STAG Industrial, Inc. Stock

Greetings. Welcome to the STAG Industrial, Inc. Second Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to Steve Xiarhos, VP, Investor Relations. Thank you, Steve. You may begin.

Thank you. Welcome to STAG Industrial's Conference Call covering the Second Quarter 2026 results. In addition to the press release distributed yesterday, we posted an unaudited quarterly supplemental information presentation on the company's website at stagindustrial.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 risks and uncertainties that may cause actual results to differ from those discussed today. Examples of forward-looking statements include forecast 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. STAG Industrial assumes no obligation to update any forward-looking statements.

On today's call, you'll hear from Bill Crooker, our Chief Executive Officer; and Matts Pinard, our Chief Financial Officer. Also here with us today are Mike Chase, our Chief Investment Officer; and Steve Kimball, our Chief Operating Officer, who are available to answer questions specific to their areas of focus.

I will now turn the call over to Bill.

Thank you, Steve. Good morning, everybody, and welcome to the second quarter earnings call for STAG Industrial. We are pleased to have you join us and look forward to discussing the second quarter 2026 results. Industrial fundamentals continue to stabilize in the second quarter, and we remain constructive on the trajectory heading into the back half of the year.

In our view, vacancy has peaked both nationally and within STAG's portfolio. Net absorption was 69 million square feet this quarter, a meaningful acceleration from Q1 and was 111 million square feet in the first half, the best start to a year since 2022. Supply continues to work in the market's favor. The development pipeline has contracted roughly halfway from its 2022 peak and under construction product now represents just 2% of total stock, of which about 55% is pre-leased. Demand tailwinds remain intact and diversified. E-commerce as a percentage of retail sales hit a record high earlier this year.

Nearshoring and onshoring trends remain a new and growing source of demand as supply chain diversification has become essential for companies both large and small. As we messaged earlier this year, we've seen significant warehouse demand from users contracted to support ongoing data center operations. While the future impact from this trend is hard to quantify, it continues to be a strong source of demand within our sector. Since the beginning of last year, we have leased 2.3 million square feet to data center-related tenants.

Notably, inland markets have continued to outperform coastal markets on both demand and net absorption and STAG's portfolio is well positioned to benefit. Overall, we believe the improvement in both the supply and demand picture is real and durable, and it positions our portfolio for improved rent growth as we move into 2027.

In the first half of this year, we saw an increase in acquisition opportunities in the market. Acquisition volume for the second quarter totaled $287.1 million. This consisted of seven buildings with cash and Straight-Line cap rates of 6.1% and 6.8%, respectively. In terms of our development platform, we have 9 buildings or 2.3 million square feet of development activity that is not in service as of the end of Q2. These buildings are in various stages of development and have expected stabilized yields of 7.1%.

In April 2026, we closed on a 343,000 square foot build-to-suit project located northeast of Dallas in Rockwall, Texas. Construction commenced in the second quarter with an estimated delivery date of Q2 2027 and an expected yield of 7.5%.

Also in April, we closed on a 184,000 square foot development project located Southeast Phoenix in Chandler, Arizona. The 12-acre site is well located within the Southeast Valley submarket with immediate access to I-10. We are currently working through the project design and anticipate breaking ground in late Q3 2026 with an estimated delivery date of Q3 2027.

In May, we executed a lease for 35,000 square feet or 25% of our Tampa development. The lease is to a fueling solutions provider and commences on August 1. Subsequent to quarter end, we executed a lease for 47,000 square feet or 62% of one of our Reno developments. The lease is for an e-commerce company and commences on September 1.

With that, I will turn it over to Matts, who will cover our remaining results and guidance for 2026.

Thank you, Bill, and good morning, everyone. Core FFO per share was $0.65 for the quarter, an increase of 3.2% as compared to last year. Leverage remains low, with net debt to annualized run rate adjusted EBITDA equal to 5.2x. When incorporating the currently unfunded $70 million of forward equity proceeds, leverage is 5.1x. Liquidity stood at $614 million at quarter end.

During the quarter, we commenced 36 leases across 5.6 million square feet, generating cash and straight-line leasing spreads of 19.8% and 33.7%, respectively. This was another strong quarter in terms of new operating portfolio square feet leased. Retention for the quarter was 75.7%. As of today, 92% of our forecasted leasing for 2026 has been addressed at levels consistent with our initial guidance and at levels in line with previous years.

Same-store cash NOI grew 3.4% for the quarter and 3.9% year-to-date. Moving to capital market activity. As of today, the company issued 3.4 million shares on a forward basis under our ATM program at a gross average share price of $39, resulting in gross proceeds of $131 million. In the second quarter, we settled $59.8 million of proceeds related to forward ATM sales that occurred in the first half of 2026. As previously mentioned, we have $70 million of forward equity proceeds available to fund at our discretion which will be used to pay down the revolver and match fund our net acquisition development pipeline.

Subsequent to quarter end, we repaid the $50 million private placement Note B, which matured on July 1. Additionally, on July 16, we refinanced our $150 million Term Loan A and $200 million Term Loan F, which were scheduled to mature in March of 2027, combining them into a single $350 million term loan. The refinanced term loan matures January 16, 2032, and there's an aggregate fixed interest rate, inclusive of interest rate swaps, of 3.53% until March 2027 and will then bear an aggregate fixed interest rate, inclusive of interest rate swaps of 4.79% for March 2027 through maturity.

As part of this refinancing exercise, we repriced our revolver and all outstanding term loans, achieving a 5 basis point savings across all bank debt, resulting in interest expense savings going forward.

Moving to guidance, we made the following updates. Credit loss guidance has been reduced from 50 basis points to 30 basis points, driven by 6 basis points of credit loss incurred to date. Average same-store occupancy guidance increased 25 basis points to a range of 96.25% to 97.25%. Retention has been narrowed to 75%. Cash same-store growth guidance has been increased to a range of 3% to 3.5% for the year, an increase of 25 basis points at the midpoint. Acquisition volume guidance has been increased to a range of $400 million to $700 million, and we expect the stabilized capitalization rate to range from 6% to 6.5%. These guidance changes resulted in an increase in Core FFO guidance to a range of $2.61 to $2.65 per share, an increase of $0.01 at the midpoint. 2026 guidance can be found on Page 21 of our supplemental package, which is available in the Investor Relations section of our website.

I'll now turn it back over to Bill.

Thank you, Matts. I want to thank our team for their continued hard work and execution in 2026. This team has done an excellent job executing our operating plan in the first half of the year. The strong first half sets us up well for the remainder of the year. We'll now turn it to the operator for questions.

[Operator Instructions] Our first question is from Craig Mailman with Citi.

Just want to start off on the acquisition side. Clearly, 2Q was a much bigger quarter than Q1 and kind of puts you on pace to hit even the midpoint of your updated guidance. But could you just kind of give us a sense of maybe what's under contract or LOI or what we should expect from a cadence perspective for the balance of the year?

Yes. Craig, we don't have much under contract or LOI right now, which is why we only raised the guidance, I think, $50 million at the midpoint. We're seeing good activity. There's a lot of sellers out there. Bid-ask spreads have tightened. And so the cadence, typically, Q4 is our largest acquisition quarter. But just given the volatility in rates and the macro environment, we didn't feel that confident in the cadence in the third and fourth quarter, just given what's going on in the macro environment. That being said, if rates stay stable and there's not a lot of volatility in the macro environment, we feel pretty confident we can keep up this pace.

And can you just talk about kind of the mix of what you bought, maybe some back story. I know at NAREIT, you guys were talking about passing on a $300 million portfolio. It didn't seem like any of these were portfolios. But at the same time, it felt like one of the reasons you guys passed on that was cap rates were falling and you weren't as pleased with where your cost of equity was. But now you lowered cap rates on acquisitions by sort of 0.25 point. So I don't know maybe we could just talk in general around how you're viewing kind of the upside in some of the assets that you're buying from either an IRR perspective to kind of offset some of that cap rate compression that you're willing to accept? And maybe how much of this was single assets versus portfolios and what the spread in those may be as well in the markets that you're targeting?

Yes. A lot to unpack there. But with what we bought this quarter, a lot of -- all Class A assets, submarkets, we feel really confident in, and we feel like we'll be a key player in for the long term. The cash cap rates were a little bit lower. I think it was 6.1% going in, 6.8% on a straight-line basis. So decently accretive from where we could raise capital in the second quarter, bumps on those leases about 3.3%.

And generally, these are at or slightly below market. So good clean buildings and say, call it, clean cash flow, so no really CapEx leakage for these properties because they're all Class A and somewhat newly built.

With respect to your question on portfolios, generally, portfolios have garnered anywhere from 25, 50, even in the best of times, 100 basis points for portfolio premiums. I would say right now, those middle-sized portfolios, call it, $500 million to maybe $1 billion, probably garner some cap rate compression. Above that, maybe not as much just because it's hard to deploy that much capital. And when you're trying to deploy it, you may not be willing to pay the cap rate compression for that portfolio. And then when you get to smaller portfolios, at least what we're seeing now, those portfolios are pricing closer to individual asset pricing.

Our next question is from Dave Rodgers with Raymond James.

Bill and Matts, I wanted to talk a little bit about leasing in the second quarter. It looked like it was only 8 leases in the new pool, but it just looked like some of the metrics were a little bit softer than what you experienced in the first quarter. So maybe you can kind of talk about if there was anything unique in that or in the first quarter? And then also just as you look kind of through the rest of the year, how you expect volume of leasing and spreads to progress? If you can give any color on that would be great.

Yes. Thanks, Dave. So for the year, we still expect 18% to 20% leasing spreads, probably closer to the higher end of that range. So right on track to a little bit better than our original guidance. With respect to the first quarter, I think our leasing spreads for new leases was 35%, 36%. We did have 2 leases that rolled up close to 60% in the first quarter. And that was due to those leases coming off of long-term leases with low escalators. So market rent just greatly outpaced where those leases were. And so that was a great win. It was baked into our guidance.

In this quarter, we had one new lease that rolled closer to market. It was a short-term lease that was -- had some decent escalators. And just with the lower market rent growth over the past few years, it just rolled closer to market. So it was kind of twofold. You had a little bit of some great wins in the first quarter and one lease that didn't roll as much in the second quarter. But it all kind of comes out in the wash, and we're still looking at close to 20% leasing spreads for the year, and we're well on track to meet our leasing plan for the year.

And then maybe a follow-up on Craig's question. I mean he was talking acquisitions. Clearly, acquisition pricing getting tighter, lots of buyers out there. You're trying to move more into development. Can you talk a little bit more about what you're finding kind of on the development front and the ability to perhaps accelerate starts even further there to create a little bit more value versus buying at market today in a competitive environment?

Yes. I mean we're having some great success on the development side, really happy with that part of the platform. We were able to bring in a couple more developments. I mean the Dallas one is great, build-to-suit in Dallas at 7.5%, source that internally. And we're hopeful we're able to announce some new developments soon, too, right? So that part of the platform is operating at a very high level. The yields are 7% plus, so a great return there for us and also meets that, call it, clean income as the new buildings.

And that's an area where we think we can continue to ramp up. I mean, right now, we've got $290 million of developments under some sort of construction period, not in the stabilized bucket. We would love to get that another couple of hundred million higher, but it's going to take some time to do that.

Our JV partners, we're active with them. They're bringing us opportunities. We continue to expand the number of relationships we have. And we're also sourcing a bunch of developments with our own team and being creative with some of the land we have in our portfolio. So it's a great use of our capital. It's probably the best use of our capital, but it's limited to the extent that we can do maybe what we're doing now and then a couple of hundred million more, but it's going to take some time to ramp up to that.

