Brad Shepherd – Vice President-Investor Relations Ben Butcher – Chief Executive Officer, President and Chairman Geoff Jervis – Chief Financial Officer, Executive Vice President and Treasurer Dave King – Executive Vice President and Director of Real Estate Operations.

Brendan Maiorana – Wells Fargo Tom Lesnick – Capital One Securities Jamie Feldman – Bank of America Stephen Philbin – Robert W Baird Michael Salinsky – RBC Capital Markets Mitch Germain – JMP Securities Daniel Donlan – Ladenburg Thalmann.

Greetings and welcome to the STAG Industrial Incorporated First Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host today, Mr. Brad Shepherd, VP of Investor Relations. Thank you sir, you may now begin..

Thank you. Welcome to STAG Industrial’s conference call covering the first quarter 2015 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 the 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 those related to STAG Industrial’s revenues and operating income, financial guidance, as well as non-GAAP financial measures such as trends from operations, core FFO and EBITDA.

We encourage all of our 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, Tuesday May 5, 2015. STAG Industrial will strive to keep its stockholders as current as possible on company matters, but assumes no obligations to update any forward-looking statements in the future.

On today’s call, we will hear from Ben Butcher, our Chief Executive Officer; and Geoff Jervis, our Chief Financial Officer. I will now turn the call over to Ben.

Good morning everybody and welcome to the first quarter earnings call for STAG Industrial. We're pleased to have you join us and look forward to telling you about our first quarter results and some significant subsequent events.

Presenting today in addition to me will be Geoff Jervis, our Chief Financial Officer, who will present the bulk of the financial and operational data. My remarks will focus on the larger issues and opportunities.

Also with me today are Steve Mecke, our Chief Operating Officer; Dave King, our Director of Real Estate Operations; and Bill Crooker, our Chief Accounting Officer. They will be available to answer questions specific to their areas of focus. I also invite you to visit our new and improved website at www.stagindustrial.com.

We are off to a great start in 2015. Acquisitions for the quarter were nearly double our previous quarter high. When combined with subsequent closings and deals under contract, we have closed or committed to close 250 plus million of transactions, significantly more than 50% of our projected total for all 2015.

Leasing activity is also strong as we have over 2.4 million square feet of leases and active negotiations after a typically light beginning of the year. We have committed to continue building STAG to take advantage of the granular acquisition opportunities that are available in the broad U.S. industrial market.

Our people, systems, and processes allow us to evaluate a very large number of potential transactions in order to identify those that we can acquire on a sufficiently attractive return basis. Last year, we made written offers on a little over 300 potential transactions in order to be the successful bidder on 43.

We fully expect that the engine we have built as it continues to mature will allow us to maintain our stated asset growth target of 25% for years to come. Our differentiated investment strategy and our acquisition evaluation processes are what sets STAG apart from our industrial operating company brethren as an accretive growth company.

And our strategy and underlying processes our focus is on cash flow, both near-term and long-term. Fundamentally, cash flow is just that cash flow regardless of where it comes from. What differentiates future streams of cash flows are factors like sustainability, predictability and future growth.

The perfect information of what the future may hold, the relative value of various cash flows could be perfectly accessed. Without perfect information relative values to turn by the individual investor and/or the markets perception of what the future may hold.

In a generally risk adverse world, these perceptions are generally skewed toward the safety of accepted wisdom, the land of decision rules and CYA decision making. Almost by definition this type of investing will in the aggregate and to perform investing based on unbiased analyses.

We continue to observe that this use of decision rules and arbitrarily conservative underwriting creates an investing landscape where persisting opportunity can be found, particularly in the fragmented ownership space through industrial assets.

We remained that sound investing practice is not merely the avoidance of risk, it is the judicious balancing of risk and return. Our investment thesis is found on belief and the power of analytics over decision rules. The world is not black and white, but shades of gray.

Our expertise is evaluating these shades of gray allows us to create a probability weighted series of cash flows for any single tenant, industrial asset acquisition opportunity that we find.

This allows us to analyze and fairly compare acquisition opportunities in disparate locations for the variety of leasebacks, building attributes and tenant credits.

In the execution of our investment thesis, we’re focused on making sure they were well paid for the risks inherent in individual acquisitions, Simply to put, the expected value of the cash flows to be derived from owning an asset, exceeds its acquisition cost by a comfortable margin.

Our individual investment decisions are thus fairly straightforward by the transaction meets our threshold return requirements, pass if it does not. However, we’re also remained vigilant in maintaining adequate diversification in our aggregated portfolio [indiscernible] any of the metrics that was introduced undue correlated risk.

This serves to enhance our portfolio cash flows predictability. It is our expectation and belief with the continued execution of our investment thesis, we will produce not only better, relative and absolute returns, but also highly predictable returns for the benefit of our shareholders.

