STAG Industrial Delivers Q4 Results with Strong Lease Growth & Near-Full Occupancy
Taking a Look at STAG Industrial's (STAG) Q4 2024 Earnings Results.
STAG’s Q4 2024 Earnings Reports
STAG Industrial (STAG) reported Q4 2024 earnings after-hours yesterday. The company maintained high occupancy rates, executed solid leasing activity, and increased NOI and FFO. Rising interest rates and broader economic headwinds are definitely something to watch here though, as all REITs are doing, but I’m not losing any sleep over it.
Operational Performance
Total Portfolio Occupancy: 96.5%, with Operating Portfolio Occupancy at 97.3%.
Properties: 591 buildings across 41 states (added 26 YoY, does not include 6 properties under construction + 5 substantially completed properties (11) are not yet in service).
WALT: 4.3 years.
Avg. Rent: $5.60/sq. ft.
Financial Performance
Rental Income: $198.7M (Q4 2024) vs. $182.6M (Q4 2023).
Net Income: $193.3M in 2024 vs. $197.2M in 2023 (↓ $3.9M, -2.0%)
FFO: $116.8M, up from $109.1M.
Core FFO/Share (Diluted): $0.61 vs. $0.58.
NOI: $159.1M, up from $146.7M.
Cash NOI: $155.5M vs. $143.1M.
Adjusted EBITDAre: $145.2M.
Debt & Capital Structure
Net Debt to EBITDAre: 5.2x.
Unsecured Credit Facility: $409M.
Unsecured Term Loans & Notes: $1.02B & $1.59B.
Dividend/Share: $0.1233 monthly (Annualized $1.48).
Cash/Liquidity: $36M ($587M available thru CFs)
Leasing & Rent Growth
Straight-Line Rent Change (New & Renewal Leases): 41.8%.
Cash Rent Change (New & Renewal Leases): 28.3% (↓ from 31.0% in 2023).
Challenges & Considerations
Interest Expense: $31.7M (Q4 2024) vs. $25.3M (Q4 2023).
Macroeconomic Pressures: Inflation & Fed rate hikes impacting borrowing costs (speculative).
Lease Expirations: 22.7% of total base rent expiring by 2026—tenant retention critical.
My Take
This quarter was not bad, I'd call it neutral overall. The market seems to back me up on that, given there hasn’t been much drama in the share price so far. Since this REIT isn’t exactly a household name, I want to talk through a few key points around the challenges it faces, how Net Income stacks up against Net Operating Income (NOI), and how to think about valuation. These areas can be especially important if you’re less familiar with how REITs work, since they play by their own rules when it comes to earnings and investment metrics.
Challenges
Debt
The climb in STAG’s interest expense stemmed from higher total outstanding debt, which reached $3.04B by December 31, 2024 (compared to $2.93B a year earlier). Meanwhile, the company’s weighted average interest rate rose to 3.98%, reflecting both rising market rates and the $450M in senior unsecured notes issued in March 2024, which carried rates between 6.05% and **6.30%—significantly above previous financing costs.
STAG’s total outstanding debt includes:
$409M in an unsecured credit facility, maturing in September 2028
$1.02B in unsecured term loans, with staggered maturities from 2026 to 2029
$1.59B in unsecured notes, broken down as follows:
$175M maturing in May 2029 (6.05%)
$125M maturing in May 2031 (6.17%)
$150M maturing in May 2034 (6.30%)
STAG has mostly pivoted to unsecured debt, leaving only $4.2M in secured debt because it’s less risk on the table for them.
Even with rising interest costs, STAG is still on solid financial ground. The company has $623M in total liquidity—$36M in cash plus $587M available on its credit facility. Key financial ratios remain healthy, with a net debt to EBITDAre ratio of 5.2x, a fixed charge coverage ratio of 4.7x, and an unsecured interest coverage ratio of 5.0x, all comfortably above covenant requirements.