Our next question is from Michael Carroll with RBC.

Bill, I wanted to dig in your comments regarding the data center demand that you're seeing across your portfolio. I mean, is that demand more concentrated in specific markets? Or do you see it more broadly across your entire portfolio?

It's broad. It's not across the entire portfolio, but we're seeing it a lot in the Midwest. We're seeing it in the Southeast. We're seeing it in Texas. So Michigan, Wisconsin, South Carolina, Houston. And so -- and there are some areas in the U.S. that we're seeing it that we just don't have vacancy that we can't lease to data center-related tenants. But it's in really those regions of the country. And it's not demand that's just short term. I think our weighted average lease term on that 2.3 million square feet we leased from the beginning of last year, it's like 7 years. And we rolled those tenants up -- those leases up 33%. So it's good long-term demand.

The credits are strong, and it's just an incremental demand driver. And we're seeing that as an incremental demand driver. We're seeing e-commerce continue to be an incremental demand driver. We're seeing onshoring advanced manufacturing to be an incremental demand driver. And then you have typical GDP industrial demand. So the sector is really in a really good spot and all that incremental demand and then you look at where the supply picture is and the supply picture is really in check. So we're -- the industry is in the best spot it's been in probably the last 4 years.

And then related to that data center demand, do you know what the breakout or the service those tenants are? Is it mostly to service existing data centers? Or how much of it is it to construct and build new data centers within the area?

It's almost all servicing existing data centers and the upkeep. So having generators nearby, having spare parts in case something breaks there, that's primarily what this demand is.

Our next question is from Jason Belcher with Wells Fargo.

Just wondering if you could talk a little bit about the cadence of dispositions we should expect in the back half of the year. Should we expect those to be largely matched with acquisitions from a timing perspective? And then also, I know you gave a cap rate range on the acquisition side. Just wondering if you could provide something similar on the dispositions.

Yes. It's -- as much as we'd love to match our dispositions and acquisitions, it's not that simple. The disposition process starts a long time before the actual disposition transaction occurs. So we -- I mean, ideally, we try to do it, but at the end of the day, we identify dispositions that either are noncore and we dispose of those and we go through the process. Sometimes we have opportunities that are reverse inquiries that have come in the last few years, that's been from users. So we've gotten some really good pricing on those user sales.

And then others are just assets that we feel like we've realized the most value creation we can and we dispose of those on an opportunistic basis. So I think the assets we've had -- I think we only sold 3 assets this year, 2 of which were just noncore and one was opportunistic.

And then I guess on the regional -- just touching on regional trends, can you talk about any pockets of strength or weakness outside of the data centers that you just mentioned across your markets?

Yes. So those markets that have the data center demand, I mean there's other demand drivers in those markets as well. So when we look across our portfolio, Midwest has been really strong. Southeast has been strong, absent maybe some of the port markets. Those are a little bit slower. And then in Texas markets for us have been really strong. And when you look at some of the weaker markets, it's the port markets, Savannah being one, Charleston being one, they're a little bit slower.

And then El Paso is a little bit slower just given the U.S. -Mexico relations and Reno has been a little bit slower. But overall, the portfolio is performing really well. We're in our range of market rent growth for the year, probably trending a little bit to the higher end of our market rent growth range this year, and we're optimistic as we move into 2027.

Our next question is from Nick Thillman with Baird.

Maybe along the lines of questioning around just competitive bids on the acquisition front, maybe viewing it more from the disposition side, Bill, you've talked about being a little bit more strategic and then looking to grow the longer-term growth trajectory of the portfolio overall and maybe pruning some of the tertiary markets. Is this an opportunity here where you're seeing pricing firming and we've heard from some of your peers that cap rates have been relatively tight to maybe exit some of these larger tertiary -- or some of these markets where you do have some assets that you can offload in this sort of environment here and then just redeploy and lean into the development side on -- what are your thoughts around that just overall?

Yes. It's -- we absolutely look to do that. We look to do that every year. This is a year where we feel like we can get some advantageous pricing on some of those assets, but it takes time. And it's easy to maybe say, hey, this is a market STAG has said they don't want to be in. Why don't they just sell those 3 assets there. But it also may be a situation where there's 2 years left on the lease term, we feel like it's -- the tenant has a very high probability of renewing. So we're not going to sell that asset with 2 years of lease term. We're going to renew that tenant for 5 or 10 years and then sell the asset. So we don't want to sell assets when we feel like we can realize a higher value by executing our operating plan for that asset.

So certainly, we have been disposing of some of our noncore assets. I said 2 out of 3 assets disposed of so far have been noncore. Those have sold in the, I think, about an 8.8% cap rate. And the other opportunistic transaction we sold this year was a 5.7% cap rate. So we'll continue to look at them. We expect, obviously, based on our guidance, more dispositions in the second half of the year. Those take longer.

As I mentioned, you have to put the book together, you have to market it, but expect some more dispositions in the back half of the year. And I would say, in past years, we've been about 50-50 weighting. Opportunistic noncore dispositions is probably going to be more skewed to noncore dispositions this year.

No, that's helpful. And then maybe more theoretical high-level question. As we look at -- look at your footprint maybe in the Midwest and some of the center part of the country, we've seen a big pickup in just middle market M&A from like PE-backed groups.

Traditionally, they aren't really looking from like a growth perspective, more so from an expense side and consolidation footprint. So curious if you're seeing any trends when you look at nonrenewals as a percentage of your portfolio? Is it tenants retrenching and maybe consolidating footprints or if there's anything you can read through on other tenants that you aren't renewing?

No, there's no material change from past years. I mean what we're seeing for nonrenewals, which is right at our historic average, right? I think our retention rate is around 75% this year. So the nonrenewals, sometimes it's -- well, most of the time, it's consolidating operations into bigger buildings or growing out of our building. But sometimes it's moving to a different building. We saw a trend at the end of last year, a little bit at the beginning of this year. Some tenants were moving to Class A space from some of our Class B space. That trend has slowed significantly because those rents are starting to gap out a little bit, those Class A versus Class B rents, but nothing material versus prior years.

Our next question is from Michael Griffin with Evercore ISS (sic) [ ISI ]

I wanted to go back to leasing. Clearly, this year has been very successful with 92% executed on your '26 plan. And yes, I realize I'm not asking specifically for '27 guidance, but maybe, Bill, you can give us a sense of how that leasing trend is trending relative to maybe your forward leasing plans at this time last year. Just want to get a sense of how the cadence of leasing has been progressing as we look to -- as we kind of turn the corner to 2027.

Yes. It's been progressing really well. When this time, end of July, you're not signing a lot of new leases into the next year. It's primarily renewals at this point, early renewals. And so historically, around this time, we're at 26% to 28% of our leasing plan next year. This year, around 35%. So ahead of plan. I think it speaks to the demand that we're seeing in markets and our tenants' willingness to stay in our buildings. Obviously, we're a very good landlord. Tenants love working with us, and they're looking to lock up space a little earlier. So making great progress on our '27 plan at this point.

That's certainly some helpful context. And then maybe one for Matts, just on the balance sheet. Clearly, leverage is in a very favorable position in the low 5s on a net debt-to-EBITDA basis. You recently refied the term loans. I recall you talking in the past about potentially looking to tap the public bond markets. I realize you don't have any sizable maturities until 2028. But can you maybe give us a sense of the opportunity cost, the pros and the cons of maybe going for a public bond offering versus continuing to track in sort of the bank debt arena?

Yes, absolutely. Yes. So I think really the question is long-term debt because we've been active in the bank debt market for a while. Historically, we've been a private placement issuer, and we've had phenomenal success in that market. We're a seasoned issuer. We've been in there for more than a decade, and that market continues to expand and mature. 7 years ago, it was a bunch of life insurance companies. Now you're seeing some financial buyers in there, and there's a lot of flexibility in that market. You can really tailor your offering to your debt maturity ladder.

Comparing that to the public bond market, public bond market, you need a certain size. It's a different audience. The one benefit of the public bond market is the ability to execute a transaction in a tighter time frame. But as we sit here today, based on economic conditions, we could go either way. Historically, we've really enjoyed the private placement market.

Our next question is from Eric Borden with BMO Capital Markets.

I just want to talk about the occupancy cadence for a little bit. Guidance implies that the second quarter is, in fact, a trough, but just curious if you can elaborate on the confidence in how occupancy improves from here, what that recovery trajectory could look like over the next several quarters? And where do you ultimately expect to end the year on an occupancy standpoint?

Yes. Our occupancy guide is an average occupancy, and it's based on our same-store. That's where our guide is just to make sure everybody is on the same page. So our midpoint of our revised guidance is 96.75%. So it's where we are right now in our same-store pool, I think we're at 96.8%. And so we expect that to -- it's an average occupancy number. So our spot occupancy at the end of Q2 in our same-store pool is 96%.

And so we expect spot occupancy to increase slightly as we move through the end of the year, but average occupancy to stay relatively flat for the rest of the year. That's what's in our guide. And so that would imply that the occupancy pickup we're expecting happens closer to the end of the year.

Great. That's helpful. And then just more of a bigger picture question, Bill. You talked about portfolios above $500 million to $1 billion, not having that portfolio premium just given it's harder to write larger checks and there's less companies to do so. But you're in a good shape from the balance sheet standpoint. Your cost of equity has improved. So just curious, do those larger portfolios create an opportunity for STAG? And just how are you thinking about scale overall?

Yes, so just to clarify my previous comments. So what we're seeing is portfolios sub-$500 million not having a portfolio premium, $500 million to $1 billion having some portfolio premium and above $1 billion kind of losing that portfolio premium just given how much capital they need to deploy. So it's that middle portfolio level, that $500 million to $1 billion, where we're seeing that portfolio premium.

So at this time, just because of what we've established here at STAG and the people, the processes, the systems we've set up, we don't pay portfolio premiums, which is why we really haven't acquired a lot of portfolios over the years. We underwrite the individual asset pricing. So I wouldn't expect us to acquire something in the $500 million to $1 billion range. Below that, above that, we'll certainly underwrite it. And maybe there's an opportunity if the math works. And if it does, then we'll execute on it. If it doesn't, we'll just continue to execute our strategy.

Our next question is from Jon Petersen with Jefferies.

I'm curious what you're seeing in terms of tenant demand at different box sizes. So it seems like over the past, I don't know, 6 to 12 months, there's been heavier demand for the large million square foot boxes in the market and maybe a little bit softer for the few hundred thousand square foot boxes. Does that match up with what you guys are seeing in the market? And any change in that demand over the past few months?

Jon, Steve Kimball. I appreciate the question. Yes, it's been very active in the bulk, and we've seen drops in the vacancy rate based on that activity in the bulk market. I think the new news is that it's broader the demand in size, and we are now seeing a pickup in the smaller tenant demand. So if you're 70,000 square feet or less, we're now seeing that. We're seeing it across our operating portfolio and our development portfolio that we're finding more demand in the smaller space. There's still a little low in the 150,000 to 300,000 square foot spaces, but that seems to be picking up in activity as well.

Okay. Great. And then I guess, looking over the next year or 2 and thinking about your lease expiration schedule, I mean, if rents stay flat from these levels, where do leasing spreads trend as we get into next year for your portfolio?

