STAG Industrial, Inc. (NYSE:STAG) Q2 2018 Earnings Conference Call - Final Transcript

Aug 01, 2018 • 10:00 am ET

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STAG Industrial, Inc. (NYSE:STAG) Q2 2018 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Greetings, and welcome to STAG Industrial Second Quarter 2018 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to turn the conference over to your host, Matts Pinard, VP, IR. Thank you. You may begin.

Executive
Matts Pinard

Thank you. Welcome to STAG Industrial's conference call covering the second quarter 2018 results. In addition to the press release distributed yesterday, we posted an unaudited quarterly supplemental informational presentation on the company's website at stagindustrial.com under the Investor Relations section.

(Forward-Looking Cautionary Statements)

On today's call, you will hear from Ben Butcher, our CEO; and Bill Crooker, our CFO.

I will now turn the call over to Ben.

Executive
Ben Butcher

Thank you, Matts. Good morning, everybody, and welcome to the second quarter earnings call for STAG Industrial. We're pleased to have you join us and look forward to telling you about our second quarter results. Presenting today, in addition to myself, will be Bill Crooker, our CFO, who will discuss the bulk of the financial and operational data. Also with me today are Steve Mecke, our COO; and Dave King, our Director of Real Estate Operations. They will be available to answer questions specific to their areas of focus.

The second quarter built upon our already strong start to the year. Bottom line growth continues to be a focus of the organization and are pleased to report a 10% increase in our core FFO per share for the quarter over the prior year period. This should not come as a surprise given the momentum of the platform, accelerated acquisition volume, same-store NOI growth, impressive retention and releasing spreads and all the while, further executing a further reduction in leverage.

Acquisition volume for the year more than doubled with over $190 million closed in Q2 through July 31st, with an average stabilized cap rate of 7.1%. The acquisition team was successful across a broad array of markets in which STAG operates, markets like Houston with a well-established institutional capital presence; and markets like Charlotte, which benefits from attractive demographic trends, including significant population growth but has not yet drawn the same attention from organized institutional capital.

STAG's relative value approach to acquisitions enables us to find attractive risk-adjusted returns across many markets, including the 2 just mentioned, resulting in a larger opportunity set for our acquisition activity. With over $270 million acquired through July and the historical trend of relatively larger third and fourth quarter acquisition activity, we are raising our acquisition guidance for the year to a range of $600 million to $700 million.

The leasing team continues to produce results that reflect the strength of the team and the strength of our own portfolio. Retention for the quarter was 88% with cash releasing spreads of 8%. These results contributed to our trend of improving same-store NOI growth. It should be noted that the vast majority of the assets excluded from our same-store portfolio, 24% of owned assets at quarter end, are stabilized and have embedded contractual lease