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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): July 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:

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

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

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

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

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol(s)
Name of each exchange on which registered
Common stock, $0.01 par value per share
STAG
New York Stock Exchange
6.875% Series C Cumulative Redeemable Preferred Stock ($0.01 par value)
STAG-PC
New York Stock Exchange

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 July 30, 2019, STAG Industrial, Inc. (the “Company”) issued a press release announcing its results of operations for the three and six months ended June 30, 2019, and its financial condition as of June 30, 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, July 31, 2019, to discuss its second 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: July 30, 2019
 






(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


398967221_staglogoa031a08.jpg
 
STAG INDUSTRIAL ANNOUNCES SECOND QUARTER
2019 RESULTS
 
Boston, MA — July 30, 2019 - STAG Industrial, Inc. (the “Company”) (NYSE:STAG), today announced its financial and operating results for the quarter ended June 30, 2019.
 
“STAG has had an impressive first half of the year,” said Ben Butcher, Chief Executive Officer of the Company. “The strength of the industrial market continues to provide an attractive backdrop as the Company executes across the organization. Robust operating metrics reflect the strength of our portfolio and increased acquisition guidance speaks to the attractive opportunity to continue to grow our industrial portfolio.”

Second Quarter 2019 Highlights

Reported $0.10 of net income per basic and diluted common share for the second quarter of 2019, as compared to $0.09 of net income per basic and diluted common share for the second quarter of 2018. Reported $12.4 million of net income attributable to common stockholders for the second quarter of 2019 compared to net income attributable to common stockholders of $9.3 million for the second quarter of 2018.

Achieved $0.45 of Core FFO per diluted share for the second quarter of 2019, equal to the second quarter of 2018. Generated Core FFO of $58.1 million for the second quarter of 2019 compared to $47.6 million for the second quarter of 2018, an increase of 22.1%.
 
Generated Cash NOI of $77.6 million for the second quarter of 2019, an increase of 14.9% compared to the second quarter of 2018 of $67.6 million.
 
Acquired 14 buildings in the second quarter of 2019, consisting of 3.0 million square feet, for $260.2 million with a weighted average Capitalization Rate of 6.1%.

Achieved an Occupancy Rate of 95.0% on the total portfolio and 95.8% on the Operating Portfolio as of June 30, 2019.
 
Commenced Operating Portfolio leases of 2.5 million square feet for the second quarter of 2019, resulting in a Cash Rent Change and Straight-line Rent Change of 8.7% and 18.6%, respectively.
 
Experienced 79.5% Retention for 2.5 million square feet of leases expiring in the quarter.

Produced Same Store cash NOI growth of 1.0% for the second quarter of 2019 compared to the second quarter of 2018, and 2.2% for the six months ended June 30, 2019 compared to the six months ended June 30, 2018.

Raised net proceeds of $236.6 million of equity through a combination of the Company's at-the-market offering ("ATM") program and a follow-on offering during the second quarter of 2019.

Subsequent to quarter end on July 12, 2019, originated a new five-and-a-half-year, $200 million term loan.

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, July 31, 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
 
SECOND QUARTER 2019 KEY FINANCIAL MEASURES
 
Three months ended June 30,
 
 
 
Six months ended June 30,
 
 
Metrics
2019
 
2018
 
% Change
 
2019
 
2018
 
% Change
(in $000s, except per share data)
 
 
 
 
 

 
 
 
 
 
 

Net income attributable to common stockholders
$12,394
 
$9,264
 
33.8
 %
 
$18,201
 
$30,952
 
(41.2
)%
Net income per common share — basic
$0.10
 
$0.09
 
11.1
 %
 
$0.15
 
$0.31
 
(51.6
)%
Net income per common share — diluted
$0.10
 
$0.09
 
11.1
 %
 
$0.15
 
$0.31
 
(51.6
)%
Cash NOI
$77,601
 
$67,565
 
14.9
 %
 
$152,530
 
$131,775
 
15.8
 %
Same Store Cash NOI (1)
$60,899
 
$60,277
 
1.0
 %
 
$122,190
 
$119,504
 
2.2
 %
Adjusted EBITDAre
$71,168
 
$61,217
 
16.3
 %
 
$138,805
 
$118,608
 
17.0
 %
Core FFO
$58,111
 
$47,591
 
22.1
 %
 
$111,298
 
$91,419
 
21.7
 %
Core FFO per share / unit — basic
$0.45
 
$0.46
 
(2.2
)%
 
$0.90
 
$0.89
 
1.1
 %
Core FFO per share / unit — diluted
$0.45
 
$0.45
 
0.0
 %
 
$0.90
 
$0.89
 
1.1
 %
 (1) The Same Store pool accounted for 77.8% of the total portfolio square footage as of June 30, 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 June 30, 2019, the Company acquired 14 buildings for $260.2 million with an Occupancy Rate of 98.8% upon acquisition. The chart below details the acquisition activity for the quarter:

