William Crooker

Thank you, Steve.
Good morning, everybody.
Welcome to the third quarter earnings call for STAG Industrial.
We're pleased to have you join us and look forward to telling you about the third quarter 2024 results.
We are happy to report another strong quarter of operating results.
The industrial supply pipeline continues to contract, absorption remains stable and many of our markets. Availability and vacancy appear to be approaching a trough.
Although our expectation remains that we won't see an inflection point until the back half of next year.
Market rent growth for our portfolio stands at 3.2% through September '30, keeping us on track for full year market rent growth of approximately 4%.
Leasing market is active with tenants committing to space.
I'm happy to report that we have already leased 38% of the square feet we currently expect to lease in 2025, achieving cash leasing spreads of 24.1%.
This level of leasing is on a similar pace to last year.
On October 22nd, American Tire Distributors voluntarily filed for Chapter 11 bankruptcy.
In conjunction with this filing, the tenant entered into a restructuring support agreement with participation from the current holders of its term loans.
American Tire Distributors is the nation's largest independent tire distributor with over 80,000 customers.
American Tire Distributors operates within 7 of our facilities across 841,000 square feet.
They represent 1% of our annualized base rent or approximately $6.1 million.
In the aggregate, these 7 leases have rents at market and all 7 buildings are actively utilized.
All leases are current with zero missed rental payments. We are monitoring the situation closely. This event is reflected in our updated guidance provided in yesterday's earnings release, including Core FFO per share for the year.
The acquisition market regain momentum in the third quarter with activity noticeably accelerating post-Labor Day acquisition volume for the third quarter totalled $113 million.
This consisted of 6 buildings with cash and straight-line cap rates of 6.7% and 7.2%, respectively.
During the quarter, we acquired a 5-property portfolio totalling 290,000 square feet.
Total acquisition cost was $78.1 million with a cash cap rate of 6.9%.
Portfolio is located in the supply constrained Route128, Route 3, some markets of Boston, Massachusetts.
All the buildings are located within close proximity to I93, I95 and I495
Portfolio was 100% leased to 5 tenants with a WALT of 4.9 years and weighted average lease escalations of 3.75%.
Subsequent to quarter end, we acquired two buildings for $66.6 million at a 6.3% cash cap rate.
On the development front, as of September '30, we have over 2.1 million square feet of activity across 9 buildings in the US.
In July, we closed on a 5-acre land site, planned 76,000 square foot building will be developed with an estimated delivery date of Q3 2025.
In August, we closed on our first single asset joint venture with a national developer. The project will consist of a single 200, 84,000 square feet distribution facility, capable of accommodating up to 2 tenants with an estimated delivery to date of Q4 2025.
Both projects sit in the North Valley submarket of Reno, which has experienced robust tenant demand and rent growth over the past several years and continues to be a premier location in the market for distribution tenants.
With that, I will turn it over to Matts, who will cover our remaining results and updates to guidance.

