Stag (STAG) Q1 2026 Earnings Call Transcript

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DATE

Wednesday, April 29, 2026 at 10:00 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — William Crooker
• Chief Financial Officer — Matts Pinard
• Chief Investment Officer — Michael Chase

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TAKEAWAYS

• Core FFO Per Share -- $0.65, up 6.6% year over year, reflecting improved operational performance.
• Leasing Activity -- 37 leases commenced across 6 million square feet, representing a quarterly record for total operating portfolio square feet leased.
• Leasing Spreads -- Cash leasing spreads were 20.9% and straight-line leasing spreads reached 39.6% on newly commenced leases.
• Retention Rate -- 69.5% retention for the quarter, with full-year guidance maintained at 70%-80%.
• Same-Store Cash NOI Growth -- Grew 4.1% with management noting that the result includes only partial recognition of end-of-period occupancy losses.
• Occupancy Metrics -- Same-store occupancy was 96.6%, with average loss of 60 basis points and end-of-period loss of 120 basis points; trough expected in Q2 before a projected recovery in the second half of the year.
• Liquidity -- Stood at $806 million as of quarter end, supporting ongoing investment and operational needs.
• Development Pipeline -- 1.8 million square feet in seven buildings under development not yet in service, with an expected stabilized yield of 7.1%.
• Acquisition and Disposition Activity -- Acquired a 750,000 square foot building in Platte City, Missouri for $80.7 million at a 6.1% cap rate; recently purchased land in Dallas, Texas for a facility development at a projected $38 million cost and a 7.4% yield on cost.
• Internal Investment Pipeline -- Increased to $3.9 billion, with approximately 70% single-asset transactions and 30% portfolios.
• Data Center-Related Demand -- Signed eight leases since January 2025 totaling 1.6 million square feet to tenants supporting data center construction and operations, primarily in the Southeast and Midwest.
• Embedded Annual Escalators -- Weighted average rent escalator across the portfolio is 2.9%, trending up with new lease signings averaging 3%-3.5% rent growth.
• Leasing Guidance Progress -- 79% of forecasted leasing for the year addressed at consistent levels with prior years, supporting management’s unchanged full-year guidance.
• Market Rent Growth Guidance -- Management reiterated 0%-2% market rent growth expectation, citing stronger activity but no adjustment to guidance at this time.
• Capital Markets Conditions -- Stable capital markets and tight bid-ask spreads, especially for single-asset sales; portfolio sales command a 25-50 basis point premium in cap rates.
• Geographic Market Performance -- Strength was noted in Greenville-Spartanburg, Charlotte, Houston, Nashville, and major Midwest big-box distribution markets; relative weakness cited in San Diego, Memphis, and Pittsburgh.

SUMMARY

Management indicated that industrial leasing velocity and volume continued at favorable levels, aided by the emergence of data center construction as a new demand driver for warehouse space. The company emphasized that over three-quarters of this year’s leasing objectives are already addressed, with performance ratios tracking at levels consistent with prior years. New capital deployment included both strategic acquisitions and development starts, as evidenced by the recent Missouri acquisition and shovel-ready development in Dallas secured with a committed tenant and above-average expected yield. The call highlighted minimal credit loss and persistence of disciplined investment criteria, with no major changes to underwriting or asset profile focus. Management stated all guidance items remain unchanged, suggesting confidence in their operational and market outlook.

• Crooker said, "the multiyear weakness in demand for big box product has reversed with vacancy in larger spaces decreasing in many markets."
• Pinard reported, "leasing spreads of 20.9% and 39.6%, respectively." for cash and straight-line basis.
• Chase emphasized momentum in the capital markets, stating, "that stability and momentum in the capital markets has resulted in an increase in confidence from both buyers and sellers."
• Management stated the Platte City, Missouri building is "100% leased for 12 years with 3.2% annual rental escalators."
• The company expects national industrial vacancy rates to peak in upcoming months and anticipates an "inflection point in the back half of 2026."

