STAG - Earnings call transcript Q4 2017

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Operator

Greetings, and welcome to the STAG Industrial Fourth Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation [Operator Instructions].

As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Investor President, Vice Pinard, Relations. Matts sir. Please go ahead,

Matts Pinard

call Thank quarter fourth conference you. to STAG Welcome covering XXXX the Industrial's results.

on Act site In statements contain addition Relations remarks unaudited Private presentation and an the yesterday, section. as we Company's of to the the Litigation your Securities press defined quarterly release On today's answers supplemental in Company's the to stagindustrial.com forward-looking under at distributed XXXX. call, posted the Reform Investor Web prepared information will questions

all to of subject acquisition definitions actual to listeners more our are trends, non-GAAP and include that matters. reconciliations uncertainties and from debt cause Web matters the to these statements address site. encourage G&A the and other discussions statements relating measures detailed in may available risks filings results rates, supplemental contained We and economic and Company's retention the Company's SEC those capacity, that Forward-looking forward-looking amounts, statements volumes, informational trends, the earnings discussed in to forward-looking dividend package differ related disposition the and on to rates, of today. Examples contained the statements review with industry of

no over estimates the forward-looking will reminder, our turn Financial represent a statements Officer Bill Industrial update Executive Ben now and Butcher, of from Ben. Officer. will call statements. Crooker, hear Chief to management's forward-looking STAG today. assumes On As today's you I obligation any as to call, our Chief

Ben Butcher

our Financial full to operational and great our Presenting to forward addition to King, myself, bulk and their STAG Bill me today Matts. financial specific us look you We're with you be will have answer close to Estate the will Chief in Director fourth data. Officer about Officer, pleased available join Dave way our of another you, the our quarter Steve earnings focus. successful quarter XXXX. Thank The and morning discuss Mecke, Industrial. today a fourth call Operations. STAG to year for fourth Chief They'll everybody, for Crooker, Good questions to welcome and who our Also was and and Operating areas be the of results. quarter telling Real are to of quarter out

For continues opportunities, at by grew than of rate. X.X% to the over team dispositions, year, $XXX after Net XX% the million accretive cash $XXX closing year. identify the stabilized million acquisitions prior acquisitions cap more

exceed total cash year. leashing leasing at continue leasing equally the to million we demonstrating powerful revised to plus an is We combination the feet the X.X X% of These leases front a value was of This This the leased, roll rents. our square XX attractive that in see enabled basis including of busy our new over for us per quarter on new while our markets on this with acquire leverage. Company’s million reducing was approximately favorable results team The share third earnings opportunity in guidance same-store persisting our feet history. highest quarter X.X growing to relative monitor. square consecutive

core X.X and X.X% operate. industrial The in we accretion leverage times is produced to markets X.X FFO from times healthy, sector platform while the quarter, both very to quarter which in XXXX. per compared fourth when the For same the EBITDA generally in the share to debt reducing specifically

quarter majority has has our valuations recently weighed equity and prepared buildings, on recently year impacted remains of high significantly rates and confident this to have are with highs rallied vacancy expected, corrected. This continued strategic some and in rate markets. XXXX treasury have declining time to GDP persists. should the interest across tenant rising these broad We course correlated degree The The to XX unknown. seeing shares. Industrial are XXXX markets rents strong We events our GDP in to remains market. of we entered our expiring for REIT all ability well are in The the the reprise key and rate interest the rents leases. and REIT full-year growth the highly macro volatile demand for to spiked rise first

First, laddered fixed a well have entirely balance and sheet. we almost rate

Second, the both the economic rates result is of good interest rise of continued in for buildings. growth, occupancy and the our likely rents

results cap our diversely rates Fifth, with more dependent STAG the turn full principle productive capitalization I'll phases year another and Interest is With of than we and to business. rise rate private to in will and Bill on than XXXX and in picture us. of local all our results. year STAG also execution quarter provide Fourth, year to rise. on opportunities lag earnings a interest conservative the remains accretive moderate first remain that, our impact The will competition, acquisitions, leasing to buildings has it healthy Third, levers growth. acquisitions persist, which fundamental rates. after are. increases robust fourth strong year team more continues efficient resulted was platform; its at for continue accretive over detail are likely industrial buyers attractive more acquire period, our them the another

