STAG Industrial, Inc.
Consolidated Statements of Operations
(unaudited, in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Revenue
|
|
|
|
|
|
|
|
|
Rental income
|
$
|
137,805
|
|
|
$
|
117,471
|
|
|
$
|
271,630
|
|
|
$
|
235,810
|
|
|
Other income
|
622
|
|
|
146
|
|
|
792
|
|
|
355
|
|
|
Total revenue
|
138,427
|
|
|
117,617
|
|
|
272,422
|
|
|
236,165
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
Property
|
25,356
|
|
|
20,392
|
|
|
52,358
|
|
|
42,339
|
|
|
General and administrative
|
12,578
|
|
|
9,406
|
|
|
25,368
|
|
|
19,779
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
57,332
|
|
|
53,606
|
|
|
115,739
|
|
|
106,294
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses
|
511
|
|
|
588
|
|
|
1,363
|
|
|
1,064
|
|
|
Total expenses
|
95,777
|
|
|
83,992
|
|
|
194,828
|
|
|
169,476
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
Interest and other income
|
30
|
|
|
156
|
|
|
62
|
|
|
235
|
|
|
Interest expense
|
(15,273)
|
|
|
(15,333)
|
|
|
(30,631)
|
|
|
(30,197)
|
|
|
Debt extinguishment and modification expenses
|
—
|
|
|
(834)
|
|
|
(679)
|
|
|
(834)
|
|
|
Gain on involuntary conversion
|
—
|
|
|
657
|
|
|
—
|
|
|
657
|
|
|
Gain on the sales of rental property, net
|
5,976
|
|
|
1,045
|
|
|
12,385
|
|
|
47,804
|
|
|
Total other income (expense)
|
(9,267)
|
|
|
(14,309)
|
|
|
(18,863)
|
|
|
17,665
|
|
|
Net income
|
$
|
33,383
|
|
|
$
|
19,316
|
|
|
$
|
58,731
|
|
|
$
|
84,354
|
|
|
Less: income attributable to noncontrolling interest after preferred stock dividends
|
733
|
|
|
407
|
|
|
1,206
|
|
|
2,005
|
|
|
Net income attributable to STAG Industrial, Inc.
|
$
|
32,650
|
|
|
$
|
18,909
|
|
|
$
|
57,525
|
|
|
$
|
82,349
|
|
|
Less: preferred stock dividends
|
—
|
|
|
1,289
|
|
|
1,289
|
|
|
2,578
|
|
|
Less: redemption of preferred stock
|
—
|
|
|
—
|
|
|
2,582
|
|
|
—
|
|
|
Less: amount allocated to participating securities
|
74
|
|
|
68
|
|
|
147
|
|
|
136
|
|
|
Net income attributable to common stockholders
|
$
|
32,576
|
|
|
$
|
17,552
|
|
|
$
|
53,507
|
|
|
$
|
79,635
|
|
|
Weighted average common shares outstanding — basic
|
159,736
|
|
|
148,663
|
|
|
159,086
|
|
|
148,116
|
|
|
Weighted average common shares outstanding — diluted
|
161,367
|
|
|
149,027
|
|
|
160,249
|
|
|
148,341
|
|
|
Net income per share — basic and diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share attributable to common stockholders — basic
|
$
|
0.20
|
|
|
$
|
0.12
|
|
|
$
|
0.34
|
|
|
$
|
0.54
|
|
|
Net income per share attributable to common stockholders — diluted
|
$
|
0.20
|
|
|
$
|
0.12
|
|
|
$
|
0.33
|
|
|
$
|
0.54
|
|
The accompanying notes are an integral part of these consolidated financial statements.
STAG Industrial, Inc.
Consolidated Statements of Comprehensive Income
(unaudited, in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Net income
|
$
|
33,383
|
|
|
$
|
19,316
|
|
|
$
|
58,731
|
|
|
$
|
84,354
|
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
Income (loss) on interest rate swaps
|
1,432
|
|
|
(2,009)
|
|
|
13,582
|
|
|
(32,200)
|
|
|
Other comprehensive income (loss)
|
1,432
|
|
|
(2,009)
|
|
|
13,582
|
|
|
(32,200)
|
|
|
Comprehensive income
|
34,815
|
|
|
17,307
|
|
|
72,313
|
|
|
52,154
|
|
|
Income attributable to noncontrolling interest after preferred stock dividends
|
(733)
|
|
|
(407)
|
|
|
(1,206)
|
|
|
(2,005)
|
|
|
Other comprehensive (income) loss attributable to noncontrolling interest
|
(31)
|
|
|
32
|
|
|
(299)
|
|
|
789
|
|
|
Comprehensive income attributable to STAG Industrial, Inc.
|
$
|
34,051
|
|
|
$
|
16,932
|
|
|
$
|
70,808
|
|
|
$
|
50,938
|
|
The accompanying notes are an integral part of these consolidated financial statements.
STAG Industrial, Inc.
