STAG INDUSTRIAL, INC. 2026 Q3 Earnings Call

Thank you. Welcome to STAG Industrial's conference call covering the third quarter 2026 results. In addition to the press release distributed yesterday, we have posted an unaudited quarterly supplemental information presentation on the company's website at www.stagindustrial.com under the investor relations section. On today's call, the company's prepared remarks and answers to your questions will contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today. Examples of forward-looking statements include forecasts of Core FFO, same store NOI, G&A, acquisition, disposition volumes, retention rates, and other guidance, leasing prospects, rent collections, industry and economic trends, and other matters.

We encourage all listeners to review the more detailed discussion related to these forward-looking statements contained in the company's filings with the SEC, and the definitions and reconciliations of non-GAAP measures contained in the supplemental information package available on the company's website. As a reminder, forward-looking statements represent management's estimates as of today. STAG Industrial assumes no obligation to update any forward-looking statements. On today's call, you will hear from Bill Crooker, our Chief Executive Officer, and Matts Pinard, our Chief Financial Officer. Also here with us today are Mike Chase, our Chief Investment Officer, and Steve Kimball, our Chief Operating Officer, who are available to answer questions specific to their areas of focus. I'll now turn the call over to Bill.

Thank you, Steve. Good morning, everybody, and welcome to the third quarter earnings call for STAG Industrial. We're pleased to have you join us and look forward to discussing the third quarter 2026 results. The third quarter marked a continued improvement in industrial fundamentals, with national vacancy rates down since last quarter. Net absorption totaled approximately 75 million square feet nationally, the highest quarterly figure since early 2023, and has now topped 69 million square feet in each of the last two quarters. Through nine months, the market has absorbed more than 186 million square feet, a pace we have not seen since 2022, and non-coastal markets drove 80% of year-to-date absorption. New construction remains disciplined. While development starts are up, product under construction totals less than 2% of existing inventory, with much of it already committed through pre-leasing or build-to-suit agreements.

We are seeing broad-based demand primarily from 3PLs, advanced manufacturing, and data center related tenants. We have now leased 2.5 million square feet to data center related tenants since the start of 2025. This data center related leasing activity accounted for 26% of all of our new operating portfolio leasing during that same period. The table is set for us to see upward pressure on rent growth in many markets as leverage gradually shifts back to the landlord. We expect our market rent growth for next year to be in the range of 2%-4%, an acceleration as compared to the 1.6% market rent growth expected for 2026. Geographically, the strength has been most pronounced in the markets where STAG is concentrated. Acquisition volume for the third quarter totaled $107.9 million.

This consisted of two buildings with cash and straight line cap rates of 6.9% and 7.2% respectively. Subsequent to quarter end, we acquired one building for $55 million at a cash and straight line cap rate of 6.7% and 7.1% respectively. In terms of our development platform, we have seven buildings or 1.8 million square feet of development activity that is not in service as of the end of Q3. These buildings are in various stages of development and have an expected stabilized yield of 7%. We executed two development leases this quarter, totaling 69,000 square feet. The first was a 47,000 square feet lease at our Resource Drive building in Reno, bringing that building to 62% leased. The other was for 21,000 square feet at our Piedmont Commerce Street building in Charlotte, bringing that building to 100% leased.

With that, I will turn over to Matt, who will cover our remaining results and guidance for 2026.

Thank you, Bill, and good morning, everyone. Core FFO per share was $0.66 for the quarter, an increase of 1.5% as compared to last year. Net debt to annualized run rate adjusted EBITDAre was equal to 5.1 times, while liquidity stood at $546 million. During the quarter, we commenced 30 leases across 3.6 million square feet, generating cash and straight line leasing spreads of 23.8% and 35.7% respectively. Retention for the quarter was 90.3%. Same store cash NOI grew 3.5% for the quarter and 3.9% year to date. Year to date same store cash NOI growth of 3.9% includes approximately 30 basis points of benefit related to a single tenant whose rent was unpaid as of the third quarter of 2025 and substantially collect in the fourth quarter of 2025.

The benefit reverses in Q4, and we expect full year same store growth within our guidance range, which we revised upwards since our last earnings call. Moving to capital market activity, as discussed on our last call, we did repay the $50 million private placement note B which matured on July 1st. Also mentioned on our last call in July, we combined our term loans A and F, both of which were set to mature in March of 2027 into a single $350 million term loan maturing in January 2032. The swap fixed rate is 3.53% until March 2027, and 4.79% from then on until maturity. We also repriced our revolver in all of our term loans, saving 5 basis points across our bank debt.

As of today, the company has total forward equity net proceeds of $70 million available to settle at our discretion. We are pleased to announce that in August of this year, STAG received an investment grade rating from S&P Global Ratings. S&P assigned a rating of triple B to STAG with a stable outlook. The company also maintains an investment grade rating of triple B with a stable outlook from Fitch, and an investment grade rating of Baa2 with a stable outlook from Moody's. Moving to guidance, we have made the following updates. Average same store occupancy guidance has been increased to a range of 96.75% to 97.25%, an increase of 25 basis points at the midpoint.

Cash same store growth guidance has also been increased from a range of 3% to 3.5% to a range of 3.5% to 3.75% for the year. This increase is driven by the upward revision of occupancy expectations and lower than expected cash credit loss. We have narrowed the range of expected acquisition volume to a range of $530 million to $600 million. We now expect a stabilized capitalization rate range between 6.3% and 6.4%. G&A guidance has been increased to a range of $56 million to $57 million. These guidance changes result in an increase in Core FFO guidance to a range of $2.64 to $2.66 per share, an increase of $0.02 at the midpoint.

2026 guidance can be found on page 21 of our supplemental package, which is available in the investor relations section of our website. I will now turn the call back over to Bill.

Thank you, Matt. Thank you to our team for their continued hard work and achievement towards our 2026 goals. We will finish this year ahead of our initial budgets and are well-positioned going into 2027. With that, I will turn it back to the operator for questions.