Operator: Greetings. Welcome to the STAG Industrial, Inc. third quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Steve Xiarhos, Vice President, Investor Relations. Thank you, Steve. You may begin.
Steve Xiarhos: Thank you. Welcome to STAG Industrial's conference call covering the third 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 forecasts of core FFO, same store NOI, G&A, acquisition disposition volumes, retention rates, and other guidance, leasing prospects, rent collections, industry and economic trends, and other matters.
Steve Xiarhos: 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.
Bill Crooker: Thank you, Steve. Good morning, everybody, and welcome to the third quarter earnings call for STAG Industrial. We are pleased to have you join us and look forward to discussing the third quarter 2026 results. The third quarter marked the continued improvement in industrial fundamentals with national vacancy rates down since last quarter. Net absorption totaled approximately 75 million square feet nationally, the highest quarterly figure since early 2023, and has now topped 69 million square feet in each of the last two quarters. Through 9 months, the market has absorbed more than 186 million square feet, a pace we have not seen since 2022. Non-coastal markets drove 80% of year-to-date absorption. New construction remains disciplined. While development starts are up, product under construction totals less than 2% of existing inventory, with much of it already committed through pre-leasing or build-to-suit agreements.
Bill Crooker: We are seeing broad-based demand primarily from 3PLs, advanced manufacturing, and data center related tenants. We have now leased 2.5 million square feet to data center related tenants since the start of 2025. This data center related leasing activity accounted for 26% of all of our new operating portfolio leasing during that same period. The table is set for us to see upward pressure on rent growth in many markets as leverage gradually shifts back to the landlord. We expect our market rent growth for next year to be in the range of 2% to 4%, an acceleration as compared to the 1.6% market rent growth expected for 2026. Geographically, the strength has been most pronounced in the markets where STAG is concentrated. Acquisition volume for the third quarter totaled $107.9 million.
Bill Crooker: This consisted of two buildings with cash and straight line cap rates of 6.9% and 7.2% respectively. Subsequent to quarter end, we acquired one building for $55 million at a cash and straight line cap rate of 6.7% and 7.1% respectively. In terms of our development platform, we have seven buildings or 1.8 million square feet of development activity that is not in service as of the end of Q3. These buildings are in various stages of development and have an expected stabilized yield of 7%. We executed two development leases this quarter, totaling 69,000 square feet. The first was a 47,000 square feet lease at our Resource Drive building in Reno, bringing that building to 62% leased. The other was for 21,000 square feet at our Piedmont Commerce Street building in Charlotte, bringing that building to 100% leased. With that, I will turn it over to Matts, who will cover our remaining results and guidance for 2026.
Matts Pinard: Thank you, Bill, and good morning, everyone. Core FFO per share was $0.66 for the quarter, an increase of 1.5% as compared to last year. Net debt to annualized run rate adjusted EBITDA was equal to 5.1x, while liquidity stood at $546 million. During the quarter, we commenced 30 leases across 3.6 million square feet, generating cash and straight line leasing spreads of 23.8% and 35.7% respectively. Retention for the quarter was 90.3%. Same store cash NOI grew 3.5% for the quarter and 3.9% year to date. Year to date same store cash NOI growth of 3.9% includes approximately 30 basis points of benefit related to a single tenant whose rent was unpaid as of the third quarter of 2025 and substantially collected in the fourth quarter of 2025.
Matts Pinard: The benefit reverses in Q4, and we expect full year same store growth within our guidance range, which we revised upwards since our last earnings call. Moving to capital market activity. As discussed on our last call, we did repay the $50 million private placement note B, which matured on 1 July. Also mentioned on our last call in July, we combined our term loans A and F, both of which were set to mature in March 2027 into a single $350 million term loan maturing in January 2032. The swap fixed rate is 3.53% until March 2027 and 4.79% from then on until maturity. We also repriced our revolver and all of our term loans, saving 5 basis points across our bank debt. As of today, the company has total forward equity net proceeds of $70 million available to settle at our discretion.
