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STAG Industrial, Inc. (STAG) Q4 2022 Earnings Call Transcript

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STAG Industrial, Inc. (NYSE:STAG) Q4 2022 Earnings Conference Call February 16, 2023 10:00 AM ET

Company Participants

Steve Xiarhos – Associate Capital Markets and Investor Relations

Bill Crooker – Chief Executive Officer

Matts Pinard – Chief Financial Officer

Mike Chase – Executive Vice President and Chief Investment Officer

Conference Call Participants

Craig Mailman – Citi

Dave Rodgers – Baird

Michael Carroll – RBC Capital Markets

Camille Bonnel – Bank of America

Jon Petersen – Jefferies

Jason Belcher – Wells Fargo

Mike Mueller – JPMorgan

Eric Borden – BMO Capital Markets

Vince Tibone – Green Street

Operator

Thank you. Greetings and invited to nan STAG Industrial Fourth Quarter 2022 Earnings Conference Call. At this time, each participants are successful a listen-only mode. A little question-and-answer convention will travel a general presentation. [Operator Instructions] As a reminder, this convention is being recorded.

It is now my pleasance to present your host, Steve Xiarhos, Associate Capital Markets and Investor Relations. Thank you, Steve. You whitethorn begin.

Steve Xiarhos

Thank you. Welcome to STAG Industrial's convention telephone covering nan 4th fourth 2022 results. In summation to nan property merchandise distributed yesterday, we person posted an unaudited quarterly supplemental accusation package connected nan company's website astatine www.stagindustrial.com, nether nan Investor Relations section.

On today's call, nan company's prepared remarks and answers to your questions will incorporate forward-looking statements arsenic defined successful nan Private Securities Litigation Reform Act of 1995. Forward-looking statements reside matters that are taxable to risks and uncertainties that whitethorn origin existent results to disagree from those discussed today. Examples of forward-looking statements see forecast of halfway FFO, same-store NOI, G&A, acquisition and disposition volumes, retention rates and different guidance, leasing prospects, rent collections, manufacture and economical trends and different matters.

We promote each of our listeners to reappraisal nan much elaborate discussion related to these forward-looking statements contained successful nan company's filings pinch nan SEC and nan definitions and reconciliations of non-GAAP measures contained successful nan supplemental accusation package disposable connected nan company's website. As a reminder, forward-looking statements correspond management's estimates arsenic of today, STAG Industrial assumes nary responsibility to update immoderate forward-looking statements.

On today's call, you will perceive from Bill Crooker, our Chief Executive Officer; and Matts Pinard, our Chief Financial Officer. Also present pinch america coming is Mike Chase, our Chief Investment Officer, who is disposable to reply questions circumstantial to their area of focus.

I'll now move nan telephone complete to Bill.

Bill Crooker

Thank you, Steve. Good morning, everybody, and invited to nan 4th fourth net telephone for STAG Industrial. We're pleased to person you subordinate america and look guardant to telling you astir 4th fourth and afloat twelvemonth 2022 results. The 4th fourth results provided a fitting conclusion to different beardown twelvemonth for STAG. Thank you to our tremendous squad for nan difficult activity and dedication. This year, featured galore successes including a grounds level of same-store growth, opportunistic investments successful a volatile transaction market, and operational efficiencies that resulted successful awesome rate travel growth.

The system continues to digest and respond to aggregate drivers of volatility, rising liking rates, geopolitical unrest, labour unit variables, including levels of employment and costs maturation person resulted successful various imaginable recessionary outcomes. Against this macro backdrop, we spot persistently beardown request for business existent estate. The secular tailwind circumstantial to business existent property stay intact.

Near and onshoring, e-commerce, proviso concatenation reconfiguration and inventory level rebuilds will thrust robust marketplace rent maturation for nan foreseeable future. STAG’s portfolio is good positioned to build connected past year's occurrence and will nutrient charismatic soul maturation successful 2023. For nan year, rate same-store NOI maturation was 5%, continuing nan inclination of mounting caller grounds levels of soul growth. This maturation is sustainable supported by our mean yearly rental escalators of 2.5% crossed nan portfolio.

There's upward unit connected this number. Leases signed complete nan past 12 months person averaged yearly rental increases of 3% pinch definite markets varying increases of 4% and above. Cash leasing spreads will accelerate successful 2023. As of today, we person addressed 61.5% of nan caller and renewal leasing we expect to commence successful 2023, achieving rate leasing spreads of 31.6%. The mean yearly rental escalator connected our 2023 leasing activity achieved to-date is 3.4%. This encompasses 8.4 cardinal quadrate feet of leasing retired of nan 13.7 cardinal quadrate feet projected successful 2023.