INDUSTRY GLOSSARY

• FFO (Funds From Operations): A key profitability metric for REITs, calculated as net income plus depreciation and amortization, excluding gains or losses on property sales.
• Leasing Spread: The percentage change between the rental rate on a new lease and the rate on the prior lease for the same space.
• Cap Rate: The ratio of a property's net operating income to its purchase price, used as a yield measure in real estate.
• Build-to-Suit: A development project constructed to tenant specifications, typically with a long-term lease in place before construction.
• 3PL (Third-Party Logistics): Companies providing outsourced logistics and supply-chain management services for customers.
• ESFR (Early Suppression, Fast Response): A type of advanced fire sprinkler system commonly found in modern warehouses.
• NOI (Net Operating Income): Income from property operations after operating expenses, but before depreciation and financing costs.

Full Conference Call Transcript

William Crooker: Thank you, Steve. Good morning, everybody, and welcome to the first quarter earnings call for STAG Industrial. We are pleased to have you join us and look forward to discussing the first quarter 2026 results. Q1 industrial leasing velocity and volume were healthy, both market-wide and within STAG's portfolio. Year-over-year absorption continues to improve. Notably, the multiyear weakness in demand for big box product has reversed with vacancy in larger spaces decreasing in many markets. This has not been limited to larger spaces, however, with strong activity in the 150,000 to 250,000 square foot segment of the sector where STAG's portfolio predominantly sits.

The market is benefiting from a more recent demand driver tied to the rapid acceleration of data center construction. 3PLs supporting these data center developments have resulted in a new segment of leasing demand for traditional warehouse facilities. Since the beginning of 2025, we have signed 8 leases totaling 1.6 million square feet to data center-related tenants. New supply also remains subdued with approximately 40% of new supply constructed for build-to-suit projects, above historical averages. We continue to expect national vacancy rates to peak in the coming months with an inflection point in the back half of 2026. Capital markets have remained stable to start the year and industrial product remains 1 of the most liquid asset classes.

We see momentum in the transaction market with the pipeline growing and transaction volume increasing. Our internal pipeline has increased to $3.9 billion. In February, we acquired a 750,000 square foot building located in Platte City, Missouri for $80.7 million at a reported cap rate of 6.1%. The newly constructed Class A building features 36-foot clear height, ESFR, ample trailer parking and heavy power. Strategically located within a northwest submarket of Kansas City, the building benefits from close access to highways and the Kansas City International Airport. The building is 100% leased for 12 years with 3.2% annual rental escalators.

In terms of our development platform, we have 7 buildings or 1.8 million square feet of development activity that is not in service as of the end of Q1. These buildings are in various stages of development and have an expected stabilized yield of 7.1%. Subsequent to quarter end, we have signed two new development leases. We agreed to a 73,000 square-foot lease at our casual drive development in Greenville. That building is now 100% leased. We also executed a lease totaling 45,000 square feet and 1 of our Charlotte development projects. That building is now 90% leased. With that, I will turn it over to Matts who will cover our remaining results and guidance for 2026.

Matts Pinard: Thank you, Bill, and good morning, everyone. Core FFO per share was $0.65 for the quarter, an increase of 6.6% as compared to last year. Leverage remains low, with net debt to annualized run rate adjusted EBITDA equal to 5. Liquidity stood at $806 million at quarter end. During the quarter, we commenced 37 leases across 6 million square feet, generating cash and straight-line leasing spreads of 20.9% and 39.6%, respectively. This is a quarterly record in terms of total operating portfolio square feet leased. Tenant demand is strong and in many industries, including air freight and logistics, retail and containers and packaging.

