STAG - Earnings call transcript Q4 2018

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Operator

Greetings and welcome to STAG Industrial's Fourth Quarter 2018 Earnings Conference Call. [Operator Instructions].

As a reminder, this conference is being recorded. I would now like to turn the conference over to Matts Pinard, Senior Vice President of Investor Relations. Thank you, please go ahead.

Matts Pinard

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

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

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

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

Benjamin Butcher

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

with platform was balance driven by Our this maintaining leasing continued at record a accomplished All spreads with acquisition the of We robust strong investment successful while the level company acquisition off the year and set capped retention. defensive high operated a volume, sheet. additional opportunity sale achievement for accretion a team attractive. and very execution rating. the portfolio remains an The grade continues of The presence underwriting being is their made producing vast through and opportunities. company's more closing noticeable harnessed and The and data in to marketing amount returns. their The efficient. improve years expand internal seasoning, is insights external The investments and of investable through more several over robust the time data enhance wide past through process is are market to and outward-facing the personnel. accumulated additional of use

acquired. quarter, and XXX the from thousands rate, accretive on attractive has transaction STAG be and portfolio a provided fourth in set will previously demonstrates, were that executed capable These pricing constructed with at cap portfolio sale the basis sale into that platform again, aggregation diversification. power an year. manner. proceeds of opportunity of our transactions the redeployed once evaluating a STAG During representing The expectations. where these metrics had consistent traded X.X% a compression our point assets a we described This of

well reduction the value obtained portfolio, best do aggregation than across only to actual We XX% as we between relative including Our thoughtful what XX% The non-core continue pricing generally that wide longer We'll portfolio operate assets portion opportunistically landscape represent we that in through the are to sell continue discipline this relative of anticipate filter the no assets buyers as STAG. to that sales This pricing/returns to are more any has worth value. acquisitions of limited to available assets adds fit they acquire only not to and strict in. the the sell XXXX. STAG's markets underwrite. ensures flex/office we risk

an rating grade During quarter, low Volatility and of This is The and been the Services. and leverage, marked this beginning obtained Moody's rating The list another maybe portfolio. from of STAG yet of investment long second the is broad current value strong markets Investor a growing. headlines. investment of of reintroduced likely itself the and macro XXXX year the diversification has and confirmation grade less have likely by the to issues, uncertainty. potential end

the today, these correlation, we we to are low where uncertain strong are in below diversified for industry, available of lease our base times, with and liquidity. positioned almost portfolio both diversified is term. confidence point healthy. September cetera. that net of debt-to-EBITDA well cannot that tenant a single the enter leverage we macro balance The is widely with overly We provide across our no to XXXX, company of our XXXX, However, the defensively et with until metrics tenants makes and that maturing and can sheet you and fundamentals about geography, as remains concerned $XXX operations The Xx term, in million immediately tell its sit underlying us thing form Adding near the and industrial sector the active positioned. debt

reintroduce to XXXX. to Bill to our common results dividend every IPO XXXX. $X.XX and to discuss Directors year let that increase our since over of to increased our our January turn voted effective fourth XXXX guidance, our note dividend quarter the Board We've I annually Before in me

William Crooker

of end at growth or band as increase $X.XX XXXX. successful while quarter fourth Core Good grade STAG, was FFO quarter, the X.X% a from and investment the during morning, Ben. highlighted for portfolio to XXXX. an sheet year, Thank the for you, leverage $X.XX operating Moody's share the rating per our for achieved This The sale. by the new targeted and was active low of below balance compared everyone. was

individual $XX volume million would are acquisitions yield a rate estimate We value-add at which stabilized assets, to totaled million a stabilize X a redevelopment cap basis us part cap set acquisitions across X% XXXX an Our $XXX expansion define as expected to opportunity that X.X%. transactions We value-add acquisitions X.X%. on at with with to of stabilized. expect our these plan, of and traded forward. continue going have vacancy, plan of be of the or included acquisitions This when

XX% very return operating portfolio other the end. X% results. XX% portfolio The acquisitions the and XXXX were same-store comparing to attractive rental X% any year, and a Cash spreads continues Our Cash and of by strength basis contractual XXXX Retention quarter liquidity. coupled for year. NOI very greater positioned bumps. of leasing and was year XX% full high for with the the points to for the had than year when our average GAAP lease year's weighted of in accounted XX% driven The in sheet term profile, with the the prior acquisitions, portfolio XX% reflected be XX respectively. defensively XXXX. and remains by for at The annual pool pool annual for balance same-store grew ample quarter