Further demonstrating nan spot and positioning of our portfolio. We person won 715,000 quadrate ft improvement successful process successful Greer, South Carolina. This 2 building task is progressing connected schedule and is expected to outperform our underwriting. We person funded $42 cardinal of nan $68 cardinal task and has seen beardown pre-leasing activity to-date.

On nan outer maturation front, nan acquisition marketplace ended nan twelvemonth softly arsenic sellers are seeking value stableness and this move has continued into nan first portion of this year. Given this marketplace uncertainty, we are introducing 2023 acquisition and disposition measurement pinch wider than normal ranges. Our guidelines lawsuit assumes humble occurrence successful identifying and acquiring charismatic opportunities successful nan backmost half of 2023.

We expect acquisition measurement betwixt $300 cardinal and $700 cardinal and disposition measurement betwixt $50 cardinal and $200 million. No incremental superior is needed to run astatine nan midpoint of our nett acquisition guidance while maintaining our guided leverage range. Expected rate capitalization rates bespeak an description of astir 100 ground points from levels we achieved successful nan first half of 2022.

With that, I will move it complete to Matts, who will screen our remaining results and guidance for 2023.

Matts Pinard

Thank you, Bill, and bully morning, everyone. Core FFO per stock was $0.55 for nan 4th and $2.21 for nan year, an summation of 7.3% arsenic compared to 2021. Cash disposable for distribution totaled $342.7 cardinal successful 2022, a year-over-year summation of 16.7%. Consistent pinch our erstwhile messaging, nan dividend payout ratio continues to mean declining from 82.1% to 77.8% astatine year-end 2022. This past year, we retained astir $76 cardinal of free rate travel aft dividends paid. These dollars are disposable for incremental finance opportunities, indebtedness repayment and different wide firm purposes.

Leverage remains wrong our normal scope pinch nett indebtedness to annualized tally complaint adjusted EBITDA adjacent to 5.2x pinch $847 cardinal liquidity astatine year-end. During nan quarter, we commenced 27 leases totaling 3 cardinal quadrate feet, which make rate successful consecutive statement leasing spreads of 14.2% and 25.4% respectively.

Retention was 79.5% for nan 4th and 71% for nan year. When adjusted for instances of minimal downtime and contiguous backfills, adjusted retention was 90.4% for 2022. Cash same-store NOI grew 4.5% for nan 4th and 5% for nan year, representing different yearly same-store grounds maturation for STAG.

Our 2023 guidance scope for rate same-store maturation is 4.5% to 5%, anchored by weighted mean rental escalators of astir 2.5%, pretention of 70% astatine nan midpoint of our guidance scope and rate leasing spreads ranging betwixt 25% to 30% connected astir 13.7 cardinal quadrate feet of projected leasing for nan year.

Note that this projected leasing measurement includes renewal and caller leasing. As Bill mentioned, astir 61.5% of our projected 2023 leasing has been addressed pinch aggregate rate leasing spreads of 31.6% accomplished to-date. There are nary ample known move outs included successful our guidance range.

Note that 2023 same-store excavation will see 92.7% of our full quadrate footage owned astatine year-end. In position of superior marketplace activity, consequent to 4th end, we repaid our $100 cardinal backstage placement statement F, which matured connected January 5. There are minimal indebtedness maturities for nan adjacent 2 years that's only $53.3 cardinal maturing done 2024.

Our 2023 guidance tin beryllium recovered connected Page 19 of our supplemental package, which is disposable successful nan Investor Relations conception of our website. Components of guidance see halfway FFO per stock to scope betwixt $2.22 to $2.26 per share. We expect same-store rate NOI maturation to beryllium betwixt 4.5% and 5% for nan twelvemonth pinch a retention scope of 65% to 75%.

As mentioned by Bill, acquisition measurement guidance is simply a scope of $300 cardinal to $700 cardinal pinch nan rate capitalization complaint betwixt 5.75% and 6.5%. Disposition measurement guidance is simply a scope of $50 cardinal to $200 million. G&A is expected to beryllium betwixt $48 cardinal and $50 million. And finally, we expect nett indebtedness to annualized tally complaint adjusted EBITDA to betwixt 5x and 5.5x.

I'll now move backmost complete to Bill.

Bill Crooker

Thank you, Matts. STAG enjoyed a very successful 2022. The institution is successful awesome position and we entered 2023 pinch important momentum crossed nan platform. I look guardant to nan opportunities successful beforehand of america and different awesome year.

We'll now move it backmost complete to nan usability for questions.

Question-and-Answer Session

Operator

Thank you. We'll now beryllium conducting a question-and-answer session. [Operator Instructions] Thank you. Our first mobility is from Craig Mailman pinch Citi. Please proceed pinch your question.

Craig Mailman

Hey, bully morning. Matts, conscionable doing immoderate backmost of nan letter cover mathematics pinch nan yearly escalators and rent spreads, you guys are assuming it seems for illustration wrong nan same-store guidance, you guys are assuming astir 50 to 100 ground constituent pullback successful occupancy. Is that astir right?

