STAG - Earnings call 3 2023 | STAG Industrial, Inc.

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Operator

Ladies and gentlemen, good morning, and welcome to the STAG Industrial, Inc.

Third Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Steve Xiarhos, Investor Relations. Please go ahead.

Steve Xiarhos

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

company's under addition distributed supplemental unaudited the release the information at we on In press an yesterday, to section. Investor the Relations have posted presentation website www.stagindustrial.com, quarterly

company's defined On as answers to forward-looking the of XXXX. Private Securities remarks your today's prepared and will questions call, contain Act the in statements Litigation Reform

to and all today. uncertainties in matters differ acquisition the that and rates are contained supplemental same-store risks to of measures discussed the may economic from prospects, the leasing actual the company's address encourage matters. We subject available FFO, filings that other the collections, statements and in website. include and other Forward-looking non-GAAP and statements and industry information reconciliations to trends of cause forward-looking results package and those these on the core with retention forecasts Examples contained definitions statements discussion listeners forward-looking related SEC to guidance, rent disposition review more of volumes, detailed company's G&A, NOI,

reminder, areas of the with Estate obligation to Operations. a is Also Investment forward-looking to Chief over focus. I'll Mike update statements As our EVP questions Crooker, to today Steve the us today's call of specific estimates Kimball, Real Officer. Officer; from Matts Chief Officer; Financial We're here Chase, statements. On hear now our and Bill. Chief answer turn available you Bill to call, will any assumes Industrial Executive represent today. STAG our as and forward-looking no management's Pinard, of

William Crooker

one by happy as have changing affordable for given degree the tailwinds, and portfolio to has our best on Industrial including STAG's landscape. Construction is e-commerce. in the for onshoring we STAG at the a activity rent normalization benefiting which to growth, rates. of experienced you capital, and with steadily difficult years last you, is the expensive declined Thank Industrial. instances quarter third secular of welcome be since starts today primarily generally debt tracking the everybody, earnings is end however, morning, more driven discuss from leasing obtain quarter. of results record. us many to have Steve. call to nearshoring, We're Market year, Good

uncertainty, to the box particularly concentrated space. national been It's average size feet, expect new directly provide XXX,XXX million the important the lack are capital to these an larger half than suite with STAG's The is a projected not softest of supply larger buildings. economic conditions. deliveries be to absorbed. as leverage of square of are last year-end, slight from expected indicative X.X% a these is level These vacancy This uptick with nearly feet compete Deliveries of this big strong in forecast. be of approximately result rate square less vacancy as to deliveries that year, industrial box of classified of stock overall still X% to are rent spaces acceleration by note tenants and space. Subleasing the new quarter's does spaces. with and as We XXX,XXX spaces. growth to these opposed industrial in starts construction potential generation move between third-party opting first logistics X projects also to the in large market is big of providers concentrated part continues market has expensive In light existing into to funding

high this in the growth We be rent our year. to portfolio single market in expect digits

our part secular markets, in average portfolio has the in the to the our rent is We XXXX resilient, of growth suite portfolio our There which has of private in. Because digits. we operate by mentioned meeting within tailwinds coastal enterprises be part due as expect remained to noncoastal government growth earlier, The for investment markets. rent federal of strongest an economic by positioning and mid-single both portfolio convergence the market influx the in our the in between in size, noncoastal as in and well driven the a been markets. is demand markets largely

proud spreads at cash leasing record report and are highs We GAAP STAG. to for

October of to XX, of cash achieved at As leasing in accomplish XX% XXXX we we've spreads leasing of XX.X%. expect

XXXX, have XX% million approximately next XX% For spreads. feet, we of leasing, addressed year's achieving re-leasing square X expected cash

begin sellers acquisitions. the spread bid-ask buyers this where between Moving transactions of In towards and year, the could to to levels narrowed middle clear.

X.X%, end, for X.X% XX buildings with quarter $XX.X cash totaled quarter $XXX.X the straight-line rate. X consisted of for This cash third buildings million respectively. and million. volume acquisition cap we of to acquired Our Subsequent a rates X.X% and cap and

And rapid guidance the market. increase the resurgence transaction our have we as of dampened adjusted in Recently, interest accordingly. such, has rates

dispositions terms aggregate quarter, noncore X In of of sold million. this buildings we $XX.X for proceeds

to lease On the compete in healthy development. the XXX XXX,XXX as is square greater remains South Port development activity we XX foot our substantial commencement We completion achieved positioned This underwriting. well tenant half front, anticipate assumptions in XX,XXX Carolina. rents first is suite in this shell our for Port XXX quarter, of range. to located Greer, meeting than

to a was distribution accommodate August, an building. This addition, XX feet. will in Anticipated to shovel-ready for buildings deliver up to acres to of development growing barrier totaling the in Tampa. in closed of assets rent the dirt for high strong Tampa, XXXX, million. construct add entry, of tenants STAG East on the portfolio Blue growth In X per to XXX,XXX $X.X of Florida, fourth submarket submarket its STAG quarter opportunity warehouse X and square

remaining results to will With that, updates I will to who turn it and guidance. our over Matts cover