Yes. I mean that's a big if, Jon, just given the dynamics we're seeing in the sector. But if we assume they stay flat, I mean, if you just go look back the last couple of years, we chew into about 5% of leasing spreads every year. In the last few years, we've had 0% to 2% market rent growth. So assuming that type of market rent growth, you would assume spreads deteriorate about 5% every year.

Okay. That's helpful. And then if I could sneak in one more. So you have $70 million of forward equity that's unsettled. I think the leverage, while it's low, it did tick up a little bit in the quarter. So can you talk about the decision-making on settling the forward equity versus allowing that leverage to trend a bit higher?

Yes. I mean a big part of that was we typically try to operate our balance sheet 5 to 5.5x, and we've been at 5x almost at every quarter end. There was an acquisition that we closed right at the end of the quarter that we weren't sure if that was going to close. And that was a decision of, hey, let's not fund this forward equity, settle this forward equity unless we need to.

And then fortunately, the deal closed. I think we closed at the end of June. Otherwise, we probably would have settled some of that forward equity.

Our next question is from Jessica Zheng with Green Street.

Just wondering, as you're seeing strong new demand from data center and manufacturing-related tenants, are there any tenant categories that are maybe leasing a bit less today than before? Just curious if you think there are any future growth opportunities from any other tenant groups?

There's nothing that jumps out on our stats and what we've seen about demand drop off. It's just really just been some incremental demand drivers and rest of the other sectors that are in our tenant base have been pretty steady.

Our next question is from Mike Mueller with JPMorgan.

I guess looking at your in-process and recently completed developments, how broad-based is the interest in the tour activity that you're seeing? Or -- and is it skewed toward any, I guess, certain asset sizes or geographies?

Yes, Steve Kimball, I'll take that one. If you look at the supplemental, and we will first go with what we have under construction, we have the 4 projects that Bill referenced earlier on. Two of those in the under construction are build-to-suit. So we're 65% leased in the under construction pool, which is a high percentage for us in that group because we're skewed to build-to-suit there.

But the 2 other projects you see, one is in Kansas City, which was on some excess land that we had. That building is under construction. I can actually use the word excellent for the activity we have on that building. We've had a number of people looking at that building. It's in an established industrial park in Lenexa in the Southern submarket of Kansas City, and we've had a very, very good activity on that building.

And then the second one under construction is in Phoenix, but we're not breaking ground on that asset in the Chandler submarket until the late in the third quarter. So that's really going to work and Phoenix is an improving market. So we should be delivering that product right into a healthy market, and it's in an infill location.

Probably you're more focused a little bit on the substantially complete portfolio, and I'll walk you through that. And I would say the one market that Bill referenced that we have -- that we're watching a little more closely is the Reno market, right? So we're happy to report we had the 47,000 square foot lease done subsequent to quarter end. That's a 75,000 square foot building. So we get the majority of that leased up. We're left with the 284,000 square foot building in the North Valley submarket. Reno is a very active market, but that activity is really in the manufacturing and the data center business and a little less in the traditional logistics that is located in the North Valleys market.

So I would say a little bit slow in Reno, Nevada for distribution tenants, and that's playing off a little of a lull in the California markets. So we'll watch that a little closely. We do have activity. We have worked with different groups, but I think that's one submarket that we're watching a little more closely.

Charlotte, we built the 200,000 square foot buildings. We're very -- we have good activity on the remaining 20,000 in our first building, which would bring that to 100% leased. And we also have good activity on our second building there. So I would say that's a market hovering a little over 7% vacancy. But when you drill down to the smaller tenants in our submarket, it's below that. So feeling good about Charlotte.

Last but not least on that list is the Louisville market. And you've seen what's happened to bulk product in the Midwest. I mean those markets were hovering 200, 300 basis points higher in vacancy and has quickly dropped to about 5% in all those Midwest markets. We have the 500,000 square foot cross-dock in an established park in Bullitt County, just south of Louisville. And we have very good activity. There's probably 4 or 5 large spaces that have been delivered, and there's 4 or 5 tenants that are out in the market looking at those buildings. So that one also fits the market well, and we expect to have good activity.

Got it. And maybe one other quick one. What were the blended escalators on the new leases that you've signed so far this year?

I don't know if we have the exact number.

Mike, I can take this. I don't have it to the decimal point. It's north of 3%. It's anywhere between 3% and 3.25%.

There are no further questions at this time. I would like to turn the floor back over to Bill Crooker for closing comments.

I just want to thank everybody for joining the call today. I appreciate the questions as always, and look forward to seeing everyone soon.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Greetings. Welcome to the STAG Industrial, Inc. First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to Steve Xiarhos, Vice President, Investor Relations. Please proceed, sir.

Thank you. Welcome to STAG Industrial's conference call covering the first quarter 2026 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.stagindustrial.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 risks and uncertainties that may cause actual results to differ from those discussed today. Examples of forward-looking statements include forecast 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. STAG 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 Matts Pinard, our Chief Financial Officer. Also here with us today are Mike Chase, our Chief Investment Officer; and Steve Kimball, our Chief Operating Officer, who are available to answer questions specific to their areas of focus.

I'll now turn the call over to Bill.

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 one 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 in one 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.

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 5x. 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 strongest in many industries, including air freight, logistics, retail and containers & 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.

Thank you, Matts. I want to thank our team for the great start to 2026. STAG has set the foundation of sustainable growth in 2026, and we 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 Instructions] Our first question comes from Craig Mailman with Citigroup.

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 all your guidance actually. Just in terms of -- I know you guys have an elevated expiration schedule this year. Are you seeing quicker backfills on spaces that have come back to you or anything encouraging on that front? Because I know you guys are a little bit worried about that as a source of occupancy downside.

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. I think 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.

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 grows a little bit as just the proliferation of data centers takes hold?

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, one of our -- the lease we signed in Nashville was a data center-related tenant. And then we saw some in the Midwest in Wisconsin, one 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.

Not to ask a third one, but like what type of tenants are they? Are they 3PLs or are they equipment manufacturers or servicers? Like who are you leasing to?

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 on that 1.6 million square feet was about 35%. So good economics, long-term leases, strong credits backing these leases as well.

The next question comes from Michael Griffin with Evercore.

I appreciate the commentary around 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 any 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.

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 maintained our guidance really across all components of that. With respect to market rent growth, our guide was 0% to 2%. That will -- 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.

Great. That's helpful. And then maybe for my follow-up, you're at about 80% of your 2026 leasing goal. It 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.

Yes. I mean it's a little -- it's obviously a little early for '27, but we do -- especially for renewals, we start those conversations typically 12 months in advance. So when you look at our '27 leasing plan, we're about 25% through that at this point, and that's pretty comparable to the last few years.

The next question comes from Nick Thillman with Baird.

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 with the increased demand environment, are you willing to take a little bit more value add? Or 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?

Yes. I'll let Mike jump in, 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 that 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 it 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 -- the 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's good to put that land under contract. It's 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. And 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 criteria. And if I didn't mention that transaction, that piece of land is in Dallas, Texas. So with that, I'll pass it over to Mike to share any more commentary on that.

Sure. And I think another thing just to mention on that piece of land is that, that's a committed build-to-suit where we already have a tenant committed for that building on the land that we just bought yesterday. Just looking nationally, it was a strong end to '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, 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.

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

That's helpful. And then, Bill, I know you've mentioned just some of these partnerships you've had with regional developers and it 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.

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 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 this one in Dallas, it's a 7.4% yield. So that's our best use of capital. It's 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.

The next question comes from Jason Belcher with Wells Fargo.

I guess, first, Q1 Same Store was pretty solid at 4.1%. The guidance was unchanged at 3%, suggesting somewhat of a possible slowdown. Just 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?

Absolutely. So Cash Same Store 4.1% in the first quarter is very healthy. But really, what we need to do 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 a different way, the 4.1% includes the impact of the 60 basis points of average occupancy loss, not the 120 basis points of actual occupancy loss at period end. So all of that's related to the first quarter. So the 4.1% does not account for the fact that the space is vacant for an entire quarter.

The first quarter Cash Same Store was fully anticipated. It was included in our guidance. As we said, we continue to expect Cash Same Store growth of 3% at the midpoint. So no change to the guidance. This was expected. It really comes down to the impact of occupancy over a full period.

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?

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 the 3. 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.

The next question comes from Eric Borden with BMO.

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?

Yes, exactly. So with the known 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 experienced 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 here, that's a very healthy level. As Bill mentioned, our budgets assume 9 to 12 months of lease-up. So space that rolls vacant is in our budget to 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 at the end of this year, we're going to start to see equilibrium in market rent growth acceleration. Again, the change in occupancy is 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.

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 tenant?

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. But with respect to the spaces that we lease to 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 functional buildings that can be used for multiple uses. We're just seeing an incremental demand driver from data center tenants.

The next question comes from Jessica Zheng with Green Street.

Just following up on the data center piece. So for the construction tenants that signs the longer-term leases, do you know if they're serving 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 is complete? Yes, I'm just curious about the kind of the sustainability of this new tailwind here.

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 are these warehouses are located, there's multiple demand drivers within those markets. I mean we have at least 2 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. There's just this incremental demand driver of data centers.

Great. 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 strength and weaknesses right now?

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. I'd 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, your Louisvilles, your Indies.

The next question comes from Henry Newell with RBC Capital Markets.

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?

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

Yes.

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 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 cap rates 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 portfolios. So anywhere from a 25 to 50 basis point portfolio premium on private transactions.

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

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

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.

Greetings, and welcome to the STAG Industrial, Inc. Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Steve Xiarhos, Vice President, Investor Relations. Thank you, sir. You may begin.

Thank you. Welcome to STAG Industrial's conference call covering the fourth quarter 2021 results. In addition to the press release distributed yesterday, we have posted an unaudited quarterly supplemental information presentation on the company's website at stagindustrial.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 risks and uncertainties and that may cause actual results to differ from those discussed today.

Examples of forward-looking statements include forecast FFO, same-store NOI, G&A, acquisition and disposition volumes, retention rates and other guidance, leasing prospects and collections, industry and economic trends and other matters. 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. STAG 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 Matts Pinard, our Chief Financial Officer. Also here with us today are Mike Chase, our Chief Investment Officer; and Steve Kimball, our Chief Operating Officer, who are available to answer questions specific to the areas of focus.

I'll now turn the call over to Bill.

Thanks, Steve. Good morning, everybody, and welcome to the fourth quarter for STAG Industrial. We are pleased to have you join us and look forward to discussing the fourth quarter and full year 2021 results. We will also provide our initial 2026 guidance.

As I look back on 2025, it was arguably one of our more successful year. [indiscernible] '26 to follow suit, driven by a record amount of square footage expiring in a calendar year for our company. I'm pleased to report that we have addressed 69% of the operating portfolio square feet we expect to lease in 2026.

We project cash leasing spreads of 18% to 20% and for 2026. This leasing success is a testament to the quality of our portfolio and a welcome sign of tenant engagement and commitment to their space. Q4 was the most active transaction quarter of 2025. This was due in part to less macro volatility, which brought sellers to the market in the second half of the year.

Acquisition volume for the fourth quarter totaled $285.9 million. This consisted of 7 buildings with cash and straight-line cap rates of 6.4% and and 7%, respectively. These buildings are 97% leased to strong credits with weighted average rental escalators of 3.5%. We Subsequent to quarter end, we acquired 1 building for $80.6 million with a 6.1% cash cap rate. This is a Class A building leads to a strong credit over 12 years.

In terms of our development platform, we have 3.5 million square feet of development activity or recent completions across 14 buildings as of the end of Q4. We of 3.5 million square feet are completed developments. These completed developments are 73% leased as of December 31.