Matts Pinard

Thank you, Bill, and good morning, everyone.
Core FFO per share was $0.6 for the quarter, an increase of 1.7% as compared to the third quarter of last year.
Cash available for distribution for the third quarter totalled $88 million, we have retained approximately $75 million of cash after dividends paid to September '30 of this year.
These dollars are available for incremental investment opportunities that repayment and other general corporate purposes.
Net debt to annualized run rate adjusted EBITDA was 5.1x and Liquidity $974 million at quarter end, inclusive of available for ATM proceeds.
During the quarter, we commenced 20 leases totalling 3.3 million square feet, which generated cash and straight-line leasing spreads of 24.6% and 34.3%, respectively.
As of today, we have achieved 99.5% of the leasing we expect to accomplish in 2024 were approximately 13.2 million square feet, a cash leasing spread of 28.5%. Our 6 large leasing spread outlays totalling 1.2 million square feet at featuring aggregate positive cash leasing spreads of almost 100%.
Excluding these leases, cash leasing spreads would be 22.5% for the year.
As mentioned by Bill, we have accomplished 38% of the square feet we currently expect at least in 2025, achieving 24.1% cash leasing spreads. Spreads that are relatively in line with the adjusted 2024 level.
We achieved s Same Store Cash NOI growth of 4.4% for the quarter and 6.1% year to date.
We have increased our annual Same Store Cash NOI guidance to a range of 5.25% to 5.5% for the year or 12.5 basis points increase at the midpoint.
Moving to capital market activity.
In the third quarter, we issued 2.3 million shares on a forward basis under our ATM program at a gross average share price of $39.89, resulting in gross proceeds of $93 million.
As of today, we have $164 million of forward equity proceeds available to 100 at our discretion at a net share price of $38.86 . Its equity will be used to pay down the revolver and match fund our acquisitions development pipeline.
On September '10, we refinanced our $1 billion senior unsecured credit facility to refinance revolving credit facility matures in September 2028 foot to six-month extension options and no change to pricing and covenants.
Subsequent to quarter end, we fully repaid our $50 million private placement note day, which matured on October first.
Moving to guidance, we made the following updates.
As previously mentioned, we have increased the cash same-store growth expectation to a range of 5.25% to 5.5%, an increase of 12.5 basis points at the midpoint.
Additionally, we have increased and narrowed the range of expected acquisition volume through a range of $500 million to $700 million.
G&A expectations for the year have been decreased to a range of $49 million to $50 million with a decrease of $500,00,000 at the midpoint. This guidance changes result in core people guidance revision during the $2.38 to $2.40 per share, with an increase of one penny at the midpoint.
I wanted to note that we have also added a new slide to our supplemental information package.
Given the increase in development projects.
We've added this slide to detail each project in our development pipeline. It can be found on page 10 of our supplemental informational package.
I will now turn it over to Bill.

William Crooker

Thank you, Mats.
And thank you to the rest of our team for their continued hard work and achievements towards our 2024 goals.
Will now turn it back to the operator for questions.

Question and Answer Session

Operator

Thank you.
We'll now be conducting a question-and-answer session.
I would like to ask a question, please press star one on your telephone keypad.
A confirmation tone will indicate your line is in the question queue, you may press star two to remove yourself from the queue. For participants using speaker equipment.
It may be necessary to pick up your handset before pressing the star keys.
We ask that you please limit yourself to one question and one follow up question.
one moment, please.
While we poll for your questions.
Our first questions come from the line of Craig Mailman with Citi.
Please proceed with your questions.

Craig Mailman

Hey, good morning.
Bill, maybe just going back to your commentary about the leasing market, getting more active, as you know, look over the last year, so you guys had become one sector that historically yield partly a cost of capital than just deal flow.
What do you think it is now on?
That's really kind of opening up the deal pipeline to you guys, logistic cost of capital?
Are you seeing better opportunities out there?
And kind of what on I think we can get back to sort of a baseline level of acquisition you guys are doing a couple of years ago.

William Crooker

Yes.
Thanks, Craig.
And just to clarify, you're referencing the acquisition mark, right.
I thought I heard leasing market

Craig Mailman

sorry, so the acquisition market?

William Crooker

Yes, I think that's a number of things.
I think there's some there was pent-up, call it seller demand to sell properties.
So are seeing a lot more properties on the market.
I think with rates stabilizing for a period of time, it reduced the bid, ask spreads.
So you saw a lot of transactions occurring.
I think there's just a lot of confidence that you'll do where we can buy a building, the cap rates we can pay for a lot of opportunities, our pipeline.
As you saw north of $4 billion, it was nice to see about 75% of that pipeline is individual assets across the CVR retail one markets.
About 20% of that pipeline is in, call it portfolios anywhere from of 5 buildings are more and about 5% of the pipeline is developments.
So I think it's regarding your second part of your question and what pace of acquisitions we can achieve.
I think it's going to be subject to interest rates and seller expectations when we look at transactions to price transactions to be accretive day one and it typically with some growth embedded in it, whether it be from new escalators or market to market.
And we make sure that those acquisitions of submarkets have been really well.
So I'm certainly happy with the progress we have had on the acquisition front this year.
We raised our guidance.
We've had a bit of success subsequent to quarter end, and we closed another $67 million of acquisitions subsequent to quarter end.
So the pace right now is really strong.
Typically, the fourth quarter is the biggest quarter with regards to acquisitions.
We'll see if that if that pans out this year.
But overall, we're really happy with what we're seeing in the acquisition market.