SECOND QUARTER 2019 ACQUISITION ACTIVITY
Market
Date Acquired
Square Feet
Buildings
Purchase Price ($000s)
W.A. Lease Term (Years)
Capitalization Rate
Minneapolis/St Paul, MN
4/2/2019
100,600
1
$9,045
4.1
 
West Michigan, MI
4/8/2019
230,200
1
15,786
7.7
 
Greensboro/Winston-Salem, NC
4/12/2019
129,600
1
7,771
10.8
 
Greenville/Spartanburg, SC
4/25/2019
319,660
2
15,432
5.4
 
Charleston/N Charleston, SC
4/29/2019
500,355
1
40,522
15.0
 
Houston, TX
4/29/2019
128,136
1
13,649
18.3
 
Richmond, VA
5/16/2019
109,520
1
9,467
15.1
 
Laredo, TX
6/6/2019
213,982
1
18,972
12.0
 
Baton Rouge, LA
6/18/2019
252,800
2
20,041
4.5
 
Philadelphia, PA
6/19/2019
187,569
2
13,645
4.1
 
Columbus, OH
6/28/2019
857,390
1
95,828
14.9
 
Total / weighted average
 
3,029,812
14
$260,158
11.3
6.1%

The chart below details the 2019 acquisition activity and Pipeline through July 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%
Q2
3,029,812
14
260,158
11.3
6.1%
Total / weighted average
5,393,435
24
$445,521
9.8
6.3%
 
 
 
 
 
 
As of July 30, 2019
 
 
 
 
 
Subsequent to quarter-end acquisitions
593,406
3
$31,969
 
 
 
 
 
 
 
 
Pipeline
36.6 million
159
$2.6 billion
 
 



2



The chart below details the disposition activity for the six months ended June 30, 2019:

2019 DISPOSITION ACTIVITY
 
Square Feet
Buildings
Sale Price ($000s)
Q1
973,305
5
$17,939
Q2
1,125
Total
973,305
5
$19,064
Note: Sold two parcels of land in the second quarter of 2019 for $1.1 million.

Operating Portfolio Leasing Activity
 
The chart below details the leasing activity for leases commenced during the three months ended June 30, 2019:
 
SECOND 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
554,717
5.9
$3.56
$3.70
$1.22
$0.36
22.8%
34.2%
 
 
Renewal Leases
1,954,251
4.1
$4.17
$4.35
$0.51
$0.42
5.8%
15.4%
79.5%
 
Total / weighted average
2,508,968
4.5
$4.03
$4.20
$0.67
$0.41
8.7%
18.6%
 
 
Note: The table above represents leases commencing during the quarter.

The chart below details the leasing activity for leases commenced during the six months ended June 30, 2019:
 
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
677,907
6.0
$3.66
$3.81
$1.30
$0.36
18.3%
30.3%
 
 
Renewal Leases
4,422,414
4.1
$4.04
$4.21
$0.43
$0.30
10.9%
20.3%
80.2%
 
Total / weighted average
5,100,321
4.4
$3.99
$4.16
$0.55
$0.31
11.7%
21.4%
 
 


3






Capital Market Activity
 
On April 4, 2019, the Company closed a public offering of 7,475,000 shares, inclusive of underwriters' option to purchase additional shares. The Company raised net proceeds of $214.7 million.

The chart below details the ATM program activity for the six months ended June 30, 2019:

2019 ATM ACTIVITY 
Equity
Shares Issued
Price per Share (Weighted Avg)
Gross Proceeds
($000s)
Net Proceeds
($000s)
Q1
5,441,409
$27.60
$150,189
$148,887
Q2
705,794
$31.29
$22,082
$21,861
Total / weighted average
6,147,203
$28.02
$172,271
$170,748

Subsequent to quarter end, the Company sold 762,729 shares under its ATM program for net proceeds of $23 million.

As of June 30, 2019, net debt to annualized Run Rate Adjusted EBITDAre was 4.6x.