In the fourth quarter, we commenced a new development that was identified within our existing portfolio by our operations team. The 186,000 square foot project is located southwest of Kansas City in Lenexa, Kansas. The project has an estimated delivery date of Q1 2027. The building will have the flexibility to demise into suites of 60,000 square feet or less in a market with healthy fundamentals.

We are projecting a cash yield of 7.2% on this project. Subsequent to quarter end, we executed a 78,000 square foot lease in 1 of our Charlotte development projects. to manufacturing and assembly company. The building is now 39% leased. We initially underwrote fully stabilized in the building in the first quarter of 2027.

Before I turn it over to Matts, I'm pleased to say that after year-end, we raised our dividend 4%, which is the largest rate we have had since 2014. This raises a result of many years of reducing our payout ratio and retaining as much free cash flow as possible. In addition to raising our dividend, we have modified the dividend payment cadence from monthly to quarterly going forward.

With that, I will turn it over to Matts, who will cover our remaining results and guidance for 2026.

Thank you, Bill. Good morning, everyone. Core FFO per share was $0.66 for the quarter and $2.55 for the year, representing an increase of 6.3% as compared to 2024. We Included in core for the quarter are 2 onetime items that contributed approximately $0.01 to core FFO per share.

During the quarter, we commenced 31 leases totaling 3 million square feet which generate cash and straight-line leasing spreads of 16.3% and 27.4%, respectively. This leasing activity included 5 fixed rate renewal options totaling 882,000 square feet, most of any quarter in 2025. Excluding these 5 fixed-rate leases, fourth quarter cash leasing spreads would have been 0.2%, an increase of 570 basis points.

For the year, we achieved cash and straight-line renting spreads of 24% and 38.2%, respectively. Same-store cash NOI growth was 5.4% for the quarter and 4.3% for the year. we incurred 22 basis points of cash credit loss in 2025. Retention was 75.8% for the quarter and 77.2% for a year. As mentioned by Bill, we've accomplished 69% of the square feet we currently expect to lease in 2026, achieving 20% cash leasing spreads.

Moving to capital market activity. On December 8, the company settled $157.4 million of proceeds related to forward ATM sales that occurred throughout 2020. Net debt to annualized run rate adjusted EBITDA was 5.0x at year-end with liquidity of $750 million. 2026 guidance can be found on Page 20 of our supplemental package, which is available in the Investor Relations section of our website. Same-store cash NOI growth is expected to range between 2.75% and 3.25%.

The components of our same-store cash no guidance include the following: intention to range between 70% and 80% and cash leasing spreads of 18% to 20%, average same-store occupancy for 2026 is expected to be between 96% and 97%. And consistent with previous years, basis points of credit losses included in our initial cash same-store guidance. Acquisition volume guidance is a range of $350 million to $650 million with a cash capitalization rate between 6.25% and 6.75%.

Acquisition timing will be more heavily weighted to the back end of the year. Disposition volume guidance is between $100 million and $200 million. G&A is expected to be between $53 million and $56 million. Finally, the increase in interest expense from our recent refinancing of our $300 million Term Loan G will be a $0.03 headwind to core FFO per share growth in 2026. Incorporating these components, we are initiating a core FFO per share range between $2.60 and $2.64 per share.

I will now turn it back over to Bill.

Thank you, Matts, and thank you to our team for their continued hard work and outperformance of our 2025 goals. We're excited about the opportunities that are in front of us here at STAG. And we look forward to building off this momentum in 2026.

We will now turn it back to the operator for questions.

[Operator Instructions] Our first question comes from Craig Mailman with the Citi.

Just kind of curious on the leasing front. I know, Bill, you said you guys aren't expecting vacancy nationally to peak until middle of the year. But just from commentary from peers and brokers, it feels like the leasing environment and velocity is picking up. So I'm just kind of curious, as you guys kind of contemplated the 100 basis points of occupancy decline, which I understand you guys have 20 million square feet rolling.

And so 25% of that nonrenewal is a fairly large amount. But I'm just kind of curious how you guys thought about the pace of backfill activity in guidance and kind of what could be the upside to that if the momentum that we're seeing coming out of 25% kind of hold and sustainable and maybe even ticks up a bit.

Yes. Thanks, Craig. I mean we had a really successful year in 2025 with leasing and exceeded, as I mentioned, most, if not all, of our budgeting metrics, including our leasing volume. If -- certainly, if that continues, there's -- we could lease product earlier in the year, and that would be upside. And the way we look at and prepare our budgets, I mean, we entered the year in 2026 at close to 98% occupancy rate.

And so when you have 20 million square feet rolling at our historical retentions, you've got a fair number of square feet that's going vacant. In our budgets in contemplated a 9- to 12-month lease-up period for those assets. There is a number of examples where we outperformed that in 2025.

Just 1 example. For example, we leased an asset in Savannah, Georgia. In '25 when vacant in the first quarter, we anticipated releasing that in the first quarter of 26%. We found a tenant released that asset with no downtime. That was in a market that at that time had 10% vacancy rates. So some other options for the tenants ultimately decided to go with our building. And that's something when we budget -- we're going to budget that, I think, prudently to lease up in 9 to 12 months, but we -- our outcome was 0 downtime.

There's several other examples I could give you on that, that happened in those scenarios could pan out in 2016. But the way we budget we try to be prudent, and we certainly don't budget 0 downtime for our assets, but there's those things happen some years and certainly happened a lot in '25, and we hope it continues in '26. And then just going back to our view on the overall industrial market.

I mean it's still pretty strong, right? I mean we have to choose through some of this supply. We think that happens peaks midway through 26 and it starts to really improve as you move through the back half of '26 and into '27. So overall, really happy with the way 2025 played out. really happy with the results coming into the year with some really high occupancy, some great trends.

We hope it continues as we move through 2016, but we try to be prudent when we budget for $26 million.

That's helpful. And then just on the acquisition front, you guys are -- came out of the gates with $81 million, but Matts had mentioned it's more heavily weighted to the back end. Could you just talk a little bit more about what you have visibility on today? And kind of anticipated timing versus what is speculative in the guidance for acquisitions?

Yes. I mean, right now, all we've disclosed is the $81 million. We typically don't disclose any LOI acquisitions or under contract acquisitions, things do fall out of LOI, they do fall out of contract. We have been underwriting more deals, frankly, this first quarter than we did last first quarter.

The momentum from Q4 has continued into the first quarter. a typical transaction year though is usually slower in the first quarter and then it starts to build as you move through the year. So we do expect first quarter to be slower, but we're underwriting more transactions now than we did in the first quarter of 2025. Our pipeline is strong. It stands at $3.6 billion.

Mike can certainly dive into the details of that, if you'd like. But overall, the transaction market is really healthy. And we're seeing some portfolios come to the market. There's just -- it seems to be pretty healthy. There's a call it pent-up seller demand that came to the market at the back half of 2025, and that has continued as we moved into 2026.

Our next question comes from Michael Griffin with Evercore ISI.

Bill, I appreciated the comments in your prepared remarks around sort of increased tenant activity. I was wondering if you could unpack that a little bit. Are these customers, potential tenants you've been monitoring that are looking around for a deal? Or are they really, I guess, closer to signing on the dotted line? And have you seen maybe more newer prospects come into the market that might have been holding off last year?

Yes. That's a good question, interesting question. beginning of last year, certainly, after liberation day, there was tenants hanging around the hoop looking into space, but it didn't feel like real demand this tenant activity is real demand. We're seeing tenants make decisions, lease space.

We obviously had a lot of successes in 2025 I'd say the demand is pretty broad-based. We're seeing it from 3PL. We're seeing it from food and beverage. I would say something that's a little newer, a little more nuances they're seeing a fair bit of demand from data center, tenants.

So those are tenants that are either supplying generators to data centers or even some light manufacturing of data centers, storing other things for data center developments we looked at our portfolio, we've got 3 million square feet leased to data center tenants. And these are 5-plus year leases to good credits.

In addition, we've got some prospects in some of our buildings for data center demand. So that's a newer demand. But with respect to overall tenant demand, it feels real. It doesn't feel like they're just kicking tires. These are tenants that need space and are looking for space. I think the the caveat to all of that is there's some supply that we need to chew through. So these tenants have options.

Our portfolio, when I say this a lot, is we buy buildings, we add buildings to our portfolio. We make sure those buildings fit the submarkets that they operate in and fit them well. And because of that, we have historically continued to maintain occupancy levels well above market occupancy levels. We expect that to continue.

We have been fortunate in 2025 to win deals when there were other options that tenants could have gone to, but we proved to be a very good landlord, and we proved to have very good product in our respective submarkets. So we hope that continues. And we just need to get through some of the supply, but the demand out there is real, and we expect absorption to increase as we move through the year.

Great. That's certainly some helpful context. And then maybe just going back to sort of the outlook for supply, maybe to unpack that a little bit more. I mean, look, it seems like if trends are improving into 2026, if you expect vacancies to decline in the back half of the year.

If others in the industry are seeing this as well, I guess, is there a worry that we could see a ramp back up in supply if the fundamental picture continues to improve? Or are there more governors or barriers to entry, whether it's elevated development cost that might preclude a overbuilding problem that we might have had a couple of years ago?

Yes. I mean I think the developers in industrial are generally prudent. We had a little bit of excess supply there. But I think really the story there was just a falloff in demand, right? So I think the supply was was okay. It was just the falloff in demand.

And as that picks back up and you start to -- you look at your crystal ball and underwrite more market rent growth, more developments pencil out, right? But I think those developments, if you've got a piece of land and you need a permit and title it and then build it, you're looking well into '27 before any of these things come online, right? So there's a window here where it's going to fly up. And when it starts to flip, I think it's going to flip pretty quickly in the landlord's favor here.

So with respect to new supply coming online and being a concern, I'm not concerned about our team is not concerned about. And if that supply comes back on, it's going to come back on, I think, prudently. And I think middle to late '27 or even later than that.

Our next question comes from Nick Thillman with Baird.

Bill, I just want to make sure you and Matts are on talking terms after Sunday, but we can move on to some other things. just overall, I understand there's a new organic growth story with STAG. And you had mentioned in your prior conversations looking to maybe improve on that growth rate by potentially looking to do some more strategic exits of the nutra markets that might cause some like near-term dilution would enhance the longer-term growth rate.

I guess, has there been any changes in that conversation or any recent developments on the thought process there? And is any of that baked into some of the disposition guidance that is included in 2026?

Yes. I would say it's not a material shift to what we've been executing on in the past 5 years, right? There's -- every year, there's some noncore assets we disposed of in every year, there's some opportunistic dispositions generally, we can -- we have a sense of the noncore dispositions to start the year.

We don't really have a sense of the opportunistic because oftentimes, those are reverse inquiries that come in, and we had 2 of those in 2025, 2 assets, 1 was in the first quarter, 1 was in the fourth quarter where -- and there were assets that went vacant and we love the leasing prospects and we were planning on holding those assets and leasing them up, and we got -- we sold both of those assets at what a market rate would be -- market cap rate would be -- market rent would be, and those were sold at a 4.9% cap -- so just great execution from the team, but users wanted the space and they didn't want to lease it. So great execution.

So we anticipate having some -- hopefully having some of those this year. But right now, the plan is -- what's in our guide is just some noncore dispositions, but nothing in excess of past years. I think reflecting back on our conversation, Nick, that's just when you look at the map of STAG's portfolio, there might be 1 asset in a market. And if we don't feel like we can grow into that market over time, that's an asset that we'll opportunistically dispose of, just to be a little bit more efficient on the operating side. but that's on the margin and not really that impactful to the numbers.

