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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to                 .

Commission file number 1-34907
STAG INDUSTRIAL, INC.
(Exact name of registrant as specified in its charter)
Maryland
 
27-3099608
(State or other jurisdiction of
 
(IRS Employer Identification No.)
incorporation or organization)
 
 
 
 
 
 
One Federal Street
 
 
23rd Floor
 
 
Boston,
Massachusetts
 
02110
(Address of principal executive offices)
 
(Zip code)
(617574-4777
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
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
STAG
New York Stock Exchange
6.875% Series C Cumulative Redeemable Preferred Stock, $0.01 par value
STAG-PC
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YesNo 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes   No 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesNo 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YesNo 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer      Accelerated filer       Non-accelerated filer      Smaller reporting company      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.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No 
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately $3,815 million based on the closing price on the New York Stock Exchange as of June 28, 2019.
Number of shares of the registrant’s common stock outstanding as of February 10, 2020: 148,692,554
Number of shares of 6.875% Series C Cumulative Redeemable Preferred Stock as of February 10, 2020: 3,000,000

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement with respect to its 2020 Annual Meeting of Stockholders to be filed not later than 120 days after the end of the registrant’s fiscal year are incorporated by reference into Part II, Item 5 and Part III, Items 10, 11, 12, 13 and 14 hereof as noted therein.
 


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STAG INDUSTRIAL, INC.

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PART I.
Introduction

As used herein, except where the context otherwise requires, “Company,” “we,” “our” and “us,” refer to STAG Industrial, Inc. and our consolidated subsidiaries and partnerships, including our operating partnership, STAG Industrial Operating Partnership, L.P. (“Operating Partnership”).

Forward-Looking Statements
 
This report, including the information incorporated by reference, contains “forward-looking statements” within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). You can identify forward-looking statements by the use of words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “seeks,” “should,” “will,” and variations of such words or similar expressions. Forward-looking statements in this report include, among others, statements about our future financial condition, results of operations, capitalization rates on future acquisitions, our business strategy and objectives, including our acquisition strategy, occupancy and leasing rates and trends, and expected liquidity needs and sources (including capital expenditures and the ability to obtain financing or raise capital). Our forward-looking statements reflect our current views about our plans, intentions, expectations, strategies and prospects, which are based on the information currently available to us and on assumptions we have made. Although we believe that our plans, intentions, expectations, strategies and prospects as reflected in or suggested by our forward-looking statements are reasonable, we can give no assurance that our plans, intentions, expectations, strategies or prospects will be attained or achieved and you should not place undue reliance on these forward‑looking statements. Furthermore, actual results may differ materially from those described in the forward‑looking statements and may be affected by a variety of risks and factors including, without limitation:

the factors included in this report, including those set forth under the headings “Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations;”

our ability to raise equity capital on attractive terms;

the competitive environment in which we operate;

real estate risks, including fluctuations in real estate values and the general economic climate in local markets and competition for tenants in such markets;

decreased rental rates or increased vacancy rates;

potential defaults (including bankruptcies or insolvency) on or non-renewal of leases by tenants;

acquisition risks, including our ability to identify and complete accretive acquisitions and/or failure of such acquisitions to perform in accordance with projections;

the timing of acquisitions and dispositions;

technological developments, particularly those affecting supply chains and logistics;

potential natural disasters and other potentially catastrophic events such as acts of war and/or terrorism;

international, national, regional and local economic conditions;

the general level of interest rates and currencies;

potential changes in the law or governmental regulations and interpretations of those laws and regulations, including changes in real estate and zoning laws or real estate investment trust (“REIT”) or corporate income tax laws, and potential increases in real property tax rates; 


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financing risks, including the risks that our cash flows from operations may be insufficient to meet required payments of principal and interest and we may be unable to refinance our existing debt upon maturity or obtain new financing on attractive terms or at all; 

credit risk in the event of non-performance by the counterparties to the interest rate swaps and revolving and unfunded debt;

how and when pending forward equity sales may settle;

lack of or insufficient amounts of insurance;

our ability to maintain our qualification as a REIT;

our ability to retain key personnel; 

litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; and

possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by us.

Any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise over time, and it is not possible for us to predict those events or how they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Item 1.  Business

Certain Definitions

In this report:

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

We define “total annualized base rental revenue” as the contractual monthly base rent as of December 31, 2019 (which differs from rent calculated in accordance with GAAP) multiplied by 12. If a tenant is in a free rent period as of December 31, 2019, the total annualized base rental revenue is calculated based on the first contractual monthly base rent amount multiplied by 12.

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.

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

We define “Stabilization” for properties being redeveloped as the earlier of achieving 90% occupancy or 12 months after completion. With respect to properties acquired and immediately added to the Value Add Portfolio, (i) 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; or (ii) 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.

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, assets contained in the Value Add Portfolio, and assets classified at held for sale.

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.


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We define “SL Rent Change” as the percentage change in the average monthly base rent over the term of the lease that 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.

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.

We define a “New Lease” as any lease that is signed for an initial term equal to or greater than 12 months for any vacant space, including a lease signed by a new tenant or an existing tenant that is expanding into new (additional) space.

We define “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, or (iii) an early renewal or workout, which ultimately does extend the original term for 12 months or more.

Overview

We are a REIT focused on the acquisition, ownership and operation of single-tenant, industrial properties throughout the United States. We seek to (i) identify properties for acquisition that offer relative value across all locations, industrial property types, and tenants through the principled application of our proprietary risk assessment model, (ii) operate our properties in an efficient, cost-effective manner, and (iii) capitalize our business appropriately given the characteristics of our assets. We are a Maryland corporation and our common stock is publicly traded on the New York Stock Exchange (“NYSE”) under the symbol “STAG.”

We are organized and conduct our operations to qualify as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”), and generally are not subject to federal income tax to the extent we currently distribute our income to our stockholders and maintain our qualification as a REIT.  We remain subject to state and local taxes on our income and property and to U.S. federal income and excise taxes on our undistributed income.

As of December 31, 2019, we owned 450 buildings in 38 states with approximately 91.4 million rentable square feet, consisting of 365 warehouse/distribution buildings, 69 light manufacturing buildings, eight flex/office buildings, six Value Add Portfolio buildings, and two buildings classified as held for sale. We own both single- and multi-tenant properties, although we focus on the former. As of December 31, 2019, our buildings were approximately 95.0% leased to 414 tenants, with no single tenant accounting for more than approximately 1.9% of our total annualized base rental revenue and no single industry accounting for more than approximately 11.1% of our total annualized base rental revenue. We intend to maintain a diversified mix of tenants to limit our exposure to any single tenant.
As of December 31, 2019, our Operating Portfolio was approximately 96.6% leased and our SL Rent Change on new and renewal leases together grew approximately 18.2% and 15.2% during the years ended December 31, 2019 and 2018, respectively and our Cash Rent Change on new and renewal leases together grew approximately 10.0% and 7.9% during the years ended December 31, 2019 and 2018, respectively.
We have a fully-integrated acquisition, leasing and asset management platform, and our senior management team has a significant amount of single-tenant, industrial real estate experience. Our mission is to continue to be a disciplined, relative value investor and a leading owner and operator of single-tenant, industrial properties in the United States.  We seek to deliver attractive stockholder returns in all market environments by providing a covered dividend combined with accretive growth.
We are structured as an umbrella partnership REIT, also known as an UPREIT, and own all of our properties and conduct substantially all of our business through our Operating Partnership, which we control and manage. As of December 31, 2019, we owned approximately 97.5% of the common equity of our Operating Partnership, and our current and former executive officers, directors, senior employees and their affiliates, and third parties who contributed properties to us in exchange for common equity in our Operating Partnership, owned the remaining 2.5%. We completed our initial public offering of common stock and related formation transactions, pursuant to which we succeeded our predecessor, on April 20, 2011.


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Our Strategy
Our primary business objectives are to own and operate a balanced and diversified portfolio of binary risk investments (individual single-tenant industrial properties) that maximize cash flows available for distribution to our stockholders, and to enhance stockholder value over time by achieving sustainable long-term growth in distributable cash flow from operations per share.
We believe that our focus on owning and operating a portfolio of individually-acquired, single-tenant industrial properties throughout the United States will, when compared to other real estate portfolios, generate returns for our stockholders that are attractive in light of the associated risks for the following reasons.
Buyers tend to price an individual, single-tenant, industrial property according to the binary nature of its cash flows; with only one potential tenant, any one property is either generating revenue or not. Furthermore, tenants typically cover operating expenses at a property and when a property is not generating revenue, we, as owners, are responsible for paying these expenses. We believe the market prices these properties are based upon a higher risk profile due to the single-tenant nature of these properties and therefore applies a lower value relative to a diversified cash flowing investment.
The acquisition and contribution of these single-tenant properties to an aggregated portfolio of these individual binary risk cash flows creates diversification, thereby lowering risk and creating value.
Industrial properties generally require less capital expenditure than other commercial property types and single-tenant properties generally require less expenditure for leasing, operating and capital costs per property than multi-tenant properties.
Other institutional, industrial real estate buyers tend to focus on properties and portfolios in a select few primary markets. In contrast, we focus on individual properties across many markets. As a result, our typical competitors are local investors who often do not have the same access to debt or equity capital as us. In our fragmented, predominantly non-institutional environment, a sophisticated, institutional platform with access to capital has execution and operational advantages.
Our focus on single-tenant properties is not exclusive; we also own multi-tenant properties, as a result of acquiring properties with more than one tenant or of originally single-tenant properties re-leasing to multiple tenants.
Regulation
General
Our properties are subject to various laws, ordinances and regulations, including regulations relating to common areas and fire and safety requirements. We believe that we and/or our tenants, as applicable, have the necessary permits and approvals to operate each of our properties.
Americans with Disabilities Act
Our properties must comply with Title III of the Americans with Disabilities Act of 1990, as amended (the “ADA”) to the extent that such properties are “public accommodations” as defined under the ADA. Under the ADA, all public accommodations must meet federal requirements related to access and use by disabled persons. The ADA may require removal of structural barriers to access by persons with disabilities in certain public areas of our properties where such removal is readily achievable. Although we believe that the properties in our portfolio in the aggregate substantially comply with current requirements of the ADA, and we have not received any notice for correction from any regulatory agency, we have not conducted a comprehensive audit or investigation of all of our properties to determine whether we are in compliance and therefore we may own properties that are not in compliance with the ADA.
ADA compliance is dependent upon the tenant’s specific use of the property, and as the use of a property changes or improvements to existing spaces are made, we will take steps to ensure compliance. Noncompliance with the ADA could result in additional costs to attain compliance, imposition of fines by the U.S. government or an award of damages or attorney’s fees to private litigants. The obligation to make readily achievable accommodations is an ongoing one, and we will continue to assess our properties and to make alterations to achieve compliance as necessary.
Environmental Matters

Our properties are subject to various federal, state and local environmental laws. Under these laws, courts and government agencies have the authority to require us, as owner of a contaminated property, to clean up the property, even if we did not know of or were

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not responsible for the contamination. These laws also apply to persons who owned a property at the time it became contaminated, and therefore it is possible we could incur these costs even after we sell some of our properties. In addition to the costs of cleanup, environmental contamination can affect the value of a property and, therefore, an owner’s ability to borrow using the property as collateral or to sell the property. Under applicable environmental laws, courts and government agencies also have the authority to require that a person who sent waste to a waste disposal facility, such as a landfill or an incinerator, pay for the clean-up of that facility if it becomes contaminated and threatens human health or the environment. We invest in properties historically used for industrial, light manufacturing and commercial purposes. Certain of our properties are on or are adjacent to or near other properties upon which others, including former owners or tenants of our properties have engaged, or may in the future engage, in activities that may generate or release petroleum products or other hazardous or toxic substances.
Environmental laws in the United States also require that owners or operators of buildings containing asbestos properly manage and maintain the asbestos, adequately inform or train those who may come into contact with asbestos and undertake special precautions, including removal or other abatement, in the event that asbestos is disturbed during building renovation or demolition. These laws may impose fines and penalties on building owners or operators who fail to comply with these requirements and may allow third parties to seek recovery from owners or operators for personal injury associated with exposure to asbestos. Some of our buildings are known to have asbestos containing materials, and others, due to the age of the building and observed conditions, are suspected of having asbestos containing materials. We do not believe these conditions will materially and adversely affect us.  In most or all instances, no immediate action was recommended to address the conditions.
Furthermore, various court decisions have established that third parties may recover damages for injury caused by property contamination. For instance, a person exposed to asbestos at one of our properties may seek to recover damages if he or she suffers injury from the asbestos. Lastly, some of these environmental laws restrict the use of a property or place conditions on various activities. An example would be laws that require a business using chemicals to manage them carefully and to notify local officials that the chemicals are being used.
We could be responsible for any of the costs discussed above. The costs to clean up a contaminated property, to defend against a claim, or to comply with environmental laws could be material and could adversely affect the funds available for distribution to our stockholders. All of our properties were subject to a Phase I or similar environmental assessment by independent environmental consultants at the time of acquisition. We generally expect to continue to obtain a Phase I or similar environmental assessment by independent environmental consultants on each property prior to acquiring it. However, these environmental assessments may not reveal all environmental costs that might have a material adverse effect on our business, assets, results of operations or liquidity and may not identify all potential environmental liabilities.
At the time of acquisition, we add each property to our portfolio environmental insurance policy that provides coverage for potential environmental liabilities, subject to the policy’s coverage conditions and limitations.
We can make no assurances that future laws, ordinances or regulations will not impose material environmental liabilities on us, or the current environmental condition of our properties will not be affected by tenants, the condition of land or operations in the vicinity of our properties (such as releases from underground storage tanks), or by third parties unrelated to us.
Insurance
We carry comprehensive general liability, fire, extended coverage and rental loss insurance covering all of the properties in our portfolio under a blanket insurance policy. In addition, we maintain a portfolio environmental insurance policy that provides coverage for potential environmental liabilities, subject to the policy’s coverage conditions and limitations. Generally, we do not carry insurance for certain losses, including, but not limited to, losses caused by floods (unless the property is located in a flood plain), earthquakes, acts of war, acts of terrorism or riots. We carry employment practices liability insurance that covers us against claims by employees, former employees or potential employees for various employment related matters including wrongful termination, discrimination, sexual harassment in the workplace, hostile work environment, and retaliation, subject to the policy’s coverage conditions and limitations. We carry comprehensive cyber liability insurance coverage that covers us against claims related to certain first party and third party losses including data restoration costs, crisis management expenses, credit monitoring costs, failure to implement and maintain reasonable security procedures, invasion of customer’s privacy and negligence, subject to the policy’s coverage conditions and limitations. We also carry directors and officers insurance. We believe the policy specifications and insured limits are appropriate and adequate given the relative risk of loss, the cost of the coverage and standard industry practice; however, our insurance coverage may not be sufficient to cover all of our losses.

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Competition

In acquiring our target properties, we compete primarily with local or regional operators due to the smaller, single asset (versus portfolio) focus of our acquisition strategy. From time to time we compete with other public industrial property sector REITs, single-tenant REITs, income oriented non-traded REITs, and private real estate funds. Local real estate investors historically have represented our predominant competition for deals and they typically do not have the same access to capital that we do as a publicly traded institution. We also face significant competition from owners and managers of competing properties in leasing our properties to prospective tenants and in re-leasing space to existing tenants.

Operating Segments

We manage our operations on an aggregated, single segment basis for purposes of assessing performance and making operating decisions, and accordingly, have only one reporting and operating segment. See Note 2 in the accompanying Notes to Consolidated Financial Statements under “Segment Reporting.”

Employees

As of December 31, 2019, we employed 72 employees. None of our employees are represented by a labor union.

Our Corporate Structure

We were incorporated in Maryland on July 21, 2010, and our Operating Partnership was formed as a Delaware limited partnership on December 21, 2009.

We are structured as an UPREIT; our publicly-traded entity, STAG Industrial, Inc., is the REIT in the UPREIT structure, and our Operating Partnership is the umbrella partnership. We own a majority, but not all, of the Operating Partnership. We also wholly own the sole general partner (the manager) of the Operating Partnership. Substantially all of our assets are held in, and substantially all of our operations are conducted through, the Operating Partnership. Shares of our common stock are traded on the NYSE under the symbol “STAG.” The limited partnership interests in the Operating Partnership, which we sometimes refer to as “common units,” are not and cannot be publicly traded, although they may provide liquidity through an exchange feature described below. Our UPREIT structure allows us to acquire properties on a tax-deferred basis by issuing common units in exchange for the property.

The common units of limited partnership interest in our Operating Partnership correlate on a one-for-one economic basis to the shares of common stock in the REIT. Each common unit receives the same distribution as a share of our common stock, the value of each common unit is tied to the value of a share of our common stock and each common unit, after one year, generally may be redeemed (that is, exchanged) for cash in an amount equivalent to the value of a share of common stock or, if we choose, for a share of common stock on a one-for-one basis. When redeeming common units for cash, the value of a share of common stock is calculated as the average common stock closing price on the NYSE for the 10 trading days immediately preceding the redemption notice date.

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The following is a simplified diagram of our UPREIT structure at December 31, 2019.

UPREITJPEG.JPG

Additional Information
Our principal executive offices are located at One Federal Street, 23rd Floor, Boston, Massachusetts 02110. Our telephone number is (617) 574-4777.
Our website is www.stagindustrial.com. Our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and any amendments to any of those reports that we file with the Securities and Exchange Commission (“SEC”) are available free of charge as soon as reasonably practicable through our website at www.stagindustrial.com. Also posted on our website, and available in print upon request, are charters of each committee of the board of directors, our code of business conduct and ethics and our corporate governance guidelines. Within the time period required by the SEC, we will post on our website any amendment to the code of business conduct and ethics and any waiver applicable to any executive officer, director or senior financial officer. The information found on, or otherwise accessible through, our website is not incorporated into, and does not form a part of, this report or any other report or document we file with or furnish to the SEC.
All reports, proxy and information statements and other information we file with the SEC are also available free of charge through the SEC’s website at www.sec.gov.
Item 1A.  Risk Factors
The following risk factors and other information included in this Annual Report on Form 10-K should be carefully considered. The risks and uncertainties described below are not the only risks we face. Additional risks and uncertainties not presently known to us or that we may currently deem immaterial also may impair our business operations. If any of the following or other risks

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occur, our business, financial condition, operating results, cash flows, and distributions, as well as the market prices for our securities, could be materially adversely affected.
Risks Related to Our Business and Operations
Our investments are concentrated in the industrial real estate sector, and we would be adversely affected by an economic downturn in that sector.
As of December 31, 2019, the majority of our buildings were industrial properties. This concentration may expose us to the risk of economic downturns in the industrial real estate sector to a greater extent than if our properties were more diversified across other sectors of the real estate industry.
Adverse economic conditions may adversely affect our operating results and financial condition.
Our operating results and financial condition may be affected by market and economic challenges and uncertainties, which may result from a general economic downturn experienced by the nation as a whole, by the local economies where our properties are located or our tenants conduct business, or by the real estate industry, including the following:
poor economic conditions may result in tenant defaults under leases and extended vacancies at our properties;
re-leasing may require concessions or reduced rental rates under the new leases due to reduced demand;
adverse capital and credit market conditions may restrict our operating activities; and
constricted access to credit may result in tenant defaults, non-renewals under leases or inability of potential buyers to acquire properties held for sale.
Also, to the extent we purchase real estate in an unstable market, we are subject to the risk that if the real estate market ceases to attract the same level of capital investment in the future that it attracts at the time of our purchases, or the number of companies seeking to acquire properties decreases, the value of our investments may not appreciate or may decrease significantly below the amount we paid for these investments. The length and severity of any economic slowdown or downturn cannot be predicted. Our operating results and financial condition could be negatively affected to the extent that an economic slowdown or downturn is prolonged or becomes more severe.
Substantial international, national and local government deficits and the weakened financial condition of these governments may adversely affect us.
The values of, and the cash flows from, the properties we own may be affected by historical or future developments in global, national and local economies. As a result of any global economic crisis and significant government intervention, federal, state and local governments have historically incurred and may continue to incur record deficits and assume or guarantee liabilities of private financial institutions or other private entities. Increased budget deficits and weakened financial condition of federal, state and local governments may lead to reduced governmental spending, tax increases, public sector job losses, increased interest rates, currency devaluations, defaults on debt obligations or other adverse economic events, which may directly or indirectly adversely affect our business, financial condition and results of operations.
Events or occurrences that affect areas in which our properties are geographically concentrated may impact financial results.
In addition to general, regional, national and international economic conditions, our operating performance is impacted by the economic conditions of the specific markets in which we have concentrations of properties. See our “Geographic Diversification” table in Item 2, “Properties” for details of geographic concentration of our properties. Our operating performance could be adversely affected if conditions become less favorable in any of the markets in which we have a concentration of properties.
We are subject to industry concentrations that make us susceptible to adverse events with respect to certain industries.
We are subject to certain industry concentrations with respect to our properties. See our “Industry Diversification” table in Item 2, “Properties” for details of industry concentration of our properties. Such industries are subject to specific risks that could result in downturns within the industries. Any downturn in one or more of these industries, or in any other industry in which we may have a significant concentration now or in the future, could adversely affect our tenants who are involved in such industries. If any of these tenants is unable to withstand such downturn or is otherwise unable to compete effectively in its business, it may be forced to declare bankruptcy, fail to meet its rental obligations, seek rental concessions or be unable to enter into new leases, which could materially and adversely affect us.

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Default by one or more of our tenants could materially and adversely affect us.
Any of our tenants may experience a downturn in its business at any time that may significantly weaken its financial condition or cause its failure. As a result, such a tenant may decline to extend or renew its lease upon expiration, fail to make rental payments when due or declare bankruptcy. The default, financial distress or bankruptcy of a tenant could cause interruptions in the receipt of rental revenue and/or result in a vacancy, which is, in the case of a single-tenant property, likely to result in the complete reduction in the operating cash flows generated by the property and may decrease the value of that property. In addition, a majority of our leases generally require the tenant to pay all or substantially all of the operating expenses normally associated with the ownership of the property, such as utilities, real estate taxes, insurance and routine maintenance. Following a vacancy at a single-tenant property, we will be responsible for all of the operating costs at such property until it can be re-let, if at all.
If our tenants are unable to obtain financing necessary to continue to operate their businesses and pay us rent, we could be materially and adversely affected.
Many of our tenants rely on external sources of financing to operate their businesses. The U.S. financial and credit markets may experience liquidity disruptions, resulting in the unavailability of financing for many businesses. If our tenants are unable to obtain financing necessary to continue to operate their businesses, they may be unable to meet their rental obligations to us or enter into new leases with us or be forced to declare bankruptcy and reject our leases, which could materially and adversely affect us.
We have owned our properties for a limited time, and we may not be aware of characteristics or deficiencies involving any one or all of them.
Of the properties in our portfolio at December 31, 2019, 261 buildings totaling approximately 54.4 million rentable square feet have been acquired in the past five years. These properties may have characteristics or deficiencies unknown to us that could affect their valuation or revenue potential and such properties may not ultimately perform up to our expectations. We cannot assure you that the operating performance of the properties will not decline under our management.
We face risks associated with system failures through security breaches or cyber-attacks, as well as other significant disruptions of our information technology (“IT”) networks and related systems.
We face risks associated with security breaches, whether through cyber-attacks, computer viruses, attachments to e-mails, phishing schemes, persons inside our organization or persons with access to systems inside of our organization, and other significant disruptions of our IT networks and related systems. The risk of a security breach or disruption, particularly through cyber-attack, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks from around the world have increased. Our IT networks and related systems are essential to the operation of our business and our ability to perform day-to-day operations and, in some cases, may be critical to the operations of certain of our tenants. Although we make efforts to maintain the security and integrity of these types of IT networks and related systems, and we have implemented various measures, to manage the risk of a security breach or disruption, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging. Even the most well protected information, networks, systems and facilities remain potentially vulnerable because the techniques used in such attempted security breaches evolve and generally are not recognized until launched against a target, and in some cases are designed to not be detected and, in fact, may not be detected. Accordingly, we may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, and thus it is impossible for us to mitigate this risk entirely. A security breach or other significant disruption involving our IT networks and related systems could disrupt the proper functioning of our networks and systems; result in misstated financial reports, violations of loan covenants and/or missed reporting deadlines; result in our inability to monitor our compliance with the rules and regulations regarding our qualification as a REIT; result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of proprietary, confidential, sensitive or otherwise valuable information of ours or others, which others could use to compete against us or for disruptive, destructive or otherwise harmful purposes and outcomes; require significant management attention and resources to remedy any damages that result; subject us to claims for breach of contract or failure to safeguard personal information, damages, credits, penalties or termination of leases or other agreements; or damage our reputation among our tenants and investors generally.
We depend on key personnel; the loss of their full service could adversely affect us.
Our success depends to a significant degree upon the continued contributions of certain key personnel including, but not limited to, our executive officers, whose continued service is not guaranteed, and each of whom would be difficult to replace. While we have entered into employment contracts with our executive officers, they may nevertheless cease to provide services to us at any time. If any of our key personnel were to cease employment with us, our operating results could suffer. Our ability to retain our management group or to attract suitable replacements should any members of the management group leave is dependent on the competitive nature of the employment market. The loss of services from key members of the management group or a limitation in their availability could adversely impact our financial condition and cash flows. Further, such a loss could be negatively perceived

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in the capital markets. As of December 31, 2019, we have not obtained and do not expect to obtain key man life insurance on any of our key personnel.
We also believe that, as we expand, our future success depends, in large part, upon our ability to hire and retain highly skilled managerial, investment, financing, operational and marketing personnel. Competition for such personnel is intense, and we cannot assure you that we will be successful in attracting and retaining such skilled personnel.
Our growth will depend upon future acquisitions of properties, and we may be unable to consummate acquisitions on advantageous terms and acquisitions may not perform as we expect.
We acquire and intend to continue to acquire primarily warehouse/distribution properties and light manufacturing properties. The acquisition of properties entails various risks, including the risk that our investments may not perform as we expect. Further, we face competition for attractive investment opportunities from other well-capitalized real estate investors, including both publicly-traded REITs and private institutional investment funds, and these competitors may have greater financial resources and a greater ability to borrow funds to acquire properties. This competition will increase as investments in real estate become increasingly attractive relative to other forms of investment. As a result of competition, we may be unable to acquire additional properties for the purchase price we desire. In addition, we expect to finance future acquisitions through a combination of secured and unsecured borrowings, proceeds from equity or debt offerings by us or our Operating Partnership or its subsidiaries and proceeds from property contributions and divestitures which may not be available and which could adversely affect our cash flows.
The cash available for distribution to stockholders may not be sufficient to pay dividends at expected levels, nor can we assure you of our ability to make distributions in the future.
Distributions will be authorized and determined by our board of directors in its sole discretion from time to time and will depend upon a number of factors, including:
cash available for distribution;
our results of operations;
our financial condition, especially in relation to the anticipated future capital needs of our properties;
the distribution requirements for REITs under the Code;
our operating expenses; and
other factors our board of directors deems relevant.
Consequently, we may not continue our current level of distributions to stockholders, and our distribution levels may fluctuate.
In addition, some of our distributions may include a return of capital. To the extent that we make distributions in excess of our current and accumulated earnings and profits, such distributions would generally be considered a return of capital for federal income tax purposes to the extent of the holder’s adjusted tax basis in its shares. A return of capital is not taxable, but it has the effect of reducing the holder’s adjusted tax basis in its investment. To the extent that distributions exceed the adjusted tax basis of a holder’s shares, they will be treated as gain from the sale or exchange of such stock. If we borrow to fund distributions, our future interest costs would increase, thereby reducing our earnings and cash available for distribution from what they otherwise would have been.
Risks Related to Our Organization and Structure
Our growth depends on external sources of capital, which are outside of our control and affect our ability to take advantage of strategic opportunities, satisfy debt obligations and make distributions to our stockholders.
In order to maintain our qualification as a REIT, we are generally required under the Code to annually distribute at least 90% of our net taxable income, determined without regard to the dividends paid deduction and excluding any net capital gain. In addition, we will be subject to federal income tax at regular corporate rates to the extent that we distribute less than 100% of our net taxable income, including any net capital gains. Because of these distribution requirements, we may not be able to fund future capital needs, including acquisition financing, from operating cash flow. Consequently, we may rely on third-party sources to fund our capital needs. We may not be able to sell equity or obtain financing on favorable terms or at all. In addition, any additional debt we incur will increase our leverage and debt service obligations. Our access to third-party sources of capital depends, in part, on:
general market conditions;

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the market’s perception of our growth potential;
our current debt levels;
our current and expected future earnings;
our cash flow and dividends; and
the market price per share of our common stock.
If we cannot raise equity or obtain capital from third-party sources, we may not be able to acquire properties when strategic opportunities exist, meet the capital and operating needs of our existing properties or satisfy our debt service obligations. Further, in order to meet the REIT distribution requirements and maintain our REIT status and to avoid the payment of income and excise taxes, we may need to borrow funds on a short-term basis even if the then-prevailing market conditions are not favorable for these borrowings. These short-term borrowing needs could result from differences in timing between the actual receipt of cash and inclusion of income for federal income tax purposes or the effect of non-deductible capital expenditures, the creation of reserves, certain restrictions on distributions under loan documents or required debt or amortization payments.
To the extent that capital is not available to acquire properties, profits may not be realized or their realization may be delayed, which could result in an earnings stream that is less predictable than some of our competitors or a failure to meet our projected earnings and distributable cash flow levels in a particular reporting period. Such a failure to meet our projected earnings and distributable cash flow levels in a particular reporting period could have an adverse effect on our financial condition and on the market price of our stock.
Our fiduciary duties as sole member of the general partner of our Operating Partnership could create conflicts of interest, which may impede business decisions that could benefit our stockholders.
We, as the sole member of the general partner of our Operating Partnership, have fiduciary duties to the other limited partners in our Operating Partnership, the discharge of which may conflict with the interests of our stockholders. The limited partners of our Operating Partnership have agreed that, in the event of a conflict in the fiduciary duties owed by us to our stockholders and, in our capacity as indirect general partner of our Operating Partnership, to such limited partners, we are under no obligation to give priority to the interests of such limited partners. In addition, those persons holding common units will have the right to vote on certain amendments to the Operating Partnership agreement (which require approval by a majority interest of the limited partners, including us) and individually to approve certain amendments that would adversely affect their rights. These voting rights may be exercised in a manner that conflicts with the interests of our stockholders. For example, we are unable to modify the rights of limited partners to receive distributions as set forth in the Operating Partnership agreement in a manner that adversely affects their rights without their consent, even though such modification might be in the best interest of our stockholders.
In addition, conflicts may arise when the interests of our stockholders and the limited partners of our Operating Partnership diverge, particularly in circumstances in which there may be an adverse tax consequence to the limited partners. Tax consequences to holders of common units upon a sale or refinancing of our properties may cause the interests of our senior management to differ from your own. As a result of unrealized built-in gain attributable to contributed property at the time of contribution, some holders of common units, including our principals, may suffer different and more adverse tax consequences than holders of our securities upon the sale or refinancing of the properties owned by our Operating Partnership, including disproportionately greater allocations of items of taxable income and gain upon a realization event. As those holders will not receive a correspondingly greater distribution of cash proceeds, they may have different objectives regarding the appropriate pricing, timing and other material terms of any sale or refinancing of certain properties, or whether to sell or refinance such properties at all.
We may experience conflicts of interest with several members of our senior management team and board who have or may become limited partners in our Operating Partnership through the receipt of common units or long-term incentive plan units in our Operating Partnership (“LTIP units”) granted under the STAG Industrial, Inc. 2011 Equity Incentive Plan, as amended and restated (the “2011 Plan”).
We are subject to financial reporting and other requirements for which our accounting, internal audit and other management systems and resources may not be adequately prepared and we may not be able to accurately report our financial results.
We are subject to reporting and other obligations under the Exchange Act, including the requirements of Section 404 of the Sarbanes-Oxley Act of 2002. Section 404 requires annual management assessments of the effectiveness of our internal controls over financial reporting and a report by our independent registered public accounting firm addressing these assessments. These reporting and other obligations place significant demands on our management, administrative, operational, internal audit and accounting resources and cause us to incur significant expenses. We may need to upgrade our systems or create new systems; implement additional

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financial and management controls, reporting systems and procedures; expand our internal audit function; or hire additional accounting, internal audit and finance staff. Any failure to maintain effective internal controls could have a material adverse effect on our business, operating results and trading price of our securities.
Our charter, the partnership agreement of our Operating Partnership and Maryland law contain provisions that may delay or prevent a change of control transaction.
Our charter contains 9.8% ownership limits.  Our charter, subject to certain exceptions, authorizes our directors to take such actions as are necessary and desirable to limit any person to actual or constructive ownership of no more than 9.8% in value or in number of shares, whichever is more restrictive, of the outstanding shares of our capital stock and no more than 9.8% in value or in number of shares, whichever is more restrictive, of the outstanding shares of our common stock. In addition, the articles supplementary for our 6.875% Series C Cumulative Redeemable Preferred Stock, par value $0.01 per share (the “Series C Preferred Stock”) provide that generally no person may own, or be deemed to own by virtue of the attribution provisions of the Code, either more than 9.8% in value or in number of shares, whichever is more restrictive, of our outstanding Series C Preferred Stock. Our board of directors, in its sole discretion, may exempt a proposed transferee from the ownership limits. However, our board of directors may not grant an exemption from the ownership limits to any proposed transferee whose ownership, direct or indirect, of more than 9.8% of the value or number of our outstanding shares of our common stock or Series C Preferred Stock, could jeopardize our status as a REIT. The ownership limits contained in our charter and the restrictions on ownership of our common stock may delay or prevent a transaction or a change of control that might be in the best interest of our stockholders.
Our board of directors may create and issue a class or series of preferred stock without stockholder approval.  Subject to the rights of holders of Series C Preferred Stock to approve the classification or issuance of any class or series of stock ranking senior to the Series C Preferred Stock, our board of directors is empowered under our charter to amend our charter to increase or decrease the aggregate number of shares of our common stock or the number of shares of stock of any class or series that we have authority to issue, to designate and issue from time to time one or more classes or series of preferred stock and to classify or reclassify any unissued shares of our common stock or preferred stock without stockholder approval. Subject to the rights of holders of Series C Preferred Stock discussed above, our board of directors may determine the relative rights, preferences and privileges of any class or series of preferred stock issued. The issuance of preferred stock could also have the effect of delaying or preventing a change of control transaction that might otherwise be in the best interests of our stockholders.
Certain provisions in the partnership agreement for our Operating Partnership may delay or prevent unsolicited acquisitions of us.  Provisions in the partnership agreement for our Operating Partnership could discourage third parties from making proposals involving an unsolicited acquisition of us or change of our control, although some stockholders might consider such proposals, if made, desirable. These provisions include, among others:
redemption rights of qualifying parties;
transfer restrictions on our common units;
the ability of the general partner in some cases to amend the partnership agreement without the consent of the limited partners; and
the right of the limited partners to consent to transfers of the general partnership interest and mergers under specified circumstances.
Any potential change of control transaction may be further limited as a result of provisions of the partnership unit designation for the LTIP units, which require us to preserve the rights of LTIP unit holders and may restrict us from amending the partnership agreement for our Operating Partnership in a manner that would have an adverse effect on the rights of LTIP unit holders.
Certain provisions of Maryland law could inhibit changes in control.  
Title 8, Subtitle 3 of the Maryland General Corporation Law (“MGCL”), permits our board of directors, without stockholder approval and regardless of what is currently provided in our charter or our bylaws, to implement takeover defenses, some of which (for example, a classified board) we do not currently have. These provisions may have the effect of inhibiting a third party from making an acquisition proposal for our company or of delaying, deferring or preventing a change in control of our company under circumstances that might be in the best interest of our stockholders.
Our charter and bylaws, the partnership agreement for our Operating Partnership and Maryland law contain other provisions that may delay, defer or prevent a transaction or a change of control that might be in the best interest of our stockholders.

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Under their employment agreements, our executive officers have the right to terminate their employment and, under certain conditions, receive severance, which may adversely affect us.
The employment agreements with our executive officers provide that each executive officer may terminate his employment and, under certain conditions, receive severance based on two or three times (depending on the executive officer) the annual total of salary and bonus and immediate vesting of equity-based awards. In addition, in the case of certain terminations, executive officers would not be restricted from competing with us after their departure.
Compensation awards to our management may not be tied to or correspond with our improved financial results or the stock price, which may adversely affect us.
The compensation committee of our board of directors is responsible for overseeing our compensation and employee benefit plans and practices, including our executive compensation plans and our incentive compensation and equity-based compensation plans. Our compensation committee has significant discretion in structuring compensation packages and may make compensation decisions based on any number of factors. As a result, compensation awards may not be tied to or correspond with improved financial results at our company or the share price of our common stock.
Our board of directors can take many actions without stockholder approval.
Our board of directors has the general authority to oversee our operations and determine our major corporate policies. This authority includes significant flexibility. For example, our board of directors can do the following:
amend or revise at any time and from time to time our investment, financing, borrowing and dividend policies and our policies with respect to all other activities, including growth, debt, capitalization and operations;
amend our policies with respect to conflicts of interest, provided that such changes are consistent with applicable legal requirements;
within the limits provided in our charter, prevent the ownership, transfer and accumulation of shares in order to protect our status as a REIT or for any other reason deemed to be in the best interests of us and our stockholders;
issue additional shares without obtaining stockholder approval, which could dilute the ownership of existing stockholders;
amend our charter to increase or decrease the aggregate number of shares of stock or the number of shares of stock of any class or series, without obtaining stockholder approval;
subject to the rights of holders of Series C Preferred Stock, classify or reclassify any unissued shares of our common stock or preferred stock, set the preferences, rights and other terms of such classified or reclassified shares, without obtaining stockholder approval;
make certain amendments to the 2011 Plan;
employ and compensate affiliates;
direct our resources toward investments that do not ultimately appreciate over time;
change creditworthiness standards with respect to third-party tenants; and
determine that it is no longer in our best interests to continue to qualify as a REIT.
Any of these actions could increase our operating expenses, impact our ability to make distributions or reduce the value of our assets without giving you, as a stockholder, the right to vote.
Our rights and the rights of our stockholders to take action against our directors and officers are limited.
Maryland law provides that a director or officer has no liability in that capacity if he or she performs his or her duties in good faith, in a manner he or she reasonably believes to be in our best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances. In addition, our charter eliminates our directors’ and officers’ liability to us and our stockholders for monetary damages except for liability resulting from actual receipt of an improper benefit or profit in money, property or services or active and deliberate dishonesty established by a final judgment and which is material to the cause of action. Our bylaws require us to indemnify our directors and officers to the maximum extent permitted by Maryland law for liability actually incurred in connection with any proceeding to which they may be made, or threatened to be made, a party, except to the

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extent that the act or omission of the director or officer was material to the matter giving rise to the proceeding and was either committed in bad faith or was the result of active and deliberate dishonesty, the director or officer actually received an improper personal benefit in money, property or services, or, in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful. As a result, we and our stockholders may have more limited rights against our directors and officers than might otherwise exist under common law. In addition, we may be obligated to fund the defense costs incurred by our directors and officers.
The number of shares of our common stock available for future sale, including by our affiliates or investors in our Operating Partnership, could adversely affect the market price of our common stock, and future sales by us of shares of our common stock may be dilutive to existing stockholders.
Sales of substantial amounts of shares of our common stock in the public market, or upon exchange of common units or exercise of any options, or the perception that such sales might occur could adversely affect the market price of our common stock. The exchange of common units for common stock, the exercise of any stock options or the vesting of any restricted stock granted under the 2011 Plan, the issuance of our common stock or common units in connection with property, portfolio or business acquisitions and other issuances of our common stock or common units could have an adverse effect on the market price of our common stock. The existence of shares of our common stock reserved for issuance under the 2011 Plan or upon exchange of common units may adversely affect the terms upon which we may be able to obtain additional capital through the sale of equity securities. We also have filed a registration statement with the SEC allowing us to offer, from time to time, an indefinite amount of equity securities (including common and preferred stock) on an as-needed basis and subject to our ability to affect offerings on satisfactory terms based on prevailing conditions. Our board of directors has authorized us to issue shares of common stock in our “at-the-market” program under such registration statement. We may also enter into forward sale agreements under our “at-the-market” program or in follow-on offerings from time to time. Settlement provisions contained in any forward sale agreement could result in substantial dilution to our earnings per share and return on equity or result in substantial cash payment obligations. In addition, in the case of our bankruptcy or insolvency, any forward sale agreement will automatically terminate, and we would not receive the expected proceeds from the sale of our common stock under such agreement. Our ability to execute our business strategy depends on our access to an appropriate blend of debt financing, including unsecured lines of credit and other forms of secured and unsecured debt, and equity financing, including issuances of common and preferred stock. No prediction can be made about the effect that future distributions or sales of our common stock will have on the market price of our common stock. In addition, future sales by us of our common stock may be dilutive to existing stockholders.
Future offerings of debt securities, which would be senior to our common stock upon liquidation, or equity securities, which would dilute our existing stockholders and may be senior to our common stock for the purposes of distributions, may adversely affect the market price of our securities.
Our common stock is ranked junior to our Series C Preferred Stock. Our outstanding Series C Preferred Stock also has or will have a preference upon our dissolution, liquidation or winding up in respect of assets available for distribution to our stockholders. Holders of our common stock are not entitled to preemptive rights or other protections against dilution. In the future, we may attempt to increase our capital resources by making additional offerings of debt or equity securities, including commercial paper, medium-term notes, senior or subordinated notes and classes of preferred or common stock. Upon liquidation, holders of our debt securities and shares of preferred stock and lenders with respect to other borrowings will receive a distribution of our available assets prior to the holders of our common stock. Additional equity offerings may dilute the holdings of our existing stockholders or reduce the market price of our securities or both. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, our stockholders bear the risk of our future offerings reducing the market price of our securities and diluting their proportionate ownership.
The market price and trading volume of our common stock may be volatile.
The market price of our common stock may be volatile. In addition, the trading volume in our common stock may fluctuate and cause significant price variations to occur. If the market price of our common stock declines significantly, you may be unable to resell your shares at or above the price at which they traded when you acquired them. We cannot assure you that the market price of our common stock will not fluctuate or decline significantly in the future. Some of the factors that could negatively affect the market price of our common stock or result in fluctuations in the market price or trading volume of our common stock include:
actual or anticipated variations in our quarterly operating results;
changes in our operations or earnings estimates or publication of research reports about us or the industry;
changes in our dividend policy;

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increases in market interest rates that lead purchasers of our shares to demand a higher yield;
changes in market valuations of similar companies;
adverse market reaction to any increased indebtedness we incur in the future;
our ability to comply with applicable financial covenants in our unsecured credit facility, unsecured term loans, unsecured notes, and other loan agreements;
additions or departures of key management personnel;
actions by institutional stockholders;
the realization of any of the other risk factors presented in this report;
speculation in the press or investment community; and
general U.S. and worldwide market and economic conditions.
General Real Estate Risks
Our performance and value are subject to general economic conditions and risks associated with our real estate assets.
The investment returns available from equity investments in real estate depend on the amount of income earned and capital appreciation generated by the properties, as well as the expenses incurred in connection with the properties. If our properties do not generate income sufficient to meet operating expenses, including debt service and capital expenditures, then our ability to pay distributions to our stockholders could be adversely affected. In addition, there are significant expenditures associated with an investment in real estate (such as mortgage payments, real estate taxes and maintenance costs) that generally do not decline when circumstances reduce the income from the property. Income from and the value of our properties may be adversely affected by:
changes in general or local economic climate;
the attractiveness of our properties to potential tenants;
changes in supply of or demand for similar or competing properties in an area;
bankruptcies, financial difficulties or lease defaults by our tenants;
technological changes, such as reconfiguration of supply chains, autonomous vehicles, drones, robotics, 3D printing, online marketplaces for industrial space, or other developments;
changes in interest rates and availability of permanent mortgage funds that may render the sale of a property difficult or unattractive or otherwise reduce returns to stockholders;
changes in operating costs and expenses and our ability to control rents;
changes in or increased costs of compliance with governmental rules, regulations and fiscal policies, including changes in tax, real estate, environmental and zoning laws, and our potential liability thereunder;
our ability to provide adequate maintenance and insurance;
changes in the cost or availability of insurance, including coverage for mold or asbestos;
unanticipated changes in costs associated with known adverse environmental conditions or retained liabilities for such conditions;
periods of high interest rates and tight money supply;
tenant turnover;
general overbuilding or excess supply in the market; and
disruptions in the global supply chain caused by political, regulatory or other factors, including terrorism and geopolitical developments outside the United States, such as the effects of the United Kingdom’s referendum to withdraw from the European Union.

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In addition, periods of economic slowdown or recession, rising interest rates or declining demand for real estate, or public perception that any of these events may occur, would result in a general decrease in rents or an increased occurrence of defaults under existing leases, which would adversely affect our financial condition and results of operations. Future terrorist attacks may result in declining economic activity, which could reduce the demand for, and the value of, our properties. To the extent that future attacks impact our tenants, their businesses similarly could be adversely affected, including their ability to continue to honor their existing leases.
For these and other reasons, we cannot assure you that we will be profitable or that we will realize growth in the value of our properties.
Actions by our competitors may decrease or prevent increases in the occupancy and rental rates of our properties.
We compete with other owners, operators and developers of real estate, some of which own properties similar to ours in the same markets and sub-markets in which our properties are located. If our competitors offer space at rental rates below current market rates or below the rental rates we currently charge our tenants, we may lose potential tenants, and we may be pressured to reduce our rental rates below those we currently charge in order to retain tenants when our tenants’ leases expire.
A significant portion of our properties have leases that expire in the next three years and we may be unable to renew leases, lease vacant space or re-lease space as leases expire.
Our results of operations, cash flows, cash available for distribution, and the value of our securities would be adversely affected if we are unable to lease, on economically favorable terms, a significant amount of space in our operating properties. As of December 31, 2019, leases with respect to approximately 32.3% (excluding month-to-month leases) of our total annualized base rental revenue will expire before December 31, 2022. We cannot assure you that expiring leases will be renewed or that our properties will be re-leased at base rental rates equal to or above the current market rental rates. In addition, the number of vacant or partially vacant industrial properties in a market or sub-market could adversely affect our ability to re‑lease the space at attractive rental rates.
We may be unable to lease vacant space or renew leases or re-lease on favorable terms.
A property may incur a vacancy either by the continued default of a tenant under its lease or the expiration of one of our leases. In addition, certain of the properties we acquire may have some level of vacancy at the time of closing. Certain of our properties may be specifically suited to the particular needs of a tenant. We may face difficulty obtaining, or be unable to obtain, a new tenant for any vacant space we have in our properties. If the vacancy continues for a long period of time, we may suffer reduced revenue resulting in less cash available to be distributed to stockholders. In addition, the resale value of a property could be diminished because the market value of a particular property will depend principally upon the value of the leases of such property.
We may not have funding for future tenant improvements.
When a tenant at one of our properties does not renew its lease or otherwise vacates its space in one of our buildings, it is likely that, in order to attract one or more new tenants, we will be required to expend funds to construct new tenant improvements in the vacated space. Except with respect to our current reserves for capital expenditures, tenant improvements and leasing commissions, we cannot assure you that we will have adequate sources of funding available to us for such purposes in the future.
Bankruptcy laws will limit our remedies if a tenant becomes bankrupt and rejects the lease and we may be unable to collect balances due on our leases.
The bankruptcy or insolvency of a tenant could diminish the income we receive from that tenant’s lease. Our tenants may experience downturns in their operating results due to adverse changes to their business or economic conditions, and those tenants that are highly leveraged may have a higher possibility of filing for bankruptcy or insolvency. We may not be able to evict a tenant solely because of its bankruptcy. On the other hand, a bankruptcy court might authorize the tenant to terminate its lease with us. If that happens, our claim against the bankrupt tenant for unpaid future rent would be an unsecured pre-petition claim subject to statutory limitations, and therefore such amounts received in bankruptcy are likely to be substantially less than the remaining rent we otherwise were owed under the lease. In addition, any claim we have for unpaid past rent could be substantially less than the amount owed. If the lease for such a property is rejected in bankruptcy, our revenue would be reduced and could adversely impact our ability to pay distributions to stockholders.
Real estate investments are not as liquid as other types of investments.
Real estate investments are not as liquid as other types of investments, and this lack of liquidity may limit our ability to react promptly to changes in economic or other conditions. In addition, significant expenditures associated with real estate investments, such as mortgage payments, real estate taxes and maintenance costs, are generally not reduced when circumstances cause a reduction in income from the investments. In addition, we intend to comply with the safe harbor rules relating to the number of properties

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that can be disposed of in a year, the tax basis and the costs of improvements made to these properties, and other items that enable a REIT to avoid punitive taxation on the sale of assets. Thus, our ability at any time to sell assets or contribute assets to property funds or other entities in which we have an ownership interest may be restricted. This lack of liquidity may limit our ability to vary our portfolio promptly in response to changes in economic or other conditions.
Acquired properties may be located in new markets where we may face risks associated with investing in an unfamiliar market.
We have acquired, and may continue to acquire, properties in markets that are new to us. When we acquire properties located in these markets, we may face risks associated with a lack of market knowledge or understanding of the local economy, forging new business relationships in the area and unfamiliarity with local government and permitting procedures.
Uninsured losses relating to real property may adversely affect your returns.
We attempt to ensure that all of our properties are adequately insured to cover casualty losses. However, there are certain losses, including losses from floods, earthquakes, acts of war, acts of terrorism or riots, that are not generally insured against or that are not generally fully insured against because it is not deemed economically feasible or prudent to do so. In addition, changes in the cost or availability of insurance could expose us to uninsured casualty losses. In the event that any of our properties incurs a casualty loss that is not fully covered by insurance, the value of our assets will be reduced by the amount of any such uninsured loss, and we could experience a significant loss of capital invested and potential revenue in these properties and could potentially remain obligated under any recourse debt associated with the property. Moreover, we, as the indirect general partner of our Operating Partnership, generally will be liable for all of our Operating Partnership’s unsatisfied recourse obligations, including any obligations incurred by our Operating Partnership as the general partner of joint ventures. In addition, we may have no source of funding to repair or reconstruct the damaged property, and we cannot assure you that any such sources of funding will be available to us for such purposes in the future. We evaluate our insurance coverage annually in light of current industry practice through an analysis prepared by outside consultants.
Environmentally hazardous conditions may adversely affect our operating results.
Under various federal, state and local environmental laws, a current or previous owner or operator of real property may be liable for the cost of remediation or removing hazardous or toxic substances on such property. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Even if more than one person may have been responsible for the contamination, each person covered by the environmental laws may be held responsible for all of the clean‑up costs incurred. In addition, third parties may sue the owner or operator of a site for damages based on personal injury, natural resources or property damage or other costs, including investigation and clean‑up costs, resulting from the environmental contamination. The presence of hazardous or toxic substances on one of our properties, or the failure to properly remediate a contaminated property, could give rise to a lien in favor of the government for costs it may incur to address the contamination, or otherwise adversely affect our ability to sell or lease the property or borrow using the property as collateral. Environmental laws also may impose restrictions on the manner in which property may be used or businesses may be operated. A property owner who violates environmental laws may be subject to sanctions which may be enforced by governmental agencies or, in certain circumstances, private parties. In connection with the acquisition and ownership of our properties, we may be exposed to such costs. The cost of defending against environmental claims, of compliance with environmental regulatory requirements or of remediation of any contaminated property could materially adversely affect our business, assets or results of operations and, consequently, amounts available for distribution to our stockholders.
Environmental laws in the United States also require that owners or operators of buildings containing asbestos properly manage and maintain the asbestos, adequately inform or train those who may come into contact with asbestos and undertake special precautions, including removal or other abatement, in the event that asbestos is disturbed during building renovation or demolition. These laws may impose fines and penalties on building owners or operators who fail to comply with these requirements and may allow third parties to seek recovery from owners or operators for personal injury associated with exposure to asbestos. Some of our properties contain asbestos‑containing building materials.
We invest in properties historically used for industrial, light manufacturing and commercial purposes. Some of these properties contain, or may have contained, underground storage tanks for the storage of petroleum products and other hazardous or toxic substances. All of these operations create a potential for the release of petroleum products or other hazardous or toxic substances. Some of our properties are adjacent to or near other properties that have contained or currently contain underground storage tanks used to store petroleum products or other hazardous or toxic substances. In addition, certain of our properties are on or are adjacent to or near other properties upon which others, including former owners or tenants of our properties, have engaged, or may in the future engage, in activities that may release petroleum products or other hazardous or toxic substances.
From time to time, we may acquire properties, or interests in properties, with known adverse environmental conditions where we believe that the environmental liabilities associated with these conditions are quantifiable and that the acquisition will yield a

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superior risk‑adjusted return. In such an instance, we underwrite the costs of environmental investigation, clean‑up and monitoring into the cost. Further, in connection with property dispositions, we may agree to remain responsible for, and to bear the cost of, remediating or monitoring certain environmental conditions on the properties.
Before acquiring a property, we typically obtain a preliminary assessment of environmental conditions at the property that meets certain specifications, often referred to as “Phase I environmental site assessment” or “Phase I environmental assessment.” It is intended to discover and evaluate information regarding the environmental condition of the surveyed property and surrounding properties. A Phase I environmental assessment generally includes an historical review, a public records review, an investigation of the surveyed site and surrounding properties, and preparation and issuance of a written report, but does not include soil sampling or subsurface investigations and typically does not include an asbestos survey. Material environmental conditions, liabilities or compliance concerns may arise after the environmental assessment has been completed. Moreover, there can be no assurance that:
future laws, ordinances or regulations will not impose any material environmental liability; or
the current environmental condition of our properties will not be affected by tenants, by the condition of land or operations in the vicinity of our properties (such as releases from underground storage tanks), or by third parties unrelated to us.
We are exposed to the potential impacts of future climate change and climate-change related risks.
We are exposed to potential physical risks from any changes in climate. Our properties may be exposed to rare catastrophic weather events, such as severe storms, floods or wildfires. If the frequency of extreme weather events increases due to climate change, our exposure to these events could increase. We may be harmed with respect to any real estate development or redevelopment by potential changes to the supply chain or stricter energy efficiency standards for industrial buildings. To the extent climate change causes shifts in weather patterns, our markets could experience negative consequences, including declining demand for industrial space and our inability to operate our buildings. Climate change may also have indirect negative effects on our business by increasing the cost of, or decreasing the availability of, property insurance on terms we find acceptable and increasing the cost of energy, building materials and snow removal at our properties. In addition, compliance with new laws or regulations relating to climate change, including compliance with “green” building codes, may require us to make improvements to our existing properties or result in increased operating costs that we may not be able to effectively pass on to our tenants. Any such laws or regulations could also impose substantial costs on our tenants, thereby impacting the financial condition of our tenants and their ability to meet their lease obligations and to lease or re-lease our properties.

Compliance or failure to comply with the ADA and other similar regulations could result in substantial costs.
Under the ADA, places of public accommodation must meet certain federal requirements related to access and use by disabled persons. Noncompliance could result in the imposition of fines by the federal government or the award of damages to private litigants. If we are required to make unanticipated expenditures to comply with the ADA, including removing access barriers, then our cash flows and the amounts available for distributions to our stockholders may be adversely affected. While we believe that our properties are currently in material compliance with these regulatory requirements, the requirements may change or new requirements may be imposed that could require significant unanticipated expenditures.
Some of our properties are subject to ground leases that expose us to the loss of such property upon breach or termination of the ground lease and may limit our ability to sell the property.
We own some properties through leasehold interests in the land underlying the building and we may acquire additional buildings in the future that are subject to similar ground leases. As lessee under a ground lease, we are exposed to the possibility of losing the property upon expiration, or an earlier breach by us, of the ground lease.
In the future, our ground leases may contain certain provisions that may limit our ability to sell certain of our properties. In addition, in the future, in order to assign or transfer our rights and obligations under certain of our ground leases, we may be required to obtain the consent of the landlord which, in turn, could adversely impact the price realized from any such sale.
We also own properties that benefit from payment in lieu of tax (“PILOT”) programs or similar programs and to facilitate such tax treatment our ownership in this property is structured as a leasehold interest with the relevant municipality serving as lessor. With respect to such arrangements, we have the right to purchase the fee interest in the property for a nominal purchase price, so the risk factors set forth above for traditional ground leases are mitigated by our ability to convert such leasehold interests to fee interests. In the event of such a conversion of our ownership interests, however, any preferential tax treatment offered by the PILOT programs will be lost.

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We may be unable to sell a property if or when we decide to do so, including as a result of uncertain market conditions.

We expect to hold the various real properties in which we invest until such time as we decide that a sale or other disposition is appropriate given our investment objectives. Our ability to dispose of properties on advantageous terms depends on factors beyond our control, including competition from other sellers and the availability of attractive financing for potential buyers of our properties. We cannot predict the various market conditions affecting real estate investments which will exist at any particular time in the future. Due to the uncertainty of market conditions which may affect the future disposition of our properties, we cannot assure you that we will be able to sell our properties at a profit in the future. Accordingly, the extent to which you will receive cash distributions and realize potential appreciation on our real estate investments will be dependent upon fluctuating market conditions.

Furthermore, we may be required to expend funds to correct defects or to make improvements before a property can be sold. We cannot assure you that we will have funds available to correct such defects or to make such improvements.

If we sell properties and provide financing to purchasers, defaults by the purchasers would adversely affect our cash flows.
If we decide to sell any of our properties, we presently intend to use our best efforts to sell them for cash. However, in some instances we may sell our properties by providing financing to purchasers. If we provide financing to purchasers, we will bear the risk that the purchaser may default, which could negatively impact our cash distributions to stockholders and result in litigation and related expenses. Even in the absence of a purchaser default, the distribution of the proceeds of sales to our stockholders, or their reinvestment in other assets, will be delayed until the promissory notes or other property we may accept upon a sale are actually paid, sold, refinanced or otherwise disposed of.
Risks Related to Our Debt Financings
Our operating results and financial condition could be adversely affected if we are unable to make required payments on our debt.
Our charter and bylaws do not limit the amount or percentage of indebtedness that we may incur, and we are subject to risks normally associated with debt financing, including the risk that our cash flows will be insufficient to meet required payments of principal and interest. There can be no assurance that we will be able to refinance any maturing indebtedness, that such refinancing would be on terms as favorable as the terms of the maturing indebtedness or that we will be able to otherwise obtain funds by selling assets or raising equity to make required payments on maturing indebtedness.
In particular, loans obtained to fund property acquisitions may be secured by first mortgages on such properties. If we are unable to make our debt service payments as required, a lender could foreclose on the property or properties securing its debt. This could cause us to lose part or all of our investment. Certain of our existing secured indebtedness is, and future secured indebtedness may be, cross-collateralized and, consequently, a default on this indebtedness could cause us to lose part or all of our investment in multiple properties.
Increases in interest rates could increase the amount of our debt payments and adversely affect our ability to make distributions to our stockholders.
As of December 31, 2019, we had total outstanding debt of approximately $1.7 billion, including $246.0 million of debt subject to variable interest rates (excluding amounts that were hedged to fix rates), and we expect that we will incur additional indebtedness in the future. Interest we pay reduces our cash available for distributions. Since we have incurred and may continue to incur variable rate debt, increases in interest rates by the Federal Reserve or changes in the London Interbank Offered Rate (“LIBOR”), or its replacement would raise our interest costs, which reduces our cash flows and our ability to make distributions to you. If we are unable to refinance our indebtedness at maturity or meet our payment obligations, the amount of our distributable cash flows and our financial condition would be adversely affected, and we may lose the property securing such indebtedness. In addition, if we need to repay existing debt during periods of rising interest rates, we could be required to sell one or more of our properties at times which may not permit realization of the maximum return on such investments.

We may be adversely affected by developments in the London Inter-bank Offered Rate (“LIBOR”) market, changes in the methods in which LIBOR is determined or the use of alternative reference rates.
As of December 31, 2019, approximately 61.8% or $1.0 billion of our outstanding debt outstanding was indexed to LIBOR. In July 2017, the U.K. Financial Conduct Authority (the “FCA”), which regulates LIBOR, announced its intention to stop compelling banks to submit rates for the calculation of LIBOR after 2021. Accordingly, there is considerable uncertainty regarding the publication of LIBOR beyond 2021. The Federal Reserve Board convened the Alternative Reference Rates Committee (“ARRC”) to identify a set of alternative reference rates for possible use as market benchmarks. Based on the ARRC’s recommendation, the

21


Federal Reserve Bank of New York began publishing the Secured Overnight Financing Rate (“SOFR”) and two other alternative rates beginning in April 2018. Since then, certain derivative products and debt securities tied to SOFR have been introduced, and a number of industry groups are developing transition plans to SOFR as the new market benchmark.
We are not able to predict whether LIBOR will actually cease to be available after 2021 or whether SOFR will become the market benchmark in its place. Any changes announced or adopted by the FCA or other authorities or institutions in the methods used for determining LIBOR or the transition from LIBOR to a successor benchmark may result in, among other things, a sudden or prolonged increase in LIBOR, a delay in the publication of LIBOR, higher interest obligations arising from such successor benchmark and changes in the rules or methodologies for determining LIBOR in the overall debt capital markets, which may discourage market participants from continuing to administer or to participate in variable rate debt tied to LIBOR or such successor benchmark. If  LIBOR as determined in accordance with the terms of our particular debt is no longer available, whether before or after 2021, the interest rates on such debt would be determined using various alternative methods, any of which may result in interest obligations which are more than or do not otherwise correlate over time with the payments that would have been made on such debt if LIBOR was available in its current form. As a result, there can be no assurance that any of the aforementioned developments or changes will not result in financial market disruptions, significant increases in benchmark interest rates, substantially higher financing costs or a shortage of available debt financing, any of which could have an adverse effect on us, which currently would be limited by our relatively low exposure to variable rate LIBOR-based debt.
Covenants in our unsecured credit facility, unsecured term loans, unsecured notes, mortgage notes, and any future debt instruments could limit our flexibility, prevent us from paying distributions, and adversely affect our financial condition or our status as a REIT.