Subsequent to quarter end on July 12, 2019, the Company closed on a new $200 million, five-and-a-half-year unsecured term loan. The new term loan bears a current interest rate of LIBOR plus a spread of 1.00% and matures on January 12, 2025. The Company entered into four interest rate swaps to fix the interest rate on the new term loan, which will bear a fixed interest rate of 3.11% inclusive of these swaps.

On July 25, 2019, the Company drew the $175 million unsecured term loan E and used the proceeds to retire balances on the unsecured revolving credit facility.

Conference Call
 
The Company will host a conference call tomorrow, Wednesday, July 31, 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 13692201.
 
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.

4





CONSOLIDATED BALANCE SHEETS
STAG Industrial, Inc.
(unaudited, in thousands, except share data) 
 
June 30, 2019
 
December 31, 2018
Assets
 
 
 
Rental Property:
 
 
 
Land
$
397,193

 
$
364,023

Buildings and improvements, net of accumulated depreciation of $344,597 and $316,930, respectively
2,574,746

 
2,285,663

Deferred leasing intangibles, net of accumulated amortization of $229,864 and $246,502, respectively
381,133

 
342,015

Total rental property, net
3,353,072

 
2,991,701

Cash and cash equivalents
5,092

 
7,968

Restricted cash
4,503

 
14,574

Tenant accounts receivable
45,871

 
42,236

Prepaid expenses and other assets
36,919

 
36,902

Interest rate swaps
983

 
9,151

Operating lease right-of-use assets
15,717

 

Total assets
$
3,462,157

 
$
3,102,532

Liabilities and Equity
 
 
 
Liabilities:
 
 
 
Unsecured credit facility
$
129,000

 
$
100,500

Unsecured term loans, net
596,879

 
596,360

Unsecured notes, net
572,684

 
572,488

Mortgage notes, net
55,659

 
56,560

Accounts payable, accrued expenses and other liabilities
49,911

 
45,507

Interest rate swaps
18,865

 
4,011

Tenant prepaid rent and security deposits
21,220

 
22,153

Dividends and distributions payable
16,822

 
13,754

Deferred leasing intangibles, net of accumulated amortization of $10,854 and $12,764, respectively
20,340

 
21,567

Operating lease liabilities
17,525

 

Total liabilities
1,498,905

 
1,432,900

Equity:
 
 
 
Preferred stock, par value $0.01 per share, 20,000,000 and 15,000,000 shares authorized at June 30, 2019 and December 31, 2018, respectively,
 
 
 
Series C, 3,000,000 shares (liquidation preference of $25.00 per share) issued and outstanding at June 30, 2019 and December 31, 2018
75,000

 
75,000

Common stock, par value $0.01 per share, 300,000,000 and 150,000,000 shares authorized at June 30, 2019 and December 31, 2018, respectively, 126,372,945 and 112,165,786 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively
1,264

 
1,122

Additional paid-in capital
2,501,013

 
2,118,179

Cumulative dividends in excess of earnings
(653,759
)
 
(584,979
)
Accumulated other comprehensive income (loss)
(17,771
)
 
4,481

Total stockholders’ equity
1,905,747

 
1,613,803

Noncontrolling interest
57,505

 
55,829

Total equity
1,963,252

 
1,669,632

Total liabilities and equity
$
3,462,157

 
$
3,102,532

 
 
 
 


5



CONSOLIDATED STATEMENTS OF OPERATIONS
STAG Industrial, Inc.
(unaudited, in thousands, except per share data)
 
Three months ended June 30,
 
Six months ended June 30,
 
2019
 
2018
 
2019
 
2018
Revenue
    

 
    

 
    

 
 
Rental income
$
96,362

 
$
84,866

 
$
191,977

 
$
167,993

Other income
284

 
608

 
371

 
764

Total revenue
96,646

 
85,474

 
192,348

 
168,757

Expenses
 

 
 

 
 

 
 
Property
16,955

 
16,124

 
36,466

 
33,623

General and administrative
8,587

 
7,978

 
17,799

 
16,726

Depreciation and amortization
44,633

 
40,901

 
86,936

 
80,866

Loss on impairments

 

 
5,344

 
2,934

Other expenses
427

 
350

 
826

 
641

Total expenses
70,602

 
65,353

 
147,371

 
134,790

Other income (expense)
 

 
 

 
 

 
 
Interest and other income
2

 
7

 
18

 
13

Interest expense
(12,193
)
 
(11,512
)
 
(25,027
)
 
(22,904
)
Gain on the sales of rental property, net
317

 
6,348

 
1,591

 
29,037

Total other income (expense)
(11,874
)
 
(5,157
)
 
(23,418
)
 