Very helpful. And then maybe just appetite to hold land on the balance sheet for development opportunities, understanding that that's a growing part of the business. And most of your development opportunities have been with JV partners, but just appetite on growing the land bank.

Yes, certainly not part of our 2026 plan, something that's part of our long-term development plan. We're going to step our way into that. Right now, we've got a fair amount of development. I'm very happy with how the development initiative has progressed the results we're seeing.

It's great to see that lease get signed in our Concord development. There are some good opportunities that we're looking at now with some other potential leasing on the development side. And with respect to newer development opportunities, hopefully, there are some things we can announce in the near future on that.

And then when you start to think about longer-term view of markets, the land is not in our plan, as I mentioned -- holding land right now is not in our plan for '26, but we are looking -- it's early days, but looking into some phase developments that may be an opportunity to -- for us to have a, call it, quasi land position. But we're looking at a lot of those things as we grow this platform.

Our next question comes from Blaine Heck with Wells Fargo.

Can you just talk about how you're thinking about your overall cost of capital today and the spread between your cost of debt or maybe more importantly, cost of equity in your required returns on investment?

Blaine, this is Matt. So cost of debt is pretty easy. If we were to go to the private placement market where you historically have been in short spread there anywhere between 140 and 150 basis points over -- if we go to the public bond market, which we have been evaluated and have discussed on these calls, after our inaugural issuance, we would likely -- we've been pulled receive a 25 to 30 basis point pricing benefit.

So if we think about today in the market in which we are currently operating in, it's call it 5.5% to 5.75% depending on tenor, cost equity, you can do that in many different ways from an implied cap rate basis using 1 of our sell-side analysts, rubric, we're in the low 6s. But what is important is we are retaining, and Bill mentioned in his prepared remarks, we're getting north of $100 million of cash flows after dividends as well.

So a different way to kind of go through the funding for 2016, if you look at the net acquisitions of $350 million, and that's obviously gross acquisitions less dispositions factor in the $100 million plus of retained earnings. We have the ability to operate this business plan without accessing the equity capital markets.

Our labor to be right in the midpoint of our range. Right now, we're at 5x levered. We operate this business plan for 26% at the midpoint, we'd be a 5.25 leverage.

Great. That's helpful color, Matts. Second question, you guys commented on the fixed rate renewals weighing on spreads during the fourth quarter. Can you just tell us what percentage of your leases have those fixed rate renewals incorporated in their terms and whether there are any chunky ones that we should be aware of in the coming quarters?

Yes, it's single digits. Usually, we don't even call that out playing. We just called it out in the fourth quarter because it looked like spreads were were moderating in Q4, but it was really due to that. So every year, there's a few fixed renewal options, a handful and they're just spread out throughout the year. So it's just part of our leasing plan. But because it was concentrated in the fourth quarter, that's why we called it out.

So it's single digits, and they're laddered, but the good thing is as you get through these, you work these off, it's not like there's unlimited fixed renewal options. Generally, there's one, and then you get through it and then you're just pushing out the mark-to-market opportunity. Our next question comes from Vince Lombardi with Green Street. How should we think about potential development starts in 2016? And kind of what is your appetite to start new spec projects this year.

Is it dependent on leasing current projects or just on a deal-by-deal basis. Curious how you're thinking about that and the amount that's maybe reasonable this year? Yes. Vince, I mean, given where our development portfolio sits today, we're very eager to start some new spec projects, right, especially given our outlook on the industrial market in the back half of 2016 and into 27, right? It's just -- we view it as a great time to start some projects.

So for us, it's just whether we can source more. We think we can. This year, we're a little over $100 million of kind of new projects sourced. I think that's our -- that is what we have planned for this year. Hopefully, we can we can exceed that. No, it's not going to come in day 1, right? It's going to come in throughout the year. But it's something that -- it's an initiative that I feel strongly that we continue to build on.

The team feels strongly we can continue to build on it, and we think it's something that we will be able to build on. But with respect to starting a new spec project today, very happy to do that, assuming the returns pencil out.

No, makes sense. Helpful. Helpful color. And maybe just switching gears. Could you talk a little bit broadly about kind of the concession environment in your markets? Like particularly free rent? Do you feel the free rent levels or TIs have really stabilized across the market among private players with some more vacancy potentially.

Some of your peers have called that out the near-term growth, it doesn't look like that's an issue for your same-store guide, I just love to hear color on kind of free rent trends and concessions in your market.

Yes. We think they're very stable. They've been stable really since beginning at '25. But there are instances in markets, in our markets where you'll have a private landlord. I don't see -- I don't see it really with the public peers, but you have a private landlord that has been sitting on an asset and just saying, you know what, I'm going to buy this deal, and I'm going to give them whatever they need, and I'm going to give them a bunch of free rent and that is at market, right?

I mean, if you've got 5 buildings that are competing against 10 1s willing to just give a ton of free rent and concessions. The other 4 are not. So generally, what we're seeing in a market that has vacancy rates 5% to 10%, you're seeing a half a month of free rent per year right now, but that's been stable since '25. With respect to TIs, we haven't seen a material change in TIs. What you do see sometimes is, okay, tenant wanting additional dock doors, if there isn't maybe LED lighting, generally, our buildings have that.

But if there isn't something like that, where it's more of a building upgrade, they may ask for that. In those situations, you're seeing landlords in the market, and we would be willing to do it, too, to put that capital in the building. But that's -- I don't view that as much as TI as it is like putting capital in your building, making your building more marketable and frankly, more valuable, much different than a tenant-specific TI. So I haven't seen a big uptick in tenant-specific TI packages, which are -- which is what we really view as concessions.

Our next question comes from Mike Mueller with JPMorgan.

Just a quick one. What's your '26 guide for development leasing?

Sorry, I missed that, Mike. What was that again? .

Yes, sorry. Let's take into your 2 scout for developing.

Yes. Mike, it's Steve Kimball here. We've guided for 957,000 square feet of leasing. And we've -- 1 of those is a build-to-suit that's in those numbers. we -- and Bill mentioned the Charlotte lease that was done after the quarter. So we'd have after those 2, we'd be left with 530,000 square feet of leasing. They're about 0.5 million square feet of leasing that we have projected to do in 2026.

Our next question comes from Brendan Lynch with Barclays.

Bill, maybe you could just walk through your markets and highlight which ones are particularly strong right now, which ones are lagging?

Yes. So we're seeing some really good demand in the Midwest markets. I mean -- similar to the last couple of quarters, Minneapolis remains strong, Chicago, Milwaukee, but what we've seen really in the past, I would say, 4 months is an increase in demand in some of the big bulk Midwest distribution markets, Indianapolis being 1 of them and Louisville is really strong. .

Columbus has strengthened with a lot of bulk distribution leases getting done there. Southeast has been pretty strong. I would say the -- on the other side of it, where we're seeing a little bit more weakness, it's some of the southeast port markets, frankly, it's Jacksonville, Savannah, Charleston, seeing some weakness there.

And then -- but then when you think about going down -- continuing down, you go around to Texas, Houston is really strong. Dallas is really strong. So overall, I mean, some good fundamentals, but seeing some weakness in those Southeast port markets.

Okay. Great. That's helpful. And I believe you've suggested in the past that market rent growth would be kind of 0% to 2% throughout 2026. With that context in mind, with those markets that are particularly strong, -- how much are we seeing those stronger markets deviate from that 0% to 2% average?

Yes. I don't have all the numbers right in front of me, but I would say, generally, it's a pretty tight band because you are still -- you still have some vacancy in those markets. So you're getting a couple mark the rent growth in some of those stronger markets. But like, for example, in indoor Columbus that has really strengthened lately, I don't think you're seeing a 3% rent growth there. But in Minneapolis and Milwaukee and Chicago, you might be seeing it there. And then on the other side, it's closer to that 0% to 1%.

Okay. So it's the demand that it's mostly coming through as absorption rather than pushing rents more aggressively?

Yes. I think what you're seeing -- you're going to see the rent growth really start to accelerate as you move into that dynamic is, I think why you're seeing some -- and what we're seeing, I think others are, too, is there are larger, more sophisticated tenants coming to us well in advance to try to renew their leases to try to get ahead of some of the market rent growth that is likely to come. .

Our next question comes from John Kim with BMO Capital Markets.

You've had a healthy leasing activity recently. I'm wondering if you could provide the leasing executed or signed during the quarter. And in particular, the volume versus the 3.5 million square foot average that you had last year and the lease spreads compared to your 18% to 20% guidance?

Lot there, John. I don't have the executed leases in front of me. But we with respect to what we're budgeting for this year, I think we're budgeting almost $18 million square feet of leasing for 2026. So it will be our largest just absolute square footage of leasing for the year.

So I don't -- when you look at our leasing spreads of 18% to 20%, what the stuff just from recollection, right, we see these leases getting signed, and we get notified of everything there's nothing that I see that's kind of a big deviation 1 way or the other with respect to those spreads. You might see something a little bit lower because the lease was a little closer to market or something a little bit higher because the lease was a little bit below market. But it's not like we're seeing a trend 1 way or the other. And rent bumps are holding up and we're signing rent bumps in the 3% to 3.5% range.

But just following up on that, I mean, if you expect 18 million square feet of leasing, that's almost 30% more than what you did last year, yet you're expecting occupancy to go down. So is this a lot of early renewals? Or I'm just trying to marry the activity versus the guidance.

Yes, it's because we had so much square feet rolling, that's the biggest, right? So we had initially a little over 20 million square feet rolling. And so when you have that and you've got your, call it, 75% retention rate and these leases roll throughout the year. So we budget typically a 9- to 12-month lease-up time for these. So if they roll halfway through the year and it's a nonrenewal and just the absolute square footage a little higher, but we're budgeting that at least is going to be released in '27, right?

So that's -- our occupancy guide is average. So if you -- that's what's impacting it, especially another example, if you have a nonrenewal happening March 31, a and that's going to be vacancy for 9 months of the year, right, because we're budgeting that to lease up in '27.

Now maybe there's some some -- maybe we leased up earlier. We certainly had several of those examples in 2025. I gave 1 earlier on this call. But our budget is that, that will lease up in 2017. So it really is -- it's a factor of having a large amount of square feet rolling in 2026, offset by high occupancy coming into '26. So if our occupancy was lower, there's more opportunity to backfill some of that nonrenewal. And it was just an interesting dynamic that happened in 2016, declared by your renewal High occupancy numbers, good leasing spreads, really great year some great tailwinds with respect to development.

We're seeing some good acquisition activity. I mean, I was just thrilled with how '25 went in. '26 other than some of this occupancy loss is shaping up to be -- I'm really happy with the projections that we're putting out.

And a similar renewal rates than what you've achieved in prior years.

Exactly. It's not like renewals are down. I think our midpoint of renewal guidance is 75%. .

Our next question comes from RichAnderson with Cantor Fitzgerald.

So just looking back, start the year last year, your same-store guidance was 3.5% to 4%. You easily beat that at 4.3%. You're starting this year at 3%, not to belabor the 20 million square feet rolling in 2026 and the 75% retention. But if you beat that retention, obviously, that's the main driver to beating your 3% same-store guidance, I assume, and you can answer that, let me just finish the thought.

Do you have a line of sight into some clarity that 25% is not going to renew? Or is that just kind of going off of your history? Do you already have a sense of that vacancy level? Just curious if you can respond to that.