Matts Pinard: We are pleased to announce that in August of this year, STAG received an investment grade rating from S&P Global Ratings. S&P assigned a rating of BBB to STAG with a stable outlook. The company also maintains an investment grade rating of BBB with a stable outlook from Fitch, and an investment grade rating of Baa2 with a stable outlook from Moody's. Moving to guidance, we have made the following updates. Average same store occupancy guidance has been increased to a range of 96.75% to 97.25%, an increase of 25 basis points at the midpoint. Cash same store growth guidance has also been increased from a range of 3% to 3.5% to a range of 3.5% to 3.75% for the year. This increase is driven by the upward revision of occupancy expectations and lower than expected cash credit loss.
Matts Pinard: We have narrowed the range of expected acquisition volume to a range of $530 million to $600 million. We now expect a stabilized capitalization rate range between 6.3% and 6.4%. G&A guidance has been increased to a range of $56 million to $57 million. These guidance changes result in an increase in corporate flow guidance to a range of $2.64 to $2.66 per share, an increase of 2 cents 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 will now turn the call back over to Bill.
Bill Crooker: Thank you, Matts, and thank you to our team for their continued hard work and achievement towards our 2026 goals. We will finish this year ahead of our initial budgets and are well-positioned going into 2027. With that, I will turn it back to the operator for questions.
Operator: Thank you. We will now be conducting a question and answer session. We ask that each participant limit themselves to one question and one follow-up. If you would like to ask a question, please press star one on your telephone keypad. The confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we pull for questions. Our first question is from Craig Mailman with Citigroup. Please proceed with your question.
Craig Mailman: Good morning, guys. Bill, I appreciate your comment on your market rent growth expectation for 2027. Apologies if I missed this, but did you discuss where you think rent spreads are coming in and maybe give us an update on progress on 2027 expirations to date? I know you used to give this metric in the press release.
Bill Crooker: Hey, Craig. We did not include that, but I can give an update now. We are about 40% through our 2027 leasing plan. Those spreads on the 40% were 12% cash rollover spreads. The one nuance there is almost all of our fixed renewal options are in that 40%. So when you take those out, the spreads on that 40% was 17.5%. We expect leasing spreads next year to be around 15%.
Craig Mailman: Okay, that is helpful. I know you guys, I am asking for 2027, now I am going to get greedy and ask for 2028, but a lot of the questions I am getting are just you guys and some of your peers have talked about the sort of mid to high teen spread for next year. Can you just walk us through the math or how we should think about maybe a normalized rate of decel or where like 2028, 2029 could be from a rent spread perspective on a cash basis and just kind of walk us through the math and what that could look like?
Bill Crooker: Yeah. I mean, do you want to go out to 2030 and 2031 too, or no?
Craig Mailman: Hey, listen, if your crystal ball is that good, go for it.
Bill Crooker: No, I understand the question. The way we look at it, with moderate market rent growth, we are probably in the low double digits to mid double digits of leasing spreads as you kind of move out to 2028 and 2029. I would not say it bottoms out in 2027, but it should be pretty steady from here on out.
Craig Mailman: Perfect. Thank you.
Bill Crooker: You are welcome.
Operator: Our next question is from Nick Thillman with Baird. Please proceed with your question.
Nick Thillman: Hey, good morning, guys. Maybe wanted to comment or get your thoughts on the updated deployment strategy. Obviously, the board is authorizing the buyback here. As you look across acquisitions with the interest rate rises, are you seeing more opportunities there, or do you see opportunity on the buyback? I guess weighing all the buckets you can pick at, where are you seeing the best opportunity to deploy capital today?
Bill Crooker: Yeah, it is interesting, Nick. It changes. The good thing is the buyback, it is another tool in our toolkit here. So when that is the best use of capital, we will deploy it to that. And if we can find stabilized acquisitions at higher yields that we like those assets in those markets, we will deploy it there. And historically, or at least in the past year, 2 years, we have seen is developments has been our best opportunity to deploy capital. Right now, those developments are yielding 7% plus, and build-to-suit is a little bit inside of that. As you saw, we were able to pick off some nice acquisitions in this quarter. I think those came in at about a 6.9 cap rate. So we will look across all those opportunities, and frankly, if none of them are what we view as a good opportunity to deploy capital, then we will not do any of it. We have done a good job of allocating capital in the past, and this just gives us another tool to use if we see that as the best opportunity.