ATM QX, coverage raised interest X.Xx allowed EBITDA net Fixed in was year loans The million. $X revolving second facility. term at year our charge $XXX STAG by X.Xx $XXX We of liquidity million our million with on resulting through expense to approximately of to by debt in of issuance and equity end. grade unsecured investment run per credit reduce rating Moody's rate

XXXX Investor can is our initial Page Our the website. on guidance be which of supplemental section on available XX our found package, in Relations

acquisitions. this million Beginning the year, we We and external expect aggregate stabilized for The disclose predominantly million acquisition XXXX. and X are $XXX volume value-add to XXX% in be guidance assets using between stabilized $XXX will occupied. categories,

to range X.X% acquire $XXX an expect X%. to $XXX stabilized million with We assets cap million to expected rate of of

cap $XXX that line with $XX rate would value-add XXXX NOI when in and on million individual acquisitions online stabilized. million expect traded the rate rate coming a value-add XXXX our year cap at guidance. between We estimate with an at cap transactions in mid-Xs a basis of the have We in stabilized this XXXX

year. which share the compensation between diluted to G&A the new includes X% We cash growth is million XXXX be count. million annual noncash our fully expect G&A be for of $XX.X expected reflected $XX lease is and The between impact million XXXX pool the year, to guidance and for same-store of and X% in the is accounting the NOI $XX guidance.

For and we X.XXx operate debt net time lower-end related cost context, to legal And the leasing. with internal expectation band. to expect between on the we the external $XXX,XXX in to that at XXXX, of capitalized related that and Xx be sheet, we to balance EBITDA

it back QX million $X.X seasonality. $XX to volume acquisition to for value-add million is to Ben. expected we of Looking at $XX quarter specifically now acquisitions. expect million will I turn our due G&A to be between 'XX, the and over include

Benjamin Butcher

in Bill. begin you, position as just we Thank great STAG is XXXX.

the a evaluate opportunities number growing in attractive centers and We of around across investment U.S. to continue population

base expanding, expect tenant we impressive healthy, to is in diverse numerous and year's today position reflected in on opportunities operating and The see future. see to in sheet balance Our capitalize is metrics. the this which confident the is

the process Our deliver And continued of thank maturing all this morning per and company. support on producing for of share to time to platform for initiatives efficiencies insights new various data. and We and power else, as continues are data and above the you and harness your greater STAG continues growth. focus your the

a everybody the Valentine's to moderator I happy for questions, Before I Day. back to wish turn want it

Operator

Instructions]. [Operator

Our comes line Shelia first McGrath question from of with Evercore. the

Sheila McGrath

guidance driving same-store I outlook was discuss the wondering same-store versus 'XX? if the What's NOI? in improved you could XXXX NOI

Benjamin Butcher

strength market, continuing and same-store that I NOI. think, had note our improvement you Sheila, of that the general gradual we of in reflective into It's XXXX. see the we've improvement

Sheila McGrath

a versus then And on acquisition program. stabilize acquisitions? us detail them going part the give value-add if them? How to you you returns these the of assets And hold and compare could or and more sell Okay. stabilize are the stabilized little

Benjamin Butcher

last intent to first, them. our answer to question the think hold I and stabilize is

portfolio, been of or the the to sense stabilized. over value -- our least consider to As in consistently it once just will us seeing have -- we the of to quality always above quality part markets look asset these perhaps If disclose on cap more a always at are we're where doing the of in. of to short-term been our selling course, these somebody similar transparency. stabilize a worth rate of a the better the similar look we're our returns to set bigger assets on than it opportunity on in we than it'll rates of be may we interest the of are IRRs overall But the it. We and and cap market. more part finding because else value we're basis haven't are decide same, as and years. make where they the strategy. the a today opportunities over buying is the We've These within simply it stabilize assets asset has assets slightly because what basis it's of Value-add to will that'll long-term the them

Operator

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

Michael Carroll

off And has many XXXX? Ben, did for to that why related the just that's there activity been started in coming last it? question value-add that you providing and value-add acquisitions deal. pickup you in guidance How complete of a

Benjamin Butcher

things. One million. $XX X there of is, Couple were deals about XXXX in

have some acquisitions XXXX. -- are into We frontloaded value-add

of So of through always be we're but expecting frontloaded some larger -- a also those the will assets most that extent them, may to amount vacant year.