Yes. So I'll answer the second question first. We have line of sight for a lot of our renewal -- or a lot of our lease expirations in the first half of the year. So there's certainly lease expirations in the back half of the year that we're saying, hey, these 3 are going to renew, and this 1 is going to vacate, right? That's how we build our budget, right? In the back half of the year, it's not -- we're not certain with what's going to happen. But our team is close to our tenants.

We have a sense. We're usually within 5% of our retention guidance every year. So -- but some of it is speculative. And with respect to outperformance or potential outperformance on same store, it's not just for pension and retention is a factor, right? If that goes up to 80% or 83%, yes, that will help same-store because you're not incurring any downtime on that additional 5% to 8%. But really, it's -- we have lease-up projections that are the new leasing is really heavily weighted to the back half of the year. S

o I think we've got about $3 million budgeted for new leasing, most of which is expected to occur in the back half of the year. So if that leasing occurred sooner, that would be a benefit to same-store NOI. The other factor to same-store NOI. I mean, really, the other components are leasing spreads. We have pretty good insight to that and bumps and leases, we've got pretty good insight to that, but the last factor is credit loss, right?

We're budgeting 50 basis points of credit loss this year in our same-store pool. Last year, we budgeted $75 million, and we achieved -- we don't achieve this the right word. We realized 20 basis points -- so there is an incremental 30 basis points that we are budgeting for 2026.

No new tenants on the watch list. It's more of a broad-based budget. It's not like we've allocated that specifically to 1 tenant like we did last year with some of our credit loss budget. So that's the other factor that could move same-store 1 way or the other.

Okay. Great color. You mentioned early in the call, delivery is down 35% versus 2024. And I think you mentioned 180 million square feet deliveries. What would that equate to in terms of a draft downward versus 2025? And where do you think this all settles next year in terms of deliveries because to -- in response to an earlier question, perhaps there'll be a reignite reignited development activity, maybe, we'll see.

But I'm just curious, what's the cadence of things to 2027 as you see it right now from a delivery standpoint?

Yes, I'll let Steve jump in on this 1 to kick it off.

Yes. So I appreciate the question. We're looking at new deliveries in 2025 of about 225 million square feet, obviously, well down from previous years. And when you go forward to 2026, as you mentioned in our remarks, we're looking at about 180 million square feet. We think of a stabilized market, more 250 million to 300 million square feet of deliveries. So deliveries are going to be well below the average at the $180 million.

And I think they start to tick back up in 2027 to some of the questions that came earlier in the call about -- is there going to be a little more activity about -- around the development world and a little more interest in going spec. And I think that's probably the case. So we probably moved back up into the million the 200-plus million square feet in 2027. But I don't think there'll be a big increase to the numbers that we saw a few years ago.

And then the build-to-suit component of that, like 40% this year.

It's moved up from 30% to the 40%, but that's not abnormal right.

Okay. And last for me, and this is something I think I'm trying to will to happen, but you mentioned the 7,000, 8,000 square foot manufacturing-oriented lease in the first quarter. Can you sort of describe that? Is that a supplier that real manufacturing? Is it -- is there any kind of power issues? Just generally, I mean, we talk a lot about your markets and being a beneficiary of onshoring and so on.

You get this question a lot, I'm sure. But I'm just wondering if there's any glimmer of manufacturing happening in your markets to a greater degree and how that might play a role longer term for STAG.

Yes, I'll let Steve answer it. And nice job sneaking in that third question there, Rich. It's late in the call. I figure the last one. You're not the last one.

I want to really appreciate the question. We do have a balance of demand, particularly in our development markets where we have a balance between distribution and manufacturing. And we saw that in Nashville, where half our building leased up to distribution, the other half of the manufacturing and that's boded well for the development pipeline.

The lease we talked about for 78,000 square feet in the Charlotte market that we just didn't that is -- they have a larger manufacturing facility that's in the submarket and they need -- and that manufacturing is growing. And it's more around automotive, but specialty automotive and government uses. And so yes, it is manufacturing related. We are seeing it grow in that market, and we are seeing it elsewhere.

And I just want to characterize the manufacturing. It's really just light manufacturing, yes.

Yes. So that's a good point. So a lot of what we're seeing is the heavy manufacturing is doing well -- these are relief valves in some case where they need to either store the raw materials or do some light assembly that is tertiary a part of their core business.

Yes. When we develop buildings and we develop buildings and these ones in particular, these are developed as warehouse distribution buildings but can also have some additional power that can be a solution for some of these ancillary manufacturing tenants.

Our next question is from Michael Carroll with RBC Capital Markets. .

Bill, I wanted to turn back to some of your comments on the acquisition market. I guess, throughout the call, do I hear you correctly that you're seeing more deals to come across your desk right now? And if so, what is driving that increased activity? Or are there just more sellers coming back to the market? Or is Stag doing something differently going forward?

No, it's really sellers. And we saw that in the back half of $25 million everything just came to a halt a bit at the beginning of the year last year, really from April to July. So a lot of sellers come back to the market in the back half of -- that was 1 of the reasons why we had such a successful acquisition quarter in Q4 '25. And those sellers are still in the market.

And we're seeing a lot more portfolios start to come to market, even even whispers of portfolios coming to market, we're just evaluating more transactions. So really nothing that we're doing, just more opportunities that are in the market today.

And then how competitive are these deals? I mean, I guess, who are you competing with? And has that changed? And mean just looking at your acquisition cap rate guidance, I mean, 2026 is really in line with 2025. So is kind of those cap rates kind of holding steady where they were last year?

Yes. I mean depending on the product, I mean you can see -- you're seeing some cap rates compress. For us, and when we look at deals, one of the first things -- first thing is does this building fit the submarket it operates in, right, and it checks that box.

And we need to make sure these deals are accretive to our portfolio and to earnings. And -- so for us, our cap rate guidance is a little bit of a function of our cost of capital. So we bid to where we can buy deals accretively and if we don't get a deal, we're okay with that. So that's a little bit. When you think about market color, yes, we saw -- we're seeing a little bit of cap rate compression.

We're certainly seeing portfolio premiums are out there. But I would say, yes, probably similar to '25 pricing, maybe slightly lower with respect to market. But because we operate in the CBRE Tier 1 markets, there's a lot of opportunities, and we can cast a pretty wide net. So we're looking at so many opportunities and we're able to pick off the ones that fit the submarkets well, but are also accretive to our portfolio.

We have reached the end of our question-and-answer session, which means that there are no further questions at this time. I would now like to turn the floor back over to Bill Crooker for closing comments.

Yes. Thanks, everybody, again for for joining the call and then asking the questions. We look forward to another great year. I certainly really proud of the results we put forth in 2025, and we'll see you all soon at the upcoming conferences.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Greetings, and welcome to the STAG Industrial Third Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the call over to your host, Steve Xiarhos, Vice President, Investor Relations. Thank you. You may begin.

Thank you. Welcome to STAG Industrial's conference call covering the third quarter 2025 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.stagindustrial.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 risks and uncertainties and may cause actual results to differ from those discussed today. Examples of forward-looking statements include forecast 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. STAG Industrial assumes no obligation to update any forward-looking statements.

On today's call, you'll hear from Bill Crooker, our Chief Executive Officer; and Matts Pinard, our Chief Financial Officer. Also here with us today are Mike Chase, our Chief Investment Officer; and Steve Kimball, our Chief Operating Officer, who are available to answer questions specific to their 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 STAG Industrial. We're pleased to have you join us and look forward to telling you about the third quarter 2025 results.

Our year-to-date results continue to exceed internal projections. The outperformance year-to-date has allowed us to increase our core FFO guidance for the year to a range of $2.52 to $2.54 per share, a $0.03 increase at the midpoint.

Industrial fundamentals remain stable and are improving. Leasing demand is improving with increased tours and RFPs. However, lease gestation periods remain elongated.

Supply pipeline continues to decrease, and we are forecasting further decreases next year. While we expect national vacancy rates to be in and around 7% for the next 2 to 3 quarters, we anticipate those will improve materially in the back half of next year. Based on this, we believe our market rent growth for next year to be similar to the 2% market rent growth expected for 2025.

We have accomplished 99% of our forecasted leasing for 2025 at levels consistent with our initial guidance, including cash leasing spreads of approximately 24%.

Turning to next year, 2026 represents a record amount of square footage expiring in a calendar year for our company. I'm pleased to report that we have addressed approximately 52% of the operating portfolio square feet we expect to lease in 2026. This compares to 38% at the same time last year. We expect cash leasing spreads to be between 18% and 20% for 2026. This leasing success is a testament to the quality of our portfolio and a welcome sign of tenant engagement and commitment to their space.

We've seen an increase in acquisition opportunities in the market. specifically with sellers eager to close by year-end. Acquisition volume for the third quarter totaled $101.5 million. This consisted of 2 buildings with cash and straight-line cap rates of 6.6% and 7.2%, respectively. Subsequent to quarter end, we acquired one building for $49.2 million with a 6.5% cash cap rate. In addition to the $212 million of stabilized acquisitions we have closed so far this year, we have $153 million more under agreement and slated to close before year-end.

In terms of our development platform, we have 3.4 million square feet of development activity or recent completions across 13 buildings as of the end of Q3. 52% of this 3.4 million square feet are completed developments. These completed developments are 83% leased as of September 30. This includes a full building lease totaling 244,000 square feet, which commenced in Greer, South Carolina on September 1, with 3.75% annual rent escalations.

Subsequent to quarter end, we leased the remaining 91,000 square feet in our Nashville development. This project is now 100% leased with a cash stabilized yield of 9.3%. We stabilized this transaction 210 basis points higher than our initial underwriting and 6 months ahead of schedule. Including this transaction, our completed developments are currently 88% leased. I'm happy to announce a recently signed build-to-suit project on a fully entitled 40-acre parcel of land located in Union Ohio. We will develop a Class A 349,000 square foot warehouse with our development partner. The building is scheduled to be completed in Q3 2026. Upon completion, the building will be fully leased for 10 years with 3.25% annual lease escalations to a strong credit tenant. The project is estimated to cost $34.6 million and is expected to have a stabilized yield of 7%.

With that, I will turn it over to Matts who will cover our remaining results and updates to guidance.

Thank you, Bill, and good morning, everyone. Core FFO per share was $0.65 for the quarter, an increase of 8.3% as compared to last year. During the quarter, we commenced 22 leases totaling 2.2 million square feet, which generated cash and straight-line leasing spreads of 27.2% and 40.6%, respectively.

Additionally, executed leasing activity accelerated from 4.1 million square feet leased in the second quarter to 5.9 million square feet leased in the third quarter. 2025 is on track to be a record year in terms of leasing volume. Retention for the quarter was 63.4% and 78% for the year through September 30. We have accomplished 98.7% of the operating portfolio square feet we expected -- we currently expect to lease in 2025, achieving 23.9% cash leasing spreads, demonstrating the strength of our portfolio. As mentioned by Bill, we have accomplished 52% of the square feet we currently expect to lease in 20.6%, achieving 21.8% cash leasing spreads.

Same-store cash NOI grew 3.9% for the quarter and has grown 3.5% year-to-date. Included in the same-store cash NOIs, 22 basis points of cash credit loss incurred this year as of yesterday.

Moving to capital market activity. On September 15, we refinanced the $300 million Term Loan G, which was scheduled to mature in February 2026. It now matures March 15, 2030, with one 1-year extension option. The terminal impairs an aggregate fixed interest rate inclusive of interest rate swaps of 1.7% until February 5, 2026, and will then ran aggregate fixed interest rate, inclusive of interest rate swaps at 3.94% from February 5, 2026, through initial maturity.