Nick Thillman: Then maybe for my follow-up, just on the overall development leasing and the progress you are seeing at some of your projects. I believe you guys underwrite 12 months post-completion for lease-up for a lot of these projects. Maybe just some of the bigger ones, how discussions have progressed on that front, and where the overall tenant mix and how far along we are within the pipeline on executed deals.
Bill Crooker: Yeah, I can pass it over to Steve to walk through the details there. I will say our disclosure have developments that we have placed in service that are well within the 12-month lease-up. I think that is something that needs to be factored into when you look at the progress on developments.
Steve Kimball: Yeah. Thanks, Bill, and thanks, Nick. Probably get a few questions on the development side, so let me frame it a little bit first. This is becoming a core part of our business with over $100 million annual starts. We expect that to trend up as we go forward. If you are looking at page 10 and 11 of the supplemental, we are tracking over $500 million of investment in 16 buildings. We have spread that out across 11 markets, and with 20% plus in the build-to-suit category. As you two were just mentioning, we do underwrite 12 months of downtime for the spec construction. I think that is why Bill directed you to the couple of deals that we have stabilized and put into service as of 30 September, and those two are obviously 100% occupied.
Steve Kimball: If you put those together with the assets that we are working on right now that are complete but not in service, that would bring that occupancy number up a little higher to like 37%. On the 1.8 million as a total that we have active projects to work on, let me just walk you through them quickly. In the under construction side, because I think there is some good news there. We are in Kansas City with 188,000 square foot deal. That is a 4% vacancy market, and we have had excellent activity on that, Nick. So we feel very good about that project. Dallas, that is a build-to-suit for 343,000 square feet. Construction is on time, and we expect that delivery to be smooth. The third project is Phoenix, and we are only breaking ground in Phoenix right now and just starting that construction.
Steve Kimball: It is 184,000 square foot project in West Chandler, which is just off the I-10. The Phoenix dynamics of that market continue to improve with vacancies moving down closer to 9%. They were a little bit higher prior to that. So there is a lot of activity in Phoenix, and we feel really good about those projects. So the under construction bucket, 48% leased. There are 2027 deliveries, and we think we will lease up and feel comfortable with that 12 months of downtime. When you move to the more highlighted section, the complete not in service, we are really looking at three markets. I think the first property that is listed there, Resource Drive, we only have 28,000 square foot left to lease there. That is currently being demised with office built out, and we expect that will be leased up pretty quickly.
Steve Kimball: You move down to Reno, the Mount Anderson building, the 284,000. Candidly, that is the one project that probably sticks out that has the most leasing risk right now. The Reno market, when it comes to pure distribution fulfillment uses and the sub-market we are in, North Valleys, has been slower. The good news there is the trend is that vacancy is coming down. Absorption picked back up in Q4 2025 and has been consistently positive. We do have some leasing challenges in the Reno North Valleys market as the traditional fulfillment logistics users have not pushed back out to Reno. So we do have activity there. We have had activity since we delivered it. We just have not landed those deals as they tend to be multi-market opportunities, and there is a lot of competition. Moving down to Charlotte.
Steve Kimball: Charlotte is on the list here, but remember, that was a two-building development. The first building leased within seven months. We did four leases in that building, just systematically leased it up. We are very active on the building that shows here, the 200,000. Those leases you can expect will come in at 40,000 to 50,000 square foot leases, and I would expect we will have three or four leases to lease up that final building. When you put the two buildings together, we should average 12 or 13 months of downtime to stabilization.
Steve Kimball: Feeling good about that market and the progress that we have in Charlotte. The large project that really jumps off the page is our 500,000 square footer in Louisville. Again, a very healthy market, a 5.9% vacancy. We are in the right park, we are in the right sub-market, and there has been a lot of very positive activity in that market with some of the competing buildings being taken down, and we are active as well with prospects for that building. In general, we feel pretty good about the complete not in-service portfolio.
Nick Thillman: No, that is very thorough, and I appreciate the time, guys. Thank you.
Steve Kimball: You are welcome.
Operator: Our next question is from Dave Rodgers with Raymond James. Please proceed with your question.