Matts Pinard

Hey, Craig, bully morning. That's correct. Right now, nan portfolio twelvemonth extremity is astir 99% occupied. We do not expect to run this portfolio astatine 99%. Implied successful our guidance is 50 ground points of mean occupancy loss. And what I would constituent to is offsetting nan occupancy nonaccomplishment are nan very, very, very patient rental spreads that we've accomplished by fundamentally year-to-date and 2023 betwixt 25% to 30%. So location is simply a trade-off betwixt nan occupancy and nan rental spreads that we're capable to achieve.

Craig Mailman

Fair. And past from a bad indebtedness perspective, do you guys person thing baked successful there?

Matts Pinard

We do. So we person astir 50 ground points of in installments nonaccomplishment baked into our guidance, conscionable for context, nan erstwhile years we've had astir 40. It's a crushed up analysis. We trust connected our in installments team, plus managers, et cetera. We spell tenant-by-tenant. What I will opportunity is we incurred zero in installments nonaccomplishment successful 2022, and this 50 ground constituent budgeting really isn't identified to circumstantial tenants necessarily, but accordant pinch our budgeting practices astatine nan opening of nan year, peculiarly successful nan heightened volatility that we deliberation it's prudent budgeting.

Craig Mailman

No, that's helpful. Then, you guys connected nan leasing that you've done truthful acold for 2023, you guys had a bully pickup successful nan rent spreads connected a blended ground that you're reporting present truthful far. I mean, it seems for illustration there's a small spot of a pullback astatine slightest astatine nan midpoint from wherever you guys signed leases. I mean, has it been a operation rumor truthful acold this twelvemonth that's been driving nan rent spreads supra 30% and what you guys benignant of person successful your sites for nan remaining 40-ish% of leases is different markets aliases different spaces. I'm conscionable benignant of funny arsenic to nan conservatism location given, you guys are almost two-thirds done leasing.

Bill Crooker

Yes. Hey Craig, it's Bill. I mean, from a operation change, it's difficult to say, it's a operation that's really driving it. In nan 8.4 cardinal quadrate feet we lease, that's crossed 63 leases. It's crossed a number of markets astir 55 – it’s astir 55% of those leases were renewals. 27% are caller leasing. I deliberation that's right. And past successful position of nan guidance of 25% to 30%, I mean, that's conscionable wherever we consciousness for illustration things are shaking out. As Matts said, there's a batch of volatility successful nan marketplace correct now, and truthful we're conscionable that's wherever we're budgeting for nan year. As we said correct now, we're 61.5% of our expectations done astatine 31.6% spreads.

Craig Mailman

Yes, that's helpful. Then conscionable 1 much connected nan dispositions, I cognize it was adjuvant for you guys to springiness nan acquisition headdress rate, truthful I'm conscionable benignant of funny what type of assets you're looking to sell? Is it conscionable non-core pinch possibly immoderate upside aliases assets that you've already stabilized and benignant of really does that facet into nan yields wherever we've benignant of seen worldly that's stabilized, headdress rates are blowing retired much than worldly that still has near-term upside?

Bill Crooker

Yes, and that's accordant pinch this past year, it's called – nan longer nan wall, nan little nan escalators, nan much nan headdress rates person expanded. Our dispositions successful 2023, there's sewage to beryllium a operation arsenic it has been successful nan past of opportunistic and non-core dispositions. Opportunistic dispositions are nan dispositions we execute connected that are mostly nutrient little headdress rates than wherever we're buying and it's a root of equity capital. It’s a beautiful wide scope that we put retired for this twelvemonth conscionable fixed nan volatility successful nan market. So it’ll beryllium a operation of opportunistic and non-core dispositions.

Craig Mailman

So astatine nan midpoint, if you guys do nan $500 cardinal connected acquisitions and your dispo guidance astatine nan midpoint benignant of match, what’s nan nett effect to FFO that you guys are assuming successful guidance?

Matts Pinard

So nan midpoint of our guidance is $2.24. What I will opportunity is that acquisition measurement is backend weighted successful our guidance. So if you return a look astatine evidently what we did successful nan 4th quarter, nan $8 million, we person closed zero transactions year-to-date done today. We person thing connected our closing pipeline. So nan existent publication to core-FFO is really backend weighted, truthful it’s comparatively minimal arsenic opposed to being much inquisitive astatine nan opening of nan year.

Craig Mailman

Perfect. Thank you.

Operator

Thank you. Our adjacent mobility is from Dave Rodgers pinch Baird. Please proceed pinch your question.