6,146

Net income
$
14,170

 
$
14,964

 
$
21,559

 
$
40,113

Less: income attributable to noncontrolling interest after preferred stock dividends
408

 
392

 
622

 
1,334

Net income attributable to STAG Industrial, Inc.
$
13,762

 
$
14,572

 
$
20,937

 
$
38,779

Less: preferred stock dividends
1,289

 
2,578

 
2,578

 
5,026

Less: redemption of preferred stock

 
2,661

 

 
2,661

Less: amount allocated to participating securities
79

 
69

 
158

 
140

Net income attributable to common stockholders
$
12,394

 
$
9,264

 
$
18,201

 
$
30,952

Weighted average common shares outstanding — basic
125,251

 
100,386

 
120,015

 
98,713

Weighted average common shares outstanding — diluted
125,560

 
100,733

 
120,306

 
99,037

Net income per share — basic and diluted
 

 
 

 
 

 
 

Net income per share attributable to common stockholders — basic
$
0.10

 
$
0.09

 
$
0.15

 
$
0.31

Net income per share attributable to common stockholders — diluted
$
0.10

 
$
0.09

 
$
0.15

 
$
0.31

 
 
 
 
 
 
 
 


6



RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES
STAG Industrial, Inc.
(unaudited, in thousands) 
 
Three months ended June 30,
 
Six months ended June 30,
 
2019
 
2018
 
2019
 
2018
NET OPERATING INCOME RECONCILIATION
 
 
 
 
 
 
 
Net income
$
14,170

 
$
14,964

 
$
21,559

 
$
40,113

General and administrative
8,587

 
7,978

 
17,799

 
16,726

Transaction costs
79

 
76

 
153

 
76

Depreciation and amortization
44,633

 
40,901

 
86,936

 
80,866

Interest and other income
(2
)
 
(7
)
 
(18
)
 
(13
)
Interest expense
12,193

 
11,512

 
25,027

 
22,904

Loss on impairments

 

 
5,344

 
2,934

Other expenses
348

 
274

 
673

 
565

Gain on the sales of rental property, net
(317
)
 
(6,348
)
 
(1,591
)
 
(29,037
)
Net operating income
$
79,691

 
$
69,350

 
$
155,882

 
$
135,134


 
 
 
 
 
 
 
Net operating income
$
79,691

 
$
69,350

 
$
155,882

 
$
135,134

Straight-line rent adjustments, net
(3,231
)
 
(2,790
)
 
(5,411
)
 
(5,434
)
Straight-line termination income adjustments, net

 
156

 
(43
)
 
19

Amortization of above and below market leases, net
1,141

 
849

 
2,102

 
2,056

Cash net operating income
$
77,601

 
$
67,565

 
$
152,530

 
$
131,775


 
 
 
 
 
 
 
Cash net operating income
$
77,601

 
 
 
 
 
 
Cash NOI from acquisitions' and dispositions' timing
2,341

 
 
 
 
 
 
Run Rate Cash NOI
$
79,942

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same Store Portfolio NOI
 
 
 
 
 
 
 
Total NOI
$
79,691

 
$
69,350

 
$
155,882

 
$
135,134

NOI non-same-store properties
(18,184
)
 
(7,740
)
 
(32,988
)
 
(13,540
)
Termination adjustments, net
196

 
(29
)
 
156

 
(43
)
Same Store NOI
$
61,703

 
$
61,581


$
123,050


$
121,551

Straight-line rent adjustments, net
(1,878
)
 
(2,494
)
 
(3,027
)
 
(4,497
)
Amortization of above and below market leases, net
1,074

 
1,190

 
2,167

 
2,450

Same Store Cash NOI
$
60,899

 
$
60,277


$
122,190


$
119,504

 
 
 
 
 
 
 
 
EBITDA FOR REAL ESTATE (EBITDAre) RECONCILIATION
 
 
 
 
 
 
 
Net income
$
14,170

 
$
14,964

 
$
21,559

 
$
40,113

Depreciation and amortization
44,633

 
40,901

 
86,936

 
80,866

Interest and other income
(2
)
 
(7
)
 
(18
)
 
(13
)
Interest expense
12,193

 
11,512

 
25,027

 
22,904

Loss on impairments

 

 
5,344

 
2,934

Gain on the sales of rental property, net
(317
)
 
(6,348
)
 
(1,591
)
 
(29,037
)
EBITDAre
$
70,677

 
$
61,022

 
$
137,257

 
$
117,767

 
 
 
 
 
 
 
 
