Matts Pinard - Vice President, Investor Relations Benjamin Butcher - Chairman, President and Chief Executive Officer Bill Crooker - Chief Financial Officer, Executive Vice President and Treasurer Steve Mecke - Chief Operating Officer Dave King - Director of Real Estate Operations.

Tom Lesnick - Capital One Securities Blaine Heck - Wells Fargo Gaurav Mehta - Cantor Fitzgerald Joshua Dennerlein - Bank of America Merrill Lynch Michael Mueller - JPMorgan Barry Oxford - D.A. Davidson Richard Taylor - Robert W Baird.

Greetings and welcome to the STAG Industrial Third Quarter 2016 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’d now like to turn the conference over to host Mr.

Matts Pinard. Thank you. You may begin..

Thank you. Welcome to STAG Industrial’s conference call covering the third quarter 2016 results. In addition to the press release distributed yesterday, we’ve 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 statements relating to earnings trends, G&A amounts, acquisition and disposition volumes, retention rates, debt capacity, dividend rates, industry and economic trends and other matters.

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 informational package available on the company’s website.

As a reminder, forward-looking statements represent management’s estimates as of today, Friday, November 04, 2016. STAG Industrial assumes no obligation to update any forward-looking statements. On our call today, you will hear from Ben Butcher, our Chief Executive Officer; and Bill Crooker, our Chief Financial Officer.

I will now turn the call over to Ben..

Thank you, Matts. Good morning, everybody. And welcome to the 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 results.

Presenting today in addition to myself will be, Bill Crooker, our Chief Financial Officer, who’ll discuss the bulk of the financial and operational data. Also with me today are Steve Mecke, our Chief Operating Officer and Dave King, our Director of Real Estate Operations. They will be available to answer questions specific to their areas of focus.

The third quarter was another very strong one for STAG. We had second largest quarterly acquisition volume and are projecting the acquisition volume in the fourth quarter to the largest in any quarter in the company’s history.

We also enjoyed exceptional operational results as our own portfolio continues to benefit from the very strong industrial fundamentals and our expertise in actively managing our assets. Our principal focus continues to be on the bottom line and we’re happy to report that we grew our quarterly per share metrics both sequentially and year-over-year.

We continue to see widespread opportunities for accretive acquisitions as we look broadly across the U.S. industrial landscape. This is reflected in our current dynamic pipeline of $1.9 billion. The availability of accretive transactions has proven to be a persistent opportunity for us to deliver growth to our shareholders.

Because of the very fragmented ownership structure of U.S. industrial assets, we frequently acquire from smaller sellers because individual reasons for selling are relatively uncorrelated to each other or to macro conditions.

For instance a seller maybe looking to pay for their child’s education, to buy a boat or simply retire and not have to manage the asset, this dynamic drives a persistent and widespread availability of accretive acquisition opportunities.

On the operations side of the business, STAG contains the benefit from the tail winds and resulting strong fundamentals enjoyed by our peers. The growth of e-commerce continues to be an incremental demand driver for our space. We’re seeing strong tenant demand for buildings, decline in vacancy and rising rents across the markets we operate in.

This is reflected in our strong operational growth. Despite these strong fundamentals, we’re not seen specular [ph] supply as an issue in the majority of the markets we participate in. The new supply we do see in our markets tends to be a build-to-suit variety.

As we mentioned previously, we’re selling a small portfolio of our assets which we put under contract in October.

This portfolio sale consists of six assets that are representative of the overall STAG portfolio of approximately 300 assets, consistent with the overall portfolio on parameters such as building size, age, lease term and trending credit quality.

This sale demonstrates a portion of the value created by the STAG platform to the aggregation of individual binary risk cash flows into a discrete diversified portfolio. The resulting capital raise in this transactional will be redeployed into accretive acquisitions with cap rates well above the portfolio execution cap rate.

With that, I turn over to Bill to walk through our third quarter results..

Thank you, Ben and good morning everyone. The third quarter results demonstrate our continued focus on execution and the strength of the industrial market. The acquisition volume closed this quarter double the amount closed in the first half of the year.

The previously message portfolio disposition has been placed under contract with pricing in line with previous guidance and our operational results continued to display the strength of the portfolio. During the quarter, we acquired 13 buildings for a purchase price of $166 million with the weighted average cap rate of 7.9%.

These attractive acquisition opportunities continue to persist and as our current pipeline suggests, we continue to underwrite a significant number of potential transactions across the markets in which we operate. We currently have 30 buildings for $331 million that have closed subsequent to quarter end, are under contract or under LOI.