The terms of certain of our mortgage notes require us to comply with loan-to-collateral-value ratios, debt service coverage ratios and, in the case of an event of default, limitations on the ability of our subsidiaries that are borrowers under our mortgage notes to make distributions to us or our other subsidiaries. In addition, our unsecured credit facility, unsecured term loans and unsecured notes require us to comply with loan-to-collateral-value ratios, debt service coverage ratios, leverage ratios, and fixed charge coverage ratios. Our existing loan covenants may reduce flexibility in our operations, and breaches of these covenants could result in defaults under the instruments governing the applicable indebtedness even if we have satisfied our payment obligations. In addition, upon a default, our unsecured credit facility, unsecured term loans and unsecured notes, will limit, among other things, our ability to pay dividends, even if we are otherwise in compliance with our financial covenants. Other indebtedness that we may incur in the future may contain financial or other covenants more restrictive than those in our unsecured credit facility, unsecured term loans, unsecured notes and mortgage notes.

Our unsecured credit facility, unsecured term loans and unsecured notes contain, and future borrowing facilities may contain, certain cross-default provisions which are triggered in the event that our other material indebtedness is in default. These cross-default provisions may require us to repay or restructure the facilities in addition to any mortgage or other debt that is in default. If our properties were foreclosed upon, or if we are unable to refinance our indebtedness at maturity or meet our payment obligations, we would be adversely affected.

We are a holding company and conduct substantially all of our business through our Operating Partnership. We do not have, apart from our ownership of our Operating Partnership, any independent operations. As a result, we will rely on distributions from our Operating Partnership to pay any dividends we might declare on our securities. We will also rely on distributions from our Operating Partnership to meet our debt service and other obligations, including our obligations to make distributions required to maintain our REIT status. The ability of subsidiaries of our Operating Partnership to make distributions to our Operating Partnership, and the ability of our Operating Partnership to make distributions to us in turn, will depend on their operating results and on the terms of any loans that encumber the properties owned by them. Such loans may contain lock box arrangements, reserve requirements, financial covenants and other provisions that restrict the distribution of funds. In the event of a default under these loans, the defaulting subsidiary would be prohibited from distributing cash. For example, our subsidiaries are party to mortgage notes that prohibit, in the event of default, their distribution of any cash to a related party, including our Operating Partnership. As a result, a default under any of these loans by the borrower subsidiaries could cause us to have insufficient cash to make the distributions required to maintain our REIT status.

Financing arrangements involving balloon payment obligations may adversely affect us.

Most of our financing arrangements require us to make a lump-sum or “balloon” payment at maturity. Our ability to make a balloon payment at maturity is uncertain and, in the event that we do not have sufficient funds to repay the debt at maturity of these loans, we will need to refinance this debt. If the credit environment is constrained at the time the balloon payment is due, we may not be able to refinance the existing financing on acceptable terms and may be forced to choose from a number of unfavorable options.

22


These options include agreeing to otherwise unfavorable financing terms on one or more of our unencumbered assets, selling one or more properties on disadvantageous terms or defaulting on the loan and permitting the lender to foreclose. The effect of a refinancing or sale could affect the rate of return to stockholders and the projected time of disposition of our assets. In addition, payments of principal and interest made to service our debts may leave us with insufficient cash to pay the distributions that we are required to pay to maintain our qualification as a REIT.

If mortgage debt or unsecured debt is unavailable at reasonable rates, we may not be able to finance the purchase of our properties or refinance our debt.

If mortgage debt or unsecured debt is unavailable at reasonable rates, we may not be able to finance the purchase of properties. In addition, we run the risk of being unable to refinance mortgage debt or unsecured debt when the loans come due or of being unable to refinance such debt on favorable terms. If interest rates are higher when we refinance such debt, our net income could be reduced. We may be unable to refinance such debt at appropriate times, which may require us to sell properties on terms that are not advantageous to us or could result in the foreclosure of any mortgaged properties. In addition, we locked in our fixed-rate debt at a point in time when we were able to obtain favorable interest rates, principal amortization and other terms. When we refinance our debt, prevailing interest rates and other factors may result in paying a greater amount of debt service, which will adversely affect our cash flow, and, consequently, our cash available for distribution to our stockholders.

Our hedging strategies may not be successful in mitigating our risks associated with interest rates.

We use various derivative financial instruments to provide a level of protection against interest rate risks, but no hedging strategy can protect us completely. These instruments involve risks, such as the risk that the counterparties may fail to honor their obligations under these arrangements, that these arrangements may not be effective in reducing our exposure to interest rate changes and that a court could rule that such agreements are not legally enforceable. These instruments may also generate income that may not be treated as qualifying REIT income for purposes of the 75% or 95% REIT income tests. In addition, the nature and timing of hedging transactions may influence the effectiveness of our hedging strategies. Poorly designed strategies or improperly executed transactions could actually increase our risk and losses. Moreover, hedging strategies involve transaction and other costs. We cannot assure you that our hedging strategy and the derivatives that we use will adequately offset the risk of interest rate volatility or that our hedging transactions will not result in losses that may adversely impact our financial condition.

Adverse changes in our credit ratings could negatively affect our financing activity.

The credit ratings of our unsecured debt are based on our operating performance, liquidity and leverage ratios, overall financial position and other factors employed by the credit rating agencies. Our credit ratings can affect the amount of capital we can access, as well as the terms and pricing of any debt we may incur. There can be no assurance that we will be able to maintain our current credit ratings, and in the event our credit ratings are downgraded, we would incur greater borrowing costs and may encounter difficulty in obtaining additional financing. Also, a downgrade in our credit ratings may trigger additional payments or other negative consequences under our unsecured credit facility and other debt instruments. Adverse changes in our credit ratings could harm our business and, in particular, our financing, refinancing and other capital market activities, our ability to manage debt maturities, our future growth and our acquisition activity.

U.S. Federal Income Tax Risks
Failure to qualify as a REIT would reduce our net earnings available for investment or distribution.
Our qualification as a REIT will depend upon our ability to meet requirements regarding our organization and ownership, distributions of our income, the nature and diversification of our income and assets and other tests imposed by the Code. If we fail to qualify as a REIT for any taxable year after electing REIT status, we will be subject to federal income tax on our taxable income at regular corporate rates (21%). In addition, we would generally be disqualified from treatment as a REIT for the four taxable years following the year in which we failed to qualify as a REIT. Losing our REIT status would reduce our net earnings available for investment or distribution to stockholders because of the additional tax liability. In addition, dividends to stockholders would no longer qualify for the dividends‑paid deduction and we would no longer be required to make distributions. If this occurs, we might be required to borrow funds or liquidate some investments in order to pay the applicable tax.
Even if we maintain our qualification as a REIT for federal income tax purposes, we may be subject to other tax liabilities that reduce our cash flow and our ability to make distributions to our stockholders.
Even if we maintain our qualification as a REIT for federal income tax purposes, we may be subject to some federal, state and local taxes on our income or property. For example:

23


To maintain our qualification as a REIT, we must distribute annually at least 90% of our REIT taxable income to our stockholders (which is determined without regard to the dividends-paid deduction or net capital gain). To the extent that we satisfy the distribution requirement but distribute less than 100% of our REIT taxable income, we will be subject to federal corporate income tax on the undistributed income.
We will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions we pay in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years.
If we have net income from the sale of foreclosure property that we hold primarily for sale to customers in the ordinary course of business or other non‑qualifying income from foreclosure property, we must pay a tax on that income at the highest corporate income tax rate.
If we sell an asset, other than foreclosure property, that we hold primarily for sale to customers in the ordinary course of business, our gain would be subject to the 100% “prohibited transaction” tax unless such sale were made by our taxable REIT subsidiary (“TRS”) or if we qualify for a safe harbor from tax.
Our TRS will be subject to federal, state and local income tax at regular corporate rates on any income that it earns.
We intend to make distributions to our stockholders to comply with the REIT requirements of the Code.
REIT distribution requirements could adversely affect our ability to execute our business plan.
From time to time, we may generate taxable income greater than our income for financial reporting purposes, or our taxable income may be greater than our cash flow available for distribution to stockholders. If we do not have other funds available in these situations, we could be required to borrow or raise equity on unfavorable terms, sell investments at disadvantageous prices, make taxable distributions of our stock or debt securities or find another alternative source of funds to distribute enough of our taxable income to satisfy the REIT distribution requirement and to avoid corporate income tax and the 4% excise tax in a particular year. These alternatives could increase our costs or reduce the value of our equity. Thus, compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.
To maintain our REIT status, we may be forced to forego otherwise attractive opportunities, which may delay or hinder our ability to meet our investment objectives and reduce our stockholders’ overall return.
To maintain our qualification as a REIT, we must satisfy certain tests on an ongoing basis concerning, among other things, the sources of our income, nature of our assets and the amounts we distribute to our stockholders. We may be required to make distributions to stockholders at times when it would be more advantageous to reinvest cash in our business or when we do not have funds readily available for distribution. Compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits and the value of our stockholders’ investment.
Re-characterization of sale‑leaseback transactions may cause us to lose our REIT status.
In certain circumstances, we expect to purchase real properties and lease them back to the sellers of such properties. While we intend to structure any such sale‑leaseback transaction such that the lease will be characterized as a “true lease” for tax purposes, thereby allowing us to be treated as the owner of the property for federal income tax purposes, we cannot assure you that the Internal Revenue Service (“IRS”) will not challenge such characterization. In the event that any such sale‑leaseback transaction is challenged and re-characterized as a financing transaction or loan for federal income tax purposes, deductions for depreciation and cost recovery relating to such property would be disallowed. If a sale‑leaseback transaction were so re-characterized, we might fail to satisfy the REIT qualification “asset tests” or “income tests” and, consequently, lose our REIT status effective with the year of re-characterization. Alternatively, the amount of our REIT taxable income could be recalculated which might also cause us to fail to meet the distribution requirement for a taxable year.

The prohibited transactions tax may limit our ability to engage in transactions, including dispositions of assets that would be treated as sales for federal income tax purposes.

A REIT’s net income from prohibited transactions is subject to a 100% tax. In general, prohibited transactions are sales or other dispositions of property, other than foreclosure property, held primarily for sale to customers in the ordinary course of business. We may be subject to the prohibited transaction tax upon a disposition of real property. Although a safe harbor to the characterization of the sale of real property by a REIT as a prohibited transaction is available, we cannot assure you that we can comply with the safe harbor or that we will avoid owning property that may be characterized as held primarily for sale to customers in the ordinary

24


course of business. Consequently, we may choose not to engage in certain sales of real property or may conduct such sales through a TRS.

We may be subject to adverse legislative or regulatory tax changes.

The rules dealing with federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S. Department of the Treasury. Changes to the tax laws, with or without retroactive application, could adversely affect our stockholders or us. We cannot predict how changes in the tax laws might affect our stockholders or us. New legislation, Treasury Regulations, administrative interpretations or court decisions could significantly and negatively affect our ability to qualify as a REIT or the federal income tax consequences of such qualification, or may reduce the relative attractiveness of an investment in a REIT compared to a corporation not qualified as a REIT. Additional changes to the tax laws are likely to continue to occur. We cannot predict the long-term effect of any recent changes or any future changes on REITs and their stockholders.

Item 1B.  Unresolved Staff Comments
None.
Item 2.  Properties
As of December 31, 2019, we owned the properties in the following table.
State
 
City
 
Number of
Buildings
 
Asset Type
 
Total Rentable
Square Feet
Alabama
 
 
 
 
 
 
 
 
 
 
Montgomery
 
1
 
Warehouse / Distribution
 
332,000

 
 
Phenix City
 
1
 
Warehouse / Distribution
 
117,568

Arkansas
 
 
 
 
 
 
 
 
 
 
Rogers
 
1
 
Warehouse / Distribution
 
400,000

Arizona
 
 
 
 
 
 
 
 
 
 
Avondale
 
1
 
Warehouse / Distribution
 
186,643

 
 
Tucson
 
1
 
Warehouse / Distribution
 
129,047

California
 
 
 
 
 
 
 
 
 
 
Camarillo
 
2
 
Warehouse / Distribution
 
732,606

 
 
Sacramento
 
1
 
Warehouse / Distribution
 
147,840

 
 
San Diego
 
1
 
Warehouse / Distribution
 
205,440

Colorado
 
 
 
 
 
 
 
 
 
 
Grand Junction
 
1
 
Warehouse / Distribution
 
82,800

 
 
Johnstown
 
1
 
Warehouse / Distribution
 
132,194

 
 
Longmont
 
1
 
Light Manufacturing
 
64,750

Connecticut
 
 
 
 
 
 
 
 
 
 
Avon
 
1
 
Light Manufacturing
 
78,400

 
 
East Windsor
 
2
 
Warehouse / Distribution
 
271,111

 
 
Milford
 
1
 
Warehouse / Distribution
 
200,000

 
 
North Haven
 
3
 
Warehouse / Distribution
 
824,727

 
 
Wallingford
 
1
 
Warehouse / Distribution
 
105,000

Delaware
 
 
 
 
 
 
 
 
 
 
New Castle
 
1
 
Warehouse / Distribution
 
485,987

Florida
 
 
 
 
 
 
 
 
 
 
Daytona Beach
 
1
 
Light Manufacturing
 
142,857

 
 
Jacksonville
 
5
 
Warehouse / Distribution
 
1,256,750

 
 
Ocala
 
1
 
Warehouse / Distribution
 
619,466

 
 
Orlando
 
1
 
Light Manufacturing
 
215,900

 
 
Orlando
 
1
 
Warehouse / Distribution
 
155,000

 
 
Pensacola
 
1
 
Flex / Office
 
30,620

 
 
Tampa
 
1
 
Warehouse / Distribution
 
78,560

Georgia
 
 
 
 
 
 
 
 
 
 
Augusta
 
1
 
Warehouse / Distribution
 
203,726

 
 
Calhoun
 
1
 
Warehouse / Distribution
 
151,200

 
 
Dallas
 
1
 
Warehouse / Distribution
 
92,807

 
 
Forest Park
 
2
 
Warehouse / Distribution
 
799,200

 
 
Norcross
 
1
 
Warehouse / Distribution
 
152,036

 
 
Savannah
 
1
 
Warehouse / Distribution
 
504,300

 
 
Shannon
 
1
 
Warehouse / Distribution
 
568,516


25


State
 
City
 
Number of
Buildings
 
Asset Type
 
Total Rentable
Square Feet
 
 
Smyrna
 
1
 
Warehouse / Distribution
 
102,000

 
 
Statham
 
1
 
Warehouse / Distribution
 
225,680

 
 
Stone Mountain
 
1
 
Warehouse / Distribution
 
78,000

Idaho
 
 
 
 
 
 
 
 
 
 
Idaho Falls
 
1
 
Warehouse / Distribution
 
90,300

Illinois
 
 
 
 
 
 
 
 
 
 
Batavia
 
1
 
Warehouse / Distribution
 
102,500

 
 
Belvidere
 
9
 
Warehouse / Distribution
 
1,364,222

 
 
DeKalb
 
1
 
Warehouse / Distribution
 
146,740

 
 
Gurnee
 
2
 
Warehouse / Distribution
 
562,500

 
 
Harvard
 
1
 
Light Manufacturing
 
126,304

 
 
 Itasca
 
1
 
Warehouse / Distribution
 
202,000

 
 
Libertyville
 
1
 
Warehouse / Distribution
 
251,961

 
 
Libertyville
 
1
 
Flex / Office
 
35,141

 
 
Lisle
 
1
 
Light Manufacturing
 
105,925

 
 
Machesney Park
 
1
 
Warehouse / Distribution
 
80,000

 
 
McHenry
 
2
 
Warehouse / Distribution
 
169,311

 
 
Montgomery
 
1
 
Warehouse / Distribution
 
584,301

 
 
Sauk Village
 
1
 
Warehouse / Distribution
 
375,785

 
 
Waukegan
 
1
 
Warehouse / Distribution
 
131,252

 
 
West Chicago
 
5
 
Light Manufacturing
 
305,874

 
 
West Chicago
 
1
 
Warehouse / Distribution
 
249,470

 
 
Wood Dale
 
1
 
Light Manufacturing
 
137,607

 
 
Woodstock
 
1
 
Light Manufacturing
 
129,803

Indiana
 
 
 
 
 
 
 
 
 
 
Albion
 
7
 
Light Manufacturing
 
261,013

 
 
Elkhart
 
2
 
Warehouse / Distribution
 
170,100

 
 
Fort Wayne
 
1
 
Warehouse / Distribution
 
108,800

 
 
Goshen
 
1
 
Warehouse / Distribution
 
366,000

 
 
Greenwood
 
1
 
Warehouse / Distribution
 
446,500

 
 
Kendallville
 
1
 
Light Manufacturing
 
58,500

 
 
Lafayette
 
3
 
Warehouse / Distribution
 
466,400

 
 
Lebanon
 
3
 
Warehouse / Distribution
 
2,065,393

 
 
Marion
 
1
 
Warehouse / Distribution
 
249,920

 
 
Portage
 
2
 
Warehouse / Distribution
 
786,249

 
 
South Bend
 
1
 
Warehouse / Distribution
 
225,000

Iowa
 
 
 
 
 
 
 
 
 
 
Ankeny
 
1
 
Warehouse / Distribution
 
200,011

 
 
Council Bluffs
 
1
 
Warehouse / Distribution
 
90,000

 
 
Des Moines
 
1
 
Warehouse / Distribution
 
121,922

 
 
Marion
 
1
 
Warehouse / Distribution
 
95,500

Kansas
 
 
 
 
 
 
 
 
 
 
Edwardsville
 
1
 
Warehouse / Distribution
 
270,869

 
 
Lenexa
 
3
 
Warehouse / Distribution
 
581,059

 
 
Olathe
 
2
 
Warehouse / Distribution
 
725,839

 
 
Wichita
 
3
 
Warehouse / Distribution
 
248,550

Kentucky
 
 
 
 
 
 
 
 
 
 
Bardstown
 
1
 
Warehouse / Distribution
 
102,318

 
 
Danville
 
1
 
Warehouse / Distribution
 
757,047

 
 
Erlanger
 
1
 
Warehouse / Distribution
 
108,620

 
 
Florence
 
2
 
Warehouse / Distribution
 
641,136

 
 
Hebron
 
1
 
Warehouse / Distribution
 
109,000

 
 
Louisville
 
2
 
Warehouse / Distribution
 
497,820

 
 
Walton
 
1
 
Warehouse / Distribution
 
224,921

Louisiana
 
 
 
 
 
 
 
 
 
 
Baton Rouge
 
3
 
Warehouse / Distribution
 
532,036

 
 
Shreveport
 
1
 
Warehouse / Distribution
 
420,259

Maine
 
 
 
 
 
 
 
 
 
 
Belfast
 
5
 
Flex / Office
 
306,554

 
 
Biddeford
 
2
 
Warehouse / Distribution
 
265,126

 
 
Gardiner
 
1
 
Warehouse / Distribution
 
265,000


26


State
 
City
 
Number of
Buildings
 
Asset Type
 
Total Rentable
Square Feet
 
 
Lewiston
 
1
 
Flex / Office
 
60,000

 
 
Portland
 
1
 
Warehouse / Distribution
 
100,600

Maryland
 
 
 
 
 
 
 
 
 
 
Elkridge
 
1
 
Warehouse / Distribution
 
167,410

 
 
Hampstead
 
1
 
Warehouse / Distribution
 
1,035,249

 
 
White Marsh
 
1
 
Warehouse / Distribution
 
60,000

 
 
 
 
 
 
 
 
 
Massachusetts
 
 
 
 
 
 
 
 
 
 
Chicopee
 
1
 
Warehouse / Distribution
 
217,000

 
 
Malden
 
2
 
Light Manufacturing
 
109,943

 
 
Middleborough
 
1
 
Light Manufacturing
 
80,100

 
 
Norton
 
1
 
Warehouse / Distribution
 
200,000

 
 
South Easton
 
1
 
Light Manufacturing
 
86,000

 
 
Stoughton
 
2
 
Warehouse / Distribution
 
258,213

 
 
Taunton
 
1
 
Warehouse / Distribution
 
349,870

 
 
Westborough
 
1
 
Warehouse / Distribution
 
121,700

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Michigan
 
 
 
 
 
 
 
 
 
 
Belleville
 
1
 
Light Manufacturing
 
160,464

 
 
Chesterfield
 
4
 
Warehouse / Distribution
 
478,803

 
 
Grand Rapids
 
1
 
Warehouse / Distribution
 
301,317

 
 
Holland
 
1
 
Warehouse / Distribution
 
195,000

 
 
Kentwood
 
1
 
Warehouse / Distribution
 
210,120

 
 
Kentwood
 
1
 
Light Manufacturing
 
85,157

 
 
Lansing
 
4
 
Warehouse / Distribution
 
770,425

 
 
Livonia
 
2
 
Warehouse / Distribution
 
285,306

 
 
Marshall
 
1
 
Light Manufacturing
 
57,025

 
 
Novi
 
3
 
Warehouse / Distribution
 
685,010

 
 
Plymouth
 
1
 
Warehouse / Distribution
 
125,214

 
 
Redford
 
1
 
Warehouse / Distribution
 
135,728

 
 
Romulus
 
1
 
Light Manufacturing
 
274,500

 
 
Romulus
 
1
 
Warehouse / Distribution
 
303,760

 
 
Sterling Heights
 
1
 
Warehouse / Distribution
 
108,000

 
 
Walker
 
1
 
Warehouse / Distribution
 
210,000

 
 
Warren
 
2
 
Warehouse / Distribution
 
422,377

 
 
Zeeland
 
1
 
Warehouse / Distribution
 
230,200

Minnesota
 
 
 
 
 
 
 
 
 
 
Carlos
 
1
 
Light Manufacturing
 
196,270

 
 
Blaine
 
1
 
Warehouse / Distribution
 
248,816

 
 
Bloomington
 
1
 
Light Manufacturing
 
145,351

 
 
Brooklyn Park
 
1
 
Warehouse / Distribution
 
200,720

 
 
Eagan
 
1
 
Warehouse / Distribution
 
276,550

 
 
Maple Grove
 
1
 
Warehouse / Distribution
 
108,628

 
 
Mendota Heights
 
1
 
Warehouse / Distribution
 
87,183

 
 
New Hope
 
1
 
Light Manufacturing
 
107,348

 
 
Oakdale
 
2
 
Warehouse / Distribution
 
210,044

 
 
Plymouth
 
3
 
Warehouse / Distribution
 
357,085

 
 
Rogers
 
1
 
Warehouse / Distribution
 
386,724

 
 
Savage
 
1
 
Warehouse / Distribution
 
244,050

 
 
Shakopee
 
1
 
Light Manufacturing
 
136,589

 
 
South Saint Paul
 
1
 
Warehouse / Distribution
 
422,727

Missouri
 
 
 
 
 
 
 
 
 
 
Earth City
 
1
 
Warehouse / Distribution
 
116,783

 
 
Fenton
 
1
 
Warehouse / Distribution
 
127,464

 
 
Hazelwood
 
1
 
Warehouse / Distribution
 
305,550

 
 
O'Fallon
 
2
 
Warehouse / Distribution
 
186,854

Nebraska
 
 
 
 
 
 
 
 
 
 
Omaha
 
3
 
Warehouse / Distribution
 
365,832

Nevada
 
 
 
 
 
 
 
 
 
 
Las Vegas
 
1
 
Light Manufacturing
 
122,472


27


State
 
City
 
Number of
Buildings
 
Asset Type
 
Total Rentable
Square Feet
 
 
Las Vegas
 
1
 
Warehouse / Distribution
 
34,916

 
 
Paradise
 
2
 
Light Manufacturing
 
80,422

 
 
Reno
 
1
 
Light Manufacturing
 
87,264

 
 
Sparks
 
1
 
Warehouse / Distribution
 
161,986

New Hampshire
 
 
 
 
 
 
 
 
 
 
Londonderry
 
1
 
Warehouse / Distribution
 
125,060

 
 
Nashua
 
1
 
Warehouse / Distribution
 
337,391

New Jersey
 
 
 
 
 
 
 
 
 
 
Branchburg
 
1
 
Warehouse / Distribution
 
113,973

 
 
Burlington
 
2
 
Warehouse / Distribution
 
1,552,121

 
 
Franklin Township
 
1
 
Warehouse / Distribution
 
183,000

 
 
Lopatcong
 
1
 
Warehouse / Distribution
 
237,500

 
 
Lumberton
 
1
 
Light Manufacturing
 
120,000

 
 
Moorestown
 
2
 
Warehouse / Distribution
 
187,569

 
 
Pedricktown
 
1
 
Warehouse / Distribution
 
245,749

 
 
Swedesboro
 
1
 
Warehouse / Distribution
 
123,962

New York
 
 
 
 
 
 
 
 
 
 
Buffalo
 
1
 
Warehouse / Distribution
 
117,000

 
 
Cheektowaga
 
1
 
Warehouse / Distribution
 
121,760

 
 
Farmington
 
1
 
Warehouse / Distribution
 
149,657

 
 
Gloversville
 
3
 
Warehouse / Distribution
 
211,554

 
 
Johnstown
 
1
 
Light Manufacturing
 
42,325

 
 
Johnstown
 
3
 
Warehouse / Distribution
 
169,602

North Carolina
 
 
 
 
 
 
 
 
 
 
Charlotte
 
3
 
Warehouse / Distribution
 
295,471

 
 
Durham
 
1
 
Warehouse / Distribution
 
80,600

 
 
Greensboro
 
1
 
Warehouse / Distribution
 
128,287

 
 
Huntersville
 
1
 
Warehouse / Distribution
 
185,570

 
 
Lexington
 
1
 
Warehouse / Distribution
 
201,800

 
 
Mebane
 
2
 
Warehouse / Distribution
 
606,840

 
 
Mebane
 
1
 
Light Manufacturing
 
202,691

 
 
Mocksville
 
1
 
Warehouse / Distribution
 
129,600

 
 
Mooresville
 
2
 
Warehouse / Distribution
 
799,200

 
 
Mountain Home
 
1
 
Warehouse / Distribution
 
146,014

 
 
Newton
 
1
 
Warehouse / Distribution
 
217,200

 
 
Pineville
 
1
 
Light Manufacturing
 
75,400

 
 
Rural Hall
 
1
 
Warehouse / Distribution
 
250,000

 
 
Salisbury
 
1
 
Warehouse / Distribution
 
288,000

 
 
Smithfield
 
1
 
Warehouse / Distribution
 
307,845

 
 
Troutman
 
1
 
Warehouse / Distribution
 
301,000

 
 
Winston-Salem
 
1
 
Warehouse / Distribution
 
385,000

 
 
Youngsville
 
1
 
Warehouse / Distribution
 
365,000

Ohio
 
 
 
 
 
 
 
 
 
 
Bedford Heights
 
1
 
Warehouse / Distribution
 
173,034

 
 
Boardman
 
1
 
Warehouse / Distribution
 
168,111

 
 
Columbus
 
2
 
Warehouse / Distribution
 
333,645

 
 
Dayton
 
2
 
Warehouse / Distribution
 
775,727

 
 
Fairborn
 
1
 
Warehouse / Distribution
 
258,680

 
 
Fairfield
 
2
 
Warehouse / Distribution
 
364,948

 
 
Gahanna
 
1
 
Warehouse / Distribution
 
383,000

 
 
Groveport
 
1
 
Warehouse / Distribution
 
320,657

 
 
Hilliard
 
1
 
Warehouse / Distribution
 
237,500

 
 
Macedonia
 
1
 
Warehouse / Distribution
 
201,519

 
 
Mason
 
1
 
Light Manufacturing
 
116,200

 
 
North Jackson
 
2
 
Warehouse / Distribution
 
517,150

 
 
Oakwood Village
 
1
 
Warehouse / Distribution
 
75,000

 
 
Salem
 
1
 
Light Manufacturing
 
271,000

 
 
Seville
 
1
 
Warehouse / Distribution
 
75,000

 
 
Streetsboro
 
1
 
Warehouse / Distribution
 
343,416

 
 
Strongsville
 
1
 
Warehouse / Distribution
 
161,984

 
 
Toledo
 
1
 
Warehouse / Distribution
 
177,500


28


State
 
City
 
Number of
Buildings
 
Asset Type
 
Total Rentable
Square Feet
 
 
Twinsburg
 
1
 
Warehouse / Distribution
 
150,974

 
 
West Chester
 
1
 
Warehouse / Distribution
 
269,868

 
 
West Jefferson
 
1
 
Warehouse / Distribution
 
857,390

Oklahoma
 
 
 
 
 
 
 
 
 
 
Oklahoma City
 
2
 
Warehouse / Distribution
 
303,740

 
 
Tulsa
 
1
 
Warehouse / Distribution
 
175,000

Oregon
 
 
 
 
 
 
 
 
 
 
Salem
 
2
 
Light Manufacturing
 
155,900

Pennsylvania
 
 
 
 
 
 
 
 
 
 
Allentown
 
1
 
Warehouse / Distribution
 
289,900

 
 
Burgettstown
 
1
 
Warehouse / Distribution
 
455,000

 
 
Charleroi
 
1
 
Warehouse / Distribution
 
119,161

 
 
Clinton
 
3
 
Warehouse / Distribution
 
737,768

 
 
Croydon
 
1
 
Warehouse / Distribution
 
101,869

 
 
Export
 
1
 
Warehouse / Distribution
 
138,270

 
 
Elizabethtown
 
1
 
Warehouse / Distribution
 
206,236

 
 
Imperial
 
1
 
Warehouse / Distribution
 
315,634

 
 
Lancaster
 
1
 
Warehouse / Distribution
 
240,529

 
 
Langhorne
 
2
 
Light Manufacturing
 
287,647

 
 
Langhorne
 
1
 
Warehouse / Distribution
 
102,000

 
 
Lebanon
 
1
 
Warehouse / Distribution
 
211,358

 
 
Mechanicsburg
 
4
 
Warehouse / Distribution
 
1,077,054

 
 
Muhlenberg Township
 
1
 
Warehouse / Distribution
 
392,107

 
 
New Galilee
 
1
 
Warehouse / Distribution
 
410,389

 
 
New Kensington
 
1
 
Warehouse / Distribution
 
200,500

 
 
O'Hara Township
 
1
 
Warehouse / Distribution
 
887,084

 
 
Pittston
 
1
 
Warehouse / Distribution
 
437,446

 
 
Reading
 
1
 
Warehouse / Distribution
 
248,000

 
 
Warrendale
 
1
 
Warehouse / Distribution
 
179,394

 
 
Williamsport
 
1
 
Warehouse / Distribution
 
250,000

 
 
York
 
3
 
Warehouse / Distribution
 
811,931

South Carolina
 
 
 
 
 
 
 
 
 
 
Columbia
 
1
 
Light Manufacturing
 
185,600

 
 
Duncan
 
2
 
Warehouse / Distribution
 
787,380

 
 
Edgefield
 
1
 
Light Manufacturing
 
126,190

 
 
Fountain Inn
 
1
 
Light Manufacturing
 
203,000

 
 
Fountain Inn
 
2
 
Warehouse / Distribution
 
442,472

 
 
Gaffney
 
1
 
Warehouse / Distribution
 
226,968

 
 
Goose Creek
 
1
 
Warehouse / Distribution
 
500,355

 
 
Graniteville
 
1
 
Warehouse / Distribution
 
450,000

 
 
Greenwood
 
2
 
Light Manufacturing
 
175,055

 
 
Greer
 
6
 
Warehouse / Distribution
 
645,417

 
 
Laurens
 
1
 
Warehouse / Distribution
 
125,000

 
 
Piedmont
 
5
 
Warehouse / Distribution
 
942,736

 
 
Rock Hill
 
2
 
Warehouse / Distribution
 
590,520

 
 
Simpsonville
 
3
 
Warehouse / Distribution
 
1,138,494

 
 
Spartanburg
 
9
 
Warehouse / Distribution
 
1,802,623

 
 
Summerville
 
1
 
Warehouse / Distribution
 
88,583

 
 
Ware Shoals
 
1
 
Light Manufacturing
 
20,514

 
 
West Columbia
 
1
 
Light Manufacturing
 
464,206

 
 
West Columbia
 
5
 
Warehouse / Distribution
 
969,532

Tennessee
 
 
 
 
 
 
 
 
 
 
Chattanooga
 
3
 
Warehouse / Distribution
 
646,200

 
 
Cleveland
 
1
 
Warehouse / Distribution
 
151,704

 
 
Clinton
 
1
 
Warehouse / Distribution
 
166,000

 
 
Jackson
 
1
 
Warehouse / Distribution
 
216,902

 
 
Knoxville
 
1
 
Light Manufacturing
 
106,000

 
 
Knoxville
 
2
 
Warehouse / Distribution
 
335,550

 
 
Lebanon
 
1
 
Warehouse / Distribution
 
348,880

 
 
Loudon
 
1
 
Warehouse / Distribution
 
104,000

 
 
Madison
 
1
 
Warehouse / Distribution
 
418,406


29


State
 
City
 
Number of
Buildings
 
Asset Type
 
Total Rentable
Square Feet
 
 
Mascot
 
1
 
Warehouse / Distribution
 
130,560

 
 
Mascot
 
1
 
Light Manufacturing
 
130,560

 
 
Memphis
 
2
 
Warehouse / Distribution
 
1,764,539

 
 
Murfreesboro
 
1
 
Warehouse / Distribution
 
102,505

 
 
Nashville
 
1
 
Warehouse / Distribution
 
150,000

 
 
Portland
 
1
 
Warehouse / Distribution
 
414,043

 
 
Vonore
 
1
 
Warehouse / Distribution
 
342,700

Texas
 
 
 
 
 
 
 
 
 
 
Arlington
 
2
 
Warehouse / Distribution
 
290,132

 
 
Cedar Hill
 
1
 
Warehouse / Distribution
 
420,000

 
 
Conroe
 
1
 
Warehouse / Distribution
 
252,662

 
 
El Paso
 
8
 
Warehouse / Distribution
 
1,903,033

 
 
Garland
 
1
 
Light Manufacturing
 
253,900

 
 
Houston
 
3
 
Light Manufacturing
 
536,735

 
 
Houston
 
9
 
Warehouse / Distribution
 
1,133,349

 
 
Humble
 
1
 
Warehouse / Distribution
 
289,200

 
 
Katy
 
2
 
Warehouse / Distribution
 
244,903

 
 
Laredo
 
2
 
Warehouse / Distribution
 
420,792

 
 
Mission
 
1
 
Warehouse / Distribution
 
270,084

 
 
Rockwall
 
1
 
Warehouse / Distribution
 
389,546

 
 
Stafford
 
1
 
Warehouse / Distribution
 
68,300

 
 
Waco
 
1
 
Warehouse / Distribution
 
66,400

Virginia
 
 
 
 
 
 
 
 
 
 
Chester
 
1
 
Warehouse / Distribution
 
100,000

 
 
Harrisonburg
 
1
 
Warehouse / Distribution
 
357,673

 
 
Independence
 
1
 
Warehouse / Distribution
 
120,000

 
 
N. Chesterfield
 
1
 
Warehouse / Distribution
 
109,520

Washington
 
 
 
 
 
 
 
 
 
 
Ridgefield
 
1
 
Warehouse / Distribution
 
141,400

Wisconsin
 
 
 
 
 
 
 
 
 
 
Caledonia
 
1
 
Light Manufacturing
 
53,680

 
 
Chippewa Falls
 
2
 
Light Manufacturing
 
97,400

 
 
Delavan
 
2
 
Light Manufacturing
 
146,400

 
 
DeForest
 
1
 
Warehouse / Distribution
 
254,431

 
 
De Pere
 
1
 
Warehouse / Distribution
 
200,000

 
 
East Troy
 
1
 
Warehouse / Distribution
 
149,624

 
 
Elkhorn
 
1
 
Warehouse / Distribution
 
111,000

 
 
Elkhorn
 
1
 
Light Manufacturing
 
78,540

 
 
Germantown
 
4
 
Warehouse / Distribution
 
520,163

 
 
Hartland
 
1
 
Warehouse / Distribution
 
121,050

 
 
Janesville
 
1
 
Warehouse / Distribution
 
700,000

 
 
Kenosha
 
1
 
Light Manufacturing
 
175,052

 
 
Madison
 
2
 
Warehouse / Distribution
 
283,000

 
 
Mayville
 
1
 
Light Manufacturing
 
339,179

 
 
New Berliin
 
2
 
Warehouse / Distribution
 
397,863

 
 
Oak Creek
 
2
 
Warehouse / Distribution
 
232,144

 
 
Pewaukee
 
2
 
Warehouse / Distribution
 
288,201

 
 
Pleasant Prairie
 
1
 
Light Manufacturing
 
105,637

 
 
Pleasant Prairie
 
1
 
Warehouse / Distribution
 
195,415

 
 
Sun Prairie
 
1
 
Warehouse / Distribution
 
427,000

 
 
West Allis
 
4
 
Warehouse / Distribution
 
241,977

 
 
Yorkville
 
1
 
Warehouse / Distribution
 
98,151

 
 
 
 
450
 
 
 
91,359,999


As of December 31, 2019, 25 of our 450 buildings were encumbered by mortgage indebtedness totaling approximately $55.1 million (excluding unamortized deferred financing fees, debt issuance costs, and fair market value premiums). See Note 4 in the accompanying Notes to the Consolidated Financial Statements and the accompanying Schedule III for additional information.

30


Geographic Diversification

The following table summarizes information about the 20 largest markets in our portfolio based on total annualized base rental revenue as of December 31, 2019.
Top 20 Markets(1)
 
% of Total Annualized Base Rental Revenue
Philadelphia, PA
 
8.5
%
Chicago, IL
 
7.6
%
Greenville/Spartanburg, SC
 
5.5
%
Pittsburgh, PA
 
4.5
%
Milwaukee/Madison, WI
 
4.2
%
Minneapolis/St Paul, MN
 
4.1
%
Detroit, MI
 
3.7
%
Houston, TX
 
3.4
%
Charlotte, NC
 
2.8
%
Cincinnati/Dayton, OH
 
2.6
%
Boston, MA
 
2.5
%
West Michigan, MI
 
2.5
%
Indianapolis, IN
 
2.4
%
Columbus, OH
 
2.3
%
El Paso, TX
 
2.2
%
Columbia, SC
 
1.8
%
Westchester/So Connecticut, CT/NY
 
1.8
%
Raleigh/Durham, NC
 
1.6
%
Memphis, TN
 
1.4
%
Kansas City, MO
 
1.4
%
Total
 
66.8
%
(1) As defined by CoStar Realty Information, Inc.

Industry Diversification

The following table summarizes information about the 20 largest tenant industries in our portfolio based on total annualized base rental revenue as of December 31, 2019.
Top 20 Tenant Industries(1)
 
% of Total
Annualized Base Rental Revenue
Auto Components
 
11.1
%
Air Freight & Logistics
 
8.6
%
Commercial Services & Supplies
 
7.4
%
Containers & Packaging
 
7.2
%
Machinery
 
4.8
%
Household Durables
 
4.7
%
Building Products
 
4.5
%
Food Products
 
4.5
%
Electrical Equipment
 
3.6
%
Food & Staples Retailing
 
3.4
%
Household Products
 
3.2
%
Internet & Direct Mkt Retail
 
3.2
%
Beverages
 
2.9
%
Media
 
2.8
%
Electronic Equip, Instruments
 
2.4
%
Chemicals
 
2.0
%
Specialty Retail
 
2.0
%
Textiles, Apparel, Luxury Good
 
1.9
%
Metals & Mining
 
1.8
%
Pharmaceuticals
 
1.6
%
Total
 
83.6
%
(1) Industry classification based on Global Industry Classification Standard methodology.


31


Tenant Diversification

The following table summarizes information about the 20 largest tenants in our portfolio based on total annualized base rental revenue as of December 31, 2019.
Top 20 Tenants(1)
 
Number of
Leases
 
% of Total
Annualized Base
Rental Revenue
Amazon
 
3
 
1.9
%
General Service Administration
 
1
 
1.8
%
XPO Logistics, Inc.
 
4
 
1.2
%
DHL Supply Chain
 
5
 
1.0
%
Solo Cup
 
1
 
1.0
%
TriMas Corporation
 
4
 
1.0
%
DS Smith
 
2
 
1.0
%
Ford Motor Company
 
1
 
0.9
%
Yanfeng US Automotive Interior
 
2
 
0.8
%
FedEx Corporation
 
3
 
0.8
%
WestRock Company
 
6
 
0.8
%
Kenco Logistic Services, LLC
 
2
 
0.8
%
Perrigo Company
 
2
 
0.7
%
Generation Brands
 
1
 
0.7
%
Carolina Beverage Group
 
2
 
0.7
%
Emerson Electric
 
2
 
0.7
%
Quoizel, Inc.
 
1
 
0.7
%
Hachette Book Group, Inc.
 
1
 
0.7
%
Schneider Electric USA, Inc.
 
3
 
0.7
%
American Tire Distributors Inc
 
4
 
0.6
%
Total
 
50
 
18.5
%
(1) Includes tenants, guarantors, and/or non-guarantor parents.

Scheduled Lease Expirations

As of December 31, 2019, our weighted average lease term was approximately 5.2 years. We define weighted average lease term as the contractual lease term in years, assuming that tenants exercise no renewal options, purchase options, or early termination rights, weighted by square footage. The following table summarizes lease expirations for leases in place as of December 31, 2019, plus available space, for each of the ten calendar years beginning with 2020 and thereafter in our portfolio. 
Lease Expiration Year
 
Number of
Leases
Expiring
 
Total Rentable
Square Feet
 
% of Total
Occupied
Square Feet
 
Total Annualized
Base Rental Revenue
(in thousands)
 
% of Total Annualized
Base Rental Revenue
Available
 
 
4,543,872

 

 
$

 

Month-to-month leases
 
2
 
22,800

 
%
 
54

 
%
2020
 
41
 
6,977,348

 
8.0
%
 
32,555

 
8.6
%
2021
 
74
 
11,594,269

 
13.4
%
 
50,683

 
13.3
%
2022
 
73
 
9,048,131

 
10.4
%
 
39,581

 
10.4
%
2023
 
74
 
11,398,164

 
13.1
%
 
44,345

 
11.7
%
2024
 
60
 
11,119,594

 
12.8
%
 
47,036

 
12.4
%
2025
 
41
 
7,295,205

 
8.4
%
 
30,933

 
8.1
%
2026
 
39
 
6,543,870

 
7.6
%
 
30,121

 
7.9
%
2027
 
19
 
2,724,585

 
3.1
%
 
13,394

 
3.5
%
2028
 
25
 
4,716,771

 
5.5
%
 
20,136

 
5.3
%
2029
 
21
 
3,743,900

 
4.3
%
 
18,220

 
4.8
%
Thereafter
 
40
 
11,631,490

 
13.4
%
 
53,366

 
14.0
%
Total/weighted average
 
509
 
91,359,999

 
100.0
%
 
$
380,424

 
100.0
%

Item 3.  Legal Proceedings
From time to time, we are a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of our business. We are not currently a party, as plaintiff or defendant, to any legal proceedings that, individually or in the aggregate, would be expected to have a material effect on our business, financial condition or results of operations if determined adversely to our company.

32


Item 4.  Mine Safety Disclosures

Not applicable.

PART II.
Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Information about our equity compensation plans and other related stockholder matters is incorporated by reference to our definitive Proxy Statement for our 2020 Annual Meeting of Stockholders.
Market Information
Our common stock is listed on the NYSE and is traded under the symbol “STAG.”

Holders of Our Common Stock

As of February 10, 2020, we had 69 stockholders of record. This figure does not reflect the beneficial ownership of shares held in the nominee name.

Dividends

To maintain our qualification as a REIT, we must make annual distributions to our stockholders of at least 90% of our taxable net income (not including net capital gains). Dividends are declared at the discretion of our board of directors and depend on actual and anticipated cash from operations, our financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Code and other factors our board of directors may consider relevant.

Unregistered Sales of Equity Securities and Use of Proceeds

Recent Sales of Unregistered Equity Securities

During the quarter ended December 31, 2019, the Operating Partnership issued 3,550 common units in the Operating Partnership upon exchange of outstanding long term incentive plan units pursuant to the 2011 Plan. Subject to certain restrictions, common units in the Operating Partnership may be redeemed for cash in an amount equal to the value of a share of common stock or, at our election, for a share of common stock on a one-for-one basis.

During the quarter ended December 31, 2019, we issued 19,055 shares of common stock upon redemption of 19,055 common units in the Operating Partnership held by various limited partners.  The issuance of such shares of common stock was either registered under the Securities Act or effected in reliance upon an exemption from registration provided by Section 4(a)(2) under the Securities Act and the rules and regulations promulgated thereunder. We relied on the exemption based on representations given by the holders of the common units.

All other issuances of unregistered securities during the quarter ended December 31, 2019, if any, have previously been disclosed in filings with the SEC.

33


Performance Graph
The following graph provides a comparison of the cumulative total return on our common stock with the cumulative total return on the Standard & Poor’s 500 Index and the MSCI US REIT Index. The MSCI US REIT Index represents performance of publicly-traded REITs. Returns over the indicated period are based on historical data and should not be considered indicative of future returns. The graph covers the period from December 31, 2014 to December 31, 2019 and assumes that $100 was invested in our common stock and in each index on December 31, 2014 and that all dividends were reinvested.
CHART-8D932542E1E8587280E.JPG
This performance graph shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act, or incorporated by reference into any filing by us under the Securities Act, except as shall be expressly set forth by specific reference in such filing.

34


Item 6.  Selected Financial Data

The following table summarizes selected financial and operating data for our company on a historical consolidated basis. The following data should be read in conjunction with the Consolidated Financial Statements and Notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Annual Report on Form 10-K. Our selected historical Consolidated Balance Sheet information as of December 31, 2019, 2018, 2017, 2016 and 2015, and our selected historical Consolidated Statement of Operations data for the years ended December 31, 2019, 2018, 2017, 2016 and 2015, have been derived from the audited financial statements of STAG Industrial, Inc. Certain prior year amounts have been reclassified to conform to the current year presentation.
 
 
Year Ended December 31,
Selected Financial Data (in thousands, except per share data)
 
2019
 
2018
 
2017
 
2016
 
2015
Statements of Operations Data:
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
 
 
Total revenue
 
$
405,950

 
$
350,993

 
$
301,087

 
$
250,243

 
$
218,633

Expenses
 
 
 
 
 
 
 
 
 
 
Property
 
75,179

 
69,021

 
57,701

 
48,904

 
42,627

General and administrative
 
35,946

 
34,052

 
33,349

 
33,395

 
28,750

Property acquisition costs
 

 

 
5,386

 
4,567

 
4,757

Depreciation and amortization
 
185,450

 
167,617

 
150,881

 
125,444

 
110,421

Loss on impairments
 
9,757

 
6,182

 
1,879

 
16,845

 
29,272

Gain on involuntary conversion
 

 

 
(325
)
 

 

Other expenses
 
1,785

 
1,277

 
1,786

 
1,149

 
1,048

Total expenses
 
308,117

 
278,149

 
250,657

 
230,304

 
216,875

Other income (expense)
 
 
 
 
 
 
 
 
 
 
Interest and other income
 
87

 
20

 
12

 
10

 
9

Interest expense
 
(54,647
)
 
(48,817
)
 
(42,469
)
 
(42,923
)
 
(36,098
)
Loss on extinguishment of debt
 

 
(13
)
 
(15
)
 
(3,261
)
 

Gain on the sales of rental property, net
 
7,392

 
72,211

 
24,242

 
61,823

 
4,986

Total other income (expense)
 
(47,168
)
 
23,401

 
(18,230
)
 
15,649

 
(31,103
)
Net income (loss)
 
$
50,665

 
$
96,245

 
$
32,200

 
$
35,588

 
$
(29,345
)
Less: income (loss) attributable to noncontrolling interest after preferred stock dividends
 
1,384

 
3,319

 
941

 
1,069

 
(1,962
)
Less: preferred stock dividends
 
5,156

 
7,604

 
9,794

 
13,897

 
10,848

Less: redemption of preferred stock
 

 
2,661

 

 

 

Less: amount allocated to participating securities
 
314

 
276

 
334

 
384

 
385

Net income (loss) attributable to common stockholders
 
$
43,811

 
$
82,385

 
$
21,131

 
$
20,238

 
$
(38,616
)
Net income (loss) per share attributable to common stockholders — basic
 
$
0.35

 
$
0.80

 
$
0.24

 
$
0.29

 
$
(0.58
)
Net income (loss) per share attributable to common stockholders — diluted
 
$
0.35

 
$
0.79

 
$
0.23

 
$
0.29

 
$
(0.58
)
Balance Sheets Data (December 31):
 
 
 
 
 
 
 
 
 
 
Rental property, before accumulated depreciation and amortization
 
$
4,627,444

 
$
3,555,133

 
$
3,097,276

 
$
2,541,705

 
$
2,188,642

Rental property, after accumulated depreciation and amortization
 
$
3,998,507

 
$
2,991,701

 
$
2,567,577

 
$
2,116,836

 
$
1,839,967

Total assets
 
$
4,164,645

 
$
3,102,532

 
$
2,680,667

 
$
2,186,156

 
$
1,901,782

Total debt
 
$
1,645,013

 
$
1,325,908

 
$
1,173,781

 
$
1,036,139

 
$
980,248

Total liabilities
 
$
1,800,754

 
$
1,432,900

 
$
1,270,360

 
$
1,119,230

 
$
1,043,925

Total equity
 
$
2,363,891

 
$
1,669,632

 
$
1,410,307

 
$
1,066,926

 
$
857,857

Other Data:
 
 
 
 
 
 
 
 
 
 
Dividends declared per common share
 
$
1.430004

 
$
1.419996

 
$
1.405002

 
$
1.389996

 
$
1.365

Net cash provided by operating activities
 
$
233,357

 
$
197,769

 
$
162,098

 
$
135,788

 
$
121,747

Net cash used in investing activities
 
$
1,222,574

 
$
507,201

 
$
571,635

 
$
346,259

 
$
370,589

Net cash provided by financing activities
 
$
978,539

 
$
303,845

 
$
415,861

 
$
211,870

 
$
238,464



35


Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this report. For the definitions of certain terms used in the following discussion, refer to Item 1, “Business - Certain Definitions” included elsewhere in this Annual Report on Form 10-K.

Overview

We are a REIT focused on the acquisition, ownership, and operation of single-tenant, industrial properties throughout the United States. We seek to (i) identify properties that offer relative value across all locations, industrial property types, and tenants through the principled application of our proprietary risk assessment model, (ii) operate our properties in an efficient, cost-effective manner, and (iii) capitalize our business appropriately given the characteristics of our assets. We are a Maryland corporation and our common stock is publicly traded on the NYSE under the symbol “STAG.”

We are organized and conduct our operations to qualify as a REIT under Sections 856 through 860 of the Code, and generally are not subject to federal income tax to the extent we currently distribute our income to our stockholders and maintain our qualification as a REIT. We remain subject to state and local taxes on our income and property and to U.S. federal income and excise taxes on our undistributed income.

Our qualification and taxation as a REIT depend upon our ability to meet on a continuing basis, through actual annual operating results, qualification tests in the federal income tax laws. Those tests involve the percentage of income that we earn from specified sources, the percentage of our assets that falls within specified categories, the diversity of our capital stock ownership and the percentage of our earnings that we distribute.

As of December 31, 2019, we owned 450 buildings in 38 states with approximately 91.4 million rentable square feet, consisting of 365 warehouse/distribution buildings, 69 light manufacturing buildings, eight flex/office buildings, six Value Add Portfolio buildings, and two buildings classified as held for sale. We own both single- and multi-tenant properties, although we focus on the former.

As of December 31, 2019, our buildings were approximately 95% leased to 414 tenants, with no single tenant accounting for more than approximately 1.9% of our total annualized base rental revenue and no single industry accounting for more than approximately 11.1% of our total annualized base rental revenue.

We own the interests in all of our properties and conduct substantially all of our business through our Operating Partnership. We are the sole member of the sole general partner of the Operating Partnership. As of December 31, 2019, we owned approximately 97.5% of the common equity of our Operating Partnership, and our current and former executive officers, directors, senior employees and their affiliates, and third parties who contributed properties to us in exchange for common equity in our Operating Partnership, owned the remaining 2.5%.

Factors That May Influence Future Results of Operations

Our ability to increase revenues or cash flow will depend in part on our (i) external growth, specifically acquisition activity, and (ii) internal growth, specifically occupancy and rental rates on our portfolio.  A variety of other factors, including those noted below, also affect our future results of operations.

Outlook

The outlook for our business remains positive, albeit on a moderated basis in light of over ten years of economic growth, uncertainty regarding the current U.S. presidential administration and its policy initiatives, and continued asset appreciation. In the fourth quarter of 2019, the federal funds target rate was lowered by 25 basis points, to a target range of 1.50% to 1.75%. The Federal Reserve has signaled it will support economic growth as needed. The current economic growth combined with the favorable industrial supply demand balance should translate to a net positive result for our business. Specifically, our existing portfolio should benefit from rising rental rates and strong occupancy. Furthermore, we believe certain characteristics of our business should position us well in an uncertain interest rate environment, including the fact that we have minimal floating rate debt exposure (taking into account our hedging activities) and that many of our competitors for the assets we purchase tend to be smaller local and regional investors who are likely to be more heavily impacted by interest rates.


36


Several industrial specific trends contribute to the expected strong demand, including:

the rise of e-commerce (as compared to the traditional retail store distribution model) and the concomitant demand by e-commerce industry participants for well-located, functional distribution space;
the increasing attractiveness of the United States as a manufacturing and distribution location because of the size of the United States consumer market, an increase in overseas labor costs and the overall cost of supplying and shipping goods (i.e. the shortening and fattening of the supply chain); and
the overall quality of the transportation infrastructure in the United States.

Our portfolio continues to benefit from historically low availability throughout the national industrial market. As of the most recent data, demand for space continues to support new supply and an accommodative environment for owners. Development activity has steadily increased over the past several years and is now reaching material levels in a growing number of primary industrial markets. Though availability remains historically low, this is a trend we will monitor closely. In addition, currently, the supply remains fairly concentrated in the larger primary industrial markets and we have limited exposure to many of these markets. On the demand side, we note that the quality and availability of labor remains a key focus of tenants making occupancy decisions. We will continue to monitor the supply and demand fundamentals for industrial real estate and assess its impact on our business.
Conditions in Our Markets

The buildings in our portfolio are located in markets throughout the United States. Positive or negative changes in economic or other conditions, new supply, adverse weather conditions and natural disasters and other factors in these markets may affect our overall performance.

Rental Income

We receive income primarily in the form of rental income from the tenants who occupy our buildings. The amount of rental income generated by the buildings in our portfolio depends principally on occupancy and rental rates.

Future economic downturns or regional downturns affecting our submarkets that impair our ability to renew or re-lease space and the ability of our tenants to fulfill their lease commitments, as in the case of tenant bankruptcies, could adversely affect our ability to maintain or increase rental rates at our buildings. Our ability to lease our properties and the attendant rental rate is dependent upon, among other things, (i) the overall economy, (ii) the supply/demand dynamic in our markets, (iii) the quality of our properties, including relative fit within the submarket, and (iv) our tenants’ ability to meet their contractual obligations to us.

The following table summarizes our Operating Portfolio leases that commenced during the years ended December 31, 2019 and 2018. Certain leases contain rental concessions; any such rental concessions are accounted for on a straight-line basis over the term of the lease.
Operating Portfolio
 
Square Feet
 
Cash
Basis Rent Per
Square Foot
 
SL Rent Per
Square Foot
 
Total Costs Per
Square
Foot(1)
 
Cash
Rent Change
 
SL Rent Change
 
Weighted Average Lease
Term(2)
(years)
 
Rental Concessions per Square Foot(3)
 
 
 
 
 
 
 
 
Year ended December 31, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New Leases
 
1,869,573

 
$
4.26

 
$
4.46

 
$
2.89

 
14.5
%
 
24.6
%
 
5.6

 
$
0.51

Renewal Leases
 
7,740,691

 
$
4.05

 
$
4.20

 
$
0.68

 
9.2
%
 
17.0
%
 
4.0

 
$
0.08

Total/weighted average
 
9,610,264

 
$
4.09

 
$
4.25

 
$
1.11

 
10.0
%
 
18.2
%
 
4.3

 
$
0.17

(1)
We define Total Costs as the costs for improvements of vacant and renewal spaces, as well as the contingent-based legal fees and commissions for leasing transactions. Total Costs per square foot represent the total costs expected to be incurred on the leases that commenced during the period and do not reflect actual expenditures for the period.
(2)
We define weighted average lease term as the contractual lease term in years, assuming that tenants exercise no renewal options, purchase options, or early termination rights, weighted by square footage.
(3)
Represents the total rental concessions for the entire lease term.



37


Property Operating Expenses

Our property operating expenses generally consist of utilities, real estate taxes, management fees, insurance, and site repair and maintenance costs. For the majority of our tenants, our property operating expenses are controlled, in part, by the triple net provisions in tenant leases. In our triple net leases, the tenant is responsible for all aspects of and costs related to the building and its operation during the lease term, including utilities, taxes, insurance and maintenance costs, but typically excluding roof and building structure. However, we also have modified gross leases and gross leases in our building portfolio. The terms of those leases vary and on some occasions we may absorb certain building related expenses of our tenants. In our modified gross leases, we are responsible for some building related expenses during the lease term, but the cost of most of the expenses is passed through to the tenant for reimbursement to us. In our gross leases, we are responsible for all costs related to the building and its operation during the lease term. Our overall performance will be affected by the extent to which we are able to pass-through property operating expenses to our tenants.

Scheduled Lease Expirations

Our ability to re-lease space subject to expiring leases will impact our results of operations and is affected by economic and competitive conditions in our markets and by the desirability of our individual buildings. Leases that comprise approximately 8.6% of our total annualized base rental revenue will expire during the period from January 1, 2020 to December 31, 2020, excluding month-to-month leases. We assume, based upon internal renewal probability estimates, that some of our tenants will renew and others will vacate and the associated space will be re-let subject to downtime assumptions. Using the aforementioned assumptions, we expect that the rental rates on the respective new leases will generally be the same as the rates under existing leases expiring during the period January 1, 2020 to December 31, 2020, thereby resulting in approximately the same revenue from the same space.

Critical Accounting Policies

The preparation of financial statements in conformity with GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. We base our estimates on historical experience and on various other assumptions believed to be reasonable under the circumstances. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If our judgment or interpretation of the facts and circumstances relating to various transactions had been different, it is possible that different accounting policies would have been applied resulting in a different presentation of our financial statements. From time to time, we evaluate our estimates and assumptions. In the event estimates or assumptions prove to be different from actual results, adjustments are made in subsequent periods to reflect more current information. Below is a discussion of accounting policies that we consider critical in that they may require complex judgment in their application or require estimates about matters that are inherently uncertain.

See Note 2 in the accompanying Notes to the Consolidated Financial Statements for a discussion of new accounting pronouncements.

Rental Property and Deferred Leasing Intangibles

Rental property is carried at cost less accumulated depreciation and amortization. Expenditures for maintenance and repairs are expensed as incurred. Significant renovations and betterments that extend the economic useful lives of assets are capitalized.

We capitalize costs directly and indirectly related to the development, pre-development, redevelopment, or improvement of rental property. Real estate taxes, compensation costs of development personnel, insurance, interest, and other directly related costs during construction periods are capitalized as incurred, with depreciation commencing with the date the property is substantially completed. Such costs begin to be capitalized to the development projects from the point we are undergoing the necessary activities to get the development project ready for its intended use and cease when the development projects are substantially completed and held available for occupancy. Interest is capitalized based on actual capital expenditures from the period when development or redevelopment commences until the asset is ready for its intended use, at the weighted average borrowing rate of our unsecured indebtedness during the period.

