhancing quality and managing risks related to environmental compliance and regulations [5][8] Operational Highlights - The occupancy rate remained high at 96.5%, supported by lease commencements totaling 2.4 million square feet [7] - The company added 15 buildings covering approximately 2.4 million square feet for a total of $293.7 million in acquisitions [8] Liquidity and Financial Management - Stag Industrial reported net proceeds of $167.7 million from its At-The-Market program, concluding the year with $623.1 million in available liquidity [9] - The net debt to annualized run rate adjusted EBITDA was reported at 5.2x, indicating prudent leverage and capital management [9] Future Outlook - Management projects continued growth in Core FFO, supported by strategic acquisitions and a steady leasing environment, with 70.2% of 2025 leasing already addressed [10] - The company anticipates a promising Cash Rent Change of 23.8% [10]

Portfolio and Occupancy - As of December 31, 2024, the company owned 591 buildings across 41 states, totaling approximately 116.6 million rentable square feet, with an occupancy rate of approximately 96.5%[27]. - The Operating Portfolio was approximately 97.3% leased, with a Straight-line Rent Change of approximately 41.8% for new and renewal leases in 2024, compared to 44.0% in 2023[28]. - The company has 11 development projects as of December 31, 2024, which are not included in the building count[27]. - The company has acquired 194 buildings totaling approximately 35.4 million rentable square feet in the past five years[66]. - The company operates a total of 591 buildings with a total rentable square footage of 116,627,125 square feet[148]. - The top 20 markets account for 58.4% of total annualized base rental revenue, with Chicago, IL being the largest at 7.8%[152]. - The largest market in terms of rentable square footage is El Paso, TX, with 2,417,131 square feet across 12 buildings[147]. - The company has a significant presence in Florida, owning 5 buildings in Jacksonville with a total rentable square footage of 1,256,750[142]. - The company has properties in California, including 8 buildings in Sacramento totaling 976,557 square feet[142]. - The company has a diverse portfolio with significant exposure to various industries, including Containers & Packaging and Automobile Components[153]. Financial Performance and Revenue - Cash Rent Change for new and renewal leases grew approximately 28.3% in 2024, down from 31.0% in 2023[28]. - 22.7% of total annualized base rental revenue leases are set to expire before December 31, 2026[70]. - The total annualized base rental revenue from the top 20 tenant industries is 82.2%[153]. - The weighted average lease term was approximately 4.3 years as of December 31, 2024, with a total of 767 leases expiring over the next decade[157][158]. - Annualized base rental revenue from American Tire Distributors, Inc. is approximately $6.1 million, representing about 1% of total annualized base rental revenue[182]. - For the year ended December 31, 2024, new leases totaled 2,861,955 square feet with a cash rent per square foot of $5.63, reflecting a 22.6% increase[187]. - Renewal leases amounted to 10,675,681 square feet with a cash rent per square foot of $6.23, showing a 29.8% increase[187]. - The total weighted average rent for all leases was $6.10 per square foot, with an overall rent change of 28.3%[187]. - Approximately 5.8% of total annualized base rental revenue is expected to expire between January 1, 2025, and December 31, 2025, with anticipated rental rates for new leases expected to exceed existing rates[191]. Risk Factors - Inflation and rising interest rates may adversely affect financing costs and general expenses, impacting cash flows[60]. - The company faces significant competition for tenants, which may negatively impact occupancy and rental rates[71]. - Economic downturns in the industrial real estate sector could adversely affect the company's investments[64]. - Tenant defaults could significantly impact rental revenue, with potential complete cash flow reduction from single-tenant properties[72]. - Bankruptcy of tenants may lead to diminished income, with claims for unpaid rent likely being substantially less than owed[73]. - Future public health crises could adversely affect business operations, financial condition, and cash flows[74]. - Economic challenges such as inflation and labor shortages may hinder tenants' ability to make timely rent payments[75]. - The company may face risks from uninsured losses, including those from floods and acts of terrorism, which could significantly impact asset value[99]. - The company is exposed to climate change-related risks, which could increase operational costs and affect property demand[104]. - The company may face challenges in selling properties due to uncertain market conditions, affecting potential cash distributions[107]. Corporate Governance and Responsibility - The company maintains a corporate responsibility program that incorporates environmental, social, and governance (ESG) initiatives into its overall business strategy[46]. - The company is committed to competitive employee compensation and