Craig Mailman

And just from a competitive standpoint, I know you guys are in markets with other reads, both largely not as much overlap.
I mean is that the competitive advantage here that your local peers, they just need to source financing and you guys are all cash and that's giving you sureties close shows like is there are a differentiator for you guys?
Or is it solely just your cost of capital is doing better?
You could maybe be a little bit more flexible on price and that's what's getting the deal flow backup?

William Crooker

Yes, I think it's a combination.
It depends on what markets we're in, who our competition is.
A lot of our competition has been private equity and it's a large institutional private equity.
I think we still have a cost of capital advantage against some of those folks, but then it comes down to maybe their return metrics, maybe a little bit more aggressive than ours.
Some have the other underwriting differently, little and often oftentimes, we do compete against small local regional private equity, where not only do we have cost of capital advantage, but we have that surety at close.
And over the years, especially in the fourth quarter, there's been an opportunity where seller needs to close a disposition in their case, an acquisition in our case by year end.
And because of the processes and the people we have in place, we're able to close relatively quickly.
So charity at close is a priority for some sellers.
So there is oftentimes so we're not the highest bid.
But because of our reputation as a broker network in Australia close, we're able to get this transaction.
So short answer your question.
It's a combination of cost of capital advantage, reputation and charity close.

Craig Mailman

And if I could sneak one quicker one in any comment on what the exit or transaction during the quarter kind of means potentially further evaluation of your portfolio?

William Crooker

Yes, I don't want to talk specifically about other transactions in the market, but I think as I review our portfolio, we view the submarkets, our portfolio are in where the supply demand by demand dynamics are heading.
We feel like there's a lot of upsides to our portfolio going forward.
And we frankly, are happy with where that the portfolio is going.

Craig Mailman

Great.
Thank you.

Operator

Thank you.
Our next questions come from the line of Dick Feldman with Baird.
Please proceed with your questions.

Hey, good morning, guys.
Maybe touching a little bit on 2025 leasing.
Appreciate sort of the update on spreads, how they're tracking thus far.
You think that kind of indicative of where, as you look at 25 role, is that a good representation of what you guys are rolling and what you kind of for the full year without?

William Crooker

Well, the yes, Nik will give a range of for our leasing spreads as we always do in our February guidance for 2025.
But this is indicative of what we expect at this point, but we will give a range as we move into 2025.

And then maybe a follow-up for Matts.
Maybe what was that in 3Q?
I appreciate the update on American Tire, but any other tenants on the watch list or things we should be watching out for?

Matts Pinard

Hey, good morning, Nick.
So in terms of the watch list, it's similar as it was 90 days ago.
We've experienced about $1.4 million of credit loss through September '30, which is about 23 basis points.
We maintained our guidance.
We did raise Same Store Cash FFO.
This competitors with guidance of 50 basis points for the year.
We expect it to be a real number.
We expect to incur that, by the theme across credit events is really cantered on this.
And, you know, our analysis is fully captured in the guidance that we gave for the year.

Operator

Thank you.
Our next questions come from the line of Eric Borden with BMO Capital Markets.
Please proceed with your questions.

Eric Borden

Hey, good morning, everyone.
Maybe starting with developments in all appreciate the new disclosure there in the new slide.
I was just wondering if you could provide an update on potential tenant interest as it relates to your Greenville/Spartanburg assets to near (inaudible) assets, though, I think you mentioned in your prepared remarks that, you know, availability and leasing the environment appears to be troughing in and we could see a potential increase no through the back half of 2025.
So just curious, you know, are more tenants kind of kicking the tires today and can be potentially see those leased up in the upcoming quarters?