For properties classified as held for sale, we cease depreciating and amortizing the rental property and value the rental property at the lower of depreciated and amortized cost or fair value less costs to dispose. We present those properties classified as held for sale with any qualifying assets and liabilities associated with those properties as held for sale in the accompanying Consolidated Balance Sheets.


38


Using information available at the time of acquisition, we allocate the purchase price of properties acquired based upon the fair value of the assets acquired and liabilities assumed, which generally consist of land, buildings, tenant improvements, mortgage debt assumed, and deferred leasing intangibles, which includes in-place leases, above market and below market leases, and tenant relationships. The process for determining the allocation to these components requires estimates and assumptions, including rental rates, discount rates and exit capitalization rates, and land value per square foot, as well as available market information. The fair value of the tangible assets of an acquired property considers the value of the property as if it were vacant. The portion of the purchase price that is allocated to above and below market leases is valued based on the present value of the difference between prevailing market rates and the in-place rates measured over a period equal to the remaining term of the lease term plus the term of any bargain renewal options. The purchase price is further allocated to in-place lease values and tenant relationships based on our evaluation of the specific characteristics of each tenant’s lease and its overall relationship with the respective tenant.

The above and below market lease values are amortized into rental income over the remaining lease term. The value of in-place lease intangibles and tenant relationships are amortized over the remaining lease term (and expected renewal period of the respective lease for tenant relationships) as increases to depreciation and amortization expense. The remaining lease terms are adjusted for bargain renewal options or assumed exercises of early termination options, as applicable. If a tenant subsequently terminates its lease, any unamortized portion of above and below market leases is accelerated into rental income and the in-place lease value and tenant relationships are accelerated into depreciation and amortization expense over the shortened lease term.

The purchase price allocated to deferred leasing intangible assets are included in rental property, net on the accompanying Consolidated Balance Sheets and the purchase price allocated to deferred leasing intangible liabilities are included in deferred leasing intangibles, net on the accompanying Consolidated Balance Sheets under the liabilities section.

In determining the fair value of the debt assumed, we discount the spread between the future contractual interest payments and hypothetical future interest payments on mortgage debt based on a current market rate. The associated fair market value debt adjustment is amortized through interest expense over the life of the debt on a basis which approximates the effective interest method.

We evaluate the carrying value of all tangible and intangible rental property assets and deferred leasing intangible liabilities (collectively, the “property”) held for use for possible impairment when an event or change in circumstance has occurred that indicates their carrying value may not be recoverable. The evaluation includes estimating and reviewing anticipated future undiscounted cash flows to be derived from the property. If such cash flows are less than the property’s carrying value, an impairment charge is recognized to the extent by which the property’s carrying value exceeds the estimated fair value. Estimating future cash flows is highly subjective and is based in part on assumptions regarding anticipated hold period, future occupancy, rental rates, capital requirements, and exit capitalization rates that could differ from actual results. The discount rate used to present value the cash flows for determining fair value is also subjective.

Depreciation expense is computed using the straight-line method based on the following estimated useful lives.
Description
 
Estimated Useful Life
Building
 
40 Years
Building and land improvements
 
Up to 20 years
Tenant improvements
 
Shorter of useful life or terms of related lease

Leases

For leases in which we are the lessee, we recognize a right-of-use asset and corresponding lease liability on the accompanying Consolidated Balance Sheets equal to the present value of the fixed lease payments. In determining operating right-of-use asset and lease liability for our existing operating leases upon the adoption of the new lease guidance, we were required to estimate an appropriate incremental borrowing rate on a fully-collateralized basis for the terms of the leases. We utilized a market-based approach to estimate the incremental borrowing rate for each individual lease. Since the terms under the ground leases are significantly longer than the terms of borrowings available to us on a fully-collateralized basis, the estimate of this rate required significant judgment, and considered factors such as yields on outstanding public debt and other market based pricing on longer duration financing instruments.


39


Goodwill

The excess of the cost of an acquired business over the net of the amounts assigned to assets acquired (including identified intangible assets) and liabilities assumed is recorded as goodwill. Our goodwill of approximately $4.9 million represents amounts allocated to the assembled workforce from the acquired management company, and is presented in prepaid expenses and other assets on the accompanying Consolidated Balance Sheets. Our goodwill has an indeterminate life and is not amortized, but is tested for impairment on an annual basis at December 31, or more frequently if events or changes in circumstances indicate that the asset might be impaired. We take a qualitative approach to consider whether an impairment of goodwill exists prior to quantitatively determining the fair value of the reporting unit in step one of the impairment test. We have recorded no impairments to goodwill through December 31, 2019.

Use of Derivative Financial Instruments

We record all derivatives on the accompanying Consolidated Balance Sheets at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate a derivative in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. We may enter into derivative contracts that are intended to economically hedge certain of its risks, even though hedge accounting does not apply or we elect not to apply hedge accounting.

In accordance with fair value measurement guidance, we made an accounting policy election to measure the credit risk of our derivative financial instruments that are subject to master netting arrangements on a net basis by counterparty portfolio. Credit risk is the risk of failure of the counterparty to perform under the terms of the contract. We minimize the credit risk in our derivative financial instruments by entering into transactions with various high-quality counterparties. Our exposure to credit risk at any point is generally limited to amounts recorded as assets on the accompanying Consolidated Balance Sheets.

Fair Value of Financial Instruments

Financial instruments include cash and cash equivalents, restricted cash, tenant accounts receivable, interest rate swaps, accounts payable, accrued expenses, unsecured credit facility, unsecured term loans, unsecured notes, and mortgage notes. See Note 4 in the accompanying Notes to Consolidated Financial Statements for the fair value of our indebtedness. See Note 5 in the accompanying Notes to Consolidated Financial Statements for the fair value of our interest rate swaps.

We adopted fair value measurement provisions for our financial instruments recorded at fair value. The guidance establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

Incentive and Equity-Based Employee Compensation Plans

We grant equity-based compensation awards to our employees and directors in the form of restricted shares of common stock, LTIP units, and outperformance programs and performance units (outperformance programs and performance units are collectively, the “Performance-based Compensation Plans”). See Notes 6, 7 and 8 in the accompanying Notes to Consolidated Financial Statements for further discussion of restricted shares of common stock, LTIP units, and Performance-based Compensation Plans, respectively. We measure equity-based compensation expense based on the fair value of the awards on the grant date and recognize the expense ratably over the vesting period, and forfeitures are recognized in the period in which they occur.


40


Revenue Recognition

All current leases are classified as operating leases and rental income is recognized on a straight-line basis over the term of the lease (and expected bargain renewal terms or assumed exercise of early termination options) when collectability is reasonably assured. Differences between rental income earned and amounts due under the lease are charged or credited, as applicable, to accrued rental income.

We determined that for all leases where we are the lessor, that the timing and pattern of transfer of the non-lease components and associated lease components are the same, and that the lease components, if accounted for separately, would be classified as an operating lease. Accordingly, we have made an accounting policy election to recognize the combined component in accordance with Topic 842 as rental income on the accompanying Consolidated Statements of Operations.

Rental income recognition commences when the tenant takes possession of or controls the physical use of the leased space and the leased space is substantially complete and ready for its intended use. In order to determine whether the leased space is substantially complete and ready for its intended use, we determine whether we or the tenant own the tenant improvements. When it is determined that we are the owner of the tenant improvements, rental income recognition begins when the tenant takes possession of or controls the physical use of the finished space, which is generally when our owned tenant improvements are completed. In instances when it is determined that the tenant is the owner of tenant improvements, rental income recognition begins when the tenant takes possession of or controls the physical use of the leased space.

When we are the owner of tenant improvements or other capital items, the cost to construct the tenant improvements or other capital items, including costs paid for or reimbursed by the tenants, is recorded as capital assets. For these tenant improvements or other capital items, the amount funded by or reimbursed by the tenants are recorded as deferred revenue, which is amortized on a straight-line basis as income over the shorter of the useful life of the capital asset or the term of the related lease.

Early lease termination fees are recorded in rental income on a straight-line basis from the notification date of such termination to the then remaining (not the original) lease term, if any, or upon collection if collection is not reasonably assured.

We evaluate cash basis versus accrual basis of rental income recognition based on the collectability of future lease payments.

We earned revenue from asset management fees, which are included on the accompanying Consolidated Statements of Operations in other income. We recognized revenue from asset management fees when the related fees were earned and were realized or realizable. As of December 31, 2017, we no longer earned revenue from asset management fees.

Results of Operations

The following discussion of our results of our same store (as defined below) net operating income (“NOI”) should be read in conjunction with our Consolidated Financial Statements. For a detailed discussion of NOI, including the reasons management believes NOI is useful to investors, see “Non-GAAP Financial Measures” below. Same store results are considered to be useful to investors in evaluating our performance because they provide information relating to changes in building-level operating performance without taking into account the effects of acquisitions or dispositions. We encourage the reader to not only look at our same store results, but also our total portfolio results, due to historic and future growth.

We define same store properties as properties that were in the Operating Portfolio for the entirety of the comparative periods presented. Same store properties exclude Operating Portfolio properties with expansions placed into service or transferred from the Value Add Portfolio to the Operating Portfolio after December 31, 2017. On December 31, 2019, we owned 313 industrial buildings consisting of approximately 62.3 million square feet, which represents approximately 68.2% of our total portfolio, that are considered our same store portfolio in the analysis below. Same store occupancy decreased approximately 1% to 95.6% as of December 31, 2019 compared to 96.6% as of December 31, 2018

Comparison of the year ended December 31, 2019 to the year ended December 31, 2018

The following table summarizes selected operating information for our same store portfolio and our total portfolio for the years ended December 31, 2019 and 2018 (dollars in thousands). This table includes a reconciliation from our same store portfolio to our total portfolio by also providing information for the years ended December 31, 2019 and 2018 with respect to the buildings acquired and disposed of and Operating Portfolio buildings with expansions placed into service or transferred from the Value Add Portfolio to the Operating Portfolio after December 31, 2017 and our flex/office buildings, Value Add Portfolio, and buildings classified as held for sale.

41


 
Same Store Portfolio
 
Acquisitions/Dispositions
 
Other
 
Total Portfolio
 
Year ended December 31,
 
Change
 
Year ended December 31,
 
Year ended December 31,
 
Year ended December 31,
 
Change
 
2019
 
2018
 
$
 
%
 
2019
 
2018
 
2019
 
2018
 
2019
 
2018
 
$
 
%
Revenue
    
 
    
 
 
 
    
 
    
 
    
 
 
 
 
 
    
 
    
 
    
 
    
Operating revenue
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 

 
 

 
 
 
 

Rental income
$
299,567

 
$
293,222

 
$
6,345

 
2.2
 %
 
$
89,841

 
$
41,243

 
$
15,942

 
$
15,228

 
$
405,350

 
$
349,693

 
$
55,657

 
15.9
 %
Other income
407

 
920

 
(513
)
 
(55.8
)%
 
193

 
377

 

 
3

 
600

 
1,300

 
(700
)
 
(53.8
)%
Total operating revenue
299,974

 
294,142

 
5,832

 
2.0
 %
 
90,034

 
41,620

 
15,942

 
15,231

 
405,950

 
350,993

 
54,957

 
15.7
 %
Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
Property
55,335

 
53,526

 
1,809

 
3.4
 %
 
13,739

 
10,076

 
6,105

 
5,419

 
75,179

 
69,021

 
6,158

 
8.9
 %
Net operating income (1)
$
244,639

 
$
240,616

 
$
4,023

 
1.7
 %
 
$
76,295

 
$
31,544

 
$
9,837

 
$
9,812

 
$
330,771

 
$
281,972

 
$
48,799

 
17.3
 %
Other expenses
 

 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 

 
 
General and administrative
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
35,946

 
34,052

 
1,894

 
5.6
 %
Depreciation and amortization
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
185,450

 
167,617

 
17,833

 
10.6
 %
Loss on impairments
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
9,757

 
6,182

 
3,575

 
57.8
 %
Other expenses
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
1,785

 
1,277

 
508

 
39.8
 %
Total other expenses
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
232,938

 
209,128

 
23,810

 
11.4
 %
Total expenses
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
308,117

 
278,149

 
29,968

 
10.8
 %
Other income (expense)
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
 
Interest and other income
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
87

 
20

 
67

 
335.0
 %
Interest expense
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
(54,647
)
 
(48,817
)
 
(5,830
)
 
11.9
 %
Loss on extinguishment of debt
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 

 
(13
)
 
13

 
(100.0
)%
Gain on the sales of rental property, net
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
7,392

 
72,211

 
(64,819
)
 
(89.8
)%
Total other income (expense)
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
(47,168
)
 
23,401

 
(70,569
)
 
(301.6
)%
Net income
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
$
50,665

 
$
96,245

 
$
(45,580
)
 
(47.4
)%
(1)
For a detailed discussion of NOI, including the reasons management believes NOI is useful to investors, see “Non-GAAP Financial Measures” below.


42


Net Income

Net income for our total portfolio decreased by $45.6 million or 47.4% to $50.7 million for the year ended December 31, 2019 compared to $96.2 million for the year ended December 31, 2018.

Same Store Total Operating Revenue

Same store total operating revenue consists primarily of rental income consisting of (i) fixed lease payments, variable lease payments, straight-line rental income, and above and below market lease amortization from our properties (“lease income”), and (ii) other tenant billings for insurance, real estate taxes and certain other expenses (“other billings”).

For a detailed reconciliation of our same store total operating revenue to net income, see the table above.

Same store rental income, which is comprised of lease income and other billings as discussed below, increased by $6.3 million or 2.2% to $299.6 million for the year ended December 31, 2019 compared to $293.2 million for the year ended December 31, 2018.

Same store lease income increased by $3.9 million or 1.9% to $252.9 million for the year ended December 31, 2019 compared to $249.0 million for the year ended December 31, 2018. Approximately $7.4 million of the increase was attributable to rental increases due to new leases and renewals of existing tenants and approximately $0.6 million due to a net decrease in the amortization of net above market leases. This increase was partially offset by an approximately $4.1 million decrease due to a reduction of base rent due to tenants downsizing their spaces and vacancies.

Same store other billings increased by $2.5 million or 5.6% to $46.7 million for the year ended December 31, 2019 compared to $44.2 million for the year ended December 31, 2018. The increase was primarily attributable to an increase in real estate taxes levied by the taxing authority and changes to lease terms where we began paying the real estate taxes and operating expenses on behalf of tenants that had previously paid its taxes and operating expenses directly to respective vendors of approximately $2.8 million. This increase was partially offset by a decrease of approximately $0.3 million related to tenant specific billings that occurred during the year ended December 31, 2018 that did not recur during the year ended December 31, 2019.

Same store other income decreased by $0.5 million or 55.8% to $0.4 million for the year ended December 31, 2019 compared to $0.9 million for the year ended December 31, 2018. This decrease is primarily the result of income received during the year ended December 31, 2018 for settlements or other sums received from former tenants which did not recur during the year ended December 31, 2019.

Same Store Operating Expenses

Same store operating expenses consist primarily of property operating expenses and real estate taxes and insurance.

For a detailed reconciliation of our same store portfolio operating expenses to net income, see the table above.

Total same store expenses increased by $1.8 million or 3.4% to $55.3 million for the year ended December 31, 2019 compared to $53.5 million for the year ended December 31, 2018. This increase was primarily related to increases in real estate taxes levied by the related taxing authority and changes to lease terms where we began paying the real estate taxes on behalf of tenants that had previously paid its taxes directly to the taxing authority of approximately $3.1 million, as well as an increase in snow removal and other expenses of approximately $0.6 million. These increases were partially offset by a decrease in insurance expenses of approximately $1.4 million and a decrease in repairs and maintenance and utility expenses of $0.5 million.

Acquisitions and Dispositions Net Operating Income

For a detailed reconciliation of our acquisitions and dispositions NOI to net income, see the table above.

Subsequent to December 31, 2017, we acquired 115 buildings consisting of approximately 25.0 million square feet (excluding seven buildings that were included in the Value Add Portfolio at December 31, 2019 or transferred from the Value Add Portfolio to the Operating Portfolio after December 31, 2017), and sold 28 buildings and two land parcels consisting of approximately 5.5 million square feet. For the years ended December 31, 2019 and 2018, the buildings acquired after December 31, 2017 contributed approximately $77.0 million and $18.2 million to NOI, respectively. For the years ended December 31, 2019 and 2018, the buildings sold after December 31, 2017 contributed approximately $(0.7) million and $13.3 million to NOI, respectively. Refer to Note 3 in the accompanying Notes to Consolidated Financial Statements for additional discussion regarding buildings acquired or sold.

43



Other Net Operating Income

Our other assets include our flex/office buildings, Value Add Portfolio, buildings classified as held for sale, and Operating Portfolio buildings with expansions placed in service or transferred from the Value Add Portfolio to the Operating Portfolio after December 31, 2017. Other NOI also includes termination income from buildings from our same store portfolio.

For a detailed reconciliation of our other NOI to net income, see the table above.

At December 31, 2019 we owned eight flex/office buildings consisting of approximately 0.4 million square feet, six buildings in our Value Add Portfolio consisting of approximately 1.4 million square feet, two buildings classified as held for sale consisting of approximately 0.7 million square feet, and six buildings consisting of approximately 1.6 million square feet that were Operating Portfolio buildings with expansions placed in service or transferred from the Value Add Portfolio to the Operating Portfolio after December 31, 2017. These buildings contributed approximately $9.7 million and $10.0 million to NOI for the years ended December 31, 2019 and 2018, respectively. Additionally, there was $0.1 million and $(0.2) million of termination, solar, and other income adjustments from certain buildings in our same store portfolio for the years ended December 31, 2019 and December 31, 2018, respectively.

Total Other Expenses

Total other expenses consist of general and administrative expenses, depreciation and amortization, loss on impairments, and other expenses.

Total other expenses increased $23.8 million or 11.4% for the year ended December 31, 2019 to $232.9 million compared to $209.1 million for the year ended December 31, 2018. This is primarily a result of an increase in depreciation and amortization of approximately $17.8 million as a result of acquisitions that increased the depreciable asset base, as well as an increase of approximately $3.6 million in loss on impairments. General and administrative expenses increased by approximately $1.9 million primarily due to increases in compensation and other payroll costs.

Total Other Income (Expense)

Total other income (expense) consists of interest and other income, interest expense, loss on extinguishment of debt, and gain on the sales of rental property, net. Interest expense includes interest incurred during the period as well as adjustments related to amortization of financing fees and debt issuance costs, and amortization of fair market value adjustments associated with the assumption of debt.

Total net other income decreased $70.6 million or 301.6% to $47.2 million total other expense for the year ended December 31, 2019 compared to $23.4 million total other income for the year ended December 31, 2018. This decrease is primarily the result of an decrease in the gain on the sales of rental property, net of approximately $64.8 million. This decrease is also attributable to an increase in interest expense of approximately $5.8 million which was primarily attributable to the funding of unsecured term loans on March 28, 2018, July 27, 2018, July 25, 2019, and December 18, 2019, and the funding of unsecured notes on June 13, 2018.

Comparison of year ended December 31, 2018 to the year ended December 31, 2017

The following table summarizes selected operating information for our same store portfolio and our total portfolio for the years ended December 31, 2018 and 2017 (dollars in thousands). This table includes a reconciliation from our same store portfolio to our total portfolio by also providing information for the years ended December 31, 2018 and 2017 with respect to the buildings acquired and disposed of and Operating Portfolio buildings with expansions placed into service or transferred from the Value Add Portfolio to the Operating Portfolio after December 31, 2016 and our flex/office buildings and Value Add Portfolio.
 

44


 
Same Store Portfolio
 
Acquisitions/Dispositions
 
Other
 
Total Portfolio
 
Year ended December 31,
 
Change
 
Year ended December 31,
 
Year ended December 31,
 
Year ended December 31,
 
Change
 
2018
 
2017
 
$
 
%
 
2018
 
2017
 
2018
 
2017
 
2018
 
2017
 
$
 
%
Revenue
    
 
    
 
 
 
    
 
    
 
    
 
 
 
 
 
    
 
    
 
    
 
    
Operating revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental income
$
243,313

 
$
238,931

 
$
4,382

 
1.8
%
 
$
86,251

 
$
49,069

 
$
20,129

 
$
12,836

 
$
349,693

 
$
300,836

 
$
48,857

 
16.2
 %
Other income
898

 
98

 
800

 
816.3
%
 
309

 
96

 
93

 
57

 
1,300

 
251

 
1,049

 
417.9
 %
Total operating revenue
244,211

 
239,029

 
5,182

 
2.2
%
 
86,560

 
49,165

 
20,222

 
12,893

 
350,993

 
301,087

 
49,906

 
16.6
 %
Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
Property
45,622

 
42,893

 
2,729

 
6.4
%
 
16,692

 
9,590

 
6,707

 
5,218

 
69,021

 
57,701

 
11,320

 
19.6
 %
Net operating income (1)
$
198,589

 
$
196,136

 
$
2,453

 
1.3
%
 
$
69,868

 
$
39,575

 
$
13,515

 
$
7,675

 
$
281,972

 
$
243,386

 
$
38,586

 
15.9
 %
Other expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
General and administrative
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
34,052

 
33,349

 
703

 
2.1
 %
Property acquisition costs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
5,386

 
(5,386
)
 
(100.0
)%
Depreciation and amortization
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
167,617

 
150,881

 
16,736

 
11.1
 %
Loss on impairments
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
6,182

 
1,879

 
4,303

 
229.0
 %
Gain on involuntary conversion
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
(325
)
 
325

 
(100.0
)%
Other expenses
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
1,277

 
1,786

 
(509
)
 
(28.5
)%
Total other expenses
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
209,128

 
192,956

 
16,172

 
8.4
 %
Total expenses
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
278,149

 
250,657

 
27,492

 
11.0
 %
Other income (expense)
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 

 

 

 

Interest and other income
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
20

 
12

 
8

 
66.7
 %
Interest expense
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
(48,817
)
 
(42,469
)
 
(6,348
)
 
14.9
 %
Loss on extinguishment of debt
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
(13
)
 
(15
)
 
2

 
(13.3
)%
Gain on the sales of rental property, net
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
72,211

 
24,242

 
47,969

 
197.9
 %
Total other income (expense)
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
23,401

 
(18,230
)
 
41,631

 
228.4
 %
Net income
 
 

 
 

 
 

 
 

 
 

 
 
 
 
 
$
96,245

 
$
32,200

 
$
64,045

 
198.9
 %
(1)
For a detailed discussion of NOI, including the reasons management believes NOI is useful to investors, see “Non-GAAP Financial Measures” below.


45


Net Income

Net income for our total portfolio increased by $64.0 million or 198.9% to $96.2 million for the year ended December 31, 2018 compared to $32.2 million for the year ended December 31, 2017.

Same Store Total Operating Revenue

Same store total operating revenue consists primarily of rental income consisting of (i) fixed lease payments, variable lease payments, straight-line rental income, and above and below market lease amortization from our properties (“lease income”), and (ii) other tenant billings for insurance, real estate taxes and certain other expenses (“other billings”).

For a detailed reconciliation of our same store total operating revenue to net income, see the table above.

Same store rental income, which is comprised of lease income and other billings as discussed below, increased by $4.4 million or 1.8% to $243.3 million for the year ended December 31, 2018 compared to $238.9 million for the year ended December 31, 2017.

Same store lease income increased by $3.7 million or 1.8% to $207.5 million for the year ended December 31, 2018 compared to $203.7 million for the year ended December 31, 2017. Approximately $7.3 million of the increase was attributable to rental increases due to new leases and renewals of existing tenants. Same store rental income also increased by approximately $0.7 million due to a net decrease in the amortization of net above market leases. These increases were partially offset by an approximately $4.3 million decrease due to a reduction of base rent due to tenants downsizing their spaces and vacancies.

Same store other billings increased by $0.6 million or 1.8% to $35.9 million for the year ended December 31, 2018 compared to $35.2 million for the year ended December 31, 2017. Approximately $1.7 million of the increase was primarily due to increases in occupancy and real estate taxes levied by the taxing authority, as well as changes to lease terms where we began paying the real estate taxes and operating expenses on behalf of tenants that had previously paid its taxes and operating expenses directly to respective vendors. This increase was partially offset by a decrease of approximately $0.5 million related to vacancy of previously occupied buildings and decreases in real estate taxes levied by the taxing authority. The increase was also partially offset by one of our properties where it was determined, during the year ended December 31, 2017, that the tenant will not be able to meet its requirements set forth by the taxing authority to be entitled to an abatement of real estate taxes. The abatement was applicable to prior periods, and therefore the expense and related tenant recovery income recorded for the year ended December 31, 2017 includes 36 months of real estate taxes, which attributed to approximately $0.6 million of the decrease in same store tenant recoveries as it did not recur for the year ended December 31, 2018.

Same Store Operating Expenses

Same store operating expenses consist primarily of property operating expenses and real estate taxes and insurance.

For a detailed reconciliation of our same store portfolio operating expenses to net income, see the table above.

Total same store expenses increased by $2.7 million or 6.4% to $45.6 million for the year ended December 31, 2018 compared to $42.9 million for the year ended December 31, 2017. This increase was primarily related to increases in general repairs and maintenance expense of approximately $0.4 million, real estate taxes levied by the related taxing authority of approximately $0.8 million, snow removal and utilities expenses of approximately $0.9 million, insurance expense of approximately $0.4 million, and bad debt expense of approximately $0.8 million. These increases were partially offset by a decrease in real estate taxes attributable to one of our properties where it was determined, during the year ended December 31, 2017, that the tenant will not be able to meet its requirements set forth by the taxing authority to be entitled to an abatement of real estate taxes. The abatement was applicable to prior periods, and therefore the expense and related tenant recovery income recorded for the year ended December 31, 2017 includes 36 months of real estate taxes, which attributed to approximately $0.6 million of the decrease in same store operating expenses as it did not recur for the year ended December 31, 2018.

Acquisitions and Dispositions Net Operating Income

For a detailed reconciliation of our acquisitions and dispositions NOI to net income, see the table above.

Subsequent to December 31, 2016, we acquired 100 buildings consisting of approximately 20.0 million square feet (excluding six buildings that were included in the Value Add Portfolio at December 31, 2018 or transferred from the Value Add Portfolio to the Operating Portfolio after December 31, 2016), and sold 30 buildings consisting of approximately 5.8 million square feet. For the

46


years ended December 31, 2018 and 2017, the buildings acquired after December 31, 2016 contributed approximately $61.3 million and $22.1 million to NOI, respectively. For the years ended December 31, 2018 and 2017, the buildings sold after December 31, 2016 contributed approximately $8.6 million and $17.5 million to NOI, respectively. Refer to Note 3 in the accompanying Notes to Consolidated Financial Statements for additional discussion regarding buildings acquired or sold.

Other Net Operating Income

Our other assets include our flex/office buildings, Value Add Portfolio, and Operating Portfolio buildings with expansions placed in service or transferred from the Value Add Portfolio to the Operating Portfolio after December 31, 2016. Other NOI also includes termination income from buildings from our same store portfolio.

For a detailed reconciliation of our other NOI to net income, see the table above.

At December 31, 2018 we owned nine flex/office buildings consisting of approximately 0.6 million square feet, three buildings in our Value Add Portfolio consisting of approximately 0.6 million square feet, and nine buildings consisting of approximately 2.7 million square feet that were Operating Portfolio buildings with expansions placed in service or transferred from the Value Add Portfolio to the Operating Portfolio after December 31, 2016. These buildings contributed approximately $13.0 million and $7.6 million to NOI for the years ended December 31, 2018 and 2017, respectively. Additionally, there was $0.5 million and $0.1 million of termination fee income from certain buildings in our same store portfolio for the years ended December 31, 2018 and December 31, 2017, respectively.

Total Other Expenses

Total other expenses consist of general and administrative expenses, property acquisition costs, depreciation and amortization, loss on impairments, gain on involuntary conversion, and other expenses.

Total other expenses increased $16.2 million or 8.4% for the year ended December 31, 2018 to $209.1 million compared to $193.0 million for the year ended December 31, 2017. This is primarily a result of an increase in depreciation and amortization of approximately $16.7 million as a result of acquisitions that increased the depreciable asset base. The increase was also attributable to four buildings that were impaired in the amount of approximately $6.2 million during the year ended December 31, 2018, whereas there was only one building impaired in the amount of approximately $1.9 million during the year ended December 31, 2017. These increases were partially offset by a decrease in property acquisition costs of approximately $5.4 million due to the adoption of Accounting Standards Update 2017-01.

Total Other Income (Expense)

Total other income (expense) consists of interest and other income, interest expense, loss on extinguishment of debt, and gain on the sales of rental property, net. Interest expense includes interest incurred during the period as well as adjustments related to amortization of financing fees and debt issuance costs, and amortization of fair market value adjustments associated with the assumption of debt.

Total net other income increased $41.6 million or 228.4% to a net other income position of $23.4 million for the year ended December 31, 2018 compared to a net other expense position of $18.2 million for the year ended December 31, 2017. This increase was primarily the result of an increase in the gain on the sales of rental property of approximately $48.0 million. This was partially offset by an increase in interest expense of approximately $6.3 million which was primarily attributable to a higher unsecured credit facility balance during the year ended December 31, 2018 compared to the year ended December 31, 2017, and the issuance of new unsecured term loans and unsecured notes as discussed in Note 4 of the accompanying Notes to Consolidated Financial Statements. The increase in interest expense was slightly offset by the repayment of several mortgage notes during the year ended December 31, 2017.

Non-GAAP Financial Measures

In this report, we disclose funds from operations (“FFO”) and NOI, which meet the definition of “non-GAAP financial measures” as set forth in Item 10(e) of Regulation S-K promulgated by the SEC. As a result, we are required to include in this report a statement of why management believes that presentation of these measures provides useful information to investors.


47


Funds From Operations

FFO 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, FFO should be compared with our reported net income (loss) in accordance with GAAP, as presented in our consolidated financial statements included in this report.

We calculate FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts (“NAREIT”). FFO represents GAAP net income (loss), excluding gains (or losses) from sales of depreciable operating buildings, 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.

Management uses 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.

However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our buildings that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our buildings, all of which have real economic effects and could materially impact our results from operations, the utility of FFO as a measure of our performance is limited. In addition, other REITs may not calculate FFO in accordance with the NAREIT definition, and, accordingly, our FFO may not be comparable to such other REITs’ FFO. FFO should not be used as a measure of our liquidity, and is not indicative of funds available for our cash needs, including our ability to pay dividends.

The following table summarizes a reconciliation of our FFO attributable to common stockholders and unit holders for the periods presented to net income, the nearest GAAP equivalent.
 
 
Year ended December 31,
Reconciliation of Net Income to FFO (in thousands)
 
2019
 
2018
 
2017
Net income
 
$
50,665

 
$
96,245

 
$
32,200

Rental property depreciation and amortization
 
185,154

 
167,321

 
150,591

Loss on impairments
 
9,757

 
6,182

 
1,879

Gain on the sales of rental property, net
 
(7,392
)
 
(72,211
)
 
(24,242
)
FFO
 
$
238,184

 
$
197,537

 
$
160,428

Preferred stock dividends
 
(5,156
)
 
(7,604
)
 
(9,794
)
Redemption of preferred stock
 

 
(2,661
)
 

Amount allocated to restricted shares of common stock and unvested units
 
(891
)
 
(751
)
 
(927
)
FFO attributable to common stockholders and unit holders
 
$
232,137

 
$
186,521

 
$
149,707


Net Operating Income

We consider NOI to be an appropriate supplemental performance measure to net income (loss) because we believe it helps investors and management understand the core operations of our buildings. NOI is defined as rental income, which includes billings for common area maintenance, real estate taxes and insurance, less property expenses. NOI should not be viewed as an alternative measure of our financial performance since it excludes expenses which could materially impact our results of operations. Further, our NOI may not be comparable to that of other real estate companies, as they may use different methodologies for calculating NOI.

48



The following table summarizes a reconciliation of our NOI for the periods presented to net income, the nearest GAAP equivalent.
 
 
Year ended December 31,
Reconciliation of Net Income to NOI (in thousands)
 
2019
 
2018
 
2017
Net income
 
$
50,665

 
$
96,245

 
$
32,200

Asset management fee income
 

 

 
(52
)
General and administrative
 
35,946

 
34,052

 
33,349

Transaction costs
 
346

 
214

 
5,386

Depreciation and amortization
 
185,450

 
167,617

 
150,881

Interest and other income
 
(87
)
 
(20
)
 
(12
)
Interest expense
 
54,647

 
48,817

 
42,469

Loss on impairments
 
9,757

 
6,182

 
1,879

Gain on involuntary conversion
 

 

 
(325
)
Loss on extinguishment of debt
 

 
13

 
15

Other expenses
 
1,439

 
1,063

 
1,097

Loss on incentive fee
 

 

 
689

Gain on the sales of rental property, net
 
(7,392
)
 
(72,211
)
 
(24,242
)
Net operating income 
 
$
330,771

 
$
281,972

 
$
243,334

Cash Flows
Comparison of the year ended December 31, 2019 to the year ended December 31, 2018
The following table summarizes our cash flows for the year ended December 31, 2019 compared to the year ended December 31, 2018.
 
 
Year ended December 31,
 
Change
Cash Flows (dollars in thousands)
 
2019
 
2018
 
$
 
%  
Net cash provided by operating activities
 
$
233,357

 
$
197,769

 
$
35,588

 
18.0
%
Net cash used in investing activities
 
$
1,222,574

 
$
507,201

 
$
715,373

 
141.0
%
Net cash provided by financing activities
 
$
978,539

 
$
303,845

 
$
674,694

 
222.1
%
 
Net cash provided by operating activities increased $35.6 million to $233.4 million for the year ended December 31, 2019, compared to $197.8 million for the year ended December 31, 2018. The increase was primarily attributable to incremental operating cash flows from property acquisitions completed after December 31, 2018, and operating performance at existing properties. These increases were partially offset by the loss of cash flows from property dispositions completed after December 31, 2018 and fluctuations in working capital due to timing of payments and rental receipts.

Net cash used in investing activities increased by $715.4 million to $1,222.6 million for the year ended December 31, 2019, compared to $507.2 million for the year ended December 31, 2018. The increase was primarily attributable to an increase in cash paid for the acquisition of 69 buildings during the year ended December 31, 2019 of approximately $1,203.4 million, compared to the acquisition of 53 buildings during the year ended December 31, 2018 of approximately $675.6 million. The increase is also attributable to a decrease in net proceeds from the sale of nine buildings and two land parcels during the year ended December 31, 2019 for net proceeds of approximately $42.0 million, compared to the year ended December 31, 2018 where we sold 19 buildings for net proceeds of approximately $207.9 million.
Net cash provided by financing activities increased $674.7 million to $978.5 million for the year ended December 31, 2019, compared to $303.8 million for the year ended December 31, 2018. The increase was primarily due to an increase in net cash inflow on our unsecured credit facility of approximately $216.0 million and an increase in proceeds from sales of common stock of approximately $466.3 million, as well as an increase in proceeds from unsecured term loans of $125.0 million during the year ended December 31, 2019 compared to the year ended December 31, 2018. These increases were partially offset by decreases in proceeds from unsecured notes of $175.0 million and an approximately $30.7 million increase in dividends paid during the year ended December 31, 2019 compared to the year ended December 31, 2018.

49


Comparison of the year ended December 31, 2018 to the year ended December 31, 2017
The following table summarizes our cash flows for the year ended December 31, 2018 compared to the year ended December 31, 2017.
 
 
Year ended December 31,
 
Change
Cash Flows (dollars in thousands)
 
2018
 
2017
 
$
 
%
Net cash provided by operating activities
 
$
197,769

 
$
162,098

 
$
35,671

 
22.0
 %
Net cash used in investing activities
 
$
507,201

 
$
571,635

 
$
(64,434
)
 
(11.3
)%
Net cash provided by financing activities
 
$
303,845

 
$
415,861

 
$
(112,016
)
 
(26.9
)%
 

Net cash provided by operating activities increased $35.7 million to $197.8 million for the year ended December 31, 2018, compared to $162.1 million for the year ended December 31, 2017. The increase was primarily attributable to incremental operating cash flows from property acquisitions completed after December 31, 2017, and operating performance at existing properties. These increases were partially offset by the loss of cash flows from property dispositions completed after December 31, 2017 and fluctuations in working capital due to timing of payments and rental receipts.

Net cash used in investing activities decreased by $64.4 million to $507.2 million for the year ended December 31, 2018, compared to $571.6 million for the year ended December 31, 2017. The decrease is primarily attributable an increase in net proceeds from the sale of 19 buildings during the year ended December 31, 2018 for net proceeds of approximately $207.9 million, compared to the year ended December 31, 2017 where we sold 11 buildings for net proceeds of approximately $65.1 million. This was partially offset by an increase in cash paid for the acquisition of 53 buildings during the year ended December 31, 2018 of approximately $675.6 million, compared to the acquisition of 53 buildings during the year ended December 31, 2017 of approximately $593.0 million.
Net cash provided by financing activities decreased $112.0 million to $303.8 million for the year ended December 31, 2018, compared to $415.9 million for the year ended December 31, 2017. The decrease was primarily due to an increase in net cash outflow on our unsecured credit facility of approximately $413.5 million and a decrease in proceeds from sales of common stock of approximately $37.1 million, as well as an approximately $17.9 million increase in dividends paid during the year ended December 31, 2018 compared to the year ended December 31, 2017 and the redemption of the 6.625% Series B Cumulative Redeemable Preferred Stock (“Series B Preferred Stock”) of $70.0 million on July 11, 2018. These increases in net cash outflow were partially offset by the $150.0 million draw on the unsecured term loan that was entered into on July 28, 2017, the funding of the unsecured notes that were entered into on April 10, 2018 of $175.0 million, as well as a decrease in the repayment of mortgage notes of approximately $103.6 million during the year ended December 31, 2018 compared to the year ended December 31, 2017.
Liquidity and Capital Resources
We believe that our liquidity needs will be satisfied through cash flows generated by operations, disposition proceeds, and financing activities. Operating cash flow is primarily rental income, expense recoveries from tenants, and other income from operations and is our principal source of funds that we use to pay operating expenses, debt service, recurring capital expenditures, and the distributions required to maintain our REIT qualification. We look to the capital markets (common equity, preferred equity, and debt) to primarily fund our acquisition activity. We seek to increase cash flows from our properties by maintaining quality standards for our buildings that promote high occupancy rates and permit increases in rental rates while reducing tenant turnover and controlling operating expenses. We believe that our revenue, together with proceeds from building sales and debt and equity financings, will continue to provide funds for our short-term and medium-term liquidity needs.

Our short-term liquidity requirements consist primarily of funds to pay for operating expenses and other expenditures directly associated with our buildings, including interest expense, interest rate swap payments, scheduled principal payments on outstanding indebtedness, funding of property acquisitions under contract, general and administrative expenses, and capital expenditures for tenant improvements and leasing commissions.

Our long-term liquidity needs, in addition to recurring short-term liquidity needs as discussed above, consist primarily of funds necessary to pay for acquisitions, non-recurring capital expenditures, and scheduled debt maturities. We intend to satisfy our long-term liquidity needs through cash flow from operations, the issuance of equity or debt securities, other borrowings, property dispositions, or, in connection with acquisitions of certain additional buildings, the issuance of common units in the Operating Partnership.
 
As of December 31, 2019, we had total immediate liquidity of approximately $460.0 million, comprised of $9.0 million of cash and cash equivalents and $451.0 million of immediate availability on our unsecured credit facility and unsecured term loans.


50


In addition, we require funds for future dividends to be paid to our common and preferred stockholders and common unit holders in our Operating Partnership. These distributions on our common stock are voluntary (at the discretion of our board of directors), to the extent in excess of distribution requirements in order to maintain our REIT status for federal income tax purposes, and the excess portion may be reduced or stopped if needed to fund other liquidity requirements or for other reasons. The following table summarizes the dividends attributable to our common stock that were declared or paid during the year ended December 31, 2019.
Month Ended 2019
 
Declaration Date
 
Record Date
 
Per Share
 
Payment Date
December 31
 
October 15, 2019
 
December 31, 2019
 
$
0.119167

 
January 15, 2020
November 30
 
October 15, 2019
 
November 29, 2019
 
0.119167

 
December 16, 2019
October 31
 
October 15, 2019
 
October 31, 2019
 
0.119167

 
November 15, 2019
September 30
 
July 15, 2019
 
September 30, 2019
 
0.119167

 
October 15, 2019
August 31
 
July 15, 2019
 
August 30, 2019
 
0.119167

 
September 16, 2019
July 31
 
July 15, 2019
 
July 31, 2019
 
0.119167

 
August 15, 2019
June 30
 
April 9, 2019
 
June 28, 2019
 
0.119167

 
July 15, 2019
May 31
 
April 9, 2019
 
May 31, 2019
 
0.119167

 
June 17, 2019
April 30
 
April 9, 2019
 
April 30, 2019
 
0.119167

 
May 15, 2019
March 31
 
January 10, 2019
 
March 29, 2019
 
0.119167

 
April 15, 2019
February 28
 
January 10, 2019
 
February 28, 2019
 
0.119167

 
March 15, 2019
January 31
 
January 10, 2019
 
January 31, 2019
 
0.119167

 
February 15, 2019
Total
 
 
 
 
 
$
1.430004

 
 

On January 8, 2020, our board of directors declared the common stock dividends for the months ending January 31, 2020, February 29, 2020 and March 31, 2020 at a monthly rate of $0.12 per share of common stock.

We pay quarterly cumulative dividends on the Series C Preferred Stock at a rate equivalent to the fixed annual rate of $1.71875 per share, respectively. The following table summarizes the dividends on the Series C Preferred Stock during the year ended December 31, 2019.
Quarter Ended 2019
 
Declaration Date
 
Series C
Preferred Stock Per Share
 
Payment Date
December 31
 
October 15, 2019
 
$
0.4296875

 
December 31, 2019
September 30
 
July 15, 2019
 
0.4296875

 
September 30, 2019
June 30
 
April 9, 2019
 
0.4296875

 
July 1, 2019
March 31
 
January 10, 2019
 
0.4296875

 
April 1, 2019
Total
 
 
 
$
1.7187500

 
 

On January 8, 2020, our board of directors declared the Series C Preferred Stock dividend for the quarter ending March 31, 2020 at a quarterly rate of $0.4296875 per share.


51


Indebtedness Outstanding
The following table summarizes certain information with respect to the indebtedness outstanding as of December 31, 2019.
Loan
 
Principal Outstanding as of December 31, 2019 (in thousands)
 
Interest 
Rate
 (1)(2)
    
Maturity Date
 
Prepayment Terms (3) 
Unsecured credit facility:
 
 
 
 
 
 
 
 
Unsecured Credit Facility (4)
 
$
146,000

 
L + 0.90%

 
January 15, 2023
 
i
Total unsecured credit facility
 
146,000

 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
Unsecured term loans:
 
 

 
 

 
 
 
 
Unsecured Term Loan C
 
150,000

 
2.39
%
 
September 29, 2020
 
i
Unsecured Term Loan B
 
150,000

 
3.05
%
 
March 21, 2021
 
i
Unsecured Term Loan A
 
150,000

 
2.70
%
 
March 31, 2022
 
i
Unsecured Term Loan D
 
150,000

 
2.85
%
 
January 4, 2023
 
i
Unsecured Term Loan E
 
175,000

 
3.92
%
 
January 15, 2024
 
i
Unsecured Term Loan F (5)
 
100,000

 
L + 1.00%

 
January 12, 2025
 
i
Total unsecured term loans
 
875,000

 
 
 
 
 
 
Less: Total unamortized deferred financing fees and debt issuance costs
 
(3,625
)
 
 
 
 
 
 
Total carrying value unsecured term loans, net
 
871,375

 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
Unsecured notes:
 
 

 
 

 
 
 
 
Series F Unsecured Notes
 
100,000

 
3.98
%
 
January 5, 2023
 
ii
Series A Unsecured Notes
 
50,000

 
4.98
%
 
October 1, 2024
 
ii
Series D Unsecured Notes
 
100,000

 
4.32
%
 
February 20, 2025
 
ii
Series G Unsecured Notes
 
75,000

 
4.10
%
 
June 13, 2025
 
ii
Series B Unsecured Notes
 
50,000

 
4.98
%
 
July 1, 2026
 
ii
Series C Unsecured Notes
 
80,000

 
4.42
%
 
December 30, 2026
 
ii
Series E Unsecured Notes
 
20,000

 
4.42
%
 
February 20, 2027
 
ii
Series H Unsecured Notes
 
100,000

 
4.27
%
 
June 13, 2028
 
ii
Total unsecured notes
 
575,000

 
 
 
 
 
 
Less: Total unamortized deferred financing fees and debt issuance costs
 
(2,117
)
 
 
 
 
 
 
Total carrying value unsecured notes, net
 
572,883

  
 

 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage notes (secured debt):
 
 

 
 

 
 
 
 
Wells Fargo Bank, National Association CMBS Loan
 
51,406

 
4.31
%
 
December 1, 2022
 
iii
Thrivent Financial for Lutherans
 
3,679

 
4.78
%
 
December 15, 2023
 
iv
Total mortgage notes
 
55,085

 
 

 
 
 
 
Add: Total unamortized fair market value premiums
 
39

 
 

 
 
 
 
Less: Total unamortized deferred financing fees and debt issuance costs
 
(369
)
 
 
 
 
 
 
Total carrying value mortgage notes, net
 
54,755

 
 

 
 
 
 
Total / weighted average interest rate (6)
 
$
1,645,013

 
3.48
%
 
 
 
 
(1)
Interest rate as of December 31, 2019. At December 31, 2019, the one-month LIBOR (“L”) was 1.7625%. The interest rate is not adjusted to include the amortization of deferred financing fees or debt issuance costs incurred in obtaining debt or any unamortized fair market value premiums. The spread over the applicable rate for our unsecured credit facility and unsecured term loans is based on our debt rating, as defined in the respective loan agreements.
(2)
The unsecured term loans have a stated interest rate of one-month LIBOR plus a spread of 1.0%. As of December 31, 2019, one-month LIBOR for the Unsecured Term Loans A, B, C, D, and E was swapped to a fixed rate of 1.70%, 2.05%, 1.39%, 1.85%, and 2.92%, respectively. One-month LIBOR for the Unsecured Term Loan F will be swapped to a fixed rate of 2.11% effective July 15, 2020.
(3)
Prepayment terms consist of (i) pre-payable with no penalty; (ii) pre-payable with penalty; (iii) pre-payable without penalty three months prior to the maturity date, however can be defeased; and (iv) pre-payable without penalty three months prior to the maturity date.
(4)
The capacity of the unsecured credit facility is $500.0 million.
(5)
The remaining capacity is $100.0 million as of December 31, 2019, which we have until July 12, 2020 to draw.
(6)
The weighted average interest rate was calculated using the fixed interest rate swapped on the current notional amount of $775.0 million of debt, and was not adjusted to include the amortization of deferred financing fees or debt issuance costs incurred in obtaining debt or any unamortized fair market value premiums.

The aggregate undrawn nominal commitments on the unsecured credit facility and unsecured term loans as of December 31, 2019 was approximately $451.0 million, including issued letters of credit. Our actual borrowing capacity at any given point in time may be less and is restricted to a maximum amount based on our debt covenant compliance.

The Wells Fargo, National Association CMBS loan agreement is a commercial mortgage backed security that provides for a secured loan. There are 24 properties that are collateral for the CMBS loan. The Operating Partnership guarantees the obligations under the CMBS loan.

52



The following table summarizes our debt capital structure as of December 31, 2019.
Debt Capital Structure
 
December 31, 2019
Total principal outstanding (in thousands)
 
$
1,651,085

Weighted average duration (years)
 
3.8

% Secured debt
 
3
%
% Debt maturing next 12 months
 
9
%
Net Debt to Real Estate Cost Basis (1)
 
35
%
(1)
We define Net Debt as our amounts outstanding under our unsecured credit facility, unsecured term loans, unsecured notes, and mortgage notes, less cash and cash equivalents. We define Real Estate Cost Basis as the book value of rental property and deferred leasing intangibles, exclusive of the related accumulated depreciation and amortization.

We regularly pursue new financing opportunities to ensure an appropriate balance sheet position. As a result of these dedicated efforts, we are confident in our ability to meet future debt maturities and building acquisition funding needs. We believe that our current balance sheet is in an adequate position at the date of this filing, despite possible volatility in the credit markets.

Our interest rate exposure as it relates to interest expense payments on our floating rate debt is managed through our use of interest rate swaps, which fix the rate of our long term floating rate debt. For a detailed discussion on our use of interest rate swaps, see “Interest Rate Risk” below.

Unsecured Credit Facility, Unsecured Term Loans, and Unsecured Notes
The unsecured credit facility provides for a facility fee payable by us to the lenders at a rate per annum of 0.125% to 0.3%, depending on our debt rating, as defined in the credit agreement, of the aggregate commitments (currently $500.0 million). The facility fee is due and payable quarterly.
Covenants: Our ability to borrow, maintain borrowings and avoid default under the unsecured credit facility, the unsecured term loans, and unsecured notes is subject to our ongoing compliance with a number of financial covenants, including:
a maximum consolidated leverage ratio of not greater than 0.60:1.00;
a maximum secured leverage ratio of not greater than 0.40:1.00;
a maximum unencumbered leverage ratio of not greater than 0.60:1.00;
a minimum fixed charge ratio of not less than or equal to 1.50:1.00; and
a minimum unsecured interest coverage ratio of not less than or equal to 1.75:1.00.
The respective note purchase agreements additionally contain a financial covenant that requires us to maintain a minimum interest coverage ratio of not less than 1.50:1.00. 
Pursuant to the terms of our unsecured debt agreements, we may not pay distributions that exceed the minimum amount required for us to qualify and maintain our status as a REIT if a default or event of default occurs and is continuing.
Our unsecured credit facility, unsecured term loans, unsecured notes, and mortgage notes are subject to ongoing compliance with a number of financial and other covenants. As of December 31, 2019, we were in compliance with the applicable financial covenants.
Events of Default: Our unsecured credit facility and unsecured term loans contain customary events of default, including but not limited to non-payment of principal, interest, fees or other amounts, defaults in the compliance with the covenants contained in the documents evidencing the unsecured credit facility and the unsecured term loans, cross-defaults to other material debt and bankruptcy or other insolvency events.
Borrower and Guarantors: The Operating Partnership is the borrower under the unsecured credit facility, the unsecured term loans and is the issuer of the unsecured notes. STAG Industrial, Inc. and certain of its subsidiaries guarantee the obligations under our unsecured debt agreements.

53


Contractual Obligations
The following table summarizes our contractual obligations as of December 31, 2019, specifically our obligations under long-term debt agreements and ground lease agreements.
 
 
Payments by Period
Contractual Obligations (in thousands)(1)(2)
 
Total
 
2020
 
2021-2022
 
2023-2024
 
Thereafter
Principal payments(3)
 
$
1,651,085

 
$
152,006

 
$
349,784

 
$
624,295

 
$
525,000

Interest payments—Fixed rate debt(4)
 
152,938

 
27,433

 
54,410

 
41,706

 
29,389

Interest payments —Variable rate debt(4)(5)
 
88,981

 
30,304

 
44,324

 
14,241

 
112

Property lease
 
1,513

 
1,210

 
303

 

 

Ground leases
 
52,560

 
1,084

 
2,204

 
2,237

 
47,035

Total
 
$
1,947,077

 
$
212,037

 
$
451,025

 
$
682,479

 
$
601,536

(1)
From time to time in the normal course of our business, we enter into various contracts with third parties that may obligate us to make payments, such as maintenance agreements at our buildings. Such contracts, in the aggregate, do not represent material obligations, are typically short-term and cancellable within 90 days and are not included in the table above.
(2)
The terms of the loan agreements for the Wells Fargo, National Association CMBS loan calls for a monthly leasing escrow payment of approximately $0.1 million and the balance of the reserve is capped at $2.1 million. The cap was not met at December 31, 2019 and the balance at December 31, 2019 was approximately $2.0 million. The funding of these reserves is not included in the table above.
(3)
The total payments do not include unamortized deferred financing fees, debt issuance costs, or fair market value premiums associated with certain loans.
(4)
This is not included in our Consolidated Balance Sheets included in this report.
(5)
Amounts include interest rate payments on the $775.0 million current notional amount of our interest rate swaps, as discussed below.

Equity

Preferred Stock

The following table summarizes our outstanding preferred stock issuances as of December 31, 2019.
Preferred Stock Issuances
 
Issuance Date
 
Number of Shares
 
Liquidation Value Per Share
 
Interest Rate
6.875% Series C Cumulative Redeemable Preferred Stock
 
March 17, 2016
 
3,000,000

 
$
25.00

 
6.875
%

The Series C Preferred Stock ranks senior to our common stock with respect to dividend rights and rights upon the liquidation, dissolution or winding up of our affairs. The Series C Preferred Stock has no stated maturity date and is not subject to mandatory redemption or any sinking fund. Generally, we are not permitted to redeem the Series C Preferred Stock prior to March 17, 2021, except in limited circumstances relating to our ability to qualify as a REIT and in certain other circumstances related to a change of control.

Common Stock

The following table summarizes our at-the market (“ATM”) common stock offering program as of December 31, 2019. We may from time to time sell common stock through sales agents under the program.
ATM Common Stock Offering Program
 
Date
 
Maximum Aggregate Offering Price (in thousands)
 
Aggregate Common Stock Available as of
December 31, 2019 (in thousands)
2019 $600 million ATM
 
February 14, 2019
 
$
600,000

 
$
318,248


The following table summarizes the activity for the ATM common stock offering programs during the three months and year ended December 31, 2019 (in thousands, except share data).
 
 
Three months ended December 31, 2019
ATM Common Stock Offering Program
 
Shares
Sold
 
Weighted Average Price Per Share
 
Net
Proceeds
2019 $600 million ATM
 
2,689,374

 
$
30.82

 
$
82,082

Total/weighted average
 
2,689,374

 
$
30.82

 
$
82,082

 
 
Year ended December 31, 2019
ATM Common Stock Offering Program
 
Shares
Sold
 
Weighted Average Price Per Share
 
Net
Proceeds
2019 $600 million ATM
 
9,711,706

 
$
29.01

 
$
279,156

Total/weighted average
 
9,711,706

 
$
29.01

 
$
279,156


54


Subsequent to December 31, 2019, on January 13, 2020, we completed an underwritten public offering of an aggregate 10,062,500 shares of common stock at a price to the underwriters of $30.9022 per share, consisting of (i) 5,600,000 shares offered directly by us and (ii) 4,462,500 shares offered by the forward dealer in connection with certain forward sale agreements (including 1,312,500 shares offered pursuant to the underwriters’ option to purchase additional shares, which option was exercised in full). The offering closed on January 16, 2020 and we received net proceeds from the sale of shares offered directly by us of $173.1 million. Subject to our right to elect cash or net share settlement, we have the ability to settle the forward sales agreements at any time through scheduled maturity date of the forward sale agreements of January 13, 2021.

On September 24, 2019, we completed an underwritten public offering of an aggregate 12,650,000 shares of common stock at a price to the underwriters of $28.60 per share, consisting of (i) 5,500,000 shares offered directly by us and (ii) 7,150,000 shares offered by the forward dealer in connection with certain forward sale agreements (including 1,650,000 shares offered pursuant to the underwriters’ option to purchase additional shares, which option was exercised in full). The offering closed on September 27, 2019 and we received net proceeds from the sale of shares offered directly by us of $157.3 million. On December 26, 2019, we physically settled the forward sales agreements in full by issuing 7,150,000 shares of common stock and received net proceeds of approximately $202.3 million.

On April 1, 2019, we completed an underwritten public offering of 7,475,000 shares of common stock (including 975,000 shares issued pursuant to the underwriters’ option to purchase additional shares, which option was exercised in full) at a price to the underwriters of $28.72 per share. The offering closed on April 4, 2019 and we received net proceeds of approximately $214.7 million.

Noncontrolling Interest

We own our interests in all of our properties and conduct substantially all of our business through our Operating Partnership. We are the sole member of the sole general partner of the Operating Partnership. As of December 31, 2019, we owned approximately 97.5% of the common units of our Operating Partnership, and our current and former executive officers, directors, senior employees and their affiliates, and third parties who contributed properties to us in exchange for common units in our Operating Partnership, owned the remaining 2.5%.

Interest Rate Risk

We use interest rate swaps to fix the rate of our variable rate debt. As of December 31, 2019, all of our outstanding variable rate debt, with the exception of our unsecured credit facility and Unsecured Term Loan F, was fixed with interest rate swaps through maturity. The Unsecured Term Loan F will be swapped to a fixed rate effective July 15, 2020 through maturity.

We recognize all derivatives on the balance sheet at fair value. If the derivative is designated as a hedge, depending on the nature of the hedge, changes in the fair value of derivatives are either offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income (loss), which is a component of equity. Derivatives that are not designated as hedges must be adjusted to fair value and the changes in fair value must be reflected as income or expense.

We have established criteria for suitable counterparties in relation to various specific types of risk. We only use counterparties that have a credit rating of no lower than investment grade at swap inception from Moody’s Investor Services, Standard & Poor’s, Fitch Ratings, or other nationally recognized rating agencies.


55


The following table summarizes our outstanding interest rate swaps as of December 31, 2019.
Interest Rate
Derivative Counterparty
 
Trade Date    
 
Effective Date
 
Notional Amount
(in thousands)
 
Fair Value
(in thousands)
 
Pay Fixed Interest Rate
 
Receive Variable Interest Rate
 
Maturity Date
Regions Bank
 
Mar-01-2013
 
Mar-01-2013
 
$
25,000

 
$
13

 
1.3300
%
 
One-month L
 
Feb-14-2020 
Capital One, N.A.
 
Jun-13-2013
 
Jul-01-2013
 
$
50,000

 
$
5

 
1.6810
%
 
One-month L
 
Feb-14-2020 
Capital One, N.A.
 
Jun-13-2013
 
Aug-01-2013
 
$
25,000

 
$
2

 
1.7030
%
 
One-month L
 
Feb-14-2020 
Regions Bank
 
Sep-30-2013
 
Feb-03-2014
 
$
25,000

 
$
(7
)
 
1.9925
%
 
One-month L
 
Feb-14-2020 
The Toronto-Dominion Bank
 
Oct-14-2015
 
Sep-29-2016
 
$
25,000

 
$
48

 
1.3830
%
 
One-month L
 
Sep-29-2020
PNC Bank, N.A.
 
Oct-14-2015
 
Sep-29-2016
 
$
50,000

 
$
94

 
1.3906
%
 
One-month L
 
Sep-29-2020
Regions Bank
 
Oct-14-2015
 
Sep-29-2016
 
$
35,000

 
$
67

 
1.3858
%
 
One-month L
 
Sep-29-2020
U.S. Bank, N.A.
 
Oct-14-2015
 
Sep-29-2016
 
$
25,000

 
$
46

 
1.3950
%
 
One-month L
 
Sep-29-2020
Capital One, N.A.
 
Oct-14-2015
 
Sep-29-2016
 
$
15,000

 
$
28

 
1.3950
%
 
One-month L
 
Sep-29-2020
Royal Bank of Canada
 
Jan-08-2015
 
Mar-20-2015
 
$
25,000

 
$
(37
)
 
1.7090
%
 
One-month L
 
Mar-21-2021
The Toronto-Dominion Bank
 
Jan-08-2015
 
Mar-20-2015
 
$
25,000

 
$
(38
)
 
1.7105
%
 
One-month L
 
Mar-21-2021
The Toronto-Dominion Bank
 
Jan-08-2015
 
Sep-10-2017
 
$
100,000

 
$
(778
)
 
2.2255
%
 
One-month L
 
Mar-21-2021
Wells Fargo, N.A.
 
Jan-08-2015
 
Mar-20-2015
 
$
25,000

 
$
(162
)
 
1.8280
%
 
One-month L
 
Mar-31-2022
The Toronto-Dominion Bank
 
Jan-08-2015
 
Feb-14-2020
 
$
25,000

 
$
(490
)
 
2.4535
%
 
One-month L
 
Mar-31-2022
Regions Bank
 
Jan-08-2015
 
Feb-14-2020
 
$
50,000

 
$
(1,003
)
 
2.4750
%
 
One-month L
 
Mar-31-2022
Capital One, N.A.
 
Jan-08-2015
 
Feb-14-2020
 
$
50,000

 
$
(1,061
)
 
2.5300
%
 
One-month L
 
Mar-31-2022
The Toronto-Dominion Bank
 
Jul-20-2017
 
Oct-30-2017
 
$
25,000

 
$
(229
)
 
1.8485
%
 
One-month L
 
Jan-04-2023
Royal Bank of Canada
 
Jul-20-2017
 
Oct-30-2017
 
$
25,000

 
$
(230
)
 
1.8505
%
 
One-month L
 
Jan-04-2023
Wells Fargo, N.A.
 
Jul-20-2017
 
Oct-30-2017
 
$
25,000

 
$
(230
)
 
1.8505
%
 
One-month L
 
Jan-04-2023
PNC Bank, N.A.
 
