STAG Industrial, Inc. Q4 FY2024 earnings call

• Supply pipeline contracted with deliveries down over 30% in 2024 and expected to continue in 2025. Active tenant industries in 2024 included commercial services, building products, and airfreight/logistics. - Leasing activity reaccelerated in 2025 with 70% of operating portfolio square feet for 2025 leased and 23.8% cash leasing spreads. American Tire Distributors leases are current despite bankruptcy. - Q4 acquisitions totaled $294 million, including a $73 million portfolio of 5 single-tenant buildings in Chicago with 100% occupancy and weighted average lease term of 7.1 years. Post-quarter-end, another acquisition of $16.6 million. - Dispositions in Q4 were $29 million, with a January 2025 sale of a Nashua, New Hampshire building for $67 million. - Development: ~2.5 million sq ft across 11 buildings, with 50% under construction leased, 16% pre-leased, and 43% delivered leased. A 474,000 sq ft building in Greer, SC has a full building lease commencing May 2025.

Core FFO per share was $0.61 for the quarter, an increase of 4.8% compared to 2023. Same-store cash NOI grew 4.4% in the fourth quarter and 5.8% for the full year. In the fourth quarter, acquisitions totaled $294 million, consisting of 15 buildings with cash and straight-line cap rates of 6.2% and 6.9% respectively. Dispositions in the fourth quarter were two buildings with aggregate proceeds of $29 million. Leasing activity saw 70% of the operating portfolio square feet expected to be leased in 2025 achieved a cash leasing spread of 23.8%.

• Same-store cash NOI growth expected to range between 3.5% to 4%, retention 70% to 75%, cash leasing spreads projected to be approximately 25%, and 14 million square feet of budgeted new and renewal leasing for the year. - Same-store occupancy to decrease 100 basis points. - Acquisition volume guidance ranges from $350 million to $650 million with a cash capitalization rate between 6.25% and 6.75%, weighted to the back end of the year. - Disposition volume guidance ranges from $100 million to $200 million. - G&A expected to be between $52 million and $54 million. - Initiating a core FFO per share range of $2.46 to $2.50 per share.

• Volatility in capital markets affecting acquisition and disposition timing and pricing. - Uncertainty regarding tariffs impacting tenant behavior and leasing activity. - Interest rate volatility potentially slowing the transaction market.

Q: On leasing and spreads here, you know, you guys had a good year overall in 2024 on the spread side, but the fourth quarter was a little bit lighter at 19%. And you're expected to, you know, reaccelerate to 24% and the 70% you did so far. Is that 24% a good kind of place to think about the full year to be? Then just separately, the 14 million square feet planned for 2025, if you kind of look last quarter, you guys were closer to 15 million square feet. Is what's going on with the volatility or how should we think about that in terms of the overall plan of gross leasing?

A: Yeah. Hey, Craig. Very interesting way you phrased the question to get a couple of questions into one, but I appreciate it. So the leasing spreads for Q4 were a little lower. That was related to some fixed-rate renewal options in Q4. That was factored into our original guidance. If you exclude those, our leasing spreads in Q4 would have been 34%. And then looking into 2025, we're approximately 24% today for about 70% of the leasing we expect to do. So I think leasing spreads for 2025 will be in and around 24-25%. So we've got a pretty good chunk of that done already. And then with respect to prior views on leasing activity versus current views on leasing activity, a couple of things happened there. One, we sold the building in Nashua, New Hampshire, in Q1. That was a building that we were repositioning in Q4, and we were planning on leasing it ultimately. We decided to sell it just due to the economics. Very interesting transaction there. That was a drop in leasing activity we previously expected to lease in 2024, but now we've sold the building. And there was also another non-renewal that we expected to renew on the back half of next year that didn't renew, so now we're planning to lease in the back half of 2025.

Q: Hi. Good morning. Can you discuss recent trends in the private transaction market? And specifically, have you seen any slowdown in transaction activity or a notable change in price since the ten-year has climbed pretty significantly from the trough in, you know, September last year?

A: I mean, there's been some interesting trends in the private market. There were some portfolios that got executed last year. There was some big appetites for some of the larger private equity shops. The largest private equity shops are actually selling more, which I think you know who I'm referencing. But right now, there's a little bit of probably a pause in the private market. We are seeing and hearing of some portfolios coming out that may trade, and those may trade at a little bit tighter yields because they're shorter lease terms that they can get higher yields in the next three years. But, Mike, I don't know if there's anything else you want to touch on there. Michael Chase: Yeah. No, Bill. I think you hit on that. The year-end was a little bit slower. Well, it was a fast year-end for closing deals, but it was a slower year at year-end for deals coming out to market. That trickled into January, but we've seen a little bit of an uptick in February, and we expect that to accelerate throughout the rest of the year.

Q: Thank you. Can you tie in the 100 basis point occupancy loss you expect this year with the 9.7 million square feet that you've addressed for 2025, and also the 6.9 million square feet that is expiring? I'm just doesn't seem like it's apples to apples to me, so I just wanted to clarify.

A: Don't know if I can connect all those dots, but we certainly can drill down more detailed maybe after the call, John. But, I mean, what we're seeing here is our expected leasing for 2025 is around 14 million-ish square feet. We've done 70% of our leasing in our operating portfolio. So the math there is we've got another 4 million square feet in our operating portfolio we expect to lease. And then there's about 2 million square feet we expect to lease outside of the operating portfolio, which is a higher number than what we've had in the past, but I think it speaks to what we've been doing with our developments, our redevelopments, our repositioning. And so that's all, you know, I think it's a great shift. But there's still a fair amount of wood to chop as we move through the year. Matts Pinard: Yeah. John, this is Matts. So I'll jump in here. I think one point of clarification here is when we talk about the square feet we expect to lease in 2025, that's not simply addressing expiries to Bill's point. It includes new executive leasing that we have in our budget as well. I think that's going to help bridge the numbers you're looking at.