Matts Pinard

quarter Thank was with dividends Included increase $XXX,XXX the this flow FFO of through equal year quarter run of third adjusted X.X% today for core additional totaled is in for for as XX. Leverage $XXX an the you, rate from $X.XX third of $X.XX our per of Core the at quarter in the September last distribution This and X.Xx. end with is morning, stands compared net low $XX.X quarter, annualized FFO debt we just an range settlement and share million cash $XX.X EBITDA was to FFO tenant. year. million. the same-store to retained a a cash everyone. Liquidity former resulted for core excluded good Bill, million, paid NOI. after below guidance have to Cash of available settlement

During we spreads generated million XX.X%, the quarter, commenced respectively. straight-line totaling XX.X% and leases square which leasing feet, and X.X XX cash record of

the of same-store quarter year-to-date. XX.X% for approximately and for cash we year. and the cash Retention XX.X% of quarter We adjusted XX% was for X.X% when for immediate expect X.X% achieved backfills, leasing growth spreads NOI the

year. through basis this September X experienced We've points credit of loss XX

activity, we proceeds. settled $XX.X fully forward outstanding XX, equity of capital contracts and market on all terms received July In million in

range updates. year. X.XX% we guidance the and reduced XX to the our Moving for made macro basis and of points current for have expectation the the at following X.X% disposition uncertain to year a we the increased for volume environment, into guidance acquisitions or cash midpoint. to our of the Due We remainder

FFO volume year have million X.X%. to by the of the of a $XXX million. million. range to to in $X.XX range per guidance a the our share, disposition of a to and to $XXX per acquisition and incremental expected We to this our and driven material million now between ranges to $XXX decreased midpoint of range to $XX.X narrowed has reduction X.X% volume year-to-date. We acquisitions the Acquisition decreased range expected to million These share $XXX range are Core reflective for year decrease increased of $X.XX an on based midpoint of progress the made largely are guidance increase of acquisition CapEx today, $X.XX. through

year. G&A a We have updated the our $XX range expectations $XX decreased for XX% have million. for retention been million year the percentage to to of to

rate we annualized over Finally, now between to turn X.XXx. I it debt to expect and will be EBITDA Xx net Bill. run to adjusted back

William Crooker

you, Thank Matts.

within happy team face Our relative value to sector. the macroeconomic STAG's I'm uncertainty. drive in public continued REIT continues about of position the

the sheet of opportunistic balance industrial fundamentals evolves will going space the Our within defensive forward. industrial allow be to resilience with landscape the us as coupled

turn the it for now operator to questions. back We'll

Operator

[Operator Mailman Citi. comes Instructions] Our question Craig first from with

Craig Mailman

the a cash the when rate Just Or cash cap on X.X%, more rate? SAP guys cash stabilized those ], cap and are put rates? is that X.X% one in of initial cap clarification you [

William Crooker

the rate lease within cap effectively. stabilized year if the a is expiring It's first

of had other a there's the Craig. So than in-place. a those or But that, vacancy in there, it's couple we

if from cap rate market helps. a X.X%, for So that perspective X.X%, the acquisitions, it's around QX

Craig Mailman

What would difference Would and the initial? be X.X% Okay. it [indiscernible] the tight or... be pretty

William Crooker

there's one some buildings, in There's our of vacancy there.

for So It's drag time. that's it points XXX short in going lower a plus of period the obviously down. basis probably to

Craig Mailman

the year which And then earnings relatively good sounds on are commentary really some this of just coastal your kind Bill, market markets your rent follow-up do you think peers versus growth season, of this a question, a driver downtick the are of that high next coastal the of maybe to given digit of single-digit growth only some year kind issues facing? from mid-single of some markets rent seeing

William Crooker

a to scenario it's what for -- quarter, had difference still similar us. It's we a it's of markets where more than size Yes. last

boxes bigger XXX,XXX are holding than probably that still even -- square well. rent growth market XXX to the And are slowing, size smaller suite and negative. flat the is maybe up less So is feet really

really South big seeing all Indianapolis, you markets box we're get But it's suite that up sizes, boxes, ones Columbus, will where some the in holding markets, those are Dallas, So size. with smaller bigger distribution struggle suite the weakness when those still well.