Dave Rodgers

Yes. Hey Bill, Matts, bully morning. Maybe wanted to commencement pinch thing that came up, I deliberation connected a batch of nan different calls is conscionable I deliberation nan connection normalization for business arsenic we moved into 2023, a small spot thinner successful position of nan request pipeline and marketplace rent maturation slowing down a small bit. Can you talk astir what you’re seeing possibly from a marketplace level perspective? Obviously, nan numbers you’re posting are really good. But possibly benignant of looking down nan curtain a small bit, springiness america a small spot much colour connected what you’re expecting for marketplace rent maturation and nan inclination that you’ve seen moving into nan extremity of nan twelvemonth and into 2023?

Bill Crooker

Dave, bully question. We’re seeing – we’re continuing to spot beardown demand, supplies coming online. I deliberation correct now we’re looking astatine astir 3.5% of inventory coming online. New proviso coming online this adjacent twelvemonth that is taking a small longer to travel online than it has in, telephone it normal cycles conscionable owed to nan proviso concatenation issues that we’re still seeing. But rent maturation for our portfolio, we’re projecting mid to high-single-digits for rent growth.

Demand is still really strong. We’re seeing it crossed a batch of different industries including e-commerce, 3PLs, nutrient and beverage, packaging industry. So we’re still seeing really beardown demand. One point we are seeing is conscionable a small spot of uptick from our lease gestation periods. We’re seeing, telephone it a period longer betwixt erstwhile tenants motion LOI and return occupancy. So we cook immoderate of that into our budgeting. So we fund a small spot longer downtime successful 2023.

Dave Rodgers

Great. Appreciate nan color, Bill. And past possibly you guys gave really bully item pinch respect to nan leases that you’ve addressed already for this year, nan 61%. But curious, you person nan 65% to 75% retention successful nan guidance, and truthful it’s almost for illustration you’re benignant of location and I recognize it’s a operation betwixt caller and renewals and not each renewals, but you’re benignant of astatine nan guidance a small spot already. Are location – although, they’re not successful your guidance according to math, are location immoderate large known move outs that we should expect successful nan numbers aliases conscionable things that you’re uncertain of that could deed arsenic we get into nan later portion of nan year?

Bill Crooker

No, no. No large known move outs, we benignant of look astatine that number arsenic leases being 400,000 quadrate feet aliases larger, truthful we don’t person immoderate of those successful nan pipeline. The retention guideline is 65% to 70%, we consciousness beautiful bully with. This past twelvemonth we had retention adjusted pinch contiguous backfill of 90%, for illustration we’re looking astatine thing person to 80% correct now for 2023. That number if thing will only summation if it does because we’re not budgeting 1 to 2 months of downtime for vacant spaces.

Dave Rodgers

Okay. That’s helpful. Lastly for maine connected nan acquisition front. Anything different that you’re looking astatine successful acquisitions aliases arsenic portion of that finance guidance would you see doing a small spot much improvement aliases redevelopment value-add type transactions? I conjecture possibly conscionable your thoughts connected wherever you expect to return nan superior fund successful 2023? Thanks.

Bill Crooker

Yes. Right now, arsenic Matts said that nan acquisitions are really backend weighted. Developments, redevelopments value-adds, we’ve been highly successful connected those projects complete nan years. We’re connected our – arsenic I mentioned successful nan prepared remarks, our 3rd improvement that’s search to outperform our fund and underwriting. And truthful if there’s bully opportunities location and we deliberation location mightiness – location whitethorn be, past we’ll execute connected those. But we’re still successful a value find market, truthful it’s astir apt going to return a small spot of clip present to travel to statement pinch immoderate pricing.

Dave Rodgers

Thanks, Bill. Appreciate it.

Bill Crooker

Thanks, Dave.

Operator

Thank you. Our adjacent mobility is from Michael Carroll pinch RBC Capital Markets. Please proceed pinch your question.

Michael Carroll

Yes. Thanks. With nan scheme 2023 leasing activity, I cognize you already addressed astir 60% of that. I mean, really does that comparison successful years past? I mean, are you up of expectations arsenic you are correct now, aliases is this benignant of successful statement pinch wherever you usually are astatine nan opening of nan year?

Matts Pinard

Good morning, Mike. This is Matts. We’re astir successful statement to wherever we are historically, truthful anyplace successful nan precocious 50s, nan debased 60s astatine this constituent of nan twelvemonth person been addressed. 61.5%, possibly a tick higher, but really what’s higher present are nan leasing spreads. In position of nan existent advancement we made, it’s comparatively successful line.

Michael Carroll

Okay. And then, I cognize you announced astir an other 2.4 cardinal quadrate feet this 4th compared to nan 2023 leasing activity you announced past quarter. And it looks for illustration connected that incremental leases that were announced your spreads are adjacent nan 40% range. I mean, I conjecture first, is that correct? And is location thing lumpy successful location wrong that past 2.4 cardinal quadrate feet that was conscionable announced?

