STAG Industrial, Inc. Q2 FY2025 earnings call

• Year-to-date results exceeded initial business plan for the first half of the year with favorable operating portfolio results and progress in leasing development portfolio.
• Leased 90.8% of operating portfolio square feet expected to lease in 2025 with 24.5% cash leasing spreads.
• Supply side pipeline moderated, new starts down from first half of last year, but transaction market showing signs of becoming more active.
• Acquired a 183,000 sq ft building in Milwaukee at 7.1% cap rate and sold a noncore building in Calhoun, GA for $9.1M.
• Development platform has ~3 million sq ft across 12 buildings, including a 95-5 JV in Louisville, KY for a 500,000 sq ft warehouse.
• Core FFO per share $0.63, leverage at 5.1x net debt to annualized run rate adjusted EBITDA, liquidity $961M at quarter end.
• Resolved credit situations with American Tire Distributors and Vitamin Shoppe, resulting in credit loss moderation.

Core FFO per share was $0.63 for the quarter, an increase of 3.3% compared to the previous year. Leasing: 90.8% of the operating portfolio square feet expected to be leased in 2025 was achieved, with cash leasing spreads of 24.5%. Development: Approximately 3 million square feet of development activity across 12 buildings in the U.S. 42% under construction, 58% delivered and 69% leased. Acquisition: In June, acquired an 183,000 square foot building in Milwaukee, WI for $18.4 million at a cash cap rate of 7.1%. Disposition: Sold a noncore building in Calhoun, GA for $9.1 million, with a cash cap rate of 7.4% and unlevered IRR of 14%.

• Expected ending same-store portfolio occupancy losses moderated to 75 basis points from 100 basis points.
• Retention guidance increased to 75% based on leases signed to date.
• Credit loss guidance reduced from 75 basis points to 50 basis points.
• Cash same-store guidance increased to 3.75% to 4% for the year, an increase of 25 basis points at the low end.
• G&A expectations updated to $52M to $53M, a decrease of $500,000 at the midpoint.
• Core FFO per share guidance revised to $2.48 to $2.52 per share, an increase of $0.02 at the midpoint.

• Forward-looking statements subject to risks and uncertainties causing actual results to differ.
• Market volatility related to global trade wars and tariff headlines.
• Transaction market slowdown, although showing signs of becoming more active.
• Credit losses, although moderated by resolved credit situations.

Q: Craig Mailman asked about leasing markets, specifically which markets are seeing better signs of recovery versus lagging.

A: Bill Crooker responded that Midwest markets like Minneapolis, Milwaukee, Louisville, etc., and Houston are doing well; bulk distribution markets like [Indie], Columbus, Memphis are lagging; border markets like El Paso have short-term tariff uncertainty but good medium-term prospects.

Q: Nick Thillman asked about renewals and lease expirations in 2026.

A: Bill Crooker stated that early renewals for large sophisticated tenants are active, and they are ahead of previous years in addressing 2026 lease expirations, with market rent growth expected to increase.

Q: Eric Borden asked about the acquisition pipeline and credit upgrade impact.

A: Bill Crooker and Mike Chase discussed the acquisition pipeline makeup and improvement, while Matts Pinard talked about the credit upgrade allowing progression to public bond issuance and potential debt cost benefits.

Q: Jessica Zheng asked about multi-tenant vs single-tenant in development pipeline.

A: Steve Xiarhos responded that buildings are designed with flexibility to accommodate multi and single tenants, and they've been fortunate to land larger tenants than initially anticipated.