William Crooker

Yes.
I mean, I think as we said on our last call, our expectation for the two Greenville/Spartanburg that the assets we expect to lease in Q3 2025, the other Greenville/Spartanburg asset, the casual drive that tip is a 12 month lease up period we underwrote. That one as a reminder, as it was sister building more when we acquired that project, we also acquired a fully completed building that we end up leasing up shortly after closing for I think it was like a 7.5% Cap rate.
So on the casual drive, I think we're closer to the 7% Cap rate range with respect to that market, it's a market that has great demand drivers, the buildings are positioned extremely well near the inland port, um, can service by manufacturing users or distribution users.
And it's a market that has experienced some excess supply from that supply is getting absorbed.
This is going to take a little bit of time, but we've had a fair bit of activity on all three of those buildings on nothing to report yet.
But overall still expect to some lease it up in our prior, as we noted our prior quarter and the Q3 2025 range for the first two.
And then on about a year lease up from for the plus one.

Eric Borden

That's helpful.
And then maybe one for Matts.
I'm sorry if I missed this in your prepared remarks, but could you just provide an update on your Same Store average occupancy loss expectations for the remainder of the year?

Matts Pinard

Yes, absolutely.
So there is no change.
So if you recall, last quarter, we had adjusted our guidance initially at the beginning of year, we had guided the market that 50 basis points of average occupancy loss, we have seen retention has ended up at the higher end of our range of guidance, 75%.
So we adjusted that an expectation down.
So we're still assuming 25 basis points average occupancy loss on the year.

Eric Borden

Thank you very much.

Operator

Thank you.
Our next questions come from the line of Jason Belcher with Wells Fargo.
Please proceed with your questions.

Jason Belcher

Good morning, just wondering if you could talk about any common themes.
Are characteristics properties you sold recently are targeting for sale this year.
To what extent other specific markets you may be looking to exit or maybe tenant industries or categories you're trying to avoid?

William Crooker

Yes, with respect to the markets, we have that CBRE Tier1 focus.
So I would expect most of our dispositions that are non-core to be in the non-CBRE Tier1markets, though we have dispositions on an annual basis that are opportunistic where we feel like we've done achieved the most value out of that asset and we'll realize that value and redeploy that capital with respect to what we sold this quarter and that was up a non-core asset.
I think we spoke about on the previous call that was sold for a seven one Cap rate. Overall, we are really happy with that execution given our view on the asset.

Jason Belcher

Great, thanks.
And then just from just one more in terms of a kind of the slowdown in construction we've seen this year, to what extent have you seen land prices decline?
And how are you thinking about maybe adding are building up your land bank for development opportunities in the future?

William Crooker

Yes, we've seen land prices stay relatively flat throughout the year.
Right now, with our development initiative, we are not buying raw land.
We are really focused on sites that are permitted.
And so a little not as far out on the risk spectrum.
But what we are still continuing to see a lot of opportunity cities to acquire permanent land for development.
So where that will continue to be an initiative for us, and we feel like we can continue to grow that throughout the years.

Jason Belcher

Great.
Thank you.

Operator

Thank you.
Our next questions come from the line of Michael Carroll with RBC Capital Markets.
Please proceed with your question.

Michael Carroll

Bill, building off of that last question on how do you think about new development starts?
I know it does look like you bought a few land parcels this past quarter.
I mean, are those sites that you want to break ground and start developments honour or do you want to lease up some of you are on projects that are currently under construction completed before you start pursuing new starts?

William Crooker

Yes, the ones that we did buy, those are permanent, and we've already broken ground on those, Mike.
So we are not sitting on any land parcels that are permitted and ready to go.
So from everything that we have on that development slide, we've broken ground, as I mentioned earlier, we underwrite a twelve month lease up period upon building completion.
So you can underwrite or model when that revenue should be coming in and with respect to new opportunities will contain evaluated.
I like the laddered called development schedule that we have right now and as we add new properties, it's going to take nine to twelve months to build it and then another twelve months to lease it.
So we can contain the latter these developments.
And when I when I look at some of the newer developments, the Tampa developments will be completed in the fourth quarter.
Those are getting some really good interest in [Star] pre-leasing market, but we feel really good about this suite sizes tally fit the market, but [national] property, and that was on land we owned in the portfolio, will the permit that, break ground on that that's going to that's going to be a very successful market.
And Nashville is one of the stronger industrial markets today, the Portland development that say a 10-year build to suit to a strong credit, and that is in the high sixes from a from a cap rate perspective.
And so that's a great transaction.
And the Reno market, we like we like both those locations.
I mentioned that in my prepared remarks, it's one of the premier submarkets within Reno and suite sizes that I think will fit the market pretty well.
So overall, really happy with the way the development initiative is coming along and comfortable adding to it, assuming it's building that we can put up that will fit the submarket.