Bill Crooker

the XXXX. which the a the The in as great XXXX. everyone. of the XXXX finish the X% we to for strong year year, balance achieved as quarter position begin core morning an introduction quarter per the in guidance. full increase discuss in Thank $X.XX This growth for to very year, compared sheet, company simultaneously was resulted FFO the will XXXX. for the fourth I Ben Core share by and FFO a was our full putting for was and you, quarter $X.XX and while deleveraging followed a our of good results successful

the same-store outcomes in certain the operations generate property order made the retention of year. quarter expire leases retention to occupancy. XX% XX% the The by On communicated shareholders resulted of in occupancy in XX.X% year expectation points when XX% exceeded XXXX. NOI our decisions for beat was higher points. our the thirds to Same-store rental decline to produced annual This The of were Portfolio our the impact cash The the approximately with previously ultimately occupancy November in rental comparing portfolio. but XX These of decisions opportunistic same-store was full minimal annual These disclosed side, from driven an lower two leases or of decreased great result year our to compared result XX our year pool represents and for reduction to sales. year vacant pool let signing was But guidance tenant than to approximately at to related by annual from earlier budgeted. of basis numbers third rates. course X%. excluded retention full has total metric of revised portfolio XX% impact fixed of bumps retention the lower basis as operational XXXX one XXXX average annual reduced on the call. same-store our end XX.X% The over these quarter for XXXX. operational rates XXXX decisions the portfolio

a of core QX our [ph] these EBITDA are metric, sheet and the growth [amendments] meaningful excluded net raised to to portfolio FFO. equity million $XX ATM continues from our basis. slightly rate in deleveraged balance of The to debt We and and assets part is times While to through this are strengthen. run rent the these traditional contributors same-store on X.X assets contractual

fixed charge immediately. liquidity includes $XXX which swap coverage million is term is times available ratio our unfunded Our X.X million, and $XXX a loan

to Turning XXXX. our attention

to a definitions XXXX impact and enhanced added our referenced our supplemental the peers on month. not the with incorporates a REIT presented in our guidance guidance these as industrial last did disclosure. our our agreed disclosure prior have payers press have definition period release with of other conforming We XXXX The material on slide. The as standardized

stabilized $XXX acquire We expected expect $XXX to cap and and million XXXX between to rate volume in XXX million. of disposition between million XXX million a and range $XXX $XXX range with

XX the and XXXX expect of million XXXX portfolio XXXX. flat to to accounts expected that XX% projected year. NOI $XX points. is for $XX and to year-end as pool XX% for same-store be the G&A same-store the million Note is the approximately be growth be We XXXX the between basis of XX% to annual between positive for pools annual Retention the year.

first to $XX proceeds quarter. the contribution the million acquire expect $XXX of XXXX, a date. quarter, we $XX NOI for are to between between the of $XXX million Disposition the third For which result to closing quarter and be and million approximately is one with million expected projected

XX expect the growth I million. and X% the down to to quarter first be and the will same full we back NOI in year, it in between flat approximately X.X% to quarter $X.XX turn basis cash be resulting to is expected Ben. of year. points same store XXXX, For the to throughout positive million $X.XX store for for now NOI over G&A cash

Ben Butcher

Thank you, Bill.

bottom performance on line for remains investors. Our focus our delivering

As FFO X% previously noted, XXXX. the per our annual share grew core full year over by

Our accretive our to return, acquisition. look as to balance is we highest sheet deploy available currently our flexible which is capital its

on in past, the sources demonstrated the ability As which asset of includes we have various execute to capital, sales.

your accretive acquisition sold executed the for tenant very discipline We our X.X% and company. these XXXX rate. for This we focus abundance acquired you capital asset for proceeds. and our in building a During continued company. future continued your time cap generating this in first for for for morning asset support quarter the demonstrated single cap rate, X.X% thank We of sales million XXXX, combined with $XX opportunities this one and of bright made of of

Operator

Please your question. comes from Evercore. [Operator first line McGrath Instructions] question with of proceed with Sheila Our the