To stay ahead of its debt obligations, what they have been doing is refinancing and extending maturities. In September 2024, the company refinanced its unsecured credit facility, extending the maturity to 2028 (with two optional six-month extensions). In October 2024, STAG fully repaid $50M in Series A Unsecured Notes (4.98% interest), which helped reduce near-term debt. And to shield itself from further rate hikes, the company hedged $1.4B of its variable-rate debt, effectively converting it to fixed rates. Managing debt in the way STAG has been, is actually very typical for REITs. They use a combination of staggered bond maturities, unsecured loans, and credit facilities to maintain financial flexibility. Instead of taking on large amounts of secured debt tied to individual properties, REITs like STAG issue unsecured corporate bonds and term loans with staggered maturities. This strategy helps them avoid the risk of having to repay a significant portion of their debt all at once, which could create financial strain.
Additionally, it is common for REITs to maintain a credit facility rather than holding large amounts of cash. Since REITs are legally required to distribute at least 90% of their taxable income to shareholders, they typically don’t retain excess cash reserves. Instead, they use revolving credit facilities to fund operations, acquisitions, or unexpected expenses as needed. Many REITs like STAG, hedge against rising interest rates by using interest rate swaps or fixed-rate debt, reducing their exposure to fluctuations in borrowing costs. If anything, this points a very competent management team in my opinion and investors shouldn’t be very concerned about it.
Inflation & Fed
Inflation and the Federal Reserve’s interest rate policies are two major macroeconomic forces that investors should obviously watch.
When inflation rises, the costs of goods, services, and wages also climb—indirectly boosting STAG’s operating expenses, construction outlays, and tenants’ financial pressures. Higher material/labor costs can make developing or renovating properties more expensive, while tenants juggling mounting costs in their own businesses may struggle to afford rent, potentially causing vacancies or lease renegotiations. On the plus side, many industrial REIT leases include inflation-linked rent escalations (industry standard annual increases in base rent), which allows them to offset some of these added expenses by passing them on to tenants. But sometimes inflation can move much quicker.
Another piece of the puzzle is how the Fed tackles inflation. If the Fed raises interest rates, STAG’s borrowing costs go up too, making it pricier to acquire properties, refinance debt, or fund new developments—something we saw with STAG’s increased interest expenses in 2024 (pretty straightforward). Fortunately, the company has done a fair amount of hedging and locked in fixed-rate debt on a substantial portion of its loans, which helps minimize this impact (competent management team!).
That said, this is all speculative though, because no one knows exactly where inflation or Fed policy will be a year or two from now. If prices stabilize and the Fed starts cutting rates, STAG could enjoy lower borrowing costs and steadier tenants. If high inflation drags on and rates remain elevated, refinancing and expansion could become more challenging. Just something to keep an eye on.
Lease Renewals/Expirations
The company also faces 22.7% of its total base rent expiring by 2026, which covers 141 leases and spans 19.1 million square feet. Effectively managing these upcoming expirations will be huge to sustaining occupancy levels, rental income, and overall financial stability.
Because STAG’s portfolio mainly consists of single-tenant properties, each lease expiration can involve an entire building rather than just a part of one. This setup carries a higher vacancy risk compared to multi-tenant properties, but STAG mitigates that risk with a diverse tenant base—no single tenant accounts for more than 2.9% of total rental revenue.
STAG’s top tenants are high-credit, well-established companies in logistics, manufacturing, and distribution. Some of the largest industries in its portfolio include:
Air Freight & Logistics (11.3%) – Tenants like Amazon, FedEx, and DHL.
Containers & Packaging (7.9%) – Key to e-commerce fulfillment.
Automobile Components & Machinery (6.2% each) – Examples include Schneider Electric and Tempur Sealy.
Consumer Staples Distribution & Broadline Retail (3.8% and 3.7%) – Critical links in supply chains.
The top 20 tenants represent 16.2% of annualized base rental revenue, ensuring they aren’t overly reliant on any single company or sector. Its lease renewal rate of 76.6% and average rent increases of 28.3% (cash basis) and 41.8% (straight-line) shows their pricing power and the scarcity of alternatives for tenants in crucial logistics markets.
What they do, is target “mission-critical” industries—businesses central to logistics, supply chains, and essential manufacturing—helping insulate the company from broad economic swings. Rising demand for warehouse and logistics space, fueled by e-commerce growth and supply chain diversification. Even when a tenant like American Tire Distributors (1% of STAG’s revenue) declared Chapter 11, it stayed committed to paying rent, highlighting the resilience of STAG’s tenant mix. This is an extreme case, but you get the gist.
