STAG Industrial, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; balance-sheet figures are as of March 31, 2024. STAG is a U.S. industrial-property REIT. It owned 570 buildings across 41 states, with approximately 113.0 million rentable square feet.
Financial and operating performance
- Revenue: $187.5 million, up 8.1% year over year; rental income was $187.4 million, up 8.2%.
- Net income: $37.5 million, down 26.0%; net income attributable to common stockholders was $36.6 million, or $0.20 per diluted share, versus $49.4 million and $0.28 a year earlier. The prior-year quarter included a $20.1 million gain on property sales; Q1 2024 had no such gain.
- NOI and FFO: Total NOI, a non-GAAP measure, was $148.5 million, up 7.8%. FFO attributable to common stockholders and unit holders was $108.7 million, up 9.5% from $99.2 million.
- Margins: Total NOI was approximately 79.2% of revenue, compared with 79.3% in Q1 2023. Net income was approximately 20.0% of revenue versus 29.2%; the comparison reflects the prior-year property-sale gain.
- Same-store trends: Same-store revenue rose 5.6%, while property expenses rose 7.9%; same-store NOI increased 5.0%. Same-store occupancy was 97.8%, down from 98.1%. For leases commencing in the quarter, weighted-average cash rent change was 30.5% and straight-line rent change was 43.6%.
- Cash flow: Operating cash flow was $105.2 million, up 21.7%. Investing activities used $76.3 million, including property acquisition and capital spending; financing activities used $37.7 million. Cash and restricted cash totaled $13.1 million at quarter-end.
- Debt and liquidity: Debt principal totaled $2.664 billion; the weighted-average interest rate was 3.79%, weighted-average duration 4.3 years, and net debt to real estate cost basis 36.5%. Immediate liquidity was approximately $574.1 million, including $12.4 million cash and $561.7 million of credit-facility availability. STAG reported compliance with debt covenants.
- Dividends: The quarter’s declared distribution was $0.37 per share or unit; cash dividends and distributions paid were $68.7 million.
Material changes and financing
- Rental income growth reflected same-store leasing and expense reimbursements, as well as acquisitions. Same-store lease income increased 3.8%, partly offset by vacancies and changes in rent-collection accounting; property expenses increased with snow removal, insurance, repairs, taxes, and other costs.
- Interest expense increased 12.4% to $25.4 million, primarily due to a higher average credit-facility balance and higher Term SOFR. STAG also recorded $0.7 million of debt modification expense.
- STAG acquired one 697,500-square-foot Cincinnati property for approximately $50.1 million. No properties were sold in the quarter.
- The company amended Term Loan F, extending its initial maturity to March 2027 with two one-year extension options, and stated it intended to exercise both. It also entered an agreement for $450 million of senior unsecured notes at fixed rates of 6.05%–6.30%, but those notes had not been issued by March 31, 2024.
Outlook, risks, and contingencies
Management described a volatile environment marked by elevated interest rates, moderating industrial demand, rising vacancy and availability rates, and ongoing recession concerns. It noted that supply remains robust but construction starts are declining, and expects its diversified portfolio, strong occupancy, and competitive rental rates to support resilience. Management cited longer-term demand drivers including e-commerce, domestic manufacturing, and supply-chain resilience. The filing provides no specific earnings or acquisition guidance.
- Leases representing 8.6% of annualized base rent were scheduled to expire from April 1, 2024 through March 31, 2025. Management expects new lease rates on that space to exceed expiring rates, based on its renewal and downtime assumptions.
- Approximately $1.460 billion of debt was variable-rate, but all such debt other than the $435 million credit-facility balance was hedged through initial maturity. A 100-basis-point rate increase, assuming the quarter’s credit-facility balance, would have increased quarterly interest expense by approximately $1.1 million.
- Forward equity sales had not yet generated proceeds at quarter-end. STAG disclosed approximately $22.1 million of gross forward sales from January and an additional approximately $8.9 million of gross forward sales on April 1, 2024.
- Ordinary-course legal matters were not expected by management to have a material adverse effect. Letters of credit were approximately $3.3 million. The company reported no material change in risk factors, no material off-balance-sheet arrangements beyond disclosed letters of credit, and effective disclosure controls.
Important facts for investors to verify
- Whether the $450 million note placement was issued by its May 28, 2024 deadline, and the resulting financing costs and interest burden.
- Actual lease renewals, occupancy, rent spreads, and tenant credit performance as industrial demand moderates and expirations progress.
- Interest-rate exposure and credit-facility borrowing levels, including the effect of any rate changes on cash flow and distributions.
- Conversion and settlement of outstanding forward equity sales, including proceeds, share dilution, or any cash/net-share settlement.
- Cash available for acquisitions, capital expenditures, debt maturities, and dividends; FFO and NOI are supplemental non-GAAP measures and are not substitutes for cash flow or dividend capacity.