Michael Carroll

Well, I mean, is there a I guess, on offer that is there a limit to how big you want the pipeline to be that's not yet leased?
I mean, are you like at what point do you want to kind of slow that down?
And then just second to that, with what is your capitalization policy?
So should we assume that these Greenville/Spartanburg assets will roll off capitalization on the beginning of 2025 if they are not leased.

William Crooker

I think that's I think, from a capitalization policy, that's just gap.
So I think it's twelve months is what the allowable time is to capitalize some interest on that sorry wages on that.
So the with respect to tap and development, it's something that we're evaluating.
I mean, certainly, if you look at the total invested capital here, it's a very low percentage on our total overall enterprise value, will continue to evaluate that.
Obviously the build to suits bring a lot less risk than some of the more speculative developments that we have on here.
I think anywhere in that right now, as newer initiatives, somewhere in 5% of enterprise value is where I feel comfortable on.
But it will be well laddered.
It will be diversified across geography across suite sizes.

Michael Carroll

Great.
Thank you.

Operator

Thank you.
Our next questions come from the line of Jessica Zheng with Green Street.
Please proceed with your questions.

Jessica Zheng

Good morning.
I'm just wondering if you could provide some colour around the drop-in retention rate this quarter, was it driven by any particular leases.

William Crooker

It was does one lease that was a non-retention, but we backfill that with zero downtime.
And so we didn't include that in the prepared remarks, maybe we should have.
But if you factor that one in, our retention adjusted for immediate backfills above 73%.
So those really just want to [Alliar] that we didn't retain them, but we backfill that with no downtime.

Jessica Zheng

Okay, great.
Thank you.
And then just maybe one more on the occupancy side.
Are there any material known move outs in fact that we should be aware of?

William Crooker

No, no, no material non move outs at this point in the year.
There are leases rolling in the back half that weren't aware.
I'm sure that whether they're going to retain or not, but nothing that would be nothing material that's known move out at this point.

Jessica Zheng

Great.
Thank you.

Operator

Thank you.
Our next questions come from the line of Rich Anderson with Wedbush.
Please proceed with your questions.

Richard Anderson

Good morning.
So go to American Tire, what is on the bull and bear case there in terms of, you know, things that could transpire.
You have sort of bidding some Plan B's and also where the rents sit relative to market.
Maybe there's an opportunity here in some cases, just if you can get more colour to the extent you can.

William Crooker

Yes, on average, the leases are a pretty close to market.
I don't want to dive too much into this.
It's we're speculating, right, It's their company they filed.
But if you read some of the public information out there, so very good support from their lenders. It appears it's going to come down to their evaluation of their distribution network and or how they're utilizing the buildings and whether they affirm or reject leases.
So as you can probably figure out with our guidance this year, there's not a lot related to [AT&T] credit loss.
The buildings are utilized, these are buildings that fit the market well, some are highly functional buildings, healthy submarkets and with leases generally at market.
So will the bull and bear case.
And I think the bull and bear cases they vacate all leases or are they staying on leases?
But I think the answer will be now we have to figure out and see how things shake out in the first quarter next year.

Richard Anderson

Is it still to fresh to like sort of already thinking about optionality.
Should something come at you?
Or are you sort of sitting tight and just monitoring at this point?

William Crooker

I mean, we've got our we've got some views on this is just nothing I want to public the public comment on right at this point.

Richard Anderson

It during the second question on the acquisition window, the pipeline up relative to last quarter, but you referenced sort of stable interest rate environment, which, you know was the US is yesterday's news at this point.
I'm wondering how quickly does that pipeline and kind of [ebb] and flow as the macro changes.
We've had quite a change at the longer end of the curve and the more recent past.
And wondering how much quick how quickly that for two can go to something below four with some sudden this.