ADJUSTED EBITDAre RECONCILIATION
 
 
 
 
 
 
 
EBITDAre
$
70,677

 
$
61,022

 
$
137,257

 
$
117,767

Straight-line rent adjustments, net
(3,266
)
 
(2,824
)
 
(5,479
)
 
(5,468
)
Amortization of above and below market leases, net
1,141

 
849

 
2,102

 
2,056

Non-cash compensation expense
2,537

 
2,215

 
4,815

 
4,435

Termination income

 
(121
)
 
(43
)
 
(258
)
Transaction costs
79

 
76

 
153

 
76

Adjusted EBITDAre
$
71,168

 
$
61,217

 
$
138,805

 
$
118,608

 
 
 
 
 
 
 
 
Adjusted EBITDAre
$
71,168

 
 
 
 
 
 
Adjusted EBITDAre from acquisitions' and dispositions' timing
2,341

 
 
 
 
 
 
Run Rate Adjusted EBITDAre
$
73,509

 
 
 
 
 
 
 
 
 
 
 
 
 
 


7



RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES
STAG Industrial, Inc.
(unaudited, in thousands, except per share data)
 
Three months ended June 30,
 
Six months ended June 30,
 
2019
 
2018
 
2019
 
2018
CORE FUNDS FROM OPERATIONS RECONCILIATION
 
 
 
 
 
 
 
Net income
$
14,170

 
$
14,964

 
$
21,559

 
$
40,113

Rental property depreciation and amortization
44,559

 
40,826

 
86,788

 
80,718

Loss on impairments

 

 
5,344

 
2,934

Gain on the sales of rental property, net
(317
)
 
(6,348
)
 
(1,591
)
 
(29,037
)
Funds from operations
$
58,412

 
$
49,442

 
$
112,100

 
$
94,728

Preferred stock dividends
(1,289
)
 
(2,578
)
 
(2,578
)
 
(5,026
)
Redemption of preferred stock

 
(2,661
)
 

 
(2,661
)
Amount allocated to restricted shares of common stock and unvested units
(232
)
 
(198
)
 
(479
)
 
(415
)
Funds from operations attributable to common stockholders and unit holders
$
56,891

 
$
44,005

 
$
109,043

 
$
86,626

 
 
 
 
 
 
 
 
Funds from operations attributable to common stockholders and unit holders
$
56,891

 
$
44,005

 
$
109,043

 
$
86,626

Amortization of above and below market leases, net
1,141

 
849

 
2,102

 
2,056

Transaction costs
79

 
76

 
153

 
76

Redemption of preferred stock

 
2,661

 

 
2,661

Core funds from operations
$
58,111

 
$
47,591

 
$
111,298

 
$
91,419

 
 
 
 
 
 
 
 
Weighted average common shares and units
 
 
 
 
 
 
 
Weighted average common shares outstanding
125,251

 
100,386

 
120,015

 
98,713

Weighted average units outstanding
3,545

 
3,863

 
3,625

 
3,856

Weighted average common shares and units - basic
128,796

 
104,249

 
123,640

 
102,569

Dilutive performance shares
309

 
347

 
291

 
324

Weighted average common shares, units, and performance shares - diluted
129,105

 
104,596

 
123,931

 
102,893

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

 
$
0.46

 
$
0.90

 
$
0.89

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

 
$
0.45

 
$
0.90

 
$
0.89

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

 
$
75

 
$
148

 
$
148

Straight-line rent adjustments, net - increase (decrease) to revenue
$
3,266

 
$
2,824

 
$
5,479

 
$
5,468

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

 
$
(156
)
 
$
43

 
$
(19
)
Recurring capital expenditures
$
819

 
$
1,114

 
$
930

 
$
1,771

Non-recurring capital expenditures
$
7,738

 
$
6,826

 
$
10,827

 
$
8,026

New lease commissions and tenant improvements
$
512

 
$
868

 
$
1,462

 
$
2,420

Renewal lease commissions and tenant improvements
$
2,417

 
$
1,473

 
$
3,149

 
$
2,373

Non-cash portion of interest expense
$
618

 
$
547

 
$
1,236

 
$
1,081

Non-cash compensation expense
$
2,537

 
$
2,215

 
$
4,815

 
$
4,435

 
 
 
 
 
 
 
 



8



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, 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, gains (losses) from sales of land, 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, 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, transaction costs, gain (loss) on involuntary conversion, loss on extinguishment of debt, gain on sales of rental property, 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.


10



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 12 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 12 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 12 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 12 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 12 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..


11



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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