Geoff will now review our first quarter financial results and provide some detail on our balance sheet and liquidity..

Thank you, Ben and good morning everyone. As Ben mentioned, the first quarter was another strong period for STAG. From an operational standpoint, starting with property level cash flow, our portfolio-wide net operating income, or cash NOI, was $41.3 million, representing growth of 30% from the year ago period.

On a corporate level, adjusted EBITDA, probably speaking cash NOI less G&A, was $34.5 million, representing growth of 26%. Adjusted EBITDA did not grow at the same pace as cash due – as cash NOI due to increases in G&A, as our G&A expense was $7.5 million in Q1 compared to $5.5 million in the comparable period last year.

As we stated in the past, our G&A growth is an investment in the future acquisition capabilities of our platform and we’ll not required to manage our current portfolio is necessary to allow us to continue to grow at 25% over the next few years.

Specifically with an acquisition strategy based primarily on single assets, our platform costs are higher, a cost that we firmly believe is warranted given the highly accretive nature of our acquisitions. Putting some numbers around it, last year, we estimated that our acquisition team look at several thousand transactions.

We execute some level of diligence on 3,000 transactions, bid on 300 transactions and closed on 43 buildings with an average size of $10 million. In order to execute and achieve continued growth on such a granular level, we must prudently invest in our platform.

Moving down the ledger, core funds from operations, or core FFO, generally speaking adjusted EBITDA less our cash of debit capital was $23.7 million, representing growth of 25% compared to 2014. On a per share basis, core FFO was $0.35 per share, down a $0.01 from last year.

This decline was due to the aforementioned G&A increases as well as the fact that we remain on average over equitized for the quarter. These factors were offsets almost entirely by the accretive nature of our acquisitions.

In response to the strong run rate, growth rate, and income at our board meeting yesterday, the Board of Directors authorized a monthly dividend for the third quarter of $0.115 per share, an increase of 2.2%. For the trailing 12 month period, we have raised the dividend to a total of 4.5%.

From a coverage standpoint, our first quarter dividends represented a 91% AFFO payout ratio, a level in line with our target of 90%. Looking at the balance sheet, we’re very pleased to announce that yesterday Fitch ratings upgraded the company from BBB minus to BBB flat.

In its press release, Fitch cited our strong leverage metrics, strong liquidity, and increasing capital markets access as the primary rationale for the upgrade. A copy of Fitch’s press release is on our website. At the end of the first quarter, our immediately available liquidity was $389 million.

As of today, we have liquidity in the form of cash and available credit sufficient to fund our projected level of acquisitions for all of 2015. Furthermore, we do not have any debt maturities in 2015 and we have less than $30 million in maturing debt in all of 2015, 2016 and 2017 combined.

As Ben mentioned, our acquisition activities have been very strong this year. In Q1, we acquired $97 million of industrial properties and have closed an additional $21 million subsequent to quarter end.

Inclusive of properties under contract in LOI, we have a total of $257 million of acquisitions closed or in process, representing 57% of our entire 2015 target.

As we look forward given our $1.4 billion pipeline, up from $1.2 billion at year end, we feel that we will be able to meet our 25% growth target for 2015, equating to $450 million of calendar year acquisitions.

From a return standpoint, our acquisitions in the first quarter had an estimated weighted average cap rate of 8% and we anticipate that additional acquisitions in 2015 will have similar estimated cap rates.

From a leasing standpoint, activity was seasonably slow as we executed 300,000 square feet of new and renewal leases in the quarter with cash trends down 2.4% and GAAP rents essentially flat. In addition to new and renewal leases, we signed an additional 245,000 square feet of temporary leases.

Given that this quarter’s activity it was a very small sample and based upon our 2.4 million square foot pipeline of leasing LOIs, we anticipate that rents will grow for the remainder of 2015 as they did in 2014.

From a retention standpoint, we retained 64.1% of maturing tenants and continued to expect 70% retention for the full year, in line with our 2014 experience. We spend a lot of time recently discussing same-store cash NOI at STAG. As STAG experienced over the last several quarters has been flat to negative same-store cash NOI growth.

This quarter, however, our same-store cash NOI was up 1.5%. As we look forward, when we expect strong rent growth to materially offset occupancy stabilization, we expect same store cash NOI to be roughly flat as we have indicated in the past.

Back to the balance sheet, we remain committed to a low leverage balance sheet, capitalizing on acquisitions with 40% debt and 60% equity. The result of this design has been very strong credit metrics with net debt to annualized adjusted EBITDA at 5.3 times at quarter end.

We continue to strive for a defensive balance sheet and believe that we have achieved our goal today as evidenced by Fitch’s upgrade. Looking at our liabilities at year end, approximately $747 million of debt outstanding with a weighted average remaining term of 7.4 years and a weighted average interest rate of 4.5%.