Jul-20-2017
 
Oct-30-2017
 
$
25,000

 
$
(229
)
 
1.8485
%
 
One-month L
 
Jan-04-2023
PNC Bank, N.A.
 
Jul-20-2017
 
Oct-30-2017
 
$
50,000

 
$
(456
)
 
1.8475
%
 
One-month L
 
Jan-04-2023
The Toronto-Dominion Bank
 
Jul-24-2018
 
Jul-26-2019
 
$
50,000

 
$
(2,663
)
 
2.9180
%
 
One-month L
 
Jan-12-2024
PNC Bank, N.A.
 
Jul-24-2018
 
Jul-26-2019
 
$
50,000

 
$
(2,665
)
 
2.9190
%
 
One-month L
 
Jan-12-2024
Bank of Montreal
 
Jul-24-2018
 
Jul-26-2019
 
$
50,000

 
$
(2,665
)
 
2.9190
%
 
One-month L
 
Jan-12-2024
U.S. Bank, N.A.
 
Jul-24-2018
 
Jul-26-2019
 
$
25,000

 
$
(1,332
)
 
2.9190
%
 
One-month L
 
Jan-12-2024
Wells Fargo, N.A.
 
May-02-2019
 
Jul-15-2020
 
$
50,000

 
$
(1,422
)
 
2.2460
%
 
One-month L
 
Jan-15-2025
U.S. Bank, N.A.
 
May-02-2019
 
Jul-15-2020
 
$
50,000

 
$
(1,421
)
 
2.2459
%
 
One-month L
 
Jan-15-2025
Regions Bank
 
May-02-2019
 
Jul-15-2020
 
$
50,000

 
$
(1,425
)
 
2.2459
%
 
One-month L
 
Jan-15-2025
Bank of Montreal
 
Jul-16-2019
 
Jul-15-2020
 
$
50,000

 
$
(276
)
 
1.7165
%
 
One-month L
 
Jan-15-2025

The swaps outlined in the above table were all designated as cash flow hedges of interest rate risk, and all are valued as Level 2 financial instruments. Level 2 financial instruments are defined as significant other observable inputs. As of December 31, 2019, the fair value of eight of our 29 interest rate swaps that were in an asset position was approximately $0.3 million and 21 interest rate swaps that were in a liability position was approximately $18.8 million, including any adjustment for nonperformance risk related to these agreements.

As of December 31, 2019, we had $1,021.0 million of variable rate debt. As of December 31, 2019, all of our outstanding variable rate debt, with exception of our unsecured credit facility and Unsecured Term Loan F, was fixed with interest rate swaps through maturity. The Unsecured Term Loan F will be swapped to a fixed rate effective July 15, 2020 through maturity. To the extent interest rates increase, interest costs on our floating rate debt not fixed with interest rate swaps will increase, which could adversely affect our cash flow and our ability to pay principal and interest on our debt and our ability to make distributions to our security holders. From time to time, we may enter into interest rate swap agreements and other interest rate hedging contracts, including swaps, caps and floors. In addition, an increase in interest rates could decrease the amounts third parties are willing to pay for our assets, thereby limiting our ability to change our portfolio promptly in response to changes in economic or other conditions.

Inflation

Our business could be impacted in multiple ways due to inflation. We believe, however, that we are well positioned to be able to manage our business in an inflationary environment. Specifically, as of December 31, 2019 our weighted average lease term was approximately 5.2 years and, on average, approximately 8-14% of our total annualized base rental revenue will roll annually over the next few years. We expect that this lease roll will allows us to capture inflationary increases in rent on a relatively efficient basis. In addition, as of December 31, 2019 we have long term liabilities averaging approximately 3.9 years when excluding our unsecured credit facility. Our variable rate debt as of December 31, 2019 has been fully swapped to fixed rates through maturity with the exception of our unsecured credit facility and Unsecured Term Loan F. The Unsecured Term Loan F will be swapped to a fixed rate effective July 15, 2020 through maturity. Therefore, as rents rise and increase our operating cash flow, this positive impact will flow more directly to the bottom line without the offset of higher in place debt costs. Lastly, while inflation will likely lead to increases in the operating costs of our portfolio, such as real estate taxes, utility expenses, and other operating expenses,

56


the majority of our leases are either triple net leases or otherwise provide for tenant reimbursement for costs related to these expenses. Therefore, the increased costs in an inflationary environment would generally be passed through to our tenant. 

Off-balance Sheet Arrangements

As of December 31, 2019, we had letters of credit related to development projects and certain other agreements of approximately $3.0 million. As of December 31, 2019, we had no other material off-balance sheet arrangements. See the table under “Liquidity and Capital Resources—Contractual Obligations” above for information regarding certain off-balance sheet arrangements.

Item 7A.  Quantitative and Qualitative Disclosures about Market Risk
Our future income, cash flows and fair values relevant to financial instruments are dependent upon prevailing market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates. The primary market risk we are exposed to is interest rate risk.  We have used derivative financial instruments to manage, or hedge, interest rate risks related to our borrowings, primarily through interest rate swaps.

As of December 31, 2019, we had $1,021.0 million of variable rate debt outstanding. As of December 31, 2019, all of our outstanding variable rate debt, with the exception of $246.0 million outstanding under our unsecured credit facility and Unsecured Term Loan F, was fixed with interest rate swaps through maturity. The Unsecured Term Loan F will be swapped to a fixed rate effective July 15, 2020 through maturity. To the extent we undertake additional variable rate indebtedness, if interest rates increase, then so will the interest costs on our unhedged variable rate debt, which could adversely affect our cash flow and our ability to pay principal and interest on our debt and our ability to make distributions to our security holders. Further, rising interest rates could limit our ability to refinance existing debt when it matures or significantly increase our future interest expense. From time to time, we enter into interest rate swap agreements and other interest rate hedging contracts, including swaps, caps and floors. While these agreements are intended to lessen the impact of rising interest rates on us, they also expose us to the risk that the other parties to the agreements will not perform, we could incur significant costs associated with the settlement of the agreements, the agreements will be unenforceable and the underlying transactions will fail to qualify as highly-effective cash flow hedges under GAAP. In addition, an increase in interest rates could decrease the amounts third parties are willing to pay for our assets, thereby limiting our ability to change our portfolio promptly in response to changes in economic or other conditions. If interest rates increased by 100 basis points and assuming we had an outstanding balance of $246.0 million on the unsecured credit facility and Unsecured Term Loan F (the portion outstanding at December 31, 2019 not fixed by interest rate swaps) for the year ended December 31, 2019, our interest expense would have increased by approximately $2.5 million for the year ended December 31, 2019.

Item 8.  Financial Statements and Supplementary Data

The required response under this Item is submitted in a separate section of this report. See Index to Consolidated Financial Statements on page F-1.

The following table summarizes the Company’s selected quarterly information for the quarters ended December 31, 2019 and 2018, September 30, 2019 and 2018, June 30, 2019 and 2018, and March 31, 2019 and 2018 (in thousands, except for per share data).
 
 
Three months ended,
Selected Interim Financial Information
 
December 31, 2019
 
September 30, 2019
 
June 30, 2019
 
March 31, 2019
Total revenue
 
$
111,181

 
$
102,421

 
$
96,646

 
$
95,702

Net income
 
$
17,916

 
$
11,190

 
$
14,170

 
$
7,389

Net income attributable to common stockholders
 
$
16,077

 
$
9,533

 
$
12,394

 
$
5,807

Net income per share attributable to common stockholders — basic and diluted
 
$
0.12

 
$
0.07

 
$
0.10

 
$
0.05

 
 
Three months ended,
Selected Interim Financial Information
 
December 31, 2018
 
September 30, 2018
 
June 30, 2018
 
March 31, 2018
Total revenue
 
$
93,290

 
$
88,946

 
$
85,474

 
$
83,283

Net income
 
$
47,256

 
$
8,876

 
$
14,964

 
$
25,149

Net income attributable to common stockholders
 
$
44,256

 
$
7,237

 
$
9,264

 
$
21,676

Net income per share attributable to common stockholders — basic and diluted
 
$
0.40

 
$
0.07

 
$
0.09

 
$
0.22



57


Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A.  Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As required by SEC Rule 13a-15(b), we have evaluated, under the supervision of and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, as of December 31, 2019. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures for the periods covered by this report were effective to provide reasonable assurance that information required to be disclosed by our Company in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control—Integrated Framework (2013), our management concluded that our internal control over financial reporting was effective as of December 31, 2019.
The effectiveness of our internal control over financial reporting as of December 31, 2019 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which appears on page F-2 of this Annual Report on Form 10‑K.
Changes in Internal Controls
There was no change to our internal control over financial reporting during the fourth quarter ended December 31, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B.  Other Information

None.

PART III.
Item 10.  Directors, Executive Officers and Corporate Governance
The information required by Item 10 will be included in the Proxy Statement to be filed relating to our 2020 Annual Meeting of Stockholders and is incorporated herein by reference.
Item 11.  Executive Compensation
The information required by Item 11 will be included in the Proxy Statement to be filed relating to our 2020 Annual Meeting of Stockholders and is incorporated herein by reference.
Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by Item 12 will be included in the Proxy Statement to be filed relating to our 2020 Annual Meeting of Stockholders and is incorporated herein by reference.
Item 13.  Certain Relationships and Related Transactions, and Director Independence
The information required by Item 13 will be included in the Proxy Statement to be filed relating to our 2020 Annual Meeting of Stockholders and is incorporated herein by reference.

58


Item 14.  Principal Accountant Fees and Services
The information required by Item 14 will be included in the Proxy Statement to be filed relating to our 2020 Annual Meeting of Stockholders and is incorporated herein by reference.
PART IV.
Item 15.  Exhibits and Financial Statement Schedules 

1.
Consolidated Financial Statements

The financial statements listed in the accompanying Index to Consolidated Financial Statements on page F-1 are filed as a part of this report.

2.
Financial Statement Schedules

The financial statement schedules required by this Item are filed with this report and listed in the accompanying Index to Consolidated Financial Statements on page F-1. All other financial statement schedules are not applicable.

3.
Exhibits

The following exhibits are filed as part of this report:
Exhibit Number

Description of Document
3.1


3.2


4.1


4.2


4.3

 
10.1


10.2


10.3


10.4

 
10.5


10.6


10.7


10.8

 
10.9


10.10


10.11

 
10.12


10.13


10.14


10.15


10.16

 
10.17


10.18



59


Exhibit Number

Description of Document
10.19


10.20


10.21


10.22


10.23


10.24


10.25


10.26


10.27


10.28


10.29


10.30

 
10.31

 
10.32

 
10.33

 
10.34

 
10.35

 
10.36

 
10.37

 
10.38

 
10.39

 
10.40

 
10.41

 
21.1



60


Exhibit Number

Description of Document
23.1


24.1


31.1


31.2


32.1


101


The following materials from STAG Industrial, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2019 formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income, (vi) the Consolidated Statements of Equity, (v) the Consolidated Statements of Cash Flows, and (vi) related notes to these consolidated financial statements.
104

 
Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101)
*
Represents management contract or compensatory plan or arrangement.
(1)
Incorporated by reference to the Quarterly Report on Form 10-Q filed with the SEC on July 30, 2019.
(2)
Incorporated by reference to the Current Report on Form 8-K filed with the SEC on May 1, 2018.
(3)
Incorporated by reference to the Registration Statement on Form S-11/A (File No. 333-168368) filed with the SEC on September 24, 2010.
(4)
Incorporated by reference to the Registration Statement on Form 8-A filed with the SEC on March 10, 2016.
(5)
Incorporated by reference to the Current Report on Form 8-K filed with the SEC on April 21, 2011.
(6)
Incorporated by reference to the Current Report on Form 8-K filed with the SEC on November 2, 2011.
(7)
Incorporated by reference to the Current Report on Form 8-K filed with the SEC on April 16, 2013.
(8)
Incorporated by reference to the Current Report on Form 8-K filed with the SEC on March 18, 2016.
(9)
Incorporated by reference to the Registration Statement on Form S-11/A (File No. 333-168368) filed with the SEC on April 5, 2011.
(10)
Incorporated by reference to the Current Report on Form 8-K filed with the SEC on May 6, 2013.
(11)
Incorporated by reference to the Annual Report on Form 10-K filed with the SEC on February 23, 2015.
(12)
Incorporated by reference to the Quarterly Report on Form 10-Q filed with the SEC on May 3, 2016.
(13)
Incorporated by reference to the Quarterly Report on Form 10-Q filed with the SEC on July 23, 2015.
(14)
Incorporated by reference to the Quarterly Report on Form 10-Q filed with the SEC on October 31, 2014.
(15)
Incorporated by reference to the Registration Statement on Form S-11/A (File No. 333-168368) filed with the SEC on February 16, 2011.
(16)
Incorporated by reference to the Current Report on Form 8-K filed with the SEC on July 31, 2018.
(17)
Incorporated by reference to the Current Report on Form 8-K filed with the SEC on December 27, 2016.
(18)
Incorporated by reference to the Quarterly Report on Form 10-Q filed with the SEC on November 2, 2017.
(19)
Incorporated by reference to the Current Report on Form 8-K filed with the SEC on July 30, 2019.
(20)
Incorporated by reference to the Current Report on Form 8-K filed with the SEC on October 1, 2015.
(21)
Incorporated by reference to the Current Report on Form 8-K filed with the SEC on April 22, 2014.
(22)
Incorporated by reference to the Current Report on Form 8-K filed with the SEC on December 19, 2014.
(23)
Incorporated by reference to the Current Report on Form 8-K filed with the SEC on December 4, 2015.
(24)
Incorporated by reference to the Current Report on Form 8-K filed with the SEC on April 13, 2018.

Item 16. Form 10-K Summary

None.


61


SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
STAG INDUSTRIAL, INC.
Dated: February 12, 2020
 
 
 
 
/s/ Benjamin S. Butcher
 
 
By:
Benjamin S. Butcher
Chairman, Chief Executive Officer and President
 
KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and directors of STAG Industrial, Inc., hereby severally constitute Benjamin S. Butcher and William R. Crooker, and each of them singly, our true and lawful attorneys with full power to them, and each of them singly, to sign for us and in our names in the capacities indicated below, the Form 10-K filed herewith and any and all amendments to said Form 10-K, and generally to do all such things in our names and in our capacities as officers and directors to enable STAG Industrial, Inc. to comply with the provisions of the Securities Exchange Act of 1934, as amended, and all requirements of the Securities and Exchange Commission, hereby ratifying and confirming our signatures as they may be signed by our said attorneys, or any of them, to said Form 10-K and any and all amendments thereto.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and dates indicated.
Date
Signature
Title
 
 
 
February 12, 2020
/s/ Benjamin S. Butcher
Chairman, Chief Executive Officer
(principal executive officer) and President
Benjamin S. Butcher
 
 
 
February 12, 2020
/s/ Jit Kee Chin
Director
Jit Kee Chin
 
 
 
February 12, 2020
/s/ Virgis W. Colbert
Director
Virgis W. Colbert
 
 
 
February 12, 2020
/s/ Michelle S. Dilley
Director
Michelle S. Dilley
 
 
 
February 12, 2020
/s/ Jeffrey D. Furber
Director
Jeffrey D. Furber
 
 
 
February 12, 2020
/s/ Larry T. Guillemette
Director
 Larry T. Guillemette
 
 
 
February 12, 2020
/s/ Francis X. Jacoby III
Director
Francis X. Jacoby III
 
 
 
February 12, 2020
/s/ Christopher P. Marr
Director
Christopher P. Marr
 
 
 
February 12, 2020
/s/ Hans S. Weger
Director
Hans S. Weger
 
 
 
February 12, 2020
/s/ William R. Crooker
Chief Financial Officer, Executive Vice President and Treasurer (principal financial and accounting officer)
William R. Crooker

62

Table of Contents

STAG INDUSTRIAL, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS 
F-2
 
 
F-5
 
 
F-6
 
 
F-7
 
 
F-8
 
 
F-9
 
 
 
 
 
 

F-1

Table of Contents


Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of STAG Industrial, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of STAG Industrial, Inc. and its subsidiaries (the “Company”) as of December 31, 2019 and 2018, and the related consolidated statements of operations, comprehensive income, equity and cash flows for each of the three years in the period ended December 31, 2019, including the related notes and financial statement schedules listed in the accompanying index (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.


F-2

Table of Contents

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Purchase Price Accounting

As described in Notes 2 and 3 to the consolidated financial statements, during 2019, the Company completed 69 property acquisitions for consideration of approximately $1.2 billion, of which approximately $96.4 million of land, $899.1 million of buildings and improvements, $205.7 million of net leasing intangibles, and $2.7 million of other assets were recorded. Management allocates the purchase price of properties based upon the fair value of the assets acquired and liabilities assumed, which generally consist of land, buildings, tenant improvements, mortgage debt assumed, and deferred leasing intangibles, which includes in-place leases, above market and below market leases, and tenant relationships. The process for determining the allocation to these components requires estimates and assumptions, including rental rates, discount rates, exit capitalization rates, and land value per square foot.

The principal considerations for our determination that performing procedures relating to purchase price accounting is a critical audit matter are (i) there was significant judgment by management when developing the fair value measurement of the tangible and intangible assets acquired and liabilities assumed, which resulted in a high degree of auditor judgment and subjectivity in performing procedures relating to these estimates, (ii) significant audit effort was necessary in evaluating the significant assumptions, including rental rates, discount rates, exit capitalization rates, and land value per square foot, (iii) significant auditor judgment was necessary in evaluating audit evidence, and (iv) the audit effort included the involvement of professionals with specialized skill and knowledge to assist in evaluating the audit evidence obtained.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to purchase price accounting, including controls over the allocation of the purchase price to the assets acquired and liabilities assumed. These procedures also included, among others, testing management’s process for estimating the fair value of assets acquired and liabilities assumed by (i) reading the purchase agreements and (ii) evaluating the appropriateness of methods and, for a sample of acquisitions, the reasonableness of significant assumptions used by management in developing the fair value measurement including rental rates, discount rates, exit capitalization rates, and land value per square foot. Evaluating these assumptions involved evaluating whether the assumptions used were reasonable considering past performance of the tangible and intangible assets acquired and liabilities assumed, consistency with external market and industry data, and considering whether the assumptions were consistent with evidence obtained in other areas of the audit. Procedures were also performed to test the completeness and accuracy of data provided by management. For certain acquisitions, professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of management’s methods and evaluating the reasonableness of the assumptions related to the rental rates, discount rates, exit capitalization rates, and land value per square foot.

Rental Property and Deferred Leasing Intangible Liabilities Impairment Assessment

As described in Note 3 to the consolidated financial statements, the Company’s consolidated total rental property, net balance was $3,998.5 million and deferred leasing intangible liabilities, net balance was $26.7 million as of December 31, 2019. During 2019, the Company recognized an impairment loss of approximately $9.8 million. Management evaluates the carrying value of all tangible and intangible rental property assets and deferred leasing intangible liabilities (collectively, the “property”) held for use for possible impairment when an event or change in circumstance has occurred that indicates their carrying value may not be recoverable. The evaluation includes estimating and reviewing anticipated future undiscounted cash flows to be derived from the property. If such cash flows are less than the property’s carrying value, an impairment charge is recognized to the extent by which the asset’s carrying value exceeds the estimated fair value. Estimating future cash flows is highly subjective and is based in part on assumptions related to anticipated hold period, future occupancy, rental rates, capital requirements, and exit capitalization rates that could differ from actual results. The discount rate used to present value the cash flows for determining fair value is also subjective.

F-3

Table of Contents


The principal considerations for our determination that performing procedures relating to the rental property and deferred leasing intangible liabilities impairment assessment is a critical audit matter are (i) there was significant judgment by management when developing the fair value measurement of the rental property and deferred leasing intangible liabilities, which resulted in a high degree of auditor judgment and subjectivity in performing procedures relating to these estimates, (ii) significant audit effort was necessary in evaluating the significant assumptions, including the anticipated hold period, rental rates, discount rates and exit capitalization rates, (iii) significant auditor judgment was necessary in evaluating audit evidence related to the fair value measurement of the rental property and deferred leasing intangible liabilities, and (iv) the audit effort included the involvement of professionals with specialized skill and knowledge to assist in evaluating the audit evidence obtained.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the impairment assessment of rental property and deferred leasing intangible liabilities, including controls over management’s identification of events or changes in circumstances that indicate an impairment of rental property and deferred leasing intangible liabilities has occurred, and the development of significant assumptions used to determine the impairment loss. These procedures also included, among others, testing management’s process for developing estimates of undiscounted cash flows related to rental property and deferred leasing intangible liabilities and estimates of the fair value of the rental property and deferred leasing intangible liabilities, including the appropriateness of the discounted cash flow model and the reasonableness of significant assumptions used by management in developing the fair value measurement including the anticipated hold period, rental rates, discount rates and exit capitalization rates. Evaluating these assumptions involved evaluating whether the assumptions used were reasonable considering past performance of the rental property and deferred leasing intangible liabilities, consistency with external market and industry data and considering whether the assumptions were consistent with evidence obtained in other areas of the audit. Procedures were also performed to test the completeness and accuracy of data provided by management. For certain impairment assessments, professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of management’s discounted cash flow model and evaluating the reasonableness of the assumptions related to rental rates, discount rates, and exit capitalization rates used in the model.


/s/PricewaterhouseCoopers LLP
Boston, Massachusetts
February 12, 2020

We have served as the Company’s or its predecessor’s auditor since 2009.  



F-4

Table of Contents


STAG Industrial, Inc.
Consolidated Balance Sheets
(in thousands, except share data)
 
December 31, 2019

December 31, 2018
Assets
 

 
Rental Property:
 

 
Land
$
435,923


$
364,023

Buildings and improvements, net of accumulated depreciation of $387,633 and $316,930, respectively
3,087,435


2,285,663

Deferred leasing intangibles, net of accumulated amortization of $241,304 and $246,502, respectively
475,149


342,015

Total rental property, net
3,998,507


2,991,701

Cash and cash equivalents
9,041


7,968

Restricted cash
2,823


14,574

Tenant accounts receivable
57,592


42,236

Prepaid expenses and other assets
38,231


36,902

Interest rate swaps
303


9,151

Operating lease right-of-use assets
15,129

 

Assets held for sale, net
43,019

 

Total assets
$
4,164,645


$
3,102,532

Liabilities and Equity
 
 
 
Liabilities:
 
 
 
Unsecured credit facility
$
146,000


$
100,500

Unsecured term loans, net
871,375


596,360

Unsecured notes, net
572,883


572,488

Mortgage notes, net
54,755


56,560

Accounts payable, accrued expenses and other liabilities
53,737


45,507

Interest rate swaps
18,819


4,011

Tenant prepaid rent and security deposits
21,993


22,153

Dividends and distributions payable
17,465


13,754

Deferred leasing intangibles, net of accumulated amortization of $12,064 and $12,764, respectively
26,738


21,567

Operating lease liabilities
16,989

 

Total liabilities
1,800,754


1,432,900

Commitments and contingencies (Note 11)



Equity:
 

 
Preferred stock, par value $0.01 per share, 20,000,000 and 15,000,000 shares authorized at December 31, 2019 and December 31, 2018, respectively,
 

 
Series C, 3,000,000 shares (liquidation preference of $25.00 per share) issued and outstanding at December 31, 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 December 31, 2019 and December 31, 2018, respectively, 142,815,593 and 112,165,786 shares issued and outstanding at December 31, 2019 and December 31, 2018, respectively
1,428

 
1,122

Additional paid-in capital
2,970,553


2,118,179

Cumulative dividends in excess of earnings
(723,027
)

(584,979
)
Accumulated other comprehensive income (loss)
(18,426
)

4,481

Total stockholders’ equity
2,305,528


1,613,803

Noncontrolling interest
58,363


55,829

Total equity
2,363,891


1,669,632

Total liabilities and equity
$
4,164,645


$
3,102,532

The accompanying notes are an integral part of these consolidated financial statements.

F-5

Table of Contents

STAG Industrial, Inc.
Consolidated Statements of Operations
(in thousands, except share data)
 
Year ended December 31,
 
2019
 
2018
 
2017
Revenue
    

 
    

 
    

Rental income
$
405,350

 
$
349,693

 
$
300,836

Other income
600

 
1,300

 
251

Total revenue
405,950

 
350,993

 
301,087

Expenses
 


 

 
 

Property
75,179

 
69,021

 
57,701

General and administrative
35,946

 
34,052

 
33,349

Property acquisition costs

 

 
5,386

Depreciation and amortization
185,450

 
167,617

 
150,881

Loss on impairments
9,757

 
6,182

 
1,879

Gain on involuntary conversion

 

 
(325
)
Other expenses
1,785

 
1,277

 
1,786

Total expenses
308,117

 
278,149

 
250,657

Other income (expense)
 


 

 
 

Interest and other income
87

 
20

 
12

Interest expense
(54,647
)
 
(48,817
)
 
(42,469
)
Loss on extinguishment of debt

 
(13
)
 
(15
)
Gain on the sales of rental property, net
7,392

 
72,211

 
24,242

Total other income (expense)
(47,168
)
 
23,401

 
(18,230
)
Net income
$
50,665

 
$
96,245

 
$
32,200

Less: income attributable to noncontrolling interest after preferred stock dividends
1,384

 
3,319

 
941

Net income attributable to STAG Industrial, Inc.
$
49,281

 
$
92,926

 
$
31,259

Less: preferred stock dividends
5,156

 
7,604

 
9,794

Less: redemption of preferred stock

 
2,661

 

Less: amount allocated to participating securities
314

 
276

 
334

Net income attributable to common stockholders
$
43,811

 
$
82,385

 
$
21,131

Weighted average common shares outstanding — basic
125,389

 
103,401

 
89,538

Weighted average common shares outstanding — diluted
125,678

 
103,807

 
90,004

Net income per share — basic and diluted
 

 
 
 
 
Net income per share attributable to common stockholders — basic
$
0.35

 
$
0.80

 
$
0.24

Net income per share attributable to common stockholders — diluted
$
0.35

 
$
0.79

 
$
0.23

The accompanying notes are an integral part of these consolidated financial statements.

F-6

Table of Contents

STAG Industrial, Inc.
Consolidated Statements of Comprehensive Income
(in thousands)
 
Year ended December 31,
 
2019
 
2018
 
2017
Net income
$
50,665

 
$
96,245

 
$
32,200

Other comprehensive income (loss):
 
 
 
 
 
Income (loss) on interest rate swaps
(23,625
)
 
310

 
5,670

Other comprehensive income (loss)
(23,625
)
 
310

 
5,670

Comprehensive income
27,040

 
96,555

 
37,870

Income attributable to noncontrolling interest after preferred stock dividends
(1,384
)
 
(3,319
)
 
(941
)
Other comprehensive (income) loss attributable to noncontrolling interest
718

 
(12
)
 
(238
)
Comprehensive income attributable to STAG Industrial, Inc.
$
26,374

 
$
93,224

 
$
36,691

The accompanying notes are an integral part of these consolidated financial statements.

F-7

Table of Contents

STAG Industrial, Inc.
Consolidated Statements of Equity
(in thousands, except share data)
 
Preferred Stock
 
Common Stock
 
Additional Paid-in Capital
 
Cumulative Dividends in Excess of Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Total Stockholders’ Equity
 
Noncontrolling Interest - Unit Holders in Operating Partnership
 
Total Equity
 
 
Shares
 
Par Amount
 
 
 
 
 
 
Balance, December 31, 2016
$
145,000

 
80,352,304

 
$
804

 
$
1,293,706

 
$
(410,978
)
 
$
(1,496
)
 
$
1,027,036

 
$
39,890

 
$
1,066,926

Proceeds from sales of common stock, net

 
16,262,375

 
163

 
421,326

 

 

 
421,489

 

 
421,489

Dividends and distributions, net

 

 

 

 
(136,778
)
 

 
(136,778
)
 
(6,378
)
 
(143,156
)
Non-cash compensation activity, net

 
46,604

 

 
4,138

 
(194
)
 

 
3,944

 
4,676

 
8,620

Redemption of common units to common stock

 
351,260

 
3

 
3,929

 

 

 
3,932

 
(3,932
)
 

Issuance of units

 

 

 

 

 

 

 
18,558

 
18,558

Rebalancing of noncontrolling interest

 

 

 
2,726

 

 

 
2,726

 
(2,726
)
 

Other comprehensive income

 

 

 

 

 
5,432

 
5,432

 
238

 
5,670

Net income

 

 

 

 
31,259

 

 
31,259

 
941

 
32,200

Balance, December 31, 2017
$
145,000


97,012,543


$
970


$
1,725,825


$
(516,691
)

$
3,936


$
1,359,040


$
51,267


$
1,410,307

Cash flow hedging instruments cumulative effect adjustment

 

 

 

 
(258
)
 
247

 
(11
)
 
11

 

Proceeds from sales of common stock, net

 
14,724,614

 
148

 
385,951

 

 

 
386,099

 

 
386,099

Redemption of preferred stock
(70,000
)
 

 

 
5,141

 
(5,158
)
 

 
(70,017
)
 

 
(70,017
)
Dividends and distributions, net

 

 

 

 
(155,261
)
 

 
(155,261
)
 
(5,481
)
 
(160,742
)
Non-cash compensation activity, net

 
76,574

 
1

 
3,194

 
(537
)
 

 
2,658

 
4,772

 
7,430

Redemption of common units to common stock

 
352,055

 
3

 
4,398

 

 

 
4,401

 
(4,401
)
 

Rebalancing of noncontrolling interest

 

 

 
(6,330
)
 

 

 
(6,330
)
 
6,330

 

Other comprehensive income

 

 

 

 

 
298

 
298

 
12

 
310

Net income

 

 

 

 
92,926

 

 
92,926

 
3,319

 
96,245

Balance, December 31, 2018
$
75,000

 
112,165,786

 
$
1,122

 
$
2,118,179

 
$
(584,979
)
 
$
4,481

 
$
1,613,803

 
$
55,829

 
$
1,669,632

Leases cumulative effect adjustment (Note 2)

 

 

 

 
(214
)
 

 
(214
)
 

 
(214
)
Proceeds from sales of common stock, net

 
29,836,706

 
299

 
852,031

 

 

 
852,330

 

 
852,330

Dividends and distributions, net

 

 

 

 
(186,710
)
 

 
(186,710
)
 
(6,582
)
 
(193,292
)
Non-cash compensation activity, net

 
132,964

 
1

 
3,715

 
(405
)
 

 
3,311

 
5,084

 
8,395

Redemption of common units to common stock

 
680,137

 
6

 
9,515

 

 

 
9,521

 
(9,521
)
 

Rebalancing of noncontrolling interest

 

 

 
(12,887
)
 

 

 
(12,887
)
 
12,887

 

Other comprehensive loss

 

 

 

 

 
(22,907
)
 
(22,907
)
 
(718
)
 
(23,625
)
Net income

 

 

 

 
49,281

 

 
49,281

 
1,384

 
50,665

Balance, December 31, 2019
$
75,000

 
142,815,593

 
$
1,428

 
$
2,970,553

 
$
(723,027
)
 
$
(18,426
)
 
$
2,305,528

 
$
58,363

 
$
2,363,891

The accompanying notes are an integral part of these consolidated financial statements.

F-8

Table of Contents

STAG Industrial, Inc.
Consolidated Statements of Cash Flows
(in thousands)
 
Year ended December 31,
 
2019
 
2018
 
2017
Cash flows from operating activities:
    
 
    
 
    
Net income
$
50,665

 
$
96,245

 
$
32,200

Adjustment to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
Depreciation and amortization
185,450

 
167,617

 
150,881

Loss on impairments
9,757

 
6,182

 
1,879

Gain on involuntary conversion

 

 
(325
)
Non-cash portion of interest expense
2,583

 
2,316

 
1,897

Amortization of above and below market leases, net
4,862

 
4,164

 
4,583

Straight-line rent adjustments, net
(11,774
)
 
(11,163
)
 
(7,475
)
Dividends on forfeited equity compensation
38

 
15

 
2

Loss on extinguishment of debt

 
13

 
15

Gain on the sales of rental property, net
(7,392
)
 
(72,211
)
 
(24,242
)
Non-cash compensation expense
9,888

 
8,922

 
9,547

Change in assets and liabilities:
 
 
 
 
 
Tenant accounts receivable
(2,509
)
 
(903
)
 
(2,125
)
Prepaid expenses and other assets
(8,480
)
 
(8,921
)
 
(9,103
)
Accounts payable, accrued expenses and other liabilities
429

 
2,385

 
514

Tenant prepaid rent and security deposits
(160
)
 
3,108

 
3,850

Total adjustments
182,692

 
101,524

 
129,898

Net cash provided by operating activities
233,357

 
197,769

 
162,098

Cash flows from investing activities:
 
 
 
 
 
Acquisitions of land and buildings and improvements
(995,047
)
 
(564,805
)
 
(497,264
)
Additions of land and building and improvements
(65,044
)
 
(34,584
)
 
(45,790
)
Acquisitions of other assets
(2,736
)
 
(794
)
 

Proceeds from sales of rental property, net
42,028

 
207,943

 
65,075

Proceeds from insurance on involuntary conversion

 

 
1,796

Acquisitions of other liabilities

 
242

 

Acquisition deposits, net
3,846

 
(4,916
)
 
255

Acquisitions of deferred leasing intangibles
(205,621
)
 
(110,287
)
 
(95,707
)
Net cash used in investing activities
(1,222,574
)
 
(507,201
)
 
(571,635
)
Cash flows from financing activities:
 
 
 
 
 
Proceeds from unsecured credit facility
1,568,000

 
894,500

 
677,500

Repayment of unsecured credit facility
(1,522,500
)
 
(1,065,000
)
 
(434,500
)
Proceeds from unsecured term loans
275,000

 
150,000

 

Proceeds from unsecured notes

 
175,000

 

Repayment of mortgage notes
(1,926
)
 
(1,843
)
 
(105,470
)
Redemption of preferred stock

 
(70,000
)
 

Payment of loan fees and costs
(1,227
)
 
(4,465
)
 
(1,209
)
Payment of loan prepayment fees and costs

 

 
(15
)
Dividends and distributions
(189,581
)
 
(158,869
)
 
(141,006
)
Proceeds from sales of common stock, net
852,375

 
386,046

 
421,530

Repurchase and retirement of share-based compensation
(1,602
)
 
(1,524
)
 
(969
)
Net cash provided by financing activities
978,539

 
303,845

 
415,861

Increase (decrease) in cash and cash equivalents and restricted cash
(10,678
)
 
(5,587
)
 
6,324

Cash and cash equivalents and restricted cash—beginning of period
22,542

 
28,129

 
21,805

Cash and cash equivalents and restricted cash—end of period
$
11,864


$
22,542

 
$
28,129

Supplemental disclosure:
 
 
 
 
 
Cash paid for interest, net of capitalized interest
$
51,490

 
$
46,364

 
$
40,685

Supplemental schedule of non-cash investing and financing activities
 
 
 
 
 
Issuance of units for acquisitions of land and building and improvements and deferred leasing intangibles
$

 
$

 
$
18,558

Additions to building and other capital improvements
$
(274
)
 
$

 
$
(158
)
Transfer of other assets to building and other capital improvements
$
274

 
$

 
$
158

Acquisitions of land and buildings and improvements
$
(469
)
 
$
(840
)
 
$
(17,461
)
Acquisitions of deferred leasing intangibles
$
(88
)
 
$
(48
)
 
$
(2,079
)
Partial disposal of building due to involuntary conversion of building
$

 
$

 
$
363

Investing other receivables due to involuntary conversion of building
$

 
$

 
$
(363
)
Change in additions of land, building, and improvements included in accounts payable, accrued expenses, and other liabilities
$
(8,278
)
 
$
147

 
$
(7,125
)
Additions to building and other capital improvements from non-cash compensation
$
(70
)
 
$
(25
)
 
$
(26
)
Change in loan fees, costs, and offering costs included in accounts payable, accrued expenses, and other liabilities
$
(45
)
 
$
40

 
$
(15
)
Reclassification of preferred stock called for redemption to liability
$

 
$
70,000

 
$

Leases cumulative effect adjustment (Note 2)
$
(214
)
 
$

 
$

Dividends and distributions accrued
$
17,465

 
$
13,754

 
$
11,880

The accompanying notes are an integral part of these consolidated financial statements.

F-9

Table of Contents

STAG Industrial, Inc.
Notes to Consolidated Financial Statements

1. Organization and Description of Business

STAG Industrial, Inc. (the “Company”) is an industrial real estate operating company focused on the acquisition, ownership, and operation of single-tenant, industrial properties throughout the United States. The Company was formed as a Maryland corporation and has elected to be treated and intends to continue to qualify as a real estate investment trust (“REIT”) under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”).  The Company is structured as an umbrella partnership REIT, commonly called an UPREIT, and owns substantially all of its properties and conducts substantially all of its business through its operating partnership, STAG Industrial Operating Partnership, L.P., a Delaware limited partnership (the “Operating Partnership”). As of December 31, 2019 and 2018, the Company owned a 97.5% and 96.5%, respectively, common equity interest in the Operating Partnership. The Company, through its wholly owned subsidiary, is the sole general partner of the Operating Partnership.  As used herein, the “Company” refers to STAG Industrial, Inc. and its consolidated subsidiaries and partnerships, including the Operating Partnership, except where context otherwise requires.

As of December 31, 2019, the Company owned 450 buildings in 38 states with approximately 91.4 million rentable square feet (square feet unaudited herein and throughout the Notes), consisting of 373 warehouse/distribution buildings, 69 light manufacturing buildings, and eight flex/office buildings.

2. Summary of Significant Accounting Policies

Basis of Presentation

The Company’s consolidated financial statements include the accounts of the Company, the Operating Partnership and their subsidiaries. Interests in the Operating Partnership not owned by the Company are referred to as “Noncontrolling Common Units.” These Noncontrolling Common Units are held by other limited partners in the form of common units (“Other Common Units”) and long term incentive plan units (“LTIP units”) issued pursuant to the STAG Industrial, Inc. 2011 Equity Incentive Plan, as amended (the “2011 Plan”). All significant intercompany balances and transactions have been eliminated in the consolidation of entities. The financial statements of the Company are presented on a consolidated basis for all periods presented.

New Accounting Standards and Reclassifications

New Accounting Standards Adopted

In February 2016, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842), and various subsequent ASU’s, which set out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). Topic 842 superseded the previous leases standard, Topic 840, Leases. The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification determines whether lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less are accounted for similar to the previous guidance for operating leases. The new standard requires lessors to account for leases using an approach that is substantially equivalent to the previous guidance for sales-type leases, direct financing leases and operating leases. ASU 2016-02 impacted the Company’s consolidated financial statements as the Company has ground leases and its corporate office lease for which it is the lessee, which resulted in the recording of a right-of-use asset and the related lease liability.

The Company adopted ASU 2016-02 on January 1, 2019, using the modified retrospective transition method. The adoption of this standard resulted in a cumulative effect adjustment of approximately $0.2 million recorded as an increase to cumulative dividends in excess of earnings as of January 1, 2019 in the accompanying Consolidated Statements of Equity. The cumulative effect adjustment related to initial direct costs of leases where the Company is the lessor and that, as of January 1, 2019, had not begun to amortize and are no longer allowed to be capitalized under the new standard. On January 1, 2019, the Company recognized operating lease right-of-use assets of approximately $16.3 million and related operating lease liabilities of approximately $18.0 million on the Consolidated Balance Sheets, related to the leases where the Company is the lessee. The Company adopted the new standard using the practical expedient package which allowed the Company to (i) not reassess whether any expired or existing contracts are or contain leases; (ii) not reassess the lease classification for any expired or existing leases; and (iii) not reassess initial direct costs for any existing leases. This practical expedient allowed the Company to continue to account for its ground

F-10


leases as operating leases. Prospectively, any new or modified ground leases may be classified as financing leases. The adoption of this standard by the Company has been applied as of January 1, 2019, and the comparative periods have not been restated.

Reclassifications

Prior period amounts have been reclassified to conform to the current year presentation due to the adoption of ASU 2016-02. Amounts previously classified as rental income and tenant recoveries in the prior period are now classified as rental income on the accompanying Consolidated Statements of Operations, as the Company has made an accounting policy election to combine these amounts that are accounted for under the new leases standard.

Certain other prior period amounts have been reclassified to conform to the current year presentation.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Rental Property and Deferred Leasing Intangibles

Rental property is carried at cost less accumulated depreciation and amortization. Expenditures for maintenance and repairs are expensed as incurred. Significant renovations and betterments that extend the economic useful lives of assets are capitalized.

The Company capitalizes costs directly and indirectly related to the development, pre-development, redevelopment, or improvement of rental property. Real estate taxes, compensation costs of development personnel, insurance, interest, and other directly related costs during construction periods are capitalized as incurred, with depreciation commencing with the date the property is substantially completed. Such costs begin to be capitalized to the development projects from the point the Company is undergoing the necessary activities to get the development project ready for its intended use and cease when the development projects are substantially completed and held available for occupancy. Interest is capitalized based on actual capital expenditures from the period when development or redevelopment commences until the asset is ready for its intended use, at the weighted average borrowing rate of the Company’s unsecured indebtedness during the period.

For properties classified as held for sale, the Company ceases depreciating and amortizing the rental property and values the rental property at the lower of depreciated and amortized cost or fair value less costs to dispose. The Company presents those properties classified as held for sale with any qualifying assets and liabilities associated with those properties as held for sale in the accompanying Consolidated Balance Sheets.

Using information available at the time of acquisition, the Company allocates the purchase price of properties acquired based upon the fair value of the assets acquired and liabilities assumed, which generally consist of land, buildings, tenant improvements, mortgage debt assumed, and deferred leasing intangibles, which includes in-place leases, above market and below market leases, and tenant relationships. The process for determining the allocation to these components requires estimates and assumptions, including rental rates, discount rates and exit capitalization rates, and land value per square foot, as well as available market information. The fair value of the tangible assets of an acquired property considers the value of the property as if it were vacant. The portion of the purchase price that is allocated to above and below market leases is valued based on the present value of the difference between prevailing market rates and the in-place rates measured over a period equal to the remaining term of the lease term plus the term of any bargain renewal options. The purchase price is further allocated to in-place lease values and tenant relationships based on the Company’s evaluation of the specific characteristics of each tenant’s lease and its overall relationship with the respective tenant.

The above and below market lease values are amortized into rental income over the remaining lease term. The value of in-place lease intangibles and tenant relationships are amortized over the remaining lease term (and expected renewal period of the respective lease for tenant relationships) as increases to depreciation and amortization expense. The remaining lease terms are adjusted for bargain renewal options or assumed exercises of early termination options, as applicable. If a tenant subsequently terminates its lease, any unamortized portion of above and below market leases is accelerated into rental income and the in-place lease value and tenant relationships are accelerated into depreciation and amortization expense over the shortened lease term.


F-11


The purchase price allocated to deferred leasing intangible assets are included in rental property, net on the accompanying Consolidated Balance Sheets and the purchase price allocated to deferred leasing intangible liabilities are included in deferred leasing intangibles, net on the accompanying Consolidated Balance Sheets under the liabilities section.

In determining the fair value of the debt assumed, the Company discounts the spread between the future contractual interest payments and hypothetical future interest payments on mortgage debt based on a current market rate. The associated fair market value debt adjustment is amortized through interest expense over the life of the debt on a basis which approximates the effective interest method.

The Company evaluates the carrying value of all tangible and intangible rental property assets and deferred leasing intangible liabilities (collectively, the “property”) held for use for possible impairment when an event or change in circumstance has occurred that indicates their carrying value may not be recoverable. The evaluation includes estimating and reviewing anticipated future undiscounted cash flows to be derived from the property. If such cash flows are less than the property’s carrying value, an impairment charge is recognized to the extent by which the property’s carrying value exceeds the estimated fair value. Estimating future cash flows is highly subjective and is based in part on assumptions regarding anticipated hold period, future occupancy, rental rates, capital requirements, and exit capitalization rates that could differ from actual results. The discount rate used to present value the cash flows for determining fair value is also subjective.

Depreciation expense is computed using the straight-line method based on the following estimated useful lives.
Description
 
Estimated Useful Life
Building
 
40 Years
Building and land improvements
 
Up to 20 years
Tenant improvements
 
Shorter of useful life or terms of related lease
 

Fully depreciated or amortized assets or liabilities and the associated accumulated depreciation or amortization are written-off. The Company wrote-off fully depreciated or amortized tenant improvements, deferred leasing intangible assets, and deferred leasing intangible liabilities of approximately $22.8 million, $87.7 million, $5.5 million, respectively, for the year ended December 31, 2019 and approximately $1.3 million, $113.1 million, $4.3 million, respectively, for the year ended December 31, 2018.

Leases

For leases in which the Company is the lessee, the Company recognizes a right-of-use asset and corresponding lease liability on the accompanying Consolidated Balance Sheets equal to the present value of the fixed lease payments. In determining the operating right-of-use asset and lease liability for the Company’s existing operating leases upon the adoption of the new lease guidance, the Company was required to estimate an appropriate incremental borrowing rate on a fully-collateralized basis for the terms of the leases. The Company utilized a market-based approach to estimate the incremental borrowing rate for each individual lease. Since the terms under the ground leases are significantly longer than the terms of borrowings available to the Company on a fully-collateralized basis, the estimate of this rate required significant judgment, and considered factors such as yields on outstanding public debt and other market based pricing on longer duration financing instruments.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and highly liquid short-term investments with original maturities of three months or less. The Company maintains cash and cash equivalents in United States banking institutions that may exceed amounts insured by the Federal Deposit Insurance Corporation. While the Company monitors the cash balances in its operating accounts, these cash balances could be impacted if the underlying financial institutions fail or are subject to other adverse conditions in the financial markets. To date, the Company has experienced no loss or lack of access to cash in its operating accounts, and mitigates this risk by using nationally recognized banking institutions.

F-12



Restricted Cash

Restricted cash may include tenant security deposits, cash held in escrow for real estate taxes and capital improvements as required in various mortgage note agreements, and cash held by the Company’s transfer agent for preferred stock dividends that are distributed subsequent to period end. Restricted cash may also include cash held by qualified intermediaries to facilitate a like-kind exchange of real estate under Section 1031 of the Code.

The following table presents a reconciliation of cash and cash equivalents and restricted cash reported on the accompanying Consolidated Balance Sheets to amounts reported on the accompanying Consolidated Statements of Cash Flows.
Reconciliation of cash and cash equivalents and restricted cash (in thousands)
 
December 31, 2019
 
December 31, 2018
Cash and cash equivalents
 
$
9,041

 
$
7,968

Restricted cash
 
2,823

 
14,574

Total cash and cash equivalents and restricted cash
 
$
11,864

 
$
22,542



Deferred Costs

Deferred financing fees and debt issuance costs include costs incurred in obtaining debt that are capitalized and are presented as a direct deduction from the carrying amount of the associated debt liability that is not a line-of-credit arrangement on the accompanying Consolidated Balance Sheets. Deferred financing fees and debt issuance costs related to line-of-credit arrangements are presented as an asset in prepaid expenses and other assets on the accompanying Consolidated Balance Sheets. The deferred financing fees and debt issuance costs are amortized through interest expense over the life of the respective loans on a basis which approximates the effective interest method. Any unamortized amounts upon early repayment of debt are written off in the period of repayment as a loss on extinguishment of debt. Fully amortized deferred financing fees and debt issuance costs are written off upon maturity of the underlying debt.

Leasing commissions include commissions and other direct and incremental costs incurred to obtain new tenant leases as well as to renew existing tenant leases, and are presented in prepaid expenses and other assets on the accompanying Consolidated Balance Sheets. Leasing commissions are capitalized and amortized over the terms of the related leases (and bargain renewal terms or assumed exercise of early termination options) using the straight-line method. If a lease terminates prior to the expiration of its initial term, any unamortized costs related to the lease are accelerated into amortization expense. Changes in leasing commissions are presented in the cash flows from operating activities section of the accompanying Consolidated Statements of Cash Flows.

Goodwill

The excess of the cost of an acquired business over the net of the amounts assigned to assets acquired (including identified intangible assets) and liabilities assumed is recorded as goodwill. Goodwill of the Company of approximately $4.9 million represents amounts allocated to the assembled workforce from the acquired management company, and is presented in prepaid expenses and other assets on the accompanying Consolidated Balance Sheets. The Company’s goodwill has an indeterminate life and is not amortized, but is tested for impairment on an annual basis at December 31, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The Company takes a qualitative approach to consider whether an impairment of goodwill exists prior to quantitatively determining the fair value of the reporting unit in step one of the impairment test. The Company has recorded no impairments to goodwill through December 31, 2019.

Use of Derivative Financial Instruments

The Company records all derivatives on the accompanying Consolidated Balance Sheets at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting.


F-13


In accordance with fair value measurement guidance, the Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting arrangements on a net basis by counterparty portfolio. Credit risk is the risk of failure of the counterparty to perform under the terms of the contract. The Company minimizes the credit risk in its derivative financial instruments by entering into transactions with various high-quality counterparties. The Company’s exposure to credit risk at any point is generally limited to amounts recorded as assets on the accompanying Consolidated Balance Sheets.

Fair Value of Financial Instruments

Financial instruments include cash and cash equivalents, restricted cash, tenant accounts receivable, interest rate swaps, accounts payable, accrued expenses, unsecured credit facility, unsecured term loans, unsecured notes, and mortgage notes. See Note 4 for the fair value of the Company’s indebtedness. See Note 5 for the fair value of the Company’s interest rate swaps.

The Company adopted fair value measurement provisions for its financial instruments recorded at fair value. The guidance establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

Offering Costs

Underwriting commissions and direct offering costs have been reflected as a reduction of additional paid-in capital on the accompanying Consolidated Balance Sheets and Consolidated Statements of Equity. Indirect costs associated with equity offerings are expensed as incurred and included in general and administrative expenses on the accompanying Consolidated Statements of Operations.

Dividends

Earnings and profits, which determine the taxability of dividends to stockholders, will differ from income reported for financial reporting purposes due to the differences for federal income tax purposes in the treatment of gains on the sale of real property, revenue and expense recognition, and in the estimated useful lives and basis used to compute depreciation. In addition, the Company’s distributions include a return of capital. To the extent that the Company makes distributions in excess of its current and accumulated earnings and profits, such distributions would generally be considered a return of capital for federal income tax purposes to the extent of the holder’s adjusted tax basis in its shares. A return of capital may not be taxable. A return of capital has the effect of reducing the holder’s adjusted tax basis in its investment, which may or may not be taxable to the holder.

The Company paid approximately $2.4 million ($0.87413 per share) of the 6.625% Series B Cumulative Redeemable Preferred Stock ("Series B Preferred Stock") dividends, of which $0.71493 per share was treated as ordinary income for tax purposes, $0.07521 per share was treated as unrecaptured section 1250 capital gain for tax purposes, and $0.08399 per share was treated as other capital gain for income tax purposes for the year ended December 31, 2018. The Company paid approximately $4.6 million ($1.65625 per share) of the Series B Preferred Stock dividends for the year ended December 31, 2017, that were treated as ordinary income for tax purposes.

The Company paid approximately $5.2 million ($1.71875 per share) of the 6.875% Series C Cumulative Redeemable Preferred Stock (“Series C Preferred Stock”) dividends for the year ended December 31, 2019, of which $1.71441 that were treated as ordinary income for tax purposes and $0.00434 that were treated as qualified dividends for tax purposes. The Company paid approximately $5.2 million ($1.71875 per share) of the Series C Preferred Stock dividends, of which $1.40573 per share was treated as ordinary income for tax purposes, $0.14789 per share was treated as unrecaptured section 1250 capital gain for tax purposes, and $0.16513 per share was treated as other capital gain for income tax purposes for the year ended December 31, 2018. The Company paid approximately $5.2 million ($1.71875 per share) of the Series C Preferred Stock dividends for the year ended December 31, 2017, that were treated as ordinary income for tax purposes.

F-14



The following table summarizes the tax treatment of dividends per common share for federal income tax purposes.
 
 
Year ended December 31,
 
 
2019
 
2018
 
2017
Federal Income Tax Treatment of Dividends per Common Share
 
Per Share
 
%
 
Per Share
 
%
 
Per Share
 
%
Ordinary income
 
$
0.888657

 
62.2
%
 
$
1.051783

 
74.1
%
 
$
0.965483

 
68.8
%
Return of capital
 
0.538270

 
37.7
%
 
0.133170

 
9.4
%
 
0.437852

 
31.2
%
Unrecaptured section 1250 capital gain
 

 
%
 
0.110647

 
7.8
%
 

 
%
Other capital gain
 

 
%
 
0.123563

 
8.7
%
 

 
%
Qualified dividend
 
0.002243

 
0.1
%
 

 
%
 

 
%
Total (1)
 
$
1.429170

 
100.0
%
 
$
1.419163

 
100.0
%
 
$
1.403335

 
100.0
%
(1)
The December 2017 monthly common stock dividend of $0.1175 per share was included in the stockholder’s 2018 tax year. The December 2018 monthly common stock dividend of $0.118333 per share was included in the stockholder’s 2019 tax year. The December 2019 monthly common stock dividend of $0.119167 per share will be included in the stockholder’s 2020 tax year.

Revenue Recognition

All current leases are classified as operating leases and rental income is recognized on a straight-line basis over the term of the lease (and expected bargain renewal terms or assumed exercise of early termination options) when collectability is reasonably assured. Differences between rental income earned and amounts due under the lease are charged or credited, as applicable, to accrued rental income.

The Company determined that for all leases where the Company is the lessor, that the timing and pattern of transfer of the non-lease components and associated lease components are the same, and that the lease components, if accounted for separately, would be classified as an operating lease. Accordingly, the Company has made an accounting policy election to recognize the combined component in accordance with Topic 842 as rental income on the accompanying Consolidated Statements of Operations.

Rental income recognition commences when the tenant takes possession of or controls the physical use of the leased space and the leased space is substantially complete and ready for its intended use. In order to determine whether the leased space is substantially complete and ready for its intended use, the Company determines whether the Company or the tenant own the tenant improvements. When it is determined that the Company is the owner of the tenant improvements, rental income recognition begins when the tenant takes possession of or controls the physical use of the finished space, which is generally when the Company owned tenant improvements are completed. In instances when it is determined that the tenant is the owner of tenant improvements, rental income recognition begins when the tenant takes possession of or controls the physical use of the leased space.

When the Company is the owner of tenant improvements or other capital items, the cost to construct the tenant improvements or other capital items, including costs paid for or reimbursed by the tenants, is recorded as capital assets. For these tenant improvements or other capital items, the amount funded by or reimbursed by the tenants are recorded as deferred revenue, which is amortized on a straight-line basis as income over the shorter of the useful life of the capital asset or the term of the related lease.

Early lease termination fees are recorded in rental income on a straight-line basis from the notification date of such termination to the then remaining (not the original) lease term, if any, or upon collection if collection is not reasonably assured.

The Company evaluates cash basis versus accrual basis of rental income recognition based on the collectability of future lease payments. As of December 31, 2018, the Company had an allowance for doubtful accounts of approximately $0.8 million included in tenant accounts receivable.

The Company earned revenue from asset management fees, which are included on the accompanying Consolidated Statements of Operations in other income. The Company recognized revenue from asset management fees when the related fees were earned and were realized or realizable. As of December 31, 2017, the Company no longer earned revenue from asset management fees.

Gain on the Sales of Rental Property, net

The timing of the derecognition of a rental property and the corresponding recognition of gain on the sales of rental property, net is measured by various criteria related to the terms of the sale transaction, and if the Company has lost control of the property and the acquirer has gained control of the property after the transaction. If the derecognition criteria is met, the full gain is recognized.


F-15


Incentive and Equity-Based Employee Compensation Plans

The Company grants equity-based compensation awards to its employees and directors in the form of restricted shares of common stock, LTIP units, and outperformance programs and performance units (outperformance programs and performance units are collectively, “Performance-based Compensation Plans”). See Notes 6, 7 and 8 for further discussion of restricted shares of common stock, LTIP units, and Performance-based Compensation Plans, respectively. The Company measures equity-based compensation expense based on the fair value of the awards on the grant date and recognizes the expense ratably over the vesting period, and forfeitures are recognized in the period in which they occur.

Taxes

Federal Income Taxes

The Company elected to be taxed as a REIT under the Code commencing with its taxable year ended December 31, 2011 and intends to continue to qualify as a REIT. As a REIT, the Company is generally not subject to corporate level federal income tax on the earnings distributed currently to its stockholders that it derives from its REIT qualifying activities. As a REIT, the Company is required to distribute at least 90% of its REIT taxable income to its stockholders and meet the various other requirements imposed by the Code relating to such matters as operating results, asset holdings, distribution levels and diversity of stock ownership.

The Company will not be required to make distributions with respect to income derived from the activities conducted through subsidiaries that the Company elects to treat as taxable REIT subsidiaries (“TRS”) for federal income tax purposes, nor will it have to comply with income, assets, or ownership restrictions inside of the TRS. Certain activities that the Company undertakes must or should be conducted by a TRS, such as performing non-customary services for its tenants and holding assets that it cannot hold directly. A TRS is subject to federal and state income taxes. The Company’s TRS recognized a net income (loss) of approximately $0.3 million, $(0.1) million and $(0.4) million, for the years ended December 31, 2019, 2018 and 2017, respectively, which has been included on the accompanying Consolidated Statements of Operations.

State and Local Income, Excise, and Franchise Tax

The Company and certain of its subsidiaries are subject to certain state and local income, excise and franchise taxes. Taxes in the amount of approximately $1.2 million, $0.9 million and $1.0 million have been recorded in other expenses on the accompanying Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017, respectively.

Uncertain Tax Positions

Tax benefits of uncertain tax positions are recognized only if it is more likely than not that the tax position will be sustained based solely on its technical merits, with the taxing authority having full knowledge of all relevant information. The measurement of a tax benefit for an uncertain tax position that meets the “more likely than not” threshold is based on a cumulative probability model under which the largest amount of tax benefit recognized is the amount with a greater than 50% likelihood of being realized upon ultimate settlement with the taxing authority having full knowledge of all the relevant information. As of December 31, 2019, 2018 and 2017, there were no liabilities for uncertain tax positions.

Earnings Per Share

The Company uses the two-class method of computing earnings per common share, which is an earnings allocation formula that determines earnings per share for common stock and any participating securities according to dividends declared (whether paid or unpaid) and participation rights in undistributed earnings. Basic net income per common share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted net income per common share is computed by dividing net income available to common stockholders by the sum of the weighted average number of common shares outstanding and any dilutive securities for the period.

Segment Reporting

The Company manages its operations on an aggregated, single segment basis for purposes of assessing performance and making operating decisions and, accordingly, has only one reporting and operating segment.

F-16



Concentrations of Credit Risk

Concentrations of credit risk relevant to the Company may arise when a number of financing arrangements, including revolving credit facilities or derivatives, are entered into with the same lenders or counterparties, and have similar economic features that would cause their inability to meet contractual obligations. The Company mitigates the concentration of credit risk as it relates to financing arrangements by entering into loan syndications with multiple, reputable financial institutions and diversifying its debt counterparties. The Company also reduces exposure by diversifying its derivatives across multiple counterparties who meet established credit and capital guidelines.

Concentrations of credit risk may also arise when the Company enters into leases with multiple tenants concentrated in the same industry, or into a significant lease or multiple leases with a single tenant, or tenants are located in the same geographic region, or have similar economic features that would cause their inability to meet contractual obligations, including those to the Company, to be similarly affected. The Company regularly monitors its tenant base to assess potential concentrations of credit risk through financial statement review, tenant management calls, and press releases. Management believes the current credit risk portfolio is reasonably well diversified and does not contain any unusual concentration of credit risk.