Operator

BMO Capital Markets. from Our John next comes with question Kim

John Kim

rates cap acquisitions. follow Just on on question the on wanted up to Craig's

So closer even NOI Page yield. look you the on the then the timing, at compare adjustments be to initial have to it of you sub to your when X adjusting something for and X% rate NOI cap initial suggests it initial would that impact the supplement,

So that discrepancy regards... I'm; is wondering what in

William Crooker

discrepancy dispositions. to is primarily the related So

couple this a dispositions quarter. had we So noncore of

had think market and that rate a a we Tier X one disposed that higher of. cap option a was was was that fixed I another noncore, non-CBRE tenet

rates. So those cap are higher

mix I think rate dispositions. and look of run when that a acquisitions it's you adjustment, at

John Kim

So disposition? cap what were rates the in

William Crooker

you do those? have Matts,

Matts Pinard

X.X%. rate X, both for XXX% the It were they aggregate was disposition those John, cap occupied.

home portfolio And reiterate that a Bill again, these and our are in dispose not of to X. assets did opportunistically we have said, what these

Operator

next from Street. Our with comes Green question Vince Tibone

Vince Tibone

questions development activity. on have I a few Tampa the

yield just they're on kind the expected environment, talk given maybe what these spend and of you're incremental could on thought rate targeting projects, then curious once market rate cap you those just those on buildings. the uncertain you profit done. guys about also how about provide If And cap the margins

William Crooker

Thanks, risk we a been it's would a profit us so have as And a construction great From I the is Vince. a when high in land, able we and for a lease higher on that to even dirt margin, something X. opportunity of it so different depending we maybe and it's didn't high spectrum. that we that shovel immediately. of I into. going to little to high yield environment, from entitlement almost the on something be not because do that, And Xs the capital ready, why going when be enter basis, it's any begin bit That was maybe touch market could acquired was not teens. Xs a we The reason think said, the lower exactly

Vince Tibone

or you yield, cash And the is GAAP a a ones that just...

William Crooker

That's cash.

Vince Tibone

then to more kind of one-off Got that's No, of unique next it. start so? over projects need you you do and or maybe a And look is deal year for a these this expect opportunity? mentioned, of Or more more development the helpful. you

William Crooker

these, we'd do of great mean this I opportunity. and to a is more love

partner great but just JV. us. not We We It's constructing it for transaction. whole own thing, have a who's the a in the

acquiring we'd we saw better think absolutely stakeholders that use interest this environment, if it's As opportunities the the more in that themselves, this long of execute best on term, stabilized in these our something we and it. our like of something present is, acquisitions. than It's capital opportunities

Operator

from comes the question with line Nick Baird. next Our of Thillman

Nicholas Thillman

activity there. on pricey of bit quarter, a market I little you that's know in the Empire. Maybe been in acquisition the kind guys third a Inland that's acquired too

here. maybe little market you're on bit seeing more in a that what and a details good what made that So opportunity

William Crooker

Yes. I'll to it that pass over answer one. Mike to Chase

Michael Chase

San from something the of in which Riverside asset of -- us the terms fortunately which Empire that the pulls from Yes. located market, tenant is Thanks, southern in the portion Diego, The Inland attracted base we transaction. -- that is and Nick.

little the In buildings, occupied, X the tenants, of as feet. but as to was It addition, it of about XXX% market really feet. square there with area. and XX,XXX meets XX,XXX X XX,XXX They kind the that but square was meat in break down

that of so what was us transaction. And kind drove really that to

Nicholas Thillman

like looks ticked it Matts, for maybe then And helpful. of That's up kind reimbursement sequentially.

get I like a Just wondering details if couple on driving of that. changes. more could forward Maybe

Matts Pinard

seen Yes, quarters. absolutely, no reimbursable. increase what an really in point, are there. similar XXX% is previous seen But Nick. your There's theme we've we've to which in to This very expenses,

to it's aggregate change base. we right, opposed revenues So kind percentage, recommend at change expense. smaller the a looking a and size-based on bigger base as of on versus just Again, the a the line

Operator

Fargo. Jason question from next Our comes Belcher with Wells

Jason Belcher

I on acquisition. California guess, first, following up Riverside, the just

your I of a foray one new think more a targeting Or at Southern first for first this least that your is market. Is or forays California point? the to opportunity of additional you're that's be growth? market one-off at it that into going