Leverage remains low with net debt to annualized run rate adjusted EBITDA equal to 5.1x with liquidity of $904 million at quarter end.

As for guidance, we have made the following updates. We have decreased and narrowed the range of expected acquisition volume to range to $350 million to $500 million. As a reminder, the impact of external acquisition volume has always been heavily weighted to the end of the year and has a minimal impact on our core FFO guidance.

G&A expectations for the year have been reduced to a range of $51 million to $52 million, a decrease of $1 million at the midpoint. Cash same-store guidance has been increased to a range of 4% to 4.25% for the year, an increase of 25 basis points at the midpoint. These guidance changes contributed to a revised core FFO guidance range of $2.52 to $2.54 per share, an increase of $0.03 at the midpoint.

I will now turn it back over to Bill.

Thank you, Matts, and thank you to our team for their continued hard work and achievement towards our 2025 goals. We're excited about the opportunities that are in front of us here at STAG. Activity is improving across all aspects of our platform, including acquisitions, operations and development. These areas will all be key contributors to the future growth of STAG.

We will now turn it back to the operator for questions.

[Operator Instructions] Our first question comes from the line of Craig Mailman with Citi.

Bill, the progress on '26 here is really good, puts you guys in a good spot for next year. I'm just kind of curious, is it tenants coming to you -- could you just talk about what is driving that, I guess? Is there a higher weighting of those maturities kind of skewed towards the first half? And so you're just in that window of tenants kind of looking to get that done? Or are people coming to you early? I just kind of want a little bit more color on what's driving that. And is it -- like what's the breakout of renewals versus kind of new leasing or backfills of vacated lease expirations?

Yes. Thanks, Craig. I'll just answer the second part first. The breakout between renewals and, call it, new leasing, about 95% of that number is renewals, which makes sense just given where we are in the calendar, so 5% is renewals. And then with respect to, are they coming to us, we go to them? It really is -- it's a blend, right? We've been a little bit more proactive with our tenants, just given the larger than normal lease expirations we have in 2026. So we've been proactive. Our team has been proactive.

But then also, we've had our larger sophisticated tenants reach out to us and engage earlier than normal because I think a couple of factors. One, they like their space, they view themselves in their space for long term and they wanted to lock it up because in some instances, they have a large investment in that space. And that skews a little bit more to the bigger suite sizes. So next year, we had 5 or 6 large lease expirations, so call it anything over 400,000 square feet. So of those, we've addressed all of them except for one, which we're in active negotiations with. So that was a little bit of a different dynamic in '26 than we've had in previous years. So that also impacted the 52% versus prior year's circa 38%.

And you guys -- you talked about the build-to-suit in Ohio. You guys got Greenville done, you got Nashville done. I mean is this -- I know that everyone and you guys included in talking about sort of a thawing of the tenant decision-making. I mean is it people just feeling more comfortable, putting capital out the door? Or is there a bit of fomo in some of your markets where you don't have as much new supply as kind of where it's top heavy in a couple of markets in the U.S.? And so some things have been taken off the table and now people are rushing to make sure they secure a spot? Like can you talk a little bit about the dynamics across some of your markets and maybe point out some of the really -- kind of your best and maybe still slowest market in terms of activity?

You're good, Craig. I think that was 6 questions in one. But I'll do my best to try to address all. I'll try to address as much as I can there. With respect to our markets and developments, we haven't had the volatility that they call it the top 5 markets in the U.S. have with respect to vacancy. So our vacancy rates have held in there. Our occupancy rates in those markets have held in there a little bit better than others. So that's been beneficial to us and you can collaborate that through any third-party industry report.

Is there fomo for developing in our markets? I think to some degree, you can say that. We're certainly having a lot of success in our development platform. I've said in the past several quarters, our best use of capital than was incremental deployment of capital was developments. Really happy with the way that initiative is playing out.

And then if you think about what our messaging has been in the last 2 quarters, it's been this degree of uncertainty in the market. And our messaging now is the stability in the market. So it really has been a pretty big shift as we move into the last quarter of the year here. And that's a great thing. And we knew this was going to start the comp.

Now we see stability. But as I mentioned in prepared remarks, looking at industry reports, vacancy rates nationally around 7%. I think our numbers maybe high 6s. When does that really start to tick down and you can drive some additional market rent growth? It's probably another 2, 3 quarters. But overall, we feel really good about where our portfolio sits with respect to the markets they're in. Maybe I got 4 out of 6 there. I tried, Craig.

Our next question comes from the line of Nick Thillman with Baird.

Maybe talking on the '26 leasing and the progress there, just the sustainability of these spreads in the mid-20 is a little bit higher. You mentioned sort of the 4 large renewals. If we just look at the expiration schedule, it looks like the rents expiring here around 15% below where they were at the beginning of this year. So just curious on what we're thinking for spreads for the remainder of the expirations.

Yes. Thanks, Nick. And as I said in my prepared remarks, we're guiding to 18% to 20% cash leasing spreads for next year. And if you look at where they were a few years ago, I think 30 and then went to 24 this year, and 18 to 20 next year. And if you look at where our mark-to-market has been in those years, it's similar to what our escalators have been. So you haven't been driving additional mark-to-market opportunities. So naturally, that similar type of degradation and spreads that will happen.

And then with respect to next year and those large tenants, what we've done, those tenants early renewed, as I mentioned earlier to Craig, much ahead of time. But when you think about the spreads, what we've signed to date and what we're guiding to next year, there's a little bit of a difference there. And we usually don't get too much into the fixed renewal options, but they're part of our portfolio every year. So the remaining 48% of incremental leasing next year, almost all of our fixed renewals are in that number, which is why the spreads are a little bit lower for the remaining non-leased asset plan for next year.

No, that's very helpful. And then just on maybe Matts, on occupancy, you had a little bit of a headwind this year. As we think of building blocks for '26, good progress on the leasing. How are we feeling about sort of portfolio occupancy or potentially even growing that in the same-store pool next year?

Yes. Nick, I think as we sit here in October, we're going to provide 2026 guidance in February. So I don't think that we're prepared to start walking down the list of what guidance is going to be next year. I think Bill gave a lot of the color in terms of the change from maybe a little bit of instability in the first half of the year into the third quarter to a much more stable environment now. Again, I just pointed the fact that we did the 52% of what we expect to do last year, which is north of 10% higher than what we normally are at this point during the calendar year.

I had to try my best, Matts...

It was very obvious.

Our next question comes from the line of Eric Borden with BMO Capital Markets.

Bill, can you just talk a little bit about your appetite to lean into developments here, just given the improving demand environment and the potential for vacancy inflection in the back half of '26? Is there -- how are you feeling about potentially leaning into developments to get ahead or time up the deliveries with the improving landscape?

Yes. We're bullish on development. We're trying to sign up the right developments. We obviously are very careful with our underwriting, and we still want to achieve at least that 7% going in yield. We're really happy with the Ohio deal -- Ohio build-to-suit deal we signed up and that we signed up at a 7% yield to a very strong credit. So happy there.

There's -- we're working on some others. We're trying to get more internal developments done as well as some additional partner developments. And as we sign those up, we'll announce those. So it's certainly a great use of our capital. The market is stable now and looks to be improving and certainly in the back half of next year. But what -- one other change in terms of deploying capital, we're seeing a great opportunity to deploy capital on acquisitions right now, which is not what we saw earlier this year. So if you look at where we are from an acquisition, we did lower the top end of our guidance. But we've closed $212 million to date. We've got another $150 million under contract NOI. So to get to our midpoint, we need to sign up another, call it, $60 million between now and Thanksgiving. And we're underwriting a lot of deals. We're evaluating a lot of deals on a weekly basis. So we're hopeful that we can get to that midpoint this year. So that's been a pretty nice change that we've seen over the past couple of quarters.

I appreciate that. Just one on the guidance. You raised it -- raised guidance $0.03 at the midpoint, but it implies a sequential deceleration from the third quarter to the fourth quarter. Maybe could you just talk about some of the offsetting factors in the fourth quarter that are driving that sequential drag?

Yes, absolutely. I'd say the easiest thing to point to here is credit loss. We've been outperforming our credit loss guidance, but we're not through the rest of the year. So we do have some credit loss baked in on a specular basis for the remainder of the year, to the extent we outperform that. Again, these are unforeseen, just call it, more of a modeling number, we would be at the higher end.

Yes, you as at the midpoint, I assume, right?

Yes. That's right.

I think it depends on where we fall within that core range.

Our next question comes from the line of Blaine Heck with Wells Fargo.

Just following up on acquisitions, Bill, can you talk about what might have changed over the last 90 days to kind of pull back on your forecast, if there was anything specific that you noticed? And then this is probably difficult to forecast now. But given the trends you're seeing today that you just alluded to, how do you feel about your ability to make up for this 2025 decrease in 2026 and show a more significant increase in activity year-over-year?

That's a good one, Blaine. As Matts said, I think we'll handle all the remaining 2026 guidance in February. But certainly, if you look at the cadence throughout this year has been accelerating into year-end, what dynamics have changed? You've got a couple of things. You've got interest rates that have been stable. I think just a macroeconomic environment that's a little bit more stable.

And you've got some seller pent-up demand. So I think the spreads are -- the ask price is a little bit more reasonable. If you look at what happened last year, there was not a lot of transactions trading in the market compared to historical norms. This year, you had all the uncertainty as you move through the year.

And then lastly, with the stability that's in the market, you have a lot of sellers that want to get their deals done by year-end. So when you look at somebody like us who have a really strong reputation in closing deals and closing deals in a pretty short period of time. We're the preferred buyer in a lot of these instances and some of them were not the high bidder. There's a preference to close by year-end. So that's another driver in terms of giving us some confidence with our Q4 transactions. But I don't know if there's -- Mike, I don't know if there's anything else that you're seeing.

No. I mean, I think you hit on it. The end of Q3, we started seeing a significant increase in deals come into the market, particularly ones that wanted to close year-end. And as you said, Bill, on those deals, surety of closure is almost as important as pricing and STAG has a great reputation for surety of close. So we're seeing a lot of deals, and we're cautiously optimistic that we'll have a good Q4 here.

Yes. And we expected a lot of deals to come to market post Labor Day after the summer slowdown and the other uncertainty to happen this year. And that's exactly what we saw.

Okay. That's helpful and makes a lot of sense. Just shifting gears to leasing. Can you talk about any leases you've signed that are directly or indirectly related to manufacturing projects of near-shoring and off-shoring and any markets that you think are particularly well positioned in your portfolio to benefit from some of those trends?

Yes. I mean from the markets that are going to benefit from those trends, it's a lot of the markets we operate, right? It's what we've said before. It's Midwest, it's Southeast, and we signed that lease last year. What was earlier this year, everything is kind of blending together. But that was a direct onshoring lease. It was a building that was a local distribution -- regional distribution building that ultimately became a supplier building to a wood flooring manufacturing company that brought their operations onshore to be closer to the consumer. So we're certainly benefiting from that.

There's a couple of leases that we've signed this year that are related to solar manufacturing plants. There are some leases that we've signed that they -- one lease we've signed, actually manufacturers generators for data centers, so not just staging for data centers, but generators for that. So that was a lease that we're benefiting from in our markets that maybe does not have the same demand drivers in other markets.

Our next question comes from the line of Vince Tibone with Green Street.

