STAG Industrial, Inc. Q1 FY2025 earnings call

• Strong start to 2025 with core FFO per share exceeding initial expectations. - Leased 78.5% of the operating portfolio square feet expected to lease in 2025, achieving a 25.1% cash leasing spread. - Global trade war escalation causing longer lease gestation periods but continued tenant tours. - Signed 3.6 million square feet of leases commencing in the second quarter, including a 500,000 square foot full building lease in Savannah with a 25% cash spread. - National under-construction pipeline decreased more than 16% sequentially since the fourth quarter. - Acquired three buildings in the first quarter, including a 162,000 square foot building in Shakopee, Minnesota for $16.6 million at a 6.5% cash cap rate. - Sold a building in Nashua, New Hampshire for $67 million at a 4.9% cash cap rate. - Development pipeline has approximately 2.5 million square feet across 11 buildings, with 50% under construction, 16% pre-leased, and 51% leased on delivered space. - Repaid a $100 million private placement note and entered into a $550 million note purchase agreement with a weighted average fixed interest rate of 5.65%.

Core FFO per share was $0.61 in the first quarter. Leased 78.5% of the operating portfolio square feet expected to lease in 2025 with a 25.1% cash leasing spread. Acquisitions in the first quarter totaled $43 million, consisting of three buildings with cash and straight-line cap rates of 6.8% and 7.0%. Sold one building in Nashua, New Hampshire for $67 million at a 4.9% cash cap rate. Same-store cash NOI grew 3.4% for the quarter, driven by leasing spreads and escalators, partially offset by occupancy loss.

• Maintained core FFO per share guidance. - Same-store cash NOI growth guidance remains in place. - Credit loss guidance is maintained at 75 basis points, with American Tire distributors current on their 2025 rents. - Acquisition volume guidance remains unchanged, with the guidance being back-end weighted and having minimal impact on core FFO. - Occupancy loss guidance of 100 basis points remains unchanged.

• Impact of global trade war and tariffs on lease gestation periods and tenant decision-making. - Potential economic slowdown negatively impacting warehouse space demand. - Uncertainty in lease conversions from tours to signed letters of intent due to macroeconomic events. - Volatility in the private transactions market with potential seller pullbacks of deals.

Q: Craig Mailman asked about new leasing activity in the second quarter.

A: Bill Crooker responded that 3.6 million square feet of leases are commencing in the second quarter, including 1 million square feet of new leasing, with a 500,000 square foot full building lease in the Savannah market executed with a 25% cash leasing spread.

Q: Jonathan Hughes inquired about early lease renewals.

A: William Crooker stated that tenants are renewing early to get better rates and ahead of potential supply inflection, with strong new leasing activity in the second quarter, including 1 million square feet of new leasing one month into the quarter.

Q: Vince Tibone asked about trends in the private transactions market.

A: William Crooker and Mike Chase discussed the private market being strong, public bids vs private marks, and some sellers pulling deals due to volatility in the market.

Q: Nick Tillman asked about credit loss and American Tire.

A: Matts Pinard said there was minimal credit loss in the first quarter, with 75 basis points of credit loss guidance for the full year, and American Tire distributors are current on their rents.

Q: Michael Carroll asked about leasing activity and occupancy loss.

A: William Crooker and Matts Pinard discussed leasing activity holding steady, with 100 basis points of occupancy loss guidance remaining unchanged.

Q: Jason Belcher asked about rent spreads on 2026 expirations.

A: William Crooker said it is too early to discuss rent spreads for 2026 expirations.

Q: Mike Mueller asked about demand segments.

A: William Crooker stated that demand is still present but taking longer to convert due to macroeconomic uncertainty.

Q: Richard Anderson asked about retention and new tenants.

A: William Crooker and Matts Pinard discussed retention metrics and on-shoring/near-shoring benefiting the portfolio.

Q: Michael Griffin asked about concessions and American Tire.

A: William Crooker discussed concessions and American Tire being current on rents with no material impact on the portfolio.