3. Rental Property

The following table summarizes the components of rental property, net as of December 31, 2019 and 2018.
Rental Property, net (in thousands)
 
December 31, 2019
 
December 31, 2018
Land
 
$
435,923


$
364,023

Buildings, net of accumulated depreciation of $254,458 and $199,497, respectively
 
2,787,234


2,082,781

Tenant improvements, net of accumulated depreciation of $21,487 and $36,450, respectively
 
38,339


30,704

Building and land improvements, net of accumulated depreciation of $111,688 and $80,983, respectively
 
232,456


168,229

Construction in progress
 
29,406

 
3,949

Deferred leasing intangibles, net of accumulated amortization of $241,304 and $246,502, respectively
 
475,149


342,015

Total rental property, net
 
$
3,998,507


$
2,991,701

 


F-17


Acquisitions

The following tables summarize the acquisitions of the Company during the years ended December 31, 2019 and 2018.
Year ended December 31, 2019
Market(1)
 
Date Acquired
 
Square Feet
 
Buildings
 
Purchase Price
(in thousands)
Cincinnati/Dayton, OH
 
January 24, 2019
 
176,000

 
1

 
$
9,965

Pittsburgh, PA
 
February 21, 2019
 
455,000

 
1

 
28,676

Boston, MA
 
February 21, 2019
 
349,870

 
1

 
26,483

Minneapolis/St Paul, MN
 
February 28, 2019
 
248,816

 
1

 
21,955

Greenville/Spartanburg, SC
 
March 7, 2019
 
331,845

 
1

 
24,536

Philadelphia, PA
 
March 7, 2019
 
148,300

 
1

 
10,546

Omaha/Council Bluffs, NE-IA
 
March 11, 2019
 
237,632

 
1

 
20,005

Houston, TX
 
March 28, 2019
 
132,000

 
1

 
17,307

Baltimore, MD
 
March 28, 2019
 
167,410

 
1

 
13,648

Houston, TX
 
March 28, 2019
 
116,750

 
1

 
12,242

Three months ended March 31, 2019
 
 
 
2,363,623

 
10

 
185,363

Minneapolis/St Paul, MN
 
April 2, 2019
 
100,600

 
1

 
9,045

West Michigan, MI
 
April 8, 2019
 
230,200

 
1

 
15,786

Greensboro/Winston-Salem, NC
 
April 12, 2019
 
129,600

 
1

 
7,771

Greenville/Spartanburg, SC
 
April 25, 2019
 
319,660

 
2

 
15,432

Charleston/N Charleston, SC
 
April 29, 2019
 
500,355

 
1

 
40,522

Houston, TX
 
April 29, 2019
 
128,136

 
1

 
13,649

Richmond, VA
 
May 16, 2019
 
109,520

 
1

 
9,467

Laredo, TX
 
June 6, 2019
 
213,982

 
1

 
18,972

Baton Rouge, LA
 
June 18, 2019
 
252,800

 
2

 
20,041

Philadelphia, PA
 
June 19, 2019
 
187,569

 
2

 
13,645

Columbus, OH
 
June 28, 2019
 
857,390

 
1

 
95,828

Three months ended June 30, 2019
 
 
 
3,029,812

 
14

 
260,158

Kansas City, MO
 
July 10, 2019
 
304,840

 
1

 
13,450

Houston, TX
 
July 22, 2019
 
199,903

 
1

 
11,287

Charleston/N Charleston, SC
 
July 22, 2019
 
88,583

 
1

 
7,166

Tampa, FL
 
August 5, 2019
 
78,560

 
1

 
8,168

Philadelphia, PA
 
August 6, 2019
 
120,000

 
1

 
10,880

Milwaukee/Madison, WI
 
August 16, 2019
 
224,940

 
3

 
13,981

Houston, TX
 
August 19, 2019
 
45,000

 
1

 
6,190

West Michigan, MI
 
August 19, 2019
 
210,120

 
1

 
10,407

Pittsburgh, PA
 
August 21, 2019
 
410,389

 
1

 
31,219

Boston, MA
 
August 22, 2019
 
80,100

 
1

 
14,253

Las Vegas, NV
 
August 27, 2019
 
80,422

 
2

 
12,602

Nashville, TN
 
August 29, 2019
 
348,880

 
1

 
20,267

Columbia, SC
 
August 30, 2019
 
200,000

 
1

 
13,670

Pittsburgh, PA
 
September 6, 2019
 
138,270

 
1

 
9,323

Omaha/Council Bluffs, NE-IA
 
September 11, 2019
 
128,200

 
2

 
8,509

Pittsburgh, PA
 
September 16, 2019
 
315,634

 
1

 
28,712

Memphis, TN
 
September 19, 2019
 
1,135,453

 
1

 
50,941

Memphis, TN
 
September 26, 2019
 
629,086

 
1

 
31,542

Three months ended September 30, 2019
 
 
 
4,738,380

 
22

 
302,567

Chicago, IL
 
October 10, 2019
 
105,925

 
1

 
11,621

Portland, OR
 
October 10, 2019
 
141,400

 
1

 
14,180

Jacksonville, FL
 
October 15, 2019
 
231,030

 
1

 
15,603

Indianapolis, IN
 
October 18, 2019
 
1,027,678

 
1

 
52,736

St. Louis, MO
 
October 21, 2019
 
127,464

 
1

 
12,055

Minneapolis/St Paul, MN
 
October 29, 2019
 
236,479

 
2

 
18,833

Minneapolis/St Paul, MN
 
November 4, 2019
 
276,550

 
1

 
23,598

Minneapolis/St Paul, MN
 
November 5, 2019
 
136,589

 
1

 
17,601

Chicago, IL
 
November 7, 2019
 
574,249

 
1

 
34,989

Milwaukee/Madison, WI
 
November 12, 2019
 
111,000

 
1

 
5,107

Knoxville, TN
 
November 21, 2019
 
227,150

 
1

 
10,089

Columbia, SC
 
November 21, 2019
 
464,206

 
1

 
35,050

Greenville/Spartanburg, SC
 
December 4, 2019
 
273,000

 
1

 
19,224

Houston, TX
 
December 5, 2019
 
90,000

 
1

 
11,276

Milwaukee/Madison, WI
 
December 16, 2019
 
192,800

 
1

 
18,750

Houston, TX
 
December 17, 2019
 
250,000

 
1

 
21,864

Denver, CO
 
December 18, 2019
 
132,194

 
1

 
15,749

Des Moines, IA
 
December 19, 2019
 
200,011

 
1

 
17,335

Indianapolis, IN
 
December 19, 2019
 
558,994

 
1

 
53,259

Northern New Jersey, NJ
 
December 23, 2019
 
113,973

 
1

 
14,784

Sacramento, CA
 
December 30, 2019
 
147,840

 
1

 
10,680

Kansas City, MO
 
December 31, 2019
 
230,116

 
1

 
21,490

Three months ended December 31, 2019
 
 
 
5,848,648

 
23

 
$
455,873

Year ended December 31, 2019
 
 
 
15,980,463

 
69

 
$
1,203,961

(1) As defined by CoStar Realty Information Inc. If the building is located outside of a CoStar defined market, the city and state is reflected.

F-18


Year ended December 31, 2018
Market(1)
 
Date Acquired
 
Square Feet
 
Buildings
 
Purchase Price
(in thousands)
Greenville/Spartanburg, SC
 
January 11, 2018
 
203,000

 
1

 
$
10,755

Minneapolis/St Paul, MN
 
January 26, 2018
 
145,351

 
1

 
13,538

Philadelphia, PA
 
February 1, 2018
 
278,582

 
1

 
18,277

Houston, TX
 
February 22, 2018
 
242,225

 
2

 
22,478

Greenville/Spartanburg, SC
 
March 30, 2018
 
222,710

 
1

 
13,773

Three months ended March 31, 2018
 
 
 
1,091,868

 
6

 
78,821

Chicago, IL
 
April 23, 2018
 
169,311

 
2

 
10,975

Milwaukee/Madison, WI
 
April 26, 2018
 
53,680

 
1

 
4,316

Pittsburgh, PA
 
April 30, 2018
 
175,000

 
1

 
15,380

Detroit, MI
 
May 9, 2018
 
274,500

 
1

 
19,328

Minneapolis/St Paul, MN
 
May 15, 2018
 
509,910

 
2

 
26,983

Cincinnati/Dayton, OH
 
May 23, 2018
 
158,500

 
1

 
7,317

Baton Rouge, LA
 
May 31, 2018
 
279,236

 
1

 
21,379

Las Vegas, NV
 
June 12, 2018
 
122,472

 
1

 
17,920

Greenville/Spartanburg, SC
 
June 15, 2018
 
131,805

 
1

 
5,621

Denver, CO
 
June 18, 2018
 
64,750

 
1

 
7,044

Cincinnati/Dayton, OH
 
June 25, 2018
 
465,136

 
1

 
16,421

Charlotte, NC
 
June 29, 2018
 
69,200

 
1

 
5,446

Houston, TX
 
June 29, 2018
 
252,662

 
1

 
27,170

Three months ended June 30, 2018
 
 
 
2,726,162

 
15

 
185,300

Knoxville, TN
 
July 10, 2018
 
106,000

 
1

 
6,477

Pittsburgh, PA
 
August 2, 2018
 
265,568

 
1

 
19,186

Raleigh/Durham, NC
 
August 2, 2018
 
365,000

 
1

 
21,067

Detroit, MI
 
August 6, 2018
 
439,150

 
1

 
21,077

Des Moines, IA
 
August 8, 2018
 
121,922

 
1

 
6,053

McAllen/Edinburg/Pharr, TX
 
August 9, 2018
 
270,084

 
1

 
18,523

Pittsburgh, PA
 
August 15, 2018
 
200,500

 
1

 
11,327

Minneapolis/St Paul, MN
 
August 24, 2018
 
120,606

 
1

 
8,422

Milwaukee/Madison, WI
 
September 28, 2018
 
100,800

 
1

 
7,484

Milwaukee/Madison, WI
 
September 28, 2018
 
174,633

 
2

 
13,288

Chicago, IL
 
September 28, 2018
 
105,637

 
1

 
6,368

Indianapolis, IN
 
September 28, 2018
 
478,721

 
1

 
29,085

Augusta/Richmond County, GA
 
September 28, 2018
 
203,726

 
1

 
9,379

Charlotte, NC
 
September 28, 2018
 
301,000

 
1

 
16,807

Three months ended September 30, 2018
 
 
 
3,253,347

 
15

 
194,543

Greensboro/Winston-Salem, NC
 
October 22, 2018
 
128,287

 
1

 
8,376

Minneapolis/St Paul, MN
 
October 22, 2018
 
109,444

 
1

 
8,064

Baltimore, MD
 
October 23, 2018
 
60,000

 
1

 
7,538

Greenville/Spartanburg, SC
 
November 7, 2018
 
210,891

 
1

 
11,289

Philadelphia, PA
 
November 19, 2018
 
101,869

 
1

 
7,074

Detroit, MI (2)
 
November 26, 2018
 

 

 
620

Milwaukee/Madison, WI
 
December 3, 2018
 
162,230

 
1

 
14,132

Pittsburgh, PA
 
December 11, 2018
 
119,161

 
1

 
15,502

Tucson, AZ
 
December 13, 2018
 
129,047

 
1

 
10,075

Detroit, MI
 
December 14, 2018
 
285,306

 
2

 
20,095

Greenville/Spartanburg, SC
 
December 17, 2018
 
726,500

 
1

 
28,995

Milwaukee/Madison, WI
 
December 18, 2018
 
288,201

 
2

 
14,586

Milwaukee/Madison, WI
 
December 19, 2018
 
112,144

 
1

 
5,349

Chicago, IL
 
December 19, 2018
 
195,415

 
1

 
16,134

Indianapolis, IN
 
December 20, 2018
 
446,500

 
1

 
33,314

Pittsburgh, PA
 
December 20, 2018
 
179,394

 
1

 
16,725

Three months ended December 31, 2018
 
 
 
3,254,389

 
17

 
217,868

Year ended December 31, 2018
 
 
 
10,325,766

 
53

 
$
676,532

(1) As defined by CoStar Realty Information Inc. If the building is located outside of a CoStar defined market, the city and state is reflected.
(2) The Company acquired a vacant land parcel.

F-19


The following table summarizes the allocation of the consideration paid at the date of acquisition during the years ended December 31, 2019 and 2018, for the acquired assets and liabilities in connection with the acquisitions identified in the tables above.
 
 
Year ended December 31, 2019
 
Year ended December 31, 2018
Acquired Assets and Liabilities
 
Purchase price (in thousands)
 
Weighted average amortization period (years) of intangibles at acquisition
 
Purchase price (in thousands)
 
Weighted average amortization period (years) of intangibles at acquisition
Land

$
96,379

 
N/A
 
$
59,974

 
N/A
Buildings

814,541

 
N/A
 
465,272

 
N/A
Tenant improvements

12,661

 
N/A
 
6,684

 
N/A
Building and land improvements

69,903

 
N/A
 
33,715

 
N/A
Construction in progress
 
2,032

 
N/A
 

 
N/A
Other assets
 
2,736

 
N/A
 
794

 
N/A
Deferred leasing intangibles - In-place leases

128,235

 
9.3
 
77,803

 
9.0
Deferred leasing intangibles - Tenant relationships

60,689

 
12.3
 
32,448

 
11.9
Deferred leasing intangibles - Above market leases

27,808

 
12.8
 
10,372

 
10.6
Deferred leasing intangibles - Below market leases

(11,023
)
 
8.4
 
(10,110
)
 
8.1
Deferred leasing intangibles - Above market ground leases


 
N/A
 
(178
)
 
48.1
Other liabilities


 
N/A
 
(242
)
 
N/A
Total purchase price

$
1,203,961

 
 
 
$
676,532

 
 


The following table summarizes the results of operations for the years ended December 31, 2019 and 2018 for the properties acquired during the years ended December 31, 2019 and 2018, respectively, included in the Company’s Consolidated Statements of Operations from the date of acquisition.
Results of Operations (in thousands)
 
Year ended December 31, 2019
 
Year ended December 31, 2018
Total revenue
 
$
35,042

 
$
22,099

Net income
 
$
6,302

 
$
4,245



Dispositions

During the year ended December 31, 2019, the Company sold nine buildings and two land parcels comprised of approximately 1.6 million square feet with a net book value of approximately $34.6 million to third parties. These buildings contributed approximately $0.8 million, $8.5 million and $9.0 million to revenue for the years ended December 31, 2019, 2018 and 2017, respectively. These buildings contributed approximately $(2.5) million, $1.6 million and $3.4 million to net income (loss) (exclusive of loss on impairments, and gain on the sales of rental property, net) for the years ended December 31, 2019, 2018 and 2017, respectively. Net proceeds from the sales of rental property were approximately $42.0 million and the Company recognized the full gain on the sales of rental property, net of approximately $7.4 million for the year ended December 31, 2019. All of the dispositions were accounted for under the full accrual method.

During the year ended December 31, 2018, the Company sold 19 buildings comprised of approximately 3.9 million square feet with a net book value of approximately $135.7 million to third parties. These buildings contributed approximately $12.0 million and $18.6 million to revenue for the years ended December 31, 2018 and 2017, respectively. These buildings contributed approximately $3.7 million and $5.0 million to net income (exclusive of gain on involuntary conversion, loss on impairments and gain on the sales of rental property, net) for the years ended December 31, 2018 and 2017, respectively. Net proceeds from the sales of rental property were approximately $207.9 million and the Company recognized a gain on the sales of rental property, net of approximately $72.2 million for the year ended December 31, 2018. All of the dispositions were accounted for under the full accrual method.

During the year ended December 31, 2017, the Company sold 11 buildings comprised of approximately 1.9 million square feet with a net book value of approximately $40.9 million to third parties. These buildings contributed approximately $3.8 million to revenue for the year ended December 31, 2017. These buildings contributed approximately $1.5 million to net income (exclusive of loss on impairments and gain on the sales of rental property, net) for the year ended December 31, 2017. Net proceeds from the sales of rental property were approximately $65.1 million and the Company recognized a gain on the sales of rental property, net of approximately $24.2 million for the year ended December 31, 2017. All of the dispositions were accounted for under the full accrual method.


F-20


Assets Held for Sale

As of December 31, 2019, the related land, building and improvements, net, and deferred leasing intangibles, net, of approximately $15.2 million, $27.8 million, and $0, respectively, for two buildings located in Camarillo, CA were classified as assets held for sale, net on the accompanying Consolidated Balance Sheets. These buildings contributed approximately $2.5 million, $5.8 million and $5.7 million to revenue for the years ended December 31, 2019, 2018 and 2017, respectively. These buildings contributed approximately $0.7 million, $0.6 million and $1.1 million to net income for the year ended December 31, 2019, 2018 and 2017, respectively.

Involuntary Conversion

During the year ended December 31, 2017, the Company wrote down a building in the amount of approximately $0.8 million, related to an involuntary conversion event that occurred on September 1, 2016. The cumulative write down of the building since the involuntary conversion event was approximately $1.5 million as of December 31, 2017. The Company recognized a gain on involuntary conversion of approximately $0.3 million during the year ended December 31, 2017.

Loss on Impairments

The following table summarizes the Company’s loss on impairments for assets held and used during the year ended December 31, 2019, 2018 and 2017.
Market (1)
 
Buildings
 
Event or Change in Circumstance Leading to Impairment Evaluation(2)
 
Valuation technique utilized to estimate fair value
 
Fair Value(3)
 
Loss on Impairments
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
Rapid City, SD(4)
 
1
 
Change in estimated hold period
(5)
Discounted cash flows
(6)
 
 
 
Three months ended March 31, 2019
 
 
 
$
4,373

 
$
5,344

Belfast, ME(4)
 
5
 
Market leasing conditions
 
Discounted cash flows
(7)
 
 
 
Three months ended September 30, 2019
 
 
 
$
5,950

 
$
4,413

Year ended December 31, 2019
 
 
 


 
$
9,757

 
 
 
 
 
 
 
 
 
 
 
Buena Vista, VA
 
1
 
Change in estimated hold period
(8)
Discounted cash flows
(9)
 
 
 
Sergeant Bluff, IA(4)
 
1
 
Change in estimated hold period
(8)
Discounted cash flows
(9)
 
 
 
Three months ended March 31, 2018
 
 
 
$
3,176

 
$
2,934

Chicago, IL
 
1
 
Change in estimated hold period
(5)
Discounted cash flows
(10)
 
 
 
Cleveland, OH

 
1
 
Change in estimated hold period
(5)
Discounted cash flows
(10)
 
 
 
Three months ended December 31, 2018
 
 
 
$
4,322

 
$
3,248

Year ended December 31, 2018
 
 
 


 
$
6,182

 
 
 
 
 
 
 
 
 
 
 
Cincinnati/Dayton, OH(4)
 
1
 
Market leasing conditions
(8)
Discounted cash flows
(11)
 
 
 
Three months ended December 31, 2017
 
 
 
$
1,543

 
$
1,879

Year ended December 31, 2017
 
 
 


 
$
1,879

(1)
As defined by CoStar. If the building is located outside of a CoStar defined market, the city and state is reflected.
(2)
The Company tested the asset group for impairment utilizing a probability weighted recovery analysis of certain scenarios, and it was determined that the carrying value of the property and intangibles were not recoverable from the estimated future undiscounted cash flows.
(3)
The estimated fair value of the property is based on Level 3 inputs and is a non-recurring fair value measurement.
(4)
Flex/office buildings.
(5)
This property was sold during the year ended December 31, 2019.
(6)
Level 3 inputs used to determine fair value for the property impaired for the three months ended March 31, 2019: discount rate of 12.0% and exit capitalization rate of 12.0%.
(7)
Level 3 inputs used to determine fair value for the property impaired for the three months ended September 30, 2019: discount rate of 13.0% and exit capitalization rate of 12.0%.
(8)
This property was sold during the year ended December 31, 2018.
(9)
Level 3 inputs used to determine fair value for the properties impaired for the three months ended March 31, 2018: discount rates ranged from 11.0% to 14.5% and exit capitalization rates ranged from 11.0% to 13.0%.
(10)
Level 3 inputs used to determine fair value for the properties impaired for the three months ended December 31, 2018: discount rate of 12.0% and exit capitalization rates ranged from 8.3% to 12.0%.
(11)
Level 3 inputs used to determine fair value for the property impaired for the three months ended December 31, 2017: discount rate of 10.0% and exit capitalization rate of 10.0%.


F-21


Deferred Leasing Intangibles

The following table summarizes the deferred leasing intangibles on the accompanying Consolidated Balance Sheets as of December 31, 2019 and 2018.
 
 
December 31, 2019
 
December 31, 2018
Deferred Leasing Intangibles (in thousands)
 
Gross
 
Accumulated Amortization
 
Net
 
Gross
 
Accumulated Amortization
 
Net
Above market leases
 
$
92,607

 
$
(32,115
)
 
$
60,492

 
$
73,122

 
$
(31,059
)
 
$
42,063

Other intangible lease assets
 
623,846

 
(209,189
)
 
414,657

 
515,395

 
(215,443
)
 
299,952

Total deferred leasing intangible assets
 
$
716,453

 
$
(241,304
)
 
$
475,149

 
$
588,517

 
$
(246,502
)
 
$
342,015

 
 
 
 
 
 
 
 
 
 
 
 
 
Below market leases
 
$
38,802

 
$
(12,064
)
 
$
26,738

 
$
34,331

 
$
(12,764
)
 
$
21,567

Total deferred leasing intangible liabilities
 
$
38,802

 
$
(12,064
)
 
$
26,738

 
$
34,331

 
$
(12,764
)
 
$
21,567


The following table summarizes the amortization expense and the net decrease to rental income for the amortization of deferred leasing intangibles during the years ended December 31, 2019, 2018 and 2017.
 
 
Year ended December 31,
Deferred Leasing Intangibles Amortization (in thousands)
 
2019
 
2018
 
2017
Net decrease to rental income related to above and below market lease amortization
 
$
4,884

 
$
4,164

 
$
4,583

Amortization expense related to other intangible lease assets
 
$
73,726

 
$
74,370

 
$
72,936



The following table summarizes the amortization of deferred leasing intangibles over the next five calendar years as of December 31, 2019.
Year
 
Amortization Expense Related to Other Intangible Lease Assets (in thousands)
 
Net Decrease to Rental Income Related to Above and Below Market Lease Amortization (in thousands)
2020
 
$
74,061

 
$
4,321

2021
 
$
62,310

 
$
3,202

2022
 
$
53,048

 
$
2,421

2023
 
$
44,857

 
$
2,494

2024
 
$
36,182

 
$
2,869



F-22


4. Debt

The following table summarizes the Company’s outstanding indebtedness, including borrowings under the Company’s unsecured credit facility, unsecured term loans, unsecured notes, and mortgage notes as of December 31, 2019 and 2018.
Loan
 
Principal Outstanding as of December 31, 2019 (in thousands)
    
Principal Outstanding as of December 31, 2018
(in thousands)
 
Interest 
Rate
 (1)(2)
    
Maturity Date
 
Prepayment Terms (3) 
Unsecured credit facility:
 
 
 
 
 
 
 
 
 
 
Unsecured Credit Facility (4)
 
$
146,000

  
$
100,500

 
L + 0.90%

 
January 15, 2023
 
i
Total unsecured credit facility
 
146,000

  
100,500

 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unsecured term loans:
 
 

  
 
 
 

 
 
 
 
Unsecured Term Loan C
 
150,000

 
150,000

 
2.39
%
 
September 29, 2020
 
i
Unsecured Term Loan B
 
150,000

  
150,000

 
3.05
%
 
March 21, 2021
 
i
Unsecured Term Loan A
 
150,000

  
150,000

 
2.70
%
 
March 31, 2022
 
i
Unsecured Term Loan D
 
150,000

  
150,000

 
2.85
%
 
January 4, 2023
 
i
Unsecured Term Loan E
 
175,000

 

 
3.92
%
 
January 15, 2024
 
i
Unsecured Term Loan F (5)
 
100,000

 

 
L + 1.00%

 
January 12, 2025
 
i
Total unsecured term loans
 
875,000

 
600,000

 
 
 
 
 
 
Less: Total unamortized deferred financing fees and debt issuance costs
 
(3,625
)
 
(3,640
)
 
 
 
 
 
 
Total carrying value unsecured term loans, net
 
871,375

  
596,360

 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Unsecured notes:
 
 

  
 
 
 

 
 
 
 
Series F Unsecured Notes
 
100,000

 
100,000

 
3.98
%
 
January 5, 2023
 
ii
Series A Unsecured Notes
 
50,000

  
50,000

 
4.98
%
 
October 1, 2024
 
ii
Series D Unsecured Notes
 
100,000

  
100,000

 
4.32
%
 
February 20, 2025
 
ii
Series G Unsecured Notes
 
75,000

 
75,000

 
4.10
%
 
June 13, 2025
 
ii
Series B Unsecured Notes
 
50,000

  
50,000

 
4.98
%
 
July 1, 2026
 
ii
Series C Unsecured Notes
 
80,000

  
80,000

 
4.42
%
 
December 30, 2026
 
ii
Series E Unsecured Notes
 
20,000

  
20,000

 
4.42
%
 
February 20, 2027
 
ii
Series H Unsecured Notes
 
100,000

 
100,000

 
4.27
%
 
June 13, 2028
 
ii
Total unsecured notes
 
575,000

 
575,000

 
 
 
 
 
 
Less: Total unamortized deferred financing fees and debt issuance costs
 
(2,117
)
 
(2,512
)
 
 
 
 
 
 
Total carrying value unsecured notes, net
 
572,883

  
572,488

  
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Mortgage notes (secured debt):
 
 

 
 
 
 

 
 
 
 
Wells Fargo Bank, National Association CMBS Loan
 
51,406

  
53,216

 
4.31
%
 
December 1, 2022
 
iii
Thrivent Financial for Lutherans
 
3,679

 
3,795

 
4.78
%
 
December 15, 2023
 
iv
Total mortgage notes
 
55,085

  
57,011

 
 

 
 
 
 
Add: Total unamortized fair market value premiums
 
39

 
50

 
 

 
 
 
 
Less: Total unamortized deferred financing fees and debt issuance costs
 
(369
)
 
(501
)
 
 
 
 
 
 
Total carrying value mortgage notes, net
 
54,755

  
56,560

 
 

 
 
 
 
Total / weighted average interest rate (6)
 
$
1,645,013

  
$
1,325,908

 
3.48
%
 
 
 
 
(1)
Interest rate as of December 31, 2019. At December 31, 2019, the one-month LIBOR (“L”) was 1.7625%. The interest rate is not adjusted to include the amortization of deferred financing fees or debt issuance costs incurred in obtaining debt or any unamortized fair market value premiums. The spread over the applicable rate for the Company’s unsecured credit facility and unsecured term loans is based on the Company’s debt rating, as defined in the respective loan agreements.
(2)
The unsecured term loans have a stated interest rate of one-month LIBOR plus a spread of 1.0%. As of December 31, 2019, one-month LIBOR for the Unsecured Term Loans A, B, C, D, and E was swapped to a fixed rate of 1.70%, 2.05%, 1.39%, 1.85%, and 2.92%, respectively. One-month LIBOR for the Unsecured Term Loan F will be swapped to a fixed rate of 2.11% effective July 15, 2020.
(3)
Prepayment terms consist of (i) pre-payable with no penalty; (ii) pre-payable with penalty; (iii) pre-payable without penalty three months prior to the maturity date, however can be defeased; and (iv) pre-payable without penalty three months prior to the maturity date.
(4)
The capacity of the unsecured credit facility is $500.0 million. Deferred financing fees and debt issuance costs, net of accumulated amortization related to the unsecured credit facility of approximately $2.4 million and $3.2 million are included in prepaid expenses and other assets on the accompanying Consolidated Balance Sheets as of December 31, 2019 and 2018, respectively.
(5)
The remaining capacity is $100.0 million as of December 31, 2019, which the Company has until July 12, 2020 to draw.
(6)
The weighted average interest rate was calculated using the fixed interest rate swapped on the current notional amount of $775.0 million of debt, and was not adjusted to include the amortization of deferred financing fees or debt issuance costs incurred in obtaining debt or any unamortized fair market value premiums.

The aggregate undrawn nominal commitment on the unsecured credit facility and unsecured term loans as of December 31, 2019 was approximately $451.0 million, including issued letters of credit. The Company’s actual borrowing capacity at any given point in time may be less and is restricted to a maximum amount based on the Company’s debt covenant compliance. Total accrued interest for the Company’s indebtedness was approximately $6.3 million and $5.9 million as of December 31, 2019 and 2018,

F-23


respectively, and is included in accounts payable, accrued expenses and other liabilities on the accompanying Consolidated Balance Sheets.

The following table summarizes the costs included in interest expense related to the Company’s debt arrangements on the accompanying Consolidated Statement of Operations for the years ended December 31, 2019, 2018 and 2017.
 
 
Year ended December 31,
Costs Included in Interest Expense (in thousands)
 
2019
 
2018
 
2017
Amortization of deferred financing fees and debt issuance costs and fair market value premiums
 
$
2,583

 
$
2,316

 
$
2,087

Facility, unused, and other fees
 
$
1,513

 
$
1,246

 
$
1,169



2019 Debt Activity

On July 25, 2019, the Company drew $175.0 million of the $175.0 million Unsecured Term Loan E that was entered into on July 26, 2018.

On July 12, 2019, the Company entered into the $200.0 million Unsecured Term Loan F. As of December 31, 2019, the interest rate on the Unsecured Term Loan F was LIBOR plus a spread of 1.00% based on the Company’s debt rating, as defined in the loan agreement. Unless otherwise terminated pursuant to the loan agreement, the Unsecured Term Loan F will mature on January 12, 2025. The Unsecured Term Loan F has a feature that allows the Company to request an increase in the aggregate size of the unsecured term loan of up to $400.0 million, subject to the satisfaction of certain conditions and lender consents. The agreement includes a delayed draw feature that allows the Company to draw up to six advances of at least $25.0 million each until July 12, 2020. To the extent that the Company does not request advances of the $200.0 million of aggregate commitments by July 12, 2020, the unadvanced commitments terminate. The Unsecured Term Loan F has an unused commitment fee equal to 0.15% of its unused commitments, which began to accrue on October 10, 2019 and is due and payable monthly until the earlier of (i) the date that aggregate commitments of $200.0 million have been fully advanced, (ii) July 12, 2020, and (iii) the date that aggregate commitments have been reduced to zero pursuant to the terms of the agreement. The Company is required to pay an annual administrative agent fee of $35,000. The Company and certain wholly owned subsidiaries of the Operating Partnership are guarantors of the Unsecured Term Loan F. The agreement also contains financial and other covenants substantially similar to the covenants in the Company’s unsecured credit facility. On December 18, 2019, the Company drew 100.0 million of the $200.0 million Unsecured Term Loan F.

2018 Debt Activity

On December 20, 2018, upon the Company obtaining its second investment grade rating, the spread over the applicable rate on the Company’s unsecured credit facility and unsecured term loans changed from being based upon the Company’s consolidated leverage ratio, as defined in the respective loan agreements, to being based upon the Company’s debt rating, as defined in the respective loan agreements.
On July 26, 2018, the Company closed on the refinancing of its unsecured credit facility. The refinancing transaction included extending the maturity date to January 15, 2023, increasing the capacity to $500.0 million, and reducing the annual interest rate. As of December 31, 2019, the interest rate on the unsecured credit facility was LIBOR plus a spread of 0.90% based on the Company’s debt rating, as defined in the credit agreement. The Company recognized a loss of approximately $13,000 as a result of the acceleration of unamortized deferred financing fees, which is included in loss on extinguishment of debt in the accompanying Consolidated Statements of Operations. The remaining unamortized deferred financing fees were carried over and are being amortized with new deferred financing fees through the new maturity date of the unsecured credit facility. As of December 31, 2019, the unsecured credit facility has an annual facility fee of 0.20% based on the Company’s debt rating, as defined in the credit agreement, of total commitments that is due and payable quarterly. The Company is required to pay an annual fee of $50,000.
On July 26, 2018, the Company entered into the $175.0 million Unsecured Term Loan E. As of December 31, 2019, the interest rate on the Unsecured Term Loan E was LIBOR plus a spread of 1.00% based on the Company’s debt rating, as defined in the loan agreement. Unless otherwise terminated pursuant to the loan agreement, the Unsecured Term Loan E will mature on January 15, 2024. The Unsecured Term Loan E has an accordion feature that allows the Company to increase its borrowing capacity to $350.0 million, subject to the satisfaction of certain conditions and lender consents. The agreement includes a delayed draw feature that allows the Company to draw up to six advances of at least $25.0 million each until July 25, 2019. To the extent that the Company does not request advances of the $175.0 million of aggregate commitments by July 25, 2019, the unadvanced commitments terminate. The Unsecured Term Loan E has an unused commitment fee equal to 0.15% of its unused commitments, which began to accrue on October 24, 2018 and is due and payable monthly until the earlier of (i) the date that commitments of $175.0 million have been fully advanced, (ii) July 26, 2019, and (iii) the date that commitments of $175.0 million have been reduced to zero

F-24


pursuant to the terms of the agreement. The Company is required to pay an annual fee of $35,000. The Company and certain wholly owned subsidiaries of the Operating Partnership are guarantors of the Unsecured Term Loan E. The agreement also contains financial and other covenants substantially similar to the covenants in the Company’s unsecured credit facility.

On July 26, 2018, the Company entered into amendments to its unsecured term loan agreements to conform certain provisions to the Unsecured Term Loan E agreement and the new unsecured credit facility agreement.

On April 10, 2018, the Company entered into a note purchase agreement (“NPA”) for the private placement by the Operating Partnership of the $75.0 million Series G Unsecured Notes maturing June 13, 2025 with a fixed annual interest rate of 4.10%, and the $100.0 million Series H Unsecured Notes maturing June 13, 2028 with a fixed annual interest rate of 4.27%. The NPA contains a number of financial covenants substantially similar to the financial covenants contained in the Company’s unsecured credit facility and other unsecured notes. The Operating Partnership issued the Series G Unsecured Notes and the Series H Unsecured Notes on June 13, 2018. In addition, on April 10, 2018, the Company entered into amendments to the note purchase agreements related to the Company’s outstanding unsecured notes to conform certain provisions in the agreements to the provisions in the NPA. The Company and certain wholly owned subsidiaries of the Operating Partnership are guarantors of the unsecured notes.

On March 28, 2018, the Company drew $75.0 million of the $150.0 million Unsecured Term Loan D that was entered into on July 28, 2017. On July 27, 2018, the Company drew the remaining $75.0 million of the Unsecured Term Loan D.

Financial Covenant Considerations
The Company’s ability to borrow under the unsecured credit facility, unsecured term loans, and unsecured notes are subject to its ongoing compliance with a number of customary financial covenants, including:
a maximum consolidated leverage ratio of not greater than 0.60:1.00;
a maximum secured leverage ratio of not greater than 0.40:1.00;
a maximum unencumbered leverage ratio of not greater than 0.60:1.00;
a minimum fixed charge ratio of not less than or equal to 1.50:1.00; and
a minimum unsecured interest coverage ratio of not less than or equal to 1.75:1.00.
The unsecured notes are also subject to a minimum interest coverage ratio of not less than 1.50:1.00.  The Company was in compliance with all such applicable restrictions and financial covenants as of December 31, 2019 and 2018.  In the event of a default under the unsecured credit facility or the unsecured term loans, the Company’s dividend distributions are limited to the minimum amount necessary for the Company to maintain its status as a REIT.  
Each of the Company’s mortgage notes has specific properties and assignments of rents and leases that are collateral for these loans. These debt facilities contain certain financial and other covenants. The Company was in compliance with all such applicable restrictions and financial covenants as of December 31, 2019 and 2018. The real estate net book value of the properties that are collateral for the Company’s mortgage notes was approximately $85.5 million and $88.2 million at December 31, 2019 and 2018, respectively, and is limited to senior, property-level secured debt financing arrangements.
Fair Value of Debt
The following table summarizes the aggregate principal outstanding of the Company’s debt and the corresponding estimate of fair value as of December 31, 2019 and 2018. The fair value of the Company’s debt is based on Level 3 inputs.
 
 
December 31, 2019
 
December 31, 2018
Indebtedness (in thousands)
 
Principal Outstanding
 
Fair Value
 
Principal Outstanding
 
Fair Value
Unsecured credit facility
 
$
146,000

 
$
146,000

 
$
100,500

 
$
100,500

Unsecured term loans
 
875,000

 
875,000

 
600,000

 
600,000

Unsecured notes
 
575,000

 
614,493

 
575,000

 
585,292

Mortgage notes
 
55,085

 
56,021

 
57,011

 
57,289

Total principal amount
 
1,651,085

 
$
1,691,514

 
1,332,511

 
$
1,343,081

Add: Total unamortized fair market value premiums
 
39

 
 
 
50

 
 
Less: Total unamortized deferred financing fees and debt issuance costs
 
(6,111
)
 
 
 
(6,653
)
 
 
Total carrying value
 
$
1,645,013

 
 
 
$
1,325,908

 
 


F-25



Future Principal Payments of Debt

The following table summarizes the Company’s aggregate future principal payments of the Company’s debt at December 31, 2019
Year
 
Future Principal Payments of Debt
(in thousands)
2020
 
$
152,006

2021
 
152,103

2022
 
197,681

2023
 
399,295

2024
 
225,000

Thereafter
 
525,000

Total aggregate principal payments
 
$
1,651,085



5. Derivative Financial Instruments

Risk Management Objective of Using Derivatives

The Company’s use of derivative instruments is limited to the utilization of interest rate swaps to manage interest rate risk exposure on existing and future liabilities and not for speculative purposes. The principal objective of such arrangements is to minimize the risks and related costs associated with the Company’s operating and financial structure.

The following table summarizes the Company’s outstanding interest rate swaps as of December 31, 2019. All of the Company’s interest rate swaps are designated as qualifying cash flow hedges.
Interest Rate
Derivative Counterparty
 
Trade Date    
 
Effective Date
 
Notional Amount
(in thousands)
 
Fair Value
(in thousands)
 
Pay Fixed Interest Rate
 
Receive Variable Interest Rate
 
Maturity Date
Regions Bank
 
Mar-01-2013
 
Mar-01-2013
 
$
25,000

 
$
13

 
1.3300
%
 
One-month L
 
Feb-14-2020 
Capital One, N.A.
 
Jun-13-2013
 
Jul-01-2013
 
$
50,000

 
$
5

 
1.6810
%
 
One-month L
 
Feb-14-2020 
Capital One, N.A.
 
Jun-13-2013
 
Aug-01-2013
 
$
25,000

 
$
2

 
1.7030
%
 
One-month L
 
Feb-14-2020 
Regions Bank
 
Sep-30-2013
 
Feb-03-2014
 
$
25,000

 
$
(7
)
 
1.9925
%
 
One-month L
 
Feb-14-2020 
The Toronto-Dominion Bank
 
Oct-14-2015
 
Sep-29-2016
 
$
25,000

 
$
48

 
1.3830
%
 
One-month L
 
Sep-29-2020
PNC Bank, N.A.
 
Oct-14-2015
 
Sep-29-2016
 
$
50,000

 
$
94

 
1.3906
%
 
One-month L
 
Sep-29-2020
Regions Bank
 
Oct-14-2015
 
Sep-29-2016
 
$
35,000

 
$
67

 
1.3858
%
 
One-month L
 
Sep-29-2020
U.S. Bank, N.A.
 
Oct-14-2015
 
Sep-29-2016
 
$
25,000

 
$
46

 
1.3950
%
 
One-month L
 
Sep-29-2020
Capital One, N.A.
 
Oct-14-2015
 
Sep-29-2016
 
$
15,000

 
$
28

 
1.3950
%
 
One-month L
 
Sep-29-2020
Royal Bank of Canada
 
Jan-08-2015
 
Mar-20-2015
 
$
25,000

 
$
(37
)
 
1.7090
%
 
One-month L
 
Mar-21-2021
The Toronto-Dominion Bank
 
Jan-08-2015
 
Mar-20-2015
 
$
25,000

 
$
(38
)
 
1.7105
%
 
One-month L
 
Mar-21-2021
The Toronto-Dominion Bank
 
Jan-08-2015
 
Sep-10-2017
 
$
100,000

 
$
(778
)
 
2.2255
%
 
One-month L
 
Mar-21-2021
Wells Fargo, N.A.
 
Jan-08-2015
 
Mar-20-2015
 
$
25,000

 
$
(162
)
 
1.8280
%
 
One-month L
 
Mar-31-2022
The Toronto-Dominion Bank
 
Jan-08-2015
 
Feb-14-2020
 
$
25,000

 
$
(490
)
 
2.4535
%
 
One-month L
 
Mar-31-2022
Regions Bank
 
Jan-08-2015
 
Feb-14-2020
 
$
50,000

 
$
(1,003
)
 
2.4750
%
 
One-month L
 
Mar-31-2022
Capital One, N.A.
 
Jan-08-2015
 
Feb-14-2020
 
$
50,000

 
$
(1,061
)
 
2.5300
%
 
One-month L
 
Mar-31-2022
The Toronto-Dominion Bank
 
Jul-20-2017
 
Oct-30-2017
 
$
25,000

 
$
(229
)
 
1.8485
%
 
One-month L
 
Jan-04-2023
Royal Bank of Canada
 
Jul-20-2017
 
Oct-30-2017
 
$
25,000

 
$
(230
)
 
1.8505
%
 
One-month L
 
Jan-04-2023
Wells Fargo, N.A.
 
Jul-20-2017
 
Oct-30-2017
 
$
25,000

 
$
(230
)
 
1.8505
%
 
One-month L
 
Jan-04-2023
PNC Bank, N.A.
 
Jul-20-2017
 
Oct-30-2017
 
$
25,000

 
$
(229
)
 
1.8485
%
 
One-month L
 
Jan-04-2023
PNC Bank, N.A.
 
Jul-20-2017
 
Oct-30-2017
 
$
50,000

 
$
(456
)
 
1.8475
%
 
One-month L
 
Jan-04-2023
The Toronto-Dominion Bank
 
Jul-24-2018
 
Jul-26-2019
 
$
50,000

 
$
(2,663
)
 
2.9180
%
 
One-month L
 
Jan-12-2024
PNC Bank, N.A.
 
Jul-24-2018
 
Jul-26-2019
 
$
50,000

 
$
(2,665
)
 
2.9190
%
 
One-month L
 
Jan-12-2024
Bank of Montreal
 
Jul-24-2018
 
Jul-26-2019
 
$
50,000

 
$
(2,665
)
 
2.9190
%
 
One-month L
 
Jan-12-2024
U.S. Bank, N.A.
 
Jul-24-2018
 
Jul-26-2019
 
$
25,000

 
$
(1,332
)
 
2.9190
%
 
One-month L
 
Jan-12-2024
Wells Fargo, N.A.
 
May-02-2019
 
Jul-15-2020
 
$
50,000

 
$
(1,422
)
 
2.2460
%
 
One-month L
 
Jan-15-2025
U.S. Bank, N.A.
 
May-02-2019
 
Jul-15-2020
 
$
50,000

 
$
(1,421
)
 
2.2459
%
 
One-month L
 
Jan-15-2025
Regions Bank
 
May-02-2019
 
Jul-15-2020
 
$
50,000

 
$
(1,425
)
 
2.2459
%
 
One-month L
 
Jan-15-2025
Bank of Montreal
 
Jul-16-2019
 
Jul-15-2020
 
$
50,000

 
$
(276
)
 
1.7165
%
 
One-month L
 
Jan-15-2025



F-26


The following table summarizes the fair value of the interest rate swaps outstanding as of December 31, 2019 and 2018.
Balance Sheet Line Item (in thousands)
 
Notional Amount December 31, 2019
 
Fair Value December 31, 2019
 
Notional Amount December 31, 2018
 
Fair Value December 31, 2018
Interest rate swaps-Asset
 
$
250,000

 
$
303

 
$
600,000

 
$
9,151

Interest rate swaps-Liability
 
$
850,000

 
$
(18,819
)
 
$
300,000

 
$
(4,011
)


Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate swaps are to add stability to interest expense and to manage its exposure to interest rate movements.  The Company uses interest rate swaps to fix the rate of its long term variable rate debt. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in accumulated other comprehensive income and subsequently reclassified into interest expense in the same period during which the hedged transaction affects earnings.

Amounts reported in accumulated other comprehensive income (loss) related to derivatives designated as qualifying cash flow hedges will be reclassified to interest expense as interest payments are made on the Company’s variable rate debt. The Company estimates that approximately $4.7 million will be reclassified from accumulated other comprehensive income as an increase to interest expense over the next 12 months.

The following table summarizes the effect of cash flow hedge accounting and the location in the consolidated financial statements for the years ended December 31, 2019, 2018 and 2017.
 
 
Year ended December 31,
Effect of Cash Flow Hedge Accounting (in thousands)
 
2019
 
2018
 
2017
Income (loss) recognized in accumulated other comprehensive income (loss) on interest rate swaps
 
$
(21,248
)
 
$
1,687

 
$
3,597

Income (loss) reclassified from accumulated other comprehensive income (loss) into income as interest expense
 
$
2,377

 
$
1,377

 
$
(2,073
)
Total interest expense presented in the Consolidated Statements of Operations in which the effects of cash flow hedges are recorded
 
$
54,647

 
$
48,817

 
$
42,469



Credit-risk-related Contingent Features

The Company has agreements with each of its derivative counterparties that contain a provision where the Company could be declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to the Company’s default on the indebtedness. As of December 31, 2019, the Company had not breached the provisions of these agreements and has not posted any collateral related to these agreements. If the Company had breached any of its provisions at December 31, 2019, it could have been required to settle its obligations under the agreement of the interest rate swaps in a net liability position by counterparty plus accrued interest for approximately $18.7 million.

Fair Value of Interest Rate Swaps

The Company’s valuation of the interest rate swaps is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs including interest rate curves. The fair values of interest rate swaps are determined by using the market standard methodology of netting the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on an expectation of future interest rates (forward curves) derived from observable market interest rate curves.

The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of December 31, 2019 and 2018,

F-27


the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

The following tables summarize the Company’s financial instruments that are accounted for at fair value on a recurring basis as of December 31, 2019 and 2018
 
 
 
 
Fair Value Measurements as of
December 31, 2019
Balance Sheet Line Item (in thousands)
 
Fair Value December 31, 2019
 
Level 1
 
Level 2
 
Level 3
Interest rate swaps-Asset
 
$
303

 
$

 
$
303

 
$

Interest rate swaps-Liability
 
$
(18,819
)
 
$

 
$
(18,819
)
 
$


 
 
 
 
Fair Value Measurements as of
December 31, 2018
Balance Sheet Line Item (in thousands)
 
Fair Value December 31, 2018
 
Level 1
 
Level 2
 
Level 3
Interest rate swaps-Asset
 
$
9,151

 
$

 
$
9,151

 
$

Interest rate swaps-Liability
 
$
(4,011
)
 
$

 
$
(4,011
)
 
$



6. Equity

Preferred Stock

On June 11, 2018, the Company gave notice to redeem all 2,800,000 issued and outstanding shares of the Series B Preferred Stock. The Company recognized a deemed dividend to the holders of the Series B Preferred Stock of approximately $2.7 million on the accompanying Consolidated Statements of Operations for the year ended December 31, 2018 related to redemption costs and the original issuance costs of the Series B Preferred Stock. On July 11, 2018, the Company redeemed all of the Series B Preferred Stock.

The following table summarizes the Company’s outstanding preferred stock issuances as of December 31, 2019.
Preferred Stock Issuances
 
Issuance Date
 
Number of Shares
 
Liquidation Value Per Share
 
Interest Rate
6.875% Series C Cumulative Redeemable Preferred Stock
 
March 17, 2016
 
3,000,000

 
$
25.00

 
6.875
%


Dividends on the Series C Preferred Stock are payable quarterly in arrears on or about the last day of March, June, September, and December of each year. The Series C Preferred Stock ranks senior to the Company’s common stock with respect to dividend rights and rights upon the liquidation, dissolution or winding up of the Company. The Series C Preferred Stock has no stated maturity date and is not subject to mandatory redemption or any sinking fund. Generally, the Company is not permitted to redeem the Series C Preferred Stock prior to March 17, 2021, except in limited circumstances relating to the Company’s ability to qualify as a REIT and in certain other circumstances related to a change of control.


F-28


The following tables summarize the dividends attributable to the Company’s preferred stock issuances during the years ended December 31, 2019 and 2018.
Quarter Ended 2019
 
Declaration Date
 
Series C
Preferred Stock Per Share
 
Payment Date
December 31
 
October 15, 2019
 
$
0.4296875

 
December 31, 2019
September 30
 
July 15, 2019
 
0.4296875

 
September 30, 2019
June 30
 
April 9, 2019
 
0.4296875

 
July 1, 2019
March 31
 
January 10, 2019
 
0.4296875

 
April 1, 2019
Total
 
 
 
$
1.7187500

 
 
Quarter Ended 2018
 
Declaration Date
 
Series B
Preferred Stock Per Share
 
Series C
Preferred Stock Per Share
 
Payment Date
December 31
 
October 10, 2018
 
$

 
$
0.4296875

 
December 31, 2018
September 30
 
July 11, 2018
 
0.0460069

(1) 
0.4296875

 
October 1, 2018
June 30
 
April 10, 2018
 
0.4140625

 
0.4296875

 
July 2, 2018
March 31
 
February 14, 2018
 
0.4140625

 
0.4296875

 
April 2, 2018
Total
 
 
 
$
0.8741319

 
$
1.7187500

 
 
(1)
On June 11, 2018, the Company gave notice to redeem all 2,800,000 issued and outstanding shares of the Series B Preferred Stock. On July 11, 2018, the Company redeemed all of the Series B Preferred Stock at a cash redemption price of $25.00 per share, plus accrued and unpaid dividends to but excluding the redemption date, without interest.

On January 8, 2020, the Company’s board of directors declared the Series C Preferred Stock dividend for the quarter ending March 31, 2020 at a quarterly rate of $0.4296875 per share.

Common Stock

The following table summarizes the terms of the Company’s at-the market (“ATM”) common stock offering program as of December 31, 2019.
ATM Common Stock Offering Program
 
Date
 
Maximum Aggregate Offering Price (in thousands)
 
Aggregate Common Stock Available as of
December 31, 2019 (in thousands)
2019 $600 million ATM
 
February 14, 2019
 
$
600,000

 
$
318,248


The following tables summarize the activity for the ATM common stock offering programs during the years ended December 31, 2019 and 2018 (in thousands, except share data).
 
 
Year ended December 31, 2019
ATM Common Stock Offering Program
 
Shares
Sold
 
Weighted Average Price Per Share
 
Net
Proceeds
2019 $600 million ATM
 
9,711,706

 
$
29.01

 
$
279,156

Total/weighted average
 
9,711,706

 
$
29.01

 
$
279,156

 
 
Year ended December 31, 2018
ATM Common Stock Offering Program
 
Shares
Sold
 
Weighted Average Price Per Share
 
Net
Proceeds
2017 $500 million ATM (1)
 
14,724,614

 
$
26.52

 
$
386,407

Total/weighted average
 
14,724,614

 
$
26.52

 
$
386,407

(1) This program ended in February 2019.

Subsequent to December 31, 2019, on January 13, 2020, the Company completed an underwritten public offering of an aggregate 10,062,500 shares of common stock; refer to Note 14 for details.

On September 24, 2019, the Company completed an underwritten public offering of an aggregate 12,650,000 shares of common stock at a price to the underwriters of $28.60 per share, consisting of (i) 5,500,000 shares offered directly by the Company and (ii) 7,150,000 shares offered by the forward dealer in connection with certain forward sale agreements (including 1,650,000 shares offered pursuant to the underwriters’ option to purchase additional shares, which option was exercised in full). The offering closed on September 27, 2019 and the Company received net proceeds from the sale of shares offered directly by the Company of $157.3 million. On December 26, 2019, the Company physically settled the forward sales agreements in full by issuing 7,150,000 shares of common stock and received net proceeds of approximately $202.3 million.


F-29


On April 1, 2019, the Company completed an underwritten public offering of 7,475,000 shares of common stock (including 975,000 shares issued pursuant to the underwriters’ option to purchase additional shares, which option was exercised in full) at a price to the underwriters of $28.72 per share. The offering closed on April 4, 2019 and the Company received net proceeds of approximately $214.7 million.

Dividends

The following tables summarize the dividends attributable to the Company’s outstanding shares of common stock that were declared during the years ended December 31, 2019 and 2018. The Company’s board of directors may alter the amounts of dividends paid or suspend dividend payments at any time and therefore dividend payments are not assured.
Month Ended 2019
 
Declaration Date
 
Record Date
 
Per Share
 
Payment Date
December 31
 
October 15, 2019
 
December 31, 2019
 
$
0.119167

 
January 15, 2020
November 30
 
October 15, 2019
 
November 29, 2019
 
0.119167

 
December 16, 2019
October 31
 
October 15, 2019
 
October 31, 2019
 
0.119167

 
November 15, 2019
September 30
 
July 15, 2019
 
September 30, 2019
 
0.119167

 
October 15, 2019
August 31
 
July 15, 2019
 
August 30, 2019
 
0.119167

 
September 16, 2019
July 31
 
July 15, 2019
 
July 31, 2019
 
0.119167

 
August 15, 2019
June 30
 
April 9, 2019
 
June 28, 2019
 
0.119167

 
July 15, 2019
May 31
 
April 9, 2019
 
May 31, 2019
 
0.119167

 
June 17, 2019
April 30
 
April 9, 2019
 
April 30, 2019
 
0.119167

 
May 15, 2019
March 31
 
January 10, 2019
 
March 29, 2019
 
0.119167

 
April 15, 2019
February 28
 
January 10, 2019
 
February 28, 2019
 
0.119167

 
March 15, 2019
January 31
 
January 10, 2019
 
January 31, 2019
 
0.119167

 
February 15, 2019
Total
 
 
 
 
 
$
1.430004

 
 
Month Ended 2018
 
Declaration Date
 
Record Date
 
Per Share
 
Payment Date
December 31
 
October 10, 2018
 
December 31, 2018
 
$
0.118333

 
January 15, 2019
November 30
 
October 10, 2018
 
November 30, 2018
 
0.118333

 
December 17, 2018
October 31
 
October 10, 2018
 
October 31, 2018
 
0.118333

 
November 15, 2018
September 30
 
July 11, 2018
 
September 28, 2018
 
0.118333

 
October 15, 2018
August 31
 
July 11, 2018
 
August 31, 2018
 
0.118333

 
September 17, 2018
July 31
 
July 11, 2018
 
July 31, 2018
 
0.118333

 
August 15, 2018
June 30
 
April 10, 2018
 
June 29, 2018
 
0.118333

 
July 16, 2018
May 31
 
April 10, 2018
 
May 31, 2018
 
0.118333

 
June 15, 2018
April 30
 
April 10, 2018
 
April 30, 2018
 
0.118333

 
May 15, 2018
March 31
 
November 2, 2017
 
March 29, 2018
 
0.118333

 
April 16, 2018
February 28
 
November 2, 2017
 
February 28, 2018
 
0.118333

 
March 15, 2018
January 31
 
November 2, 2017
 
January 31, 2018
 
0.118333

 
February 15, 2018
Total
 
 
 
 
 
$
1.419996

 
 


On January 8, 2020, the Company’s board of directors declared the common stock dividends for the months ending January 31, 2020, February 29, 2020 and March 31, 2020 at a monthly rate of $0.12 per share of common stock.

Restricted Stock-Based Compensation

Pursuant to the 2011 Plan, the Company grants restricted shares of common stock to certain employees of the Company. The restricted shares of common stock are subject to time-based vesting. Restricted shares of common stock granted on January 7, 2019, January 5, 2018, and January 6, 2017, subject to the recipient’s continued employment, will vest in four equal installments on January 1 of each year beginning in 2020, 2019, and 2018, respectively. Refer to Note 8 for details on restricted shares of common stock granted on January 8, 2020. Holders of restricted shares of common stock have voting rights and rights to receive dividends. Restricted shares of common stock may not be sold, assigned, transferred, pledged or otherwise disposed of and are subject to a risk of forfeiture prior to the expiration of the applicable vesting period.


F-30


The following table summarizes activity related to the Company’s unvested restricted shares of common stock for the years ended December 31, 2019, 2018 and 2017.
Unvested Restricted Shares of Common Stock
 
Shares
    
Balance at December 31, 2016
 
272,337

 
Granted
 
75,001

(1)
Vested
 
(109,209
)
(2)
Forfeited
 
(922
)
 
Balance at December 31, 2017
 
237,207

 
Granted
 
76,659

(1)
Vested
 
(112,405
)
(2)
Forfeited
 
(10,999
)
 
Balance at December 31, 2018
 
190,462

 
Granted
 
110,830

(1)
Vested
 
(101,109
)
(2)
Forfeited
 
(7,138
)
 
Balance at December 31, 2019
 
193,045

(3)
(1)
The fair value per share on the grant date of January 7, 2019, January 5, 2018, and January 6, 2017 was $24.85, $26.40, and $24.41, respectively.
(2)
The Company repurchased and retired 58,697, 41,975, and 40,836 restricted shares of common stock that vested during the years ended December 31, 2019, 2018, and 2017, respectively.
(3)
The weighted average grant date fair value of unvested restricted shares of common stock was $23.10 per share at January 1, 2019, $24.85 per share granted during the year ended December 31, 2019, $22.52 per share vested during the year ended December 31, 2019, $23.78 per share forfeited during the year ended December 31, 2019, and $24.38 per share at December 31, 2019.

The unrecognized compensation expense associated with the Company’s restricted shares of common stock at December 31, 2019 was approximately $2.9 million and is expected to be recognized over a weighted average period of approximately 2.4 years.

The following table summarizes the fair value at vesting date for the restricted shares of common stock vested during the years ended December 31, 2019, 2018 and 2017.  
 
 
Year ended December 31,
Vested Restricted Shares of Common Stock
 
2019
 
2018
 
2017
Vested restricted shares of common stock
 
101,109

 
112,405

 
109,209

Fair value of vested restricted shares of common stock (in thousands)
 
$
2,658

 
$
3,002

 
$
2,591

 

7. Noncontrolling Interest

The following table summarizes the activity for noncontrolling interest in the Company for the years ended December 31, 2019, 2018 and 2017.
Noncontrolling Interest
 
LTIP Units
 
Other
Common Units
 
Total
Noncontrolling Common Units
 
Noncontrolling Interest Percentage
Balance at December 31, 2016
 
1,576,516

 
2,057,365

 
3,633,881

 
4.3
%
Granted/Issued

 
126,239

 
687,827

 
814,066

 
N/A

Forfeited
 

 

 

 
N/A

Conversions from LTIP units to Other Common Units
 
(245,685
)
 
245,685

 

 
N/A

Redemptions from Other Common Units to common stock
 

 
(351,260
)
 
(351,260
)
 
N/A

Balance at December 31, 2017
 
1,457,070

 
2,639,617

 
4,096,687

 
4.1
%
Granted/Issued
 
324,802

 

 
324,802

 
N/A

Forfeited
 

 

 

 
N/A

Conversions from LTIP units to Other Common Units
 
(165,672
)
 
165,672

 

 
N/A

Redemptions from Other Common Units to common stock
 

 
(352,055
)
 
(352,055
)
 
N/A

Balance at December 31, 2018
 
1,616,200

 
2,453,234

 
4,069,434

 
3.5
%
Granted/Issued
 
364,173

 

 
364,173

 
N/A

Forfeited
 
(16,618
)
 

 
(16,618
)
 
N/A

Conversions from LTIP units to Other Common Units
 
(266,397
)
 
266,397

 

 
N/A

Redemptions from Other Common Units to common stock
 

 
(680,137
)
 
(680,137
)
 
N/A

Balance at December 31, 2019
 
1,697,358

 
2,039,494

 
3,736,852

 
2.5
%



F-31


The weighted average grant date fair value of outstanding LTIP units was $20.50 per unit at January 1, 2019, $23.51 per unit granted during the year ended December 31, 2019, $23.92 per unit forfeited during the year ended December 31, 2019, $17.11 per unit converted during the year ended December 31, 2019, and $21.64 per unit at December 31, 2019.

The Company adjusts the carrying value of noncontrolling interest to reflect its share of the book value of the Operating Partnership when there has been a change in the Company’s ownership of the Operating Partnership. Such adjustments are recorded to additional paid-in capital as a rebalancing of noncontrolling interest on the accompanying Consolidated Statements of Equity.

LTIP Units

LTIP units are granted to certain executive officers and senior employees of the Company as part of their compensation, and to independent directors for their service. LTIP units are valued by reference to the value of the Company’s common stock and are subject to such conditions and restrictions as the compensation committee of the board of directors may determine, including continued employment or service. Vested LTIP units can be converted to Other Common Units on a one-for-one basis once a material equity transaction has occurred that results in the accretion of the member’s capital account to the economic equivalent of an Other Common Unit. All LTIP units, whether vested or not, will receive the same monthly per unit distributions as Other Common Units, which equal per share dividends on common stock. 

LTIP units granted on January 7, 2019, January 5, 2018, and January 6, 2017 to certain senior executive officers and senior employees, subject to the recipient’s continued employment, will vest quarterly over four years, with the first vesting date having been March 31, 2019, March 31, 2018, and March 31, 2017, respectively. LTIP units granted on January 7, 2019, January 5, 2018, and January 6, 2017 to independent directors, subject to the recipient’s continued service, vested on January 1, 2020, January 1, 2019, and January 1, 2018, respectively. On March 12, 2018, the Company’s board of directors appointed Michelle Dilley to serve as director of the Company. On March 12, 2018, Ms. Dilley was granted 3,930 LTIP units which vested on January 1, 2019.

Refer to Note 8 for a discussion of the LTIP units granted on January 8, 2020, January 7, 2019, and January 5, 2018, pursuant to the January 6, 2017 performance units, the March 8, 2016 performance units, and the 2015 Outperformance Program (the “2015 OPP”), respectively.