we're little more at bit people more wanted the -- little a again to frontloaded. let and know bit just frontloading a little So

Michael Carroll

about renovate you Are spaces And the and transactions? and where up it the are final then think just leasing leasing how and we putting of how to play assets, a more that? that's these should kind that's why should think buying you're is underutilized they capital we value-add, about

Benjamin Butcher

opportunities. are investment There are of releasing capital opportunities. They they a value-creation variety are opportunities,

there see of ways show does So value up immediately is are immediately in not a that that not -- income. we variety

Michael Carroll

Related then those to rate just compared And prior the then X%, me. lower off cap acquisitions? great. from year? what's rates that hear Did I to based X.X% Okay, is to cap driving the last that stabilized of just the And question correctly?

Benjamin Butcher

those driving the think are they mix What's stabilized I rates, be Well, rates the changes. will cap yes, cap assets.

the rate Mix lease be rent time sort could So -- measured in long-term changing below-market the acquire the rents, at we're return point contractual of variety requirements. things time we cap bumps, would the a that changes initial of change not our assets. term, the

William Crooker

years had saw we you little cap lease in rental a of bumps that a Mike, X And X.X%. about average rate and of where weighted a X.X% QX, contractual bit term and averaging

Operator

Instructions]. [Operator

Our next coming from Dave with question line is of Baird. Rogers the

David Rodgers

geographically, 'XX terms you more the assets or any today during maybe sell? button that you of pushing 'XX. and some talk the focused on guys lean on tenant might disposition Ben, to sit see Can you toward front, as good in to concentrations you about of you're selling areas -- more the that

Benjamin Butcher

But we one out we markets I XYZ them. than garner of is that assets that a, not worth is down mean, think is value it our was again, portfolio. which large to see to things except we that what we're geographically states value the and by is portfolio is asset we we or versus can gain portfolio, get their within mantra sell portfolio. to they're the we them. sell more within where the looking looking I selling at Clearly, that particularly think can to concentrated individual not our hate want within the It gee, value there more still flex/office

David Rodgers

provision debt about Bill. XXXX, be today XXXX in and kind your Can of as talk question any you a what little think kind bit risks portfolio? bad a maybe potential within of sit the in then about here might Great, you for

William Crooker

debt. a of ATD last which great we our Dave, and leases, we have was watchlist mean, I quarter, Firm, bad for confirmed tenants us. all of mentioned those news both Mattress

that for points cetera. payments the That's was and in XX of in our list. dynamic Tenants they with where are list forecasting basis we wanted are XXXX, watchlist XXXX. debt which on et bankruptcies, We depending consistent bad off

Benjamin Butcher

Ben, again. I think David.

footprint what they to consolidate think retailer portfolio as bankruptcies a these -- I bankruptcies and distribution to nationally their see a bankruptcy lot retailer opposed Mattress where instance where was retail footprint. of looking certainly for their that our Firm were within you are

distribution So we those not leases. got center we surprised when affirmation of an were

their have we're store with other footprint. their We where distribution retailers some that -- using to to as bankruptcy seeing rationalize they're opposed footprint

David Rodgers

maybe And then Great, for me. good color. last

rent have spread. catching your of On market? growth the last spread those would used are leasing kind to positive get to term much spread X% the seen of just maturity? leasing that get a seeing those side years is you're spreads, starting good be Maybe what leasing continue on of covered, does now X, some X% finally that of that How to ago, of you've that versus your and long really that X market XXXX? you're continue kind function part the then we buying been and that maybe that to And into up

Benjamin Butcher

a or opposed buy to that as the are of leases leased made thing been may assets portfolio up is to is that we One were -- of that market garner cetera. tend have at around to having made occupancy, et

we because the of as leasing markets generally not much certainly operate have having But share So dramatic we may of -- growth sort fair intervening been have that their model. spreads rental over in of the a that year.

have we good to spreads. leasing So to expect continue

Operator

Massocca And the question John with our next from Landenberg line Thalmann. comes of

John Massocca

question. detail Just a quick

other On lost the occupancy What bridge, in guys being XXXk category. about up there that? square the foot was of was you ended that

William Crooker

That's primarily short-term leasing.