Consolidated Statements of Equity
(unaudited, in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock
|
|
Common Stock
|
|
Additional Paid-in Capital
|
|
Cumulative Dividends in Excess of Earnings
|
|
Accumulated Other Comprehensive Loss
|
|
Total Stockholders’ Equity
|
|
Noncontrolling Interest - Unit Holders in Operating Partnership
|
|
Total Equity
|
|
|
|
Shares
|
|
Amount
|
|
|
|
|
|
|
|
Three months ended June 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2021
|
$
|
—
|
|
|
159,082,448
|
|
|
$
|
1,591
|
|
|
$
|
3,443,787
|
|
|
$
|
(778,727)
|
|
|
$
|
(28,143)
|
|
|
$
|
2,638,508
|
|
|
$
|
59,608
|
|
|
$
|
2,698,116
|
|
|
Proceeds from sales of common stock, net
|
—
|
|
|
1,208,014
|
|
|
12
|
|
|
41,781
|
|
|
—
|
|
|
—
|
|
|
41,793
|
|
|
—
|
|
|
41,793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends and distributions, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(58,036)
|
|
|
—
|
|
|
(58,036)
|
|
|
(4,325)
|
|
|
(62,361)
|
|
|
Non-cash compensation activity, net
|
—
|
|
|
2,901
|
|
|
—
|
|
|
2,192
|
|
|
—
|
|
|
—
|
|
|
2,192
|
|
|
2,347
|
|
|
4,539
|
|
|
Redemption of common units to common stock
|
—
|
|
|
22,175
|
|
|
—
|
|
|
368
|
|
|
—
|
|
|
—
|
|
|
368
|
|
|
(368)
|
|
|
—
|
|
|
Rebalancing of noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,186)
|
|
|
—
|
|
|
—
|
|
|
(1,186)
|
|
|
1,186
|
|
|
—
|
|
|
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,401
|
|
|
1,401
|
|
|
31
|
|
|
1,432
|
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
32,650
|
|
|
—
|
|
|
32,650
|
|
|
733
|
|
|
33,383
|
|
|
Balance, June 30, 2021
|
$
|
—
|
|
|
160,315,538
|
|
|
$
|
1,603
|
|
|
$
|
3,486,942
|
|
|
$
|
(804,113)
|
|
|
$
|
(26,742)
|
|
|
$
|
2,657,690
|
|
|
$
|
59,212
|
|
|
$
|
2,716,902
|
|
|
Three months ended June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2020
|
$
|
75,000
|
|
|
148,708,031
|
|
|
$
|
1,487
|
|
|
$
|
3,142,495
|
|
|
$
|
(714,799)
|
|
|
$
|
(47,860)
|
|
|
$
|
2,456,323
|
|
|
$
|
60,791
|
|
|
$
|
2,517,114
|
|
|
Proceeds from sales of common stock, net
|
—
|
|
|
—
|
|
|
—
|
|
|
(67)
|
|
|
—
|
|
|
—
|
|
|
(67)
|
|
|
—
|
|
|
(67)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends and distributions, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(54,880)
|
|
|
—
|
|
|
(54,880)
|
|
|
(2,105)
|
|
|
(56,985)
|
|
|
Non-cash compensation activity, net
|
—
|
|
|
4,750
|
|
|
—
|
|
|
1,970
|
|
|
—
|
|
|
—
|
|
|
1,970
|
|
|
978
|
|
|
2,948
|
|
|
Redemption of common units to common stock
|
—
|
|
|
228,340
|
|
|
2
|
|
|
3,656
|
|
|
—
|
|
|
—
|
|
|
3,658
|
|
|
(3,658)
|
|
|
—
|
|
|
Rebalancing of noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
109
|
|
|
—
|
|
|
—
|
|
|
109
|
|
|
(109)
|
|
|
—
|
|
|
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,977)
|
|
|
(1,977)
|
|
|
(32)
|
|
|
(2,009)
|
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
18,909
|
|
|
—
|
|
|
18,909
|
|
|
407
|
|
|
19,316
|
|
|
Balance, June 30, 2020
|
$
|
75,000
|
|
|
148,941,121
|
|
|
$
|
1,489
|
|
|
$
|
3,148,163
|
|
|
$
|
(750,770)
|
|
|
$
|
(49,837)
|
|
|
$
|
2,424,045
|
|
|
$
|
56,272
|
|
|
$
|
2,480,317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2020
|
$
|
75,000
|
|
|
158,209,823
|
|
|
$
|
1,582
|
|
|
$
|
3,421,721
|
|
|
$
|
(742,071)
|
|
|
$
|
(40,025)
|
|
|
$
|
2,716,207
|
|
|
$
|
54,845
|
|
|
$
|
2,771,052
|
|
|
Proceeds from sales of common stock, net
|
—
|
|
|
1,888,290
|
|
|
19
|
|
|
63,340
|
|
|
—
|
|
|
—
|
|
|
63,359
|
|
|
—
|
|
|
63,359
|
|
|
Redemption of preferred stock
|
(75,000)
|
|
|
—
|
|
|
—
|
|
|
2,573
|
|
|
(2,582)
|
|
|
—
|
|
|
(75,009)
|
|
|
—
|
|
|
(75,009)
|
|
|
Dividends and distributions, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(116,864)
|
|
|
—
|
|
|
(116,864)
|
|
|
(5,761)
|
|
|
(122,625)
|
|
|
Non-cash compensation activity, net
|
—
|
|
|
98,091
|
|
|
1
|
|
|
(1,022)
|
|
|
(121)
|
|
|
—
|
|
|
(1,142)
|
|
|
8,954
|
|
|
7,812
|
|
|
Redemption of common units to common stock
|
—
|
|
|
119,334
|
|
|
1
|
|
|
1,990
|
|
|
—
|
|
|
—
|
|
|
1,991
|
|
|
(1,991)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rebalancing of noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,660)
|
|
|
—
|
|
|
—
|
|
|
(1,660)
|
|
|
1,660
|
|
|
—
|
|
|
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13,283
|
|
|
13,283
|
|
|
299
|
|
|
13,582
|
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
57,525
|
|
|
—
|
|
|
57,525
|
|
|
1,206
|
|
|
58,731
|
|
|
Balance, June 30, 2021
|
$
|
—
|
|
|
160,315,538
|
|
|
$
|
1,603
|
|
|
$
|
3,486,942
|
|
|
$
|
(804,113)
|
|
|
$
|
(26,742)
|
|
|
$
|
2,657,690
|
|
|
$
|
59,212
|
|
|
$
|
2,716,902
|
|
|
Six months ended June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sales of common stock, net
|
—
|
|
|
5,600,000
|
|
|
56
|
|
|
172,600
|
|
|
—
|
|
|
—
|
|
|
172,656
|
|
|
—
|
|
|
172,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends and distributions, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(109,702)
|
|
|
—
|
|
|
(109,702)
|
|
|
(3,001)
|
|
|
(112,703)
|
|
|
Non-cash compensation activity, net
|
—
|
|
|
77,798
|
|
|
1
|
|
|
1,112
|
|
|
(390)
|
|
|
—
|
|
|
723
|
|
|
3,596
|
|
|
4,319
|
|
|
Redemption of common units to common stock
|
—
|
|
|
447,730
|
|
|
4
|
|
|
7,082
|
|
|
—
|
|
|
—
|
|
|
7,086
|
|
|
(7,086)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rebalancing of noncontrolling interest
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,184)
|
|
|
—
|
|
|
—
|
|
|
(3,184)
|
|
|
3,184
|
|
|
—
|
|
|
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(31,411)
|
|
|
(31,411)
|
|
|
(789)
|
|
|
(32,200)
|
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
82,349
|
|
|
—
|
|
|
82,349
|
|
|
2,005
|
|
|
84,354
|
|
|
Balance, June 30, 2020
|
$
|
75,000
|
|
|
148,941,121
|
|
|
$
|
1,489
|
|
|
$
|
3,148,163
|
|
|
$
|
(750,770)
|
|
|
$
|
(49,837)
|
|
|
$
|
2,424,045
|
|
|
$
|
56,272
|
|
|
$
|
2,480,317
|
|
The accompanying notes are an integral part of these consolidated financial statements.