Included in this number are two forward commitments equipments for $51 million related to build-to-suit take out transactions expected to become completed and funded in 2017. On our last earnings call, we increased our acquisition guidance for the year to between $350 million and $450 million.

And we are confident they’ll be at the upper end of that range for 2016, while maintaining our investment returns. We contain to execute on disposition plan. During the third quarter, we disposed three non-core buildings for $835,000.

And as Ben mentioned, we are under contract to sell a portfolio of industrial assets for $80 million, which is expected to close by year end. We continue to expect the pricing to be in line of our previous guidance in the low 7 cap rate range. At quarter end we owned 300 buildings with a total of 59 million square feet.

Occupancy for the operating portfolio standard in 96.4% with an average lease term of 4.1 years, the quarter’s operating portfolio cash and GAAP Rent Change for signed leases were up 7% and 16% respectively. We have retention rate of 92.4% on the 1.3 million square feet expiring in the third quarter.

The operating portfolio’s cash and GAAP Rent Change for the retained tenants were both up 3%. We continue to expect retention for the full year 2016 to be approximately 70%. From an operation standpoint, cash NOI for the quarter grew 10% from the prior year. Same store cash NOI grew approximately 3.4% over the same period.

Core FFO grew by 9% compared to the third quarter of 2015, and on a per share basis Core FFO was $0.40 per share, an increase of approximately 2.6%. Our balance sheet continues to be strong in line with the BBB investment grade rating, which was reaffirmed by Fitch this quarter.

At quarter-end our immediately available liquidity was $468 million, our net debt to run rate EBITDA was 5.3 times and our fixed charge coverage ratio was 3.0 times. At quarter-end, we had approximately 1 billion of debt outstanding with a weighted average maturity of 5.7 years and a weighted average interest rate of 4%.

All of our debt is either fixed rate or has been swapped fixed rate with the exception of our revolver. During at the quarter we sold 4.2 million shares under our ATM program with gross proceeds of $101 million and a weighted average share price of $23.97.

Subsequent to the quarter, we sold an additional 3.1 million shares with gross proceeds of $71 million. Additionally, our Series A Preferred with a coupon of 9% and a notional balance of $69 million was fully repaid on November 2, 2016. I will now turn it back over to Ben..

Thank you, Bill. As I had on at least one previous occasion on our earnings call, please let me apologize for what seems to be the overuse of the word continues. Our inherence to a fundamentally sound approach to persisting market opportunity, leaves us little choice, but to overuse that word in describing our results and future.

We’re pleased with the progress we have made this year and our expectations for the fourth quarter and beyond. We will continue to focus on growing the bottom line and delivering the best risk adjusted returns to our shareholders.

Maintaining the strength of our balance sheet and lower our cost of capital is an important part of delivering these superior risk adjusted returns.

Our commitment to these goals is demonstrated by our capital markets activity during and subsequent to the quarter and additional equity ratio of the ATM and the repayment of our 9% coupon Series A Preferred. Since our IPO, we’ve demonstrated a commitment to reviving our shareholders with not only growth but also income.

On November 2, our Board of Directors approved a dividend increase to $0.40 per share annually. We’ve now raised our dividend every year since we’ve been public. This continued focus and demonstrated capital discipline combined with the abundance of accretive acquisition opportunities make for a very bright future for our company.

We thank you for your time this morning and for your continued support of our company. I’ll now turn it back to the operator to open the floor for questions. Thank you..

Thank you. [Operator Instructions] Our first question comes from Tom Lesnick of Capital One Securities..

Hey, guys, How is going on this morning.

I guess first, I just wonder if you talk about the pipeline a little bit and its composition, how that changed at all over the past year you seeing any more portfolios meeting your criteria, bigger building, smaller buildings?.

I think that the, that combination of pipeline tend to be relatively consistent. It rises and falls with sort of quarterly general real estate activity that as we get into that second and third quarter.

It tends to get into the larger numbers as people try and build it to close before year end and turns to trend down a little bit as it is to get through the fourth quarter and into the first quarter. But it’s pretty consistent throughout in terms of the rare opportunities. I don’t think that we’ve seen much in the way of change.

Steve do you?.

No, I mean in terms of portfolios, the larger portfolios are still being priced fairly aggressively would you can compete the small to midsize sort of $20 million or $50 million portfolios –a little bit, a little better than we doing a large amount. But in terms of mix the mix is pretty consistent quarter-to-quarter..

Got it. That’s helpful. And then I guess along those lines. Can you talk at all about how our seller [ph] motivations may have changed over the last few months are you seeing more tax driven motivations going in the year-end and has the election had any impact on that at all..