John Massocca

at Okay. all? leasing not that short-term is roll That's credit tenant just

Benjamin Butcher

leasing. short-term right, that's Exactly,

John Massocca

like in looks on a that? overall quarter-to-quarter. of foot as But and TIs, and in that can commissions XXXX? variable driving per XQ. little normalize out kind the we it up in What's be look -- basis should it And square leasing then And a trended basis that mind you,

David King

This King. is David

think that's anomaly on I done an deals just 'XX. in the based

spaces, 'XX that's cetera. We the this finish be into we et dictated again put were it's by year. to But below the -- we expect lease, what terminal

a commission. the So lease is have going higher longer to

Benjamin Butcher

being So again, mix -- mix. it ends up

John Massocca

Or needs normalized your operational as to become quarter-to-quarter. on been relieved be in Understood. trade common discussions of and of a some the any that's kind automotive-based kind on of the little But that any done automotive bit And question those stuff maybe have side are happened? seeing you pressure pressure of that has tenants? some a

Benjamin Butcher

exposure. good domestic. are look obviously with and It There They're across tenant at We credit They're those very our Tier OEM. They're X, Tier foreign, they're automotive leases. they're is widely North they're entities. diversified X. South, XX-plus individual

-- significant it The widely a is very category it's -- So diversified. percentage. is a

second the concentration. within again, us And underneath it's industry lot gives good the -- our tenants a But comfort. individual that is think largest have granularity pretty that there it concentration credit. of I exits a

Operator

line with question from of next Petersen the our And Jefferies. Jon comes

Jonathan Petersen

got I terms terms come guidance answer. year we be assumed So back spread. think what will to What of don't of X% to in a the leasing spreads the in leasing this is to X%? direct

Benjamin Butcher

I am I'm it going wishing you but going happy for turn to back Day. to over to Bill, Valentine's cascade not us

William Crooker

single-digits XXXX. projecting mid John, in it's leasing spreads We're Bill. cash for

Jonathan Petersen

great. today, And be at end target? terms plan fair of in stay you guys debt-to-EBITDA the leverage, of where trading to the is right, I Okay, it to that price all assume stock think, would then low that with

William Crooker

X.XX year. right. is few X X.XX We've been past that's the to for for our around the John, range quarters. operating

I So be range think that foreseeable operating future. around for the we'll

Jonathan Petersen

value-add just would more reason it. in these maybe make understand phrase then the markets? because other way just sure And primarily of you and question a Okay. primary of question So primarily of primary rest to acquisitions, one on more it, assets the are it's go I I -- the better they're value-add Is in the I guess after where to markets? mix secondary guess, another acquisitions the markets

Benjamin Butcher

cap value-add necessary I line I as them relatively basis our may to time rate considering characterization. these is reasons much that of fully don't be where development that short. this value as assets like that basis add is, the accomplish into might the get component is assets. value-add of stabilized to we have business versus value the that one to between opposed as you believe that that can here can that there in We points think we we make on XXX buy a

of hasn't the will consistent but value its add, expectations operating that where So that cycle, are be portion accomplish of pretty is extent cycle we're confident with our as it the we in within to we a mentioned value. garnering the been we that it

Jonathan Petersen

just And a right imbalance last where right. All see maybe one. now? markets supply then any there you one Are

Benjamin Butcher

in or we markets I where be not say, South maybe is not underwriting my markets instance is Dallas. where the is have where terribly we wouldn't. are should that not will a for this Or active that the be within operating It's been point It invest The that's to consistent supply markets see prior markers underwriting that undertaken to little the we're with the that concerns. we imbalance the undertaken rational quarter finer has just in is, submarkets in.

to amount coming downtime. on new the impact understand the have supply You and vacancy of and in probable

not it's garnering So that us we rational to our occupancy underwriting wouldn't. from like being perhaps markets buy time line risks we about our may be -- for think able that where other people We optimistic the prevents that. more in of believe those

Operator

our to turn session. concludes floor to back for would Butcher I closing like This the question-and-answer comments. Ben

Benjamin Butcher

for today. Thank everybody, you, joining us

we earlier, As at mentioned Fundamentals our comments we sit particularly a time. in are attractive strong.

them capital have a of lot available have We opportunities of and lot a to. to apply

we're telling Thank more So about you to excited year as it forward progresses. about XXXX you. look the very and

Operator

This concludes today's conference.

this may at and lines participation. you for your time your thank You disconnect

STAG Industrial (STAG) 14 Feb 192018 Q4 Earnings call transcript