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Section 1: 8-K (8-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549



FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): April 30, 2019

STAG INDUSTRIAL, INC.
(Exact name of registrant as specified in its charter)

Maryland
 
1-34907
 
27-3099608
(State or Other Jurisdiction
 
(Commission
 
(IRS Employer
of Incorporation)
 
File Number)
 
Identification No.)

One Federal Street, 23rd Floor
Boston, Massachusetts 02110
(Address of principal executive offices, zip code)

Registrant’s telephone number, including area code: (617) 574-4777

Not applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities and Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨







ITEM 2.02.     RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On April 30, 2019, STAG Industrial, Inc. (the “Company”) issued a press release announcing its results of operations for the three months ended March 31, 2019, and its financial condition as of March 31, 2019. A copy of such press release is furnished as Exhibit 99.1 to this report. The press release referred to certain supplemental information that is available in the Investor Relations section of the Company’s website at www.stagindustrial.com.

As previously announced and as further detailed in the press release furnished with this report, the Company will conduct a conference call at 10:00 a.m. eastern time on Wednesday, May 1, 2019, to discuss its first quarter results of operations and financial condition.

The information in Item 2.02 of this report, including the information in the press release attached as Exhibit 99.1 to this report, is furnished pursuant to Item 2.02 of Form 8-K and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. Furthermore, the information in Item 2.02 of this report, including the information in the press release attached as Exhibit 99.1 to this report, shall not be deemed to be incorporated by reference in the filings of the registrant under the Securities Act of 1933, as amended.

ITEM 9.01.     FINANCIAL STATEMENTS AND EXHIBITS

(d) Exhibits.
Exhibit Number
 
Description
99.1
 






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.



 
STAG INDUSTRIAL, INC.
 
 
 
 
 
By:
/s/ Jeffrey M. Sullivan
 
 
Jeffrey M. Sullivan
 
 
Executive Vice President, General Counsel
 
 
And Secretary
 
 
Dated: April 30, 2019
 






(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


397733785_staglogoa031a05.jpg
 
STAG INDUSTRIAL ANNOUNCES FIRST QUARTER
2019 RESULTS
 
Boston, MA — April 30, 2019 - STAG Industrial, Inc. (the “Company”) (NYSE:STAG), today announced its financial and operating results for the quarter ended March 31, 2019.
 
“It has been an active start to 2019 for STAG” said Ben Butcher, Chief Executive Officer of the Company. “The Company achieved a record first quarter acquisition volume and produced strong same-store cash NOI growth and cash releasing spreads. This combined with a successful equity transaction has set STAG up for continued success in 2019.”

First Quarter 2019 Highlights

Reported $0.05 of net income per basic and diluted common share for the first quarter of 2019, as compared to $0.22 of net income per basic and diluted common share for the first quarter of 2018. Reported $5.8 million of net income attributable to common stockholders for the first quarter of 2019 compared to net income attributable to common stockholders of $21.7 million for the first quarter of 2018.

Achieved $0.45 of Core FFO per diluted share for the first quarter of 2019, an increase of 4.7% compared to the first quarter of 2018 of $0.43. Generated Core FFO of $53.2 million for the first quarter of 2019 compared to $43.8 million for the first quarter of 2018, an increase of 21.4%.
 
Generated Cash NOI of $74.9 million for the first quarter of 2019, an increase of 16.7% compared to the first quarter of 2018 of $64.2 million.
 
Acquired 10 buildings in the first quarter of 2019, consisting of 2.4 million square feet, for $185.4 million with a weighted average Capitalization Rate of 6.6%.
 
Sold five buildings in the first quarter of 2019, consisting of 1.0 million square feet for $17.9 million, resulting in a net gain of $1.3 million.

Achieved an Occupancy Rate of 95.2% on the total portfolio and 95.7% on the Operating Portfolio as of March 31, 2019.
 
Commenced Operating Portfolio leases of 2.6 million square feet for the first quarter of 2019, resulting in a Cash Rent Change and Straight-line Rent Change of 14.9% and 24.3%, respectively.
 
Experienced 80.7% Retention for 3.1 million square feet of leases expiring in the quarter.

Produced Same Store cash NOI growth of 3.5% for the first quarter of 2019 compared to the first quarter of 2018.

Raised gross proceeds of $150.2 million of equity through the Company's at-the-market offering ("ATM") program for the first quarter of 2019.