Retention for the quarter was 69.5%, we are maintaining our retention guidance of 70% to 80% for the year. As of today, 79% of our forecasted leasing for 2026 has been addressed at levels consistent with our initial guidance and at levels equal to our previous years at this point. We still expect cash leasing spreads of 18% to 20% this year. Same-store cash NOI grew 4.1% for the quarter. Credit loss was minimal for the first quarter as well. At this point, we are maintaining all guidance for the year. 2026 guidance can be found on Page 21 of our supplemental package, which is available within the Investor Relations section of the website.

I will now turn it back over to Bill.

William Crooker: Thank you, Matts. I want to thank our team for the great start to 2026. SAG has set the foundation of sustainable growth in 2026 and will continue to benefit from a strong balance sheet, ample liquidity and broad market diversification. We will now turn it back to the operator for questions.

Operator: [Operator Instructions]. Our first question comes from Craig Mailman with Citigroup.

Craig Mailman: Bill, you noted similar to peers that the leasing market is healthier here today. I'm just kind of curious, you guys did maintain retention guidance and quicker backfills on spaces that have come back to you or anything encouraging on that front because I know you guys were a little bit worried about that as a source of occupancy to outside.

William Crooker: Yes. Thanks, Craig. Yes, I mean, it's certainly a higher lease expiration year. And that's driving our guidance -- our occupancy guidance for the year. With respect to what we're budgeting, it's still 9 to 12 months of lease-up time for assets when they go vacant. I will say we had good activity in Q4. That has continued in Q1. We had a large amount of square footage leased in Q1, it was 6 million square feet. So activity is really strong. We're seeing it from multiple industries. We're getting a lot of RFPs. It feels really good. But with all that being said, we have not changed our lease-up assumptions at this time.

But the momentum from Q4 has continued into Q1 and into Q2.

Craig Mailman: And then just a follow-up here. You mentioned, I think, 8 leases, 1.6 million square feet to data center supply tenants. What markets are you seeing that in predominantly? And do you think that this is concentrated in your portfolio or it grows a little bit as just the proliferation of data centers takes hold?

William Crooker: Yes, it certainly feels like it's going to continue to grow. I mean South Carolina, we're seeing a lot of it. We had 3 leases in South Carolina, 2 in the Greenville Spartanburg market. Nashville, 1 of our -- the lease we signed in Nashville was a data center-related tenant. And then we saw some in the Midwest in Wisconsin 1 lease there. We had a lease we signed in Ohio and also in Charlotte. So it's really that Southeast Midwest markets is where we're primarily seeing that demand. And that's where a lot of our portfolio is concentrated. So we anticipate further demand from data center-related tenants.

Craig Mailman: Not to ask a third one, but like what type of tests are there 3PLs? Or are they equipment manufacturers or servicers, who are you leasing to?

William Crooker: Yes. So one was a 3PL to one of the largest 3PLs in the world serving a meta data center contract. We have some tenants that are distributing generators to data centers. We have some light assembly of racking of power conversion systems in one of them, one is manufacturing battery components. So it's a variety of things supporting data center developments and just the operations. And these are long-term leases. I mean the weighted average lease term is a little over 8 years and the leasing spreads we achieved that 1.6 million square feet, was about 35%. So good economics, long-term leases, strong credits backing these leases as well.

Operator: The next question comes from Michael Griffin with Evercore.

Michael Griffin: I appreciate the commentary on the leasing front. It seems like it's been a good start to the year. I realize you haven't -- you've maintained your guide across the board. But maybe, Bill, if you can give us a sense of updated thoughts on market rent growth expectations. I think at the beginning of the year, it seemed like you were flat to up 2%. Does it feel like we're above the midpoint on that? I realize things can fluctuate around, but any commentary there would be helpful.

William Crooker: Yes. I mean, I think this is part of the theme of Q1 calls, especially with us, where we just put out our annual guidance a couple of months ago, we had pretty good insight into where things were trending to start the year. activity is probably a little bit stronger than what we initially thought. But with all that being said, we maintain our guidance really across all components of that. With respect to market rent growth, our guide was 0% to 2%. That will -- that we're going to maintain that guidance as well at this time.

