STAG - Earnings call transcript Q1 2018

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Operator

Greetings, and welcome to the STAG Industrial First Quarter 2018 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. It is now my pleasure to introduce your host, Matts Pinard, Vice President of Investor Relations. sir. you, Thank

begin. You may

Matts Pinard

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

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

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

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

Ben Butcher

bulk our to Operations. answer Operating to of who about myself operational Bill the first Industrial. quarter focus. Officer, pleased Estate the joining Real today Director areas our with We're Mecke, will and Presenting us me They'll Chief look you, you will and morning, their Thank to welcome the tell to questions be our Crooker, addition call earnings to Matts. today Good you Officer, STAG for Chief be specific Dave Financial our Steve are King, results. and financial discuss forward first of data. Also of quarter in available everybody having to and

The was all to team The was way on busy first a great fronts. quarter XXXX. start very

platform X.X% accretion, while at of range. share quarter, our maintaining core produced FFO target the end low For the the leverage per

improvements million XXXX X.X The continued identify at acquisitions opportunities, our at positive and a million We Tenant featured on stabilized continues team dispositions, an The a closed leasing be rate for XX cap X.X% gain busy between closing million generally rate. of IRR and The also cap accretive Particularly largest million a are during Notably, to proceeds a higher notable unlevered of X.X% team of of to was team XX.X%. XX resulting bumps We at square we leases extended this quarter and spreads. in XX% resulting contractual X% building today. signed a acquired cash confidence of X.X% very achieved feet, retention for signing $XX rate building in we lease. that with was X%. the Tenants was rate generated X.X% term million longer an quarter. opportunistic leasing high. sold disposition rate. leases the lease cap the after that various XX schedule as expirations just accomplished and in

longer term renewal average. leases, we achieve and leases on years both quarter, five This term new than than seven on our were historical our able our to of of over greater years

the and specific demonstrate delivered is to both strength platform results markets the sector's operating sector. we of Our that operate. industrial which general in the The industrial health clearly

supply By majority demand equilibrium US whole. a accounts, We rents or for the most of these at are demand our is strong the rising seeing vacancy tenant declining imbalance for near as the and markets. buildings, across

must would This in million to delivered being primary XX feet greater which markets. remainder of markets that are secondary our and have see and suggest XXX XXX we demand However, few there supply is square relevant better to or incremental square primary excess e-commerce. supply for buildings growth the The and characteristics million but is demand population or from consumer tied feet GDP generally the million growth, markets. from continue of five markets, the large the oversupplied those primary so to demand demand

the our of past the in greatly now our foreseeable e-commerce e-commerce XX% buildings the activity to over believe exposure risen incremental having persist for this demand approximately future. years, driver with within Our portfolio building. two We an will has

I'll to prices. to We We In acquire are plan assets of plan the provide Board to perspective logistics background tenants. of the do the on attractive our March, Directors. our recycling and brings of a while very at as the and persisting optimistic as supply valuable for first we had opportunity this announced into to a of Dilley start we Michelle turn to needs to advantage over year appointment management it great more to that, well acquisitions. quarter She take strong expertise results. Bill of XXXX. We've simultaneously distribution accretive warehouse chain With detail and evolving

Bill Crooker

Ben everyone. and morning, good Thank you,

and These would disclosures. remind Before with our that peers have operating releasing operating spreads as not our joint everyone did I like non-GAAP beginning impact changes a certain in this metrics such January. same I from of to as disclosure store, industrial material are release to quarter, begin, STAG's discussed retention consistent our

our disclosure X, January supplementary adopted our package. GICS for reporting industry we effective in Additionally, have classification the

increase as achieve XXXX. quarter, puts first XXXX was X.X quarter quarter on feet XX% in expiring the of to quarter. of the company for and FFO the to in position first plan Retention potentially The business the exceed communicated in square compared the Core $X.XX X.X% February. million the an was