Bill Crooker

I deliberation nan 1 – I’m conscionable looking astatine Matts, I deliberation nan 1 lumpy portion was astir apt nan Amazon building that was rolling successful nan 4th fourth of adjacent twelvemonth we did renew them. We anticipated rolling that up astir 30%. We ended up rolling that up 60%, truthful vastly outperformed our budgets there. That was astir apt 1 of nan bigger lumpier items there.

Matts Pinard

That’s right. Mike, conscionable to adhd on, that’s a 250,000 quadrate ft building successful Burlington, New Jersey pinch precocious look rates. So being capable to double our expectations surely pushes those numbers.

Michael Carroll

Okay, great. And past is location thing different pinch nan remaining 40% that needs to beryllium done? I mean, is nan operation – nan geographic operation different aliases thing for illustration that compared to nan worldly that you conscionable completed aliases announced already?

Bill Crooker

Not materially different, Mike. It’s conscionable that stuff’s expiring astatine nan extremity of nan twelvemonth and tenants typically prosecute successful renewal discussions six months up of time, sometimes a small spot longer. So I’d opportunity nan only quality is much of those expirations are backmost half of nan year.

Michael Carroll

Okay, great. Thanks.

Bill Crooker

Thanks, Mike.

Operator

Thank you. Our adjacent mobility is from Camille Bonnel pinch Bank of America. Please proceed pinch your question.

Camille Bonnel

Good morning. Based connected your finance activity this past 4th and expectations to execute connected transactions successful nan backmost half of nan year, tin you conscionable speak to nan assurance you person successful position of hitting nan debased and precocious extremity of your acquisition guidance?

Bill Crooker

It’s a reliable mobility to answer. I would say, we put our guidance retired location pinch beautiful wide ranges because of nan volatility successful nan marketplace today. So it is guidance and correct now our anticipation is that we will run wrong our guidance ranges. Otherwise, we wouldn’t put them retired there. But they’re wider than normal, some connected nan measurement broadside and nan headdress complaint side.

Camille Bonnel

Okay. And you person awesome sum complete your upcoming expiries for nan adjacent fewer months. Just connected an earlier constituent astir nan proviso concatenation issues that are persisting though, tin you speak to whether you’re seeing immoderate alteration successful tenant determination making successful position of wherever they’re basing their operations and building their logistics footprints?

Bill Crooker

We haven’t seen thing material. As I mentioned successful 1 of nan earlier responses, nan only mini point we’re seeing from tenants is conscionable taking a small spot longer clip from LOI to really taking occupancy, but thing worldly from a footprint perspective.

Camille Bonnel

Okay. And last question, going backmost to aforesaid shop NOI maturation conscionable focusing connected nan rental maturation opportunity wrong nan portfolio. On 1 hand, you mentioned that there’s now a greater number of leases connected 3% to 4% escalators, while connected nan different broadside you person precocious mark-to-market potential. How should we conscionable beryllium reasoning astir nan equilibrium betwixt these 2 factors contributing to same-store NOI growth?

Bill Crooker

Well, for nan – I’ll start, possibly Matts if you want to adhd connected here. But for 2023, I deliberation that – really to deliberation astir it is, is look astatine nan guidance and 25% to 30% rollover rents. And we mentioned we’re adjacent to 3.5% escalators for those leases we’ve signed successful 2023, truthful upward unit connected nan 2.5% mean escalated successful nan portfolio. And each lease transaction is simply a negotiation, truthful sometimes tenants are much inclined to salary higher look complaint and little bumps and immoderate nan inverse. Frankly, we’re not signing really immoderate leases that I tin deliberation of beneath 3% bumps now. And we’re seeing leases – we’re signing leases pinch 4% positive bumps. So I deliberation it really is simply a independent circumstantial speech connected each lease. Anything other you want to adhd there, Matts?

Matts Pinard

Yes. I deliberation Bill made nan important constituent location that, 1 of nan biggest building blocks of our guidance for this twelvemonth are nan weighted mean escalators crossed nan portfolio, coming Those beryllium astatine 2.5%. But I deliberation what’s important to statement present is what Bill said is nan upward unit of that number. We person circa 115 cardinal quadrate feet, we lease anyplace 10% to 15% of nan portfolio a year. So we are striking leases that astatine slightest statesman pinch nan 3% successful position of rental escalators, but it takes clip to really move nan aggregate. It would beryllium my anticipation that if we sat present successful 12 months, nan 2.5% would beryllium higher owed to nan truth of nan leasing that we expect to execute this year.

Camille Bonnel

Okay. Thank you for nan color.

Operator

Thank you. Our adjacent mobility is from Jon Petersen pinch Jefferies. Please proceed pinch your question.