The fair value of the LTIP units at the date of grant was determined by a lattice-binomial option-pricing model based on a Monte Carlo simulation. The fair value of the LTIP units are based on Level 3 inputs and are non-recurring fair value measurements. The following table summarizes the assumptions used in valuing such LTIP units granted during years ended December 31, 2019, 2018 and 2017 (excluding those LTIP units granted pursuant to the March 8, 2016 performance units and those LTIP units granted pursuant to the 2015 OPP; refer to Note 8 for details).
LTIP Units
 
 
Grant date
 
January 7, 2019
 
March 12, 2018
 
January 5, 2018
 
January 6, 2017
Expected term (years)
 
10

 
10

 
10

 
10

Expected volatility
 
19.0
%
 
22.0
%
 
22.0
%
 
23.0
%
Expected dividend yield
 
6.0
%
 
6.0
%
 
6.0
%
 
6.0
%
Risk-free interest rate
 
2.57
%
 
2.46
%
 
2.09
%
 
1.61
%
Fair value of LTIP units at issuance (in thousands)
 
$
3,636

 
$
90

 
$
3,447

 
$
2,924

LTIP units at issuance
 
154,649

 
3,930

 
137,616

 
126,239

Fair value unit price per LTIP unit at issuance
 
$
23.51

 
$
22.90

 
$
25.05

 
$
23.16



F-32



The following table summarizes activity related to the Company’s unvested LTIP units for the years ended December 31, 2019, 2018 and 2017.
Unvested LTIP Units
 
Units
Balance at December 31, 2016
 
403,423

Granted
 
126,239

Vested
 
(229,355
)
Forfeited
 

Balance at December 31, 2017
 
300,307

Granted
 
324,802

Vested
 
(373,893
)
Forfeited
 

Balance at December 31, 2018
 
251,216

Granted
 
364,173

Vested
 
(371,423
)
Forfeited
 
(16,618
)
Balance at December 31, 2019
 
227,348


The weighted average grant date fair value of unvested LTIP units was $22.52 per unit at January 1, 2019, $23.51 per unit granted during the year ended December 31, 2019, $22.91 per unit vested during the year ended December 31, 2019, $23.92 per unit forfeited during the year ended December 31, 2019, and $23.37 per unit at December 31, 2019.

The unrecognized compensation expense associated with the Company’s LTIP units at December 31, 2019 was approximately $4.5 million and is expected to be recognized over a weighted average period of approximately 2.3 years.

The following table summarizes the fair value at vesting date for the LTIP units vested during years ended December 31, 2019, 2018 and 2017.
 
 
Year ended December 31,
Vested LTIP units
 
2019
 
2018
 
2017
Vested LTIP units
 
371,423

 
373,893

 
229,355

Fair value of vested LTIP units (in thousands)
 
$
10,620

 
$
9,772

 
$
6,101



Other Common Units

Other Common Units and shares of the Company’s common stock have essentially the same economic characteristics in that Other Common Units directly, and shares of the Company’s common stock indirectly, through the Company’s interest in the Operating Partnership, share equally in the total net income or loss distributions of the Operating Partnership. Subject to certain restrictions, investors who own Other Common Units have the right to cause the Operating Partnership to redeem any or all of their Other Common Units for cash equal to the then-current value of one share of the Company’s common stock, or, at the Company’s election, shares of common stock on a one-for-one basis. When redeeming the Other Common Unit for cash, the value of a share of common stock is calculated as the average common stock closing price on the NYSE for the 10 trading days immediately preceding the redemption notice date. Each Other Common Unit receives the same monthly distribution as a share of common stock.

As partial consideration for a property acquired on May 31, 2017, the Company granted 687,827 Other Common Units with a fair value of approximately $18.6 million. The number of Other Common Units granted was calculated based on the trailing five-day average common stock closing price ending on the second business day that immediately preceded the grant date. The fair value of the shares of the Other Common Units granted was calculated based on the closing stock price per the NYSE on the grant date multiplied by the number of Other Common Units granted. The issuance of the Other Common Units was effected in reliance upon an exemption from registration provided by Section 4(2) under the Securities Act of 1933, as amended. The Company relied on the exemption based on representations given by the holders of the Other Common Units.

8. Equity Incentive Plan

The 2011 Plan provides for the issuance of equity-based awards, including stock options, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock awards and other awards based on shares of the Company’s common stock, such as LTIP units in the Operating Partnership, that may be made by the Company directly to the executive officers, directors, employees, and other individuals providing bona fide services to or for the Company.


F-33


Subject to certain adjustments identified within the 2011 Plan, the aggregate number of shares of the Company’s common stock that may be awarded under the 2011 Plan is 6,642,461 shares. Under the 2011 Plan, each LTIP unit awarded will be equivalent to an award of one share of common stock reserved under the 2011 Plan, thereby reducing the number of shares of common stock available for other equity awards on a one-for-one basis.

The 2011 Plan may be terminated, amended, modified or suspended at any time by the board of directors, subject to stockholder approval as required by law or stock exchange rules. The 2011 Plan expires on March 31, 2021.

Under the 2011 Plan the Company grants performance units to certain key employees of the Company. The ultimate value of the performance units depends on the Company’s total stockholder return (“TSR”) over a three-year period (the “measuring period”). At the end of the measuring period, the performance units convert into shares of common stock, or, at the Company’s election and with the award recipient’s consent, LTIP units or other securities (“Award Shares”), at a rate depending on the Company’s TSR over the measuring period as compared to three different benchmarks and on the absolute amount of the Company’s TSR. A recipient of performance units may receive as few as zero shares or as many as 250% of the number of target units, plus deemed dividends. The target amount of the performance units is nominally allocated as: (i) 25% to the Company’s TSR compared to the TSR of an industry peer group; (ii) 25% to the Company’s TSR compared to the TSR of a size-based peer group; and (iii) 50% to the Company’s TSR compared to the TSR of the companies in the MSCI US REIT index.

No dividends are paid to the recipient during the measuring period. At the end of the measuring period, if the Company’s TSR is such that the recipient earns Award Shares, the recipient will receive additional Award Shares relating to dividends deemed to have been paid and reinvested on the Award Shares. The Company, in the discretion of the compensation committee of the board of directors, may pay the cash value of the deemed dividends instead of issuing additional Award Shares.

On January 7, 2019, January 5, 2018, and January 6, 2017, the Company granted performance units approved by the compensation committee of the board of directors, under the 2011 Plan to certain key employees of the Company. The measuring period commenced on January 1, 2019, 2018, and 2017, respectively, and ends on December 31, 2021, 2020, and 2019, respectively. For the 2019 performance units, the Award Shares are immediately vested at the end of the measuring period. For the 2018 and 2017 performance units, one-half of the Award Shares and all dividend shares vest immediately. The other one-half of the Award Shares will be restricted (subject to forfeiture) and vest one year after the end of the measuring period.

The fair value of the performance units at the date of grant was determined by a lattice-binomial option-pricing model based on a Monte Carlo simulation. The fair value of the performance units are based on Level 3 inputs and are non-recurring fair value measurements. The performance unit equity compensation expense is recognized into earnings ratably from the grant date over the respective vesting periods. The following table summarizes the assumptions used in valuing the performance units granted during the years ended December 31, 2019, 2018 and 2017.
Performance Units
 
Assumptions
Grant date
 
January 7, 2019

 
January 5, 2018

 
January 6, 2017

Expected volatility
 
20.7
%
 
22.0
%
 
23.0
%
Expected dividend yield
 
6.0
%
 
6.0
%
 
6.0
%
Risk-free interest rate
 
2.56
%
 
2.09
%
 
1.61
%
Fair value of performance units grant (in thousands)
 
$
5,620

 
$
5,456

 
$
2,882



On December 31, 2019 the measuring period pursuant to the January 6, 2017 performance units concluded and it was determined that the Company’s TSR exceeded the threshold percentage and return hurdle. Subsequent to December 31, 2019, the compensation committee of the board of directors approved the issuance of 76,096 vested LTIP units and 46,376 vested shares of common stock to the participants, which were issued on January 8, 2020. The compensation committee of the board of directors also approved the issuance of 65,969 LTIP units and 3,398 restricted shares of common stock that will vest on December 31, 2020, which were issued on January 8, 2020.

On December 31, 2018, the measuring period pursuant to the March 8, 2016 performance units concluded and it was determined that the Company’s total stockholder return exceeded the threshold percentage and return hurdle. The compensation committee of the board of directors approved the issuance of 102,216 vested LTIP units and 74,032 vested shares of common stock (of which 30,193 shares of common stock were repurchased and retired) to the participants, which were issued on January 7, 2019. The compensation committee of the board of directors also approved the issuance of 107,308 LTIP units and 22,678 restricted shares of common stock that vested on December 31, 2019, which were issued on January 7, 2019.


F-34


On January 1, 2018, the measuring period pursuant to the 2015 OPP concluded and it was determined that the Company’s total stockholder return exceeded the threshold percentage and return hurdle and a pool of approximately $6.2 million was awarded to the participants. The compensation committee of the board of directors approved the issuance of 183,256 vested LTIP units and 53,722 vested shares of common stock (of which 15,183 shares of common stock were repurchased and retired) to the participants, all of which were issued on January 5, 2018.

The unrecognized compensation expense associated with the Company’s performance units at December 31, 2019 was approximately $5.9 million and is expected to be recognized over a weighted average period of approximately 1.8 years.

At December 31, 2019 and 2018, the number of shares available for issuance under the 2011 Plan were 2,851,304 and 3,276,125, respectively. The number of shares available for issuance under the 2011 Plan as of December 31, 2019 do not include an allocation for the January 7, 2019 and January 5, 2018 performance units as the awards were not determinable as of December 31, 2019. The number of shares available for issuance under the 2011 Plan as December 31, 2018 do not include an allocation for the January 5, 2018 and January 6, 2017 performance units as the awards were not determinable as of December 31, 2018.

Non-cash Compensation Expense

The following table summarizes the amounts recorded in general and administrative expenses in the accompanying Consolidated Statements of Operations for the amortization of restricted shares of common stock, LTIP units, Performance-based Compensation Plans, and the Company’s director compensation for the years ended December 31, 2019, 2018 and 2017.
 
 
Year ended December 31,
Non-Cash Compensation Expense (in thousands)
 
2019
    
2018
 
2017
Restricted shares of common stock
 
$
1,732

  
$
1,698

 
$
2,373

LTIP units
 
3,583

 
3,546

 
4,675

Performance-based Compensation Plans
 
4,169

 
3,298

 
2,147

Directors compensation (1)
 
404

 
380

 
352

Total non-cash compensation expense
 
$
9,888

 
$
8,922

 
$
9,547

(1) All of the Company’s independent directors elected to receive shares of common stock in lieu of cash for their service during the years ended December 31, 2019, 2018 and 2017. The number of shares of common stock granted is calculated based on the trailing 10 days average common stock price ending on the third business day preceding the grant date.

9. Leases

Lessor Leases

The Company has operating leases in which it is the lessor for its rental property. Certain leases contain variable lease payments based upon changes in the Consumer Price Index (“CPI”). Certain leases contain options to renew or terminate the lease, and options for the lessee to purchase the rental property, all of which are predominately at the sole discretion of the lessee.

The following table summarizes the components of rental income recognized during the year ended December 31, 2019 included in the accompanying Consolidated Statements of Operations.
 
 
Year ended December 31,
Rental Income (in thousands)
 
2019
Fixed lease payments
 
$
313,426

Variable lease payments
 
84,927

Straight-line rental income
 
11,881

Net decrease to rental income related to above and below market lease amortization
 
(4,884
)
Total rental income
 
$
405,350



As of December 31, 2019, the Company had accrued rental income of approximately $44.3 million included in tenant accounts receivable on the accompanying Consolidated Balance Sheets. As of December 31, 2018, the Company had accrued rental income of approximately $32.4 million included in tenant accounts receivable on the accompanying Consolidated Balance Sheets.

As of December 31, 2019 and December 31, 2018, the Company had approximately $22.6 million and $18.3 million, respectively, of total lease security deposits available in the form of existing letters of credit, which are not reflected on the accompanying Consolidated Balance Sheets. As of December 31, 2019 and December 31, 2018, the Company had approximately $0.7 million and $0.7 million, respectively, of lease security deposits available in cash, which are included in restricted cash on the accompanying Consolidated Balance Sheets. The Company’s remaining lease security deposits are commingled in cash and cash equivalents.

F-35


These funds may be used to settle tenant accounts receivables in the event of a default under the related lease. As of December 31, 2019 and December 31, 2018, the Company’s total liability associated with these lease security deposits was approximately $9.8 million and $8.4 million, respectively, and is included in tenant prepaid rent and security deposits on the accompanying Consolidated Balance Sheets.

The Company estimates that billings for real estate taxes, which are the responsibility of certain tenants under the terms of their leases and are not reflected on the Company’s consolidated financial statements, was approximately $19.1 million, $15.0 million and $12.4 million for the years ended December 31, 2019, 2018 and 2017, respectively. These amounts would have been the maximum real estate tax expense of the Company, excluding any penalties or interest, had the tenants not met their contractual obligations for these periods.

On December 21, 2016, the tenant at the Golden, CO property exercised its early lease termination option per the terms of the lease agreement. The option provided that the tenant’s lease terminate effective December 31, 2017 and required the tenant to pay a termination fee of approximately $0.9 million. The termination fee was recognized on a straight-line basis from December 21, 2016 through the relinquishment of the space on December 31, 2017. The termination fee income of approximately $0.8 million is included in rental income on the accompanying Consolidated Statements of Operations for the year ended December 31, 2017.

The following table summarizes the maturity of fixed lease payments under the Company’s leases as of December 31, 2019.
Year (as of December 31, 2019)
 
Maturity of Fixed Lease Payments (in thousands)
2020
 
$
355,563

2021
 
$
319,843

2022
 
$
283,526

2023
 
$
242,305

2024
 
$
200,527

Thereafter
 
$
758,401



The following table summarizes the minimum contractual lease payments under the superseded leases standard, Topic 840, as of December 31, 2018.
Year (as of December 31, 2018)
 
Future Minimum Rents (in thousands)
2019
 
$
299,978

2020
 
$
271,936

2021
 
$
226,970

2022
 
$
188,707

2023
 
$
152,814

Thereafter
 
$
535,192



Lessee Leases

The Company has operating leases in which it is the lessee for ground leases and its corporate office lease. These leases have remaining lease terms of approximately 1.2 years to 47.0 years. Certain ground leases contain options to extend the leases for ten years to 20 years, all of which are reasonably certain to be exercised, and are included in the computation of the Company’s right-of-use assets and operating lease liabilities.

The following table summarizes supplemental information related to operating lease right-of-use assets and operating lease liabilities recognized in the Company’s Consolidated Balance Sheets as of December 31, 2019.
Operating Lease Term and Discount Rate
 
December 31, 2019
Weighted average remaining lease term (years)
 
36.0

Weighted average discount rate
 
7.1
%

F-36



The following table summarizes the operating lease cost recognized during the year ended December 31, 2019 included in the Company’s Consolidated Statements of Operations.
 
 
Year ended December 31,
Operating Lease Cost (in thousands)
 
2019
Operating lease cost included in property expense attributable to ground leases
 
$
1,324

Operating lease cost included in general and administrative expense attributable to corporate office lease
 
1,065

Total operating lease cost
 
$
2,389


The following table summarizes supplemental cash flow information related to operating leases recognized during the year ended December 31, 2019 in the Company’s Consolidated Statements of Cash Flows.
 
 
Year ended December 31,
Operating Leases (in thousands)
 
2019
Cash paid for amounts included in the measurement of lease liabilities (operating cash flows)
 
$
2,282



The following table summarizes the maturity of operating lease liabilities under the Company’s ground leases and corporate office lease as of December 31, 2019.
Year (as of December 31, 2019)
 
Maturity of Operating Lease Liabilities(1)
(in thousands)
2020
 
$
2,294

2021
 
1,400

2022
 
1,107

2023
 
1,116

2024
 
1,121

Thereafter
 
47,035

Total lease payments
 
54,073

Less: Imputed interest
 
(37,084
)
Present value of operating lease liabilities
 
$
16,989

(1)
Operating lease liabilities do not include estimates of CPI rent changes required by certain ground lease agreements. Therefore, actual payments may differ than those presented.

The following table summarizes the minimum contractual lease payments under the superseded leases standard, Topic 840, as of December 31, 2018.
Year (as of December 31, 2018)
 
Future Minimum Rental Payments (1)
(in thousands)
2019
 
$
2,110

2020
 
$
2,122

2021
 
$
1,227

2022
 
$
935

2023
 
$
944

Thereafter
 
$
45,580

(1)
Future minimum rental payments do not include estimates of CPI rent changes required by certain lease agreements. Therefore, actual minimum rental payments may differ than those presented.

10. Earnings Per Share

The Company uses the two-class method of computing earnings per common share, which is an earnings allocation formula that determines earnings per share for common stock and any participating securities according to dividends declared (whether paid or unpaid) and participation rights in undistributed earnings. Basic net income per common share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted net income per common share is computed by dividing net income available to common stockholders by the sum of the weighted average number of common shares outstanding and any dilutive securities for the period.

Restricted shares of common stock are considered participating securities as these stock-based awards contain non-forfeitable rights to dividends, unless and until a forfeiture occurs, and these awards must be included in the computation of earnings per share pursuant to the two-class method. During the years ended December 31, 2019, 2018 and 2017, there were 217,623, 195,281 and 237,896, respectively, unvested shares of restricted stock on a weighted average basis that were considered participating securities. Participating securities are included in the computation of diluted EPS using the treasury stock method if the impact is

F-37


dilutive. Other potentially dilutive common shares from the Company’s Performance-based Compensation Plans are considered when calculating diluted EPS.

The following table reconciles the numerators and denominators in the computation of basic and diluted earnings per common share for the years ended December 31, 2019, 2018 and 2017.
 
 
Year ended December 31,
Earnings Per Share (in thousands, except per share data)
 
2019
 
2018
 
2017
Numerator
 
 
 
 
 
 
Net income attributable to common stockholders
 
$
43,811

 
$
82,385

 
$
21,131

Denominator
 
 

 
 
 
 
Weighted average common shares outstanding — basic
 
125,389

 
103,401

 
89,538

Effect of dilutive securities(1)
 
 
 
 
 
 
Share-based compensation
 
284

 
406

 
466

Shares issueable under forward sales agreements
 
5

 

 

Weighted average common shares outstanding — diluted
 
125,678

 
103,807

 
90,004

Net income per share — basic and diluted
 
 
 
 
 
 
Net income per share attributable to common stockholders — basic
 
$
0.35

 
$
0.80

 
$
0.24

Net income per share attributable to common stockholders — diluted
 
$
0.35

 
$
0.79

 
$
0.23


(1)
During the years ended December 31, 2019, 2018, and 2017, there were 218, 195, and 238, unvested shares of restricted common stock, respectively, on a weighted average basis that were not included in the computation of diluted earnings per share because the allocation of income under the two-class method was more dilutive.

11. Commitments and Contingencies

The Company is subject to various legal proceedings and claims that arise in the ordinary course of business. These matters are generally covered by insurance subject to deductible requirements. Management believes that the ultimate settlement of these actions will not have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

On April 18, 2012, the Company entered into an agreement with affiliates of Columbus Nova Real Estate Acquisition Group, Inc. (“Columbus Nova”) to source sale leaseback transactions for potential acquisitions by the Company. The agreement called for various fees to be paid to Columbus Nova for its services including acquisition fees, credit monitoring fees, and a one-time incentive fee if certain performance thresholds were met. The measurement period for the incentive fee ended on May 31, 2017. The incentive fee was settled in cash during the year ended December 31, 2017 and an incentive fee loss of approximately $0.7 million for the year ended December 31, 2017 is included in other expenses on the accompanying Consolidated Statements of Operations.

The Company has letters of credit of approximately $3.0 million as of December 31, 2019 related to construction projects and certain other agreements.

12. Employee Benefit Plans

Effective April 20, 2011, the Company adopted a 401(k) Defined Contribution Savings Plan (the “Plan”) for its employees. Under the Plan, as amended, employees, as defined, are eligible to participate in the Plan after they have completed three months of service. The Company provides a discretionary match of 50% of the employee’s contributions annually up to 6.0% of the employee’s annual compensation, subject to a cap imposed by federal tax law. The Company’s aggregate matching contribution for the years ended December 31, 2019, 2018 and 2017 was approximately $0.4 million, $0.3 million and $0.3 million, respectively. The Company’s contribution is subject to a three year vesting schedule, such that employees who have been with the Company for three years are fully vested in past and future contributions.

13. Related-Party Transactions

STAG Industrial Management, LLC (“Manager”), a wholly owned subsidiary of the Company, was performing certain asset management services for STAG Investments II, LLC (“Fund II”), a private, fully-invested fund that was an affiliate of the Company, that as of December 31, 2017 was legally dissolved. Before dissolution, the Manager was paid an annual asset management fee based on the equity investment in the Fund II assets, which was 1.25% of the equity investment. In June 2013, Fund II and the Company amended the service agreement to exclude disposition services from the asset management services to be performed by the Company and results in a concomitant reduction in the asset management fee. The Company recognized asset management fee income of approximately $0.1 million for the year ended December 31, 2017, which is included in other income on the accompanying Consolidated Statements of Operations.


F-38


14. Subsequent Events

GAAP requires an entity to disclose certain events that occur after the balance sheet date but before financial statements are issued or are available to be issued (“subsequent events”). There are two types of subsequent events. The first type consists of events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements (“recognized subsequent events”). No significant recognized subsequent events were noted.

The second type consists of events that provide evidence about conditions that did not exist at the date of the balance sheet but arose subsequent to that date (“non-recognized subsequent events”). The following non-recognized subsequent events are noted.

On January 27, 2020, the Company sold two buildings located in Camarillo, CA to a third party for a contractual purchase price of $88.0 million.

On January 13, 2020, the Company completed an underwritten public offering of an aggregate 10,062,500 shares of common stock at a price to the underwriters of $30.9022 per share, consisting of (i) 5,600,000 shares offered directly by the Company and (ii) 4,462,500 shares offered by the forward dealer in connection with certain forward sale agreements (including 1,312,500 shares offered pursuant to the underwriters’ option to purchase additional shares, which option was exercised in full). The offering closed on January 16, 2020 and the Company received net proceeds from the sale of shares offered directly by the Company of approximately $173.1 million. Subject to the Company’s right to elect cash or net share settlement, the Company has the ability to settle the forward sales agreements at any time through scheduled maturity date of the forward sale agreements of January 13, 2021.

On January 8, 2020, the Company granted 65,127 restricted shares of common stock to certain employees of the Company pursuant to the 2011 Plan. The restricted shares of common stock granted will vest in four equal installments on January 1 of each year beginning in 2021. The fair value of the restricted shares of common stock at the date of grant was $31.49 per share.

On January 8, 2020, the Company granted 27,144 LTIP units to non-employee, independent directors, and 109,597 LTIP units to certain executive officers and senior employees pursuant to the 2011 Plan. The LTIP units granted to non-employee, independent directors will vest on January 1, 2021. The LTIP units granted to certain executive officers and senior employees will vest quarterly over four years, with the first vesting date being March 31, 2020. The fair value of the LTIP units at the date of grant was approximately $4.0 million, as determined by a lattice-binomial option-pricing model based on a Monte Carlo simulation using an expected term of ten years, a weighted average volatility factor of 18.0%, a weighted average expected dividend yield of 5.75%, and a weighted average risk-free interest rate of 1.61%. The fair value of the LTIP units are based on Level 3 inputs and are non-recurring fair value measurements.

On January 8, 2020, the Company granted performance units to certain executive officers and senior employees pursuant to the 2011 Plan. The terms of the January 8, 2020 performance units grant is substantially the same as the performance units grants discussed in Note 8, except that the measuring period commences on January 1, 2020 and ends on December 31, 2022, and the Award Shares are immediately vested at the end of the measuring period. The fair value of the performance units at the date of grant was approximately $5.4 million, as determined by a lattice-binomial option-pricing model based on a Monte Carlo simulation using a weighted average volatility factor of 17.4%, a weighted average expected dividend yield of 5.75%, and a weighted average risk-free interest rate of 1.59%. The fair value of the performance units are based on Level 3 inputs and are non-recurring fair value measurements.


F-39


STAG Industrial, Inc.
Schedule II—Valuation and Qualifying Accounts
(in thousands)
Allowance for Doubtful Receivables and Accrued Rent Reserves
 
STAG Industrial, Inc.
 
Beginning of Period
 
Costs and Expenses
 
Amounts Written Off
 
Balance at End of Period
December 31, 2019
$
758

 
$

 
$
(758
)
 
$

December 31, 2018
$
311

 
$
1,050

 
$
(603
)
 
$
758

December 31, 2017
$
188

 
$
123

 
$

 
$
311



F-40

Table of Contents

STAG Industrial, Inc.
Schedule III—Real Estate and Accumulated Depreciation
December 31, 2019
(in thousands)
 
 
 
 
 
 
Initial Cost to STAG Industrial, Inc.
 
 
 
Gross Amounts at Which Carried at December 31, 2019
 
 
 
 
State & City
 
Address
 
Encumbrances (1)
 
Building & Improvements (2)
 
Land
 
Costs Capitalized Subsequent to Acquisition and Valuation Provision
 
Building & Improvements
 
Land
 
Total
 
Accumulated Depreciation (3)
 
Year Acquired
Alabama
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Montgomery
 
4300 Alatex Road
 

 
7,523

 
418

 
1,789

 
9,312

 
418

 
9,730

 
(1,094
)
 
2016
Phenix City
 
16 Downing Drive
 
(1,440
)
 
1,415

 
276

 
280

 
1,695

 
276

 
1,971

 
(348
)
 
2012
Arkansas
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rogers
 
8th and Easy Street
 

 
7,878

 
1,072

 
1,513

 
9,391

 
1,072

 
10,463

 
(1,808
)
 
2011
Arizona
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Avondale
 
925 N. 127th Avenue
 

 
13,163

 
1,674

 

 
13,163

 
1,674

 
14,837

 
(926
)
 
2017
Tucson
 
6161 South Palo Verde Road
 

 
8,037

 
996

 

 
8,037

 
996

 
9,033

 
(360
)
 
2018
California
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Camarillo
 
3001 East Mission Oaks Blvd
 

 
13,559

 
7,242

 
262

 
13,821

 
7,242

 
21,063

 
(2,177
)
 
2014
Camarillo
 
3175 East Mission Oaks Blvd
 

 
19,780

 
7,989

 
60

 
19,840

 
7,989

 
27,829

 
(3,696
)
 
2014
Sacramento
 
7728 Wilbur Way
 

 
9,225

 
857

 

 
9,225

 
857

 
10,082

 
(27
)
 
2019
San Diego
 
2055 Dublin Drive
 

 
14,983

 
2,290

 
116

 
15,099

 
2,290

 
17,389

 
(1,524
)
 
2017
Colorado
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Grand Junction
 
2139 Bond Street
 

 
4,002

 
314

 

 
4,002

 
314

 
4,316

 
(599
)
 
2015
Johnstown
 
4150 Ronald Reagan Blvd.
 

 
14,964

 
1,133

 

 
14,964

 
1,133

 
16,097

 
(36
)
 
2019
Longmont
 
4300 Godding Hollow Parkway
 

 
5,345

 
734

 

 
5,345

 
734

 
6,079

 
(308
)
 
2018
Connecticut
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Avon
 
60 Security Drive
 

 
2,750

 
336

 
483

 
3,233

 
336

 
3,569

 
(669
)
 
2012
East Windsor
 
4 Craftsman Road
 

 
5,711

 
400

 
72

 
5,783

 
400

 
6,183

 
(818
)
 
2016
East Windsor
 
24 Thompson Road
 

 
4,571

 
348

 
1,182

 
5,753

 
348

 
6,101

 
(1,389
)
 
2012
Milford
 
40 Pepes Farm Road
 

 
10,040

 
1,264

 
1,005

 
11,045

 
1,264

 
12,309

 
(1,269
)
 
2017
North Haven
 
300 Montowese Avenue Ext.
 

 
39,686

 
4,086

 
4,439

 
44,125

 
4,086

 
48,211

 
(7,581
)
 
2015
Wallingford
 
5 Sterling Drive
 

 
6,111

 
585

 

 
6,111

 
585

 
6,696

 
(658
)
 
2017
Delaware
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New Castle
 
400 Lukens Drive
 

 
17,767

 
2,616

 
198

 
17,965

 
2,616

 
20,581

 
(2,786
)
 
2016
Florida
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Daytona Beach
 
530 Fentress Boulevard
 

 
875

 
1,237

 
2,287

 
3,162

 
1,237

 
4,399

 
(1,044
)
 
2007
Jacksonville
 
775 Whittaker Road
 

 
3,438

 
451

 
410

 
3,848

 
451

 
4,299

 
(520
)
 
2017
Jacksonville
 
9601 North Main Street
 

 
7,829

 
650

 
497

 
8,326

 
650

 
8,976

 
(958
)
 
2017
Jacksonville
 
550 Gun Club Road
 

 
8,195

 
674

 
1,557

 
9,752

 
674

 
10,426

 
(1,314
)
 
2017
Jacksonville
 
555 Zoo Parkway
 

 
7,266

 
596

 
1,016

 
8,282

 
596

 
8,878

 
(1,066
)
 
2017
Jacksonville
 
9779 Pritchard Road
 

 
14,319

 
1,284

 

 
14,319

 
1,284

 
15,603

 
(112
)
 
2019
Ocala
 
650 Southwest 27th Aveune
 

 
13,296

 
731

 
1,553

 
14,849

 
731

 
15,580

 
(2,643
)
 
2013
Orlando
 
1854 Central Florida Parkway
 

 
4,839

 
1,339

 

 
4,839

 
1,339

 
6,178

 
(1,023
)
 
2013
Orlando
 
7050 Overland Road
 

 
1,996

 
721

 

 
1,996

 
721

 
2,717

 
(483
)
 
2012
Pensacola
 
1301 North Palafox Street
 

 
2,829

 
145

 
470

 
3,299

 
145

 
3,444

 
(1,306
)
 
2007

F-41

Table of Contents

 
 
 
 
 
 
Initial Cost to STAG Industrial, Inc.
 
 
 
Gross Amounts at Which Carried at December 31, 2019
 
 
 
 
State & City
 
Address
 
Encumbrances (1)
 
Building & Improvements (2)
 
Land
 
Costs Capitalized Subsequent to Acquisition and Valuation Provision
 
Building & Improvements
 
Land
 
Total
 
Accumulated Depreciation (3)
 
Year Acquired
Tampa
 
4330 Williams Road
 

 
6,390

 
829

 

 
6,390

 
829

 
7,219

 
(95
)
 
2019
Georgia
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Augusta
 
1816 Tobacco Road
 

 
6,249

 
937

 

 
6,249

 
937

 
7,186

 
(364
)
 
2018
Calhoun
 
103 Enterprise Drive
 

 
2,743

 
388

 

 
2,743

 
388

 
3,131

 
(434
)
 
2014
Dallas
 
351 Thomas D. Murphy Drive
 

 
1,712

 
475

 

 
1,712

 
475

 
2,187

 
(427
)
 
2012
Forest Park
 
5300 Kennedy Road
 

 
9,527

 
1,733

 
900

 
10,427

 
1,733

 
12,160

 
(1,528
)
 
2016
Forest Park
 
5345 Old Dixie Highway
 

 
8,189

 
1,715

 
286

 
8,475

 
1,715

 
10,190

 
(1,095
)
 
2016
Norcross
 
4075 Blue Ridge Industrial Pkw
 

 
2,586

 
1,589

 

 
2,586

 
1,589

 
4,175

 
(644
)
 
2016
Savannah
 
1086 Oracal Parkway
 

 
13,034

 
439

 
119

 
13,153

 
439

 
13,592

 
(2,192
)
 
2014
Shannon
 
212 Burlington Drive
 

 
12,949

 
393

 
102

 
13,051

 
393

 
13,444

 
(2,220
)
 
2013
Smyrna
 
3500 Highlands Parkway
 

 
3,092

 
264

 
134

 
3,226

 
264

 
3,490

 
(650
)
 
2012
Statham
 
1965 Statham Drive
 

 
6,130

 
588

 
1,151

 
7,281

 
588

 
7,869

 
(1,462
)
 
2012
Stone Mountain
 
1635 Stone Ridge Drive
 

 
2,738

 
612

 
658

 
3,396

 
612

 
4,008

 
(417
)
 
2017
Idaho
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Idaho Falls
 
3900 South American Way
 

 
2,712

 
356

 
71

 
2,783

 
356

 
3,139

 
(564
)
 
2013
Illinois
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Batavia
 
1100 Paramount Parkway
 

 
4,273

 
618

 

 
4,273

 
618

 
4,891

 
(485
)
 
2017
Belvidere
 
3458 Morreim Drive
 

 
4,083

 
442

 
255

 
4,338

 
442

 
4,780

 
(684
)
 
2015
Belvidere
 
775 Logistics Drive
 

 
16,914

 
2,341

 

 
16,914

 
2,341

 
19,255

 
(1,588
)
 
2017
Belvidere
 
1701 Industrial Court
 

 
3,932

 
733

 
36

 
3,968

 
733

 
4,701

 
(713
)
 
2013
Belvidere
 
725 Landmark Drive
 

 
3,485

 
538

 
114

 
3,599

 
538

 
4,137

 
(606
)
 
2013
Belvidere
 
888 Landmark Drive
 

 
6,899

 
670

 

 
6,899

 
670

 
7,569

 
(1,223
)
 
2013
Belvidere
 
3915 & 3925 Morreim Drive
 

 
4,291

 
668

 

 
4,291

 
668

 
4,959

 
(780
)
 
2013
Belvidere
 
725 & 729 Logistics Drive
 

 
3,699

 
866

 
159

 
3,858

 
866

 
4,724

 
(781
)
 
2013
Belvidere
 
795 Landmark Drive
 

 
2,794

 
586

 
83

 
2,877

 
586

 
3,463

 
(583
)
 
2013
Belvidere
 
857 Landmark Drive
 

 
8,269

 
1,542

 
591

 
8,860

 
1,542

 
10,402

 
(1,773
)
 
2013
Belvidere
 
984 Landmark Drive
 

 
71

 
216

 

 
71

 
216

 
287

 
(71
)
 
2013
DeKalb
 
1085 Peace Road
 

 
4,568

 
489

 

 
4,568

 
489

 
5,057

 
(945
)
 
2013
Gurnee
 
3818 Grandville Avenue & 1200 Northwestern Avenue
 

 
11,380

 
1,716

 
984

 
12,364

 
1,716

 
14,080

 
(2,065
)
 
2014
Gurnee
 
3800 Swanson Court
 

 
4,553

 
1,337

 
954

 
5,507

 
1,337

 
6,844

 
(1,141
)
 
2012
Harvard
 
875 West Diggins Street
 

 
2,980

 
1,157

 
324

 
3,304

 
1,157

 
4,461

 
(952
)
 
2013
Itasca
 
1800 Bruning Drive
 

 
12,216

 
2,428

 
1,213

 
13,429

 
2,428

 
15,857

 
(1,903
)
 
2016
Libertyville
 
1755 Butterfield Road
 

 
6,455

 
421

 
80

 
6,535

 
421

 
6,956

 
(1,194
)
 
2015
Libertyville
 
1795 N. Butterfield Road
 

 
729

 
143

 
210

 
939

 
143

 
1,082

 
(379
)
 
2015
Lisle
 
4925 Indiana Avenue
 

 
8,368

 
2,302

 

 
8,368

 
2,302

 
10,670

 
(78
)
 
2019
Machesney Park
 
7166 Greenlee Drive
 

 
3,525

 
300

 
43

 
3,568

 
300

 
3,868

 
(503
)
 
2015
McHenry
 
831/833 Ridgeview Drive
 

 
3,818

 
576

 
120

 
3,938

 
576

 
4,514

 
(295
)
 
2018
McHenry
 
921 Ridgeview Drive
 

 
4,010

 
448

 
27

 
4,037

 
448

 
4,485

 
(275
)
 
2018
Montgomery
 
2001 Baseline Road
 

 

 
173

 

 

 
173

 
173

 

 
2018
Montgomery
 
2001 Baseline Road
 

 
12,485

 
2,190

 
1,936

 
14,421

 
2,190

 
16,611

 
(2,998
)
 
2012
Sauk Village
 
21399 Torrence Avenue
 

 
5,405

 
877

 
105

 
5,510

 
877

 
6,387

 
(1,066
)
 
2013

F-42

Table of Contents

 
 
 
 
 
 
Initial Cost to STAG Industrial, Inc.
 
 
 
Gross Amounts at Which Carried at December 31, 2019
 
 
 
 
State & City
 
Address
 
Encumbrances (1)
 
Building & Improvements (2)
 
Land
 
Costs Capitalized Subsequent to Acquisition and Valuation Provision
 
Building & Improvements
 
Land
 
Total
 
Accumulated Depreciation (3)
 
Year Acquired
Waukegan
 
3751 Sunset Ave
 

 
5,140

 
1,004

 

 
5,140

 
1,004

 
6,144

 
(607
)
 
2017
West Chicago
 
1300 Northwest Avenue
 

 
2,036

 
768

 
772

 
2,808

 
768

 
3,576

 
(414
)
 
2016
West Chicago
 
1400 Northwest Avenue
 

 
668

 
382

 
282

 
950

 
382

 
1,332

 
(140
)
 
2016
West Chicago
 
1450 Northwest Avenue
 

 
768

 
450

 
272

 
1,040

 
450

 
1,490

 
(169
)
 
2016
West Chicago
 
1145 & 1149 Howard
 

 
842

 
369

 
269

 
1,111

 
369

 
1,480

 
(176
)
 
2016
West Chicago
 
1270 Nuclear Drive
 

 
892

 
216

 
301

 
1,193

 
216

 
1,409

 
(164
)
 
2016
West Chicago
 
1726-1850 Blackhawk Drive
 

 
6,135

 
915

 
1,257

 
7,392

 
915

 
8,307

 
(1,073
)
 
2016
Wood Dale
 
321 Forster Ave
 

 
5,042

 
1,226

 

 
5,042

 
1,226

 
6,268

 
(560
)
 
2016
Woodstock
 
1005 Courtaulds Drive
 

 
3,796

 
496

 

 
3,796

 
496

 
4,292

 
(902
)
 
2012
Indiana
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Albion
 
907 Weber Road
 

 
93

 
67

 

 
93

 
67

 
160

 
(32
)
 
2006
Albion
 
1515 East State Road 8
 

 
932

 
103

 

 
932

 
103

 
1,035

 
(323
)
 
2006
Albion
 
1563 East State Road 8
 

 
1,107

 
55

 

 
1,107

 
55

 
1,162

 
(383
)
 
2006
Albion
 
600 South 7th Street
 

 
970

 
332

 

 
970

 
332

 
1,302

 
(336
)
 
2006
Albion
 
1545 East State Road 8
 

 
1,397

 
52

 

 
1,397

 
52

 
1,449

 
(484
)
 
2006
Albion
 
1514 Progress Drive
 

 
1,528

 
126

 

 
1,528

 
126

 
1,654

 
(529
)
 
2006
Albion
 
1105 Weber Road
 

 
710

 
187

 

 
710

 
187

 
897

 
(246
)
 
2006
Elkhart
 
2701Marina Drive
 

 
210

 
25

 
143

 
353

 
25

 
378

 
(96
)
 
2007
Elkhart
 
23590 County Road 6
 

 
3,519

 
422

 
571

 
4,090

 
422

 
4,512

 
(1,242
)
 
2007
Fort Wayne
 
3424 Centennial Drive
 

 
3,142

 
112

 

 
3,142

 
112

 
3,254

 
(585
)
 
2014
Goshen
 
2600 College Avenue
 

 
6,509

 
1,442

 
1,824

 
8,333

 
1,442

 
9,775

 
(2,034
)
 
2011
Greenwood
 
1415 Collins Road
 

 
22,032

 
2,585

 

 
22,032

 
2,585

 
24,617

 
(685
)
 
2018
Kendallville
 
811 Commerce Drive
 

 
1,510

 
142

 

 
1,510

 
142

 
1,652

 
(523
)
 
2006
Lafayette
 
1520 Kepner Drive
 
(1,105
)
 
2,205

 
295

 
43

 
2,248

 
295

 
2,543

 
(434
)
 
2012
Lafayette
 
1540-1530 Kepner Drive
 
(1,877
)
 
3,405

 
410

 
123

 
3,528

 
410

 
3,938

 
(688
)
 
2012
Lafayette
 
1521 Kepner Drive
 
(3,856
)
 
7,920

 
906

 
301

 
8,221

 
906

 
9,127

 
(1,700
)
 
2012
Lebanon
 
100 Purity Drive
 

 
21,160

 
1,654

 

 
21,160

 
1,654

 
22,814

 
(923
)
 
2018
Lebanon
 
800 Edwards Drive
 

 
35,868

 
2,359

 

 
35,868

 
2,359

 
38,227

 
(95
)
 
2019
Lebanon
 
121 N. Enterprise Boulevard
 

 
37,971

 
2,948

 

 
37,971

 
2,948

 
40,919

 
(341
)
 
2019
Marion
 
2201 E. Loew Road
 
(2,622
)
 
2,934

 
243

 
718

 
3,652

 
243

 
3,895

 
(779
)
 
2012
Portage
 
6515 Ameriplex Drive
 

 
28,227

 
1,626

 

 
28,227

 
1,626

 
29,853

 
(179
)
 
2019
Portage
 
725 George Nelson Drive
 

 
5,416

 

 

 
5,416

 

 
5,416

 
(1,046
)
 
2012
South Bend
 
3310 William Richardson Court
 

 
4,718

 
411

 
294

 
5,012

 
411

 
5,423

 
(974
)
 
2012
Iowa
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ankeny
 
5910 Southeast Rio Circle
 

 
13,709

 
846

 

 
13,709

 
846

 
14,555

 
(36
)
 
2019
Council Bluffs
 
1209 31st Avenue
 

 
4,438

 
414

 

 
4,438

 
414

 
4,852

 
(344
)
 
2017
Des Moines
 
1900 E. 17th Street
 

 
4,477

 
556

 

 
4,477

 
556

 
5,033

 
(246
)
 
2018
Marion
 
6301 North Gateway Drive
 

 
2,229

 
691

 
175

 
2,404

 
691

 
3,095

 
(508
)
 
2013
Kansas
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Edwardsville
 
9601 Woodend Road
 

 
13,224

 
1,360

 
544

 
13,768

 
1,360

 
15,128

 
(1,340
)
 
2017
Lenexa
 
9700 Lackman Road
 

 
9,649

 
1,759

 
33

 
9,682

 
1,759

 
11,441

 
(157
)
 
2019
Lenexa
 
14000 Marshall Drive
 

 
7,610

 
2,368

 

 
7,610

 
2,368

 
9,978

 
(2,144
)
 
2014

F-43

Table of Contents

 
 
 
 
 
 
Initial Cost to STAG Industrial, Inc.
 
 
 
Gross Amounts at Which Carried at December 31, 2019
 
 
 
 
State & City
 
Address
 
Encumbrances (1)
 
Building & Improvements (2)
 
Land
 
Costs Capitalized Subsequent to Acquisition and Valuation Provision
 
Building & Improvements
 
Land
 
Total
 
Accumulated Depreciation (3)
 
Year Acquired
Olathe
 
1202 South Lone Elm Road
 

 
16,272

 
1,193

 

 
16,272

 
1,193

 
17,465

 
(49
)
 
2019
Olathe
 
16231 South Lone Elm Road
 

 
20,763

 
2,431

 
2,138

 
22,901

 
2,431

 
25,332

 
(2,880
)
 
2016
Wichita
 
2655/2755 South Eastmoor Street
 
(1,389
)
 
1,815

 
88

 
110

 
1,925

 
88

 
2,013

 
(411
)
 
2012
Wichita
 
2652 South Eastmoor Street
 
(1,518
)
 
1,839

 
107

 
283

 
2,122

 
107

 
2,229

 
(487
)
 
2012
Wichita
 
2510 South Eastmoor Street
 
(694
)
 
833

 
76

 
181

 
1,014

 
76

 
1,090

 
(291
)
 
2012
Kentucky
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bardstown
 
300 Spencer Mattingly Lane
 

 
2,398

 
379

 

 
2,398

 
379

 
2,777

 
(810
)
 
2007
Danville
 
1355 Lebanon Road
 

 
11,593

 
965

 
3,891

 
15,484

 
965

 
16,449

 
(3,497
)
 
2011
Erlanger
 
1500-1532 Interstate Drive
 

 
3,825

 
635

 
346

 
4,171

 
635

 
4,806

 
(632
)
 
2016
Florence
 
9200 Brookfield Court
 

 
7,914

 
863

 

 
7,914

 
863

 
8,777

 
(297
)
 
2019
Florence
 
1100 Burlington Pike
 

 
10,934

 
3,109

 
128

 
11,062

 
3,109

 
14,171

 
(854
)
 
2018
Hebron
 
2151 Southpark Drive
 

 
4,526

 
370

 
130

 
4,656

 
370

 
5,026

 
(855
)
 
2014
Louisville
 
6350 Ladd Avenue
 

 
3,615

 
386

 
520

 
4,135

 
386

 
4,521

 
(954
)
 
2011
Louisville
 
6400 Ladd Avenue
 

 
5,767

 
616

 
632

 
6,399

 
616

 
7,015

 
(1,449
)
 
2011
Walton
 
125 Richwood Road
 

 
6,244

 
2,105

 

 
6,244

 
2,105

 
8,349

 
(844
)
 
2017
Louisiana
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Baton Rouge
 
6565 Exchequer Drive
 

 
5,886

 
1,619

 

 
5,886

 
1,619

 
7,505

 
(128
)
 
2019
Baton Rouge
 
6735 Exchequer Drive
 

 
6,682

 
2,567

 

 
6,682

 
2,567

 
9,249

 
(161
)
 
2019
Baton Rouge
 
12100 Little Cayman Avenue
 

 
15,402

 
1,962

 

 
15,402

 
1,962

 
17,364

 
(872
)
 
2018
Shreveport
 
7540 Bert Kouns Indust. Loop
 

 
5,572

 
1,804

 
534

 
6,106

 
1,804

 
7,910

 
(830
)
 
2015
Maine
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Belfast
 
21 Schoodic Drive & 32 Katahdin Avenue
 

 
6,821

 
1,081

 
486

 
7,307

 
1,081

 
8,388

 
(2,474
)
 
2011
Biddeford
 
1 Baker's Way
 

 
8,164

 
1,369

 
3,916

 
12,080

 
1,369

 
13,449

 
(2,054
)
 
2016
Gardiner
 
47 Market Street
 

 
8,983

 
948

 

 
8,983

 
948

 
9,931

 
(1,412
)
 
2016
Lewiston
 
19 Mollison Way
 

 
5,374

 
173

 
1,064

 
6,438

 
173

 
6,611

 
(1,895
)
 
2007
Portland
 
125 Industrial Way
 

 
3,648

 
891

 
86

 
3,734

 
891

 
4,625

 
(722
)
 
2012
Maryland
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Elkridge
 
6685 Santa Barbara Court
 

 
8,792

 
2,982

 

 
8,792

 
2,982

 
11,774

 
(243
)
 
2019
Hampstead
 
630 Hanover Pike
 

 
34,969

 
780

 

 
34,969

 
780

 
35,749

 
(6,323
)
 
2013
White Marsh
 
6210 Days Cove Road
 

 
5,839

 
963

 

 
5,839

 
963

 
6,802

 
(265
)
 
2018
Massachusetts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Chicopee
 
2189 Westover Road
 

 
5,614

 
504

 
77

 
5,691

 
504

 
6,195

 
(1,121
)
 
2012
Malden
 
219 Medford Street
 

 
2,817

 
366

 

 
2,817

 
366

 
3,183

 
(908
)
 
2007
Malden
 
243 Medford Street
 

 
3,961

 
507

 

 
3,961

 
507

 
4,468

 
(1,276
)
 
2007
Middleborough
 
16 Leona Drive
 

 
7,243

 
2,397

 

 
7,243

 
2,397

 
9,640

 
(163
)
 
2019
Norton
 
202 South Washington Street
 

 
6,740

 
2,839

 
217

 
6,957

 
2,839

 
9,796

 
(1,873
)
 
2011
South Easton
 
55 Bristol Drive
 

 
5,880

 
403

 

 
5,880

 
403

 
6,283

 
(420
)
 
2017
Stoughton
 
100 Campanelli Parkway
 

 
2,613

 
2,256

 
1,510

 
4,123

 
2,256

 
6,379

 
(1,121
)
 
2015
Stoughton
 
12 Campanelli Parkway
 

 
1,162

 
538

 
185

 
1,347

 
538

 
1,885

 
(361
)
 
2015
Taunton
 
800 John Quincy Adams Road
 

 
23,885

 
2,598

 
303

 
24,188

 
2,598

 
26,786

 
(696
)
 
2019
Westborough
 
35 Otis Street
 

 
5,808

 
661

 
23

 
5,831

 
661

 
6,492

 
(679
)
 
2016
Michigan
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

F-44

Table of Contents

 
 
 
 
 
 
Initial Cost to STAG Industrial, Inc.
 
 
 
Gross Amounts at Which Carried at December 31, 2019
 
 
 
 
State & City
 
Address
 
Encumbrances (1)
 
Building & Improvements (2)
 
Land
 
Costs Capitalized Subsequent to Acquisition and Valuation Provision
 
Building & Improvements
 
Land
 
Total
 
Accumulated Depreciation (3)
 
Year Acquired
Belleville
 
8200 Haggerty Road
 

 
6,524

 
724

 
9

 
6,533

 
724

 
7,257

 
(675
)
 
2017
Chesterfield
 
50501 E. Russell Schmidt
 

 
1,099

 
207

 
12

 
1,111

 
207

 
1,318

 
(358
)
 
2007
Chesterfield
 
50371 E. Russell Schmidt
 

 
798

 
150

 
407

 
1,205

 
150

 
1,355

 
(293
)
 
2007
Chesterfield
 
50271 E. Russell Schmidt
 

 
802

 
151

 
224

 
1,026

 
151

 
1,177

 
(377
)
 
2007
Chesterfield
 
50900 E. Russell Schmidt
 

 
5,006

 
942

 
2,197

 
7,203

 
942

 
8,145

 
(2,212
)
 
2007
Grand Rapids
 
5050 Kendrick Street, SE
 

 
7,532

 
169

 
34

 
7,566

 
169

 
7,735

 
(1,448
)
 
2015
Holland
 
4757 128th Avenue
 
(2,869
)
 
3,273

 
279

 
60

 
3,333

 
279

 
3,612

 
(685
)
 
2012
Kentwood
 
4660 East Paris Avenue, SE
 

 
7,955

 
307

 
29

 
7,984

 
307

 
8,291

 
(127
)
 
2019
Kentwood
 
4070 East Paris Avenue
 

 
2,436

 
407

 
120

 
2,556

 
407

 
2,963

 
(464
)
 
2013
Lansing
 
7009 West Mount Hope Highway
 

 
7,706

 
501

 
1,240

 
8,946

 
501

 
9,447

 
(1,670
)
 
2011
Lansing
 
2780 Sanders Road
 

 
3,961

 
580

 
33

 
3,994

 
580

 
4,574

 
(780
)
 
2012
Lansing
 
5640 Pierson Highway
 
(5,141
)
 
7,056

 
429

 
100

 
7,156

 
429

 
7,585

 
(1,469
)
 
2012
Lansing
 
2051 South Canal Road
 

 
5,176

 
907

 

 
5,176

 
907

 
6,083

 
(1,048
)
 
2013
Livonia
 
38150 Plymouth Road
 

 
7,123

 
1,390

 
176

 
7,299

 
1,390

 
8,689

 
(369
)
 
2018
Livonia
 
38220 Plymouth Road
 

 
8,967

 
848

 
31

 
8,998

 
848

 
9,846

 
(323
)
 
2018
Marshall
 
1511 George Brown Drive
 

 
1,042

 
199

 
130

 
1,172

 
199

 
1,371

 
(258
)
 
2013
Novi
 
22925 Venture Drive
 
(2,519
)
 
3,649

 
252

 
336

 
3,985

 
252

 
4,237

 
(764
)
 
2012
Novi
 
25250 Regency Drive
 

 
6,035

 
626

 

 
6,035

 
626

 
6,661

 
(929
)
 
2015
Novi
 
43800 Gen Mar Drive
 

 
16,918

 
1,381

 

 
16,918

 
1,381

 
18,299

 
(819
)
 
2018
Plymouth
 
14835 Pilot Drive
 

 
4,620

 
365

 

 
4,620

 
365

 
4,985

 
(797
)
 
2015
Redford
 
12100 Inkster Road
 

 
6,114

 
728

 
414

 
6,528

 
728

 
7,256

 
(1,319
)
 
2017
Romulus
 
9800 Inkster Road
 

 
14,942

 
1,254

 

 
14,942

 
1,254

 
16,196

 
(944
)
 
2018
Romulus
 
27651 Hildebrandt Road
 

 
14,956

 
1,080

 
49

 
15,005

 
1,080

 
16,085

 
(1,559
)
 
2017
Sterling Heights
 
42600 Merrill Street
 
(1,388
)
 
4,191

 
1,133

 
415

 
4,606

 
1,133

 
5,739

 
(948
)
 
2012
Walker
 
2640 Northridge Drive
 

 
4,593

 
855

 
169

 
4,762

 
855

 
5,617

 
(1,067
)
 
2011
Warren
 
13301 Stephens Road
 

 
6,111

 
502

 
10

 
6,121

 
502

 
6,623

 
(839
)
 
2017
Warren
 
7500 Tank Avenue
 

 
16,035

 
1,290

 

 
16,035

 
1,290

 
17,325

 
(2,017
)
 
2016
Zeeland
 
750 E. Riley Avenue
 

 
12,100

 
487

 

 
12,100

 
487

 
12,587

 
(352
)
 
2019
Minnesota
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Blaine
 
3705 95th Avenue NE
 

 
16,873

 
2,258

 

 
16,873

 
2,258

 
19,131

 
(505
)
 
2019
Bloomington
 
11300 Hampshire Avenue South
 

 
8,582

 
1,702

 
23

 
8,605

 
1,702

 
10,307

 
(695
)
 
2018
Brooklyn Park
 
6688 93rd Avenue North
 

 
11,988

 
1,926

 

 
11,988

 
1,926

 
13,914

 
(1,215
)
 
2016
Carlos
 
4750 County Road 13 NE
 

 
5,855

 
960

 
151

 
6,006

 
960

 
6,966

 
(1,431
)
 
2011
Eagan
 
3355 Discovery Road
 

 
15,290

 
2,526

 

 
15,290

 
2,526

 
17,816

 
(109
)
 
2019
Maple Grove
 
6250 Sycamore Lane North
 

 
6,634

 
969

 
473

 
7,107

 
969

 
8,076

 
(750
)
 
2017
Mendota Heights
 
2250 Pilot Knob Road
 

 
3,492

 
1,494

 
1,062

 
4,554

 
1,494

 
6,048

 
(364
)
 
2018
New Hope
 
5520 North Highway 169
 

 
1,970

 
1,919

 
10

 
1,980

 
1,919

 
3,899

 
(560
)
 
2013
Oakdale
 
550 Hale Avenue
 

 
6,556

 
647

 

 
6,556

 
647

 
7,203

 
(203
)
 
2019
Oakdale
 
585-595 Hale Avenue
 

 
5,028

 
1,396

 
59

 
5,087

 
1,396

 
6,483

 
(253
)
 
2018
Plymouth
 
9800 13th Avenue North
 

 
4,978

 
1,599

 

 
4,978

 
1,599

 
6,577

 
(392
)
 
2018
Plymouth
 
6050 Nathan Lane
 

 
5,855

 
1,109

 

 
5,855

 
1,109

 
6,964

 
(55
)
 
2019
Plymouth
 
6075 Trenton Lane North
 

 
6,961

 
1,569

 

 
6,961

 
1,569

 
8,530

 
(70
)
 
2019

F-45

Table of Contents

 
 
 
 
 
 
Initial Cost to STAG Industrial, Inc.
 
 
 
Gross Amounts at Which Carried at December 31, 2019
 
 
 
 
State & City
 
Address
 
Encumbrances (1)
 
Building & Improvements (2)
 
Land
 
Costs Capitalized Subsequent to Acquisition and Valuation Provision
 
Building & Improvements
 
Land
 
Total
 
Accumulated Depreciation (3)
 
Year Acquired
Rogers
 
19850 Diamond Lake Road
 

 
10,429

 
1,671

 
238

 
10,667

 
1,671

 
12,338

 
(2,391
)
 
2011
Savage
 
14399 Huntington Avenue
 

 
3,836

 
3,194

 
989

 
4,825

 
3,194

 
8,019

 
(1,188
)
 
2014
Shakopee
 
1451 Dean Lakes Trail
 

 
12,496

 
927

 

 
12,496

 
927

 
13,423

 
(64
)
 
2019
South Saint Paul
 
411 Farwell Avenue
 

 
14,975

 
2,378

 
329

 
15,304

 
2,378

 
17,682

 
(984
)
 
2018
Missouri
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earth City
 
1 American Eagle Plaza
 

 
2,806

 
1,123

 
60

 
2,866

 
1,123

 
3,989

 
(488
)
 
2016
Fenton
 
2501 & 2509 Cassens Drive
 

 
9,380

 
791

 

 
9,380

 
791

 
10,171

 
(82
)
 
2019
Hazelwood
 
7275 Hazelwood Avenue
 

 
5,030

 
1,382

 
1,599

 
6,629

 
1,382

 
8,011

 
(1,314
)
 
2011
O'Fallon
 
6705 Keaton Corporate Parkway
 

 
3,627

 
1,233

 
345

 
3,972

 
1,233

 
5,205

 
(507
)
 
2017
O'Fallon
 
3801 Lloyd King Drive
 

 
2,579

 
1,242

 
335

 
2,914

 
1,242

 
4,156

 
(671
)
 
2011
Nebraska
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Omaha
 
10488 S. 136th Street
 

 
13,736

 
1,602

 
32

 
13,768

 
1,602

 
15,370

 
(342
)
 
2019
Omaha
 
9995 I Street
 

 
3,250

 
572

 

 
3,250

 
572

 
3,822

 
(39
)
 
2019
Omaha
 
10025 I Street
 

 
2,449

 
579

 

 
2,449

 
579

 
3,028

 
(32
)
 
2019
Nevada
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Las Vegas
 
730 Pilot Road
 

 
12,390

 
2,615

 
170

 
12,560

 
2,615

 
15,175

 
(753
)
 
2018
Las Vegas
 
3450 West Teco Avenue
 

 
3,259

 
770

 

 
3,259

 
770

 
4,029

 
(281
)
 
2017
Paradise
 
4565 Wynn Road
 

 
4,514

 
949

 

 
4,514

 
949

 
5,463

 
(63
)
 
2019
Paradise
 
6460 Arville St
 

 
3,415

 
1,465

 
10

 
3,425

 
1,465

 
4,890

 
(62
)
 
2019
Reno
 
9025 Moya Blvd.
 

 
3,461

 
1,372

 

 
3,461

 
1,372

 
4,833

 
(812
)
 
2014
Sparks
 
325 E. Nugget Avenue
 

 
6,328

 
938

 
977

 
7,305

 
938

 
8,243

 
(1,067
)
 
2017
New Hampshire
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Londonderry
 
29 Jack's Bridge Road/Clark Rd
 

 
6,683

 
730

 

 
6,683

 
730

 
7,413

 
(1,367
)
 
2013
Nashua
 
80 Northwest Boulevard
 

 
8,470

 
1,431

 
449

 
8,919

 
1,431

 
10,350

 
(1,644
)
 
2014
New Jersey
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Branchburg
 
291 Evans Way
 

 
10,852

 
2,367

 

 
10,852

 
2,367

 
13,219

 
(28
)
 
2019
Burlington
 
1900 River Road
 

 
42,753

 
5,135

 
256

 
43,009

 
5,135

 
48,144

 
(7,487
)
 
2015
Burlington
 
8 Campus Drive
 

 
12,609

 
3,267

 
165

 
12,774

 
3,267

 
16,041

 

 
2015
Burlington
 
6 Campus Drive
 

 
19,577

 
4,030

 
1,238

 
20,815

 
4,030

 
24,845

 
(3,278
)
 
2015
Franklin Township
 
17 & 20 Veronica Avenue
 

 
8,322

 
2,272

 
395

 
8,717

 
2,272

 
10,989

 
(1,350
)
 
2017
Lopatcong
 
190 Strykers Road
 

 
9,777

 
1,554

 
1,599

 
11,376

 
1,554

 
12,930

 
(1,104
)
 
2011
Lumberton
 
101 Mount Holly Bypass
 

 
6,372

 
1,121

 

 
6,372

 
1,121

 
7,493

 
(126
)
 
2019
Moorestown
 
550 Glen Avenue
 

 
5,714

 
466

 

 
5,714

 
466

 
6,180

 
(137
)
 
2019
Moorestown
 
600 Glen Court
 

 
4,763

 
510

 

 
4,763

 
510

 
5,273

 
(126
)
 
2019
Pedricktown
 
One Gateway Blvd.
 