previously than XXXX of than forecasted better than the square X.X year the spreads during any quarter. retention million store company XX context, for For given space the to NOI renewed releasing history. for of renewed due cash amount higher which in quarter the decreased of first by feet the points, the was greater Same basis calendar was expected

this of XX positive our raising we same basis to our basis positive points. annual XX are to XX store guidance flat to Given previous points from outperformance, guidance

increasing year to The also same of of pool store quarter. guidance annual rental XX% The approximately We XXXX not XX% between approximately our fixed are our of represents of and XX%. XXXX portfolio total store the portfolio X%. that expected for same first pool the annual XX% in retention as the included is has bumps

metric, assets this from to core excluded store FFO. While these same contribute

be evidenced very balance Our Fitch rating, was continues BBB March. to affirmed in as by a which strong by sheet

end. and dispositions, remains basis times leverage We times at have not today. our subsequent and year on net run at debt Including this X.X acquisitions leverage quarter common X.X issued to was a rate equity EBITDA

with notes private Funding placement million X.X of X.XX%. fixed and and million ten-year is two Our previously charge a million in weighted we expected In of million with drew of coupon occur notes April, tranches, transaction rate to $XXX This liquidity all-in coverage closed times loan. X.XX%. million ratio interest interest term of term is we average rate transaction X.X% $XXX an June. is a of coupon undrawn a X-year March, the our $XXX fully a In of XX loan The X.X%. with of was consists XXX with million. of swapped $XX

and last tenure the in placement previous had private years contraction this risen risen Despite basis rate and a spreads, ten-year previous to XX-year reflects that transaction to since seven-year in comparison placement increase of cost only treasury was transaction and for XXX points compared increase purposes, the X-year in in three the because when basis the our transaction. transaction. of points the when transaction. point last for XX since X.X the XX Also, private this half had credit this a basis For basis debt decrease points compared the the treasury our X all-in the years

resulting Although to have increased in term one back compressed the I long turn no for on past placement term will over in With spreads increase Ben. one over overall the private little cost few it long to almost a now that, rates of years, debt. have basis,

Ben Butcher

you, Bill. Thank

maintaining balance Our performance our delivering focus while on line remains investors, defensive sheet. bottom a for

leverage by FFO six conservative. core As deploy acquisitions. to highest continue to our of look We'll previously X.X% capital accretive our available sheet to further remains and to end target our grew intend times. of below upper maintain its share leverage keep per is to comfortably range noted, balance flexibility five and return. our this We the Currently,

your this a quarter and on execute we in demonstrated the of source of you for support company. have for As our as thank continued and will this sales and past, and morning We portfolio your time capital. asset

Operator

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

Sheila McGrath

guidance any larger were dispositions why than could give on pricing, quarter. were chosen you wondering was in if or I first expected color any assets the those for more sale us for just and IRR had Dispositions year. we for

Ben Butcher

dispositions. opportunistic were Those

in the gave cap to IRR little buying today. buyers So assets. and these the body to continue expect in on they're interested the to - tied of We're rates sell when We to remarks of in our a between going color were the bit

Bill Crooker

Yeah. Hi, Sheila.

in as it two sell prepared were million XXX remarks, XXX IRR both in million mentioned continue between dispositions opportunistic. we think year. to the the and expect QX, Ben I for unlevered And on was the XX.X%

Sheila McGrath

Okay.

I transaction aggregated on that that. your news. picture DCT big then industrial your for there just missed on Ben premiums portfolios, the on and Sorry, thoughts then paid And the - curious Are just thoughts market