William Crooker

another own close is We like It's entry in there. Yes. asset Diego, which just, always price for market. San We it's the there. us, to been

was not X.X% and was included the think in cap. below XX% a to So I XX% that's well, this deal, And market in X.X%. particular, as

there, and that Mike for market. meets And the get sizes as demand. like we the suite So us, to really it good said, a into opportunity

in to capital this we if of present on can. So type we're as themselves execute environment, opportunities going market those

Jason Belcher

thinking we're tenants hearing longer leasing And taking the larger all around it. to Got decisions. noise then make just about

Just your persists And you us this single-tenant think 'XX? can if do into think headwinds you about drive largely how help it occupancy dynamic affects could portfolio. this

William Crooker

Yes.

can assets rolling XXX,XXX suite sizes, way our we if -- XX% assets we it's underwrite larger our make sure that assets XX% feet. down smaller being multi-tenant. above portfolio need that So a is With we single said, market year, that assets is square we is if tenant, to. have no next The our break

majority think above those, renewed We feet. already rolling few square for are a them. the But have that we've XXX,XXX I of

doesn't portfolio headwinds said as our big-box remarks, average our my I suite year. those than for less size next face prepared us, is again, feet. really And So square in XXX,XXX

think square I it's feet. thousand XXX-ish

Operator

next Our Samir question comes ISI. Evercore from with Khanal

Samir Khanal

a of sort the now. market single talking that of high on that's expand Bill, Is that. guess, a about of the sort demand on Maybe driving this growth, I function range kind rent of like digits you're markets, better just trying that a I'm it's demand onshoring understanding, your given the to given bit or nearshoring you're low peers. supply your get seeing markets? your maybe in from different of

William Crooker

question. put is industries good big various to assets, or With that. a our more doubled I XPLs year, to of single before, a the mentioned be we've This get last a demand The some wins were high over a we we it's market, onshoring, big specific coming and little effectively had on thought little significant a tenants those this have We've had to driver. assets. Yes, from those continue asking respect on to the nearshoring, to digits, number year. call X% in assets call a seen it's the El going our we be out e-commerce demand driver. Paso when been what we rents

impact top, timing peers the the positive just call of we look is and in part growth. the the lot With respect rent seen it -- competing impact But our the just market coming of growth presentations, mentioned the what's about to as market our rent, when as how the our then is limited to compares exact to markets. is it, not we direct haven't supply. half we supply with like demand onshoring, well is and certainly And impact in to demand the box, map coming. investor XX our our the the market It's to measure supply a big And of feels talked other you at XX, supply significance where portfolio. and of it's And online, space. as rent the hard it

continued with onshoring. in incremental from short supply demand the And I term, think the less demand. medium So to

Samir Khanal

in It pencils I I follow-up. I if just for about are guess, missed I then talked development well? you acquisitions of guess those sorry opportunities but it's I'm as guidance. seeing... with you're acquisition last quarter overall like know case as development what's the acquisition this, these sounds it. the Got opportunities. the the What a And But kind down

William Crooker

one initial the that opportunities low. is seeing where executing similar Tampa, in we're Yes, to price we're the

$XXX capital initial about our pipeline just pipeline, So think these when $XXX development but of call that's outflow it, potential the opportunities, you million million is, that. our for of to

$X and million million you'll build a another parcel build million $XX land $XX So then to to development.

of So just of there's markets. those capital we're seeing given lot the opportunities a the state

think focused this call mentioned I But a as we're -- prior I've on well.

being doing Our our both CBRE with markets. Tier Tampa and the in a our those markets. the X that's markets, strategy the XXX standpoint, Port From is really so it's we're half probably of what XX And development development. in top top

So we obviously, the price bit opportunities for get little for to wanted most they a be just And expect there We're more us. them seeing longer. take to we is effective opportunities.

Samir Khanal

the Or . thinking about come from sort how would opportunities that? are flow? funding those cash for of And free you

William Crooker

combination flow Yes, of right now. revolver a free cash and

Operator

of comes question from next with Bonnel Bank Camille of the line Our America.

Andrew Berger

on Berger could around about assets dispositions. your head into thoughts core just 'XX behalf recycling, we end this whether big I'm you're about of thinking sell But Andrew Camille. more is noncore. capital I how just This dispositions we wondering if wondering picture, 'XX. and were quarter know get as you some

William Crooker

I On on the noncore, an Xs. cap our aggregate was call mean, I were basis, opportunistic. of we low half dispositions Xs, about high this Yes. rate year, think half aggregate, were, it, had

dispositions mid-Xs. in the So were opportunistic

down, the we phase discovery a When we market very also execution really disposition guidance adjust It's acquisition we capital given price the So again good adjust environment. our in guidance entered -- down. market. our

able of it's efficiently assets. not tough acquire, to dispose efficiently when So to we're

the given and every quiet, in in fine-tune right our pretty guidance give volatility rates. of But now, we this it's the something capital that is our So as February. XXXX and always market's just we'll interest each plan year,