Dave Rodgers: Yeah. Hey, good morning, guys. Wanted to ask about the step up in earnings from Q3 to Q4. It is a pretty strong increase sequentially for this late in the year. Was leasing just well ahead of expectations? Is the business just performing better than anticipated? Then you mentioned the same store kind of split between Q3 and Q4. Can you quantify kind of what that looks like from the tenant last year?
Matts Pinard: Yeah, absolutely. Hey, Dave. Good morning. It is Matts. You are right. If you were to take a look at the midpoint of our guidance, we would expect to step up in core FFO for the fourth quarter. One of the drivers is the fact that what we acquired this quarter occurred literally in the last week of September, so you can get a full quarter of economics on those 6.9% cap rate deals. Then the same store, right? We increased occupancy, credit losses are trending much better than we had initially projected in February. We did moderate our expectation of credit loss on the last call, and we continue to outperform there. Those are the two biggest drivers. Was there a second part to your question?
Dave Rodgers: You had mentioned that there was a same store NOI kind of impact from the tenant last year. I did not know if that was going to be a bigger impact or what that looks like from a quantification standpoint.
Matts Pinard: Yeah, absolutely. The simple answer is, cash same store is 3.9% year to date. If you adjust the timing, which I will walk into in a second, that 3.9% would be 3.6%. Just to kind of back up and reframe what occurred. A tenant last year in the third quarter was affiliated with the First Brands bankruptcy. We moved them to cash basis. There was kind of a disruption in communication. They are domiciled in Europe. They did not pay rent in the third quarter. They fully paid the third quarter rent and the current rent in the fourth quarter, so no payment in the third quarter, double payment in the fourth quarter. Again, on a calendar year basis, no impact, but on a quarter to quarter, Q3 artificially high due to the favorable comp, and it would reverse in the fourth quarter.
Matts Pinard: I think really the story here, Dave, is our 3.9% year to date. If you account for this timing mismatch in 2025, 3.9% is 3.6%, which is in basically the midpoint of our updated guidance. Did that clearly answer that question?
Dave Rodgers: Yeah, I got that. Thank you. That's helpful. Then just as a follow-up, I think Nick asked a good capital allocation question earlier. But I'm curious if you changed that math instead of just saying, "Where do we put money?" But, "Where can we raise money?" Have you guys kind of looked at the convert market or something to maybe lower initial borrowing costs, take advantage of the backup in cap rate? That convert market probably lets you issue equity in the low to mid 40s, which is above the 39 where you seem comfortable. So curious if maybe changing that equation of how do we raise money maybe more accretively today to take advantage of this backup in cap rates because this could help you drive growth even more. Is that something you're thinking about?
Matts Pinard: Yeah, Dave, we evaluate everything. We're obviously very familiar with the convert market. The good news is, look, we have a revolver balance of $500 million. We have $70 million of unfunded equity. We retain $130 million of cash after dividends paid. So we don't really need additional capital right now. We would raise capital in the sense that we saw opportunity to deploy it, but where we are right now with where our balance sheet is, our liquidity, and our retained cash flow, we're in a very comfortable spot capital-wise.
Dave Rodgers: All right, thanks, guys.
Operator: Our next question is from Michael Griffin with Evercore ISI. Please proceed with your question.
Michael Griffin: Great, thanks. Maybe just starting on the acquisitions environment. I saw the cap rate guidance ticked up marginally. I imagine that was largely due to the acquisitions in Q3. But have you gotten a sense if you've seen any repricing or retrading on deals, just given the volatility in interest rates recently? Curious if buyer or seller expectations have moved, have bid-ask spreads widened? Any additional color there would be helpful.
Mike Chase: Yeah. Hey, Michael, this is Mike Chase. Appreciate the question. It takes a little while for the volatility to push through the market, but there has been some indications of buyer retrades and general repricing on deals that are coming to market. The movement in cap rates will take a little bit to flush through the system, but I would say so far, I would say it is probably somewhere in the 25 to 30 basis points based on kind of the retrades we have heard about. Some of those retrades are happening, and some of the sellers are saying no and either waiting to see what happens with the capital markets and the kind of market volatility or buyers are pushing through. So we have seen a few retrades here and there or been hearing about them.