Subsequent to quarter end on April 4, 2019, the Company closed a public offering with gross proceeds of $218.7 million, inclusive of underwriters' option to purchase additional shares.

Please refer to the Non-GAAP Financial Measures and Other Definitions section at the end of this release for definitions of capitalized terms used in this release.
 
The Company will host a conference call tomorrow, May 1, 2019 at 10:00 a.m. (Eastern Time), to discuss the quarter’s results and provide information about acquisitions, operations, capital markets and corporate activities. Details of the call can be found at the end of this release.

1



Key Financial Measures
 
FIRST QUARTER 2019 KEY FINANCIAL MEASURES
 
 
Three months ended March 31,
 
 
 
Metrics
 
2019
 
2018
 
% Change
 
(in $000s, except per share data)
 
 
 
 
 
 

 
Net income attributable to common stockholders
 
$5,807
 
$21,676
 
(73.2
)%
 
Net income per common share — basic
 
$0.05
 
$0.22
 
(77.3
)%
 
Net income per common share — diluted
 
$0.05
 
$0.22
 
(77.3
)%
 
Cash NOI
 
$74,929
 
$64,210
 
16.7
 %
 
Same Store Cash NOI (1)
 
$61,291
 
$59,227
 
3.5
 %
 
Adjusted EBITDAre
 
$67,637
 
$57,391
 
17.9
 %
 
Core FFO
 
$53,187
 
$43,828
 
21.4
 %
 
Core FFO per share / unit — basic
 
$0.45
 
$0.43
 
4.7
 %
 
Core FFO per share / unit — diluted
 
$0.45
 
$0.43
 
4.7
 %
 
 (1) The Same Store pool accounted for 80.8% of the total portfolio square footage for the three months ended March 31, 2019.

Definitions of the above-mentioned non-GAAP financial measures, together with reconciliations to net income (loss) in accordance with GAAP, appear at the end of this release. Please also see the Company’s supplemental information package for additional disclosure.
Acquisition and Disposition Activity

For the three months ended March 31, 2019, the Company acquired 10 buildings for $185.4 million with an Occupancy Rate of 85.2% upon acquisition. The chart below details the acquisition activity for the quarter:

FIRST QUARTER 2019 ACQUISITION ACTIVITY
Market
Date Acquired
Square Feet
Buildings
Purchase Price ($000s)
W.A. Lease Term (Years)
Capitalization Rate
Cincinnati/Dayton, OH
1/24/2019
176,000
1
$9,965
4.3
 
Pittsburgh, PA
2/21/2019
455,000
1
28,676
9.9
 
Boston, MA (1)
2/21/2019
349,870
1
26,483
 
Minneapolis/St Paul, MN
2/28/2019
248,816
1
21,955
9.9
 
Greenville/Spartanburg, SC
3/7/2019
331,845
1
24,536
4.9
 
Philadelphia, PA
3/7/2019
148,300
1
10,546
5.2
 
Omaha/Coucil Bluffs, NE-IA
3/11/2019
237,632
1
20,005
6.8
 
Houston, TX (1)
3/28/2019
132,000
1
17,307
7.8
 
Baltimore, MD
3/28/2019
167,410
1
13,648
3.6
 
Houston, TX
3/28/2019
116,750
1
12,242
13.9
 
Total / weighted average
 
2,363,623
10
$185,363
7.4
6.6%
  (1) Value Add Acquisition

The chart below details the 2019 acquisition activity and Pipeline through April 30, 2019:

2019 ACQUISITION ACTIVITY AND PIPELINE DETAIL
 
Square Feet
Buildings
Purchase Price ($000s)
W.A. Lease Term (Years)
Capitalization Rate
Q1
2,363,623
10
$185,363
7.4
6.6%
 
 
 
 
 
 
As of April 30, 2019
 
 
 
 
 
Subsequent to quarter-end acquisitions
1.4 million
7
$102,644
 
 
 
 
 
 
 
 
Pipeline
38.1 million
162
$2.7 billion
 
 



2



The chart below details the disposition activity for the three months ended March 31, 2019:

2019 DISPOSITION ACTIVITY
 
Square Feet
Buildings
Sale Price ($000s)
Q1
973,305
5
$17,939
Total
973,305
5
$17,939

Operating Portfolio Leasing Activity
 
The chart below details the leasing activity for leases commenced during the three months ended March 31, 2019:
 