That will likely trend higher on a quarterly basis as we move through the year as we see that vacancy rate -- market vacancy rate peak in the coming months. So everything is panning out as we thought a couple of months ago, maybe a little bit more optimism in the portfolio just given the activity we're seeing and the leases we're signing and the discussions we're having with tenants. So -- but it's still early in the year, right? We're 2 months past our original guidance we put out.

Michael Griffin: Great. That's helpful. And then maybe for my follow-up, you're at about 80% of your 2026 leasing goal seems pretty good so far. I don't want to put the cart before the horse, obviously. But as you look to maybe 2027. Are you starting to have those conversations? I mean does it feel like as you look even at the year ahead, you're running maybe ahead of where you were relative to expectations? Or anything you can glean on maybe those '27 conversations would be helpful.

William Crooker: Yes. I mean, it's a little -- it's obviously a little early for 2017, but we do -- especially for renewals, we start this conversation typically 12 months in advance. So when you look at leasing plan, we're about 25% through that at this point, and that's pretty comparable to the last few years.

Operator: The next question comes from Nick Thillman with Baird.

Nicholas Thillman: Maybe I wanted to touch a little bit on what you're seeing on the acquisition front. Is there any sort of change in the pool of assets you're looking at? Are you willing to take on increased demand environment? Are you willing to take a little bit more value add? Or is -- I guess, bucket, the development, value-add versus core acquisitions and what you're underwriting today and how that sort of trended over the last 90 days or so?

William Crooker: Yes. I'll let Mike jump in terms of kind of what we're seeing broad-based. But with respect to identifying a certain profile of asset and focusing on that I mean we're fortunate enough that we've got the people, the processes in place and the systems in place to underwrite a large amount -- a large number of transactions. So we'll look at everything and depending on what meets our criteria and if we can meet the price, then we'll buy it. So it's not like we're going to shift materially into value-add or materially into long-term stabilized leases. We'll acquire what meets our investment criteria at that time, but we'll look at everything.

Just one thing on the, call it, the acquisition side, sourcing side, and then I'll pass over to Mike for more of the broader view is we did yesterday just acquire a piece of land adjacent to one of our buildings in Dallas, Texas. It's about a 3 -- it's a land is large enough to fit about a 340,000 square foot facility. So we're going to start development of that facility shortly. So it was good to put that land under contracted shovel-ready that transaction is going to be about $38 million at a 7.4% yield on cost. So excited to get that going. And that's just an example. When we're looking at a number of development opportunities.

We're looking at a number of value-add opportunities, stabilized opportunities, some small portfolios. So it really depends on what meets that investment center. And if I didn't mention that transaction, that PSA Land is in Dallas, Texas. So -- and with that, I'll pass over to Mike to share any more commentary on that.

Michael Chase: Sure. And I think another thing just to mention on that piece of land, that's a committed fill-to-suit where we already have it tenant committed for that building on the land that we just bought yesterday. Just looking nationally, it was a strong end of '25. So Q4 came in from an investment sales perspective, came in pretty strong. That's carried over into Q1 of '26. So that stability and momentum in the capital markets has resulted in an increase in confidence from both buyers and sellers in the market. So that also resulted in an uptick of deal flow of more buyers coming to the -- coming off the sidelines and into the market.

So there's been good deal flow that we've seen in Q1 and that's continuing into Q2.

William Crooker: Yes. I mean you see that in our pipeline to our pipeline is $3.9 billion, about 70% of that is single transactions, 30% portfolios. And just on the seller side, I mean, those Empire side bid-ask spreads pretty tight now. So we expect just the overall industrial transaction market to pick up here as we move through Q2.

Michael Griffin: That's helpful. And then, Bill, I know you've mentioned just some of these partnerships you've had with regional developers and sounds like Dallas might be an opportunity that you just locked in here as well. But I guess, longer term, are you thinking about getting a little bit more concentrated now that you're building these relationships with these developers I guess, are you guys being a little bit more submarket focused and looking for a little bit more growth in end markets and underwriting that. I guess more commentary there would be helpful because it's something that we've talked about in the past.

