STAG Industrial, Inc. (STAG) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reflects positive sentiment with increased FFO guidance, strong leasing projections, and a healthy transaction market. The Q&A section supports this with broad-based demand, prudent development strategies, and stable concessions. Despite some management vagueness, the overall outlook is optimistic, particularly with a strong acquisition pipeline and market rent growth expectations. The positive guidance and strategic plans suggest a likely stock price increase.
Key Financial Performance
Core FFO per share $0.66 for the quarter and $2.55 for the year, representing an increase of 6.3% compared to 2024. The increase was supported by improved industrial supply conditions and positive rent growth across markets.
Same-store cash NOI growth 5.4% for the quarter and 4.3% for the year. The growth was driven by increased tenant activity and positive rent growth.
Acquisition volume $285.9 million for the fourth quarter, consisting of 7 buildings with cash and straight-line cap rates of 6.4% and 7%, respectively. This was due to reduced macro volatility, which brought sellers to the market.
Retention 75.8% for the quarter and 77.2% for the year. This reflects strong tenant engagement and commitment to their space.
Net debt to annualized run rate adjusted EBITDA 5.0x at year-end with liquidity of $750 million. This indicates a stable financial position.
Dividend increase 4% increase after year-end, the largest raise since 2014. This was achieved through years of reducing the payout ratio and retaining free cash flow.
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Operating Highlights
Development of new building in Lenexa, Kansas: A new 186,000 square foot project was initiated southwest of Kansas City in Lenexa, Kansas. The project is expected to be completed by Q1 2027 and will have the flexibility to divide into suites of 60,000 square feet or less. It is projected to yield a cash return of 7.2%.
Charlotte development project lease: A 78,000 square foot lease was executed in one of the Charlotte development projects with a manufacturing and assembly company. The building is now 39% leased, with full stabilization expected by Q1 2027.
Leasing activity and tenant engagement: 2025 was a record year for leasing volume, and 2026 is expected to follow suit with 69% of the operating portfolio square feet already addressed. Cash leasing spreads are projected to be 18%-20% for 2026.
Positive rent growth and market health: Most markets operated by STAG Industrial experienced positive rent growth in 2025, supported by improved economic conditions and tenant activity. National vacancy rates are expected to peak in early 2026 and improve in the latter half of the year.
Core FFO and NOI growth: Core FFO per share grew by 6.3% in 2025, reaching $2.55. Same-store cash NOI grew by 4.3% for the year and 5.4% in Q4.
Leasing spreads and retention: Leasing spreads for 2025 were 24% (cash) and 38.2% (straight-line). Retention rates were 77.2% for the year.
Dividend increase and payment cadence change: The dividend was raised by 4%, the largest increase since 2014, and the payment cadence was changed from monthly to quarterly.
Acquisition and disposition strategy: Acquisition volume for Q4 2025 was $285.9 million, with subsequent acquisitions of $80.6 million. Disposition volume guidance for 2026 is set between $100 million and $200 million.
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Risk or Challenges
Economic Uncertainty: The company acknowledges that forward-looking statements are subject to risks and uncertainties, which may cause actual results to differ from projections. This includes economic trends and macroeconomic volatility that could impact leasing prospects, rent collections, and overall financial performance.
Interest Rate Impact: The increase in interest expense from the recent refinancing of a $300 million term loan will create a $0.03 headwind to core FFO per share growth in 2026, directly impacting financial performance.
Credit Loss: The company incurred 22 basis points of cash credit loss in 2025 and has included 50 basis points of credit loss in its 2026 guidance, indicating potential challenges in tenant creditworthiness.
Leasing Risks: While the company has addressed 69% of the operating portfolio square feet expected to lease in 2026, there remains a significant portion of unleased space, which could impact occupancy and revenue targets.
Development Leasing Challenges: Completed developments are only 73% leased as of December 31, 2025, and some projects, such as the Charlotte development, are still in the early stages of leasing, posing risks to achieving full stabilization.
Acquisition Timing and Volume: Acquisition volume guidance for 2026 is heavily weighted to the back end of the year, which could pose risks if market conditions or seller activity do not align with expectations.
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Guidance & Outlook
Net Absorption and Rent Growth: Net absorption is expected to improve in 2026, contributing to another year of positive rent growth across STAG Industrial's markets.
National Vacancy Rates: National vacancy rates are projected to peak in the first half of 2026, with an inflection point anticipated in the back half of the year.