Matts Pinard: Yeah, we expect it to stabilize, all else being equal, 25 to 35 basis points higher than what it was this year. The reason for the lag generally is 1031 buyers hold up pricing for a little bit. That usually, as Mike was saying, flushes through within 3 to 6 months. With respect to our guidance, yeah, really our guidance was moved and represents very little acquisition activity for the rest of the year, just due to the uncertain capital markets environment.
Michael Griffin: Thanks. I certainly appreciate the context there. Bill, just going back to your comments in the prepared remarks about continued improvement in industrial fundamentals. As you talk to your big customers, your big tenants out there, what are they saying is the reason for this increased demand? Is there more certainty in their business, and do they just feel more confident about the macro outlook and the need to lease space? If you could add anything, whether proposal activity, decision timelines have shrunk, some commentary around that would be great, too.
Bill Crooker: Yeah. What we are hearing, and there are a couple of demand drivers, and this has been pretty consistent for the past six, 12 months, and even further, I guess, is our large sophisticated tenants, global tenants have said they have wanted to diversify supply chains for years, and that dates back to port strikes and water levels in the Panama Canal. For a number of reasons, diversification of supply chains is important for the business because the disruption is very costly to them. So that takes years and years to implement, and part of that is onshoring manufacturing. It is bringing goods into the US through other ports. It is nearshoring. So that is a demand driver we are seeing. We are also seeing, for a couple of years there was a lack of demand, I would say.
Bill Crooker: A couple of years were the lowest level of demand we have seen in industrial in a decade. That created some pent-up demand, and so those tenants are in the market and active. So I think there is confidence in their businesses. Obviously, oil prices are driving some issues with the economy, and driving inflation. But overall, business activity remains really strong, and that is a big driver of demand. With respect to, call it lease gestation periods, those have shortened. Certainly, in markets where vacancy has dropped. One of our bigger markets is probably more unique to us, Greenville-Spartanburg. There are some buildings there that are over 300,000 square feet, Class A facilities beginning at 25. There was double-digit vacancies. That is close to zero now. So that is a market where if tenants are looking for space, they are acting really quickly to take it down because they are going to lose it. When you have urgency in markets, when you have vacancy rates coming down, that shortens the lease gestation periods.
Michael Griffin: Great. That's it for me. Thanks for the time.
Bill Crooker: Thank you.
Operator: Our next question is from Jason Belcher with Wells Fargo. Please proceed with your question.
Jason Belcher: Yeah, hi, good morning. Matts, just thinking about the ratings upgrade from S&P in August. Can you touch on how that might change the calculus on tapping the public unsecured market and maybe tell us where you think you could price a 10-year offering today?
Matts Pinard: Yeah, absolutely. This is our inaugural rating, actually, from S&P. Previously, we had Moody's and Fitch. Fitch at BBB, stable. Moody's at Baa2 stable. Then we originated S&P rating at BBB stable. To your point, that was what we felt was a gating item to enter the public bond market. We were looking at the market earlier this year. The capital markets world changed. Capital deployment has slowed. Like I explained to Dave Rodgers, we do not really have a need for long-term debt capital at this point. Again, with $500 million plus liquidity in the unfunded forward, plus the retained earnings. To directly answer your question, if we were to go to the public bond market, we would likely look at the five-year tenor. If we looked at the five-year tenor, spreads are anywhere between 100 and 110 over.
Matts Pinard: If we were to look at the 10-year, add an additional 20 basis points to that credit spread. To kind of sum that up, the all-in coupon rate on a five-year public bond with our three ratings would be a little below 6% and closer to 6.25%, 6.4% in the 10-year. Again, to reiterate, we are not actively looking at that market. We do not have a need for long-term debt capital right now.
Jason Belcher: Understood. Thank you. Just if you could give us an update on your tenant credit profile, if there are any tenant industries that are giving you more concern than others currently, and maybe how that is trended over the past couple of quarters.