During the quarter, we closed an additional $120 million of long-term fixed rate debt, representing a combination of our comprehensive refinancing that we embarked on in Q3 of 2014.

On the equity front, in order to capitalize our acquisitions, we have raised a total of $32 million of equity in Q1 from a combination of our ATM programs and the private issuance of OP Units as consideration from one of our acquisitions. On a weighted average basis, our equity capital was raised at $26.05 per share for the quarter.

Going forward, we expect to continue to primarily rely on the ATM for our equity needs and as maybe required look to use discrete equity offerings like the one we executed last October. Before, I pass it back to Ben, I want to spend a moment on two separate topics OP Units and inflation, first OP Units.

As you may know, we own our assets in a typical upgrade structure where the public company owns its assets by a subsidiary partnership. This partnership allows us to exchange partnership, ownership units, or OP Units for properties on a tax deferred basis for the seller, very similar to 1031 Like-Kind Exchange.

The benefit of our ability to offer this tax structure are powerful and we look to increase the use of this technology as another institutional advantage in our non-institutional marketplace.

It is also worth noted that unlike underwritten offerings such as our ATM and traditional follow-on offerings, OP Unit transactions are executed without any third party fees or discounts, saving the company between 1.5% and 8% compared to underwritten offerings, yet another benefit of the OP Unit technology.

On the inflation topic, we believe that we have not only a strong pasture in the event of inflation, but also arguably a superior pasture relative to most companies. There are four main drivers of our conclusion.

First, our average lease duration is 4.2 years and pursuant to our lease expiration disclosure on average 15% to 20% of our leases will roll over the next few years. This allows us to capture inflationary increases in rents on a relatively efficient basis. Second our growth. Since IPO, we have grown our portfolio by over 40% a year.

If we continue on this pace or the more measured pace of our targeted 25% growth, we’ll be acquiring material amounts of assets in the prevailing interest rate and cap rate environments. So if cap rates rise in the inflationary environment, we will effectively be bootstrapping our book of assets up in terms of cap rates.

Larger companies or non-growth oriented companies will not be able to benefit from this bootstrapping to the same degree. Third, we acquired a large majority of our assets at the lower placement cost. As such these assets have built-in protection from speculative development that typically comes from rent growth. And finally, our balance sheet.

We have long-term liabilities, 7.7 years on average excluding our revolver and no floating rate exposure other than our revolver, any of our floating rate term loans have been fully swapped to fixed rates.

So, as inflation causes increases in the market cost of debt, our entire book of permanent liabilities will be below market from a cost standpoint. The benefit of this below market debt will allow increases in rental revenue to fall more directly to the bottom line.

As I stated earlier, we believe that these four drivers positioned STAG very well in the event of inflation.

In summary, it was a good quarter for STAG, success in the left hand side of the balance sheet with acquisitions and strong retention as well as success in the right side of the balance sheet with opportunistic debt and equity capital raises and the upgrade from Fitch.

As we look forward, we as managers are excited that we are building a best-in-class platform, not only for the opportunities presented to us today, but also for the opportunities that we foresee in the future. And with that I’ll turn it back to Ben..

Thank you, Jeff. As previously mentioned and with the support of our Board, we've committed to building on and improving the STAG, continuously making improvements in our people, systems and processes. In prior period comments, I focused primarily on the acquisition side of our business.

However, we are equally proud of the continued development and strength of the other side of the house, our operation group that leases and maintains our 250 plus asset portfolio. During 2014, our operations group was restructured by more traditional asset management lines and strengthened through new hires.

From a systems standpoint, our 2015 data initiative is providing our operation staff better access to centralized data, improve tools for managing processes and identifying opportunities for revenue and maintenance and enhancement. The tenants in our buildings are our customers.

These are our most important relationships, improved customer service will lead to better tenant retention and other revenue enhancement opportunities such as expansions and build-to-suit opportunities. Two weeks ago yesterday, we celebrated our fourth anniversary as a public company.

During these four years, we have made great strides in accretively growing our company and solidifying our place among reach in general and more specifically among the industrial operating companies. Going forward, we’ll maintain our investment discipline and focus on shareholder returns. We thank you for your continued support.

I will now turn it back to the operator and open the floor for your questions..

Thank you. At this time, we'll conduct a question-and-answer session. [Operator Instructions] Our first question is from Brendan Maiorana with Wells Fargo. Please proceed with your question..

Thanks. Good morning, probably for Ben, maybe Jeff too. So if you look at kind of the dynamics of your cost of capital over the past let’s call this year, share price is down and cap rates are down a little bit.

And so, while, it looks like your cost of equity relative to an FFO or an FFO run rate is maybe around 7% and your cost is down obviously much lower than that. Weighted average cost of capital is still well below where acquisition cap rates are.