William Crooker: Yes. So just backing up on the piece of land we bought, that was sourced by us. We had a tenant in our portfolio that's on an adjacent site that wanted to do a build-to-suit. So we were able to source the land, and go through all the approval process. So that was done on balance sheet. That's not being partnered with anybody. With all of our developments, we look at the submarkets and make sure that those buildings fit the submarkets I mean these buildings that we're putting up meet the teeth of the demand in these markets. So that's first and foremost. We appreciate the partnerships we have with our development partners. We want to grow those.

We're trying to grow those. In some respects, we are growing those. And there's also some opportunities to expand partnerships with new partners. So all that's on the table. If you were to ask what's our best use of capital today is probably on the development side. I mean, just as one in Dallas, it's a 7.4% yield. So that's our best use of capital is harder to acquire that land and takes longer to develop it. but we like the opportunity, and we'll do it either on balance sheet or with existing partners or with new partners.

Operator: Next question comes from Jason Belcher with Wells Fargo.

Jason Belcher: I guess, first, Q1 same-store was pretty solid at 4.1%. The guidance was unchanged at 3, suggesting somewhat of a possible slowdown. Can you talk about how you expect that to take shape or how we should be thinking about the cadence of that metric for the rest of the year?

Matts Pinard: Yes.So cash same-store of 4.1% in the first quarter is very healthy. But really what we know is talk about the economic impact to occupancy decline. In the first quarter, occupancy decline was only partially reflected in the same-store number, meaning a good portion of the nonrenewals occurred near the end of the quarter. So basically, the second quarter is going to reflect the full impact of that vacancy. So put it a different way, the 4.1% includes impact of the 60 basis points of average occupancy loss, not 120 basis points of actual occupancy loss of period end. So all of that's related to the first quarter.

So the 4.1% does not account for the fact that this space is vacant for the entire quarter. But the first quarter cash same-store was fully anticipated. It was included in our guidance. As you said, we continue to expect cash sales or growth of 3% at the midpoint. So no change in the guidance. This was expected. It really comes down to the impact of occupancy over a full period.

Jason Belcher: Great. And then secondly, could you just give us an update on where your embedded rent increases are trending for newly signed leases and also remind us what the average escalator is across the portfolio is at this point.

Matts Pinard: Yes, absolutely. The weighted average escalator across the portfolio is 2.9%, almost 3%, and that's going to increase every quarter because every lease that we're kind of coming across our desk starts with anywhere in the 3% to 3.5% range, call it, 3.25 on average of the leases that we are signing. So again, just mathematically, that 2.9% will continue to increase.

Operator: The next question comes from Eric Borden with BMO.

Eric Borden: Matts, you just touched on this a little bit about the same-store, but just on the occupancy front, you started off the year with positive leasing, but had a few known move-outs in the back end of the quarter. how should we be thinking about the quarterly occupancy cadence just for the balance of '26, and as we look to the rest of the year, should we expect any additional known move-outs?

Matts Pinard: Yes, exactly. So with the no move outs, we didn't change our guidance. We're at 75% at the midpoint retention, which is basically spot on what we've averaged as a public company and what you can see from any other institutional quality industrial portfolio. But the same store being 60 basis points of average occupancy loss and 120 basis points of period-end occupancy loss. So that resulted in 96.6% occupancy in the same store. And I just want to pause you, that's a very healthy level. As Bill mentioned, our budgets assume 9 to 12 months of lease-up. So space that rolls vacant in our budget lease-up next year, not this year.

If we think about the cadence, we expect the trough occupancy to occur in the second quarter with occupancy increasing during the second half of the year. And that basically squares with our view that at the end of this year, we're going to start to see equilibrium in market rent growth acceleration. Again, the change in Oxy's fully anticipated, we had messaged it. It's included in our initial guidance. We continue to expect average occupancy in the same-store pool to be 96.5% with no change to our guidance.

