• Core FFO per Share: $0.61, exceeding initial expectations.
• Cash Leasing Spreads: 25.1% achieved on 78.5% of expected 2025 leases.
• Leases Commenced: 36 leases totaling 5 million square feet with cash and straight-line leasing spreads of 27.3% and 42.1%, respectively.
• Retention Rate: 85.3% for the quarter.
• Acquisition Volume: $43 million for the first quarter, including three buildings.
• Disposition Proceeds: $67 million from the sale of one building.
• Same-Store Cash NOI Growth: 3.4% for the quarter.
• Liquidity: $1 billion at quarter end.
• Net Debt to Adjusted EBITDA: 5.2 times.
• Cash Available for Distribution: $106.5 million, an increase of 8.5% compared to the prior period.
• New Leasing: 1 million square feet commencing in the second quarter.
• Development Activity: 2.5 million square feet across 11 buildings, with 50% under construction and 16% pre-leased.
• Private Placement Notes: $550 million issued with a weighted average fixed interest rate of 5.65%.

• Warning! GuruFocus has detected 6 Warning Signs with STAG.

Release Date: April 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) reported a strong start to 2025 with core FFO per share of $0.61, exceeding initial expectations.
• The company achieved cash leasing spreads of 25.1% and has already leased 78.5% of the operating portfolio square feet expected for 2025.
• Stag Industrial Inc (NYSE:STAG) completed 36 leases totaling 5 million square feet, generating cash and straight-line leasing spreads of 27.3% and 42.1%, respectively.
• Liquidity remains robust with $1 billion at quarter-end, supported by a recent $550 million fixed-rate senior unsecured notes issuance.
• The company successfully executed a 500,000 square foot full building lease in Savannah with zero downtime, achieving a 25% cash leasing spread.

Negative Points

• The escalation of the global trade war and tariffs have introduced uncertainty, potentially impacting tenant decisions and lease gestation periods.
• There is a noted lengthening in lease gestation periods due to macroeconomic events, causing delays in converting tours to signed LOIs.
• The transaction market has seen some volatility, with sellers pulling portfolios from the market due to pricing concerns.
• Some markets, such as Atlanta and San Diego, are experiencing weakness, impacting leasing activity.
• The company is maintaining a cautious credit loss guidance of 75 basis points due to ongoing discussions with American Power Distributors, despite them being current on rent.

Q & A Highlights

Q: Did I hear you right that you guys have signed 1 million square feet of new leasing quarter-to-date, so just in the month of April? A: Yes, in Q2, we've signed 3.6 million square feet of leases commencing, $1 million of which is new leasing. We had a success with a 500,000 square foot space that was backfilled with no downtime, achieving a 25% rollover leasing spread.

Q: Can you talk about the demand you're seeing across different submarkets, particularly in manufacturing versus distribution? A: The macro environment is causing uncertainty, leading to longer lease negotiation periods. However, markets like Milwaukee, Chicago, and Minneapolis are performing well, as are Sun Belt markets like Nashville. Weaker markets include Atlanta and San Diego. Overall, tenants are still making leasing decisions despite the uncertainty.

Q: Could you discuss trends in the transactions market since April 2, and are you seeing any retrading activity or potential sellers pulling deals? A: The private market remains strong, but some portfolios have been pulled due to pricing dislocation. We haven't seen much retrading, but sellers are waiting for volatility to settle. This is similar to past years, and we are comfortable waiting for opportunities.

Q: How are you thinking about your cost of capital given recent share price changes? A: We raised over $550 million of long-term debt at 5.65%. We are retaining capital and focusing on accretive recycling, as seen with our Nashville sale and redeployment into assets with higher cap rates. This gives us flexibility to be opportunistic.

Q: Can you provide an update on demand for your development pipeline and if lease-up could take longer due to macro uncertainty? A: We are seeing good activity at our Greenville and Tampa facilities. While new leasing for developments is slower, we are optimistic about leasing activity. There might be slight slippage in lease-up periods, but overall, we are happy with the activity.

Q: Are there any tenant categories giving you more concern than others in the current environment, and how has your tenant watch list trended? A: We focus on tenants with low-margin businesses and highly levered balance sheets. The watch list hasn't expanded materially, and it's dominated by the American Tire discussion. We are monitoring sectors closely.

Q: What kind of rent spreads are you seeing on '26 expirations compared to '25, and what percent of '26 expirations have been addressed? A: It's too early to discuss '26 spreads, but we've executed over 15% of our '26 leasing. We are in line with past years, but it's early to talk about economics for next year.

Q: In a world with lesser overall demand, are there any segments continuing at a normal pace, or is everything muted? A: Demand feels present, with strong activity from 3PLs and manufacturing components in markets like Milwaukee and Chicago. While decision-making is slower, demand remains healthy, and we are optimistic about the industrial sector.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.