Stag Industrial, Inc.

Ladies and gentlemen, good morning and welcome to the Stagg Industrial Inc. Third Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star and zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Steve Zaros, Investor Relations. Please go ahead.

Thank you. Welcome to Stagg Industrial's conference call covering the third quarter 2023 results. In addition to the press release distributed yesterday, we have posted an unaudited quarterly supplemental information presentation on the company's website at www.staggindustrial.com under the Investor Relations section. On today's call, Companies' 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 risks and uncertainties that may cause actual results to differ from those discussed today. Examples of forward-looking statements include forecasts of core FFO, same-store NOI, G&A, acquisition and disposition volumes, retention rates, and other guidance. leasing prospects, rent collections, industry and economic trends, and other matters. We encourage all listeners to review the more detailed discussion related to these forward-looking statements contained in the company's filings with the SEC and the definitions and reconciliations of non-GAAP measures contained in the supplemental information package available on the company's website. As a reminder, forward-looking statements represent management's estimates as of today. Bank Industrial assumes no obligation to update any forward-looking statements. On today's call, you will hear from Bill Crooker, our Chief Executive Officer, and Matt Spenard, our Chief Financial Officer. Also here with us today is Mike Chase, our Chief Investment Officer, and Steve Kimball, EVP of Real Estate Operations. We're available to answer questions specific to the areas of focus. I'll now turn the call over to Bill.

Thank you, Steve. Good morning, everybody, and welcome to the third quarter earnings call for Stagg Industrial. We're happy to have you with us today as we discuss our results for the quarter. Industrial leasing activity is tracking to be one of the best years on record. DAG's portfolio is benefiting from secular tailwinds, including nearshoring, onshoring, and e-commerce. Market rent growth, however, has generally experienced a degree of normalization given the changing landscape. Construction starts have steadily declined since the end of last year, primarily driven by more expensive debt capital, which in many instances is difficult to obtain at affordable rates. We expect the lack of new construction starts to provide an acceleration of market rent growth as the existing supply is absorbed. The softest part of the industrial market continues to be concentrated in big box spaces between 500,000 and 1 million square feet, particularly first generation space. In light of the potential economic uncertainty, Large tenants are opting to leverage third-party logistics providers as opposed to funding expensive capital projects to move into new space. Sub-leasing has also been concentrated in these larger spaces. It is important to note that Stagg's average suite size is less than 150,000 square feet and does not compete directly with these larger spaces. Deliveries are projected to be approximately 3% of the overall industrial stock this year, with nearly half of these deliveries classified as big box buildings. These deliveries are expected to result in national vacancy rate of 4.4% by year-end, a slight uptick from last quarter's forecast. This level of vacancy is still indicative of strong conditions. We expect market rent growth in our portfolio to be in the high single digits this year, and we expect market rent growth in our portfolio for 2024 to be in the mid-single digits. The portfolio has remained resilient, due in part to our positioning within the markets we operate in. Because of the average suite size, our portfolio is meeting the strongest part of the demand in our markets. There has been a convergence in rent growth between coastal and non-coastal markets, which is largely driven by the secular tailwinds mentioned earlier, as well as an influx of economic investment by both the federal government and private enterprises in non-coastal markets. We are proud to report cash and gap leasing spreads at record highs for STAG. As of October 24th, We've achieved 98% of the leasing we expect to accomplish in 2023 at cash leasing spreads of 30.1%. For 2024, we have addressed 37% of next year's expected leasing, approximately 5 million square feet, achieving 30% cash releasing spreads. Moving to acquisitions, in the middle of this year, the bid-ask spread between sellers and buyers narrowed towards levels where transactions could begin to clear. Our acquisition volume for the third quarter totaled $204.3 million. This consisted of 12 buildings with cash and straight-line cap rates of 6.2% and 6.7% respectively. Subsequent to quarter end, we acquired three buildings for $67.5 million at a 6.7 cash cap rate. Recently, the rapid increase in interest rates has dampened the resurgence of transaction market, and as such, we have adjusted our guidance accordingly. In terms of dispositions this quarter, we sold two non-core buildings for aggregate proceeds of $28.4 million. On the development front, this quarter we achieved substantial shell completion for our Port 290 development. This is located in Greer, South Carolina. Port 290 is well positioned to compete as tenant activity remains healthy in the 75 to 250,000 square foot suite range. We anticipate meeting our first half of 2024 lease commencement assumptions and rents greater than underwriting. In addition, in August, Stagg closed on 31 acres of shovel-ready dirt in the east submarket of Tampa, Florida, for $9.6 million. We will construct two warehouse distribution buildings totaling 298,000 square feet. Anticipated to deliver in the fourth quarter of 2024, the assets will accommodate up to three tenants per building. This was an opportunity for STAG to add to its growing development portfolio and a high barrier to entry, strong rent growth sub-market of Tampa. With that, I will turn it over to Matt, who will cover our remaining results and updates to guidance.