Ben Butcher

of on some surprised in XXX start public asset off past, said basis I them, saying, smaller occurring when rate a days compression and assets. will ten doing to portfolio such the in points pricing. in I the portfolios of history and variety, individual well experience - that, of transaction capital. seen, the We've think has between aggregating been cap aggregated a little by these of of pricing was But five having private I that to our our XXX

by PLD would compression. company small target It's however an already clean well-run i.e., suggested operating there in operating XXX should terms there's a the us another have story, cap we're DCT to past another being that but to be next or a leg DCT look was in as it's that leg from noting at that points that are that since attempts. rate X.X transaction, rate that entity, expertise. It's characteristics had portfolio assets, assets the We enterprise you the there the represents an that of evolved not more expertise. of, of basis an very nice We the operated is move with cap X.X and with development transaction, up or surprised worth enterprise, acquisition in that

the value our can of think we what So purchase, produce through of wasn't but very execution of our forward DCT by like growth some opportunity, of development our going presumably, much the We're expertise. but to relevant confident similar that developing not the equation, ability as perhaps, to assets. produce peers

the purchase mark the by encouraged that occurred very opportunities exist DCT that So think the it's with we consistent market. we're with the and within industrial

Operator

America next the Bank comes question line from Jamie of with Merrill Our Lynch. of Feldman

Jamie Feldman

you talk across most where can just guess market you different, and maybe locations, portfolio. demand across whether about quality the leasing the or I it's just seeing the asset are your

Ben Butcher

general confidence. I seeing tenant think we're

industrial all is others. been, down expect the the more in that tenants more of encouraged particularly more the changes, don't observation, the there. than is there expenditures from think any you - that capital tenants. class by confident think, terms, particular relatively or any have shorter might I group seeing I sector assets, probably law there - tax our time, by Dave? We're things is out lease longer asset

Dave King

for Jamie. based, broad sensitivity is, pretty that was means major The point of labor. It tenants

in we well. the broad have big provided be demand to buildings, they're pool compete labor So surrounding our seems But a based.

Ben Butcher

of has CEOs all they which up was Amazon other got might - on other there's the were excited sure neighborhood be, labor. heard the point, commentators the everyone some I'm they from evolution when building Amazon Jamie, market the the going it effect and some competition to used and of into level available announced a you've had because they now where that suck

So effect for are few labor. the competitor years a has Amazon considered now very reversed tough where they last over the

Jamie Feldman

million say want XXX I missed I'm you to I it. XXX sure it. of I million dispositions make heard this year? just sorry. to Did

Ben Butcher

consideration that on in and - sales. of the are to million stronger think Yes. dispositions. days portfolio granular was today, remarks dispositions, you million in non-core of if little three body XXX And about based XXX will, our our I we're opportunistic The right. a That's the statements

to that could that we add sale within not really If portfolio saying contemplate now number this that but it it's are a something year. committing could We at add be the indeed, will consider. we're - will we point, number, it actively but to

Jamie Feldman

a X% to just the of It's can bumps, produce? us rent more date. guess said through you growth I so this Okay. then kind And broadly, thinking can X.X% that normalized you like company help

so like to a getting rate rent if growth normalized what bumps, So aren't internal like? X% X.X% you look does

Ben Butcher

rate, we Jamie, be Yeah. portfolio. The growth stabilized after would normalized internal had a

than As portfolio in primary number. markets might that's us? you'll - an - growth on we've discussed portfolio rent we move will think has course see at bumps that. primarily In a about coastal more of acquire larger X% occupancy was cycle where continue produce growth, XXX% markets long the probably the the occupied shows. that portfolio, bumps, a better world cycle into of the going to there's that been than weight the contractual the past, That rent the see buildings, lower in history as through Obviously, think a a around rent markets data store Could same point normalization X.X% rent the our again there a exceeds, normalized the same so rent to changed has forward. what that you history at I numbers what we the reasonable falls in more But that's the whatever. We have and probably off - the weigh to growth you're concentrated Possibly. that as internal shown. looking no that the to or is or with as is or against is concentrated growth that, rent contractual have extent, as then goes X.X% that is growth

Jamie Feldman

about And I it. ask I external was growth the piece guess Okay. going to also of then

hit the you didn't So ATM quarter. this

capital asset that through on think done generate You've recycle sales, we do some like type to growth how and based your of about the ability capital?