Sheila McGrath

disposition? on your historically more talk year. sale? and of quality Ben, XX past the these even you’re for dispositions or than owner asset on Are about opportunistic user you the more around sold spectrum you guiding philosophy Can more sales? give this insights some end assets the Just months, bottom over -

Ben Butcher

somebody think have we was sale sales, in basis we’ll us one I The the worth sell else primarily asset our our year that the always instances. they’re when those to first asset they on within portfolio. thought of to more that are quarter accomplished certainly about than we this

Although, those we than some of valued a would within higher have valued portfolio. fine our asset

We flex our think quiver as we near the the I and strategic plan necessarily The non-core for through year potential those. not as opportunistically far but And office is that that in dispositions are to also prices we exist, arrow think disposition that in at would legacy we I hopefully sourcing sell lease we something as continue assets, term. a thus in contemplate opportunistic the it’s year. there capital certainly move for the good

Sheila McGrath

cap hurdles more have your you thinking are you is acquisitions up in historical changed rate follow rent or there range. guidance is talk IRR on wonder could I today. if growth a acquisitions as you lower And about, than your embedded

Just range? that some thoughts on cap rate

Ben Butcher

suggest on perception of again focus also remains to the good as think I I then terms FFO our and lease mix growth, perception accretive to expected longer think per has market asset quality, in assets change, buying of primary. as share growth rent of embedded But terms term more well quality. embedded it’s reflective rent as market Well, you or lease add it's

up So mix change giving without accretion.

Bill Crooker

And XXXX to for context for higher GAAP rate basis XX was cash to points cap put acquisitions our that rate. than XXXX, our XX our in cap

Sheila McGrath

IRR your changed haven't underwriting? you But

Ben Butcher

still feature our that's analysis. No, a of

Operator

next question Please RBC Michael Carroll Markets. comes Our your line the question. with proceed from of Capital with

Michael Carroll

rate lower? and rate I your now you’re general could are just interest then were coming pursuing push your better you markets and you higher wanted assumptions the or after are lower. comments guidance. cap on a pricing secondary cap right cap see rates remarks just that's your you Sheila's in that quality on higher in going are and in prepared why bit Ben, your rates I bit follow-up that know, adjusting highlighting your little little assets assumptions to questions Do

Ben Butcher

if think where will Well, see you stay conservative are and are even drift or that rise period will a they rates both in after promulgated the the to part today of interest conditions higher, I'm today very our range our secondary I cap would primary as is And we portfolio. -- primary in that also we markets if is lag I buy to that continue also across think reflective certain you likely rates that some and of concentration up. markets. move suggest do I

have we're indeed that's this I rate would the expect the of occurred that may numbers market cap over of the X.XX of last again, think current more a it's of view is it some not that promulgated I of than going mix number reflective point. in perhaps forward. years. release sharing X.XX change our compression is of the the So bit and year at conservative conditions But and a a

Michael Carroll

And then the are cash? cap rates that those GAAP or quoting, you’re

Ben Butcher

year rates just are cash last XXXX, Those XX the cash. as GAAP rates. points And our above out, basis were cap for Bill pointed

Michael Carroll

then assets same-store break acquisitions the talk your see portfolio you from acquisitions. between maybe And up bit within resetting same-store to guidance about Bill a occupancy recent it do and your headwind How and much can maybe growth that little recent guidance? you impacting the seasoned on your expect

Bill Crooker

number same-store. there is -- things Well, no that growth impact of

mentioned about portfolio. will for represent we the same-store of pool XXXX as in So the remarks, prepared XX% the

would that average So the a be occupancy year. mix of throughout

increase retention as we term over below to view roll which see of roll should year in rents XX% over cash market was the the so Our rates, roll we XX% well as for near over a And to be rents. bit rents as little well. slightly

Michael Carroll

low much pretty the rate leased you XX% and run your acquisitions, see to expected headwind to at fully occupancy much rate general? you're resetting And from do have them a in since you buying recent expect

Ben Butcher

recent same-store on in generally are lease but a -- two, the five for not couple terms years. those Not Mike, they're acquisitions, one to pool, seven the

those of time. won't for period some So leases roll

Operator

Our proceed Please your Baird. from with with the Robert line of is next Dave W. question Rodgers question.

