Stag Industrial, Inc.

Greetings and welcome to the Stagg Industrial, Inc. First Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Matts Pinard, Senior Vice President of Investor Relations. Thank you. You may begin.

Thank you. Welcome to Stagg Industrial's conference call covering the first quarter 2020 results. In addition to the press release distributed yesterday, we've posted an unaudited quarterly supplemental information presentation on the company's website at staggindustrial.com under the investor relations section. On today's call, the company's prepared remarks and answers to your questions will contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements address matters that are subject to risk, and more. As a reminder, Forward-looking statements represent management's estimates as of today. Stagg Industrial assumes no obligation to update any forward-looking statements. On today's call, you will hear from Ben Butcher, our Chief Executive Officer, and Bill Crooker, our Chief Financial Officer. I will now turn the call over to Ben.

Thank you, Matts. Good morning, everybody, and welcome to the first quarter earnings call for Stagg Industrial. We're pleased to have you join us and look forward to telling you about our first quarter results. Presenting today, in addition to myself, will be Bill Crooker, our Chief Financial Officer, who will be discussing the bulk of our financial and operational data. Also with me today are Steve Mechie, our Chief Operating Officer, and Dave King, our Director of Real Estate Operations. They will be available to answer questions specific to their areas of focus. First and foremost, I hope and trust that you and your families are all staying safe and healthy during these unprecedented times. I'm happy to report that, despite the ongoing pandemic, Stag and its employees remain safe and healthy. We've spent a considerable amount of time and energy over the past few years creating a strong culture of bright, talented, and engaged employees. Our team has been working remotely for some time, and the company continues to function at a high level. The investments made over the years and process of improvement, data collection, storage, and analytics are all paying dividends as we continue to navigate the current environment. The near-term impact on the industrial real estate sector due to the novel COVID-19 virus continues to be fluid. Virtually all GDP growth predictions for Q2 are decidedly negative. The disruptions in both the domestic and global economy will continue to dampen consumption through the current shutdowns and likely beyond. This is putting considerable strain on a broad spectrum of tenants and industries. The government has responded with large and varied policy initiatives intended to inject liquidity into the economy. The size and pace of these initiatives is unprecedented. The long-term impact of these government actions is yet to be determined. However, we believe the longer-term impact on the industrial sector will be net positive. Companies are reevaluating global supply chains and are reliant on China and other low-cost manufacturing countries. Establishing more supply chain redundancy will also provide better defenses. and many more. Collectively, these factors should provide increased demand for industrial space post-crisis. These positive effects for industrial real estate demand will likely manifest themselves later this year. Speaking of the current investment market conditions, the real estate asset transaction market has generally paused as market participants work to understand the current pricing environment. Brokers are recommending to sellers, who can wait, that new transaction offerings be delayed until summer. Renewal leasing activity remains steady. Most corporate growth initiatives are on hold, eliminating much of the warehouse consolidation traditionally seen as a result of M&A activity or supply chain rationalization. New leasing has slowed, and the duration of negotiations is widely expected to increase. We expect that new supply will also decrease materially due to developer and lender uncertainty, construction moratoriums, and permitting delays. So, in the medium term, we expect modestly increasing demand and decreased supply generally for the industrial sector. In response to the market disruption, we place our acquisition efforts on pause. In mid-March, as the level of market disruption increased, we terminated several transactions that were under contract and LOI. These were deals that involved tenants and or industries likely to face elevated levels of disruption during the crisis. On the remaining transactions we had under remitment, The request of a 60-day expense of any contract period. Where the seller would not agree to this concession, we terminate our pursuit of the deal. We continue to monitor the market to determine when and how our acquisition efforts will resume. We continue to see demand for our space in the current environment, as evidenced by our healthy operating metrics for the first quarter, both strong retention and leasing spreads. This has continued even after the period of shutdown started. We have remained active on the leasing front during this time. From the third week in March through today, we've executed 13 leases for 1.4 million square feet. We have seen increased demand from tenants in the logistics, retailer, food products, and pharmaceutical industries. Tenants remain interested in available space, with 28 tenants representing 5 million square feet of requirements interested in our marketed space, similar to normal levels during more normal environments. Credit underwriting and monitoring has been an integral part of our business since day one, and our dedicated team has a deep understanding of our tenancies, operations, and financial conditions. This understanding is vital to our operating under current conditions. The credit team, in conjunction with our asset management and customer solution teams, continue to communicate directly with tenants across various points of internal contacts. Our balance sheet strategy was positioned to endure times like this. Incorporating our January equity offering and forward equity proceeds, our leverage sits at four times that of the EBITDA, which is considerably less than the low end of our recently stated leverage bands. Our liquidity stands at $597 million before taking into account the forward equity proceeds available, with a large portion of that in cash on our balance sheet. It is a testament to the business we have built and the strength of our portfolio that we were able to recently complete the refinancing of $300 million last year. of term loan debt in these market conditions. This refinancing activity effectively extends all of debt maturities until 2022 and beyond. Our company is well positioned to operate in the current environment. The benefit of not maintaining a development component is the ability to readily hit pause in capital deployment when the market dislocates and the ability to quickly reengage to capture the opportunities we expect to uncover as recovery begins. Our balance sheet and liquidity levels will allow us to be opportunistic when the time is right. We very much look forward to that day. The market remains volatile, and it is difficult to predict both the time and the slope of the recovery. We have updated guidance knowing that a heightened level of uncertainty exists in the world. We have incorporated what we know now and what might recently be expected to occur based on our various scenario analyses across multiple inputs. Bill will discuss in detail our updated 2020 guidance in his remarks. We will continue to update the market as appropriate as we all move forward through this unprecedented time. How 2020 plays out is uncertain for all market participants. The industrial sector has benefited from historical tailwinds and continues to display strong fundamentals even as we endure today's current conditions. SPAG has positioned its portfolio and balance sheet to withstand and eventually benefit from today's environment and during the recovery that follows. With that, I'll turn it over to Bill who will discuss our first quarter operational results and our updated 2020 guidance.