But do you think maybe about selling some assets to one demonstrates sort of the value of your existing portfolio and realize some of the strong asset prices that are out there and recycle that into acquisitions as opposed to what the strategy has been thus far, which is to issue some equity to help fund the acquisition growth strategy?.

Brendan, good morning. Thanks for the question. That has not been – I think we said this before, so I think that we look at our assets within our portfolio and the value to us within that portfolio. We’ll sell an asset if we believe that its worth more outside the portfolio than inside the portfolio and we don’t believe that is generally the case.

Despite the strong activity in the private markets, we continue to believe that that to be the case. Certainly, our cost of equity with the declined in the share price since January has gone up.

We’re still very, very accretive to the margin and acquiring assets and we believe there also continues to be a benefit that has accrued to us from size and things like our scalability and eventual reduction of our G&A load as a percentage of NOI.

Certainly investability, the larger company, larger flow allows the – some of the larger investors who may not participate at the date to participate. So although it’s something that we look at, it’s not something that we have – based on our evaluation it’s deemed as a good course of actions for us at this time..

Okay, fair enough, probably for Geoff. So lease terms were down or they were low – I think they were 3.3 years and I think it’s the first time you guys have offered the term. I think you mentioned in your script, 4.2 years is your average lease term.

Anything – and then it also look like your temporary leases were higher at least the amount was higher this quarter.

So anything in terms of the short duration of the leases and the higher proportion of temporary leases this quarter or should we see that normalized as we get later in the year?.

I would say that the as is generally or frequently the case and our quarter-to-quarter activity, it’s a small sample. So we bought three deals in the first quarter, so that the average is skewed by – can be skewed by the fact that it's just the small sample.

I still think that, you’ll see us by generally speaking an average of the remaining lease terms across our – our acquisition activity over longer period of time will be in excess of our average for the existing portfolio. So the existing portfolio was 4.2 years.

I think over a longer period of time you might expect us to have something in the five to six year range, remaining lease term at the acquisition. The temporary lease number is an again small, small sample anomaly. First quarter is always very light in terms of leasing for us.

Dave – I am talking because Dave King who is here who can talk and will talk is suffering from the head cold and some people [indiscernible] let him talk. But I know David and his team are very successful in terms of the activity on deals [indiscernible] some that we signed almost 150,000 square feet of leases today.

So there is a lot of activity going on as – and it has and will continue to result in leasing activity. It must show up here always….

Not particularly..

All right, so last one, I don’t know it’s could be Ben or Dave too. About a dollar or square foot TIs and leasing commissions in the quarter and last quarter about $0.50.

What do you think is normalized for that number as we think about just long term?.

Since inception we’ve averaged about $1.20 per foot and that is inclusive of some office deals that are loaded into that number. Dollar foot is we generally consider a new rental rate or a new deal capital contribution. We do a lot of our renewal deals without tenant improvements and often without brokers.

So I think a dollars is a fair number as run rate..

Okay, thanks..

Our next question comes from Tom Lesnick with Capital One Securities. Please proceed with your question..

Good morning, thanks for taking my questions. I really appreciate the additional disclosure and the supplement this quarter, but I just wanted to ask quickly on leases on the lease expiration table as always you provided quarterly detail out for the rest of 2015.

I'm just curious given kind of the ramp ups you're going to see here in 2Q and through the rest of the year, given the seasonality in the first quarter, where do you guys stand today really on renewing the bulk of the space for the rest of the year?.

I think you will see quarter-to-quarter variability and retention rate. Next quarter is, as you will see – as you’ve seen from the slides is a very low amount of turnover. And so we’ve given that low amount of turnover no move-outs and we have a significant one will likely produce a low retention rate.

We still believe for the year that, blending the four quarters together, we’re going to see retention somewhere around 70%.

Obviously at next quarter is low and this quarter was a little bit low 70%, we’re expecting very good retention over the remainder of the year, the 2.4 million square feet that was alluded to earlier, and lease activity, a significant portion of that is renewal activity, which makes up deals that are rolling later in the year..

Got it. Thank you. And then again going back to the additional disclosure on the same-store NOI by vintage page, which I know you guys started providing last quarter, I thought you broke out a bucket of flex office buildings acquired in 2012. I just wondered if you could provide some context behind that.

Yes, they were 2012 as part of our portfolio purchase of – they’re actually assets were bought by as such a company back in 2006 and 2007. So they kind of don’t feel like acquisitions as much to watch as we – the experienced environment was back during the period where we in line with that, they came as part of the portfolio.

And so certainly it’s not assets we’re buying today. Our view on flex assets is – we will opportunistically liquidate that portfolio over time. That means that when we sign a new lease gets some that new commitments from the tenant those assets will be sold.

The kind of point with that is that there’s an asset that guess we’ll point but we don’t think it’s leasable and that’s not an immediate use of sale we made to choose to liquidate those assets. But for most part we liquidate them at least to investors..