But I think that the nature of our shelter [ph] the way we operate our business and the way we identify assets tends to make for it the pipeline consistency a very return conscious internally, we have a reset the way of looking at things and that ensures the consistency of the pipeline.

I don’t think we’ve seen much in the way of changes I think every year there is tax driven actually with regards to selling I don’t know that anybody has underwritten any great change going forward in - at least not among the sellers who are doing at great change in expectations about capital gains tax rates or by the like I think that it’s there and you mentioned during the call it that they a lot of sellers would deal with they’re not looking the macro invention making a decision to sell.

The amount of micro blazers [ph] may have some tax motivation. But it’s not a we’re not seen that in massive in terms of correlated region for the pipeline, change in a material way..

Got it. Appreciate that. And then last one for me, retention is very strong for this quarter and frankly was strong for the industrial group, broadly heading into next year with about 9.7% your run expiring.

How do you think that will impact occupancy for next few quarters you expect for retention to kind of remain elevated and you see that as a tailwind for occupancy?.

So I mean retention obviously the quarter-to-quarter, can vary quite a bit depending on which particular tenants are coming out in that quarter for renewal we are - we have expectations of how the tenants that will roll next year are going to behave and whether they’re going to renew or not, we actually have a fair about visibility and we’re still thinking that it’s going to be in the mid 60’s to 70%.

However, I would say one thing that is interesting about high retention at this point with [indiscernible] competitors is the most likely reason by our observations for a tenant to leave is actually business is good. The building is in big enough.

Is it through consolidation or M&A activity or just general growth of their business and so when you run into really good economic times, it’s more likely actually the retention goes ups then down. But we’re seeing a pretty steady state environment right now.

I don’t think there’s been that how much share projected change in environment or next 6, 12, 18 months to cause much of the way of change..

Hi, guys, really appreciate it. Thanks a lot and nice quarter..

Thanks, Tom..

And our next question comes from Blaine Heck of Wells Fargo..

Hey, guys, good morning. Ben, can you talk a little bit more about the disposition environment at this point and whether you’ve seen any change in the amount of interested buyers or their ability to obtain financing for the assets you guys are selling in.

I guess how does the financing situation change for the buyer with respect to finding a single asset versus kind of buying portfolio like the one you’re selling?.

Well, I think there’s no question we talked about it before the portfolios are easy to finance and that part of the capital structure and therefore the pricing of portfolios is going to be stronger, I mean the cost of capital is going to be lower for the debt portion of a portfolio purchase versus the single assets purchase.

The single assets with the moderate term lease and is very difficult and maybe a private equity is a very difficult financing and you drop them into five or six assets with some diversification and it looks a lot like a multi-tenant building or multi-tenant industrial park and you get much better feedback from the lenders.

Our activity in selling assets we've announced and we’ll close this quarter a portfolio sale, I think it reflective of the strength of the financing available two people that are buying portfolios, one of the advantages I mean continues one of our managers as we pursue assets on a one off basis, and we're frequently competing with people who don't have the access to capital, because of our large portfolio that we do.

We're not trying to finance them on an individual basis, and there have a significant capital advantage of our peers, that portfolio we're selling we expect to close out this quarter.

As we mentioned in the call we can buy, we believe similar assets to what are being sold is significantly a cap rate significantly above with that portfolio will sell, because and we think that's because of the aggregation and the financing opportunities to that aggregation.

Okay, great that makes sense.

Then from a tenant perspective have you noticed any change in behavior or they looking for longer term or pushing back at all and when it increases, I guess how does that deal from an operating point of view kind of stage in the cycle?.

Well, I think things are pretty good, rents are pretty good, I think the tenants. I’ll let Dave comment this and my tenants to see [ph] answer every question. I think the tenants understand the things are pretty good, I mean they can read the paper industrial occupancies that are near all-time highs vacancy is very low broadly across the market.

And so there’s an expectation for higher rent and higher rent bumps in contract - in the lease agreements are certainly there.

So the environment is pretty good, I don't think that there's necessarily any great change in tenant behavior, Dave?.

No, I think the tenant confidence from rents high and therefore they're willing to sign up for a longer term as we've seen in some of the recent quarters our average lease term on new executive leases has gone up..

And comparing back to five years ago, when we became public, we’re not coming in out of the depths of the global financial crisis that certainly much longer lease terms much greater as Dave refers too so much greater confidence to make commitments to build in not only in terms of lease, but in terms of the tenants of expenditures within those buildings..

I guess just down at lease since he brought it up and I’m probably splitting here, but on the newly sign this quarter it looked like it was two years, so was that just a one off kind of short term kind of new lease or what was the situation there?.