 
10,696

 
2,414

 

 
10,696

 
2,414

 
13,110

 
(1,166
)
 
2017
Swedesboro
 
2165 Center Square Road
 

 
5,129

 
1,212

 

 
5,129

 
1,212

 
6,341

 
(519
)
 
2017
New York
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Buffalo
 
1236-50 William Street
 

 
2,924

 
146

 

 
2,924

 
146

 
3,070

 
(618
)
 
2012
Cheektowaga
 
40-60 Industrial Parkway
 

 
2,699

 
216

 
1,004

 
3,703

 
216

 
3,919

 
(904
)
 
2011
Farmington
 
5786 Collett Road
 

 
5,282

 
410

 
469

 
5,751

 
410

 
6,161

 
(1,662
)
 
2007
Gloversville
 
125 Belzano Drive
 
(668
)
 
1,299

 
117

 

 
1,299

 
117

 
1,416

 
(288
)
 
2012
Gloversville
 
122 Belzano Drive
 
(1,080
)
 
2,559

 
151

 
73

 
2,632

 
151

 
2,783

 
(524
)
 
2012

F-46

Table of Contents

 
 
 
 
 
 
Initial Cost to STAG Industrial, Inc.
 
 
 
Gross Amounts at Which Carried at December 31, 2019
 
 
 
 
State & City
 
Address
 
Encumbrances (1)
 
Building & Improvements (2)
 
Land
 
Costs Capitalized Subsequent to Acquisition and Valuation Provision
 
Building & Improvements
 
Land
 
Total
 
Accumulated Depreciation (3)
 
Year Acquired
Gloversville
 
109 Belzano Drive
 
(771
)
 
1,486

 
154

 
36

 
1,522

 
154

 
1,676

 
(332
)
 
2012
Johnstown
 
6 Clermont Street
 
(668
)
 
1,304

 
178

 

 
1,304

 
178

 
1,482

 
(313
)
 
2012
Johnstown
 
123 Union Avenue
 
(977
)
 
1,592

 
216

 
47

 
1,639

 
216

 
1,855

 
(325
)
 
2012
Johnstown
 
231 Enterprise Drive
 
(797
)
 
955

 
151

 

 
955

 
151

 
1,106

 
(252
)
 
2012
Johnstown
 
150 Enterprise Avenue
 
(1,491
)
 
1,467

 
140

 

 
1,467

 
140

 
1,607

 
(356
)
 
2012
North Carolina
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Charlotte
 
6601 North I-85 Service Road
 

 
2,342

 
805

 
79

 
2,421

 
805

 
3,226

 
(403
)
 
2014
Charlotte
 
1401 Tar Heel Road
 

 
3,961

 
515

 

 
3,961

 
515

 
4,476

 
(535
)
 
2015
Charlotte
 
2027 Gateway Blvd
 

 
3,654

 
913

 
30

 
3,684

 
913

 
4,597

 
(191
)
 
2018
Durham
 
2702 Weck Drive
 

 
2,589

 
753

 
31

 
2,620

 
753

 
3,373

 
(423
)
 
2015
Greensboro
 
415 Westcliff Road
 

 
6,383

 
691

 
202

 
6,585

 
691

 
7,276

 
(269
)
 
2018
Huntersville
 
13201 Reese Boulevard Unit 100
 

 
3,123

 
1,061

 
477

 
3,600

 
1,061

 
4,661

 
(675
)
 
2012
Lexington
 
200 Woodside Drive
 

 
3,863

 
232

 
1,345

 
5,208

 
232

 
5,440

 
(1,075
)
 
2011
Mebane
 
7412 Oakwood Street
 

 
4,570

 
481

 
552

 
5,122

 
481

 
5,603

 
(1,063
)
 
2012
Mebane
 
7600 Oakwood Street
 

 
4,148

 
443

 

 
4,148

 
443

 
4,591

 
(928
)
 
2012
Mebane
 
7110 E. Washington Street
 

 
4,981

 
358

 
861

 
5,842

 
358

 
6,200

 
(1,003
)
 
2013
Mocksville
 
171 Enterprise Way
 

 
5,582

 
1,091

 
225

 
5,807

 
1,091

 
6,898

 
(147
)
 
2019
Mooresville
 
119 Super Sport Drive
 

 
18,010

 
4,195

 
43

 
18,053

 
4,195

 
22,248

 
(1,370
)
 
2017
Mooresville
 
313 Mooresville Boulevard
 

 
7,411

 
701

 
437

 
7,848

 
701

 
8,549

 
(2,027
)
 
2011
Mountain Home
 
199 N. Egerton Road
 

 
2,472

 
523

 

 
2,472

 
523

 
2,995

 
(476
)
 
2014
Newton
 
1500 Prodelin Drive
 

 
7,338

 
732

 
1,283

 
8,621

 
732

 
9,353

 
(1,258
)
 
2011
Pineville
 
10519 Industrial Drive
 

 
1,380

 
392

 

 
1,380

 
392

 
1,772

 
(376
)
 
2012
Rural Hall
 
300 Forum Parkway
 

 
5,375

 
439

 
1,007

 
6,382

 
439

 
6,821

 
(1,384
)
 
2011
Salisbury
 
913 Airport Road
 

 
5,284

 
1,535

 
1,420

 
6,704

 
1,535

 
8,239

 
(910
)
 
2017
Smithfield
 
3250 Highway 70 Business West
 

 
10,657

 
613

 
72

 
10,729

 
613

 
11,342

 
(1,439
)
 
2011
Troutman
 
279 & 281 Old Murdock Road
 

 
13,392

 
802

 

 
13,392

 
802

 
14,194

 
(683
)
 
2018
Winston-Salem
 
2655 Annapolis Drive
 

 
11,054

 
610

 
16

 
11,070

 
610

 
11,680

 
(2,266
)
 
2014
Youngsville
 
200 K-Flex Way
 

 
16,150

 
1,836

 

 
16,150

 
1,836

 
17,986

 
(737
)
 
2018
Ohio
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Bedford Heights
 
26801 Fargo Ave
 

 
5,267

 
837

 
917

 
6,184

 
837

 
7,021

 
(702
)
 
2017
Boardman
 
365 McClurg Rd
 

 
3,473

 
282

 
854

 
4,327

 
282

 
4,609

 
(1,460
)
 
2007
Columbus
 
1605 Westbelt Drive
 

 
5,222

 
337

 
37

 
5,259

 
337

 
5,596

 
(533
)
 
2017
Columbus
 
3900-3990 Business Park Drive
 

 
3,123

 
489

 
254

 
3,377

 
489

 
3,866

 
(870
)
 
2014
Dayton
 
2815 South Gettysburg Avenue
 

 
5,896

 
331

 
417

 
6,313

 
331

 
6,644

 
(1,160
)
 
2015
Dayton
 
2800 Concorde Drive
 

 
23,725

 
2,465

 

 
23,725

 
2,465

 
26,190

 
(2,830
)
 
2017
Fairborn
 
1340 E Dayton Yellow Springs Rd
 

 
5,569

 
867

 
223

 
5,792

 
867

 
6,659

 
(1,323
)
 
2015
Fairfield
 
4275 Thunderbird Lane
 

 
2,788

 
948

 
109

 
2,897

 
948

 
3,845

 
(545
)
 
2016
Fairfield
 
3840 Port Union Road
 

 
5,337

 
1,086

 

 
5,337

 
1,086

 
6,423

 
(374
)
 
2018
Gahanna
 
1120 Morrison Road
 

 
3,806

 
1,265

 
1,258

 
5,064

 
1,265

 
6,329

 
(1,244
)
 
2011
Groveport
 
5830 Green Pointe Drive South
 

 
10,920

 
642

 
207

 
11,127

 
642

 
11,769

 
(1,061
)
 
2017
Hilliard
 
4251 Leap Road
 

 
7,412

 
550

 
326

 
7,738

 
550

 
8,288

 
(674
)
 
2017
Macedonia
 
1261 Highland Road
 

 
8,112

 
1,690

 
230

 
8,342

 
1,690

 
10,032

 
(1,386
)
 
2015

F-47

Table of Contents

 
 
 
 
 
 
Initial Cost to STAG Industrial, Inc.
 
 
 
Gross Amounts at Which Carried at December 31, 2019
 
 
 
 
State & City
 
Address
 
Encumbrances (1)
 
Building & Improvements (2)
 
Land
 
Costs Capitalized Subsequent to Acquisition and Valuation Provision
 
Building & Improvements
 
Land
 
Total
 
Accumulated Depreciation (3)
 
Year Acquired
Mason
 
7258 Innovation Way
 

 
4,582

 
673

 

 
4,582

 
673

 
5,255

 
(849
)
 
2014
North Jackson
 
500 South Bailey Road
 

 
4,427

 
1,528

 
89

 
4,516

 
1,528

 
6,044

 
(917
)
 
2013
North Jackson
 
382 Rosemont Road
 

 
7,681

 
486

 
154

 
7,835

 
486

 
8,321

 
(1,282
)
 
2011
Oakwood Village
 
26350 Broadway
 

 
3,041

 
343

 

 
3,041

 
343

 
3,384

 
(597
)
 
2015
Salem
 
800 Pennsylvania Ave
 

 
7,674

 
858

 
1,102

 
8,776

 
858

 
9,634

 
(2,478
)
 
2006
Seville
 
276 West Greenwich Road
 

 
1,591

 
273

 
61

 
1,652

 
273

 
1,925

 
(458
)
 
2011
Streetsboro
 
9777 Mopar Drive
 

 
4,909

 
2,161

 
214

 
5,123

 
2,161

 
7,284

 
(1,167
)
 
2011
Strongsville
 
12930 Darice Parkway
 

 
5,750

 
491

 
658

 
6,408

 
491

 
6,899

 
(1,051
)
 
2014
Toledo
 
1800 Jason Street
 

 
6,487

 
213

 

 
6,487

 
213

 
6,700

 
(1,250
)
 
2012
Twinsburg
 
7990 Bavaria Road
 

 
8,027

 
590

 
87

 
8,114

 
590

 
8,704

 
(2,203
)
 
2007
West Chester
 
9696 International Blvd
 

 
8,868

 
936

 

 
8,868

 
936

 
9,804

 
(1,014
)
 
2016
West Jefferson
 
1550 West Main Street
 

 
70,213

 
2,015

 

 
70,213

 
2,015

 
72,228

 
(1,380
)
 
2019
Oklahoma
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Oklahoma City
 
4949 Southwest 20th Street
 

 
2,211

 
746

 
49

 
2,260

 
746

 
3,006

 
(433
)
 
2016
Oklahoma City
 
5101 South Council Road
 

 
9,199

 
1,614

 
1,373

 
10,572

 
1,614

 
12,186

 
(1,505
)
 
2015
Tulsa
 
11607 E. 43rd Street North
 

 
8,242

 
966

 

 
8,242

 
966

 
9,208

 
(1,262
)
 
2015
Oregon
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Salem
 
4060 Fairview Industrial Drive
 

 
3,039

 
599

 
772

 
3,811

 
599

 
4,410

 
(833
)
 
2011
Salem
 
4050 Fairview Industrial Drive
 

 
1,372

 
266

 
514

 
1,886

 
266

 
2,152

 
(454
)
 
2011
Pennsylvania
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allentown
 
7132 Daniels Drive
 

 
7,199

 
1,962

 
1,300

 
8,499

 
1,962

 
10,461

 
(1,634
)
 
2014
Burgettstown
 
157 Starpointe Boulevard
 

 
23,416

 
1,248

 

 
23,416

 
1,248

 
24,664

 
(716
)
 
2019
Charleroi
 
200 Simko Boulevard
 

 
10,539

 
935

 

 
10,539

 
935

 
11,474

 
(424
)
 
2018
Clinton
 
2300 Sweeney Drive
 

 
19,339

 

 

 
19,339

 

 
19,339

 
(1,690
)
 
2017
Clinton
 
2251 Sweeney Drive
 

 
12,390

 

 

 
12,390

 

 
12,390

 
(720
)
 
2018
Clinton
 
2300 Sweeney Drive Extension
 

 
16,840

 

 
310

 
17,150

 

 
17,150

 
(792
)
 
2018
Croydon
 
3001 State Road
 

 
4,655

 
829

 

 
4,655

 
829

 
5,484

 
(203
)
 
2018
Elizabethtown
 
11 and 33 Industrial Road
 

 
5,315

 
1,000

 
208

 
5,523

 
1,000

 
6,523

 
(1,010
)
 
2014
Export
 
1003 Corporate Lane
 

 
5,604

 
667

 

 
5,604

 
667

 
6,271

 
(72
)
 
2019
Imperial
 
200 Solar Drive
 

 
22,135

 
1,762

 

 
22,135

 
1,762

 
23,897

 
(228
)
 
2019
Lancaster
 
2919 Old Tree Drive
 

 
5,134

 
1,520

 
919

 
6,053

 
1,520

 
7,573

 
(1,430
)
 
2015
Langhorne
 
2151 Cabot Boulevard West
 

 
3,771

 
1,370

 
341

 
4,112

 
1,370

 
5,482

 
(659
)
 
2016
Langhorne
 
2201 Cabot Boulevard West
 

 
3,018

 
1,308

 
528

 
3,546

 
1,308

 
4,854

 
(601
)
 
2016
Langhorne
 
121 Wheeler Court
 

 
6,327

 
1,884

 
129

 
6,456

 
1,884

 
8,340

 
(762
)
 
2016
Lebanon
 
1 Keystone Drive
 

 
5,235

 
1,380

 
163

 
5,398

 
1,380

 
6,778

 
(1,641
)
 
2017
Mechanicsburg
 
6350 Brackbill Blvd.
 

 
5,079

 
1,482

 
754

 
5,833

 
1,482

 
7,315

 
(1,097
)
 
2014
Mechanicsburg
 
6360 Brackbill Blvd.
 

 
7,042

 
1,800

 
173

 
7,215

 
1,800

 
9,015

 
(1,337
)
 
2014
Mechanicsburg
 
245 Salem Church Road
 

 
7,977

 
1,452

 
278

 
8,255

 
1,452

 
9,707

 
(1,511
)
 
2014
Muhlenberg Township
 
171-173 Tuckerton Road
 

 
13,784

 
843

 
1,224

 
15,008

 
843

 
15,851

 
(2,880
)
 
2012
New Galilee
 
1750 Shenango Road
 

 
25,659

 
1,127

 
274

 
25,933

 
1,127

 
27,060

 
(346
)
 
2019
New Kingstown
 
6 Doughten Road
 

 
8,625

 
2,041

 
520

 
9,145

 
2,041

 
11,186

 
(1,657
)
 
2014

F-48

Table of Contents

 
 
 
 
 
 
Initial Cost to STAG Industrial, Inc.
 
 
 
Gross Amounts at Which Carried at December 31, 2019
 
 
 
 
State & City
 
Address
 
Encumbrances (1)
 
Building & Improvements (2)
 
Land
 
Costs Capitalized Subsequent to Acquisition and Valuation Provision
 
Building & Improvements
 
Land
 
Total
 
Accumulated Depreciation (3)
 
Year Acquired
New Kensington
 
115 Hunt Valley Road
 

 
9,145

 
177

 

 
9,145

 
177

 
9,322

 
(435
)
 
2018
O'Hara Township
 
100 Papercraft Park
 
(14,447
)
 
18,612

 
1,435

 
7,641

 
26,253

 
1,435

 
27,688

 
(5,595
)
 
2012
Pittston
 
One Commerce Road
 

 
19,959

 
677

 

 
19,959

 
677

 
20,636

 
(1,983
)
 
2017
Reading
 
2001 Centre Avenue
 

 
5,294

 
1,708

 
223

 
5,517

 
1,708

 
7,225

 
(757
)
 
2016
Warrendale
 
410-426 Keystone Drive
 

 
12,111

 
1,853

 

 
12,111

 
1,853

 
13,964

 
(454
)
 
2018
Williamsport
 
3300 Wahoo Drive
 

 
9,059

 
688

 

 
9,059

 
688

 
9,747

 
(1,859
)
 
2013
York
 
2925 East Market Street
 

 
14,538

 
2,152

 
207

 
14,745

 
2,152

 
16,897

 
(1,388
)
 
2017
York
 
57 Grumbacher Road
 

 
15,049

 
966

 

 
15,049

 
966

 
16,015

 
(992
)
 
2018
York
 
420 Emig Road
 

 
7,886

 
869

 

 
7,886

 
869

 
8,755

 
(270
)
 
2019
South Carolina
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Columbia
 
128 Crews Drive
 

 
5,171

 
783

 
162

 
5,333

 
783

 
6,116

 
(827
)
 
2016
Duncan
 
110 Hidden Lakes Circle
 

 
10,981

 
1,002

 
866

 
11,847

 
1,002

 
12,849

 
(2,648
)
 
2012
Duncan
 
112 Hidden Lakes Circle
 

 
6,739

 
709

 
1,586

 
8,325

 
709

 
9,034

 
(1,528
)
 
2012
Edgefield
 
One Tranter Drive
 

 
938

 
220

 
750

 
1,688

 
220

 
1,908

 
(465
)
 
2012
Fountain Inn
 
107 Southchase Blvd.
 

 
8,386

 
766

 

 
8,386

 
766

 
9,152

 
(724
)
 
2018
Fountain Inn
 
141 Southchase Blvd
 

 
14,984

 
1,878

 
81

 
15,065

 
1,878

 
16,943

 
(1,192
)
 
2017
Fountain Inn
 
111Southchase Boulevard
 

 
4,260

 
719

 
95

 
4,355

 
719

 
5,074

 
(828
)
 
2016
Gaffney
 
50 Peachview Blvd
 

 
4,712

 
1,233

 
548

 
5,260

 
1,233

 
6,493

 
(681
)
 
2017
Goose Creek
 
6 Corporate Parkway
 

 
29,360

 
4,459

 

 
29,360

 
4,459

 
33,819

 
(683
)
 
2019
Graniteville
 
1043 Global Ave.
 

 
8,163

 
1,629

 

 
8,163

 
1,629

 
9,792

 
(1,349
)
 
2016
Greenwood
 
215 Mill Avenue
 
(1,388
)
 
1,824

 
166

 

 
1,824

 
166

 
1,990

 
(361
)
 
2012
Greenwood
 
308-310 Maxwell Avenue
 
(1,183
)
 
1,168

 
169

 
673

 
1,841

 
169

 
2,010

 
(272
)
 
2012
Greer
 
2501 Highway 101
 

 
10,841

 
1,126

 
419

 
11,260

 
1,126

 
12,386

 
(653
)
 
2018
Greer
 
8 Shelter Dr
 

 
4,939

 
681

 
2,646

 
7,585

 
681

 
8,266

 
(415
)
 
2018
Greer
 
129 Metro Court
 

 
1,434

 
129

 
330

 
1,764

 
129

 
1,893

 
(290
)
 
2015
Greer
 
149 Metro Court
 

 
1,731

 
128

 
428

 
2,159

 
128

 
2,287

 
(283
)
 
2015
Greer
 
153 Metro Court
 

 
460

 
153

 
155

 
615

 
153

 
768

 
(99
)
 
2015
Greer
 
154 Metro Court
 

 
2,963

 
306

 
765

 
3,728

 
306

 
4,034

 
(489
)
 
2015
Laurens
 
103 Cherry Blossom Drive
 

 
4,254

 
151

 

 
4,254

 
151

 
4,405

 
(684
)
 
2015
Piedmont
 
1100 Piedmont Highway
 

 
4,152

 
231

 
86

 
4,238

 
231

 
4,469

 
(685
)
 
2015
Piedmont
 
1102 Piedmont Highway
 

 
2,127

 
158

 

 
2,127

 
158

 
2,285

 
(354
)
 
2015
Piedmont
 
1104 Piedmont Highway
 

 
2,302

 
204

 

 
2,302

 
204

 
2,506

 
(603
)
 
2015
Piedmont
 
513 Old Griffin Road
 

 
9,260

 
797

 
1,384

 
10,644

 
797

 
11,441

 
(365
)
 
2018
Piedmont
 
1610 Old Grove Road
 

 
18,960

 
1,971

 

 
18,960

 
1,971

 
20,931

 
(773
)
 
2019
Rock Hill
 
2751 Commerce Drive,Unit C
 
(3,679
)
 
6,146

 
1,411

 
518

 
6,664

 
1,411

 
8,075

 
(920
)
 
2016
Rock Hill
 
1953 Langston Street
 

 
4,512

 
1,095

 
772

 
5,284

 
1,095

 
6,379

 
(722
)
 
2017
Simpsonville
 
101 Harrison Bridge Road
 

 
2,960

 
957

 
2,084

 
5,044

 
957

 
6,001

 
(858
)
 
2012
Simpsonville
 
103 Harrison Bridge Road
 

 
3,364

 
470

 
938

 
4,302

 
470

 
4,772

 
(808
)
 
2012
Simpsonville
 
1312 Old Stage Road
 

 
24,200

 
1,454

 
2,862

 
27,062

 
1,454

 
28,516

 
(870
)
 
2018
Spartanburg
 
5675 North Blackstock Road
 

 
15,100

 
1,867

 
166

 
15,266

 
1,867

 
17,133

 
(2,345
)
 
2016
Spartanburg
 
950 Brisack Road
 

 
3,694

 
342

 
685

 
4,379

 
342

 
4,721

 
(892
)
 
2014
Spartanburg
 
2071 Fryml Drive
 

 
7,624

 
663

 

 
7,624

 
663

 
8,287

 
(204
)
 
2019

F-49

Table of Contents

 
 
 
 
 
 
Initial Cost to STAG Industrial, Inc.
 
 
 
Gross Amounts at Which Carried at December 31, 2019
 
 
 
 
State & City
 
Address
 
Encumbrances (1)
 
Building & Improvements (2)
 
Land
 
Costs Capitalized Subsequent to Acquisition and Valuation Provision
 
Building & Improvements
 
Land
 
Total
 
Accumulated Depreciation (3)
 
Year Acquired
Spartanburg
 
2171 Fryml Drive
 

 
4,480

 
530

 
86

 
4,566

 
530

 
5,096

 
(133
)
 
2019
Spartanburg
 
2010 Nazareth Church Road
 

 
16,535

 
895

 

 
16,535

 
895

 
17,430

 
(48
)
 
2019
Spartanburg
 
150-160 National Avenue
 

 
5,797

 
493

 
804

 
6,601

 
493

 
7,094

 
(1,342
)
 
2012
Summerville
 
105 Eastport Lane
 

 
4,710

 
1,157

 

 
4,710

 
1,157

 
5,867

 
(79
)
 
2019
Ware Shoals
 
100 Holloway Road
 
(228
)
 
192

 
133

 

 
192

 
133

 
325

 
(41
)
 
2012
West Columbia
 
185 McQueen Street
 

 
6,946

 
715

 
1,543

 
8,489

 
715

 
9,204

 
(1,510
)
 
2013
West Columbia
 
610 Kelsey Court
 

 
9,570

 
488

 

 
9,570

 
488

 
10,058

 
(1,083
)
 
2016
West Columbia
 
825 Bistline Drive
 

 
9,151

 
240

 
1,008

 
10,159

 
240

 
10,399

 
(663
)
 
2017
West Columbia
 
810 Bistline Drive
 

 
10,881

 
564

 

 
10,881

 
564

 
11,445

 
(152
)
 
2019
West Columbia
 
1000 Technology Drive
 

 
26,023

 
1,422

 

 
26,023

 
1,422

 
27,445

 
(181
)
 
2019
West Columbia
 
222 Old Wire Road
 

 
4,646

 
551

 
2,301

 
6,947

 
551

 
7,498

 
(997
)
 
2016
Tennessee
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Chattanooga
 
1800 Crutchfield Street Building A
 

 
2,181

 
187

 
14

 
2,195

 
187

 
2,382

 
(316
)
 
2015
Chattanooga
 
1800 Crutchfield Street Building B
 

 
4,448

 
380

 
84

 
4,532

 
380

 
4,912

 
(649
)
 
2015
Chattanooga
 
1100 Wisdom Street & 1295 Stuart Street
 

 
7,959

 
424

 
188

 
8,147

 
424

 
8,571

 
(1,411
)
 
2015
Cleveland
 
4405 Michigan Ave Road NE
 

 
3,161

 
554

 
84

 
3,245

 
554

 
3,799

 
(826
)
 
2011
Clinton
 
1330 Carden Farm Drive
 

 
3,101

 
403

 
165

 
3,266

 
403

 
3,669

 
(542
)
 
2015
Jackson
 
1094 Flex Drive
 

 
2,374

 
230

 
369

 
2,743

 
230

 
2,973

 
(671
)
 
2012
Knoxville
 
2525 Quality Drive
 

 
3,104

 
447

 
46

 
3,150

 
447

 
3,597

 
(597
)
 
2015
Knoxville
 
2522 and 2526 Westcott Blvd
 

 
4,919

 
472

 

 
4,919

 
472

 
5,391

 
(287
)
 
2018
Knoxville
 
5700 Casey Drive
 

 
7,812

 
1,117

 

 
7,812

 
1,117

 
8,929

 
(59
)
 
2019
Lebanon
 
535 Maddox-Simpson Parkway
 

 
15,890

 
1,016

 

 
15,890

 
1,016

 
16,906

 
(322
)
 
2019
Loudon
 
1700 Elizabeth Lee Parkway
 

 
3,751

 
170

 

 
3,751

 
170

 
3,921

 
(682
)
 
2015
Madison
 
538 Myatt Drive
 

 
5,758

 
1,655

 
1,891

 
7,649

 
1,655

 
9,304

 
(1,791
)
 
2011
Mascot
 
9575 Commission Drive
 

 
3,228

 
284

 

 
3,228

 
284

 
3,512

 
(667
)
 
2016
Mascot
 
2122 Holston Bend Drive
 

 
3,409

 
385

 
611

 
4,020

 
385

 
4,405

 
(790
)
 
2013
Memphis
 
5238 Lamar Avenue
 

 
25,094

 
1,539

 

 
25,094

 
1,539

 
26,633

 
(298
)
 
2019
Memphis
 
4880 East Tuggle Road
 

 
41,078

 
2,501

 

 
41,078

 
2,501

 
43,579

 
(472
)
 
2019
Murfreesboro
 
540 New Salem Road
 

 
2,819

 
722

 
9

 
2,828

 
722

 
3,550

 
(725
)
 
2014
Nashville
 
3258 Ezell Pike
 

 
3,601

 
547

 

 
3,601

 
547

 
4,148

 
(726
)
 
2013
Portland
 
3150 Barry Drive
 

 
7,748

 
1,662

 
66

 
7,814

 
1,662

 
9,476

 
(1,528
)
 
2012
Vonore
 
90 Deer Crossing Road
 

 
7,821

 
2,355

 
85

 
7,906

 
2,355

 
10,261

 
(1,748
)
 
2011
Texas
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Arlington
 
3311 Pinewood Drive
 

 
2,374

 
413

 
304

 
2,678

 
413

 
3,091

 
(813
)
 
2007
Arlington
 
401 N. Great Southwest Parkway
 

 
6,151

 
1,246

 
1,048

 
7,199

 
1,246

 
8,445

 
(1,506
)
 
2012
Cedar Hill
 
1650 U.S. Highway 67
 

 
11,870

 
4,066

 
1,659

 
13,529

 
4,066

 
17,595

 
(2,150
)
 
2016
Conroe
 
16548 Donwick Drive
 

 
20,995

 
1,853

 
942

 
21,937

 
1,853

 
23,790

 
(981
)
 
2018
El Paso
 
32 Celerity Wagon
 

 
3,674

 

 
101

 
3,775

 

 
3,775

 
(418
)
 
2017
El Paso
 
48 Walter Jones Blvd
 

 
10,398

 

 

 
10,398

 

 
10,398

 
(1,229
)
 
2017
El Paso
 
1601 Northwestern Drive
 

 
9,052

 
1,248

 
403

 
9,455

 
1,248

 
10,703

 
(1,666
)
 
2014
El Paso
 
6500 N. Desert Blvd.
 

 
7,518

 
1,124

 
302

 
7,820

 
1,124

 
8,944

 
(1,319
)
 
2014
El Paso
 
1550 Northwestern
 

 
14,011

 
1,854

 
812

 
14,823

 
1,854

 
16,677

 
(2,602
)
 
2014

F-50

Table of Contents

 
 
 
 
 
 
Initial Cost to STAG Industrial, Inc.
 
 
 
Gross Amounts at Which Carried at December 31, 2019
 
 
 
 
State & City
 
Address
 
Encumbrances (1)
 
Building & Improvements (2)
 
Land
 
Costs Capitalized Subsequent to Acquisition and Valuation Provision
 
Building & Improvements
 
Land
 
Total
 
Accumulated Depreciation (3)
 
Year Acquired
El Paso
 
1701 Northwestern Drive
 

 
9,897

 
1,581

 
1,770

 
11,667

 
1,581

 
13,248

 
(1,843
)
 
2014
El Paso
 
7801 Northern Pass Road
 

 
5,893

 
1,136

 

 
5,893

 
1,136

 
7,029

 
(984
)
 
2015
El Paso
 
47 Butterfield Circle & 12 Leigh Fisher Blvd
 

 
3,096

 

 
1,088

 
4,184

 

 
4,184

 
(1,036
)
 
2012
Garland
 
2901 W. Kingsley Road
 

 
5,166

 
1,344

 
1,430

 
6,596

 
1,344

 
7,940

 
(1,056
)
 
2014
Houston
 
7140 West Sam Houston Parkway West
 

 
8,416

 
1,048

 
194

 
8,610

 
1,048

 
9,658

 
(525
)
 
2018
Houston
 
18601 Intercontntl Crossing Dr
 

 
8,744

 
1,505

 

 
8,744

 
1,505

 
10,249

 
(288
)
 
2019
Houston
 
9302 Ley Road
 

 
8,879

 
1,236

 

 
8,879

 
1,236

 
10,115

 
(198
)
 
2019
Houston
 
10343 Ella Boulevard
 

 
16,586

 
1,747

 

 
16,586

 
1,747

 
18,333

 
(39
)
 
2019
Houston
 
4949 Windfern Road
 

 
7,790

 
2,255

 
9

 
7,799

 
2,255

 
10,054

 
(1,596
)
 
2013
Houston
 
1020 Rankin Road
 

 
4,802

 
565

 
957

 
5,759

 
565

 
6,324

 
(1,199
)
 
2014
Houston
 
7300 Airport Blvd.
 

 
8,448

 
2,546

 
158

 
8,606

 
2,546

 
11,152

 
(1,030
)
 
2016
Houston
 
13627 West Hardy
 

 
5,037

 
1,502

 

 
5,037

 
1,502

 
6,539

 
(971
)
 
2017
Houston
 
868 Pear Street
 

 
5,564

 
953

 

 
5,564

 
953

 
6,517

 
(873
)
 
2017
Houston
 
14620 Henry Road
 

 
7,052

 
927

 
66

 
7,118

 
927

 
8,045

 
(674
)
 
2017
Houston
 
7049 Brookhollow West Drive
 

 
9,371

 
809

 

 
9,371

 
809

 
10,180

 
(547
)
 
2018
Houston
 
10401 S. Sam Houston Parkway
 

 
9,456

 
1,108

 

 
9,456

 
1,108

 
10,564

 
(25
)
 
2019
Humble
 
18727 Kenswick Drive
 

 
21,476

 
2,255

 

 
21,476

 
2,255

 
23,731

 
(403
)
 
2019
Katy
 
1800 North Mason Road
 

 
7,571

 
2,192

 

 
7,571

 
2,192

 
9,763

 
(143
)
 
2019
Katy
 
21601 Park Row Drive
 

 
3,487

 
1,655

 

 
3,487

 
1,655

 
5,142

 
(55
)
 
2019
Laredo
 
13710 IH 35 Frontage Road
 

 
13,847

 
2,538

 

 
13,847

 
2,538

 
16,385

 
(285
)
 
2019
Laredo
 
13808 Humphrey Road
 

 
10,204

 
1,535

 

 
10,204

 
1,535

 
11,739

 
(1,052
)
 
2017
Mission
 
802 Trinity Street
 

 
12,623

 
1,882

 
26

 
12,649

 
1,882

 
14,531

 
(696
)
 
2018
Rockwall
 
3400 Discovery Blvd
 

 
16,066

 
2,683

 

 
16,066

 
2,683

 
18,749

 
(1,606
)
 
2017
Stafford
 
13720 Stafford Road
 

 
6,570

 
339

 
36

 
6,606

 
339

 
6,945

 
(466
)
 
2017
Waco
 
101 Apron Road
 

 
1,394

 

 
619

 
2,013

 

 
2,013

 
(465
)
 
2011
Virginia
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Chester
 
2001 Ware Bottom Spring Road
 

 
3,402

 
775

 

 
3,402

 
775

 
4,177

 
(885
)
 
2014
Harrisonburg
 
4500 Early Road
 

 
11,057

 
1,455

 
1,180

 
12,237

 
1,455

 
13,692

 
(2,172
)
 
2012
Independence
 
One Compair Way
 
(1,290
)
 
2,061

 
226

 

 
2,061

 
226

 
2,287

 
(415
)
 
2012
N. Chesterfield
 
8001 Greenpine Road
 

 
6,174

 
1,599

 

 
6,174

 
1,599

 
7,773

 
(163
)
 
2019
Washington
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ridgefield
 
6111 S. 6th Way
 

 
9,711

 
2,307

 

 
9,711

 
2,307

 
12,018

 
(97
)
 
2019
Wisconsin
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Caledonia
 
1343 27th Street
 

 
3,339

 
225

 

 
3,339

 
225

 
3,564

 
(203
)
 
2018
Chippewa Falls
 
911 Kurth Road
 

 
2,303

 
133

 

 
2,303

 
133

 
2,436

 
(552
)
 
2011
Chippewa Falls
 
1406 Lowater Road
 

 
544

 
44

 

 
544

 
44

 
588

 
(127
)
 
2011
DeForest
 
505 - 507 Stokely Drive
 

 
5,326

 
1,131

 
491

 
5,817

 
1,131

 
6,948

 
(629
)
 
2016
Delavan
 
329 Hallberg Street
 

 
2,059

 
127

 

 
2,059

 
127

 
2,186

 
(37
)
 
2019
Delavan
 
1714 Hobbs Drive
 

 
4,696

 
241

 

 
4,696

 
241

 
4,937

 
(81
)
 
2019
De Pere
 
2191 American Boulevard
 

 
6,042

 
525

 
101

 
6,143

 
525

 
6,668

 
(1,323
)
 
2012
East Troy
 
2761 Buell Drive
 

 
4,962

 
304

 
57

 
5,019

 
304

 
5,323

 
(805
)
 
2014

F-51

Table of Contents

 
 
 
 
 
 
Initial Cost to STAG Industrial, Inc.
 
 
 
Gross Amounts at Which Carried at December 31, 2019
 
 
 
 
State & City
 
Address
 
Encumbrances (1)
 
Building & Improvements (2)
 
Land
 
Costs Capitalized Subsequent to Acquisition and Valuation Provision
 
Building & Improvements
 
Land
 
Total
 
Accumulated Depreciation (3)
 
Year Acquired
Elkhorn
 
555 Koopman Lane
 

 
3,941

 
351

 

 
3,941

 
351

 
4,292

 
(31
)
 
2019
Elkhorn
 
390 Koopman Lane
 

 
3,621

 
210

 

 
3,621

 
210

 
3,831

 
(59
)
 
2019
Germantown
 
N117 W18456 Fulton Drive
 

 
6,023

 
442

 

 
6,023

 
442

 
6,465

 
(278
)
 
2018
Germantown
 
N106 W13131 Bradley Way
 

 
3,296

 
359

 
149

 
3,445

 
359

 
3,804

 
(177
)
 
2018
Germantown
 
N102 W19400 Willow Creek Way
 

 
10,908

 
1,175

 

 
10,908

 
1,175

 
12,083

 
(407
)
 
2018
Germantown
 
11900 N. River Lane
 

 
5,977

 
1,186

 

 
5,977

 
1,186

 
7,163

 
(1,426
)
 
2014
Hartland
 
500 North Shore Drive
 

 
4,634

 
1,526

 

 
4,634

 
1,526

 
6,160

 
(677
)
 
2016
Janesville
 
2929 Venture Drive
 

 
17,477

 
828

 
818

 
18,295

 
828

 
19,123

 
(3,737
)
 
2013
Kenosha
 
9625 55th Street
 

 
3,968

 
797

 
763

 
4,731

 
797

 
5,528

 
(678
)
 
2016
Madison
 
4718 Helgesen Drive
 

 
6,365

 
609

 

 
6,365

 
609

 
6,974

 
(524
)
 
2017
Madison
 
4722 Helgesen Drive
 

 
4,518

 
444

 

 
4,518

 
444

 
4,962

 
(354
)
 
2017
Mayville
 
605 Fourth Street
 

 
4,118

 
547

 
330

 
4,448

 
547

 
4,995

 
(1,542
)
 
2007
New Berlin
 
16250 West Woods Edge Drive
 

 
15,917

 
277

 

 
15,917

 
277

 
16,194

 
(40
)
 
2019
New Berlin
 
5600 S. Moorland Road
 

 
6,409

 
1,068

 
43

 
6,452

 
1,068

 
7,520

 
(1,230
)
 
2013
Oak Creek
 
525 West Marquette Avenue
 

 
4,350

 
526

 

 
4,350

 
526

 
4,876

 
(208
)
 
2018
Oak Creek
 
7475 South 6th Street
 

 
6,125

 
805

 
355

 
6,480

 
805

 
7,285

 
(297
)
 
2018
Pewaukee
 
W288 N2801 Duplainville Road
 

 
6,678

 
841

 
407

 
7,085

 
841

 
7,926

 
(363
)
 
2018
Pewaukee
 
W277 N2837 Duplainville, Road
 

 
4,586

 
439

 
52

 
4,638

 
439

 
5,077

 
(243
)
 
2018
Pleasant Prairie
 
10411 80th Avenue
 

 
16,207

 
2,297

 

 
16,207

 
2,297

 
18,504

 
(470
)
 
2018
Pleasant Prairie
 
8901 102nd Street
 

 
4,949

 
523

 

 
4,949

 
523

 
5,472

 
(281
)
 
2018
Sun Prairie
 
1615 Commerce Dr
 

 
5,809

 
2,360

 
2,499

 
8,308

 
2,360

 
10,668

 
(2,001
)
 
2011
West Allis
 
2207 S 114th Street
 

 
1,757

 
462

 
2,002

 
3,759

 
462

 
4,221

 
(354
)
 
2015
West Allis
 
2075 S. 114th Street
 

 
1,848

 
444

 
24

 
1,872

 
444

 
2,316

 
(313
)
 
2015
West Allis
 
2145 S. 114th Street
 

 
846

 
252

 
1,018

 
1,864

 
252

 
2,116

 
(174
)
 
2015
West Allis
 
2025 S. 114th Street
 

 
956

 
251

 
710

 
1,666

 
251

 
1,917

 
(158
)
 
2015
Yorkville
 
13900 West Grandview Parkway
 

 
4,886

 
416

 
323

 
5,209

 
416

 
5,625

 
(757
)
 
2014
 
 
Total
 
$
(55,085
)
 
$
3,350,639

 
$
451,154

 
$
158,090

 
$
3,508,729

 
$
451,154

 
$
3,959,883

 
$
(393,506
)
 
 
(1)
Balance excludes the unamortized balance of fair market value premiums of approximately $39,000 and unamortized deferred financing fees and debt issuance costs of approximately $0.4 million .
(2)
The initial costs of building and improvements is the acquisition costs less asset impairment write-downs, building expansions and disposals of building and tenant improvements.
(3)
Depreciation expense is computed using the straight-line method based on the following estimated useful lives:
Description
 
Estimated Useful Life
Building
 
40 Years
Building and land improvements
 
Up to 20 years
Tenant improvements
 
Shorter of useful life or terms of related lease

As of December 31, 2019, the aggregate cost for federal income tax purposes of investments in real estate was approximately $4.8 billion.

F-52

Table of Contents

 
 
Year ended December 31,
 
 
2019
 
2018
 
2017
Real Estate:
 
 

 
 

 
 

Balance at beginning of period
 
$
2,966,616

 
$
2,524,112

 
$
2,009,716

Additions during period
 
 

 
 

 
 

Other acquisitions
 
995,516

 
565,645

 
514,725

Improvements, etc.
 
73,666

 
34,458

 
53,099

Other additions
 

 

 

Deductions during period
 
 

 
 

 
 

Cost of real estate sold
 
(43,396
)
 
(150,692
)
 
(48,674
)
Write-off of tenant improvements
 
(22,781
)
 
(1,334
)
 
(2,166
)
Asset impairments and involuntary conversion
 
(9,738
)
 
(5,573
)
 
(2,588
)
Balance at the end of the period including assets held for sale
 
3,959,883

 
2,966,616

 
2,524,112

Assets held for sale
 
(48,892
)
 

 
(20,731
)
Balance at the end of the period excluding assets held for sale
 
$
3,910,991

 
$
2,966,616

 
$
2,503,381

Accumulated Depreciation:
 
 

 
 

 
 

Balance at beginning of period
 
$
316,930

 
$
251,943

 
$
187,413

Additions during period
 
 

 
 

 
 

Depreciation and amortization expense
 
107,867

 
90,320

 
75,314

Other additions
 

 

 

Deductions during period
 
 

 
 

 
 

Disposals
 
(31,291
)
 
(25,333
)
 
(10,784
)
Balance at the end of the period including assets held for sale
 
393,506

 
316,930

 
251,943

Assets held for sale
 
(5,873
)
 

 
(2,886
)
Balance at the end of the period excluding assets held for sale
 
$
387,633

 
$
316,930

 
$
249,057




F-53



Exhibit 4.3
DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934
As of February 10, 2020, STAG Industrial, Inc. has two classes of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”): (1) the common stock, par value $0.01 per share (“common stock”) and (2) the 6.875% Series C Cumulative Redeemable Preferred Stock, par value $0.01 per share (the “Series C Preferred Stock”).
Description of Our Common Stock
The following description of our common stock does not purport to be complete and is subject to and qualified in its entirety by reference to Maryland law and to our charter and bylaws, copies of which are filed as exhibits to the Annual Report on Form 10-K to which this Exhibit 4.3 is a part.
General
Our charter provides that we may issue 300,000,000 shares of common stock, and 20,000,000 shares of preferred stock, $0.01 par value per share (“preferred stock”). Our board of directors, without any action by our stockholders, may amend our charter to increase or decrease the aggregate number of shares of our common stock or the number of shares of our stock of any class or series.
Common Stock
Holders of our common stock are entitled to receive dividends or other distributions if and when authorized by our board of directors and declared by us out of assets legally available for the payment of dividends or other distributions. They also are entitled to share ratably in our assets legally available for distribution to our stockholders in the event of our liquidation, dissolution or winding up, after payment of or adequate provision for all of our known debts and liabilities. These rights are subject to the preferential rights of any other class or series of our stock (including the Series C Preferred Stock) and to the provisions of our charter regarding restrictions on transfer and ownership of our stock.
Subject to the provisions of our charter restricting the transfer and ownership of shares of our stock and except as may otherwise be specified in the terms of any class or series of stock, each outstanding share of common stock entitles the holder to one vote on all matters submitted to a vote of stockholders, including the election of directors, and, except as provided with respect to any other class or series of shares of our stock (including the Series C Preferred Stock), the holders of our common stock possess exclusive voting power. There is no cumulative voting in the election of directors, which means that the holders of a majority of the outstanding shares of common stock, voting as a single class, may elect all of the directors then standing for election other than any preferred stock directors.
Holders of our common stock generally have no appraisal, preference, conversion, exchange, sinking fund or redemption rights and have no preemptive rights to subscribe for any of our securities. Subject to the restrictions on transfer of capital stock contained in our charter, all shares of common stock have equal dividend, liquidation and other rights.
Pursuant to our charter, we cannot dissolve, amend our charter, merge, sell all or substantially all of our assets, engage in a share exchange or engage in similar transactions outside the ordinary course of business unless declared advisable by our board of directors and approved by the affirmative vote of stockholders holding at least a majority of all votes entitled to be cast on the matter, except for amendments to our charter that would alter only the contract rights, as expressly set forth in the charter, of a specified class or series of stock (including the Series C Preferred Stock) with respect to which the holders of such class or series of stock has exclusive voting rights as provided in our charter.
Maryland law permits the merger of a 90% or more owned subsidiary with or into its parent without stockholder approval, provided that the charter of the successor is not amended other than in certain minor respects in order to change its name, the name or other designation or the par value of any class or series of its stock, or the aggregate par value of its stock and the contract rights of any stock of the successor issued in the merger in exchange for stock of the other corporation are identical to the contract rights of the stock for which it is exchanged. Also, because Maryland law may not require the stockholders of a parent corporation to approve a merger or sale of all or substantially all of the assets of a subsidiary entity, our subsidiaries may be able to merge or sell all or substantially all of their assets without a vote of our stockholders.






Power to Reclassify Shares of Our Stock
Our charter authorizes our board of directors to reclassify any unissued shares of stock into any class or series of stock, including preferred stock, to classify any unissued shares of common stock or preferred stock or to reclassify any previously classified but unissued shares of any series of preferred stock previously authorized by our board of directors. Prior to issuance of shares of each class or series of preferred stock, our board of directors is required by Maryland law and our charter to fix, subject to our charter restrictions on transfer and ownership, the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each class or series of preferred stock. Thus, our board of directors could authorize the issuance of shares of common stock with terms and conditions, or preferred stock with priority over our existing common stock with respect to distributions and rights upon liquidation or with other terms and conditions that could have the effect of delaying, deferring or preventing a transaction or a change of control of our company that might involve a premium price or otherwise be in our stockholders’ best interest.
Power to Increase and Issue Additional Shares of Common Stock and Preferred Stock
We believe that the power of our board of directors to amend our charter to increase the aggregate number of shares of our authorized stock or the number of shares of stock of any class or series, to issue additional shares of common stock or preferred stock and to classify or reclassify unissued shares of our common stock or preferred stock and thereafter to issue the classified or reclassified shares of stock provides us with increased flexibility in structuring possible future financings and acquisitions and in meeting other needs which might arise. Subject to the right of holders of Series C Preferred Stock to approve the classification or issuance of shares of a class or series of our stock ranking senior to the Series C Preferred Stock, the additional classes or series, as well as our common stock, are available for issuance without further action by our stockholders, unless stockholder action is required by applicable law or the rules of any stock exchange on which our securities may be listed.
Restrictions on Ownership and Transfer
Our charter provides that our board of directors may decide whether it is in the best interests of our company to maintain our status as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”). To qualify as a REIT under the Code, our shares of stock must be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months or during a proportionate part of a shorter taxable year. Also, no more than 50% of the value of our outstanding shares of capital stock may be owned, directly or indirectly, by five or fewer individuals (as defined by the Code to include certain entities) during the last half of any taxable year.
To help us to qualify as a REIT, our charter, subject to certain exceptions, contains restrictions on the number and proportionate value of shares of our capital stock that a person may own. Our charter provides that generally no person may own, or be deemed to own by virtue of the attribution provisions of the Code, either more than 9.8% in value or in number of shares, whichever is more restrictive, of the aggregate of our outstanding shares of capital stock, or more than 9.8% in value or in number of shares, whichever is more restrictive, of the aggregate of our outstanding common stock. In addition, the articles supplementary for the Series C Preferred Stock provide that generally no person may own, or be deemed to own by virtue of the attribution provisions of the Code, more than 9.8% in value or in number of shares, whichever is more restrictive, of our outstanding Series C Preferred Stock. The beneficial ownership and/or constructive ownership rules under the Code are complex and may cause shares of our capital stock owned actually or constructively by a group of related individuals and/or entities to be owned constructively by one individual or entity.
Our charter also prohibits any person from:
beneficially or constructively owning shares of our capital stock that would result in our being “closely held” under Section 856(h) of the Code;

beneficially or constructively owning shares of our capital stock if such ownership would result in our being treated as a “pension-held REIT” under Section 856(h)(3)(D) of the Code;

transferring shares of our capital stock if such transfer would result in our capital stock being beneficially owned by fewer than 100 persons;

beneficially or constructively owning shares of our capital stock if such ownership would cause us to constructively own 10% or more of the ownership interests in a tenant of our company or would cause any independent contractor to not be treated as such under Section 856(d)(3) of the Code, or







beneficially or constructively owning shares of our capital stock to the extent such beneficial or constructive ownership would otherwise cause us to fail to qualify as a REIT.

Any person who acquires, attempts or intends to acquire beneficial or constructive ownership of shares of our capital stock that will or may violate any of the foregoing restrictions on transferability and ownership, and any person who would have owned shares of our capital stock that resulted in a transfer of shares to a charitable trust (as described below), will be required to give written notice immediately to us, or in the case of a proposed or attempted transaction, to give at least 15 days’ prior written notice to us, and provide us with such other information as we may request in order to determine the effect of such transfer on our status as a REIT. The foregoing restrictions on transferability and ownership will not apply if our board of directors determines that it is no longer in our best interests to continue to qualify as a REIT.
Our board of directors, in its sole discretion, may exempt a person from the above ownership limits and certain of the restrictions described above. However, our board of directors may not grant an exemption to any person unless our board of directors obtains such representations, covenants and undertakings as our board of directors may deem appropriate in order to determine that granting the exemption would not result in our losing our status as a REIT. As a condition of granting the exemption, our board of directors may require a ruling from the Internal Revenue Service or an opinion of counsel, in either case in form and substance satisfactory to our board of directors in its sole discretion, in order to determine or ensure our status as a REIT.
Our board of directors may increase or decrease the ownership limits so long as the change would not result in five or fewer persons beneficially owning more than 49.9% in value of our outstanding capital stock. Any decrease in the ownership limits shall not apply to any person whose percentage ownership of capital stock is in excess of the decreased ownership limits until such time as such person's percentage ownership of capital stock equals or falls below the decreased ownership limits.
However, if any transfer of our shares of stock or other event occurs that, if effective, would result in any person beneficially or constructively owning shares of our capital stock in excess, or in violation, of the above ownership or transfer limitations, referred to as a prohibited owner, then that number of shares of our capital stock, the beneficial or constructive ownership of which otherwise would cause such person to violate the transfer or ownership limitations (rounded up to the nearest whole share), will be automatically transferred to a charitable trust for the exclusive benefit of a charitable beneficiary, and the prohibited owner will not acquire any rights in such shares. This automatic transfer will be considered effective as of the close of business on the business day before the violative transfer. If the transfer to the charitable trust would not be effective for any reason to prevent the violation of the above transfer or ownership limitations, then the transfer of that number of shares of our capital stock that otherwise would cause any person to violate the above limitations will be void ab initio and the intended transferee will acquire no rights in our capital stock. Shares of our capital stock held in the charitable trust will continue to constitute issued and outstanding shares of our capital stock. The prohibited owner will not benefit economically from ownership of any shares of capital stock held in the charitable trust, will have no rights to dividends or other distributions and will not possess any rights to vote or other rights attributable to the shares of capital stock held in the charitable trust. The trustee of the charitable trust will be designated by us and must be unaffiliated with us or any prohibited owner and will have all voting rights and rights to dividends or other distributions with respect to shares of capital stock held in the charitable trust, and these rights will be exercised for the exclusive benefit of the trust's charitable beneficiary. Any dividend or other distribution paid before our discovery that shares of capital stock have been transferred to the trustee will be paid by the recipient of such dividend or distribution to the trustee upon demand, and any dividend or other distribution authorized but unpaid will be paid when due to the trustee. Any dividend or distribution so paid to the trustee will be held in trust for the trust's charitable beneficiary. The prohibited owner will have no voting rights with respect to shares of capital stock held in the charitable trust, and, subject to Maryland law, effective as of the date that such shares of capital stock have been transferred to the trustee, the trustee, in its sole discretion, will have the authority to:
rescind as void any vote cast by a prohibited owner prior to our discovery that such shares have been transferred to the trustee; and

recast such vote in accordance with the desires of the trustee acting for the benefit of the trust's beneficiary.

However, if we have already taken irreversible corporate action, then the trustee will not have the authority to rescind and recast such vote.
Within 20 days of receiving notice from us that shares of capital stock have been transferred to the charitable trust, and unless we buy the shares first as described below, the trustee will sell the shares of capital stock held in the charitable trust to a person, designated by the trustee, whose ownership of the shares will not violate the ownership limitations in our charter. Upon the sale, the interest of the charitable beneficiary in the shares sold will terminate and the trustee will distribute the net proceeds of the sale to the prohibited owner and to the charitable beneficiary. The prohibited owner will receive the lesser of:






the price paid by the prohibited owner for the shares or, if the prohibited owner did not give value for the shares in connection with the event causing the shares to be held in the charitable trust (for example, in the case of a gift or devise), the market price of the shares on the day of the event causing the shares to be held in the charitable trust; and

the price per share received by the trustee from the sale or other disposition of the shares held in the charitable trust (less any commission and other expenses of a sale).

The trustee may reduce the amount payable to the prohibited owner by the amount of dividends and distributions paid to the prohibited owner and owed by the prohibited owner to the trustee. Any net sale proceeds in excess of the amount payable to the prohibited owner will be paid immediately to the charitable beneficiary. If, before our discovery that shares of capital stock have been transferred to the charitable trust, such shares are sold by a prohibited owner, then:
such shares will be deemed to have been sold on behalf of the charitable trust; and

to the extent that the prohibited owner received an amount for such shares that exceeds the amount that the prohibited owner was entitled to receive as described above, the excess must be paid to the trustee upon demand.

In addition, shares of capital stock held in the charitable trust will be deemed to have been offered for sale to us, or our designee, at a price per share equal to the lesser of:
the price per share in the transaction that resulted in such transfer to the charitable trust (or, in the case of a gift or devise, the market price at the time of the gift or devise); and

the market price on the date we, or our designee, accept such offer.

We may reduce the amount payable to the prohibited owner by the amount of dividends and distributions paid to the prohibited owner and owed by the prohibited owner to the trustee. We will pay the amount of such reduction to the trustee for the benefit of the charitable beneficiary. We will have the right to accept the offer until the trustee has sold the shares of capital stock held in the charitable trust. Upon such a sale to us, the interest of the charitable beneficiary in the shares sold will terminate and the trustee will distribute the net proceeds of the sale to the prohibited owner and any dividends or other distributions held by the trustee will be paid to the charitable beneficiary.
All certificates representing shares of our capital stock will bear a legend referring to the restrictions described above.
Every owner of more than 5% (or such lower percentage as required by the Code or the regulations promulgated thereunder) in value of the outstanding shares of our capital stock, within 30 days after the end of each taxable year, must give written notice to us stating the name and address of such owner, the number of shares of each class and series of shares of our capital stock that the owner beneficially owns and a description of the manner in which the shares are held. Each such owner must also provide to us such additional information as we may request in order to determine the effect, if any, of the owner's beneficial ownership on our status as a REIT and to ensure compliance with our ownership limitations. In addition, each of our stockholders, whether or not an owner of 5% or more of our capital stock, must upon demand provide to us such information as we may request, in good faith, in order to determine our status as a REIT and to comply with the requirements of any taxing authority or governmental authority or to determine such compliance and to ensure our compliance with the ownership restrictions in our charter.
The ownership and transfer limitations in our charter could delay, defer or prevent a transaction or a change in control of us that might involve a premium price for holders of our capital stock or might otherwise be in the best interest of our stockholders.
Stock Exchange Listings
Our common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “STAG.”
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Continental Stock Transfer & Trust Company.







Description of the Series C Preferred Stock
The following description of the Series C Preferred Stock does not purport to be complete and is subject to and qualified in its entirety by reference to the articles supplementary setting forth the terms of the Series C Preferred Stock, to Maryland law and to our charter and bylaws, copies of which are filed as exhibits to the Annual Report on Form 10-K to which this Exhibit 4.3 is a part.
General
Our board of directors has classified 3,000,000 shares of the company’s authorized but unissued preferred stock as Series C Preferred Stock, and has approved articles supplementary setting forth the terms of the Series C Preferred Stock. Our board of directors may authorize the issuance and sale of additional shares of Series C Preferred Stock from time to time.
We, in accordance with the terms of the partnership agreement of our operating partnership, have contributed or otherwise transferred the net proceeds of the sale of the Series C Preferred Stock to our operating partnership, and our operating partnership has issued to us 6.875% Series C Cumulative Redeemable Preferred Units. Our operating partnership is required to make all required distributions on the Series C Preferred Units after any distribution of cash or assets to the holders of preferred units ranking senior to the Series C Preferred Units as to distributions and liquidations that we may issue and prior to any distribution of cash or assets to the holders of common units of limited partnership interests in our operating partnership or to the holders of any other equity interest of our operating partnership, except for any other series of preferred units ranking on a parity with the Series C Preferred Units as to distributions and liquidation, in which case distributions will be made pro rata with the Series C Preferred Units; provided however, that our operating partnership may make such distributions as are necessary to enable us to maintain our qualification as a REIT.
Listing
The Series C Preferred Stock is listed on the NYSE under the symbol “STAG Pr C.”
Ranking
The Series C Preferred Stock ranks, with respect to dividend rights and rights upon voluntary or involuntary liquidation, dissolution or winding up of our affairs:
senior to all classes or series of our common stock, and to any other class or series of our capital stock expressly designated as ranking junior to the Series C Preferred Stock;

on parity with any future class or series of our capital stock expressly designated as ranking on parity with the Series C Preferred Stock; and

junior to any other class or series of our capital stock expressly designated as ranking senior to the Series C Preferred Stock, none of which exists on the date hereof.

The term “capital stock” does not include convertible or exchangeable debt securities, none of which is outstanding as of the date hereof, which, prior to conversion or exchange, will rank senior in right of payment to the Series C Preferred Stock. The Series C Preferred Stock also ranks junior in right of payment to our other existing and future debt obligations.
Dividends
Subject to the preferential rights of the holders of any class or series of our capital stock ranking senior to the Series C Preferred Stock with respect to dividend rights, holders of shares of the Series C Preferred Stock are entitled to receive, when, as and if authorized by our board of directors and declared by us out of funds legally available for the payment of dividends, cumulative cash dividends at the rate of 6.875% per annum of the $25.00 liquidation preference per share of the Series C Preferred Stock (equivalent to the fixed annual amount of $1.71875 per share of the Series C Preferred Stock).
Dividends on the Series C Preferred Stock accrue and are cumulative from and including the date of original issue and are payable to holders quarterly in arrears on or about the last day of March, June, September and December of each year or, if such day is not a business day, on the next succeeding business day, except that, if such business day is in the next succeeding year, such payment shall be made on the immediately preceding business day, in each case with the same force and effect as if






made on such date. The term “business day” means each day, other than a Saturday or a Sunday, which is not a day on which banks in New York are required to close.
The amount of any dividend payable on the Series C Preferred Stock for any dividend period is computed on the basis of a 360-day year consisting of 12 30-day months. A dividend period is the respective period commencing on and including the first day of January, April, July and October of each year and ending on and including the day preceding the first day of the next succeeding dividend period (other than the initial dividend period and the dividend period during which any shares of Series C Preferred Stock shall be redeemed). Dividends are payable to holders of record as they appear in our stock records at the close of business on the applicable record date, which shall be the date designated by our board of directors as the record date for the payment of dividends that is not more than 35 and not fewer than 10 days prior to the scheduled dividend payment date.
Dividends on the Series C Preferred Stock accrue whether or not:
we have earnings;

there are funds legally available for the payment of those dividends; or

Except as described in the next two paragraphs, unless full cumulative dividends on the Series C Preferred Stock for all past dividend periods that have ended shall have been or contemporaneously are declared and paid in cash or declared and a sum sufficient for the payment thereof in cash is set apart for payment, we will not:
declare and pay or declare and set aside for payment of dividends, and we will not declare and make any distribution of cash or other property, directly or indirectly, on or with respect to any shares of our common stock or shares of any other class or series of our capital stock ranking, as to dividends, on parity with or junior to the Series C Preferred Stock, for any period; or

redeem, purchase or otherwise acquire for any consideration, or make any other distribution of cash or other property, directly or indirectly, on or with respect to, or pay or make available any monies for a sinking fund for the redemption of, any common stock or shares of any other class or series of our capital stock ranking, as to payment of dividends and the distribution of assets upon our liquidation, dissolution or winding up, on parity with or junior to the Series C Preferred Stock.

The foregoing sentence, however, will not prohibit:
dividends payable solely in capital stock ranking, as to payment of dividends and the distribution of assets upon our liquidation, dissolution or winding up, junior to the Series C Preferred Stock;

the conversion into or exchange for other shares of any class or series of capital stock ranking, as to payment of dividends and the distribution of assets upon our liquidation, dissolution or winding up, junior to the Series C Preferred Stock;

our purchase of shares of Series C Preferred Stock or any other class or series of capital stock ranking, as to payment of dividends and the distribution of assets upon our liquidation, dissolution or winding up, on parity with or junior to the Series C Preferred Stock pursuant to our charter to the extent necessary to preserve our status as a REIT as discussed under “-Restrictions on Ownership and Transfer;” and

our purchase of shares of any other class or series of capital stock ranking on parity with the Series C Preferred Stock as to payment of dividends and the distribution of assets upon our liquidation, dissolution or winding up pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of Series C Preferred Stock.