STAG Industrial, Inc.
Consolidated Statements of Cash Flows
(unaudited, in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30,
|
|
|
|
|
2021
|
|
2020
|
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
Net income
|
$
|
58,731
|
|
|
$
|
84,354
|
|
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
Depreciation and amortization
|
115,739
|
|
|
106,294
|
|
|
|
|
|
|
|
|
|
|
|
Gain on involuntary conversion
|
—
|
|
|
(657)
|
|
|
|
|
Non-cash portion of interest expense
|
1,276
|
|
|
1,422
|
|
|
|
|
Amortization of above and below market leases, net
|
1,799
|
|
|
2,152
|
|
|
|
|
Straight-line rent adjustments, net
|
(8,887)
|
|
|
(5,498)
|
|
|
|
|
|
|
|
|
|
|
|
Debt extinguishment and modification expenses
|
—
|
|
|
834
|
|
|
|
|
Gain on the sales of rental property, net
|
(12,385)
|
|
|
(47,804)
|
|
|
|
|
Non-cash compensation expense
|
9,154
|
|
|
5,790
|
|
|
|
|
|
|
|
|
|
|
|
Change in assets and liabilities:
|
|
|
|
|
|
|
Tenant accounts receivable
|
3,212
|
|
|
(475)
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses and other assets
|
(10,018)
|
|
|
(4,116)
|
|
|
|
|
Accounts payable, accrued expenses and other liabilities
|
864
|
|
|
3,243
|
|
|
|
|
Tenant prepaid rent and security deposits
|
2,888
|
|
|
2,549
|
|
|
|
|
Total adjustments
|
103,642
|
|
|
63,734
|
|
|
|
|
Net cash provided by operating activities
|
162,373
|
|
|
148,088
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
Acquisitions of land and buildings and improvements
|
(194,164)
|
|
|
(110,121)
|
|
|
|
|
Additions of land and building and improvements
|
(18,913)
|
|
|
(27,299)
|
|
|
|
|
Acquisitions of other assets
|
—
|
|
|
(450)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sales of rental property, net
|
39,619
|
|
|
101,881
|
|
|
|
|
Proceeds from involuntary conversion
|
—
|
|
|
782
|
|
|
|
|
Acquisition deposits, net
|
(877)
|
|
|
660
|
|
|
|
|
Acquisitions of deferred leasing intangibles
|
(27,682)
|
|
|
(20,542)
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
(202,017)
|
|
|
(55,089)
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from unsecured credit facility
|
765,000
|
|
|
387,000
|
|
|
|
|
Repayment of unsecured credit facility
|
(588,000)
|
|
|
(533,000)
|
|
|
|
|
Proceeds from unsecured term loans
|
300,000
|
|
|
400,000
|
|
|
|
|
Repayment of unsecured term loans
|
(300,000)
|
|
|
(300,000)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment of mortgage notes
|
(1,093)
|
|
|
(1,993)
|
|
|
|
|
Payment of loan fees and costs
|
(2,847)
|
|
|
(1,129)
|
|
|
|
|
Payment of defeasance fees and other costs
|
—
|
|
|
(425)
|
|
|
|
|
Proceeds from sales of common stock, net
|
63,314
|
|
|
172,626
|
|
|
|
|
Redemption of preferred stock
|
(75,000)
|
|
|
—
|
|
|
|
|
Dividends and distributions
|
(122,212)
|
|
|
(111,868)
|
|
|
|
|
Repurchase and retirement of share-based compensation
|
(1,342)
|
|
|
(1,472)
|
|
|
|
|
Net cash provided by financing activities
|
37,820
|
|
|
9,739
|
|
|
|
|
Increase (decrease) in cash and cash equivalents and restricted cash
|
(1,824)
|
|
|
102,738
|
|
|
|
|
Cash and cash equivalents and restricted cash—beginning of period
|
20,339
|
|
|
11,864
|
|
|
|
|
Cash and cash equivalents and restricted cash—end of period
|
$
|
18,515
|
|
|
$
|
114,602
|
|
|
|
|
Supplemental disclosure:
|
|
|
|
|
|
|
Cash paid for interest, net of capitalized interest
|
$
|
29,574
|
|
|
$
|
28,520
|
|
|
|
|
Supplemental schedule of non-cash investing and financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions of land and buildings and improvements
|
$
|
(4,239)
|
|
|
$
|
(111)
|
|
|
|
|
Acquisitions of deferred leasing intangibles
|
$
|
(703)
|
|
|
$
|
(33)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in additions of land, building, and improvements included in accounts payable, accrued expenses, and other liabilities
|
$
|
3,469
|
|
|
$
|
683
|
|
|
|
|
Additions to building and other capital improvements from non-cash compensation
|
$
|
—
|
|
|
$
|
(17)
|
|
|
|
|
Assumption of mortgage notes
|
$
|
5,103
|
|
|
$
|
—
|
|
|
|
|
Fair market value adjustment to mortgage notes acquired
|
$
|
(161)
|
|
|
$
|
—
|
|
|
|
|
Change in loan fees, costs, and offering costs included in accounts payable, accrued expenses, and other liabilities
|
$
|
1,016
|
|
|
$
|
(1,020)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends and distributions accrued
|
$
|
19,803
|
|
|
$
|
18,301
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
STAG Industrial, Inc.
