STAG Industrial(US:STAG)2021-10-29 18:08Financial Data and Key Metrics Changes - Core FFO for the quarter was $0.53, an increase of 15.2% compared to Q3 2020 [13] - Cash available for distribution totaled $219.6 million year-to-date, a 22.1% increase compared to the first nine months of 2020 [13] - Cash same-store NOI grew 2.9% for the quarter and 3.4% year-to-date, driven by strong rental escalators and lower average downtime per vacancy [18] Business Line Data and Key Metrics Changes - The company acquired 24 buildings for $427.2 million during Q3, with stabilized cash and straight-line cap rates of 5.35% and 5.7% respectively [14] - Retention rate was 55.7% for the quarter and 76.2% year-to-date, with adjusted retention for immediate backfills at 77.7% for Q3 [17][50] - Disposition for the quarter totaled $39.4 million, with a subsequent sale of a facility for $78 million [16][12] Market Data and Key Metrics Changes - Approximately 40% of the buildings in the portfolio support some level of e-commerce activity, reflecting a structural change in consumer behavior [8][9] - The demand for industrial real estate remains robust, driven by supply chain adjustments due to the COVID pandemic [13] Company Strategy and Development Direction - The company continues to focus on acquiring assets that are undervalued in the market, with a projected acquisition volume for the year increased to a range of $1.1 billion to $1.2 billion [21] - The company is committed to ESG initiatives, having received a GRESB Public Disclosure letter grade rating of B, ranking second among 10 industrial real estate companies [10] Management's Comments on Operating Environment and Future Outlook - Management believes strong industrial fundamentals are likely to persist, with ongoing demand for additional space from tenants [6][23] - The company is experiencing increased competition for larger single asset transactions, but maintains a strategy focused on individual asset underwriting [15][40] Other Important Information - The company raised gross proceeds of $127.5 million through its ATM program at a weighted average share price of $39.59 [19] - The company refinanced its $750 million unsecured revolving credit facility, reducing pricing by 12.5 basis points [20] Q&A Session Summary Question: Thoughts on rent growth profile in secondary vs primary markets - Management noted that secondary markets are less volatile and expect strong rent growth across both market types [26] Question: G&A guidance adjustments - Management indicated a run rate increase of approximately $750,000 due to retirement plan costs, but emphasized that G&A growth is minimal compared to portfolio growth [28][30] Question: Acquisition strategy and competition - Management acknowledged increased competition but stated that lower cap rates are primarily due to better rent growth profiles and cash flow of acquired assets [38] Question: Retention rates and tenant expansions - Management explained that lower retention was primarily due to tenants needing more space, with adjusted retention showing a healthier rate when accounting for immediate backfills [50][52] Question: Acquisition hit rates and competition - Management confirmed that hit rates have decreased due to increased competition, but improvements in acquisition processes have allowed for maintaining volume [56][58] Question: Cap rates for stabilized vs vacant properties - Management estimated that stabilized cap rates for vacant properties are typically about 25 basis points higher than fully leased assets [66] Question: Acquisition mix and value-add strategy - Management stated that acquisitions will continue to focus on where returns are found, without strict guidelines on value-add versus income-producing properties [72][73]