STAG Industrial, Inc. Q3 FY2025 earnings call

Key Points

• Year-to-date results exceeded internal projections, leading to an increase in core FFO guidance to a range of $2.52 to $2.54 per share, a $0.03 increase at the midpoint.
• Leasing demand improved with increased tours and RFPs; 99% of 2025 leasing was accomplished at levels consistent with initial guidance, including cash leasing spreads of approximately 24%.
• Addressed 52% of the operating portfolio square feet expected to lease in 2026, with 95% being renewals, and cash leasing spreads expected to be between 18% and 20% for 2026.
• Acquisition volume in the third quarter totaled $101.5 million, with $153 million more under agreement and slated to close before year-end.
• Development platform had 3.4 million square feet of activity, with completed developments 88% leased, including a fully leased Nashville development and a new build-to-suit in Union, Ohio with a stabilized yield of 7%.

Core FFO per share was $0.65 for the quarter, an increase of 8.3% compared to the prior year. Acquisition volume for the third quarter totaled $101.5 million. There was 3.4 million square feet of development activity or recent completions across 13 buildings as of the end of Q3, with completed developments 88% leased as of September 30.

Updates

• Revised core FFO guidance to $2.52 to $2.54 per share, an increase of $0.03 at the midpoint.
• Decreased acquisition volume guidance to a range of $350 million to $500 million.
• Reduced G&A expectations to a range of $51 million to $52 million.
• Increased cash same-store guidance to a range of 4% to 4.25% for the year, an increase of 25 basis points at the midpoint.

Risks Identified

• Lease gestation periods remain elongated.
• Market uncertainties and economic trends could cause actual results to differ from forward-looking statements.
• Interest rate fluctuations and seller dynamics may impact acquisition activity.

Q: Craig Mailman asked about the progress on 2026 leasing and drivers.

A: Bill Crooker stated that ~95% of the 2026 leasing progress is renewals, with proactive tenant engagement and large lease expirations in 2026 driving the activity.

Q: Nicholas Thillman inquired about 2026 leasing spreads and portfolio occupancy.

A: Bill and Matts discussed guidance and the stable market environment, noting the 52% progress on 2026 leasing compared to prior years.

Q: Eric Borden asked about development appetite.

A: Bill Crooker expressed bullishness on development with careful underwriting, aiming for at least a 7% yield.

Q: Blaine Heck asked about acquisition forecast change and 2026 activity.

A: Bill and Michael Chase discussed seller dynamics, stable interest rates, and deal flow increasing towards year-end.

Q: Vince Tibone asked about acquisitions and same-store guidance.

A: Bill and Matts discussed evaluation of value-add deals and timing of tenant payments affecting same-store guidance.

Q: Jonathan Petersen asked about acquisition cap rates and Ohio market.

A: Bill and Steve Xiarhos discussed cap rates consistent with prior acquisitions and positive demand in the Dayton market.

Q: Michael Griffin asked about lease gestation and development demand.

A: Bill and Steve Xiarhos discussed elongated lease gestation periods and market absorption for upcoming developments.

Q: Nikita Bely asked about ranking acquisitions vs developments and funding.

A: Bill and Matts discussed evaluation of opportunities and funding sources, noting retention of free cash flow and low leverage.

Q: Brendan Lynch asked about fixed renewals and acquisition strategy.

A: Bill discussed renewal options based on assuming leases and past acquisition decision-making processes