Ben Butcher

Yeah.

buy we've between points where been portfolio in sell I individual said that obviously, on basis assets transaction occurred. the responses of was we can what to very contemporaneous we a say of our can cap small those of buy X having at them assets, X.X. and cap that rate accretive that, portfolios. And XXX our the XXX earlier experience on was where the compression level type sell at think suggested to us sales it's and has compression, If rate accretion for

So do can that. we

We is as have attractive. better has long and us raise buy assets for - as equity to pricing it been new sufficiently equity

advantage in fact of into the first equity the at not - that the year. the the we lower as have We raised below you've lower were our noted taken indeed quarter. We've of going end leverage range

So and execute equity we've without to used year combined leverage to and to stay throughout that asset promulgated sales continue on within having our our can acquisitions we do balance. the with date raise to

a are not are is we because do sheet. our We we know likely maintain to to - goal defensive balance that

a operate the period pricing considerable continue leverage to with use flexibility have raise equity, hopefully look do in to recovery will through we without having for of equity. disposition, but to to we the time through So to dispositions equity some asset issue of

Jamie Feldman

can rates, rates ask know would buy the you and where spread is, like guess on same before what but can cap of buy? you in can between where spreads? compress you a terms I sell the what's year I you what's shrink basis, and I cap sell, also

Ben Butcher

at as XXX some that cap. exactly Contemporaneous. portfolio cap. the sale assets X.X we we're are XXX exactly same were roughly areas, in X.X the buying portfolio that those We're we to did the basis assets buying of That It's to in time, points. equivalent time same selling

Operator

Heck line with the from of Fargo. comes question Wells next Blaine Our

Blaine Heck

on At maybe seems XX% after like of markets all point And and this in portfolio this in those this XX% tertiary, recycling? shift. a primary or markets, roughly that figures last in then those asset of it and X% but guys secondary shift the primary, are reclassification do in you were where XX% year tertiary. is the briefly, secondary the in XX% Ben, next hit year in big figures you year, characteristics, you Is through any time XX% it? at looking guys see or

Ben Butcher

combination. a It's

but classification we greater. in been feet through So in remarks use is square we primary the XXX markets, or went also primary more buying million have for we probably

derived the time using that now the to We market. more market a around risen five and was of been be at primary there our have are markets list have IPO that in

total there's of has feet XX So Charlotte million from instance, million. a over are square sub to markets XXX XXX that XXX here, for gone million

in. active So, that a we're market particularly

is fair of reclassification. So a because amount that of

buying been the in also we have assets primary market. However, more

So it is as mix to some degree well.

Bill Crooker

have been the Blaine. really all, not in at we And tertiary markets acquiring

Ben Butcher

the continue think on primary I as to market you expect your going, And to would we're question increase. where to concentration

Blaine Heck

about pretty fully basis. going a we same before. it looks recoverable like substantially but we've that we've taxes Is as are that store XX% should Is there still up before, Bill, were higher this again else that talked aware discussed be expenses just on of? anything on

Bill Crooker

really change, one's driven just the by This same store pool. occupancy

in you're the So increase of occupancy the change pool occupancy expenses. recovery the decreases store the that, but increases and same some getting

Blaine Heck

And then higher if that's for this expected wondering any there's retention, quarter. the on reason the just retention

guys to You I the typically expansions reason moveouts. of think most point your for tenant as

was decided may tenant So to there? expand going be on that to stay or this is that was else something a put going

Bill Crooker

to I put mix. it

and retention so very haven't Our it's long small group We're tenants. a much. expectations for term probably not changed hitting bunch of a

role We reasonable. what seeing just in buildings have ever happy the It's not first the tenants are a the we're quarter. largest that

Dave King

the some budgetary The to that's were year. just and exercise, stays up that quarter we this calls Yeah. so goals for made increased is exceed therefore and able a our had we and guidance some really guidance - and