When we do not pay dividends in full (and do not set apart a sum sufficient to pay them in full) on the Series C Preferred Stock and the shares of any other class or series of capital stock ranking, as to dividends, on parity with the Series C Preferred Stock, we will declare any dividends upon the Series C Preferred Stock and each such other class or series of capital stock ranking, as to dividends, on parity with the Series C Preferred Stock pro rata, so that the amount of dividends declared per share of Series C Preferred Stock and such other class or series of capital stock will in all cases bear to each other the same ratio that accrued dividends per share on the Series C Preferred Stock and such other class or series of capital stock (which will not include any accrual in respect of unpaid dividends on such other class or series of capital stock for prior dividend periods if such other class






or series of capital stock does not have a cumulative dividend) bear to each other. No interest, or sum of money in lieu of interest, will be payable in respect of any dividend payment or payments on the Series C Preferred Stock which may be in arrears.
Holders of shares of Series C Preferred Stock are not entitled to any dividend, whether payable in cash, property or shares of capital stock, in excess of full cumulative dividends on the Series C Preferred Stock as described above. Any dividend payment made on the Series C Preferred Stock will first be credited against the earliest accrued but unpaid dividends due with respect to those shares which remain payable. Accrued but unpaid dividends on the Series C Preferred Stock will accumulate as of the dividend payment date on which they first become payable.
We do not intend to declare dividends on the Series C Preferred Stock, or pay or set apart for payment dividends on the Series C Preferred Stock, if the terms of any of our agreements, including any agreements relating to our indebtedness, prohibit such a declaration, payment or setting apart for payment or provide that such declaration, payment or setting apart for payment would constitute a breach of or default under such an agreement. Likewise, no dividends will be authorized by our board of directors and declared by us or paid or set apart for payment if such authorization, declaration or payment is restricted or prohibited by law.
If a default or event of default occurs and is continuing, we may be precluded from paying certain distributions (other than those required to allow us to maintain our status as a REIT) under the terms of our unsecured credit facility, unsecured term loans and unsecured notes. In addition, other indebtedness that we may incur in the future may contain financial or other covenants more restrictive than those applicable to our unsecured credit facility, unsecured term loans and unsecured notes.
Liquidation Preference
Upon any voluntary or involuntary liquidation, dissolution or winding up of our affairs, before any distribution or payment shall be made to holders of shares of our common stock or any other class or series of capital stock ranking, as to rights upon any voluntary or involuntary liquidation, dissolution or winding up of our affairs, junior to the Series C Preferred Stock, holders of shares of Series C Preferred Stock will be entitled to be paid out of our assets legally available for distribution to our stockholders, after payment of or provision for our debts and other liabilities, a liquidation preference of $25.00 per share of Series C Preferred Stock, plus an amount equal to any accrued and unpaid dividends (whether or not authorized or declared) to but excluding the date of payment. If, upon our voluntary or involuntary liquidation, dissolution or winding up, our available assets are insufficient to pay the full amount of the liquidating distributions on all outstanding shares of Series C Preferred Stock and the corresponding amounts payable on all shares of each other class or series of capital stock ranking, as to rights upon our liquidation, dissolution or winding up, on parity with the Series C Preferred Stock in the distribution of assets, then holders of shares of Series C Preferred Stock and each such other class or series of capital stock ranking, as to rights upon any voluntary or involuntary liquidation, dissolution or winding up, on parity with the Series C Preferred Stock will share ratably in any distribution of assets in proportion to the full liquidating distributions to which they would otherwise be respectively entitled.
Holders of shares of Series C Preferred Stock is entitled to written notice of any distribution in connection with any voluntary or involuntary liquidation, dissolution or winding up of our affairs not less than 30 days and not more than 60 days prior to the distribution payment date. After payment of the full amount of the liquidating distributions to which they are entitled, holders of shares of Series C Preferred Stock have no right or claim to any of our remaining assets. Our consolidation or merger with or into any other corporation, trust or other entity, or the voluntary sale, lease, transfer or conveyance of all or substantially all of our property or business, will not be deemed to constitute a liquidation, dissolution or winding up of our affairs.
In determining whether a distribution (other than upon voluntary or involuntary liquidation), by dividend, redemption or other acquisition of shares of our capital stock or otherwise, is permitted under Maryland law, amounts that would be needed, if we were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of holders of shares of Series C Preferred Stock will not be added to our total liabilities.
Optional Redemption
Except with respect to the special optional redemption described below and in certain limited circumstances relating to maintaining our qualification as a REIT as described in “-Restrictions on Ownership and Transfer,” we cannot redeem the Series C Preferred Stock prior to March 17, 2021. On and after March 17, 2021, we may, at our option, upon not fewer than 30 and not more than 60 days’ written notice, redeem the Series C Preferred Stock, in whole or in part, at any time or from time to time, for cash at a redemption price of $25.00 per share, plus all accrued and unpaid dividends (whether or not authorized or declared) to, but not including, the date fixed for redemption, without interest, to the extent we have funds legally available for that purpose.






If fewer than all of the outstanding shares of Series C Preferred Stock are to be redeemed, we will select the shares of Series C Preferred Stock to be redeemed pro rata (as nearly as may be practicable without creating fractional shares) by lot, or by any other equitable method that we determine will not violate the 9.8% Series C Preferred Stock ownership limit. If such redemption is to be by lot and, as a result of such redemption, any holder of shares of Series C Preferred Stock, other than a holder of Series C Preferred Stock that has received an exemption from the ownership limit, would have actual or constructive ownership of more than 9.8% of the issued and outstanding shares of Series C Preferred Stock by value or number of shares, whichever is more restrictive, because such holder's shares of Series C Preferred Stock were not redeemed, or were only redeemed in part, then, except as otherwise provided in the charter, we will redeem the requisite number of shares of Series C Preferred Stock of such holder such that no holder will own in excess of the 9.8% Series C Preferred Stock ownership limit subsequent to such redemption. See “-Restrictions on Ownership and Transfer” below. In order for their shares of Series C Preferred Stock to be redeemed, holders must surrender their shares at the place, or in accordance with the book-entry procedures, designated in the notice of redemption. Holders will then be entitled to the redemption price and any accrued and unpaid dividends payable upon redemption following surrender of the shares as detailed below. If a notice of redemption has been given (in the case of a redemption of the Series C Preferred Stock other than to preserve our status as a REIT), if the funds necessary for the redemption have been set aside by us in trust for the benefit of the holders of any shares of Series C Preferred Stock called for redemption and if irrevocable instructions have been given to pay the redemption price and all accrued and unpaid dividends, then from and after the redemption date, dividends will cease to accrue on such shares of Series C Preferred Stock and such shares of Series C Preferred Stock will no longer be deemed outstanding. At such time, all rights of the holders of such shares will terminate, except the right to receive the redemption price plus any accrued and unpaid dividends payable upon redemption, without interest. So long as no dividends are in arrears and subject to the provisions of applicable law, we may from time to time repurchase all or any part of the Series C Preferred Stock, including the repurchase of shares of Series C Preferred Stock in open-market transactions and individual purchases at such prices as we negotiate, in each case as duly authorized by our board of directors.
Unless full cumulative dividends on all shares of Series C Preferred Stock have been or contemporaneously are authorized, declared and paid or declared and a sum sufficient for the payment thereof set apart for payment for all past dividend periods that have ended, no shares of Series C Preferred Stock will be redeemed unless all outstanding shares of Series C Preferred Stock are simultaneously redeemed and we will not purchase or otherwise acquire directly or indirectly any shares of Series C Preferred Stock or any class or series of our capital stock ranking, as to payment of dividends and the distribution of assets upon our liquidation, dissolution or winding up, on parity with or junior to the Series C Preferred Stock (except by conversion into or exchange for our capital stock ranking junior to the Series C Preferred Stock as to payment of dividends and the distribution of assets upon our liquidation, dissolution or winding up); provided, however, that whether or not the requirements set forth above have been met, we may purchase shares of Series C Preferred Stock or any other class or series of capital stock ranking, as to payment of dividends and the distribution of assets upon our liquidation, dissolution or winding up, on parity with or junior to the Series C Preferred Stock pursuant to our charter to the extent necessary to ensure that we meet the requirements for qualification as a REIT for federal income tax purposes, and may purchase or acquire shares of Series C Preferred Stock or preferred stock ranking on parity with the Series C Preferred Stock as to payment of dividends and the distribution of assets upon our liquidation, dissolution or winding up pursuant to a purchase or exchange offer made on the same terms to holders of all outstanding shares of Series C Preferred Stock. See “-Restrictions on Ownership and Transfer” below.
Notice of redemption will be mailed, postage prepaid, not less than 30 nor more than 60 days prior to the redemption date, addressed to the respective holders of record of the Series C Preferred Stock to be redeemed at their respective addresses as they appear on our stock transfer records as maintained by the transfer agent named in “-Transfer Agent and Registrar.” No failure to give such notice or any defect therein or in the mailing thereof will affect the validity of the proceedings for the redemption of any shares of Series C Preferred Stock except as to the holder to whom notice was defective or not given. In addition to any information required by law or by the applicable rules of any exchange upon which the Series C Preferred Stock may be listed or admitted to trading, each notice will state:
the redemption date;

the redemption price;

the number of shares of Series C Preferred Stock to be redeemed;

the place or places where the certificates, if any, representing shares of Series C Preferred Stock are to be surrendered for payment of the redemption price;

procedures for surrendering non-certificated shares of Series C Preferred Stock for payment of the redemption price;







that dividends on the shares of Series C Preferred Stock to be redeemed will cease to accumulate on such redemption date; and

that payment of the redemption price and any accumulated and unpaid dividends will be made upon presentation and surrender of such Series C Preferred Stock.

If fewer than all of the shares of Series C Preferred Stock held by any holder are to be redeemed, the notice mailed to such holder will also specify the number of shares of Series C Preferred Stock held by such holder to be redeemed.
We are not required to provide such notice in the event we redeem Series C Preferred Stock in order to qualify or maintain our status as a REIT.
Any such redemption may be made conditional on such factors as may be determined by our board of directors and as set forth in the notice of redemption.
If a redemption date falls after a dividend record date and on or prior to the corresponding dividend payment date, each holder of shares of the Series C Preferred Stock at the close of business of such dividend record date will be entitled to the dividend payable on such shares on the corresponding dividend payment date notwithstanding the redemption of such shares on or prior to such dividend payment date and each holder of shares of Series C Preferred Stock that surrenders such shares on such redemption date will be entitled to the dividends accruing after the end of the applicable dividend period, up to but excluding the redemption date. Except as described above, we will make no payment or allowance for unpaid dividends, whether or not in arrears, on Series C Preferred Stock for which a notice of redemption has been given.
All shares of Series C Preferred Stock that we redeem or repurchase will be retired and restored to the status of authorized but unissued shares of preferred stock, without designation as to series or class.
Subject to applicable law and the limitation on purchases when dividends on the Series C Preferred Stock are in arrears, we may, at any time and from time to time, purchase Series C Preferred Stock in the open market, by tender or by private agreement.
Future debt instruments may prohibit us, from redeeming or otherwise repurchasing any shares of our capital stock, including the Series C Preferred Stock, except in limited circumstances.
Special Optional Redemption
Upon the occurrence of a Change of Control (as defined below), we may, at our option, redeem the Series C Preferred Stock, in whole or in part within 120 days after the first date on which such Change of Control occurred, by paying $25.00 per share, plus any accrued and unpaid dividends to, but not including, the date of redemption. If, prior to the Change of Control Conversion Date, we have provided or provide notice of redemption with respect to the Series C Preferred Stock (whether pursuant to our optional redemption right or our special optional redemption right), the holders of Series C Preferred Stock will not have the conversion right described below under “-Conversion Rights.”
We will mail to record holders of the Series C Preferred Stock, a notice of redemption no fewer than 30 days nor more than 60 days before the redemption date. We will send the notice to your address shown on our stock transfer books. A failure to give notice of redemption or any defect in the notice or in its mailing will not affect the validity of the redemption of any Series C Preferred Stock except as to the holder to whom notice was defective. Each notice will state the following:
the redemption date;

the redemption price;

the number of shares of Series C Preferred Stock to be redeemed;

the place or places where the certificates, if any, representing shares of Series C Preferred Stock are to be surrendered for payment of the redemption price;

procedures for surrendering non-certificated shares of Series C Preferred Stock for payment of the redemption price;







that dividends on the shares of Series C Preferred Stock to be redeemed will cease to accumulate on such redemption date;

that payment of the redemption price and any accumulated and unpaid dividends will be made upon presentation and surrender of such Series C Preferred Stock;

that the Series C Preferred Stock is being redeemed pursuant to our special optional redemption right in connection with the occurrence of a Change of Control and a brief description of the transaction or transactions constituting such Change of Control; and

that the holders of the Series C Preferred Stock to which the notice relates will not be able to tender such Series C Preferred Stock for conversion in connection with the Change of Control and each share of Series C Preferred Stock tendered for conversion that is selected, prior to the Change of Control Conversion Date, for redemption will be redeemed on the related date of redemption instead of converted on the Change of Control Conversion Date.

If we redeem fewer than all of the outstanding shares of Series C Preferred Stock, the notice of redemption mailed to each stockholder will also specify the number of shares of Series C Preferred Stock that we will redeem from each stockholder. In this case, we will determine the number of shares of Series C Preferred Stock to be redeemed as described above in “-Optional Redemption.”
If we have given a notice of redemption and have set aside sufficient funds for the redemption in trust for the benefit of the holders of the Series C Preferred Stock called for redemption, then from and after the redemption date, those shares of Series C Preferred Stock will be treated as no longer being outstanding, no further dividends will accrue and all other rights of the holders of those shares of Series C Preferred Stock will terminate. The holders of those shares of Series C Preferred Stock will retain their right to receive the redemption price for their shares and any accrued and unpaid dividends through, but not including, the redemption date, without interest.
The holders of Series C Preferred Stock at the close of business on a dividend record date will be entitled to receive the dividend payable with respect to the Series C Preferred Stock on the corresponding payment date notwithstanding the redemption of the Series C Preferred Stock between such record date and the corresponding payment date or our default in the payment of the dividend due. Except as provided above, we will make no payment or allowance for unpaid dividends, whether or not in arrears, on Series C Preferred Stock to be redeemed.
A “Change of Control” is when, after the original issuance of the Series C Preferred Stock, the following have occurred and are continuing:
the acquisition by any person, including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Exchange Act, of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of purchases, mergers or other acquisition transactions of stock of our company entitling that person to exercise more than 50% of the total voting power of all stock of our company entitled to vote generally in the election of our directors (except that such person will be deemed to have beneficial ownership of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition); and

following the closing of any transaction referred to in the bullet point above, neither we nor the acquiring or surviving entity has a class of common securities (or ADRs representing such securities) listed on the NYSE, the NYSE American or Nasdaq or listed or quoted on an exchange or quotation system that is a successor to the NYSE, the NYSE American or Nasdaq.

Conversion Rights
Upon the occurrence of a Change of Control, each holder of Series C Preferred Stock will have the right, unless, prior to the Change of Control Conversion Date, we have provided or provide notice of our election to redeem the Series C Preferred Stock as described under “-Optional Redemption” or “-Special Optional Redemption,” to convert some or all of the Series C Preferred Stock held by such holder (the “Change of Control Conversion Right”) on the Change of Control Conversion Date into a number of shares of our common stock per share of Series C Preferred Stock (the “Common Stock Conversion Consideration”), which is equal to the lesser of:






the quotient obtained by dividing (i) the sum of the $25.00 liquidation preference plus the amount of any accrued and unpaid dividends to, but not including, the Change of Control Conversion Date (unless the Change of Control Conversion Date is after a record date for a Series C Preferred Stock dividend payment and prior to the corresponding Series C Preferred Stock dividend payment date, in which case no additional amount for such accrued and unpaid dividend will be included in this sum) by (ii) the Common Stock Price (such quotient, the “Conversion Rate”); and

2.59336 (i.e., the “Share Cap”).

The Share Cap is subject to pro rata adjustments for any share splits (including those effected pursuant to a distribution of our common stock), subdivisions or combinations (in each case, a “Share Split”) with respect to our common stock as follows: the adjusted Share Cap as the result of a Share Split will be the number of shares of our common stock that is equivalent to the product obtained by multiplying (i) the Share Cap in effect immediately prior to such Share Split by (ii) a fraction, the numerator of which is the number of shares of our common stock outstanding after giving effect to such Share Split and the denominator of which is the number of shares of our common stock outstanding immediately prior to such Share Split.
For the avoidance of doubt, subject to the immediately succeeding sentence, the aggregate number of shares of our common stock (or equivalent Alternative Conversion Consideration (as defined below), as applicable) issuable in connection with the exercise of the Change of Control Conversion Right will not exceed 7,780,080 shares of common stock (or equivalent Alternative Conversion Consideration, as applicable) (the “Exchange Cap”). The Exchange Cap is subject to pro rata adjustments for any Share Splits on the same basis as the corresponding adjustment to the Share Cap.
In the case of a Change of Control pursuant to which our common stock will be converted into cash, securities or other property or assets (including any combination thereof) (the “Alternative Form Consideration”), a holder of Series C Preferred Stock will receive upon conversion of such Series C Preferred Stock the kind and amount of Alternative Form Consideration which such holder would have owned or been entitled to receive upon the Change of Control had such holder held a number of shares of our common stock equal to the Common Stock Conversion Consideration immediately prior to the effective time of the Change of Control (the “Alternative Conversion Consideration,” and the Common Stock Conversion Consideration or the Alternative Conversion Consideration, as may be applicable to a Change of Control, is referred to as the “Conversion Consideration”).
If the holders of our common stock have the opportunity to elect the form of consideration to be received in the Change of Control, the Conversion Consideration will be deemed to be the kind and amount of consideration actually received by holders of a majority of our common stock that voted for such an election (if electing between two types of consideration) or holders of a plurality of our common stock that voted for such an election (if electing between more than two types of consideration), as the case may be, and will be subject to any limitations to which all holders of our common stock are subject, including, without limitation, pro rata reductions applicable to any portion of the consideration payable in the Change of Control.
We will not issue fractional shares of common stock upon the conversion of the Series C Preferred Stock. Instead, we will pay the cash value of such fractional shares.
Within 15 days following the occurrence of a Change of Control, we will provide to holders of Series C Preferred Stock a notice of occurrence of the Change of Control that describes the resulting Change of Control Conversion Right. This notice will state the following:
the events constituting the Change of Control;

the date of the Change of Control;

the last date on which the holders of Series C Preferred Stock may exercise their Change of Control Conversion Right;

the method and period for calculating the Common Stock Price;

the Change of Control Conversion Date;

that if, prior to the Change of Control Conversion Date, we have provided or provide notice of our election to redeem all or any portion of the Series C Preferred Stock, holders will not be able to convert Series C Preferred Stock designated for redemption and such shares will be redeemed on the related redemption date, even if such shares have already been tendered for conversion pursuant to the Change of Control Conversion Right;







if applicable, the type and amount of Alternative Conversion Consideration entitled to be received per share of Series C Preferred Stock;

the name and address of the paying agent and the conversion agent; and

the procedures that the holders of Series C Preferred Stock must follow to exercise the Change of Control Conversion Right.

We will issue a press release for publication on the Dow Jones & Company, Inc., Business Wire, PR Newswire or Bloomberg Business News (or, if these organizations are not in existence at the time of issuance of the press release, such other news or press organization as is reasonably calculated to broadly disseminate the relevant information to the public), or post a notice on our website, in any event prior to the opening of business on the first business day following any date on which we provide the notice described above to the holders of Series C Preferred Stock.
To exercise the Change of Control Conversion Right, the holders of Series C Preferred Stock will be required to deliver, on or before the close of business on the Change of Control Conversion Date, the certificates (if any) representing Series C Preferred Stock to be converted, duly endorsed for transfer, together with a written conversion notice completed, to our transfer agent. The conversion notice must state:
the relevant Change of Control Conversion Date;

the number of shares of Series C Preferred Stock to be converted; and

that the Series C Preferred Stock is to be converted pursuant to the applicable provisions of the Series C Preferred Stock.

The “Change of Control Conversion Date” is the date the Series C Preferred Stock is to be converted, which will be a business day that is no fewer than 20 days nor more than 35 days after the date on which we provide the notice described above to the holders of Series C Preferred Stock.
The “Common Stock Price” will be (i) if the consideration to be received in the Change of Control by the holders of our common stock is solely cash, the amount of cash consideration per share of our common stock or (ii) if the consideration to be received in the Change of Control by holders of our common stock is other than solely cash (x) the average of the closing sale prices per share of our common stock (or, if no closing sale price is reported, the average of the closing bid and ask prices or, if more than one in either case, the average of the average closing bid and the average closing ask prices) for the ten consecutive trading days immediately preceding, but not including, the effective date of the Change of Control as reported on the principal U.S. securities exchange on which our common stock is then traded, or (y) the average of the last quoted bid prices for our common stock in the over-the-counter market as reported by OTC Markets Group, Inc. or similar organization for the ten consecutive trading days immediately preceding, but not including, the effective date of the Change of Control, if our common stock is not then listed for trading on a U.S. securities exchange.
Holders of Series C Preferred Stock may withdraw any notice of exercise of a Change of Control Conversion Right (in whole or in part) by a written notice of withdrawal delivered to our transfer agent prior to the close of business on the business day prior to the Change of Control Conversion Date. The notice of withdrawal must state:
the number of withdrawn shares of Series C Preferred Stock;

if certificated Series C Preferred Stock has been issued, the certificate numbers of the withdrawn shares of Series C Preferred Stock; and

the number of shares of Series C Preferred Stock, if any, which remain subject to the conversion notice.

Notwithstanding the foregoing, if the Series C Preferred Stock is held in global form, the conversion notice and/or the notice of withdrawal, as applicable, must comply with applicable procedures of The Depository Trust Company (“DTC”).
Series C Preferred Stock as to which the Change of Control Conversion Right has been properly exercised and for which the conversion notice has not been properly withdrawn will be converted into the applicable Conversion Consideration in accordance with the Change of Control Conversion Right on the Change of Control Conversion Date, unless prior to the Change of Control






Conversion Date we have provided or provide notice of our election to redeem such Series C Preferred Stock, whether pursuant to our optional redemption right or our special optional redemption right. If we elect to redeem Series C Preferred Stock that would otherwise be converted into the applicable Conversion Consideration on a Change of Control Conversion Date, such Series C Preferred Stock will not be so converted and the holders of such shares will be entitled to receive on the applicable redemption date $25.00 per share, plus any accrued and unpaid dividends thereon to, but not including, the redemption date, in accordance with our optional redemption right or special optional redemption right. See “-Optional Redemption” and “-Special Optional Redemption” above.
We will deliver amounts owing upon conversion no later than the third business day following the Change of Control Conversion Date.
In connection with the exercise of any Change of Control Conversion Right, we will comply with all federal and state securities laws and stock exchange rules in connection with any conversion of Series C Preferred Stock into shares of our common stock. Notwithstanding any other provision of the Series C Preferred Stock, no holder of Series C Preferred Stock will be entitled to convert such Series C Preferred Stock into shares of our common stock to the extent that receipt of such common stock would cause such holder (or any other person) to exceed the share ownership limits contained in our charter, including the articles supplementary setting forth the terms of the Series C Preferred Stock, unless we provide an exemption from this limitation for such holder. See “-Restrictions on Ownership and Transfer” below.
The Change of Control conversion feature may make it more difficult for a party to take over our company or discourage a party from taking over our company.
Except as provided above in connection with a Change of Control, the Series C Preferred Stock is not convertible into or exchangeable for any other securities or property.
No Maturity, Sinking Fund or Mandatory Redemption
The Series C Preferred Stock has no maturity date and we are not required to redeem the Series C Preferred Stock at any time. Accordingly, the Series C Preferred Stock will remain outstanding indefinitely, unless we decide, at our option, to exercise our redemption right or, under circumstances where the holders of the Series C Preferred Stock have a conversion right, such holders convert the Series C Preferred Stock into our common stock. The Series C Preferred Stock is not subject to any sinking fund.
Limited Voting Rights
Holders of shares of the Series C Preferred Stock generally do not have any voting rights, except as set forth below.
If dividends on the Series C Preferred Stock are in arrears for six or more quarterly periods, whether or not consecutive (which we refer to as a preferred dividend default), holders of shares of the Series C Preferred Stock (voting separately as a class together with the holders of all other classes or series of preferred stock ranking on parity with the Series C Preferred Stock with respect to payment of dividends and the distribution of assets upon our liquidation, dissolution or winding up and upon which like voting rights have been conferred and are exercisable) will be entitled to vote for the election of two additional directors to serve on our board of directors (which we refer to as preferred stock directors), until all unpaid dividends for past dividend periods that have ended with respect to the Series C Preferred Stock and such other classes or series of preferred stock have been paid or declared and a sum sufficient for payment is set aside for such payment. In such a case, the number of directors serving on our board of directors will be increased by two. The preferred stock directors will be elected by a plurality of the votes cast in the election for a one-year term and each preferred stock director will serve until his successor is duly elected and qualified or until the director's right to hold the office terminates, whichever occurs earlier. The election will take place at:
a special meeting called upon the written request of holders of at least 10% of the outstanding shares of Series C Preferred Stock and any other class or series of preferred stock upon which like voting rights have been conferred and are exercisable, if this request is received more than 90 days before the date fixed for our next annual or special meeting of stockholders or, if we receive the request for a special meeting within 90 days before the date fixed for our next annual or special meeting of stockholders, at our annual or special meeting of stockholders; and

each subsequent annual meeting (or special meeting held in its place) until all dividends accumulated on the Series C Preferred Stock and on any other class or series of preferred stock ranking on parity with the Series C






Preferred Stock and upon which like voting rights have been conferred and are exercisable have been paid in full for all past dividend periods that have ended.

If and when all accumulated dividends on the Series C Preferred Stock and all other classes or series of preferred stock ranking on parity with the Series C Preferred Stock and upon which like voting rights have been conferred and are exercisable shall have been paid in full or a sum sufficient for such payment in full is set aside for payment, holders of shares of Series C Preferred Stock shall be divested of the voting rights set forth above (subject to re-vesting in the event of each and every preferred dividend default) and the term and office of such preferred stock directors so elected will terminate and the entire board of directors will be reduced accordingly.
Any preferred stock director elected by holders of shares of Series C Preferred Stock and other holders of preferred stock ranking on parity with the Series C Preferred Stock and upon which like voting rights have been conferred and are exercisable may be removed at any time with or without cause by the vote of, and may not be removed otherwise than by the vote of, the holders of record of a majority of the outstanding shares of Series C Preferred Stock and all other classes or series of preferred stock ranking on parity with the Series C Preferred Stock and entitled to vote thereon when they have the voting rights described above (voting together as a single class). The preferred stock directors will each be entitled to one vote on any matter. So long as a preferred dividend default continues, any vacancy in the office of a preferred stock director may be filled by written consent of the preferred stock director remaining in office, or if none remains in office, by a vote of the holders of record of a majority of the outstanding shares of Series C Preferred Stock when they have the voting rights described above (voting as a single class with all other classes or series of preferred stock upon which like voting rights have been conferred and are exercisable).
So long as any shares of Series C Preferred Stock remain outstanding, we will not, without the affirmative vote or consent of the holders of at least two-thirds of the shares outstanding at the time of Series C Preferred Stock and each other class or series of preferred stock ranking on parity with Series C Preferred Stock with respect to the payment of dividends and the distribution of assets upon our liquidation, dissolution or winding up and upon which like voting rights have been conferred (voting together as a single class), authorize, create or issue, or increase the number of authorized or issued shares of, any class or series of capital stock ranking senior to the Series C Preferred Stock with respect to payment of dividends or the distribution of assets upon our liquidation, dissolution or winding up, or reclassify any of our authorized capital stock into such capital stock, or create, authorize or issue any obligation or security convertible into or evidencing the right to purchase such capital stock.
In addition, so long as any shares of Series C Preferred Stock remain outstanding, we will not, without the affirmative vote or consent of the holders of at least two-thirds of the outstanding shares of Series C Preferred Stock, amend, alter or repeal the provisions of our charter or the terms of the Series C Preferred Stock, whether by merger, consolidation, transfer or conveyance of substantially all of our assets or otherwise, so as to materially and adversely affect any right, preference, privilege or voting power of the Series C Preferred Stock, except that with respect to the occurrence of any of the events set forth above, so long as the Series C Preferred Stock remains outstanding with the terms of the Series C Preferred Stock materially unchanged, taking into account that, upon the occurrence of an event set forth above, we may not be the surviving entity, the occurrence of such event will not be deemed to materially and adversely affect the rights, preferences, privileges or voting power of the Series C Preferred Stock, and in such case such holders shall not have any voting rights with respect to the events set forth above; provided, further, that such vote or consent will not be required with respect to any such amendment, alteration or repeal that equally affects the terms of the Series C Preferred Stock and one or more other classes or series of preferred stock ranking on parity with Series C Preferred Stock with respect to the payment of dividends and the distribution of assets upon our liquidation, dissolution or winding up and upon which like voting rights have been conferred, if such amendment, alteration or repeal is approved by the affirmative vote or consent of the holders of two-thirds of the shares of Series C Preferred Stock and such other class or series of preferred stock (voting together as a single class). Furthermore, if holders of shares of the Series C Preferred Stock receive the greater of the full trading price of the Series C Preferred Stock on the date of an event set forth above or the $25.00 per share liquidation preference pursuant to the occurrence of any of the events set forth above, then such holders shall not have any voting rights with respect to the events set forth above.
So long as any shares of Series C Preferred Stock remain outstanding, the holders of shares of Series C Preferred Stock also will have the exclusive right to vote on any amendment, alteration or repeal of the provisions of our charter or the terms of the Series C Preferred Stock on which holders of Series C Preferred Stock are otherwise entitled to vote pursuant to the paragraph set forth immediately above that would alter only the contract rights, as expressly set forth in our charter, of the Series C Preferred Stock, and the holders of any other classes or series of our capital stock will not be entitled to vote on such an amendment, alteration or repeal. With respect to any amendment, alteration or repeal of the provisions of our charter or the terms of the Series C Preferred Stock that equally affects the terms of the Series C Preferred Stock and one or more other classes or series of preferred stock ranking on parity with Series C Preferred Stock with respect to the payment of dividends and the distribution of assets upon our liquidation, dissolution or winding up and upon which like voting rights have been conferred, so long as any shares of Series C Preferred Stock remain outstanding, the holders of shares of Series C Preferred Stock and such other class or series of preferred






stock (voting together as a single class), also will have the exclusive right to vote on any amendment, alteration or repeal of the provisions of our charter or the terms of the Series C Preferred Stock on which holders of Series C Preferred Stock are otherwise entitled to vote pursuant to the paragraph set forth immediately above that would alter only the contract rights, as expressly set forth in our charter, of the Series C Preferred Stock and such other classes or series of preferred stock, and the holders of any other classes or series of our capital stock will not be entitled to vote on such an amendment.
Holders of shares of Series C Preferred Stock will not be entitled to vote with respect to any increase in the total number of authorized shares of our common stock or preferred stock, any increase in the number of authorized shares of Series C Preferred Stock or the creation or issuance of any other class or series of capital stock, or any increase in the number of authorized shares of any other class or series of capital stock, in each case ranking on parity with or junior to the Series C Preferred Stock with respect to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up.
Holders of shares of Series C Preferred Stock will not have any voting rights with respect to, and the consent of the holders of shares of Series C Preferred Stock is not required for, the taking of any corporate action, including any merger or consolidation involving us or a sale of all or substantially all of our assets, regardless of the effect that such merger, consolidation or sale may have upon the powers, preferences, voting power or other rights or privileges of the Series C Preferred Stock, except as set forth above.
In addition, the voting provisions above will not apply if, at or prior to the time when the act with respect to which the vote would otherwise be required would occur, we have redeemed or called for redemption upon proper procedures all outstanding shares of Series C Preferred Stock.
In any matter in which Series C Preferred Stock may vote (as expressly provided in the articles supplementary setting forth the terms of the Series C Preferred Stock), each share of Series C Preferred Stock shall be entitled to one vote per $25.00 of liquidation preference. As a result, each share of Series C Preferred Stock will be entitled to one vote.
Restrictions on Ownership and Transfer
In order for us to maintain our qualification as a REIT under the Code, our shares of stock must be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months or during a proportionate part of a shorter taxable year. Also, no more than 50% of the value of our outstanding shares of capital stock may be owned, directly or indirectly, by five or fewer individuals (as defined by the Code to include certain entities) during the last half of any taxable year.
To help us to maintain our qualification as a REIT, our charter, subject to certain exceptions, contains, and the Series C Preferred Stock articles supplementary will contain, restrictions on the number of shares of our common stock, Series C Preferred Stock and our capital stock that a person may own. Our charter provides that generally no person may own, or be deemed to own by virtue of the attribution provisions of the Code, either more than 9.8% in value or in number of shares, whichever is more restrictive, of our aggregate outstanding shares of capital stock, or more than 9.8% in value or in number of shares, whichever is more restrictive, of our aggregate outstanding shares of common stock. In addition, the Series C Preferred Stock articles supplementary will provide that generally no person may own, or be deemed to own by virtue of the attribution provisions of the Code, either more than 9.8% in value or in number of shares, whichever is more restrictive, of our aggregate outstanding shares of Series C Preferred Stock. The beneficial ownership and/or constructive ownership rules under the Code are complex and may cause shares of stock owned actually or constructively by a group of related individuals and/or entities to be owned constructively by one individual or entity.
Transfer Agent and Registrar
The transfer agent and registrar for the Series C Preferred Stock is Continental Stock Transfer & Trust Company.
Certain Provisions of Maryland Law and our Charter and Bylaws
The following summary of certain provisions of Maryland law and our charter and bylaws does not purport to be complete and is subject to and qualified in its entirety by reference to Maryland law and our charter and bylaws, copies of which are filed as exhibits to the Annual Report on Form 10-K to which this Exhibit 4.3 is a part.
Our Board of Directors
Our charter and bylaws provide that the number of directors constituting our full board of directors will be not less than the minimum number required by Maryland law, and our bylaws provide that the number of directors constituting our full board






of directors will not exceed 15 and may only be increased or decreased by a vote of a majority of our directors. Pursuant to our charter, each member of our board of directors, other than a preferred director, is elected by our stockholders to serve until the next annual meeting of stockholders and until his or her successor is duly elected and qualifies. Holders of shares of our common stock will have no right to cumulative voting in the election of these directors. Consequently, at each annual meeting of stockholders, the holders of a majority of the shares of our common stock will be able to elect all of these directors. Directors are elected by a majority of the votes cast. In addition, pursuant to our director resignation policy any incumbent director nominee who fails to receive a majority of the votes cast must submit promptly a written offer to resign from our board of directors. The nominating and corporate governance committee will make a recommendation to our board of directors on whether to accept or reject the resignation. Taking into account the recommendation of the nominating and corporate governance committee, our board of directors will determine whether to accept or reject any such resignation within 90 days after the certification of the voting results, and we will report such decision in a current report on Form 8-K furnished to the SEC.
Pursuant to Subtitle 8 of Title 3 of the Maryland General Corporation Law (“MGCL”), our charter provides that, except as may be provided by our board of directors in setting the terms of any class or series of stock, any and all vacancies on our board of directors will be filled only by the affirmative vote of a majority of the remaining directors even if the remaining directors constitute less than a quorum. Any director elected to fill a vacancy will serve for the remainder of the full term of the directorship in which the vacancy occurred and until a successor is elected and qualifies. Our charter provides that, subject to the rights of holders of one or more classes or series of preferred stock to elect or remove one or more directors, a director may be removed only upon the affirmative vote of a majority of the votes entitled to be cast in the election of directors. However, because of our board's exclusive power to fill vacant directorships, stockholders will be precluded from filling the vacancies created by any removal with their own nominees, subject to the rights of holders of one or more classes or series of preferred stock to elect or remove one or more directors.
The articles supplementary for the Series C Preferred Stock provide that if dividends on the Series C Preferred Stock are in arrears for six or more quarterly periods, whether or not consecutive, holders of shares of the Series C Preferred Stock (voting together as a class with the holders of all other classes or series of preferred stock upon which like voting rights have been conferred and are exercisable) will be entitled to vote for the election of two additional directors to serve on our board of directors (which we refer to as preferred stock directors). The articles supplementary for the Series C Preferred Stock separately provide for the election, term, removal and filling of any vacancy in the office of the preferred stock directors.
Amendment to the Charter and Bylaws
Generally, our charter may be amended only if the amendment is declared advisable by our board of directors and approved by the affirmative vote of a majority of the votes entitled to be cast on the matter. As permitted by the MGCL, our charter contains a provision permitting our directors, without any action by our stockholders, to amend the charter to increase or decrease the aggregate number of shares of stock of any class or series that we have authority to issue. In addition, our charter provides that our board of directors, in setting the terms of any class or series of stock, may grant exclusive voting rights to the holders of the class or series of stock with respect to a charter amendment that would alter the contract rights, as expressly set forth in the charter, only of that specified class or series of stock.
Our bylaws may be altered, amended or repealed, or new bylaws may be adopted (i) by our board of directors or (ii) by the affirmative vote of a majority of all votes entitled to be cast by holders of outstanding shares of common stock. In addition, the following bylaw provisions may be amended only with the affirmative vote of a majority of the votes cast on such an amendment by holders of outstanding shares of common stock:
provisions opting out of the control share acquisition statute; and

provisions prohibiting our board of directors without the approval of a majority of the votes entitled to be cast by holders of outstanding shares of our common stock, from revoking, altering or amending any resolution, or adopting any resolution inconsistent with any previously adopted resolution of our board of directors, that exempts any business combination between us and any other person or entity from the business combination provisions of the MGCL.

In addition, any amendment to the provisions governing amendments of the bylaw provisions above requires the approval of a majority of the votes entitled to be cast by holders of outstanding shares of our common stock.
Additionally, the articles supplementary for the Series C Preferred Stock provide the holders of Series C Preferred Stock with voting rights with respect to certain amendments to our charter.






No Stockholder Rights Plan
We have no stockholder rights plan. We do not intend to adopt a stockholder rights plan unless our stockholders approve in advance the adoption of a plan or, if our board of directors adopts a plan for our company, we submit the stockholder rights plan to our stockholders for a ratification vote within 12 months of adoption, without which the plan will terminate.
Dissolution
Our dissolution must be approved by a majority of our entire board of directors and by the affirmative vote of the holders of a majority of all of the votes entitled to be cast on the matter.
Business Combinations
Maryland law prohibits “business combinations” between us and an interested stockholder or an affiliate of an interested stockholder for five years after the most recent date on which the interested stockholder becomes an interested stockholder. These business combinations include a merger, consolidation, share exchange, or, in circumstances specified in the statute, an asset transfer or issuance or transfer of equity securities, liquidation plan or reclassification of equity securities. Maryland law defines an interested stockholder as:
any person or entity who beneficially owns 10% or more of the voting power of our stock; or

an affiliate or associate of ours who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of the voting power of our then outstanding voting stock.

A person is not an interested stockholder if our board of directors approves in advance the transaction by which the person otherwise would have become an interested stockholder. However, in approving a transaction, our board of directors may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by our board of directors.
After the five-year prohibition, any business combination between us and an interested stockholder or an affiliate of an interested stockholder generally must be recommended by our board of directors and approved by the affirmative vote of at least:
80% of the votes entitled to be cast by holders of our then-outstanding shares of voting stock; and

two-thirds of the votes entitled to be cast by holders of our voting stock other than stock held by the interested stockholder with whom or with whose affiliate the business combination is to be effected or stock held by an affiliate or associate of the interested stockholder.

These super-majority vote requirements do not apply if our common stockholders receive a minimum price, as defined under Maryland law, for their shares in the form of cash or other consideration in the same form as previously paid by the interested stockholder for its stock.
The statute permits various exemptions from its provisions, including business combinations that are approved or exempted by our board of directors before the time that the interested stockholder becomes an interested stockholder.
Our board of directors has adopted a resolution opting out of the business combination provisions. Our bylaws provide that this resolution or any other resolution of our board of directors exempting any business combination from the business combination provisions of the MGCL may only be revoked, altered or amended, and our board of directors may only adopt any resolution inconsistent with any such resolution, with the affirmative vote of a majority of the votes cast on the matter by holders of outstanding shares of our common stock. If this resolution is repealed, the statute may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer.
Control Share Acquisitions
Maryland law provides that “control shares” of a Maryland corporation acquired in a “control share acquisition” have no voting rights, except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter. Shares owned by the acquiror or by officers or by directors who are our employees are excluded from the shares entitled to vote on the matter. “Control shares” are voting shares of stock that, if aggregated with all other shares of stock currently owned by the acquiring person, or in respect of which the acquiring person is able to exercise or direct the exercise of voting power (except solely by






virtue of a revocable proxy), would entitle the acquiring person to exercise voting power in electing directors within one of the following ranges of voting power:
one-tenth or more but less than one-third;

one-third or more but less than a majority; or

a majority or more of all voting power.

Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained stockholder approval. A “control share acquisition” means the acquisition of control shares, subject to certain exceptions. A person who has made or proposes to make a control share acquisition may compel our board of directors to call a special meeting of stockholders to be held within 50 days of demand to consider the voting rights of the shares. The right to compel the calling of a special meeting is subject to the satisfaction of certain conditions, including an undertaking to pay the expenses of the meeting. If no request for a meeting is made, we may present the question at any stockholders meeting.
If voting rights are not approved at the stockholders meeting or if the acquiring person does not deliver the statement required by Maryland law, then, subject to certain conditions and limitations, we may redeem any or all of the control shares, except those for which voting rights have previously been approved, for fair value. Fair value is determined, without regard to the absence of voting rights for the control shares, as of the date of the last control share acquisition by the acquiror or of any meeting of stockholders at which the voting rights of the shares were considered and not approved. If voting rights for control shares are approved at a stockholders meeting and the acquiror becomes entitled to vote a majority of the shares entitled to vote, all other stockholders may exercise appraisal rights. The fair value of the shares for purposes of these appraisal rights may not be less than the highest price per share paid by the acquiror in the control share acquisition. The control share acquisition statute does not apply to shares acquired in a merger, consolidation or share exchange if we are a party to the transaction, nor does it apply to acquisitions approved by or exempted by our charter or bylaws.
Our bylaws contain a provision exempting from the control share acquisition statute any and all acquisitions by any person of our stock, and this provision of our bylaws may not be amended without the affirmative vote of a majority of the votes cast on the matter by holders of outstanding shares of our common stock.
Maryland Unsolicited Takeovers Act
Subtitle 8 of Title 3 of the MGCL permits a Maryland corporation with a class of equity securities registered under the Exchange Act, and at least three independent directors to elect to be subject, by provision in its charter or bylaws or a resolution of its board of directors and notwithstanding any contrary provision in the charter or bylaws, to any or all of five provisions:
a classified board;

a two-thirds vote requirement for removing a director;

a requirement that the number of directors be fixed only by vote of directors;

a requirement that a vacancy on our board be filled only by the remaining directors and for the remainder of the full term of the directorship in which the vacancy occurred; and

a majority requirement for the calling of a special meeting of stockholders.

In our charter, we have elected that, except as may be provided by our board of directors in setting the terms of any class or series of stock, vacancies on our board be filled only by the remaining directors, even if the remaining directors do not constitute a quorum, and for the remainder of the full term of the directorship in which the vacancy occurred. Through provisions in our charter and bylaws unrelated to Subtitle 8, we:
vest in our board of directors the exclusive power to fix the number of directorships; and

provide that unless called by our chairman of our board of directors, our president, our chief executive officer or our board of directors or holders of one or more classes or series of preferred stock pursuant to rights specifically set forth in our charter with respect to such classes or series of preferred stock, a special meeting of stockholders






may only be called by our secretary upon the written request of the stockholders entitled to cast not less than a majority of all the votes entitled to be cast at the meeting.

Limitation of Liability and Indemnification
Maryland law permits a Maryland corporation to include in its charter a provision limiting the liability of its directors and officers to the corporation and its stockholders for money damages, except for liability resulting from:
actual receipt of an improper benefit or profit in money, property or services; or

active and deliberate dishonesty established by a final judgment and which is material to the cause of action.

Our charter contains such a provision that eliminates directors' and officers' liability to the maximum extent permitted by Maryland law. These limitations of liability do not apply to liabilities arising under the federal securities laws and do not generally affect the availability of equitable remedies such as injunctive relief or rescission.
Our charter also authorizes our company, to the maximum extent permitted by Maryland law, to obligate our company to indemnify any present or former director or officer or any individual who, while a director or officer of our company and at the request of our company, serves or has served another corporation, real estate investment trust, partnership, joint venture, trust, employee benefit plan or other enterprise as a director, officer, partner or trustee, from and against any claim or liability to which that individual may become subject or which that individual may incur by reason of his or her service in any such capacity and to pay or reimburse his or her reasonable expenses in advance of final disposition of a proceeding.
Our bylaws obligate us, to the maximum extent permitted by Maryland law, to indemnify any present or former director or officer or any individual who, while a director or officer of our company and at the request of our company, serves or has served another corporation, real estate investment trust, partnership, joint venture, trust, employee benefit plan or other enterprise as a director, officer, partner or trustee and who is made, or threatened to be made, a party to the proceeding by reason of his or her service in that capacity, from and against any claim or liability to which that individual may become subject or which that individual may incur by reason of his or her service in any such capacity and to pay or reimburse his or her reasonable expenses in advance of final disposition of a proceeding. Our charter and bylaws also permit our company to indemnify and advance expenses to any individual who served a predecessor of our company in any of the capacities described above and any employee or agent of our company or a predecessor of our company.
Maryland law requires a corporation (unless its charter provides otherwise, which our charter does not) to indemnify a director or officer who has been successful in the defense of any proceeding to which he or she is made, or threatened to be made, a party by reason of his or her service in that capacity. Maryland law permits a corporation to indemnify its present and former directors and officers, among others, against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in connection with any proceeding to which they may be made, or threatened to be made, a party by reason of their service in those or other capacities unless it is established that:
the act or omission of the director or officer was material to the matter giving rise to the proceeding and (i) was committed in bad faith or (ii) was the result of active and deliberate dishonesty;

the director or officer actually received an improper personal benefit in money, property or services; or

in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful.

However, under Maryland law, a Maryland corporation may not indemnify for an adverse judgment in a suit by or in the right of the corporation or for a judgment of liability on the basis that personal benefit was improperly received, unless in either case a court orders indemnification and then only for expenses. In addition, Maryland law permits a corporation to advance reasonable expenses to a director or officer upon the corporation's receipt of:
a written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification by the corporation; and

a written undertaking by him or her on his or her behalf to repay the amount paid or reimbursed by the corporation if it is ultimately determined that the standard of conduct was not met.







We entered into indemnification agreements with our directors and executive officers that obligate us to indemnify them to the maximum extent permitted by Maryland law.
The indemnification agreements provide that if a director or executive officer is a party or is threatened to be made a party to any proceeding by reason of such director's or executive officer's status as a director, officer or employee of our company, we must indemnify such director or executive officer for all expenses and liabilities actually and reasonably incurred by him or her, or on his or her behalf, unless it has been established that:
the act or omission of the director or executive officer was material to the matter giving rise to the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty;

the director or executive officer actually received an improper personal benefit in money, property or other services; or

with respect to any criminal action or proceeding, the director or executive officer had reasonable cause to believe his or her conduct was unlawful.

The indemnification agreements also provide that upon application of a director or executive officer of our company to a court of appropriate jurisdiction, the court may order indemnification of such director or executive officer if:
the court determines the director or executive officer is entitled to indemnification under the applicable section of the MGCL, in which case the director or executive officer shall be entitled to recover from us the expenses of securing such indemnification; or

the court determines that such director or executive officer is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, whether or not the director or executive officer has met the standards of conduct set forth in the applicable section of the MGCL or has been adjudged liable for receipt of an improper benefit under the applicable section of the MGCL; provided, however, that our indemnification obligations to such director or executive officer will be limited to the expenses actually and reasonably incurred by him or her, or on his or her behalf, in connection with any proceeding by or in the right of our company or in which the executive officer or director shall have been adjudged liable for receipt of an improper personal benefit under the applicable section of the MGCL.

Notwithstanding, and without limiting, any other provisions of the indemnification agreements, if a director or executive officer is a party or is threatened to be made a party to any proceeding by reason of such director's or executive officer’s status as a director, executive officer or employee of our company, and such director or executive officer is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such proceeding, we must indemnify such director or executive officer for all expenses actually and reasonably incurred by him or her, or on his or her behalf, in connection with each successfully resolved claim, issue or matter, including any claim, issue or matter in such a proceeding that is terminated by dismissal, with or without prejudice.
In addition, the indemnification agreements require us to advance reasonable expenses incurred by the indemnitee within 20 days of the receipt by us of a statement from the indemnitee requesting the advance, provided the statement evidences the expenses and is accompanied by:
a written affirmation of the indemnitee's good faith belief that he or she has met the standard of conduct necessary for indemnification; and

a written undertaking by or on behalf of the indemnitee to repay the portion of any expenses advanced to the indemnitee relating to claims, issues or matters in a proceeding if it is ultimately established that the standard of conduct was not met.

The indemnification agreements also provide for procedures for the determination of entitlement to indemnification, including requiring such determination be made by independent counsel after a change of control of us.
In addition, to the maximum extent permitted by law, the STAG Industrial, Inc. 2011 Equity Incentive Plan, as amended, provides the members of our board of directors with limited liability with respect to actions taken or decisions made in good faith relating to the plan and indemnification in connection with their activities under the plan.






Insofar as the foregoing provisions permit indemnification of directors, executive officers or persons controlling us for liability arising under the Securities Act of 1933, as amended (the “Securities Act”), we have been informed that, in the opinion of the SEC, this indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Meetings of Stockholders
Subject to the rights of holders of one or more classes or series of preferred stock specifically set forth in our charter, special meetings of stockholders may be called only by our board of directors, the chairman of our board of directors, our chief executive officer, our president or, in the case of a stockholder requested special meeting, by our secretary upon the written request of the holders of common stock entitled to cast not less than a majority of all votes entitled to be cast at such meeting. Only matters set forth in the notice of the special meeting may be considered and acted upon at such a meeting. Additionally, the articles supplementary for the Series C Preferred Stock provide the holders of Series C Preferred Stock certain rights to have a special meeting called upon their request in connection with the election of the preferred stock directors.
Advance Notice of Director Nominations and New Business
Our bylaws provide that with respect to an annual meeting of stockholders, nominations of individuals for election to our board of directors and the proposal of business to be considered by stockholders may be made only:
pursuant to our notice of the meeting;

by our board of directors; or

by a stockholder who is entitled to vote at the meeting and who has complied with the advance notice procedures of the bylaws.

With respect to special meetings of stockholders, only the business specified in our notice of the meeting may be brought before the meeting. Nominations of individuals for election to our board of directors at a special meeting may be made only:
pursuant to our notice of the meeting; and

by our board of directors; or

provided that our board of directors has determined that directors will be elected at the meeting, by a stockholder who is entitled to vote at the meeting and who has complied with the advance notice provisions of the bylaws.

Generally, in accordance with our bylaws, a stockholder seeking to nominate a director or bring other business before our annual meeting of stockholders must deliver a notice to our secretary not later than 5:00 p.m., Eastern Time, on the 120th day, nor earlier than the 150th day, prior to the first anniversary of the date of mailing of the notice for the prior year's annual meeting of stockholders. For a stockholder seeking to nominate a candidate for our board of directors, the notice must describe various matters regarding the nominee, including name, address, occupation and number of shares held, and other specified matters. For a stockholder seeking to propose other business, the notice must include a description of the proposed business, the reasons for the proposal and other specified matters.





Exhibit 21.1
Subsidiaries of STAG Industrial, Inc., a Maryland corporation
Name
 
Jurisdiction of
Formation/Incorporation
STAG Allentown, LLC
 
Delaware
STAG Arlington 2, L.P.
 
Delaware
STAG Belvidere 10, LLC
 
Delaware
STAG Belvidere I, LLC
 
Delaware
STAG Belvidere III, LLC
 
Delaware
STAG Belvidere IV, LLC
 
Delaware
STAG Belvidere IX, LLC
 
Delaware
STAG Belvidere V, LLC
 
Delaware
STAG Belvidere VI, LLC
 
Delaware
STAG Belvidere VII, LLC
 
Delaware
STAG Belvidere VIII, LLC
 
Delaware
STAG Burlington 2, LLC
 
Delaware
STAG Burlington 3, LLC
 
Delaware
STAG Burlington, LLC
 
Delaware
STAG CA GP, LLC
 
Delaware
STAG Camarillo 1, LP
 
Delaware
STAG Camarillo 2, LP
 
Delaware
STAG Columbia, LLC
 
Delaware
STAG De Pere, LLC
 
Delaware
STAG DeKalb, LLC
 
Delaware
STAG Duncan, LLC
 
Delaware
STAG Edgefield, LLC
 
Delaware
STAG El Paso 1, LP
 
Delaware
STAG El Paso 2, LP
 
Delaware
STAG El Paso 3, LP
 
Delaware
STAG El Paso 4, LP
 
Delaware
STAG El Paso 5, LP
 
Delaware
STAG El Paso, LP
 
Delaware
STAG Elizabethtown, LLC
 
Delaware
STAG Fairborn, LLC
 
Delaware
STAG Garland, LP
 
Delaware
STAG Germantown, LLC
 
Delaware
STAG GI Investments Holdings, LLC
 
Delaware
STAG GI Mooresville, LLC
 
Delaware
STAG GI New Jersey, LLC
 
Delaware
STAG GI Rogers, LLC
 
Delaware
STAG GI Streetsboro, LLC
 
Delaware
STAG Gloversville 1, LLC
 
Delaware
STAG Gloversville 2, LLC
 
Delaware
STAG Gloversville 4, LLC
 
Delaware
STAG Greenville, LLC
 
Delaware
STAG Greenwood 1, LLC
 
Delaware
STAG Greenwood 2, LLC
 
Delaware
STAG Greer, LLC
 
Delaware
STAG Gurnee 2, LLC
 
Delaware
STAG Gurnee, LLC
 
Delaware
STAG Hampstead, LLC
 
Delaware
STAG Harvard, LLC
 
Delaware
STAG Holland 3, LLC
 
Delaware
STAG Houston 14, LP
 
Delaware
STAG Houston 2, L.P.
 
Delaware
STAG Houston 4, LP
 
Delaware
STAG III Arlington, L.P.
 
Delaware
STAG III Boardman, LLC
 
Delaware
STAG III Malden, LLC
 
Delaware
STAG IND El Paso 6, LP
 
Delaware
STAG IND Houston 11, LP
 
Delaware





Name
 
Jurisdiction of
Formation/Incorporation
STAG IND Houston 9, LP
 
Delaware
STAG IND Mission, LP
 
Delaware
STAG IND Stafford, LP
 
Delaware
STAG Independence, LLC
 
Delaware
STAG Industrial GP, LLC
 
Delaware
STAG Industrial Holdings II, LLC
 
Delaware
STAG Industrial Holdings, LLC
 
Delaware
STAG Industrial Management, LLC
 
Delaware
STAG Industrial Operating Partnership, L.P.
 
Delaware
STAG Industrial TRS, LLC
 
Delaware
STAG Investments Holdings III, LLC
 
Delaware
STAG Investments Holdings IV, LLC
 
Delaware
STAG IV Seville, LLC
 
Delaware
STAG IV Waco, LP
 
Delaware
STAG Johnstown 1, LLC
 
Delaware
STAG Johnstown 2, LLC
 
Delaware
STAG Johnstown 3, LLC
 
Delaware
STAG Johnstown 4, LLC
 
Delaware
STAG Katy 2, LP
 
Delaware
STAG Katy, LP
 
Delaware
STAG Lafayette 1, LLC
 
Delaware
STAG Lafayette 2, LLC
 
Delaware
STAG Lafayette 3, LLC
 
Delaware
STAG Lancaster, LLC
 
Delaware
STAG Lansing 3, LLC
 
Delaware
STAG Laurens, LLC
 
Delaware
STAG Lebanon, LLC
 
Delaware
STAG Libertyville 1, LLC
 
Delaware
STAG Libertyville 2, LLC
 
Delaware
STAG Livonia 1, LLC
 
Delaware
STAG Livonia 2, LLC
 
Delaware
STAG Louisville, LLC
 
Delaware
STAG Machesney Park, LLC
 
Delaware
STAG Marion, LLC
 
Delaware
STAG McHenry 2, LP
 
Delaware
STAG Mechanicsburg 1, LLC
 
Delaware
STAG Mechanicsburg 2, LLC
 
Delaware
STAG Mechanicsburg 3, LLC
 
Delaware
STAG Montgomery, LLC
 
Delaware
STAG Mooresville 2, LP
 
Delaware
STAG NC GP 2, LLC
 
Delaware
STAG NC GP, LLC
 
Delaware
STAG NC Holdings, LP
 
Delaware
STAG New Hope, LLC
 
Delaware
STAG North Haven, LLC
 
Delaware
STAG Norton, LLC
 
Delaware
STAG Novi, LLC
 
Delaware
STAG O’Hara, LLC
 
Delaware
STAG Phenix City, LLC
 
Delaware
STAG Piedmont 1, LLC
 
Delaware
STAG Piedmont 2, LLC
 
Delaware
STAG Piedmont 3 LLC
 
Delaware
STAG Pineville, LLC
 
Delaware
STAG Plymouth 3, LLC
 
Delaware
STAG Portage, LLC
 
Delaware
STAG Portland 2, LLC
 
Delaware
STAG Reading, LLC
 
Delaware
STAG Rock Hill 2, LLC
 
Maryland
STAG Rockwall, LP
 
Delaware
STAG Romulus 2, LLC
 
Delaware
STAG Sauk Village, LLC
 
Delaware
STAG Simpsonville, LLC
 
Delaware





Name
 
Jurisdiction of
Formation/Incorporation
STAG South Saint Paul, LLC
 
Delaware
STAG Sparks 2, LLC
 
Delaware
STAG Spartanburg 3, LLC
 
Delaware
STAG Spartanburg, LLC
 
Delaware
STAG Sterling Heights, LLC
 
Delaware
STAG Stoughton 1, LLC
 
Delaware
STAG Stoughton 2, LLC
 
Delaware
STAG TX GP 2, LLC
 
Delaware
STAG TX GP, LLC
 
Delaware
STAG TX Holdings, LP
 
Delaware
STAG Ware Shoals, LLC
 
Delaware
STAG West Columbia 3, LLC
 
Delaware
STAG West Houston, LP
 
Delaware
STAG Wichita 1, LLC
 
Delaware
STAG Wichita 2, LLC
 
Delaware
STAG Wichita 4, LLC
 
Delaware
STAG Williamsport, LLC
 
Delaware
STAG Woodstock, LLC
 
Delaware
STAG York, LLC
 
Delaware
STIR Investments GP III, LLC
 
Delaware
STIR Investments GP IV, LLC
 
Delaware
STIR Investments GP, LLC
 
Delaware






Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-229661 and 333-181291) and Form S-8 (No. 333-173599, 333-188483 and 333-224681) of STAG Industrial, Inc. of our report dated February 12, 2020 relating to the financial statements, financial statement schedules, and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP
Boston, MA
February 12, 2020






Exhibit 31.1
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Benjamin S. Butcher, certify that:
1.
I have reviewed this annual report on Form 10-K of STAG Industrial, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: February 12, 2020
/s/ Benjamin S. Butcher
 
Benjamin S. Butcher
Chairman, Chief Executive Officer
and President





Exhibit 31.2
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, William R. Crooker, certify that:
1.
I have reviewed this annual report on Form 10-K of STAG Industrial, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: February 12, 2020
/s/ WILLIAM R. CROOKER
 
William R. Crooker
Chief Financial Officer, Executive Vice President
and Treasurer





Exhibit 32.1
Certification Pursuant To
18 U.S.C. Section 1350,
as Adopted Pursuant to
Section 906 of The Sarbanes-Oxley Act of 2002
In connection with the Annual Report of STAG Industrial, Inc. on Form 10-K for the fiscal year ended December 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned officers of STAG Industrial, Inc., certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002, that:
(1)
the Report, containing the financial statements, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
(2)
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of STAG Industrial, Inc.
Date: February 12, 2020
/s/ BENJAMIN S. BUTCHER
 
Benjamin S. Butcher
Chairman, Chief Executive Officer and President
 
 
 
/s/ WILLIAM R. CROOKER
 
William R. Crooker
Chief Financial Officer, Executive Vice President and Treasurer