Matts Pinard: Yeah, absolutely. Happy to report I really do not have a change to answer this question from 90 days ago. Tenants come on or come off, et cetera, but the theme really is it is not necessarily sector or business line, it is smaller businesses with higher leverage in low margin businesses. Think furnitures, for example. We have incurred 12 basis points of credit loss through the Q3. We started the year at a 50 basis point expectation. We lowered that last quarter when we spoke in July. The outperformance of credit loss, which is a weird way to say it, but doing better than what we expected is one of the primary drivers of the increase of our same store guidance this quarter.
Jason Belcher: Great. Thanks a lot.
Operator: Our next question is from Eric Borden with BMO Capital Markets. Please proceed with your question.
Eric Borden: Great. Thanks everyone. Thanks for taking my question. Not getting too far ahead of 2027 guidance, but could you just help us think about the building blocks for cash same store outside of contractual rent bumps and the leasing spreads that you previously discussed? Is there anything meaningful from a free rent burn or the timing of cash commencements that we should keep in mind?
Bill Crooker: No, nothing from a free rent perspective. When you think about the building blocks, as you noted, it is contractual escalators, which are around 3%. We got leasing spreads, which as I noted, we are targeting around 15% for next year. Occupancy is a material driver. We had some occupancy loss this year. I think we have explained it numerous times, but just assume flat occupancy for next year, and then we bake in 50 basis points of credit loss. So you can back of the envelope that, and you are going to be close to the mid-single digits, circa 5%.
Eric Borden: Great. Then just on the fixed renewal options, how much of the portfolio still has those embedded, and how is that exposure trended over time? As you negotiate leases today, are you generally able to move away from those fixed options or are tenants still asking for them?
Bill Crooker: Those are not in any of our form leases. When we sign new leases, those are not in there. When you acquire a lease, you acquire a building subject to a lease, you acquire the lease, and sometimes those are in there and sometimes it takes a couple of renewals to get through those fixed renewal options. It is 2%, 3% of our portfolio, maybe even 5%, but I think the impact on leasing spreads every year has been consistent the last three years. So, we try not to back them out of our numbers. They are part of our numbers. The good thing is you are just kicking the can down the road with respect to the rollover rents for those. So, we will get at those market rents at some point. But year-over-year, it is not really an impact to same store.
Eric Borden: All right. Thank you very much.
Operator: Our next question is from Henry Newell with RBC Capital Markets. Please proceed with your question.
Henry Newell: For Michael Carroll this morning. Thank you for taking my question. Just wanted to move back to the acquisition pipeline for another moment. It is a pretty big pipeline. Can you quantify really what portion of this pipeline is maybe in the later stages of negotiation, and would we expect acquisitions to increase in Q4 and moving into 2027?
Bill Crooker: Well, the pipeline, our pipeline may be different than others. The way we define it is deals that we are evaluating, have underwritten, maybe they are back on the market, maybe we are talking about them internally. They are at various stages. So it is a pretty healthy number, but those are all the deals we are evaluating in the market. Some of those deals, the pricing is too rich for us, but we hang around the hoop, and if the pricing changes, then we will be there. So for us, when you look at that pipeline, historically, our hit rate on that pipeline is really low. So when I think about acquisition guidance for the year, we updated that. We spent a lot of time on it. It is not really factoring in many additional acquisitions this year just due to the uncertain macro environment. With respect to next year, we will evaluate the opportunity.
Bill Crooker: We will evaluate our capital, and we will buy what makes sense based on our free cash flow and our liquidity, and that is the calculus we use for next year's acquisitions, and frankly, every year acquisitions. So it is hard to pinpoint a number at this point.
Henry Newell: Great. I appreciate that context. Then just on the demand side of things, in Q3 and Q4 to date, are you guys continuing to see a lot of really data center adjacent demand, and are you seeing this emerge more or less in any specific markets?
Bill Crooker: The markets where we are seeing it is where the data centers are, right? You are seeing them in the Midwest and the Southeast and Texas, and frankly, we have had some really good success on leasing to data center related tenants. There has been a lot more leasing that frankly just has not made it into our portfolio because we have buildings in those markets that are occupied. When you look at 2025, last year, I think it accounted for almost 20% of our new leasing. In year to date 2026, it is about 30% of our new leasing. The good thing is these are long-term leases. The weighted average lease term is between 6 and 7 years. Really good credits. These leases are supporting the ongoing operations of data centers.