Operator

line Carroll question RBC. comes next Our Michael of with from the

Michael Carroll

the compared quarter how saw to to Bill, touch activity leasing during Ben your on and that wanted I it you expectation. more on Hey, and this

get want guidance, due to activity the in mainly street, just quarter saw throughout strong year. do activity expect the see you to the increase the I to So was better in first you the that or

Bill Crooker

I really think to the retention primarily, due year contribute year. to a the retention. is new same that the but little was store it for increase increase in than higher guidance the The drove the guidance for leasing expected the the in bit,

Michael Carroll

what this to you forward. realize realized retention you not that that's going quarter, And already expect

Bill Crooker

That's right.

Michael Carroll

those quarter. can during about know And had talk guys bit you rent? good bump you really spreads? that What a drove you I in little spreads cash the Okay. your some pretty then leasing leasing recognized -

Ben Butcher

a rolled up - side, which of lease, digits. signed we feet, which On rolled and up the other there of was market XXX,XXX that was tenants the that average mid-single on rolled new that handful square lease one a within we four almost to XX% market below

was primarily but it So, fairly large driven rent. one widespread the rollover by

Michael Carroll

are typical just And those industrial buildings.

Ben Butcher

that Standard area same Greenville, market. where warehouse was the large successfully the able role we distribution buildings, buildings additional were and two in Spartanburg quarter to in this acquire industrial

Michael Carroll

be exclude Okay. And you would what positive leasing those some then rollups. on the if of spread statistics the

Ben Butcher

I Well, if we exclude leases. be new on mid-single the that one, it mentioned, would digits as

on where blend. So mid-single weighted it's renewals total digits the a That's But call the it were. averages.

Operator

comes the Instructions] line next Mitch Our from of [Operator question JMP Germain with Securities.

Mitch Germain

there Has specific I with the shift maybe you're of type anything is e-commerce underwriting regards any Is focus. your that mentioned your know you to industry the in markets, terms of sort making? of previously. changed tenants,

Ben Butcher

or going that for the focus through today, so relative we can markets but find on individual find. time our across we most by only and our Not to delivering Mitch, and forward transactions basis best looking XX cash is a seamlessly on we can value tomorrow shareholders. the flow

getting in return make we're underwrite to risk, expenditures these identify good adjusted we're we is the and assets. only acquiring risk mission so Our for returns, not getting the that

into risk we're correlation. So by undue introducing the portfolio conscious of

attention paid the confident some instance, are to into other haven't things those have and for a we're the pay we risk we exposure our of things our So portfolio, that to, that metrics. we particular not introduced - but auto lot because attention

Operator

of Our with John Ladenburg Massocca Thalmann. from line next question comes the

John Massocca

that today touching for be bought where you potential you be opposed would where price compression given the the the on and ago, of back the you more to where versus sell portfolio? going as those a kind attractive in could are dump could portfolio versus you assets a portfolio redeploy So transactions, today year could capital where say maybe versus

Ben Butcher

reflected question individual it is I think no portfolio there's compression year assets. in the last occurred that also cap might be but that the that evaluation, reflected whatever rate in

portfolio, I spread don't of Should at the identified individual to think asset the happy increasing has that has not a portfolio we rates. have not as that discover expectations gotten cap are that least, spread yet be our cap we'd but an bigger, between rates So it changed. - kind and we market

contemporaneous So expect assets again, basis versus individual to XXX to we're points. XXX portfolio, continuing that

John Massocca

maybe later kind in full came get G&A Understood. guidance, hit? something in And year you're XQ unchanged. your you were shifted expecting that in pretty below that expecting but quarters to going Is remained out well - then terms that's G&A of there guidance maybe to the in that of

Ben Butcher

shareholder compensation Fair value. with non-cash our been range frankly, And the this our has performance add that with budgeting. the that's level not reflected get of us be, our will, if midpoint would to some we're total and compensation especially in performance varies which trying a to the at you will year return in