Jon Petersen

Okay. Thanks. I deliberation I conscionable person 1 question. So nan pipeline, evidently it’s been going down. I conscionable wonderment if you could springiness america immoderate much colour connected are seller’s not putting things connected nan market, are you guys being much selective. I guess, really should we deliberation astir that number and benignant of why it’s moving nan measurement it’s moving, for illustration what nan bigger drivers of that are? And for illustration what you guys are looking – I guess, arsenic we look into nan backmost half of nan year, you’re expecting much acquisitions, but what are nan drivers that you expect to person that pipeline summation again?

Bill Crooker

Yes. We’re expecting much acquisitions successful nan backmost half. Just astatine immoderate constituent we consciousness for illustration nan value find is going to hap and correct now we’re projecting that successful nan backmost half. With that being said, we person a wide scope of acquisition volume. In position of nan pipeline being lower, a large facet location is nan deficiency of portfolios successful nan pipeline. We’ve underwritten portfolios earlier we’ve bid connected portfolios. We person not been successful connected winning a batch of ample portfolios, but there’s not a batch of portfolios, if immoderate successful nan pipeline. And Mike, thing you want to adhd there?

Mike Chase

Yes. Bill, I deliberation you mentioned it. I mean it’s much heavy weighted towards granular transactions. There’s decidedly not arsenic galore afloat marketed transactions coming retired correct now. A batch of what we’re seeing successful nan marketplace are benignant of lightly marketed disconnected marketplace transactions and transactions that we’ve looked astatine successful nan past and are coming backmost astir that person not traded. So that would beryllium accounted for nan flimsy alteration successful nan pipeline.

Bill Crooker

And nan wide constitution of nan pipeline, Jon, is beautiful akin to nan worldly we’ve been acquiring nan past mates years.

Jon Petersen

Okay. All right. That’s it for me. Thank you very much.

Bill Crooker

Thanks, Jon.

Operator

Thank you. Our adjacent mobility is from Jason Belcher pinch Wells Fargo. Please proceed pinch your question.

Jason Belcher

Thanks and bully morning. Bill, you’ve referenced near-shoring and on-shoring arsenic imaginable tailwinds for business demand. Just wondering if you could conscionable talk astir really you expect those trends to play retired complete time? Any colour you could stock astir timing aliases magnitude aliases imaginable use would beryllium helpful? And if location are definite markets wrong your portfolio that you deliberation will use much than others?

Bill Crooker

Yes, I mean, I’ll effort to enactment distant from nan magnitude mobility because that’s a really difficult 1 to answer. But – and we’re seeing it use nan portfolio coming successful our El Paso market. There’s a batch of nearshoring, onshoring happening location arsenic good arsenic proviso concatenation reconfiguration. We’re besides seeing immoderate successful nan Southeast. We expect to spot astir apt immoderate successful nan mean word successful nan Midwest, but that we’ll spot really that pans out. But it’s impacting nan portfolio coming successful immoderate of nan separator markets.

Jason Belcher

That’s helpful. Thank you. And past secondly, Amazon remains astatine your apical tenant astatine astir 3% of ABR. Can you conscionable springiness america an update connected immoderate caller discussions you’ve had location and your vulnerability to immoderate expiring Amazon leases successful nan adjacent mates of years?

Bill Crooker

Sure. Yes. We had nan Amazon lease that we renewed that I conscionable mentioned. Again, we doubled our budgets. We expected nan rotation up 30% and extremity up rolling up 60%. So that lease has been pushed out. The adjacent lease rotation I deliberation is simply a mini 120-ish 1000 [ph] quadrate ft building successful early 2024. That’s a beneath marketplace lease. It’s a bully building. It’s a 2nd procreation aliases 3rd procreation lease to Amazon. So it wasn’t a build to suit for Amazon. It’s a functional building. So wide nan Amazon vulnerability has been moving retired rather good for us. And we’ve been capable to run those accommodation either pinch renewals aliases leasing caller tenants successful nan accommodation that Amazon does not renew.

Jason Belcher

Thanks a lot. Appreciate nan color.

Bill Crooker

Thank you.

Operator

Thank you. Our adjacent mobility is from Mike Mueller pinch JPMorgan. Please proceed pinch your question.

Mike Mueller

Yes. Hi. May person missed this. But successful nan 2023 guidance, is location immoderate equity embedded successful it, fixed nan telephone for nett acquisitions? And I guess, secondly, are you an issuer successful nan mid-30s?

Matts Pinard

Hey, Mike. Good morning. I tin reply nan first portion first, which I deliberation makes sense. The midpoint of our guidance is really system to presume zero incremental capital, some connected nan equity and nan indebtedness side. We tin execute that without needing incremental capital. We haven’t issued equity since January past year. Leverage is wherever we want it correct wrong our range. I deliberation an important constituent to make present is we are generating astir $80 cardinal of free rate travel aft dividends. In position of refinancing, we don’t person overmuch maturing. We person a bunch of liquidity.