Notes to Consolidated Financial Statements
(unaudited)
1. Organization and Description of Business
STAG Industrial, Inc. (the “Company”) is an industrial real estate operating company focused on the acquisition 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 Company is structured as an umbrella partnership REIT, commonly called an UPREIT, and owns substantially all of its assets 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 June 30, 2021 and December 31, 2020, the Company owned a 97.8% and 98.0%, 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 June 30, 2021, the Company owned 501 buildings in 39 states with approximately 100.1 million rentable square feet, consisting of 421 warehouse/distribution buildings, 73 light manufacturing buildings, and seven flex/office buildings.
COVID-19 Pandemic
Currently, one of the most significant risks and uncertainties facing the Company and the real estate industry generally is the potential adverse effect of the ongoing public health crisis of the novel coronavirus disease (“COVID-19”) pandemic.
The Company closely monitors the effect of the COVID-19 pandemic on all aspects of its business, including how the pandemic will affect its tenants and business partners. The Company did not incur significant disruptions from the COVID-19 pandemic during the three and six months ended June 30, 2021. In addition, the Company did not enter into any rent deferral agreements during the three and six months ended June 30, 2021. The Company will continue to evaluate tenant rent relief requests on an individual basis, considering a number of factors. Not all tenant requests will ultimately result in modified agreements, nor is the Company foregoing its contractual rights under its lease agreements.
The Company remains unable to predict the ultimate impact that the pandemic will have on its financial condition, results of operations and cash flows due to numerous uncertainties. The extent to which the COVID-19 pandemic affects the Company’s operations and those of its tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others.
2. Summary of Significant Accounting Policies
Interim Financial Information
The accompanying interim financial statements have been presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and with the instructions to Form 10-Q and Regulation S-X for interim financial information. Accordingly, these statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, the accompanying interim financial statements include all adjustments, consisting of normal recurring items, necessary for their fair statement in conformity with GAAP. Interim results are not necessarily indicative of results for a full year. The year-end consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
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 and restated (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.
Restricted Cash
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)
|
|
June 30, 2021
|
|
December 31, 2020
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
14,588
|
|
|
$
|
15,666
|
|
|
|
|
|
|
Restricted cash
|
|
3,927
|
|
|
4,673
|
|
|
|
|
|
|
Total cash and cash equivalents and restricted cash
|
|
$
|
18,515
|
|
|
$
|
20,339
|
|
|
|
|
|
Incentive and Equity-Based Employee Compensation Plans
On January 7, 2021, the Company adopted the STAG Industrial, Inc. Employee Retirement Vesting Program (the “Vesting Program”) to provide supplemental retirement benefits for eligible employees. For those employees who are retirement eligible or will become retirement eligible during the applicable vesting period under the terms of the Vesting Program, the Company accelerates equity-based compensation through the employee’s six-month retirement notification period or retirement eligibility date, respectively. The adoption of the Vesting Program resulted in an increase to general and administrative expenses of approximately $1.4 million and $2.9 million for the three and six months ended June 30, 2021, respectively, due to the acceleration of equity-based compensation expense for certain eligible employees. The Company estimates that the adoption of the Vesting Program will result in an increase in general and administrative expenses of approximately $2.4 million for the year ending December 31, 2021.
Taxes
Federal Income Taxes
The Company’s taxable REIT subsidiary recognized net loss of approximately $4,000, $4,000, $0 and $0 for the three and six months ended June 30, 2021 and 2020, respectively.
State and Local Income, Excise, and Franchise Tax
State and local income, excise, and franchise taxes in the amount of $0.4 million, $0.8 million, $0.5 million and $0.9 million have been recorded in other expenses on the accompanying Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020, respectively.
Uncertain Tax Positions
As of June 30, 2021 and December 31, 2020, there were no liabilities for uncertain tax positions.
Concentrations of Credit Risk
Management believes the current credit risk of the Company’s 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 as of June 30, 2021 and December 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental Property (in thousands)
|
|
June 30, 2021
|
|
December 31, 2020
|
|
Land
|
|
$
|
510,413
|
|
|
$
|
492,783
|
|
|
Buildings, net of accumulated depreciation of $366,571 and $327,043, respectively
|
|
3,306,299
|
|
|
3,195,439
|
|
|
Tenant improvements, net of accumulated depreciation of $25,078 and $24,891, respectively
|
|
41,000
|
|
|
43,684
|
|
|
Building and land improvements, net of accumulated depreciation of $161,318 and $143,414, respectively
|
|
278,759
|
|
|
275,433
|
|
|
Construction in progress
|
|
4,765
|
|
|
18,052
|
|
|
Deferred leasing intangibles, net of accumulated amortization of $260,893 and $258,005, respectively
|
|
482,672
|
|
|
499,802
|
|
|
Total rental property, net
|
|
$
|
4,623,908
|
|
|
$
|
4,525,193
|
|
Acquisitions