Dave Rodgers

little maybe retention or same-store. bit and up Bill, following Ben a on

at move two to probably one the to look the plus the would the quarter, the and reverses first pool into -- to asset retention two, year? driving by what's that same-store obviously I quarter. plus quarter, negative guess first negative occupancy is then the as to then or the you Bill, the you Is As one questions, through fourth that one something impact two of the what's sales be what in number

Bill Crooker

is call there. a -- number. it to same-store things. really range, retention a is it's is that quarter a going so number Retention It of in it mean, I mix a positive the be XX% of for cash first

cash year, well quarter. it in of some as in as leasing later rent that be quarters rent some the the in the So QX future free some assumptions is through will

So we year. this over our improvement positive, to for feel guidance same-store very zero which of year comfortable an points the XX basis with is last

Dave Rodgers

three, would the Ben when in year? the was of you that a or how stock anticipate depending that function of over on where is ends adjusting look last trading much four, market rest the the at your guidance function disposition the five what's And guidance you of over happened stock a up weeks.

Ben Butcher

and obviously, stock would Well, on source remains do sourcing normal we guidance We're assets to basis. opportunistic when capital part back a it's expect be disposition. looking we to to more to-date we'll to be that's an not reverts to-date, us. selling the wouldn't available plan the The capital, from use the certainly that as and levels shown issuing that equity a of we've what of hold like not we

of that purpose, and assets, really those not we reaction sourcing, if those market. We capital part have a specifics not to disposition that do is use stock the identified it's to portfolios more of for we portfolios that wanted could opportunistic are to related plan. it but numbers The so

out the year our end EBITDA capacity the is we've As to the where if the of asset capital. in as you Bill in of source at other, will, pool some we a need lots capital quiver of X.X, to would sales debt to go at to of arrows pointed

Bill Crooker

those that XXX cap a very we of did where go inside And we if compression asset as basis confident points portfolio acquire of assets. capital, source XXX to those generate would of to sales individual Dave, sales rate

Operator

Please question. question proceed line Our Michael comes from your with of JPMorgan. the next Mueller with

Michael Mueller

trying were the more all looking Couple and comment markets commentary the on to as disposition at and market was of it? that make secondary cap part that. did to opposed you the here, understand the of the that for you primary questions Ben, first whole around reason rate of

Ben Butcher

on the acquisition side. is This

a So all hold -- we're identify ability cognizant of a and primary just of the markets. fact value is our assets across that there markets to relative the lot is

that our a our -- increase will very assets of we’re market primary overtime. is So expectation portfolio concentration in

Bill Crooker

a Advisors by than promulgated of as base markets is definition net reminder, our square that size so markets Econometric And Mike really CBRE definition. which definition $XXX IPO, feet, have was a the rentable at primary back million greater

Michael Mueller

I of avoiding sit Do to. and in competition, you there past, about do was wanted you thinking less mean acquisitions bit? markets able as that out knock you could smaller Just to the sizes whole of a those idea deal be the little the expect to and still to picks market shift

Bill Crooker

we’re internal reasonable about is -- of square that growth looking of, that at you a feet primary The talk one XX think markets million I an we the Well, is will, of There by we markets. will internally the markets. XXX a if those in are at the come is numbers numbers an things of variety that GARP concept markets price. external concept about out and

of So higher the same some perhaps cap markets e. the expected have markets. those better with the rate growth sum of rates, i. cap lower in cap rates

So the XX to across relative that assets for. return cash markets that individual looked find value will produce be flow always those we will looking the we’ve

not it’s we’re compete get to the with market. cap purchases going saying just X.X in -- So not the primary we're go to

on value focused still overtime. cash flow relative We’re and

Michael Mueller

disposition for be didn’t got question, XXXX. there? And acquisitions, them cap just but disposition for expected one to I other What are side. the then for rates hear target the anything on I