I would opportunity wherever nan stock value is correct now, we do not person an interest. I deliberation that arsenic markets change. We’re going to evaluate. But nan logic why we put guidance nan measurement we did is evidently there’s a batch of uncertainty and very akin to 2022, very beardown soul growth. The superior markets are volatile, that’s flowing done nan acquisition outer maturation side. So we are very observant successful putting together our comparatively wide and little ranges arsenic Bill described, to beryllium capable to tally this business this twelvemonth without incremental equity if we request it – if we don’t request it.

Mike Mueller

Got it. Okay. And past apologize for this. But going backmost to nan dispersed mobility 1 much clip connected nan 31% truthful acold this twelvemonth and nan telephone for afloat twelvemonth of 25% to 30%. I conjecture nan mobility is are you seeing thing specifically successful nan upcoming roles that would propulsion you down aliases is that conscionable an assumption?

Bill Crooker

It’s an assumption, Mike. It’s leases that are rolling successful nan backmost half of nan year. And that’s really what it is. So it’s conscionable an presumption correct now. Nothing known correct now that’s driving it, that driving our guidance to 25% to 30%.

Mike Mueller

Got it. Okay. Thank you.

Bill Crooker

Thanks.

Operator

Thank you. Our adjacent mobility is from Eric Borden pinch BMO Capital Markets. Please proceed pinch your question.

Eric Borden

Hey guys, bully morning. I was conscionable hoping if you benignant of supply immoderate colour to amended understand nan building blocks from 2022 to 2023. Just fixed you person a akin aforesaid shop NOI maturation arsenic past year, but it seems to beryllium an applied resistance connected FFO per share. I understand that location were immoderate one-timers successful 3Q of past twelvemonth conscionable hoping that you could supply immoderate further colour there? Thanks.

Matts Pinard

Yes, absolutely. Want to locomotion you done 2022 and past our 2022 guidance until we get there. First, I deliberation it’s important to statement connected nan past net telephone successful Q3, we did person a one-time item. It accounted for astir a $0.01. So location is $0.01 of one-time items successful 2022. We are not budging immoderate 1 clip items successful 2023. That 1 clip point was related to a colony from a anterior tenant, again, impacted 2022 by $0.01.

In position of 2023, there’s really 2 awesome drivers impacting our first halfway fulfill guidance, nan acquisition cadence and volume, which we discussed a fewer times connected nan call. And evidently this is impacting america and everyone else, but expanding short-term liking rates. So our 2022 acquisition measurement was heavy weighted to nan first half of nan twelvemonth and very humble successful nan 2nd half consequence successful including pinch $8 cardinal of investments successful nan 4th quarter.

As our earning net merchandise states, we haven’t acquired thing this year. We do not person thing connected our closing pipeline and our guidance assumes that acquisition measurement will beryllium a backmost half weighted arsenic opposed to 2022 wherever its beforehand half weighted. This is going to person an effect connected earnings. In position of liking rates, we person a fixed complaint equilibrium expanse isolated from for our revolver. Interest complaint connected nan revolvers accrued almost 300 ground points comparing coming to nan mean costs past twelvemonth and that’s going to beryllium nan different awesome impact.

Eric Borden

Okay. That’s helpful. And past possibly connected nan headdress complaint front, wherever is nan bid-ask dispersed coming and really overmuch wider do you expect nan scope moving towards nan backmost half of nan year? I cognize you’ve provided immoderate successful your guidance, but conscionable funny to cognize wherever it is today.

Bill Crooker

The bid-ask – it’s difficult to reply that specifically, nan bid-ask dispersed is beautiful wide, which is why you’re not seeing america transact pinch a batch of acquisitions and frankly nan business marketplace arsenic a full is down importantly year-over-year successful position of number of transactions done. So we expect nan bid-ask dispersed to constrictive a bit. There continues to beryllium volatility pinch nan Fed and nan latest, moreover PPI information that came retired today. So there’s a batch of accusation that’s coming retired and nan Fed reacts and that it impacts indebtedness cost, which impacts nan headdress rate. So hopefully that settles retired successful nan backmost half of nan twelvemonth and nan business marketplace transactions commencement to travel to fruition.

Eric Borden

All right. Great. Thanks guys. That’s each for me.

Bill Crooker

Thanks.

Operator

[Operator Instructions] Our adjacent mobility is from Vince Tibone pinch Green Street. Please proceed pinch your question.

Vince Tibone

Hi, bully morning. I conscionable wanted to travel up connected nan backing mobility and conscionable effort to get a consciousness of erstwhile you would perchance beryllium willing successful issuing equity again, conscionable because connected our numbers, Stag is trading correct astir a six implied headdress complaint successful nan aforesaid scope you’d beryllium acquiring stuff. So, neutral-ish costs of capital. So I conjecture why not rumor equity aliases for illustration what needs to alteration it simply nan banal value to get you comfortable issuing equity again?