FIRST QUARTER 2019 LEASING ACTIVITY
Lease Type
Square Feet
W.A. Lease Term (Years)
Cash
Base Rent
$/SF
SL Base Rent
$/SF
Lease
Commissions
$/SF
Tenant Improvements $/SF
Cash Rent Change 
SL Rent Change
Retention
 
New leases
123,190
6.5
$4.15
$4.32
$1.65
$0.32
3.5%
17.1%
N/A
 
Renewal Leases
2,468,163
4.1
$3.94
$4.10
$0.37
$0.21
15.6%
24.7%
80.7%
 
Total / weighted average
2,591,353
4.2
$3.95
$4.11
$0.43
$0.21
14.9%
24.3%
 
 
Note: The table above represents leases commencing during the quarter.

Liquidity and Capital Market Activity
 
As of March 31, 2019, net debt to annualized Run Rate Adjusted EBITDAre was 4.8x.

The chart below details the ATM program activity for the three months ended March 31, 2019:

2019 ATM ACTIVITY 
ATM
Shares Issued
Price per Share (Weighted Avg)
Gross Proceeds
($000s)
Net Proceeds
($000s)
Q1
5,441,409
$27.60
$150,189
$148,887
Total / weighted average
5,441,409
$27.60
$150,189
$148,887

Subsequent to quarter end on April 1, 2019, the Company closed a public offering of 7,475,000 shares, inclusive of underwriters' option to purchase additional shares at a price of $29.25 per share. The Company raised gross proceeds of $218.7 million and net proceeds of $214.7 million.

Conference Call
 
The Company will host a conference call tomorrow, Wednesday, May 1, at 10:00 a.m. (Eastern Time) to discuss the quarter’s results.  The call can be accessed live over the phone toll-free by dialing (877) 407-4018, or for international callers, (201) 689-8471.  A replay will be available shortly after the call and can be accessed by dialing (844) 512-2921, or for international callers, (412) 317-6671.  The passcode for the replay is 13689330.
 
Interested parties may also listen to a simultaneous webcast of the conference call by visiting the Investor Relations section of the Company’s website at www.stagindustrial.com, or by clicking on the following link:
 
http://ir.stagindustrial.com/QuarterlyResults

Supplemental Schedule
 
The Company has provided a supplemental information package to provide additional disclosure and financial information on its website (www.stagindustrial.com) under the “Quarterly Results” tab in the Investor Relations section.
 
Additional information is also available on the Company’s website at www.stagindustrial.com.

3








CONSOLIDATED BALANCE SHEETS
STAG Industrial, Inc.
(unaudited, in thousands, except share data) 
 
March 31, 2019
 
December 31, 2018
Assets
 
 
 
Rental Property:
 
 
 
Land
$
377,530

 
$
364,023

Buildings and improvements, net of accumulated depreciation of $321,010 and $316,930, respectively
2,392,547

 
2,285,663

Deferred leasing intangibles, net of accumulated amortization of $224,740 and $246,502, respectively
348,439

 
342,015

Total rental property, net
3,118,516

 
2,991,701

Cash and cash equivalents
7,857

 
7,968

Restricted cash
4,451

 
14,574

Tenant accounts receivable
44,928

 
42,236

Prepaid expenses and other assets
42,503

 
36,902

Interest rate swaps
5,214

 
9,151

Operating lease right-of-use assets
16,005

 

Total assets
$
3,239,474

 
$
3,102,532

Liabilities and Equity
 
 
 
Liabilities:
 
 
 
Unsecured credit facility
$
115,500

 
$
100,500

Unsecured term loans, net
596,642

 
596,360

Unsecured notes, net
572,587

 
572,488

Mortgage notes, net
56,109

 
56,560

Accounts payable, accrued expenses and other liabilities
41,381

 
45,507

Interest rate swaps
7,060

 
4,011

Tenant prepaid rent and security deposits
21,254

 
22,153

Dividends and distributions payable
15,846

 
13,754

Deferred leasing intangibles, net of accumulated amortization of $10,394 and $12,764, respectively
20,468

 
21,567

Operating lease liabilities
17,786

 

Total liabilities
1,464,633

 
1,432,900

Equity:
 
 
 
Preferred stock, par value $0.01 per share, 15,000,000 shares authorized,
 
 
 
Series C, 3,000,000 shares (liquidation preference of $25.00 per share) issued and outstanding at March 31, 2019 and December 31, 2018
75,000

 
75,000

Common stock, par value $0.01 per share, 150,000,000 shares authorized, 118,174,102 and 112,165,786 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively
1,182