And I would just add that with respect to the format of the reporting. We add that line a flex office, so that the data on page 22 for quarterly cash NOI in the – by vintage charts puts to the traditional same-store analysis on the page before. So you can see how the two relate to each other..

Got it. All right, thanks for answering my questions..

Thanks for asking..

Our next question comes from Jamie Feldman with Bank of America. Please proceed with your question..

Thanks. Good morning..

Good morning..

So I guess if you could just start out talking about as you guys were expanding the platform, hiring more people. I think you had said in the past, you were looking to get into more regions or at least dig deeper into some of the regions.

Can you talk about where you stand and maybe the West Coast and some of the other parts the country that you haven't had as many people..

Yes, so we – over the past three years – from two to four to now seven our facing acquisition people. The last two acquisitions people one is bottom where mid-year last and she is focused on California and Arizona. And then the most recent acquisition person brought on board is focused on Texas.

These are markets where we have probably been a little under-represented, it’s been in part because they are not obviously very tend to be low return competitive market, but it’s also because we haven't spend as much time, if you will be digging through on the sand to on the beach to find the gems that lie for us to buy.

So we’ve already seen success in California. We’re going to continue to see success in acquisitions in California and in Arizona because of having something focused specifically on that market.

We expect the same thing to happen in Texas, and we expect to – although we already own assets in taxes, we expect to increase our acquisition activity in that market.

So correspondingly as we added those people that means that some of the other people who are covering Texas and California and Arizona before are now more focused on the markets that they’ve been left with or focused – pointed to focus on, while these people – the new people are focused on these other market. So we’re diving deeper.

We’re doing more offers – unsolicited offers, where we know for instance a new lease has been signed, we’ll go in and make an offer on an asset that may not have been brought to market. And we’re headed a fair amount of success in doing that..

Okay, thank you. And then should we expect to see more of a G&A ramp going forward. Or do you feel like you….

We had obviously quite a lot of G&A ramp over the last two years as we’ve made some constant decisions to build the machine to be able to continue to buy the greater assets that are so accretive to us. I think that most of the pieces are in place today, so you’re seeing the benefits of scalability that we’ve talked about in our operations.

We’ll now start to have a greater impact of the portfolio continues to grow. And as we normalize our G&A, our expectation is to normalize down around 10% of NOI in around over the next five years.

We certainly have – because of our increases in G&A over the last two years that decline from the mid teen down to ten has been slowed down and again that will get back on course going forward..

And I will just add Jamie that for the year, I think we’ve given the guidance that we’ll have $30 million, the quarter was 7.5 and to put a little more precise estimate on it 7.5 for each quarter of this year is a pretty good estimate..

Okay.

And then just in terms of the assets you're buying and what you're seeing out there I know that you guys kind of starting maybe last year's thought to talk a little bit more about how your portfolio quality stacks up to other REITs – other peers, what are you guys seeing in terms of quality the assets you're buying and than just interested in maybe some of the larger portfolios that are out there?.

So I think that we're – in some degrees, we’re reacting to what where we can find the best returns.

But we’re finding, as we have gone down the buying a little sorter lease terms over the last few years – sort of reflection of again opportunity, but also the opportunity to buy, probably a little bit better quality assets with shorter lease terms to take advantage of the expected really significant rise in run rates over the next few years as this demand continues to exceed supply.

So I think that the asset quality is probably continue to improve the overall portfolio quality continues to improve..

Okay and then And any interesting portfolios are you seeing the lesser portfolios?.

We have an interest unfortunately they won't sell us to that prices that we can make our, the returns we want to make.

I think that this market valuations and this was referred to earlier are very strong and we’re seeing and we reviewed one portfolio recently to add 42 assets in it and but it been aggregated by some and we decided on a quality basis, we are interested in entirely asset and on price basis, we were buying 42 assets we evaluated based on what these people aggregated the assets.

So as we look around some of these portfolios – [Indiscernible] 0, 50, 100, how may assets sort of aggregate in some of these portfolios but you include price page as well as I think the numbers going to be pretty dramatic.

We’re pretty safe in terms of what we buy, certainly focus on single-tenant and when you add the additional thing and return requirement, additional piece of return requirements, it’s pretty difficult for us, even if we’re able to buy at the aggregators cost.

It will be pretty difficult for us to be interested in these portfolios and certainly at the numbers that are bandied about or have been evident some of these recent trades, they would not be of interest of.

Our acquisition activities, so much more accretive, a couple of 100 basis points, 150 basis points to 200 basis points or perhaps more in some of the more recent trades. Just doesn’t feel like a good idea for us to give up that kind of return we can get by continuing our focus on the greater activity..