The following table summarizes the acquisitions of the Company during the three and six months ended June 30, 2021. The Company accounted for all of its acquisitions as asset acquisitions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market (1)
|
|
Date Acquired
|
|
Square Feet
|
|
Number of Buildings
|
|
Purchase Price
(in thousands)
|
|
Omaha/Council Bluffs, NE-IA
|
|
January 21, 2021
|
|
370,000
|
|
|
1
|
|
|
$
|
24,922
|
|
|
Minneapolis/St Paul, MN
|
|
February 24, 2021
|
|
80,655
|
|
|
1
|
|
|
10,174
|
|
|
Long Island, NY
|
|
February 25, 2021
|
|
64,224
|
|
|
1
|
|
|
8,516
|
|
|
Sacramento, CA
|
|
February 25, 2021
|
|
267,284
|
|
|
1
|
|
|
25,917
|
|
|
Little Rock/N Little Rock
|
|
March 1, 2021
|
|
300,160
|
|
|
1
|
|
|
24,317
|
|
|
Cleveland, OH
|
|
March 18, 2021
|
|
170,000
|
|
|
1
|
|
|
6,382
|
|
|
Three months ended March 31, 2021
|
|
|
|
1,252,323
|
|
|
6
|
|
|
100,228
|
|
|
Indianapolis, IN
|
|
May 17, 2021
|
|
154,440
|
|
|
1
|
|
|
13,655
|
|
|
Baltimore, MD
|
|
May 17, 2021
|
|
46,851
|
|
|
1
|
|
|
6,228
|
|
|
Detroit, MI
|
|
June 1, 2021
|
|
248,040
|
|
|
1
|
|
|
23,786
|
|
|
Green Bay, WI
|
|
June 7, 2021
|
|
152,000
|
|
|
1
|
|
|
7,249
|
|
|
Phoenix, AZ
|
|
June 14, 2021
|
|
41,504
|
|
|
1
|
|
|
8,670
|
|
|
Cleveland, OH
|
|
June 17, 2021
|
|
179,577
|
|
|
1
|
|
|
19,602
|
|
|
Reno/Sparks, NV
|
|
June 30, 2021
|
|
183,435
|
|
|
1
|
|
|
13,892
|
|
|
Washington, DC
|
|
June 30, 2021
|
|
193,420
|
|
|
1
|
|
|
17,521
|
|
|
Stockton/Modesto, CA
|
|
June 30, 2021
|
|
150,000
|
|
|
1
|
|
|
16,118
|
|
|
Three months ended June 30, 2021
|
|
|
|
1,349,267
|
|
|
9
|
|
|
126,721
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2021
|
|
|
|
2,601,590
|
|
|
15
|
|
|
$
|
226,949
|
|
(1) As defined by CoStar Realty Information Inc (“CoStar”). If the building is located outside of a CoStar defined market, the city and state is reflected.
The following table summarizes the allocation of the consideration paid at the date of acquisition during the six months ended June 30, 2021 for the acquired assets and liabilities in connection with the acquisitions identified in the table above.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired Assets and Liabilities
|
|
Purchase Price (in thousands)
|
|
Weighted Average Amortization Period (years) of Intangibles at Acquisition
|
|
|
|
|
|
Land
|
|
$
|
21,844
|
|
|
N/A
|
|
|
|
|
|
Buildings
|
|
165,549
|
|
|
N/A
|
|
|
|
|
|
Tenant improvements
|
|
1,575
|
|
|
N/A
|
|
|
|
|
|
Building and land improvements
|
|
9,435
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred leasing intangibles - In-place leases
|
|
20,206
|
|
|
8.5
|
|
|
|
|
|
Deferred leasing intangibles - Tenant relationships
|
|
9,761
|
|
|
11.4
|
|
|
|
|
|
Deferred leasing intangibles - Above market leases
|
|
2,279
|
|
|
13.8
|
|
|
|
|
|
Deferred leasing intangibles - Below market leases
|
|
(3,861)
|
|
|
6.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Below market assumed debt adjustment
|
|
161
|
|
|
18.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total purchase price
|
|
$
|
226,949
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Mortgage notes assumed
|
|
(5,103)
|
|
|
|
|
|
|
|
|
Net assets acquired
|
|
$
|
221,846
|
|
|
|
|
|
|
|
On February 25, 2021, the Company assumed a mortgage note of approximately $5.1 million in connection with the acquisition of the property located in Long Island, NY. For a discussion of the method used to determine the fair value of the mortgage note, see Note 4.
The following table summarizes the results of operations for the three and six months ended June 30, 2021 for the buildings acquired during the six months ended June 30, 2021 included in the Company’s Consolidated Statements of Operations from the date of acquisition.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Results of Operations (in thousands)
|
|
Three months ended June 30, 2021
|
|
Six months ended June 30, 2021
|
|
Total revenue
|
|
$
|
2,219
|
|
|
$
|
3,506
|
|
|
Net income
|
|
$
|
284
|
|
|
$
|
307
|
|
Dispositions
During the six months ended June 30, 2021, the Company sold six buildings to third parties comprised of approximately 0.9 million rentable square feet with a net book value of approximately $27.2 million. These buildings contributed approximately $0.2 million, $0.5 million, $1.1 million and $2.1 million to revenue for the three and six months ended June 30, 2021 and 2020, respectively. These buildings contributed approximately $0.1 million, $0.1 million, $0.5 million and $0.8 million to net income (exclusive of gain on the sales of rental property, net) for the three and six months ended June 30, 2021 and 2020, respectively. Net proceeds from the sales of rental property were approximately $39.6 million and the Company recognized the full gain on the sales of rental property, net, of approximately $12.4 million for the six months ended June 30, 2021.
Assets Held for Sale
As of June 30, 2021, the related land, building and improvements, net, and deferred leasing intangibles, net, of approximately $0.8 million, $1.9 million, and $0, respectively, for one building located in Charlotte, NC were classified as assets held for sale, net on the accompanying Consolidated Balance Sheets. This building contributed approximately $0.1 million, $0.3 million, $0.2 million and $0.3 million to revenue for the three and six months ended June 30, 2021 and 2020, respectively. This building contributed approximately $0.1 million, $0.2 million, $0.1 million and $0.1 million to net income for the three and six months ended June 30, 2021 and 2020, respectively.
Gain on Involuntary Conversion
During the three and six months ended June 30, 2021, the Company did not recognize any gain on involuntary conversion. During the three and six months ended June 30, 2020, the Company recognized a gain on involuntary conversion of approximately $0.7 million related to an eminent domain taking of a portion of a parcel of land.