Ben Butcher

opportunistically. them We somebody they’re cap the flex It continued oriented. Again, of some culling worth herd rid will the our of getting and on sold be the because of office It’s be else and sold. don’t depend promulgate there. more rates will to more of assets the mix opportunistically, assets asset will opportunistic legacy and individual some

Bill Crooker

sale, of dispositions opportunistic and portfolio way. that non-core But unlevered rate a a when as we something cap that’s it’s more and our yielded Ben give was in plus for you opportunistic XXXX capital said, there XX a mix if IRR. Mike, likely source And would

Operator

Germain question your next line the of proceed Securities. The comes JMP from with with Mitch question. Please

Mitch Germain

in terms private in upgrade of the markets? in squeeze competition you institutional buyers of from the as dynamic know any any seeing look for there change higher are your some Is capital, the increases rates. But you mentioned you on to the acquisitions? I little particularly

Ben Butcher

the feet the very is hasn’t market think changed dynamic XX,XXX I that in much.

there going change inflows about more talk I to continue the Gramercy secondary of of is certainly more has is amount search that as whole and of last three some There I is of seen years a people the is in any was limited to over involved. see a to think grand fair the and being we’ve population. markets see it yield, players But recognition last anywhere private not there dynamic. think involved, to certainly that presence, markets been ecommerce broad opportunity we couple exist press You in the the four don’t mile there

that So XX secondary years, the as impact XX markets have markets primary well. the and will so

Mitch Germain

from little one higher just non-renewals And think that last bit more guess me, opportunistic a of to question those about rates. try just I consists please. Maybe talk I lock-in to

Ben Butcher

anymore a may advantageous tenant move or in where a user tenant a is So an the to very to rents, for or just to worth tenants there focused and rent, us. building buy would pay and rents, to in than instances they’re want what on renewed rent we not is just we the to the tenant situation to where building an pay that existing there on more want building situation doesn’t have we assets will closely number know opportunistically look who the actually again, market low a maybe pay more it not and where to be will those willing is pay

Bill Crooker

leases mentioned core that it a was positive of There market hit but rolled where some the calls. previous tenant we is we've our and to obviously number, the the QX FFO. up for this handful a year, two in headline of old there earnings portfolio out tenant and on new And led those which was roll retention

sell decisions So rate result up asset the no tenants situation them either we for to in user short or XX% in our then handful the new and lease made downtown a till ultimately tenants retention of have roll a the would to opportunistically out year. to

Operator

line next comes the Please Thalmann. Massocca The John from question question. with of with Ladenburg proceed your

John Massocca

the of or at guys 'XX. light the volumes there So was in the the little XXXX have result pass that a market bit came you transactions this firstly the a given in Was given year-end? guidance slipping slowdown end at year XQ acquisition of

Ben Butcher

taken range as There the transactions midpoint quarter, identified were two slightly us the the three have 'XX above. likely were close into that the first with that or to would of

Bill Crooker

end those And our million. as $XX you'll quarter see well to in acquisition subsequent

John Massocca

willing the guys there you XXXX And ratio for retention there you that, slightly reason be been then pay looking the above there to historically is you they’re do think is or at think expecting. in going driving was are increased guidance, else want -- or rents Is market tenants what some a the something to stickier you that? little some or more that

Bill Crooker

we So some on a in long be a that, across average above just And above below mix the the portfolio tenant a and confidence has little and demand buildings. bit of think XXXX, been range you’re and years our to some little years that it's it's -- I in for that. expect XX% you’re

Ben Butcher

so but in that on then you also And rolling, the the that also variability mix the retention huge year. rate can not the small leases is particular not get obviously particular are it's just sample depending it's in --

Operator

from the is Security. question with line next of Capital One Chris The Lucas

Chris Lucas

rates or Ben, going about on forward. I rates commentary just your that not cap guess, how may impact may and

the as maybe in about be be loaded Just more curious frontend to we of back-end dispositions the should for would acquisitions whether pace loaded thinking year?

Ben Butcher

spread we the But the across obviously our again follow single are acquisitions a expectations will always disposition they as and almost we’ve expectations across significant are pretty some cyclicity but our asset -- the already, accomplished think think our year. I pretty spread year I dispositions do.