Net Income & NOI
At first glance, it might seem odd that their Net Operating Income (NOI) rose 7.8% to $612.6M while Net Income dipped 2% to $193.3M. There are many factors at play here, but it’s primarily tied to interest expenses, depreciation, and gains from property sales:
Higher Interest Expenses:
STAG’s interest expense jumped by $18.6M(19.7%) YoY, from $94.6M in 2023 to $113.2M in 2024. This increase was largely due to issuing $450M in unsecured notes in May 2024, which elevated borrowing costs. Because NOI is calculated before financing costs, it remains unaffected; however, higher interest expenses directly reduce Net Income.Increased Depreciation and Amortization:
As a REIT, most of their assets are real estate, which is subject to non-cash depreciation and amortization. These expenses rose by $14.6M (5.3%) in 2024, reflecting portfolio growth and capital improvements. Depreciation impacts Net Income but not NOI.Fewer Property Sales Gains:
In 2023, STAG recorded $54.1M in net gains from property sales, compared to $32.3M in 2024—a 40.3% drop. Gains from property sales boost Net Income but don’t factor into NOI, so this reduction contributed to the lower Net Income despite higher NOI.One-Time Impairment Charges:
They also recorded a $5M impairment charge in 2024, further weighing on Net Income. These charges occur when a property’s book value exceeds its recoverable amount, triggering an asset valuation adjustment.
This simply stems from accounting factors (like depreciation) and financing costs, rather than a “weakness” in theircore business. In fact, the underlying operations remain solid, as shown by a 7.8% jump in NOI, stable occupancy at 96.5%, and a lease renewal rate of 76.6%. FFO, a critical measure for REITs, also rose from $420.8M in 2023 to $458.2M in 2024. Since we understand the challenges and discrepancy here between Net Income and NOI, seeing healthy increases in both NOI and FFO should be the deciding factor on their performance.
Valuation
For STAG im going to determine their Net Asset Value (NAV) then calculate their Price-to-FFO (P/FFO) multiple, this is basically the REIT Equivalent of P/E.
NAV = (Total Real Estate Value − Liabilities) / Shares Outstanding
P/FFO = Stock Price / FFO Per Share
NAV
For full-year 2024, STAG reported NOI of $612.6M. Applying an estimated cap rate of 6.2%, which reflects market conditions for industrial properties, we calculate by dividing the two and get an implied real estate value of approximately $9.88B. From this, we subtract total liabilities, which include outstanding debt, credit facilities, and other obligations, amounting to $3.30B. They also hold cash and equivalents of $36.3M, tenant receivables of $136.4M, and prepaid expenses of $96.2M, which we add back to the total value.
After accounting for 186.5M shares outstanding, I arrive at an estimated NAV per share of $36.72. Given that STAG’s stock is currently trading at around $35 per share, this suggests a slight margin of safety. However, it’s important to note that NAV is indeed sensitive to changes in cap rates. If interest rates rise and cap rates increase to 7%, the NAV would actually decline to $32.73 per share, making the stock appear more fairly valued.
P/FFO
For 2024, STAG reported full-year Core FFO of $446.5M. With 186.5M shares outstanding, this translates to an FFO per share of $2.40. At a current stock price around $35, this gives them a P/FFO ratio of 14.58x, meaning investors are paying 14.58 times the company’s annualized cash flow per share. To put this into context, leading industrial REITs like Prologis (PLD) trade at a P/FFO multiple of around 20x, meaning STAG is valued at a large discount relative to its peers. This equates to around a $45-$48 per share if we go off of PLD’s premium multiple. If they continue to grow its FFO by 5% annually, and the market begins pricing the stock at a more typical REIT multiple of 15x, this wouldd imply a fair value closer to $36 per share.
I’m holding onto this industrial REIT and letting my monthly dividends drip right back into it. It’s my only real estate play at the moment, and I’m comfortable with how it’s performing, though I’ll keep an eye on systematic risks. There does seem to be a slight MOS in the stock, but it’s not high on my accumulation list. Right now, I’m prioritizing other names like RLAY, LMND, SKYH, RCEL, VRSSF, and a few others.