Deferred Leasing Intangibles
The following table summarizes the deferred leasing intangibles on the accompanying Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
Deferred Leasing Intangibles (in thousands)
|
|
Gross
|
|
Accumulated Amortization
|
|
Net
|
|
Gross
|
|
Accumulated Amortization
|
|
Net
|
|
Above market leases
|
|
$
|
86,466
|
|
|
$
|
(31,194)
|
|
|
$
|
55,272
|
|
|
$
|
92,125
|
|
|
$
|
(33,629)
|
|
|
$
|
58,496
|
|
|
Other intangible lease assets
|
|
657,099
|
|
|
(229,699)
|
|
|
427,400
|
|
|
665,682
|
|
|
(224,376)
|
|
|
441,306
|
|
|
Total deferred leasing intangible assets
|
|
$
|
743,565
|
|
|
$
|
(260,893)
|
|
|
$
|
482,672
|
|
|
$
|
757,807
|
|
|
$
|
(258,005)
|
|
|
$
|
499,802
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Below market leases
|
|
$
|
50,439
|
|
|
$
|
(17,510)
|
|
|
$
|
32,929
|
|
|
$
|
48,521
|
|
|
$
|
(15,759)
|
|
|
$
|
32,762
|
|
|
Total deferred leasing intangible liabilities
|
|
$
|
50,439
|
|
|
$
|
(17,510)
|
|
|
$
|
32,929
|
|
|
$
|
48,521
|
|
|
$
|
(15,759)
|
|
|
$
|
32,762
|
|
The following table summarizes the amortization expense and the net decrease to rental income for the amortization of deferred leasing intangibles during the three and six months ended June 30, 2021 and 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
|
Deferred Leasing Intangibles Amortization (in thousands)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Net decrease to rental income related to above and below market lease amortization
|
|
$
|
330
|
|
|
$
|
1,174
|
|
|
$
|
1,810
|
|
|
$
|
2,164
|
|
|
Amortization expense related to other intangible lease assets
|
|
$
|
21,422
|
|
|
$
|
21,076
|
|
|
$
|
43,869
|
|
|
$
|
41,378
|
|
The following table summarizes the amortization of deferred leasing intangibles over the next five calendar years beginning with 2021 as of June 30, 2021.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
|
Remainder of 2021
|
|
$
|
38,884
|
|
|
$
|
283
|
|
|
2022
|
|
$
|
68,917
|
|
|
$
|
327
|
|
|
2023
|
|
$
|
60,313
|
|
|
$
|
820
|
|
|
2024
|
|
$
|
51,203
|
|
|
$
|
1,286
|
|
|
2025
|
|
$
|
43,445
|
|
|
$
|
1,164
|
|
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 June 30, 2021 and December 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan
|
|
Principal Outstanding as of June 30, 2021 (in thousands)
|
|
Principal Outstanding as of December 31, 2020 (in thousands)
|
|
Interest
Rate(1)(2)
|
|
Maturity Date
|
|
Prepayment Terms(3)
|
|
Unsecured credit facility:
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured Credit Facility(4)
|
|
$
|
284,000
|
|
|
$
|
107,000
|
|
|
L + 0.90%
|
|
January 12, 2024
|
|
i
|
|
Total unsecured credit facility
|
|
284,000
|
|
|
107,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured term loans:
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured Term Loan A
|
|
150,000
|
|
|
150,000
|
|
|
3.38
|
%
|
|
March 31, 2022
|
|
i
|
|
Unsecured Term Loan D
|
|
150,000
|
|
|
150,000
|
|
|
2.85
|
%
|
|
January 4, 2023
|
|
i
|
|
Unsecured Term Loan E
|
|
175,000
|
|
|
175,000
|
|
|
3.92
|
%
|
|
January 15, 2024
|
|
i
|
|
Unsecured Term Loan F
|
|
200,000
|
|
|
200,000
|
|
|
3.11
|
%
|
|
January 12, 2025
|
|
i
|
|
Unsecured Term Loan G
|
|
300,000
|
|
|
300,000
|
|
|
1.28
|
%
|
|
February 5, 2026
|
|
i
|
|
Total unsecured term loans
|
|
975,000
|
|
|
975,000
|
|
|
|
|
|
|
|
|
Total unamortized deferred financing fees and debt issuance costs
|
|
(4,070)
|
|
|
(3,889)
|
|
|
|
|
|
|
|
|
Total carrying value unsecured term loans, net
|
|
970,930
|
|
|
971,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
Total unamortized deferred financing fees and debt issuance costs
|
|
(1,610)
|
|
|
(1,719)
|
|
|
|
|
|
|
|
|
Total carrying value unsecured notes, net
|
|
573,390
|
|
|
573,281
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage notes (secured debt):
|
|
|
|
|
|
|
|
|
|
|
|
Wells Fargo Bank, National Association CMBS Loan
|
|
47,580
|
|
|
48,546
|
|
|
4.31
|
%
|
|
December 1, 2022
|
|
iii
|
|
Thrivent Financial for Lutherans
|
|
3,494
|
|
|
3,556
|
|
|
4.78
|
%
|
|
December 15, 2023
|
|
iv
|
|
United of Omaha Life Insurance Company
|
|
5,040
|
|
|
—
|
|
|
3.71
|
%
|
|
October 1, 2039
|
|
ii
|
|
Total mortgage notes
|
|
56,114
|
|
|
52,102
|
|
|
|
|
|
|
|
|
Net unamortized fair market value premium (discount)
|
|
(134)
|
|
|
29
|
|
|
|
|
|
|
|
|
Total unamortized deferred financing fees and debt issuance costs
|
|
(169)
|
|
|
(233)
|
|
|
|
|
|
|
|
|
Total carrying value mortgage notes, net
|
|
55,811
|
|
|
51,898
|
|
|
|
|
|
|
|
|
Total / weighted average interest rate(5)
|
|
$
|
1,884,131
|
|
|
$
|
1,703,290
|
|
|
2.99
|
%
|
|
|
|
|
(1)Interest rate as of June 30, 2021. At June 30, 2021, the one-month LIBOR (“L”) was 0.10050%. The current 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 June 30, 2021, one-month LIBOR for the Unsecured Term Loans A, D, E, F, and G was swapped to a fixed rate of 2.38%, 1.85%, 2.92%, 2.11%, and 0.28%, respectively. One-month LIBOR for the Unsecured Term Loan G will be swapped to a fixed rate of 0.94% effective April 18, 2023.
