Stag Industrial Inc ((STAG)) has held its Q2 earnings call. Read on for the main highlights of the call.
Elevate Your Investing Strategy:
- Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
The recent earnings call for Stag Industrial Inc. highlighted a robust performance across several key areas, including leasing, development, and acquisitions. The company has shown resilience in the face of market volatility and vacancy challenges, with a positive outlook and increased guidance in various sectors.
Strong Leasing Performance
Stag Industrial reported a strong leasing performance, with 90.8% of its operating portfolio square feet expected for 2025 already leased. The company achieved impressive cash leasing spreads of 24.5%, showcasing its ability to secure favorable lease terms and maintain a high occupancy rate.
Acquisition and Disposition Activity
The company was active in acquisitions and dispositions, acquiring a 183,000 square foot building for $18.4 million at a cash cap rate of 7.1%. Additionally, Stag sold a noncore building for $9.1 million, achieving a cash cap rate of 7.4% and an unlevered internal rate of return (IRR) of 14%, demonstrating strategic asset management.
Development Progress
Stag Industrial is making significant strides in its development activities, with approximately 3 million square feet across 12 buildings. Of these, 42% are under construction, and 69% of the total development is already leased, indicating strong demand and effective project execution.
Credit Rating Upgrade
In a positive development, Moody’s upgraded Stag’s corporate credit rating to Baa2 with a stable outlook. This upgrade reflects the company’s improved financial health and operational stability, enhancing its credibility in the financial markets.
FFO and Liquidity Strength
The company’s core funds from operations (FFO) per share increased by 3.3% to $0.63, highlighting its financial strength. Stag’s liquidity remains robust at $961 million, providing a solid foundation for future growth and investment opportunities.
Guidance Updates
Stag Industrial has increased its guidance for retention, credit loss reduction, and same-store cash NOI growth. The company revised its core FFO per share guidance to a range of $2.48 to $2.52, reflecting confidence in its ongoing performance and strategic initiatives.
Market Volatility and Tariff Concerns
While initial market instability was noted due to global trade war and tariff concerns, these issues have become less pronounced. Stag Industrial continues to navigate these challenges effectively, maintaining a stable operational environment.
Vacancy Challenges
The company faced an average occupancy loss of 90 basis points, with certain markets like El Paso experiencing short-term uncertainty. However, Stag remains focused on addressing these challenges and optimizing its occupancy levels.
Development Leasing Uncertainty
Stag Industrial is experiencing some leasing uncertainty, with 47% of buildings in the complete not-in-service category still needing to be leased. Despite slower activity in some locations, the company is actively working to secure tenants and enhance its leasing performance.
Forward-Looking Guidance
Looking ahead, Stag Industrial has provided optimistic guidance for the remainder of the year. The company expects cash leasing spreads to be between 23% and 25%, with continued growth in same-store NOI. The revised core FFO per share guidance range of $2.48 to $2.52 underscores its confidence in future performance.
In summary, Stag Industrial Inc.’s latest earnings call reflects a strong operational performance and a positive outlook. The company’s strategic initiatives in leasing, acquisitions, and development, coupled with a credit rating upgrade and robust liquidity, position it well for future growth. Despite some market challenges, Stag remains resilient and focused on delivering value to its stakeholders.