Andrew Berger

little and versus capital you as thinking how And sense. my a source as makes spread about two? the the current maybe you're follow-up, debt That bit please about it. a cost could then between talk Got equity

Matts Pinard

Matts. This Absolutely. is

for I one, think appropriate capital the is number thing overarching an need we any use deployment.

acquisition Bill We sheet significant We're discovery. price through a million levered lowly we going in market, tons do million to of were this on liquidity. capacity of $XXX not cash reverted As closing year. of retain schedule, flow have balance the look, free the amount mentioned, on our $XX to anything to

be capital, the So deploy would as piece. that we first

we're Deals the that Bill X market. here hit ] would But appropriate not pulled, dollars reset incremental as are the opportunities. tenure to being seeing we take-home really now opportunities. kind I find then of revolver point mentioned, And deals be some is there extent [ think aren't trading, right the

So we're not we to if were and debt, not we're at be equity many but now. And evaluating right in issue long-term an really in the looking go Xs, today and term issue opportunities to if we're it's Xs. really out the low low that loans perspective, from going

Operator

Our Carroll, from next Capital RBC question Markets. comes Michael

Michael Carroll

the mean, have expect sidelines? doing really, markets before And questions. up back last of you're Does a off activity? that? in reramping long I know, be I the do how need you comfortable do the investment what to the stabilize feel start Just you on before few that see Bill, market. step capital taking to you to you

William Crooker

rates. And into market of that's what have market on X what I think you returns a get that's to when happens a spike to what capital catalyst we happens, sell closed usually, more in get little transactions. is. requiring -- everybody up spreads is underwriting you we're opportunities pricing sellers feels what And and If see bid-ask in for wider. still rapid that this and confident you start X willing are this interest or bit We're time the market comps happens that then environment, And the then deals -- market we'll to where a we're just what back just execute and those. generally. we're open good it

still deals, we're still higher just initial we're underwriting evaluating So deals. but underwriting for returns. We're

Michael Carroll

if Okay. XXXX mentioned they to will a give us can of XXXX? And be guess, then Great. you you this how your this similar process. But are year not. lease they date, at And us on Or to what renewal look time, you are I'm gave this thinking last what cash an I this spreads or yet not sure through year? year, to update year? you're they similar about or are kind next

William Crooker

Yes.

of X So we've feet. saying leasing XX% leasing I guidance on next for to our the spreads, square rental it's for not And leasing for year XX% And I'm on But it's year is from I mean, XXXX, expect addressed call. comfortable this think, expecting XX% we're what that this XX%. at we giving about where is, next spreads for all of about then million our spreads are time.

Operator

from line Mike with [Operator Mueller question of Instructions] Our comes next the JPMorgan.

Michael Mueller

more a developments as tenant developments single we sounds like you bit the little now? the be multi-tenant it can guess, for think about view initial versus of your to I going buildings skewed. talk going And are right of forward? that template Because multi-tenant should the

William Crooker

specifically, view Mike. our we're the the in make developments are market. to risk-adjusted achieve think in I meeting trying to want best And the Well, returns, we developments, demand our is our that sure

for that development, And users. so Tampa smaller it's

And want sure that to make so building to demand. we meet we're

multi-tenant is portfolio our of XX% said today. You

So multi-tenant, it we couple yes, to a tenant our tenant. years XX-XX probably over In has would are that the years, went over XX IPO single say, past close morphed strategy, at single acquisitions I years. the our ago, XX, of multi-tenant, but was out

Michael Mueller

it. Got

acquisition you range the that the think is guess, for be that transactions of comparable you what's at I And XQ rates -- just given today, then, the spot kind do Is of rates. backup you view now? in range product would looking a penciled, on right the cap ballpark Okay. right for that

William Crooker

transactions in The were sourced QX QX.

to be X, low opportunity in with mark-to-market in And a probably place cap now, where not that's X. market -- so relation the about are where would high rate. got included I depending assets in is Xs are leases Xs, in say relation probably those the to that on were

Operator

the I no are for comments. to closing questions, further Crooker, over Bill CEO, would As conference hand now there

William Crooker

we of all conferences. care. support upcoming to seeing the look want just soon all I thank at forward and you the call say STAG you Take through the And to today years. joining in for

Operator

of Inc. participation. conference has for you. Thank STAG you The your concluded. Thank Industrial,

lines. your disconnect now may You

STAG Industrial (STAG) 27 Oct 232023 Q3 Earnings call transcript