Chris Lucas

last between XX What's some spread you’re the cap rate maybe just primary how color on spread and done? over secondary just months. say then that And the seeing markets

Ben Butcher

versus in relevant value markets, have that again, of there're on purchases and markets cap lot so looking at rates don't the rate focused secondary sixes, And we're I the spend a grand cap the Yes, we have cap there're within single rates single fours. basis. identifying in on that primary markets primary time asset a asset mean that

at not that just looking And asset base. really we individual really at so it individual and looking at submarket scale actually

Operator

[Operator Instructions]. you Thank

from Jon comes Petersen line question Jefferies. the question. of proceed next with Please your Our with

Jon Petersen

So of your funding stock has your your pulled back a in pipeline light are and thinking have and range. we is you about how those little bit guys to modeling going acquisition guys that. on leverage this on end XXXX, acquisitions for should you your fund year towards Curious the be with the thoughts guidance addressed, low rising rate of environment that your also target how and

a it fair be to you terms And here? on of then term your follow-up in I what's year increasing So will on debt that that assume leverage? your preference might of guess issue is from is this

Ben Butcher

So the will do I'll first part address Bill second and part. the

of number prudent of that we're capital of the last the over we've prudent that we think sources is of years hope one demonstrated allocators things capital. and I

the it's is be not short certainly a the But source. source. arrows term capital of source, will hopefully these asset acquisitions. We'll common in if quiver source So very equity a as other be a a using debt is a preferred looking the at sales for equity in accretion source, we'll be

shareholders. look one to continue at that’s we've for use the our and again one hopefully demonstrated that we use as sources So best the will

Bill Crooker

no midpoint the our in we those you of and including we be forth, equity at the guidance of hit can band leverage look ranges, would you all all terms hit of the those. would put if needed of midpoint that inclusion if And that

a seven, and are a into this From five, term markets it'll XX private across loans. loans, be potentially debt term raise certainly standpoint, So we’re placement some of heading we XXXX. bank very comfortable we'll where paper debt unsecured blend year in and

Jon Petersen

pull I you on answered the sectors, it’s REIT whole then ahead just necessarily. see shake you But back how like this, or leverages the things maybe thinking on underwriting full I because underwriting pulls it’s you comfortable and stock things not the already and so this when your it do in on guess prices but stock speed slow just curious not back is And I like to this change, it down am guys just guys, acquisition how is am acquisitions, out check when now… you're

Ben Butcher

I how what really transactions. potentials of of perhaps we the aggression we're accretion at think at we're of there's that is each look looking at a level looking acquisitions. in terms But

so stock capital prices, the be at current lower it off year. And is pricing $XX this accretion if than our would we're

tampers there’s or yellow that our pampers it it. in itself so of meeting And our and capital -- green-light asset It a individual enthusiasm means a red-light, accretion, doesn't base in in on and cost a more deal have lower means not price of enthusiasm higher light our less is which stock

Operator

Thank I'll you. At this remarks. closing back time, turn the floor to Ben Butcher for

Ben Butcher

joining for everybody you us Thank today.

leverage low accuracy, the will, pipeline our end make happy in internally we level year the very, progress of very and the with its if you where underwriting. in looking, very we’re enthused sit terms at that that we and of our We with the with continue to are about efficiency

hope investors our the FFO continued on focus -- appreciate in growth shape. I share important that So very metric. per investors you and our I think continued good we’re our

growth are We focused deliver income on Thank us you highly continue to and to for joining both investors. today. our

Operator

Today's concluded. has you. Thank conference

participation. your may Thank You lines now your you this for at time. disconnect

Matts Pinard	VP, Investor Relations
Ben Butcher	Chief Executive Officer
Bill Crooker	Chief Financial Officer
Steve Mecke	Chief Operating Officer
Dave King	Director of Real Estate Operations
Sheila McGrath	Evercore ISI
Michael Carroll	RBC Capital Markets
Dave Rodgers	Robert W. Baird
Michael Mueller	JPMorgan
John James Massocca	Ladenburg Thalmann
Chris Lucas	Capital One Security
Jon Petersen	Jefferies

STAG Industrial (STAG) 16 Feb 182017 Q4 Earnings call transcript