 
1,122

Additional paid-in capital
2,266,695

 
2,118,179

Cumulative dividends in excess of earnings
(621,225
)
 
(584,979
)
Accumulated other comprehensive income (loss)
(2,253
)
 
4,481

Total stockholders’ equity
1,719,399

 
1,613,803

Noncontrolling interest
55,442

 
55,829

Total equity
1,774,841

 
1,669,632

Total liabilities and equity
$
3,239,474

 
$
3,102,532

 
 
 
 


4



CONSOLIDATED STATEMENTS OF OPERATIONS
STAG Industrial, Inc.
(unaudited, in thousands, except per share data)
 
Three months ended March 31,
 
2019
 
2018
Revenue
    

 
    

Rental income
$
95,615

 
$
83,127

Other income
87

 
156

Total revenue
95,702

 
83,283

Expenses
 

 
 

Property
19,511

 
17,499

General and administrative
9,212

 
8,748

Depreciation and amortization
42,303

 
39,965

Loss on impairments
5,344

 
2,934

Other expenses
399

 
291

Total expenses
76,769

 
69,437

Other income (expense)
 

 
 

Interest and other income
16

 
6

Interest expense
(12,834
)
 
(11,392
)
Gain on the sales of rental property, net
1,274

 
22,689

Total other income (expense)
(11,544
)
 
11,303

Net income
$
7,389

 
$
25,149

Less: income attributable to noncontrolling interest after preferred stock dividends
214

 
954

Net income attributable to STAG Industrial, Inc.
$
7,175

 
$
24,195

Less: preferred stock dividends
1,289

 
2,448

Less: amount allocated to participating securities
79

 
71

Net income attributable to common stockholders
$
5,807

 
$
21,676

Weighted average common shares outstanding — basic
114,721

 
97,021

Weighted average common shares outstanding — diluted
114,993

 
97,323

Net income per share — basic and diluted
 

 
 

Net income per share attributable to common stockholders — basic
$
0.05

 
$
0.22

Net income per share attributable to common stockholders — diluted
$
0.05

 
$
0.22

 
 
 
 


5



RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES
STAG Industrial, Inc.
(unaudited, in thousands) 
 
Three months ended March 31,
 
2019
 
2018
NET OPERATING INCOME RECONCILIATION
 
 
 
Net income
$
7,389

 
$
25,149

General and administrative
9,212

 
8,748

Transaction costs
74

 

Depreciation and amortization
42,303

 
39,965

Interest and other income
(16
)
 
(6
)
Interest expense
12,834

 
11,392

Loss on impairments
5,344

 
2,934

Other expenses
325

 
291

Gain on the sales of rental property, net
(1,274
)
 
(22,689
)
Net operating income
$
76,191

 
$
65,784


 
 
 
Net operating income
$
76,191

 
$
65,784

Straight-line rent adjustments, net
(2,180
)
 
(2,644
)
Straight-line termination income adjustments, net
(43
)
 
(137
)
Amortization of above and below market leases, net
961

 
1,207

Cash net operating income
$
74,929

 
$
64,210


 
 
 
Cash net operating income
$
74,929

 
 
Cash NOI from acquisitions' and dispositions' timing
1,921

 
 
Run Rate Cash NOI
$
76,850

 
 
 
 
 
 
Same Store Portfolio NOI
 
 
 
Total NOI
$
76,191

 
$
65,784

Less: NOI non-same-store properties
(14,805
)
 
(5,799
)
Less: termination income
(43
)
 
(20
)
Same Store NOI
$
61,343

 
$
59,965

Less: straight-line rent adjustments, net
(1,146
)
 
(1,997
)
Plus: amortization of above and below market leases, net
1,094

 
1,259

Same Store Cash NOI
$
61,291

 
$
59,227

 
 
 
 
EBITDA FOR REAL ESTATE (EBITDAre) RECONCILIATION
 
 
 
Net income
$
7,389

 
$
25,149

Depreciation and amortization
42,303

 
39,965

Interest and other income
(16
)
 
(6
)
Interest expense
12,834

 
11,392

Loss on impairments
5,344

 
2,934

Gain on the sales of rental property, net
(1,274
)
 
(22,689
)
EBITDAre
$
66,580

 
$
56,745

 
 
 
 
ADJUSTED EBITDAre RECONCILIATION
 
 
 