And I would just add to Ben’s point, two things. First off, we continue to scratch our head that the private markets continue to price assets are ever compressing cap rates and yet obviously our stock has gone the other way recently. And so we think that there is obviously a lot of room for our compression there.

And then the second thing with respect to asset quality, as you are aware one of the things that we’re trying to do is to get that out into the market is having investor day which we’re having in June where we’ll show about a half dozen assets that we've acquired over the last few years and I think that the quality of the assets will speak for themselves..

Okay, that’s helpful. And I think it's just my last question, going back to the – you using OP units in the stock for acquisitions. If you think about maybe fourth quarter last year, and I know you guys are in IRR shop, so if you think about IRRs and acquisitions in fourth quarter last year versus where they are today.

What kind of – what the relative returns you're seeing.

I know you said there's still highly accretive, but what's change you talk about?.

We are focused on maintaining our returns around – on maintaining our thresholds in terms of the returns we’ll accept. And those haven’t changed. So we are not seeing anything different.

What has changed and you will see in our cap rate over the last couple of years, acquisition cap rates go from 9% to 8%, it is the expectation renewed growth raised over the next few years is significantly higher, on the order of two to three times higher per year.

So from the sort of 1.5 kind of long-term averages to threes and fours and even higher at in some submarkets and so that has allowed us to maintain by projecting the expectations the same kind of IRR is both lever and unlevered that always bought on.

We are just able to do it with slightly lower entry point with regard to cap rates and still we are the – our acquisition are accretive at the outset and given this rental growth projections kind of going to get more accretive more appropriately because of the increase in the rental rates we are, I think the entire markets experience and expect..

And then putting for numbers around the quarter’s acquisitions, our run rate FFO and core FFO that we reported was $0.35 just a simple annualization of that number get it to about 40 what we acquired in the first quarter from a FFO standpoint adjusting for if the cost of that as well as some incremental G&A was in the order of $2.50 a share or greater.

So you can see a material accretion from the new acquisitions not quite straightforward just the $97 million at 8% cap rate adjusting for the cost of capital.

So very accretive opportunities, again and that’s with the stock price down in the low 20s obviously still accretive at these level, still very accretive, more accretive in stock improves in value what we do..

Okay. I appreciate the color. Thank you..

Our next question comes from Steven David with Robert W Baird. Please proceed with your question..

Hi, I’m Stephen Philbin for Dave, today, so you come across, I guess thousands of opportunities in terms of the asset you see come to market, but is there any particular geography where you I guess, essentially entirely pulled back from? Thanks..

No, I think that we had not focus a lot of resources on certain markets, notably California, Arizona and perhaps Texas, because of the competitive landscape.

We side a way little from focus there, but I think that the – what we described earlier in terms of deploying assets in those markets is a recognition that even if they are competitive, there are still efficiencies in those markets will allow us to find assets that we can buy at threshold returns what we’re looking for.

And so we're not – we haven't even in the debts of the global financial crisis, I think Eastern Michigan was probably a market that like everybody else were very wary off, but our CEO, Steve Mecke is from the choice of and he made us keep looking and actually we probably – we then well served and we’ve done some volume there.

And that market has been very strong last couple of years and with great absorption, rental rate increases.

And so today, we hear people saying you know Houston oil prices, you maybe should stay away from that market, that's a market that's likely attractive to us because other people apply arbitrary decision rules [Indiscernible] having come back some rates are maybe not so many people are wary of Houston these days.

But again, it's a market where we would expect to find opportunities simply because everybody else thinks it's a market that they won’t find opportunity in..

Got it. And then going to the renewal leases for the quarter, you have listed the retention at 979K square feet.

Can you just talk a little bit different between the spreads there on the spreads on 136 and just kind of help me understand trend-wise, what's going on there?.

So, one of the thing it's interesting as we discussed, leasing, as mostly successful leasing. Retention is about leases over expiring in the quarter and leasing activity is about leases that were signed or not signed in the quarter.

So the sample of leases signed in the quarter is a very small sample, simply two leases, and had a flux asset in there, it's skewed the flux asset that rent was down a bit, it skewed those numbers. I would not put a lot of credence into the activity number for the first quarter, something like I just saw was small sample.

The renewal number was a much bigger sample obviously the more assets and the activity, what we've been talking about generally is the excess of demand oversupply broadly across the U.S. and specifically in our markets is going to continue to show up as good leasing spreads that's were evident in renewal numbers.

The actual leasing activity numbers again a small sample in that way..

Thanks for the color..

Our next question comes from Michael Salinsky with RBC Capital Markets. Please proceed with your question..

Hi, guys.

You talked about portfolio transactions, you talked about incremental transactions with G&A in place, so just can you give us a sense, as you're looking at new transaction, how accretive is that, relative to the in place G&A that's already there?.

Yes, I appreciate the question Mike and I note that you changed your name from Salinsky to [indiscernible]. We are very, very scalable about the margin.