Leasing Activity: 2026 is expected to be a high watermark for leasing volume, driven by a record amount of square footage expiring in a calendar year. The company has already addressed 69% of the operating portfolio square feet expected to lease in 2026, projecting cash leasing spreads of 18% to 20%.
Development Projects: A new development project in Lenexa, Kansas, is expected to be completed by Q1 2027, with a projected cash yield of 7.2%. Additionally, a Charlotte development project is anticipated to stabilize by Q1 2027.
Dividend and Payout Adjustments: The company raised its dividend by 4% and modified the payment cadence from monthly to quarterly.
2026 Financial Guidance: Core FFO per share is projected to range between $2.60 and $2.64. Same-store cash NOI growth is expected to range between 2.75% and 3.25%, with retention rates between 70% and 80%, and cash leasing spreads of 18% to 20%. Average same-store occupancy is projected to be between 96% and 97%, with 50 basis points of credit loss included in the guidance.
Acquisition and Disposition Guidance: Acquisition volume is expected to range between $350 million and $650 million, with a cash capitalization rate between 6.25% and 6.75%. Disposition volume is projected to range between $100 million and $200 million, with acquisition timing more heavily weighted to the back end of the year.
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Shareholder Return Plan
Dividend Increase: After year-end, the company raised its dividend by 4%, marking the largest increase since 2014.
Dividend Payment Cadence: The company has modified its dividend payment schedule from monthly to quarterly.
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Key Q&A
Q:What is the outlook for leasing activity and occupancy in 2026?
A:The company expects national vacancy to peak mid-2026 and anticipates a 100 basis points decline in occupancy due to 20 million square feet rolling, with a 25% nonrenewal rate. They budget a 9- to 12-month lease-up period for vacant assets but have seen instances of outperforming this timeline in 2025. The industrial market remains strong, with improvement expected in the latter half of 2026 and into 2027.
Q:What is the visibility and timing for acquisitions in 2026?
A:The company disclosed $81 million in acquisitions so far, with more activity expected later in the year. They are underwriting more deals compared to the first quarter of 2025, with a strong pipeline of $3.6 billion. The transaction market is healthy, with continued seller demand from late 2025 into 2026.
Q:What is the nature of increased tenant activity?
A:Tenant activity is described as real demand, with decisions being made and leases signed. Demand is broad-based, including 3PL, food and beverage, and data center tenants. Data center demand is a newer trend, with 3 million square feet leased to such tenants on 5+ year leases. The company expects absorption to increase as supply is absorbed.
Q:Is there concern about a potential ramp-up in supply if fundamentals improve?
A:The company is not concerned about overbuilding. Developers are seen as prudent, and new developments would likely not come online until 2027 or later. The company expects the market to shift in favor of landlords as demand picks up.
Q:What is the strategy for dispositions and market exits?
A:The company plans noncore asset dispositions and opportunistic sales, similar to past years. They aim to improve long-term growth by exiting markets where they cannot grow efficiently. Opportunistic sales are often driven by reverse inquiries.
Q:What is the approach to holding land for development?
A:Holding land is not part of the 2026 plan but is considered in the long-term development strategy. The company is exploring phased developments as a quasi-land position.
Q:What is the current cost of capital and its impact on investments?
A:The cost of debt is 5.5% to 5.75%, and the implied cost of equity is in the low 6% range. The company retains over $100 million in cash flows after dividends, allowing them to operate without accessing equity capital markets. Leverage is expected to remain within the target range.
Q:What is the impact of fixed rate renewals on leasing spreads?
A:Fixed rate renewals, which are single-digit percentages of leases, weighed on spreads in Q4 2025. These are spread throughout the year and are not expected to significantly impact leasing spreads in 2026.
Q:What is the outlook for development starts in 2026?
A:The company is eager to start new speculative projects, especially given the positive industrial market outlook for late 2026 and 2027. They plan over $100 million in new projects for 2026, with potential for more.
Q:What are the trends in concessions and tenant improvements?
A:Concessions like free rent and tenant improvements (TIs) have been stable since early 2025. Free rent is about half a month per year, and TIs have not materially increased. Some landlords may offer additional building upgrades, but tenant-specific TIs remain stable.
Q:What is the guidance for development leasing in 2026?
A:The company has guided for 957,000 square feet of development leasing in 2026, including a build-to-suit project. After accounting for signed leases, 530,000 square feet remain to be leased.