benefits, including fully paid health and wellness benefits[50]. - The company actively engages in community development through partnerships with local charitable organizations[50]. - The company is structured as an umbrella partnership REIT (UPREIT), allowing for tax-deferred property acquisitions[52]. Debt and Financing - As of December 31, 2024, the company had total outstanding debt of approximately $3.0 billion, including $409.0 million of variable interest rate debt[112]. - The company faces risks associated with rising interest rates, which could increase debt payments and adversely affect cash flows and distributions to stockholders[112]. - Existing mortgage notes and unsecured loan agreements impose financial covenants that could limit the company's flexibility and ability to make distributions[113]. - The company's ability to pay dividends and meet debt obligations relies heavily on distributions from its Operating Partnership, which are subject to various loan terms[114]. - If debt is unavailable at reasonable rates, the company may struggle to finance acquisitions or refinance existing debt, potentially leading to unfavorable financial outcomes[115]. - Adverse changes in credit ratings could increase borrowing costs and hinder access to additional financing, impacting future growth and acquisition activities[118]. - The company may face significant tax liabilities if it fails to maintain its REIT status, which could reduce net earnings available for distribution[119]. - Compliance with REIT distribution requirements may hinder the company's ability to reinvest cash in its business, potentially affecting long-term growth[122]. Cybersecurity - The company is exposed to risks associated with cyber-attacks and IT system failures, which could disrupt operations and lead to financial misstatements[126]. - The company has implemented a comprehensive cybersecurity risk management program focusing on identifying, evaluating, and managing cybersecurity risks[132]. - The board of directors receives regular reports on cybersecurity risks and exposures, ensuring oversight of the risk management program[135]. - The company employs technical safeguards such as firewalls and intrusion detection systems, which are regularly evaluated and improved[140]. - Mandatory cybersecurity training is provided to employees to enhance awareness and prevention of potential threats[140]. - The company carries comprehensive cyber liability insurance to cover certain first-party and third-party losses[140]. - As of the report date, there are no known cybersecurity threats that have materially affected the company's business strategy or financial condition[133]. Economic Outlook - The company reported a 3.1% growth in U.S. GDP for the third quarter of 2024, despite concerns about a slowing global economy[177]. - The company anticipates continued growth in e-commerce, which is expected to drive demand for well-located distribution space[179]. - The company anticipates increased domestic warehouse demand due to higher inventory-to-sales ratios and supply chain resilience efforts[188]. - The company has experienced a slowdown in acquisition activity since 2022 due to macroeconomic uncertainties[177].

Financial Performance - Reported net income attributable to common stockholders for Q4 2024 was $50.9 million, a 22.1% increase from $41.7 million in Q4 2023[5] - Achieved Core FFO per diluted share of $0.61 for Q4 2024, up 5.2% from $0.58 in Q4 2023, and $2.40 for the full year 2024, a 4.8% increase from $2.29 in 2023[5] - Produced Cash NOI of $155.5 million for Q4 2024, an 8.6% increase compared to $143.1 million in Q4 2023, and $597.8 million for the full year 2024, an 8.5% increase from $550.9 million in 2023[5] - In Q4 2024, the Company reported total revenue of $199.3 million, an increase of 8.3% from $183.3 million in Q4 2023[30] - Rental income for Q4 2024 was $198.7 million, up 8.8% from $182.6 million in Q4 2023[30] - Net income for Q4 2024 was $52,008,000, an increase of 22% compared to $42,628,000 in Q4 2023[33] - Cash net operating income (NOI) for Q4 2024 reached $155,470,000, up from $143,131,000 in Q4 2023, representing an increase of 8.5%[33] - Funds from operations (FFO) for the year ended December 31, 2024, totaled $458,741,000, a 8.9% increase from $421,317,000 in 2023[36] - Core funds from operations for Q4 2024 were $113,515,000, compared to $108,538,000 in Q4 2023, reflecting a growth of 4.5%[36] - Adjusted EBITDAre for the year ended December 31, 2024, was $557,350,000, an increase of 8.8% from $511,893,000 in 2023[36] - Same Store Cash NOI for the year ended December 31, 2024, was $550,246,000, up from $520,315,000 in 2023, indicating a growth of 5.8%[33] - Total NOI for Q4 2024 was $159,061,000, compared to $146,696,000 in Q4 2023, marking an increase of 8.4%[33] - Cash available for distribution for the year ended December 31, 2024, was $369,814,000, compared to $361,278,000 in 2023, showing a slight increase of 2.0%[36] Asset and Liability Management - As of December 31, 2024, total assets increased to $6.83 billion from $6.28 billion as of December 31, 2023, reflecting a growth of 8.8%[28] - Total liabilities rose to $3.30 billion as of December 31, 2024, compared to $2.84 billion a year earlier, marking an increase of 16.2%[28] - The Company's net debt to annualized run rate adjusted EBITDAre was 5.2x as of December 31, 2024[23] - The Company had liquidity of $623.1 million as of December 31, 2024[23] Leasing and Occupancy - Achieved an occupancy rate of 96.5% across the total portfolio as of December 31, 2024[2] - Commenced Operating Portfolio leases of 2.4 million square feet in Q4 2024, resulting in a Cash Rent Change of 19.4%[16] - Addressed 70.2% of expected 2025 new and renewal leasing, consisting of 9.7 million square feet, achieving a Cash Rent Change of 23.8%[20] - Produced Same Store Cash NOI of $139.2 million for Q4 2024, a 4.4% increase from $133.4 million in Q4 2023[5] Acquisitions and Dispositions - Acquired 15 buildings totaling 2.4 million square feet for $293.7 million in Q4 2024, with a Cash Capitalization Rate of 6.2%[7] - Sold two buildings in Q4 2024 for $29.4 million, totaling 366,599 square feet[15] Financial Reporting and Future Outlook - The Company plans to host a conference call on February 13, 2025, to discuss the quarter's results[24] - A supplemental information package with additional financial details is available on the Company's website[25] - The company reported a loss on impairment of $4,967,000 for the year ended December 31, 2024[33] - Forward-looking statements indicate that actual results may differ due to various risks and uncertainties, emphasizing the importance of cautious interpretation of future projections[68] Definitions and Metrics - The company defines Funds from Operations (FFO) in accordance with NAREIT standards, which excludes gains or losses from sales of depreciable operating property and impairment write-downs[48] - Core FFO excludes amortization of above and below market leases, debt extinguishment expenses, and non-recurring other expenses, providing a clearer view of operational performance[49] - Net operating income (NOI) is defined as rental income minus property expenses, excluding depreciation and amortization, which helps assess the core operations of the properties[53] - Cash NOI is calculated by adjusting NOI for straight-line rent adjustments and amortization of above and below market leases, providing a more accurate measure of cash flow[54] - Run Rate Cash NOI includes adjustments for a full period of acquisitions and dispositions, but does not predict future results, highlighting the variability in performance[55] - The company emphasizes that occupancy rate is a key metric, defined as the percentage of total leasable square footage for which revenue recognition has commenced[57] - The Operating Portfolio includes all stabilized buildings, excluding non-core properties and those held for sale, which is crucial for understanding the company's asset base[58] - The Pipeline includes transactions under consideration that have passed initial screening, indicating potential future growth opportunities[59] - Renewal Leases are defined as leases signed by existing tenants to extend terms for 12 months or more, reflecting tenant retention strategies[60]

Core Insights - The company reported strong financial and operational results for Q4 and the full year 2024, highlighting increased acquisition activity and operational efficiency [2][4][7] Financial Performance - Net income attributable to common stockholders for Q4 2024 was $50.9 million, a 22.1% increase from $41.7 million in Q4 2023 [4][7] - Basic and diluted net income per share for Q4 2024 was $0.28, up 21.7% from $0.23 in Q4 2023 [4][7] - Cash NOI for Q4 2024 was $155.5 million, an 8.6% increase from $143.1 million in Q4 2023 [4][7] - Same Store Cash NOI for Q4 2024 was $139.2 million, a 4.4% increase from $133.4 million in Q4 2023 [4][7] - Adjusted EBITDAre for Q4 2024 was $145.2 million, a 9.0% increase from $133.2 million in Q4 2023 [4][7] - Core FFO for Q4 2024 was $113.5 million, a 4.6% increase from $108.5 million in Q4 2023 [4][7] Acquisition and Disposition Activity - The company acquired 15 buildings for $293.7 million in Q4 2024, with a total square footage of 2.4 million and an occupancy rate of 100% upon acquisition [6][9] - The total acquisition activity for 2024 amounted to 32 buildings and 5.95 million square feet for $682.4 million [9] - The company sold two buildings in Q4 2024 for $29.4 million, totaling 366,599 square feet [10] Leasing Activity - The company commenced leases totaling 2.4 million square feet in Q4 2024, with a Cash Rent Change of 19.4% and a Straight-Line Rent Change of 34.9% [11][12] - For the full year 2024, new leases totaled 2.86 million square feet, with a Cash Rent Change of 22.6% [12] Capital Markets Activity - The company paid off a $50 million fixed-rate senior unsecured note at maturity on October 1, 2024 [14][15] - As of December 31, 2024, the company's Net Debt to Annualized Run Rate Adjusted EBITDAre was 5.2x, with liquidity of $623.1 million [15] Balance Sheet Highlights - Total assets as of December 31, 2024, were $6.83 billion, compared to $6.28 billion as of December 31, 2023 [18] - Total liabilities increased to $3.30 billion from $2.84 billion year-over-year [18]