Bill Crooker: But I do want to note what is important here is that these buildings were already built, were in these markets, and were there to service other demand drivers within these markets. This is just another incremental demand driver in these markets. So a lot of these buildings were leased to either regional distributors or servicing the local economy, servicing a plant nearby. So our buildings in these markets were there for other reasons. This is just an incremental demand driver.
Henry Newell: Wonderful. Thank you, and congrats on another strong report.
Bill Crooker: Thank you.
Operator: Our next question is from Jessica Zheng with Green Street. Please proceed with your question.
Jessica Zheng: Hi, good morning. In the last earnings call, you mentioned El Paso as one of your weaker markets in terms of market rent growth. Can you just walk us through your thesis on the El Paso acquisition in this quarter?
Bill Crooker: Yeah, we like El Paso. We like the long-term fundamentals in that market. The El Paso acquisition had a little over 5 years of lease term. It is right near the bridge where a lot of the demand is in El Paso, especially cross-border demand. For us, El Paso is going to, we think, have some short-term struggles, but long-term, we really like the market. So that was the thesis behind that acquisition.
Jessica Zheng: Great. Thank you. Additionally, curious what drove the increase in the G&A guidance this quarter?
Bill Crooker: Absolutely. The midpoint of G&A increased $2 million with our updated guidance. It is not one item, it is a collection of items. It includes internal employee adjustments. We have some new hires. Every year we have normal course annual service provider fee increases, true-up of the short-term incentive program. It is not one thing, it is a collection of things, but added together, we did increase our G&A guidance.
Jessica Zheng: Okay, that is very helpful. Thank you.
Operator: Our next question is from Sydney McEntee with JPMorgan Chase. Please proceed with your question.
Sydney McEntee: Hi, guys. In your opening remarks, you mentioned expecting rent growth in the 2% to 4% range next year. Can you just talk a little bit specifically on any green shoots you are seeing in any of your markets in particular that might be making you feel better about market rent growth?
Bill Crooker: Yeah, we operate in a lot of markets, so it is hard to go market by market. But because it is one of our top markets, I will go back to the Greenville-Spartanburg. Even market occupancy last year, I think, the vacancy rates were in the double digits. It is probably mid-single digits now, and depending on the product type, it is lower, right? I think I mentioned over 300,000 Class A is close to 0%. So when you look at market rent growth, you also then have to further look at product type and what assets are in those markets. You look at Columbus, great success in that market. A lot of big box leasing. It is a big box market. So you are getting really strong market rent growth for big box distribution assets in that market. If you have got a smaller box asset there, your market rent growth is probably not as strong.
Bill Crooker: We take a market-by-market look, layer on our view of our assets in those markets, and that is where we come up with our market rent growth of 2% to 4%. This year we had 0% to 2% market rent growth, and I think we are at 1.6% year to date. So trending on the higher end of that range in our portfolio, and we will see how 2027 shakes out, but we feel really good about the fundamentals and how our assets fit in those markets.
Sydney McEntee: Okay, great. Then maybe as a follow-up to the acquisition talk earlier, could this rate volatility in the macro environment in the acquisition market currently maybe create an opportunity to acquire assets from smaller developers who might be facing higher financing costs or watch list exposures now?
Bill Crooker: Absolutely. This is part of our business, and we were able to find some great opportunities in Q3. You turn the clock back 6 months, we are not able to acquire those assets for 6, 9, right? I think one of them, we just talked about the El Paso asset. I think there is some noise there with the short-term fundamentals in that market. But long term, we really like the market, and we have got a 5-year lease to a good credit. So we will be able to get through the short-term market issues there, and we got it at a really strong cap rate.
Sydney McEntee: Thanks
Bill Crooker: There will be opportunities, and we will look at them, and hopefully we will be able to take advantage of them.
Operator: There are no further questions at this time. I would like to turn the floor back over to Bill Crooker for closing comments.
Bill Crooker: Thanks, everybody, for joining the call, and thank you for the questions, and we look forward to seeing you soon at the upcoming conferences.
Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