(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 $750.0 million. Deferred financing fees and debt issuance costs, net of accumulated amortization related to the unsecured credit facility of approximately $2.2 million and $1.6 million is included in prepaid expenses and other assets on the accompanying Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020, respectively. The initial maturity date is January 15, 2023, which may be extended pursuant to two six-month extension options exercisable by the Company in its discretion upon advance written notice. Exercise of each six-month option is subject to the following conditions: (i) absence of a default immediately before the extension and immediately after giving effect to the extension, (ii) accuracy of representations and warranties as of the extension date (both immediately before and after the extension), as if made on the extension date, and (iii) payment of a fee. Neither extension option is subject to lender consent, assuming proper notice and satisfaction of the conditions.
(5)The weighted average interest rate was calculated using the fixed interest rate swapped on the notional amount of $975.0 million of debt, and 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 or discounts.
The aggregate undrawn nominal commitment on the unsecured credit facility as of June 30, 2021 was approximately $463.1 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 $6.3 million as of June 30, 2021 and December 31, 2020, 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 three and six months ended June 30, 2021 and 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
|
Costs Included in Interest Expense (in thousands)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Amortization of deferred financing fees and debt issuance costs and fair market value premiums/discounts
|
|
$
|
789
|
|
|
$
|
746
|
|
|
$
|
1,276
|
|
|
$
|
1,422
|
|
|
Facility, unused, and other fees
|
|
$
|
440
|
|
|
$
|
316
|
|
|
$
|
826
|
|
|
$
|
680
|
|
Subsequent to June 30, 2021, on July 8, 2021, the Company entered into a note purchase agreement for the future private placement by the Operating Partnership of $275.0 million senior unsecured notes, maturing September 29, 2031, with a fixed annual interest rate of 2.80%, and $50.0 million senior unsecured notes, maturing September 28, 2033, with a fixed annual interest rate of 2.95%. The notes are expected to be issued on or around September 28, 2021, subject to conditions.
On February 25, 2021, the Company assumed a mortgage note with United of Omaha Life Insurance Company of approximately $5.1 million in connection with the acquisition of the property located in Long Island, NY, which serves as collateral for the debt. The debt matures on October 1, 2039 and bears interest at 3.71% per annum. The assumed debt was recorded at fair value and a fair value discount of approximately $0.2 million was recorded during three months ended March 31, 2021. The fair value of debt was determined by discounting the future cash flows using the current rate of approximately 4.10% at which loans would be made to borrowers with similar credit ratings for loans with similar maturities, terms, and loan-to-value ratios. The fair value of the debt is based on Level 3 inputs and is a nonrecurring fair value measurement.
On February 5, 2021, the Company entered into an amendment to the unsecured credit facility (the “Credit Facility Amendment”). The Credit Facility Amendment provides for an increase in the aggregate commitments available for borrowing under the unsecured credit facility from $500 million to up to $750 million. As of June 30, 2021, the unsecured credit facility bore an interest rate of LIBOR plus a spread of 0.90% based on the Company’s debt rating, as defined in the loan agreement. In connection with the Credit Facility Amendment, the Company incurred approximately $1.2 million in costs which are being deferred and amortized through the maturity date of the unsecured credit facility. Other than the increase in the borrowing commitments, the material terms of the unsecured credit facility remain unchanged.
On February 5, 2021, the Company entered into an amendment to the Unsecured Term Loan G (the “Amendment to Unsecured Term Loan G”). The Amendment to Unsecured Term Loan G provides for an extension of the maturity date to February 5, 2026 and a reduced stated interest rate of one-month LIBOR plus a spread that ranges from 0.85% to 1.65% for LIBOR borrowings based on the Company’s debt ratings. The Amendment to Unsecured Term Loan G also amended the provision for a minimum interest rate, or floor, for LIBOR borrowings to 0.00% and for Base Rate borrowings to 1.00%. As of June 30, 2021, borrowings under the Unsecured Term Loan G bore interest at LIBOR plus 1.00%. In connection with the Amendment to Unsecured Term Loan G, the Company incurred approximately $1.6 million in costs which are being deferred and amortized through the new maturity date of February 5, 2026. The Company also incurred approximately $0.7 million of modification expenses which were recognized in debt extinguishment and modification expenses in the accompanying Consolidated Statements of Operations. Additionally, the Company reversed the previously accrued extension fees of approximately $1.1 million from the amendment to the Unsecured Term Loan G that was entered into on April 17, 2020, which resulted in a decrease to interest expense of approximately $0.3 million. Other than the maturity and interest rate provisions described above, the material terms of the Unsecured Term Loan G remain unchanged.
Financial Covenant Considerations
The Company was in compliance with all financial and other covenants as of June 30, 2021 and December 31, 2020 related to its unsecured credit facility, unsecured term loans, unsecured notes, and mortgage notes. The real estate net book value of the properties that are collateral for the Company’s debt arrangements was approximately $89.3 million and $81.4 million at June 30, 2021 and December 31, 2020, respectively, and is limited to senior, property-level secured debt financing arrangements.
Fair Value of Debt
The following table summarizes the aggregate principal outstanding under the Company’s debt arrangements and the corresponding estimate of fair value as of June 30, 2021 and December 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2021
|
|
December 31, 2020
|
|
Indebtedness (in thousands)
|
|
Principal Outstanding
|
|
Fair Value
|
|
Principal Outstanding
|
|
Fair Value
|
|
Unsecured credit facility
|
|
$
|
284,000
|
|
|
$
|
284,558
|
|
|
$
|
107,000
|
|
|
$
|
107,000
|
|
|
Unsecured term loans
|
|
975,000
|
|
|
979,222
|
|
|
975,000
|
|
|
978,448
|
|
|
Unsecured notes
|
|
575,000
|
|
|
627,036
|
|
|
575,000
|
|
|
628,575
|
|
|
Mortgage notes
|
|
56,114
|
|
|
58,435
|
|
|
52,102
|
|
|
54,485
|
|
|
Total principal amount
|
|
1,890,114
|
|
|
$
|
1,949,251
|
|
|
1,709,102
|
|
|
$
|
1,768,508
|
|
|
Net unamortized fair market value premium (discount)
|
|
(134)
|
|
|
|
|
29
|
|
|
|
|
Total unamortized deferred financing fees and debt issuance costs
|
|
(5,849)
|
|
|
|
|
(5,841)
|
|
|
|
|
Total carrying value
|
|
$
|
1,884,131
|
|
|
|
|
$
|
1,703,290
|
|
|
|
The applicable fair value 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. The fair value of the Company’s debt is based on Level 3 inputs.
