STAG Industrial, Inc. — Q1 2022 Form 10-Q
Business context and period. STAG is a U.S. industrial-property REIT. This unaudited filing covers the three months ended March 31, 2022, compared with Q1 2021. At quarter-end, it owned 551 buildings across 40 states, totaling approximately 110.1 million rentable square feet.
Key financial metrics
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Total revenue | $159.2 million | $134.0 million |
| Net income | $54.0 million | $25.3 million |
| Net income attributable to common stockholders | $52.8 million | $20.9 million |
| Diluted earnings per share | $0.30 | $0.13 |
| FFO attributable to common stockholders and unit holders | $97.2 million | $73.2 million |
| Net operating income (NOI) | $127.4 million | $107.0 million |
| Cash from operating activities | $88.9 million | $73.5 million |
| Cash used in investing activities | $148.8 million | $79.5 million |
| Cash from financing activities | $74.7 million | $8.0 million |
At March 31, 2022, cash and cash equivalents were $34.8 million; total immediate liquidity was approximately $397.1 million, including $362.3 million available under the credit facility. Debt principal was $2.31 billion, with a weighted-average interest rate of 2.87%, weighted-average duration of 4.3 years, and net debt to real estate cost basis of 34.5%. Secured debt was 2.4% of debt; 12.8% was scheduled to mature within 12 months. The company reported compliance with debt covenants.
Material changes versus Q1 2021
- Revenue rose 18.8%; net income more than doubled. The increase in net income was substantially affected by a $24.0 million property-sale gain, versus $6.4 million a year earlier.
- Total NOI increased 19.1%, while same-store NOI grew 2.4%. Same-store occupancy was 97.4%, down from 97.9% a year earlier.
- Same-store rental income increased 3.3%, while same-store property expenses increased 7.7%, partly reflecting higher utilities and real estate taxes.
- Leases commencing in the operating portfolio showed weighted-average rent changes of 15.2% on a cash basis and 25.1% on a straight-line basis, including new and renewal leases.
- Interest expense increased 12.4%, primarily reflecting $325 million of unsecured notes issued in September 2021. Depreciation and amortization increased 15.3%, mainly due to acquisitions.
- STAG acquired eight buildings totaling approximately 1.8 million square feet for $166.4 million, and sold one building and one land parcel. It raised $55.1 million in net equity proceeds, including settlement of a forward sale.
Outlook, risks and unusual items
- Management cited strong industrial-space demand, historically low market availability, and potential support from e-commerce and supply-chain shifts. It also noted inflation, supply-chain disruption, interest-rate increases, and geopolitical uncertainty. These are management views, not quantified earnings guidance; the filing provides no specific full-year earnings outlook.
- Management said it expects competitive rents and strong occupancy to support the portfolio and believes diversification, liquidity, and hedging position the company to navigate uncertainty. It warned outcomes remain subject to economic, tenant, market, and financing conditions.
- COVID-19 caused no significant operating disruption and no rent-deferral agreements in Q1 2022, but its ultimate effects remain uncertain. Other risks include tenant defaults or non-renewals, acquisition execution, property costs and values, rising rates, refinancing, and counterparty performance.
- Most variable-rate debt was hedged through maturity, except the $384 million credit-facility balance. STAG estimated a 100-basis-point rate increase would add about $1.0 million to quarterly interest expense, assuming that balance remained outstanding.
- After quarter-end, STAG entered an agreement for a planned $400 million, 10-year senior unsecured note issuance at a fixed 4.12% rate, expected around June 28, 2022, subject to conditions. Proceeds are intended for credit-facility repayment and general corporate purposes, including acquisitions.
- The company declared monthly common-stock dividends of $0.121667 per share for April, May, and June 2022. Ordinary-course legal matters were not expected by management to have a material adverse effect.
Important facts for investors to verify
- How much of the reported earnings increase reflects recurring property operations versus the larger property-sale gain; consider FFO and same-store NOI alongside GAAP net income.
- Whether same-store occupancy and expense growth affect future NOI, and whether reported lease rent spreads translate into collected rent and sustained occupancy.
- The maturity and refinancing profile, especially debt due within 12 months, and the terms and completion of the planned $400 million note issuance.
- Liquidity after acquisition spending, dividends, and debt repayment, as well as the continued availability of credit-facility capacity under covenant limits.
- Exposure to unhedged floating-rate borrowing, tenant credit and lease expirations, and the evolving effects of inflation, supply-chain disruption, COVID-19, and geopolitical conditions.