And I think that we've talked about this, I think before, if we bought on the order of, in a particular time periods $300 million of assets, we would need to add one account and one asset manager and little pieces of may be some other functions. But you're talking about at most three people and probably a total cost of at most $600,000.

That same $300 million at our current cap rates is producing $24 million of new NOI. So you have $600,000 versus $24 million, I think that's 3% and 2.5% of marginal G&A for adding $300 million.

We have chosen on this and it’s evident by our G&A over the last two years, we have chosen to build machine in order to not only able to buy 25% growth this year, but with the investments you've made today with maturation and development of the team over the next few years, [Indiscernible] by 25% or more growth in assets per year for the next five years, and that's not been cheap.

But we know at the margin how dramatically scalable our enterprise is and that will come into effect over the next – that same 5 years, you’re going to see as fully we expect that you will see our G&A well it go from 15% plus down to 10% or may be inside of 10% of NOI and that will have dramatic impact on our per share numbers as sunrise as we go forward.

.

That's helpful. Second question, just in terms of retention below 70% there in the first quarter.

Over the back half of the year, any reason why we wouldn't expect your attention north of 70%?.

No, I think we fully do expect, I think given a little bit ahead that – we're going – the second quarter is evident, very small amount of roles in the second quarter and one move-outs will likely make that quarter a lower retention quarter but our full expectations on the granular regular base is looking at the tenants and our knowledge of where they are and some of our resigned leases for the year is 70%.

And so the pattern is going to be first quarter a little under 70%, second quarter under 70%, and then in the latter half of the year, we're fully expecting to be very strong retention quarters..

That's helpful. Thank you..

Thank you..

Our next question comes from Mitch Germain with JMP Securities. Please proceed with your question..

Good afternoon. Just a quick one from me, with 3,000 deals considered last year. Obviously, more so this year with the ramp and the team.

Have you guys done anything to change your underwriting process with regards to you know how the investment committee starts betting deals and when guys like Ben and Geoff, you guys can evolve?.

Well, you know, it is always been a [Indiscernible] process and so the average facing people in conjunction with Steve Mecke, who acts as our COO as well as the senior acquisition people in that group that down as quickly as they can to a number that is manageable and we actually do underwriting on.

But that's still thousands and thousands of transactions a year to get some basic degree of underwriting on.

But it is various, if you will the secret sauce of STAG is our ability to take that very large funnel and triage down to the things that make sense to focus on and then to be very efficient on the assets that we have decide at least do desktop underwriting through very efficient and how that happens.

We also internally have been do spend a lot of time and not entering into that amounts of money on streamliner of processes with regard to the use of data, the sharing of data, manipulation of data, so that – so that the everybody is on the same page, people traveling are basically in contact as part of our partner and will fall out on the process when they are traveling.

All of that is designed to be able to allow us to look at that very large volume of transactions, very broadly across the U.S.

markets and so again part of these secret sauce is special advances as I guess, look at so many deals and be able to offer on the participants in the Permian bid process of so many transactions, that allow us to identify those inefficiently priced one that will deliver alter returns, if you will, to us and to our shareholders. .

And Mitch I can’t resist the opportunity for one more plug for the Investor Day. But our goal and the plan right now is that before we go out and see the half dozen properties, will spend an hour or two with the underwriting team and Steve Mecke and the originators as well and walk through how we underwrite a transaction and how our model works.

So hopefully we got to shed some light on that and I mean – I guess what 28 days.

Looking forward to it, thanks guys..

Thank you, Mitch..

[Operator Instructions] Our next question comes from Daniel Donlan with Ladenburg Thalmann. Please proceed with your question..

Thank you and good morning.

As little bit late getting on the call, but I was just curious, then if when you look at your retention in leasing, have you seen any trend amongst kind of a larger tenants or your investment grade rated tenants, what seemingly is there any correlation between those two and – use to signing not to renew?.

I'll Dave if we can talk but I don't think if there is any particular relationship as between tenant credit quality and their behavior in this market.

Obviously better tenant quality credit quality probably have the better access to build-to-suite opportunities, but other than that – but in this market, I think if you're willing to sign a 15-year lease is probably developer or will do a build-to-suite for you. So, I don't know this particular any….

I don’t think from a retention standpoint there is much difference, their decision making process tends to be a little longer. But as far as – and if they’re buying out one of our existing tenants, we probably have a little over shorter retention, but in general I don't see any correlation between credit and retention..

So Dave is referring that M&A activity, if a big company buy this small company, we've learned over time, the retention of the smaller companies assets is probably diminishes. The facilities guys in the big company will tend to dominate the new combined companies going forward and they tend to like their own facilities.

So it’s just something we've observed in the market. .

Okay, and then….

Daniel, you have missed beginning of the call that must've the guarantee section right, probably we would guaranty things..