For the near-term acquisitions you're looking at, are you considering any value-add deals that will require lease-up or focus more on stabilized assets? Just curious kind of where you find the best opportunity today and if there's any greater opportunities from some for sellers with some spec projects that have not gone according to their underwriting, kind of hitting the market and allowing for any interesting opportunities for yourself?

Yes. We're seeing some of them. I would say we're not seeing a lot of value-add deals come to market or at least the ones that we have a desktop review. We're not penciling the pricing out. So we don't -- they don't even make it to the full underwriting stage.

Well, we will absolutely evaluate those transactions, right? I mean it's what we do, right? We build buildings, we buy buildings, we lease buildings. So if there is a developer that wants to take some chips off the table and as a vacant asset that they don't want to try to lease or that's not their core business, we'll absolutely take a look at that transaction and put a bit to price that. But we're not seeing a lot of those. I think what we're seeing now is probably a little bit more skewed to 3, 5 and kind of longer lease term transactions. And part of it is the ones we are seeing, like I said, just don't pass that even initial desktop review with respect to where we would price those assets.

No, that's helpful color. Maybe just switching gears for a second. Just on the updated same-store guide for the year, it looks like it's implying decent acceleration in the fourth quarter. If you could just talk about kind of what's driving that? Are you expecting any sequential occupancy gains in the fourth quarter kind of what else may be at play that kind of gets things like the mid- to high 5s is what it implies for the fourth quarter, the updated same-store guide? Can you just touch on that, that would be helpful.

Yes, absolutely, Vince. Thank you for the question. So I'm going to walk you through, it's related to a tenant and some cash basis accounting. So number one, we've executed virtually all the leasing we expect this year. In the third quarter, the metrics include the impact of moving one tenant to cash basis accounting and obviously, the associated impact of writing off AR balance.

Well, after September and quite recently, we executed a repayment agreement that requires the tenant to come current during this quarter and also make the required rental payments. So a performed pursuant an agreement through today. And to the extent they become current by year-end, we'd expect to be near at the high end of our same-store guidance. So this is what I think is going to help here. Had we not written off the AR balance, the Q3 same-store would have been approximately 5% as opposed to where it is. And year-to-date, it would have been approximately 4%, right in line with our updated guidance. So it's basically it's a matter of timing.

Tenants catching up on past due payments in the fourth quarter, Q3 is lower due to the write-off. In the fourth quarter, we'll benefit from the payments being made by the tenant as they become current. Just a little background, this customer is a supplier to the automotive industry and has an incredibly strong customer roster and is profitable. So it really is timing, Vince.

No, that's super helpful. And there's any color on occupancy. I mean, should we expect same-store occupancy to be around 97% as well in the fourth quarter, given it sounds like most the leasing is done.

Yes. I mean our guidance, which we didn't change is roughly 75 basis points of occupancy loss in the same store for the full year. So we didn't change that.

Our next question comes from the line of Jon Petersen with Jefferies.

The $153 million of acquisitions that you have under agreement, can you give us a sense of the cap rates on those properties that we should be thinking about?

Yes, it's pretty consistent with what we've closed in the third quarter.

Okay. And then the new land that you bought in Union Ohio, I believe that's near Dayton. Can you just talk about that market a little bit, maybe not one, I'm super familiar with. So just what are you seeing from a demand and supply perspective that gives you confidence in doing a development there?

Yes. And just that land that we bought, that's the build-to-suit that I mentioned in the prepared remarks to a strong credit for 10 years. But I don't know, Mike or Steve, who wants to take the -- Mike, why don't you take that?

Yes. I mean, Dayton is kind of, I would say, a market that is up and coming and emerging. It's 104 million square feet. It's about 4% vacant. They have less than 1 million square feet of construction going on right now. So -- but all that said, we were very comfortable with acquiring that land and developing as we had a long-term build-to-suit lease signed up with a strong credit tenant. So that was an easy one for us to kind of take a look at.

And in this property is near the airport.

Yes, this property is located our next to International Airport, a couple of miles away from the main interstate there...

If not the best submarket in the market, one of the best submarkets, right? So the building fits the market really well. So to the extent after the 10 years, the tenant doesn't renew, we feel very comfortable with the leasability of that asset.

Okay. And then I know we're all trying to tease out 2026 same-store, so maybe I'll ask it 1 more way. Is there any known move outs that we should be thinking about as we look into '26?

All right. I'll answer that one just because you're so direct with it. Nothing material. It was -- we call out the large no move-outs, call it, anything over $400 million. As I said, I think there was 5 of them. We addressed 4 of them were in active negotiations with the last, so nothing to call out.

Our next question comes from the line of Michael Griffin with Evercore ISI.

Bill, I want to go back to your comment in your prepared remarks about lease gestation time frame remaining longer and maybe marrying that up to the execution you've had in your '26 leasing plan already. I mean whether it's new leases or renewals, like can you give us a sense, are tenants shopping around for a deal? Or does it seem like they're getting closer and closer and ready to sign on the dotted line, given the maybe greater clarity and certainty that's out in the market?

Yes. And that's -- it's a good question. Just to clarify, it's, call it, a couple of months for the negotiations that go on, maybe a little bit longer for normal negotiations with the lease historically. Those are the numbers, maybe we're a little bit longer this year. But for example, in our Nashville lease that we got done, that was done from start to finish in weeks, right? So we -- I do expect those to remain elongated for a period of time, similar to tracking with vacancy rates, right?

As I mentioned, in and around that 7% or high 6s mark for the next couple of 3 quarters. And as those vacancy rates comes down, naturally the lease gestation periods got reduced, right, because these are less options. You needed to make decisions a little quicker. In Nashville, a great example, very strong industrial market, not a ton of options, tenant needed our space. We got the deal done to start to finish in a matter of weeks.

So I think it's just a period of time for these to stay relatively, call it, elongated and then those will start to shorten as vacancy rates come down.

Appreciate the color there. And then maybe you could just give us some insights into the demand of the 4 development projects that are going to be completed in the fourth quarter? I know there's probably some time until those stabilize, but what's the traction sort of looking like on that space? And would you be willing to give on concessions in order to get the projects leased up?

Yes. I'll let Steve answer the details there. And just as a reminder, we underwrite 12 months of lease-up for our development projects, but Steve can walk through the demand that we're seeing for the ones that are going to be completed soon.

Yes, Michael, I appreciate the question. We've made good progress on the existing, but the stuff coming that we still have left to lease. I'll just walk you through the 5 markets. That's probably the easiest way to do it. We have a small amount of vacancy in Greenville, Spartanburg, just 70,000 square feet. As you probably know, the activity in that market has been very good with a lot of absorption in the last couple of quarters, and we do have activity on that 70,000. So we feel pretty good about that space. It's built out the offices there. It's ready to go, and we have users looking at it.

The next -- and that market has dropped to below 7% vacancy. And on these calls, we've talked about it being double digit for some time. So a big improvement in that market.

The next market where we have vacancy would be in Tampa. If you recall, we had the 2 buildings there. We leased one of them relatively quickly to a single user. We have one remaining at 140,000 square feet. That market as a whole is about 6.5% vacant and our submarket is below 5%. So -- and there, again, we have activity for that building. And so we feel good about the Tampa market and prospects for that building.

The next market where we'll be delivering here in the fourth quarter is two 200,000 square foot buildings into the Charlotte market. That market is about 8% vacancy with a lot of positive momentum, particularly in the larger bulk that's brought that vacancy down. So as it was alluded to earlier, 1 of the questions about developing into improving markets, I think Charlotte should be one of those stories where that market is starting to improve, and we're delivering product.

In the submarket that we're out in Concord, that's about a 5% vacancy market. And in that project, you'll recall when we've talked about it, we have some benefits on users relative to some of the peers because there are some zoning issues with sewer availability in the market. So we can do distribution and manufacturing tenants when some of our competition can't do the distribution.

Next market would be Reno where we have 2 buildings delivering, a 285,000 and a 76,000 square footer. Both of those buildings fit the North Valley submarket that we're in. That market has been slower absorption in the last probably 6 quarters. And so that little bit of headwinds there, but we expect absorption will pick up as we deliver these buildings. And we do have activity and have had activity on both buildings, but nothing to report yet.

And then the last market is Louisville, probably the one I'm personally the most bullish about. It's a 4% vacancy market. We are in a Class A park just south of the market and a very established park. We have strong activity in our building and there's very limited supply that we'll be competing with in that market. That takes you through kind of the 5 markets where we have future exposure.

I appreciate the detailed analysis there.

Our next question comes from the line of Nikita Bely with JPMorgan.

It looks like you are pretty bullish on both acquisitions and developments. Can you talk a little bit about how you rank them on a relative basis, one versus another? And as you start to ramp both of them up, it appears in 2026, how do you plan to fund it? And are we close enough to issue equity at these prices?

Nikita, it's Bill. With respect to ranking, it's hard. I mean, that was good -- I guess, I'll still say the joke, it's like ranking your children, right? They're different. I would say we evaluate opportunities for development and acquisitions. And depending on the returns, the market, et cetera, we may choose to look at one or the other. But the reality is we've got a balance sheet and liquidity to, if we like both opportunities, we can deploy capital to both opportunities. So it's not an either/or for us.

And we certainly have the process, the people and the systems internally to evaluate all those opportunities. So for us, it's not an either/or. So we don't have to force rank those 2 opportunities. But as I said, development was -- the favorite choice of deployment of capital earlier this year, and I think acquisitions is catching up, which is great to see. In terms of capitalizing those and financing those, I'll turn it over to Matts to talk about that.

Yes. Nikita, so as we sit here today, we're retaining north of $100 million of free cash flow. Our balance sheet is at the low end of our balance of our leverage target. So those are probably the [indiscernible] sources. We have $47 million of unfunded forward equity, which would be the next source. We don't anticipate any deviation from our normal leverage bands generally operating in the low 5x.

Our next question comes from the line of Brendan Lynch with Barclays.

You mentioned the fixed renewal options that are in place for some of the leases that are going to roll in 2026. Do you have a lot more of these? And are they -- they mostly reflecting acquisitions that you've made and the contracts that were put in place by the prior owners?

Yes. They're almost all based on assuming leases. And I would say they're not higher -- materially higher or lower than other years. They just happen to be in the remaining portion of the unleased space for next year. Generally, those renewal options have some sort of notice period. It could be as short as 3 months. So some of those are to the back end of next year.

Okay. That's helpful. And then maybe kind of a strategy question. You seem to have an improving view on how the market is trending. And I think there's a lot of third-party data out there to support that. When you think about the acquisitions that you have made versus the ones that you passed on, do you get the sense that you could have been more aggressive in the past to make more acquisitions? And is that changing your calculus now as the market seems to be improving?

One of the things we look at for acquisitions is we're deploying capital accretively, right? And that was part of the issue that we were seeing earlier was that we weren't able to do that with all of them. You can always -- Monday morning quarterback decisions. We try to evaluate decisions with the information that we have on hand at that point in time and make the best informed decision at that point in time.

So I think we've made a lot of good decisions this year. Really, I'm happy with the acquisitions that we've made this year and really happy with the development decisions we've made this year. So we'll continue to evaluate acquisitions and development opportunities with the information that we know and try to make the best decision we can.

Ladies and gentlemen, that concludes our question-and-answer session. I'll turn the floor back to Mr. Crooker for any final comments.

I just want to thank everybody for joining the call. And as always, the thoughtful questions. And we look forward to seeing you all soon at the upcoming conferences. Take care.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.