Stag Industrial Inc (STAG) Q2 2025 Earnings Call Highlights: Strong Leasing Performance and ...

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31-07-2025

Core FFO per Share: $0.63 for the quarter, a 3.3% increase compared to last year.
Net Debt to Adjusted EBITDA: 5.1 times.
Liquidity: $961 million at quarter end.
Leases Commenced: 32 leases totaling 4.2 million square feet.
Cash Leasing Spreads: 24.6% for commenced leases.
Retention Rate: 75.3% for the quarter.
Same-Store Cash NOI Growth: 3% for the quarter, 3.2% year-to-date.
Moody's Credit Rating: Upgraded to BAA2 with a stable outlook.
Senior Unsecured Notes: $550 million funded with a weighted average fixed interest rate of 5.65%.
Cash Credit Loss: Approximately 17 basis points through June 30.
Guidance for Core FFO per Share: Revised to $2.48 to $2.52 per share.
Warning! GuruFocus has detected 6 Warning Signs with STAG.
Release Date: July 30, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Stag Industrial Inc (NYSE:STAG) achieved a high leasing rate of 90.8% for its operating portfolio, with cash leasing spreads of 24.5%.
The company reported a 3.3% increase in Core FFO per share compared to the previous year, reaching $0.63 for the quarter.
Liquidity remains strong at $961 million, providing financial flexibility for future operations and investments.
Moody's Investor Services upgraded STAG's corporate credit rating to BAA2 with a stable outlook, reflecting the company's financial strength.
STAG has a robust development pipeline with approximately 3 million square feet of activity, indicating future growth potential.
Negative Points
The transaction market has been slow, although there are positive indicators of increased activity.
Some markets, such as bulk distribution areas like Indianapolis and Columbus, are experiencing weaker leasing demand.
The company has experienced an average occupancy loss of 90 basis points, impacting same-store NOI growth.
There are concerns about tariff uncertainties affecting certain border markets like El Paso.
The acquisition guidance remains wide, indicating uncertainty in the volume of future acquisitions.
Q & A Highlights
Q: Bill, could you walk through which markets are showing early signs of recovery in leasing versus those that are lagging? A: The Midwest markets like Minneapolis, Milwaukee, Louisville, Detroit, Cleveland, and Nashville are performing well. Houston is also doing well. However, bulk distribution markets such as Indianapolis, Columbus, and Memphis are weaker. Border markets like El Paso face short-term uncertainty due to tariffs but have medium-term potential. - William Crooker, CEO
Q: Could you discuss the competition from well-funded users like Samsung and its impact on your markets? A: We are seeing user sales, which are attractive in terms of cap rates and pricing. This trend is beneficial as it reduces market vacancy, particularly in onshore manufacturing markets like the Midwest, Southeast, and Texas. - William Crooker, CEO
Q: Are there specific markets or asset types with stubborn vacancy or more downtime? A: Vacancy rates vary by building type and market. Smaller buildings may have lower vacancy rates, while larger ones can be higher. Lease-up times have increased to about 12 months on average, but we are still in a good position overall. - William Crooker, CEO
Q: What does the acquisition pipeline consist of, and how is it improving? A: The pipeline is similar to the past, with 60% one-off assets, 20-30% portfolios, and some development deals. The market has become more active recently, and the bid-ask spread is narrowing, indicating a healthier transaction environment. - Michael Chase, CIO
Q: How does the recent credit upgrade impact your borrowing costs and future debt plans? A: The upgrade may provide modest benefits in the private placement market and sets us up for potential public bond issuance. We plan to work with S&P to achieve an investment-grade rating, which will allow us to access the public bond market. - Matts Pinard, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.