Eric Borden: Great. And then just going back to the increasing data center demand, how are you guys thinking about underwriting that tenant base in terms of power availability, building specs CapEx needs and credit duration just versus your traditional warehouse timing?

William Crooker: I mean, one of the themes we're seeing across a lot of tenants is they want more power, right? And whether that's today or in 5 years in their lease term, maybe because they plan to automate their facility more or whatnot. But power is certainly something tenants are looking for. with respect to the spaces that we lease to the data center tenants, I mean, some of them had excess power and some did not. So it's your traditional warehouse that is just being used for a different use. It's the same example of we've had warehouses that were regional distribution centers that second tenant was a light assembly tenant and then the third tenant was warehousing, right?

So these are can be used for multiple uses. We're just seeing an incremental demand driver from data center peers.

Operator: The next question comes from Jessica Zheng with Green Street.

Jessica Zheng: Just following up on the data center piece. So for the construction tenants that sized the longer-term basis, do you know if they're surveying like multiple data centers in the area? And if not, do you know if they will be servicing the data centers operations after the construction completes Yes, I'm just curious about the kind of the sustainability of this new tailwind here?

William Crooker: Yes. So some of them are servicing the data centers that are already complete, and it's just servicing their ongoing operations. Some are servicing the development of it. and some are servicing multiple data centers and some are servicing just one data center. But where these warehouses are located. There's multiple demand drivers within those markets. I mean, we have at least two of these data center leases in the Greenville Spartanburg market, and we spoke about that market many times. It's one of our top markets, and there's consumption in that market for warehousing and local distribution. There's regional distribution related to the inland port. There's now data center demand there.

There's the BMW plant that creates a lot of demand there. So these are functional buildings that can meet many of the demand drivers is just this incremental demand driver of data centers.

Jessica Zheng: Okay. And then additionally, I was wondering if you could just kind of walk through your other markets and kind of highlight the ones with relative strengths and weaknesses right now?

William Crooker: Yes. I mean if you look at kind of markets that are a little weaker, it's -- we have one asset in San Diego that's proving to be a little challenging now Memphis is a little slower, Pittsburgh a little slower. Let's say, our markets that have probably been improving the most, the Greenville Spartanburg and Charlotte. And then if you want to move a little further to our best markets, Houston has been a great market. Nashville -- and the Midwest big-box distribution markets have really started to perform extremely well.

I mean that's a trend we're also seeing is big box leasing has been strong, and a lot of these markets are -- have very low vacancy rates for big box distribution. So that's your Columbus, our Louisville, your Indies.

Operator: Next question comes from Henry Newell with RBC Capital Markets.

Unknown Analyst: Just wondering about where you're seeing underlying private market valuation trends in your specific markets and if you're seeing them being impacted by really what's going on macroeconomically or geopolitically at the moment?

William Crooker: Yes. I mean depending on the transaction, whether it's a -- I assume you're talking cap rates just to clarify the question?

Unknown Analyst: Yes.

William Crooker: Yes. So I mean, individual transactions, I mean, we just bought one transaction in Q1. We're close to putting a couple of others under LOI. I mean those are transaction transacting at and around where we're buying assets, right? Sometimes 25 basis points or 50 basis points inside of that, and that's why we don't win the deal, right? So they're trading at are a little bit lower than what we're willing to pay. And then portfolios because there's a lot of capital still chasing this asset class. We're still seeing a slight premium for portfolio. So anywhere from a 25 to 50 basis point portfolio premium on private transactions.

Operator: At this time, I would like to turn the floor back to Mr. Crooker for closing comments.

William Crooker: Thanks, everybody, for participating in the call. We appreciate the questions and look forward to seeing you all soon. Thank you.

Operator: You may disconnect your lines at this time. Thank you for your participation, and have a great day.

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