I probably did a little bit, but just….

Only….

I can use that word either. But the other thing I was kind of curious on as you've seen some of at least one of the large triple net companies that historically has been retail has moved into the single-tenant industrial space. But I think most of what they're buying is over 10 years. So I would imagine you're probably not seeing them for assets.

But from a capital deployment standpoint, just kind of curious, your stock price has been up this year a little bit, but would you ever consider kind of if you're signed a new lease or you have a – it's for 10 years or 15 years, whatever it may be would you look that potentially divest of that asset, just because you can get the best cap rate on that.

How do you look at that going forward?.

I think, I may have mentioned in the previous calls, I think we signed new 10 year deal and building that that to become vacant in South Carolina with an investment grade credit. It is our firm belief that that asset is worth more to somebody outside our portfolio than it is to us in our portfolio and that's an asset we’ll sell.

I mean maybe asset management kicking and streamline because it's an absolutely very easy to manage for the next 10 years. But still – we’re cognizant of the fact that the same model that tells us what assets worth when we’re buying it, that same model tell us what it's worth when we sign a new lease.

It was worth more than outside the portfolio will go head in selling. So very much cautious on that and something that our asset management folks are cognizant on that they need to – they signed any leases or other commitments remaining space that we need to evaluate the asset as a potential disposition..

Okay.

And what percentage of your leases would you say, what percentage of your rents or maybe by assets are greater than 10 years?.

Not many. So it tends to be the build-to-suites and sale leasebacks and to a lesser extent, where we are kind of put a lot of capital and Dave actually have the number here..

Yes, if you look at the lease expiration schedule 6.3% of our annual revenue is beyond 2024..

And then I guess from an asset management standpoint. How proactive are you with you now going out to a tenant and you’re seeing some of the single-tenant retail guys do this where there might be five years left on a lease with three years left on the lease.

And they give them maybe a break on price, but the extend out the lease five, six, ten years, whatever it may be, is that something that you guys have done something you're looking to do?.

Well, I think one of the thing is about retail tenancy is that we have sales numbers. And so they are probably more able to tell sort of how much money they are making in that specific location and that – it’s an incentive toward the retailer to look to extend the lease.

I think that you know for us it's a – for us it's a – the analysis would be weather all of the ramp-up gap is between now and the existing exploration, another evaluating potential for retention versus the what we get and reduce – potentially reduce ramps in longer term.

So it’s a – again a probability assessment of those potential fund and extend transactions.

And I think, we assume the tenants are centers being set there asking for an extend, they are telling you that they are going to stay, so you may well be they're all staying with your existing brand and go ahead and negotiating the cost of the lease expiration..

Okay..

So again, we think were rational actors in those types of discussions, we certainly love to new extensions to leases. We're now always interested necessarily in giving up right to do that when the time is likely to stand to build it anyway..

Sure, okay.

And then lastly, just on the acquisition cost that you guys recognize how much of that is capitalized because you're buying a property subject to a lease and how much of that is brokerage costs and I realize that probably oscillates every quarter, but maybe just a general?.

So you’re trying to bring that between leasing the tangibles and acquisition costs, so that's what a stuff?.

Yes, I mean, then we – in Q1 we acquired the $97 million of acquisitions and $318, 000 that was the acquisition cost which is separately bifurcated on our P&L and expense not capitalized..

Okay, so excuse me, well how much of that is brokerage costs and typically when you break out the property acquisition cost number. How much of that is brokerage cost versus what is….

So typically, we're not paying brokers costs on acquisitions, it’s a – I don’t have the number here. But I’d probably an 80% or 90% of our transactions we are not paying any brokerage cost on acquisitions.

Sometimes that – I alluded to you before the unsolicited offers, there will be situations where we will take a brokerage costs because it's a transaction where brokers created not represented to sell it, but again it's fairly rare..

Okay. All right, well, thank you, I appreciate it..

There are no further questions in queue at this time. I’d like to turn the call back over to management for closing comments..

Thank you very much for joining us, everybody today was a good questions and we enjoy the – chance to speak to you. One of the thing that we sort of hang out hat over, think about it as we have had this little ramp down in our stock prices.

We are – we're very confident our ability to produce strong cash flows from our assets, I know like today as we’re going forward. And we strongly believe that in the long run that ability to – cash flow if you will win.

So the STAG machine continues to do accretive acquisitions we’re highly confident of our ability to continue to do that and again highly confident of our ability to produce cash flow for the benefit of our shareholders. So we’re stay in the course.

We referred our stock price had not moved down over the last month – last few months, it has – but we still remain very accretive in our acquisitions and we’ll continue to do that. And so, we look forward to having all of you continue to follow us and support us as we do so. Thank you..

Thank you. This does concludes today teleconference. You may disconnect your lines at this time and have a great day..