Q:Which markets are performing strongly or weakly?
A:Strong markets include Midwest regions like Minneapolis, Chicago, Milwaukee, Indianapolis, Louisville, and Columbus. Southeast port markets like Jacksonville, Savannah, and Charleston are weaker. Texas markets like Houston and Dallas remain strong.
Q:What is the outlook for market rent growth in 2026?
A:Market rent growth is expected to be 0% to 2% in 2026, with stronger markets seeing up to 3% growth. Rent growth is anticipated to accelerate in 2027.
Q:What is the guidance for same-store NOI growth in 2026?
A:Same-store NOI growth is guided at 3% for 2026. Factors influencing this include retention rates, lease-up timing, leasing spreads, rent bumps, and credit loss, which is budgeted at 50 basis points.
Q:What is the outlook for industrial deliveries in 2026 and beyond?
A:Industrial deliveries are expected to be 180 million square feet in 2026, down from 225 million in 2025. Deliveries may increase slightly in 2027 but are not expected to return to peak levels.
Q:What is the nature of manufacturing-related leasing activity?
A:The company is seeing light manufacturing demand, often for relief valves or light assembly related to core manufacturing operations. This includes automotive and government-related uses.
Q:What is driving increased acquisition activity?
A:Increased acquisition activity is driven by more sellers returning to the market, not changes in the company's strategy. The company is seeing more portfolios and opportunities, with pricing similar to 2025.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on certain topics, such as the exact percentage of leases with fixed rate renewals, the precise impact of early renewals on occupancy guidance, and the detailed breakdown of market rent growth by region. Additionally, while they mentioned a strong acquisition pipeline, they did not disclose specifics about potential deals or the competitive landscape for acquisitions.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
ATM sale
Acquisition timing
Acquisition volume
Charlotte development
City Lenexa
Class building
Disposition volume
FFO onetime
GA increase
Kansas City
Kansas project
Lenexa Kansas
Loan headwind
NOI component
NOI core
NOI development
NOI retention
President Investor
Relations sir
Retention foot
STAG suit
absorption rent
activity proceeds
activity rate
addition dividend
assembly building
backdrop delivery
building credit
building end
building flexibility
cadence result
capitalization rate
end foot
foot development
point cash
rent market
spread leasing
spread store
today Chief
STAG Transcript
STAG Industrial, Inc. (STAG) Q4 2025 Earnings Call Transcript
Positive2-12
The earnings call reflects positive sentiment with increased FFO guidance, strong leasing projections, and a healthy transaction market. The Q&A section supports this with broad-based demand, prudent development strategies, and stable concessions. Despite some management vagueness, the overall outlook is optimistic, particularly with a strong acquisition pipeline and market rent growth expectations. The positive guidance and strategic plans suggest a likely stock price increase.
STAG Industrial, Inc. (STAG) Q3 2025 Earnings Call Transcript
Positive10-30
The earnings call highlights increased guidance for cash NOI growth, core FFO per share, and retention, alongside decreased credit loss guidance, indicating strong financial health. The company is optimistic about developments and acquisitions, with stable market conditions and improving demand. Despite some cautious guidance for Q4 due to speculative credit loss, the overall sentiment is positive, supported by strategic development activities and strong leasing trends. The lack of specific 2026 occupancy guidance is a minor concern but does not outweigh the positive aspects.
STAG Industrial, Inc. (STAG) Q2 2025 Earnings Call Transcript
Positive7-30
The earnings call summary shows strong financial performance with record leasing activity, increased cash available for distribution, and a credit rating upgrade. The Q&A highlights optimistic market trends, robust acquisition activity, and strategic financial planning. Despite some uncertainty in specific markets and vague management responses, the overall sentiment is positive, especially with strong tenant retention and a solid liquidity position. The lack of market cap data suggests a cautious approach, but the indicators point towards a positive stock price movement in the short term.
STAG Industrial, Inc. (STAG) Q1 2025 Earnings Call Transcript
Unknown4-30
The earnings call presents mixed signals: positive financial metrics like increased FFO per share and cash available for distribution, but concerns over economic growth, lease gestation periods, and acquisition risks. The Q&A highlights healthy leasing activity but also notes market-specific weaknesses and management's evasive responses on certain issues. The absence of a share repurchase program and unclear rent spread guidance further contribute to a neutral outlook.
STAG Slides
STAG Report
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