STAG Industrial(STAG) - 2024 Q4 - Earnings Call Transcript

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]