EBITDAre
$
66,580

 
$
56,745

Straight-line rent adjustments, net
(2,213
)
 
(2,644
)
Amortization of above and below market leases, net
961

 
1,207

Non-cash compensation expense
2,278

 
2,220

Termination income
(43
)
 
(137
)
Transaction costs
74

 

Adjusted EBITDAre
$
67,637

 
$
57,391

 
 
 
 
Adjusted EBITDAre
$
67,637

 
 
Adjusted EBITDAre from acquisitions' and dispositions' timing
1,921

 
 
Run Rate Adjusted EBITDAre
$
69,558

 
 
 
 
 
 


6



RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES
STAG Industrial, Inc.
(unaudited, in thousands, except per share data)
 
Three months ended March 31,
 
2019
 
2018
CORE FUNDS FROM OPERATIONS RECONCILIATION
 
 
 
Net income
$
7,389

 
$
25,149

Rental property depreciation and amortization
42,229

 
39,892

Loss on impairments
5,344

 
2,934

Gain on the sales of rental property, net
(1,274
)
 
(22,689
)
Funds from operations
$
53,688

 
$
45,286

Preferred stock dividends
(1,289
)
 
(2,448
)
Amount allocated to restricted shares of common stock and unvested units
(247
)
 
(217
)
Funds from operations attributable to common stockholders and unit holders
$
52,152

 
$
42,621

 
 
 
 
Funds from operations attributable to common stockholders and unit holders
$
52,152

 
$
42,621

Amortization of above and below market leases, net
961

 
1,207

Transaction costs
74

 

Core funds from operations
$
53,187

 
$
43,828

 
 
 
 
Weighted average common shares and units
 
 
 
Weighted average common shares outstanding
114,721

 
97,021

Weighted average units outstanding
3,707

 
3,849

Weighted average common shares and units - basic
118,428

 
100,870

Dilutive performance shares
272

 
302

Weighted average common shares, units, and performance shares - diluted
118,700

 
101,172

Core funds from operations per share / unit - basic
$
0.45

 
$
0.43

Core funds from operations per share / unit - diluted
$
0.45

 
$
0.43

 
 
 
 
SELECTED FINANCIAL INFORMATION
 
 
 
Non-rental property depreciation and amortization
$
74

 
$
73

Straight-line rent adjustments, net - increase (decrease) to revenue
$
2,213

 
$
2,644

Straight-line termination income adjustments, net - increase (decrease) to revenue
$
43

 
$
137

Recurring capital expenditures
$
111

 
$
657

Non-recurring capital expenditures
$
3,089

 
$
1,200

New lease commissions and tenant improvements
$
950

 
$
1,552

Renewal lease commissions and tenant improvements
$
732

 
$
900

Non-cash portion of interest expense
$
618

 
$
534

Non-cash compensation expense
$
2,278

 
$
2,220

 
 
 
 



7



Non-GAAP Financial Measures and Other Definitions
 
Acquisition Capital Expenditures: We define Acquisition Capital Expenditures as Recurring and Non-Recurring Capital Expenditures identified at the time of acquisition. Acquisition Capital Expenditures also include new lease commissions and tenant improvements for space that was not occupied under the Company's ownership.

Capitalization Rate: We define Capitalization Rate as the estimated weighted average cash Capitalization Rate, calculated by dividing (i) the Company’s estimate of year one cash net operating income from the applicable property’s operations stabilized for occupancy (post-lease-up for vacant properties), which does not include termination income, miscellaneous other income, capital expenditures, general and administrative costs, reserves, tenant improvements and leasing commissions, credit loss, or vacancy loss, by (ii) the GAAP purchase price plus estimated Acquisition Capital Expenditures. These Capitalization Rate estimates are subject to risks, uncertainties, and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties, and factors that are beyond our control, including those risk factors contained in our Annual Report on Form 10-K for the year ended December 31, 2018.
 
Cash Rent Change: We define Cash Rent Change as the percentage change in the base rent of the lease commenced during the period compared to the base rent of the Comparable Lease for assets included in the Operating Portfolio. The calculation compares the first base rent payment due after the lease commencement date compared to the base rent of the last monthly payment due prior to the termination of the lease, excluding holdover rent. Rent under gross or similar type leases are converted to a net rent based on an estimate of the applicable recoverable expenses.

Comparable Lease: We define a Comparable Lease as a lease in the same space with a similar lease structure as compared to the previous in-place lease, excluding new leases for space that was not occupied under our ownership.

