STAG Industrial(US:STAG)2021-07-28 19:45Financial Data and Key Metrics Changes - Core FFO for Q2 2021 was $0.52, a 10.6% increase compared to Q2 2020 [14] - Cash available for distribution year-to-date was $147.2 million, up 17.8% from the first half of 2020 [15] - Same-store NOI guidance was raised by 1% at the midpoint to a range of 3.25% to 3.75%, the highest level of guidance provided during the company's public history [12][21] Business Line Data and Key Metrics Changes - The company acquired 9 buildings for $126.7 million in Q2 2021, with stabilized cash and straight-line cap rates of 5.7% and 6.2% respectively [15] - Year-to-date leasing results included 43 leases, with 40% involving an e-commerce component [16] - Cash same-store NOI grew 4.4% for the quarter and 3.6% for the year, both record highs for the company [18] Market Data and Key Metrics Changes - The industrial real estate sector showed strong fundamentals, with increased demand for warehouse space due to supply chain issues and robust reopening demand [11] - Tenant retention for the quarter was 80%, outperforming historical averages [17] - The company is on track to be among the top 10 real estate companies in solar energy production [10] Company Strategy and Development Direction - The company aims to continue acquiring additional assets that are accretive to its portfolio, with a current acquisition pipeline exceeding $3.5 billion [6][39] - STAG Industrial is focusing on expanding its acquisition team rather than development capacity, increasing from 6 to 11 acquisition personnel [39] - The company is committed to enhancing its ESG initiatives, recently achieving a GRESB public disclosure rating of B [7][8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strength of the STAG platform and investment thesis, anticipating a strong second half of the year [25] - The company expects continued strong rent growth for the next five years, driven by robust demand in various markets [49][51] - Management noted that while cap rates have decreased, internal growth from acquisitions remains strong [34] Other Important Information - The company raised gross proceeds of $42.2 million through its ATM program in Q2 2021 [19] - A $325 million private placement transaction was closed with a weighted average interest rate of 2.82%, the lowest in the company's history [20] Q&A Session Summary Question: Can you provide specifics on the lower downtime? - Management indicated that average downtime has improved from approximately 12 months a few years ago to closer to 6 months today [28] Question: What are the current contractual rent bumps? - Current contractual rent bumps are around 3% for new deals, compared to about 2% historically [29] Question: How do in-place rents compare to market rents? - Management believes in-place rents are likely under market, in the mid to upper single digits [30] Question: What trends are seen in the transaction market? - The market is very active, with increased competition and better internal growth from acquisitions [33][34] Question: How is the pipeline structured? - The pipeline consists of approximately 85% individual assets, with a focus on identifying opportunities across various markets [42] Question: What is the strategy for funding acquisitions? - The company plans to match fund acquisitions and operate within its leverage levels, utilizing both private placements and forward equity [44] Question: How has market rent growth underwriting changed? - Management has seen improved rent growth expectations across virtually all markets due to strong demand [48] Question: What is the outlook for tenant rollover? - Management expects retention to remain within historical ranges, with no concerning changes anticipated [53] Question: How do property-level trends differ across markets? - Larger markets like New Jersey and Philadelphia are seeing strong demand, while smaller markets like Detroit are also performing well [56] Question: What factors influenced the increase in guidance? - The principal factor driving the guidance increase was strong same-store performance, with cost of capital playing a supportive role [80]