We run out at some situation with M&A or expansions and consolidations where the tenants are trying to figure out what they're going to do next. And we often end new situations where a short term lease will eventually migrate and so much longer term lease once the corporate supply chain decisions are made and on a small sample..

Yes right. Okay..

To that point, I mean for the years lease term for new leases were five and a half years and renewals was four point six years, so well within and to the high end of our historical averages..

And then we don't see this quarter as a particular as a trend in any particular way..

Sure that’s fair. One last one quick clarification on the leasing page, page 15 of your supplemental. So on your leasing activity report cash went spreads of 6.6% but when I looked down to the retention table the cash right spread to 2.5%. So I guess what’s the difference between those two baskets of leases..

Yes, this has reported in an anomaly of - you have retention is why actually refers to when the lease expires and leasing activity occurs to when the lease has signed and obviously those are frequently not the same time period.

So if we sign the lease today for our tenant that was rolling in the second quarter of 2017 it will get reported in retention status of 2017 but in leasing activity of the of the fourth quarter of 2016..

Got it, thanks guys..

Our next question comes from Gaurav Mehta of Cantor Fitzgerald..

Yes, thanks good morning.

Following up on leasing spread I guess going forward should we be expecting a leasing spread somewhat in line with what you guys are in 3Q?.

I think our expected expectations for leasing spread to next year in the low to mid-single digits, sort of consistent with what we're sort of trends are today..

Okay, and then on the funding of acquisition going forward. I was wondering if you could talk about how you're thinking about selling more assets versus common stock issuance and other sources of funding..

Well I think our expectation of our shareholders and our plans to be responsive to the availability and the capital conditions the time that we need capital.

We've actually move to kind of a relatively lower level on a run rate basis is sort of the lower ranges of our promulgated [ph] leverage levels and so we have a fair amount of runway today, so it's not a decision that we need to make necessarily today even though we announce a lot of acquisition activity expected for the fourth quarter and the first quarter.

But we're still committed towards issuing common stock is our first alternative with the other issuing preferred stock, selling asset, et cetera, but I think that common stocks remains our first alternative, we discussed in the call and our earnings release and been quite under the ATM, which is a pretty efficient way of issuing equity for the benefit of our shareholders and the company..

Okay and then lastly on the build-to-suit take out, I was wondering if could provide more detail of more build-to-suit take out in the market and is that something we should expect from you going forward?.

We’ve always been an active least active and looking to find build-to-suit take out opportunities, I think it will continue to be a portion of our acquisition activity, I'm not sure that I’ll ask Steve answer, it's going to be a bigger portion of our activity and it will continue to be a component albeit a relatively small component of our overall acquisition activity..

Yes, I agree with that, it looks it's ramped up in this part of the first quarter or beginning of next year is still going to be a fairly small piece of our overall acquisition puzzle..

Okay, thank you..

Thank you..

Our next question comes from Joshua Dennerlein of Bank of America Merrill Lynch..

Joshua Dennerlein:.

.:.

Hey Josh, there’s an enough report is always one off items, but in the aggregate it all kind of even all over time. There's nothing in particular in this quarter or in last quarter that really drove the change in expenses, so nothing worthy to note to you..

Okay going forward in fact another drop [indiscernible].

No another drop going forward going forward is unlikely..

Okay thank you..

Our next question is from Michael Mueller of JPMorgan..

Hi, I had a quick follow-up on the build-to-suit question, you just talk a little bit about the economics of it, and how the cap rates you're taking properties out compared to what you're buying in your open market for existing product?.

As we look at our run through our filters for return requirements et cetera. As we look assets we look at the number of things obviously we look at a long term IRRs, we look at long term average cash flow, they look at FFO per share generated by the acquisition.

Obviously a build-to-suite take out as we’ll tend to have a long term lease low capital requirements in the early years which would affect that while the metrics I just discussed. So we can garner returns that are commensurate with sort of a more run of the mill acquisition activity in the build-to-suitor take out area with lower entry cap rates.

So I think what you would expect on general basis that the cap rates on the build-to-suits are going to be what I say lowered they may be 25, 50 basis points lower. But they’re not much lower than what we our average cap rate would be across the portfolio.

And again we will garner the same overall returns to our shareholders over time, because of the fact that it's going to be a very clean and long term cash flow out of those acquisitions..

Okay that was it, thank you..

Thank Mike..

[Operator Instructor] Our next question comes from Barry Oxford of D.A. Davidson..

Great, thanks guys. Getting back to the equity question.