William Crooker

Yes.
I mean, the pipelines dynamic assets roll on and off at every week, it's not going to go from 4 to 3 in matter of a weak, but some assets, a lot of times these assets will sit on the pipeline if they don't trade.
So I think when you think about just the broader transaction mark, but in and what's happening, at least in the past couple of years, as you have seen spikes in interest rates and it, there's a little bit of a pause in the market and sometimes in that, that sometimes results in a pause in the acquisition market.
So for us as net buyers, we adjusted our returns immediately with our cost to capital.
So, the benefit of the team we've built is that we're looking across all the CBRE Tier 1 markets and evaluating opportunities from a high net worth individuals to large institutional private equity.
And we're adjusting our returns immediately.
And so we think there's still some really good opportunities even with some elevated 10-year rates right now.

Richard Anderson

Okay, great.
Thanks very much.

Operator

Thank you.
Our next questions come from the line of Brendan Lynch with Barclays.
Please proceed with your questions.
Great.

Brendan Lynch

Thank you for taking my questions.
Maybe on the development excuse me, the acquisition pipeline.
Can you just talk about the characteristics of the assets that you're looking for in terms of value add or fully leased or market conditions considerations?

William Crooker

Yes.
I mean, it's CBRE Tier 1 markets.
It's building needs to fit the submarket.
Well, the it's made up about 75% individual assets, 20% portfolios, 5% developments.
The individual assets in some of those are our value add.
I don't have the exact breakout, but it's a wide range of opportunities.
And similar to past years.
Similar to that this year, we can buy assets that have a vacant asset to an asset that has a 10-year lease term.
And we evaluate all the aspects of the transaction when determining whether to put a bit and four.

Brendan Lynch

Great.
In the past, you've called out El Paso as being a market of particular strength.
Can you give us an update there and maybe any others along the border that are performing particularly well,

William Crooker

I mean, El Paso's still performing well.
I mean, certainly seeing a little bit of uptick in vacancy.
There was some new deliveries, but still a very strong market.
When I look across all the markets on the mid automate web, our Midwest markets continue to be strong.
Detroit's Milwaukee, Minneapolis, Chicago, Sacramento is strong Tampa is strong.
I mentioned Nashville earlier with our development.
That's a really strong market.
And then the continued weakness in Columbus.
Andy mentioned Philly on the last call, Philly, Southern Jersey is some weakness there.
I'm not too dissimilar from what we've seen in this last quarter.
I would say on the on the whole, though, are you seeing markets generally absorption improving kind of quarter-over-quarter at and a lot of our markets, and it feels like we'll see some pretty good recovery in the back half of next year.

Brendan Lynch

Great.
Thank you for the colour.

Operator

Thank You.
Our next questions come from the line of Jon Petersen with Jefferies.
Please proceed with your questions.

Jonathan Petersen

Great.
Thank you for taking time, one more question on American Tower.
And I'm wondering one year from one of your peers has a similar situation and they talked about how there's a security deposit in place.
They can contribute to top line our rents in the case that they don't pay, you guys have anything like that with American Tire and what would be the duration on it?

William Crooker

Nothing material.
I will say just as I said, the prepared remarks there, they are current on all the rent.
There's no way related to them.
We have added to all seven of our facilities.
They are actively utilizing our facilities.
They are highly functional facilities and healthy submarkets.

Jonathan Petersen

Got it.
Okay.
I appreciate that.
And then maybe just one other me somewhat more broad question, but what impact is election uncertainty having on your business right now, whether it's closing on transactions or the leasing market?

William Crooker

Yes.
It's an interesting question, Jon.
I mean, we we've heard from brokers that your tenants larger tenants are waiting on the election to make a decision that I don't know what the reason for that is other than it may be buying and time and just getting some certainty, but it feels like it's being used for a reason to delay decision-making in the leasing market.
With respect to the acquisition market, I don't think it's really played a factor in that, but more on the leasing market and delaying decision-making.

Jonathan Petersen

Right.
I'll ask you to follow up question on a rate on that.
What you think once a year ago?
Thanks, guys.

William Crooker

Thank you for not asking enough.
Thank you.

Operator

That does conclude our question and answer session.
I would now like to turn the floor back over to Bill Crooker for closing remarks.

William Crooker

Thank you all for attending the call and thank you to the analysts again for their thoughtful questions.
And we look forward to seeing you all soon.

Operator

Thank you.
(Operator Instructions)