Earnings before Interest, Taxes, Depreciation, and Amortization for Real Estate (EBITDAre), Adjusted EBITDAre, Annualized Adjusted EBITDAre, and Run Rate Adjusted EBITDAre: We define EBITDAre in accordance with the standards established by the National Association of Real Estate Investment Trusts (“NAREIT”). EBITDAre represents net income (loss) (computed in accordance with GAAP) before interest expense, tax, depreciation and amortization, gains or losses on the sale of rental property, and loss on impairments. Adjusted EBITDAre further excludes transaction costs, termination income, straight-line rent adjustments, non-cash compensation, amortization of above and below market leases, net, gain (loss) on involuntary conversion, loss on extinguishment of debt, loss on incentive fee, and other non-recurring items.

We define Annualized Adjusted EBITDAre as Adjusted EBITDAre multiplied by four.

We define Run Rate Adjusted EBITDAre as Adjusted EBITDAre plus incremental Adjusted EBITDAre adjusted for a full period of acquisitions and dispositions. Run Rate Adjusted EBITDAre does not reflect the Company’s historical results and does not predict future results, which may be substantially different.

EBITDAre, Adjusted EBITDAre, and Run Rate Adjusted EBITDAre should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of our performance, and we believe that to understand our performance further, EBITDAre, Adjusted EBITDAre, and Run Rate Adjusted EBITDAre should be compared with our reported net income or net loss in accordance with GAAP, as presented in our consolidated financial statements. We believe that EBITDAre, Adjusted EBITDAre, and Run Rate Adjusted EBITDAre are helpful to investors as supplemental measures of the operating performance of a real estate company because they are direct measures of the actual operating results of our properties. We also use these measures in ratios to compare our performance to that of our industry peers.

Funds from Operations (FFO) and Core FFO: We define FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts (“NAREIT”). FFO represents net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciable operating property, impairment write-downs of depreciable real estate, real estate related depreciation and amortization (excluding amortization of deferred financing costs and fair market value of debt adjustment) and after adjustments for unconsolidated partnerships and joint ventures. Core FFO excludes transaction costs, amortization of above and below market leases, net, loss on extinguishment of debt, gain (loss) on involuntary conversion, gain (loss) on swap ineffectiveness, loss on incentive fee, and non-recurring other expenses.

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None of FFO or Core FFO should be considered as an alternative to net income (determined in accordance with GAAP) as an indication of our performance, and we believe that to understand our performance further, these measurements should be compared with our reported net income or net loss in accordance with GAAP, as presented in our consolidated financial statements. We use FFO as a supplemental performance measure because it is a widely recognized measure of the performance of REITs. FFO may be used by investors as a basis to compare our operating performance with that of other REITs. We and investors may use Core FFO similarly as FFO.
However, because FFO and Core FFO exclude, among other items, depreciation and amortization and capture neither the changes in the value of our buildings that result from use or market conditions of our buildings, all of which have real economic effects and could materially impact our results from operations, the utility of these measures as measures of our performance is limited. In addition, other REITs may not calculate FFO in accordance with the NAREIT definition as we do, and, accordingly, our FFO may not be comparable to such other REITs’ FFO. Similarly, our calculation of Core FFO may not be comparable to similarly titled measures disclosed by other REITs.

GAAP: We define GAAP as generally accepted accounting principles in the United States.

Market: We define Market as the market defined by CoStar based on the building address. If the building is located outside of a CoStar defined market, the city and state is reflected.
 
Net operating income (NOI), Cash NOI, and Run Rate Cash NOI: We define NOI as rental income, including reimbursements, less property expenses, which excludes depreciation, amortization, loss on impairments, general and administrative expenses, interest expense, interest income, asset management fee income, transaction costs, gain (loss) on involuntary conversion, loss on extinguishment of debt, gain on sales of rental property, loss on incentive fee, and other expenses.

We define Cash NOI as NOI less straight-line rent adjustments and less amortization of above and below market leases, net.

We define Run Rate Cash NOI as Cash NOI plus Cash NOI adjusted for a full period of acquisitions and dispositions, less cash termination income. Run Rate Cash NOI does not reflect the Company’s historical results and does not predict future results, which may be substantially different.