Can you guys do in 2017 enough equity on your ATM to satisfy your needs or would you be looking more possibly at some point 2017 for lack of a better word a full blown offering?.

It’s a question that can only answered by the market as we issue under the ATM, our expectations are given sort of the phase of acquisitions that there may well be a point during the year well we'd executed some kind of follow on offering. But I think that the ATM will certainly be an important component of that issuance..

And one follow-up on that, let's say nobody wants in phase to go down, but let's say that a point that you don't like it, and let's say we'll real estate values are kind of maintaining their value where they are right now.

You could obviously probably get better pricing bringing in a JV partner, how do you guys look at that?.

I think of the opportunities that we have to fund our acquisitions are very accretive acquisitions I’d probably should point out. I think JV remains sort of towards the bottom of alternatives.

I think we have in the past what are common equity price has not been attractive to us, we have used the preferred market to bridge those times, we are in the fourth quarter now selling assets accretively selling assets we’re going to redeploy that capital significantly above where we exit at that small portfolio.

So there are alternatives before we get to the joint venture, the joint venture has surely has its place and sort of the quiver of alternatives, but it certainly not at the top..

Great thanks guys..

Our next question comes from Richard Taylor of Robert W Baird..

Hey, good morning guys. Following up on the last question, if you guys have issued about $7 million shares in 3Q and 4Q on the ATM, how much left you have less than your ATM looking on the capacity of it looking out over 2017..

Yes, we have $20 million left under our existing program, but that's a program that we're going to continue to refresh and keep active as we find it a cost effective tool in raising equity, so it's a program that will be active in for a long time..

Okay, great thanks.

And then touching on acquisitions if you guys do have a record quarter in the fourth quarter here, is there a chance you could overshoot your guidance of $350 million to $450 million of acquisitions for the year?.

What we've announced so far in terms of LOI contract et cetera certainly would give the rise to speculation that will be at the upper end of graph beyond the upper end, so it's not going to be grandly above, but certainly a chance to be at the upper end or slightly beyond that..

Yes, as I said in the prepared remarks we certainly feel like to be at the upper end of our guidance and whether we exceed that will just depend on some of the LOI contract acquisitions and whether those close the end of 2016 or beginning of 2017..

Yes, I might say that we also have in terms of heading into and we're a long way in terms of activity and from being in 2017 we're looking at one of the stronger acquisition quarters from this vantage point it will get better going forward, but one of the stronger quarters stronger first quarters of acquisitions as we've had in our company's history..

Right. Awesome, great thanks guys. Great quarter..

Thanks.

Thanks..

Operator our next question comes from Daniel Donlan of Ladenburg Thalmann..

Hi, it’s actually John [indiscernible]..

Okay, we appreciate you’re being here..

Thanks.

The kind of post the portfolios sale is that fair to assume that kind of all these positions in the near to intermediate term will be more opportunistic in nature?.

I mean we’ve describe that we have three types of dispositions. We have the opportunistic were in our asset is certainly worth more to somebody else then it is to some there may well be some of those in the coming year. We have - I know we have couple situations that we’re looking at they can certainly turn out to that work.

For instance two year lease to an investment grade credit becomes a 15 year lease and maybe that's worth more to somebody else, so those situations will come up we don't expected to be a major part of our capital raising or capital availability I think our disposition guidance is 25 to 40 year something like in that range.

Relatively minimal and we will also continue to do our culling if you look the culling of the herd of selling assets that did not fit our long term portfolio goals.

I don't believe that you will see, but certainly at this point I think you will see us selling another small portfolio as a way of funding our acquisitions going for, it's not in our expectations..

Okay and then just focusing on the culling of the herd, maybe piles assets, I know you guys have talked about flex assets being pretty much and most entirely non-core to your term portfolio as you look to kind of selectively sell these assets, what kind of cap rate do you think you get in those properties and maybe even you can give a number just relative to the rest of the portfolio?.

You know it all depends on the - as we sell them opportunistically, it all depends on what leasing and we're able to do.

It's pretty hard to put a number to that, surely some of these assets will simply be sold in situations or decide to move on will be sold basically for base building the value, so really not a cap rate for more of first quarter split dispossession..

Okay understood. That’s it from me..

Thank you..

We have reached the end of our question-and-answer session. I would now like turn the call back over to management for closing remarks..

Thank you for your questions. We will continue to execute on a business plan to capitalize the persisting investment opportunity in single tenant industrial real estate and the ongoing strength of our portfolio. Our goal is and we’ll continue to be delivering the best-in-class risk adjusted returns to our shareholders.

We appreciate your time this morning and your continued support of STAG..

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