STAG Industrial, Inc. — 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone fourth-quarter filing; the supplied text does not provide separate Q4 results.
Business context
STAG is a U.S. industrial-property REIT focused on acquiring, owning and operating warehouse, distribution and light-manufacturing properties. At year-end, it owned 544 buildings across 40 states, totaling approximately 108.6 million rentable square feet, leased to 532 tenants. Portfolio occupancy was 96.9% (97.4% for the Operating Portfolio). Amazon was the largest tenant at 3.2% of annualized base rent; no industry exceeded 11.3%.
Key financial metrics
| Metric | 2021 | 2020 | Change |
|---|---|---|---|
| Total revenue | $562.2 million | $483.4 million | +16.3% |
| Net income | $196.4 million | $206.8 million | -5.0% |
| Net income attributable to common stockholders | $188.2 million | $196.7 million | Lower |
| Diluted earnings per share | $1.15 | $1.32 | Lower |
| FFO attributable to common stockholders and unit holders | $332.2 million | $285.2 million | +16.5% |
| Net operating income (NOI) | $454.2 million | $394.1 million | +15.3% |
| Net cash from operating activities | $336.2 million | $293.9 million | +14.4% |
| Net cash used in investing activities | $1,220.4 million | $554.6 million | Higher investment outflow |
| Net cash from financing activities | $887.1 million | $269.2 million | Higher financing inflow |
Revenue growth reflected acquisitions and same-store improvement. Same-store revenue increased 3.8% and same-store NOI increased 2.5%; same-store occupancy declined to 97.1% from 97.7%. The reported net income decrease primarily reflected lower gains on property sales: $98.0 million in 2021 versus $135.7 million in 2020. FFO and NOI are non-GAAP measures and should not be treated as substitutes for GAAP earnings or cash available for dividends.
New and renewal Operating Portfolio leases produced a 10.4% cash rent change and 17.6% straight-line rent change in 2021, compared with 2.2% and 8.2%, respectively, in 2020. The weighted-average lease term was approximately 5.1 years. Leases representing 18.2% of annualized base rent expire before year-end 2024; 6.3% expires in 2022.
At December 31, total debt principal was approximately $2.226 billion, with a weighted-average interest rate of 2.88%, weighted-average duration of 4.6 years and net debt to real estate cost basis of 34.2%. Secured debt was 2.5% of the total; 2.1% of debt principal was scheduled to mature in the next 12 months. Cash and cash equivalents were $19.0 million. Immediate liquidity was approximately $469.4 million, and reported total liquidity was approximately $519.5 million including forward equity proceeds available at the Company’s option. The $750 million credit facility had $450.4 million of undrawn nominal availability, subject to covenants.
Material changes versus 2020
- Acquisitions accelerated: STAG acquired 74 buildings for approximately $1.373 billion in 2021, versus 48 buildings for approximately $776 million in 2020. Investing cash outflow rose substantially.
- Operating cash flow and FFO increased, while GAAP net income and diluted EPS declined, largely because property-sale gains were lower. Depreciation and amortization rose 11.2%, partly reflecting acquisitions.
- Debt principal increased from approximately $1.709 billion to $2.226 billion, including $325 million of new long-dated unsecured notes issued at fixed rates of 2.80% and 2.95%. STAG also amended and extended its credit facility and certain term loans.
- Common shares outstanding increased to 177.8 million from 158.2 million. Equity offerings and forward-sale settlements generated substantial financing proceeds. STAG redeemed all $75 million of its Series C preferred stock in March 2021 and had no preferred stock outstanding at year-end.
- The common dividend was $0.120833 per share monthly in 2021; the board declared a monthly rate of $0.121667 for January–March 2022.
Outlook, risks and unusual items
- Management said 2021 operations experienced no significant COVID-19 disruption and no rent deferral agreements were entered into that year; $2.1 million of rent deferrals were made in 2020. Management expects industrial demand to benefit from e-commerce, supply-chain resilience and U.S. manufacturing trends, but did not provide quantitative earnings or FFO guidance in the supplied filing text.
- Management expected monetary policy to tighten amid elevated inflation and strong employment, while noting uncertainty from the pandemic, supply-chain constraints and inflation. It cited portfolio diversification, strong occupancy and liquidity as strengths.
- Interest-rate exposure remains relevant: $1.271 billion of debt was classified as variable-rate, although all of it except the $296 million credit-facility balance was fixed through swaps at year-end. A 100-basis-point increase, assuming the credit-facility balance remained at $296 million, would have increased 2021 interest expense by approximately $3.0 million.
- LIBOR transition is a risk for debt and derivatives indexed to LIBOR; U.S. dollar LIBOR was expected to cease publication after June 30, 2023. Refinancing, covenant compliance, capital-market access and the availability and cost of equity are also risks.
- Property and tenant risks include lease expirations, vacancies, tenant default or bankruptcy, local-market and industrial-sector concentration, and the costs or liabilities associated with environmental conditions, climate events and uninsured losses. Management reported no legal proceeding expected to have a material adverse effect and no material off-balance-sheet arrangements other than approximately $3.6 million of letters of credit.
- Unusual and potentially non-recurring items included $2.152 million of debt extinguishment and modification expenses, $2.1 million of severance-related expense for a former executive, accelerated equity compensation under a new retirement vesting program, and no impairment charges in 2021 (versus $5.6 million in 2020).
Important facts for investors to verify
- Review acquisition returns, purchase-price allocations and the performance of the 74 buildings acquired in 2021; purchase-price accounting was the auditor’s critical audit matter.
- Track occupancy, same-store NOI, lease renewals and rent spreads, especially as leases representing 18.2% of annualized base rent expire through 2023.
- Confirm actual available liquidity after covenant limits, capital spending, acquisition commitments and settlement of the remaining forward-sale agreements.
- Assess debt maturities and refinancing plans, the LIBOR-to-successor-rate transition, swap coverage and exposure to higher rates.
- Compare cash available for distributions with the dividend, and consider dilution from equity issuance. The filing states that dividends are discretionary and not assured.
- Reconcile GAAP net income and EPS with FFO and NOI, including the effect of property-sale gains and acquisition-related depreciation.