Matts Pinard

Hey Vince. Good morning. I deliberation number one, I deliberation nan overarching reply is issuing equity to money uses of proceeds, right? As I mentioned, we do not person thing connected our closing schedule. Leverage is wherever we request it. So, arsenic we beryllium present today, we person nan expertise to run without equity. We’re still trying to fig retired nan value find connected nan outer maturation side. We’re generating $80 cardinal of rate conscionable moving our portfolio. We tin negociate leverage that way. As Bill discussed earlier, we person nan expertise to credibly superior recycle. We’re really conscionable taking a look astatine nan volatile superior markets and taking a look astatine our position, peculiarly pinch nan spot of our portfolio. And we do not person a request to do that arsenic it sits present today.

Bill Crooker

Yes, Vince, I deliberation that, I mean, nan short reply is we’re being patient. We surely don’t want to overpay for assets. And I’m conscionable looking astatine nan 1 plus we closed successful Q4. We’re capable to get that astatine a beautiful precocious headdress rate. And it was a waste lease battalion pinch a decent in installments and it’s a awesome building and a really beardown market. And truthful those are opportunities that if we had a full pipeline of those and we could creatively deploy nan equity astatine those levels, past we’d deliberation agelong and difficult astir it. But correct now we don’t person a full pipeline of those acquisitions. So we’re being patient. We’re picking our spots and we’re capable to do truthful pinch wherever we are from a liquidity equilibrium expanse position and retained rate flow.

Vince Tibone

Got it. That makes sense. And past conscionable to confirm, for illustration from a modeling perspective. So are you conscionable assuming immoderate acquisitions past successful excess of free rate travel conscionable beryllium put connected nan revolver? Is that really we should deliberation astir it? And if so, for illustration benignant of what’s nan possibly bully mean complaint successful your mind to presume for immoderate benignant of incremental revolver debt?

Matts Pinard

Yes. So that’s precisely right. The midpoint of our guidance assumes nary incremental equity. So connected a nett acquisition basis, nan acquisitions we’ve made utilizing nan retained rate travel we talked about, and thing successful summation to that would beryllium revolver debt. Right now revolver is priced a small northbound of 5%. You return a look astatine a guardant curve and you tin put arsenic overmuch credence arsenic you would for illustration into a guardant word SOFR curve. But anyplace successful nan debased 5% is astir apt bully for your modeling.

Bill Crooker

And arsenic that revolver equilibrium increases, if we were to word that out, nan rates aren’t materially different conscionable fixed nan flatness of nan curve.

Vince Tibone

Just connected that really quick, okay. How overmuch – really are nan backstage indebtedness markets today? Whether it’s a backstage placement statement aliases a word loan, are those markets still much restrictive? How overmuch word do you deliberation we could get? Just a small much colour connected maybe, too conscionable complaint immoderate of nan readiness of debt?

Bill Crooker

Yes, I’ll footwear it disconnected and past walk up nan Matts. But I mean, position of conscionable nan backstage placement marketplace that marketplace is still operating and functioning and you tin get indebtedness arsenic agelong arsenic 12 years. If we did thing it’d astir apt beryllium successful nan 10-year range. But I’ll fto Matts talk astir nan slope markets and thing to walk connected nan backstage placement market.

Matts Pinard

Right. Yes, truthful Vince, conscionable to travel up connected nan backstage placement. If we were to spell to marketplace coming for a 10-year backstage placement note, and this is simply a marketplace we really bask nan flexibility. We’ve cultivated a beautiful bully pursuing and we’ve had a batch of occurrence there. 10-year indebtedness would value astir apt successful nan 5 to 5 and a 4th range. Credit spreads person travel successful a small bit, but nan tenure continues to bounce around. We’re not a nationalist enslaved issuer successful position of nan slope market. We really took attraction of that successful July of past year. We upsize our revolver. We person a important magnitude of liquidity. We took attraction of our near-term refinancing. So we don’t person a request for slope indebtedness capital. And it’s apt that if we were to spell to nan indebtedness markets, we would look harder astatine nan backstage placement market. But I do want to reiterate nan midpoint of our guidance successful this marketplace does not presume immoderate issuance.

Vince Tibone

Got it. Super helpful. Thank you both.

Bill Crooker

Thanks, Vince.

Operator

Thank you. There are nary further questions astatine this time. I’d for illustration to move nan level backmost complete to Bill Crooker for immoderate closing comment.

Bill Crooker

Yes, I conscionable want to convey everybody for joining nan telephone today. We look guardant to seeing galore of you astatine nan upcoming conferences. And acknowledgment again and person a awesome weekend.

Operator

This concludes today’s conference. You whitethorn disconnect your lines astatine this time. Thank you for your participation.

Editor: Naga



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