Bill Crooker

if would we G&A change low given our year. for performance guidance, in continued that of And year, didn't so the end it but probably the the early Right. guidance at the throughout it's year, our be

John Massocca

be And in pulling expected Understood. thinking placement the as close balance is of you something remainder you that private look of loan, especially June? would at sheet, in terms July, down then the the term of for that to with

Ben Butcher

already swapped, just revolver Yes. draw left end, dollars term on the doesn't loan or loan term to on really putting quarter at costs pull so of it revolver the loans. that flexibility, maintain some the We'll We down. The the has term some matter.

then July in we'll fund placements the down that before draw June. we'll So private and

Operator

One. from of with Capital Chris question next comes Our Lucas the line

Chris Lucas

whether in the assets of tenants Just kinds be you terms is go then a potentially in or if some size is. quick provide guess, question this size markets price of you of or on sort by portfolio stock characteristics into of the would could maybe terms and for the that of dictated and the sense where secondarily potentially looking opportunity. would just I that

Ben Butcher

think spots in I would assess our community which response, terms are a strong and market buyer portfolio identify to to brokerage look we the it work the at there do work in going receive When in addition some we're - that friends brokers study the of last with where size is important was to message drive with of what very very to of the we the the brokerage sweet was to the in a investors potential by from a makeup could day, that portfolio, market. sold to community pool. that geographic proximity portfolio a

has lot recently think I term. for there market, the in appreciation been, of a

So maybe but term the look friends appetite at be buyers in there. portfolio is we'll leases will the the make again, in in a concert that has from that community with it, our out about we'll determination longer what brokerage

Operator

W. the from Robert of Rodgers Baird. comes question Dave next Our with line

Dave Rodgers

bit I seeing you signs recycling of Dave. about be you seeing this, some that or so about any little in Ben, own other I your sort jump late, faster maybe any and did just may assets go for of bad heads or and addressed you're read talk of I'll thoughts any on or apologize if retail stress in in. it, either worried debt, but signs some about sector to you back Wanted a that debt bad

Ben Butcher

we're cash relatively do went ago where for assets, - bankruptcy with ascribe situation get bankruptcy. so risk that the project where instance we've on well cash to I was years we on we're the were credit asset. if could that than overlays, they to willing concept more specifics, the the for were were where than flow they but within lease, we risk got occur credit and hold the could of held selling. understand will had place markets, all assets an is in would for let to the the tenant the our going in opposite going few net Dave going we're say an - we markets, asset thought If if sure asset a I sense Well, perception we because ascribes, more that probably is our - the perception that the sure market that's higher lower probably not into lease market even and a the we pretty a get affirm that makes of flow us the to out That's in an that was in to the on that pretty future too case a for obviously a of

make sell. So situation a where sense probably will for it to that's us Dave?

Dave King

We're great challenge specific probably tenant now one from the It's lot date market. Dave, so right assets a of get their characteristics. we the Bon-Ton of stores in the have liquidating located, is, you read eager the to upon our back. building well just

an as that view rather opportunity stress. a than we So

Dave Rodgers

kind amount our that material not contribute of ABR of standpoint, to financial a a portfolio? from does And

Dave King

the the pretty good have exposure think pretty feel risk we - not there's is, a brick overarching a we I de lot have So a in minimus the retail. we to the of mortar lot And answer and we portfolio, see about. don't exposure

Operator

I over back like you. to have now at for further we you the floor would time. questions Butcher, turn no Mr. this Thank closing to comments.

Ben Butcher

participation the everybody you, thank look your opportunities good and thank to of for forward the the for strength for encouraged Well, results Right. and of us. strength and fundamental you demand joining XXXX acquisitions accretive industrial tenant rest market, We confidence. delivering We're tenant identify about the today. to of very the continuing

Operator

teleconference. gentlemen, this conclude today's and does Ladies

this may You for your your wonderful participation Thank disconnect at you time. lines and day. have a

STAG Industrial (STAG) 2 May 182018 Q1 Earnings call transcript