STAG Industrial Experiences Growth Amid Market Shifts

STAG Industrial, Inc. Achieves Strong Q2 2024 Results

STAG Industrial, a leading real estate investment trust, has reported impressive operating results for the second quarter of 2024, highlighting strong market rent growth forecasts and strategic property transactions. The company’s emphasis on nearshoring and onshoring trends is projected to result in a 4-5% uptick in market rent for its portfolio this year. Alongside this, STAG Industrial has revised its guidance, indicating an optimistic outlook with enhanced same-store cash NOI growth and an anticipated increase in disposition volume.

Key Takeaways:

• STAG Industrial forecasts a 4-5% growth in market rent for its portfolio in 2024, driven by nearshoring and onshoring trends.
• The company acquired 10 buildings for $225.6 million and sold seven buildings for $78.2 million during Q2.
• Same-store cash NOI growth guidance has been raised to 5-5.5% for the year.
• Core FFO per share increased to $0.61, reflecting an 8.9% rise from the prior year.
• The company maintains a low leverage ratio and holds $55.8 million in cash for investments and debt repayment.
• Disposition volume guidance has been elevated to $100 million to $150 million.

Company Outlook:

• Acquisition volume is expected to remain stable, as the company is comfortable at its acquisition range midpoint.
• There is cautious optimism regarding heightened investment market activity in the latter half of the year.
• Strong demand is noted across various markets, especially in the Midwest, with no significant known moveouts anticipated for 2025.

Bearish Highlights:

• The sale of non-core assets at an 8% cash cap rate has a slightly dilutive impact on core earnings for the year.
• The company anticipates incurring additional credit loss in the latter half of the year, maintaining a credit loss assumption of 50 basis points.

Bullish Highlights:

• The company is strategically exiting select markets, including Belvidere, Illinois, and Kentucky, to enhance long-term growth potential.
• Other income saw an increase in the quarter, largely attributed to leasing performance and occupancy, alongside two settlement items.

Challenges:

• Although STAG has divested non-core assets, the associated sales have a minor dilutive effect on core earnings.
• The leasing process for larger properties and leases is taking longer due to the volatile rate environment.

Q&A Highlights:

• STAG Industrial has not considered equity issuances for external growth, with no incremental equity issuance factored into its guidance.
• Should the company choose to raise long-term debt in the private placement market, it could potentially secure around $450 million at an interest rate of 5-6%.
• The strategy focuses on acquiring properties in CBRE Tier 1 markets, with a careful evaluation of potential transactions across all those areas.

In summary, STAG Industrial’s strategic management of its portfolio amidst evolving market conditions reflects a disciplined acquisition approach and a commitment to leveraging quality opportunities for sustainable growth. The increase in same-store cash NOI and core FFO per share underscores a solid financial performance, while the company’s cautious optimism and updated guidance demonstrate confidence in its future trajectory. As STAG navigates the dynamic real estate investment landscape, its focus on financial prudence and strategic market exits is expected to bolster its long-term growth prospects.