We consider NOI, Cash NOI and Run Rate Cash NOI to be appropriate supplemental performance measures to net income because we believe they help us and investors understand the core operations of our buildings. None of these measures should be considered as an alternative to net income (determined in accordance with GAAP) as an indication of our performance, and we believe that to understand our performance further, these measurements should be compared with our reported net income or net loss in accordance with GAAP, as presented in our consolidated financial statements. Further, our calculations of NOI, Cash NOI and Run Rate NOI may not be comparable to similarly titled measures disclosed by other REITs.

Non-Recurring Capital Expenditures: We define Non-Recurring Capital Expenditures as capital items for upgrades or items that previously did not exist at a building or capital items which have a longer useful life, such as roof replacements. Non-Recurring Capital Expenditures funded by parties other than the Company and Acquisition Capital Expenditures are excluded.

Occupancy Rate: We define Occupancy Rate as the percentage of total leasable square footage for which either revenue recognition has commenced in accordance with GAAP or the lease term has commenced as of the close of the reporting period, whichever occurs earlier.

Operating Portfolio: We define the Operating Portfolio as all warehouse and light manufacturing assets that were acquired stabilized or have achieved Stabilization. The Operating Portfolio excludes non-core flex/office assets and assets contained in the Value Add Portfolio.

Pipeline: We define Pipeline as a point in time measure that includes all of the transactions under consideration by the Company’s acquisitions group that have passed the initial screening process. The pipeline also includes transactions under contract and transactions with non-binding LOIs.


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Recurring Capital Expenditures: We define Recurring Capital Expenditures as capital items required to sustain existing systems and capital items which generally have a shorter useful life. Recurring Capital Expenditures funded by parties other than the Company are excluded. 

Renewal Lease: We define a Renewal Lease as a lease signed by an existing tenant to extend the term for twelve months or more, including (i) a renewal of the same space as the current lease at lease expiration, (ii) a renewal of only a portion of the current space at lease expiration and (iii) an early renewal or workout, which ultimately does extend the original term for twelve months or more.

Retention: We define Retention as the percentage determined by taking Renewal Lease square footage commencing in the period divided by square footage of leases expiring in the period for assets included in the Operating Portfolio.

Same Store: We define Same Store properties as properties that were in the Operating Portfolio for the entirety of the comparative periods presented.

Stabilization: We define Stabilization for assets under development or redevelopment to occur upon the earlier of achieving 90% occupancy or twelve months after completion. Stabilization for assets that were acquired and immediately added to the Value Add Portfolio occurs under the following:
if acquired with less than 75% occupancy as of the acquisition date, Stabilization will occur upon the earlier of achieving 90% occupancy or twelve months from the acquisition date;
if acquired and will be less than 75% occupied due to known move-outs within two years of the acquisition date, Stabilization will occur upon the earlier of achieving 90% occupancy after the known move-outs have occurred or twelve months after the known move-outs have occurred.

Straight-line Rent Change (SL Rent Change): We define SL Rent Change as the percentage change in the average monthly base rent over the term of the lease, calculated on a straight-line basis, of the lease commenced during the period compared to the Comparable Lease for assets included in the Operating Portfolio. Rent under gross or similar type leases are converted to a net rent based on an estimate of the applicable recoverable expenses, and this calculation excludes the impact of any holdover rent.

Value Add Portfolio: We define the Value Add Portfolio as properties that meet any of the following criteria:
less than 75% occupied as of the acquisition date;
will be less than 75% occupied due to known move-outs within two years of the acquisition date;
out of service with significant physical renovation of the asset;
development.

Weighted Average Lease Term: We define Weighted Average Lease Term as the contractual lease term in years as of the lease start date weighted by square footage. Weighted Average Lease Term related to acquired assets reflects the remaining lease term in years as of the acquisition date weighted by square footage..


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Forward-Looking Statements

This earnings release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. STAG Industrial, Inc. (STAG) intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and includes this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe STAG’s future plans, strategies and expectations, are generally identifiable by use of the words “believe,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “should”, “project” or similar expressions. You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond STAG’s control and which could materially affect actual results, performances or achievements. Factors that may cause actual results to differ materially from current expectations include, but are not limited to, the risk factors discussed in STAG’s most recent Annual Report on Form 10-K for the year ended December 31, 2018, as updated by the Company’s subsequent reports filed with the Securities and Exchange Commission. Accordingly, there is no assurance that STAG’s expectations will be realized. Except as otherwise required by the federal securities laws, STAG disclaims any obligation or undertaking to publicly release any updates or revisions to any forward-looking statement contained herein (or elsewhere) to reflect any change in STAG’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.



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