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 June 30, 2021. 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
|
|
Wells Fargo Bank, N.A.
|
|
Jan-08-2015
|
|
Mar-20-2015
|
|
$
|
25,000
|
|
|
$
|
(324)
|
|
|
1.8280
|
%
|
|
One-month L
|
|
Mar-31-2022
|
|
The Toronto-Dominion Bank
|
|
Jan-08-2015
|
|
Feb-14-2020
|
|
$
|
25,000
|
|
|
$
|
(441)
|
|
|
2.4535
|
%
|
|
One-month L
|
|
Mar-31-2022
|
|
Regions Bank
|
|
Jan-08-2015
|
|
Feb-14-2020
|
|
$
|
50,000
|
|
|
$
|
(891)
|
|
|
2.4750
|
%
|
|
One-month L
|
|
Mar-31-2022
|
|
Capital One, N.A.
|
|
Jan-08-2015
|
|
Feb-14-2020
|
|
$
|
50,000
|
|
|
$
|
(912)
|
|
|
2.5300
|
%
|
|
One-month L
|
|
Mar-31-2022
|
|
The Toronto-Dominion Bank
|
|
Jul-20-2017
|
|
Oct-30-2017
|
|
$
|
25,000
|
|
|
$
|
(637)
|
|
|
1.8485
|
%
|
|
One-month L
|
|
Jan-04-2023
|
|
Royal Bank of Canada
|
|
Jul-20-2017
|
|
Oct-30-2017
|
|
$
|
25,000
|
|
|
$
|
(638)
|
|
|
1.8505
|
%
|
|
One-month L
|
|
Jan-04-2023
|
|
Wells Fargo Bank, N.A.
|
|
Jul-20-2017
|
|
Oct-30-2017
|
|
$
|
25,000
|
|
|
$
|
(638)
|
|
|
1.8505
|
%
|
|
One-month L
|
|
Jan-04-2023
|
|
PNC Bank, N.A.
|
|
Jul-20-2017
|
|
Oct-30-2017
|
|
$
|
25,000
|
|
|
$
|
(637)
|
|
|
1.8485
|
%
|
|
One-month L
|
|
Jan-04-2023
|
|
PNC Bank, N.A.
|
|
Jul-20-2017
|
|
Oct-30-2017
|
|
$
|
50,000
|
|
|
$
|
(1,273)
|
|
|
1.8475
|
%
|
|
One-month L
|
|
Jan-04-2023
|
|
The Toronto-Dominion Bank
|
|
Apr-20-2020
|
|
Sep-29-2020
|
|
$
|
75,000
|
|
|
$
|
(64)
|
|
|
0.2750
|
%
|
|
One-month L
|
|
Apr-18-2023
|
|
Wells Fargo Bank, N.A.
|
|
Apr-20-2020
|
|
Sep-29-2020
|
|
$
|
75,000
|
|
|
$
|
(70)
|
|
|
0.2790
|
%
|
|
One-month L
|
|
Apr-18-2023
|
|
The Toronto-Dominion Bank
|
|
Apr-20-2020
|
|
Mar-19-2021
|
|
$
|
75,000
|
|
|
$
|
(64)
|
|
|
0.2750
|
%
|
|
One-month L
|
|
Apr-18-2023
|
|
Wells Fargo Bank, N.A.
|
|
Apr-20-2020
|
|
Mar-19-2021
|
|
$
|
75,000
|
|
|
$
|
(71)
|
|
|
0.2800
|
%
|
|
One-month L
|
|
Apr-18-2023
|
|
The Toronto-Dominion Bank
|
|
Jul-24-2018
|
|
Jul-26-2019
|
|
$
|
50,000
|
|
|
$
|
(3,243)
|
|
|
2.9180
|
%
|
|
One-month L
|
|
Jan-12-2024
|
|
PNC Bank, N.A.
|
|
Jul-24-2018
|
|
Jul-26-2019
|
|
$
|
50,000
|
|
|
$
|
(3,243)
|
|
|
2.9190
|
%
|
|
One-month L
|
|
Jan-12-2024
|
|
Bank of Montreal
|
|
Jul-24-2018
|
|
Jul-26-2019
|
|
$
|
50,000
|
|
|
$
|
(3,243)
|
|
|
2.9190
|
%
|
|
One-month L
|
|
Jan-12-2024
|
|
U.S. Bank, N.A.
|
|
Jul-24-2018
|
|
Jul-26-2019
|
|
$
|
25,000
|
|
|
$
|
(1,622)
|
|
|
2.9190
|
%
|
|
One-month L
|
|
Jan-12-2024
|
|
Wells Fargo Bank, N.A.
|
|
May-02-2019
|
|
Jul-15-2020
|
|
$
|
50,000
|
|
|
$
|
(2,932)
|
|
|
2.2460
|
%
|
|
One-month L
|
|
Jan-15-2025
|
|
U.S. Bank, N.A.
|
|
May-02-2019
|
|
Jul-15-2020
|
|
$
|
50,000
|
|
|
$
|
(2,932)
|
|
|
2.2459
|
%
|
|
One-month L
|
|
Jan-15-2025
|
|
Regions Bank
|
|
May-02-2019
|
|
Jul-15-2020
|
|
$
|
50,000
|
|
|
$
|
(2,930)
|
|
|
2.2459
|
%
|
|
One-month L
|
|
Jan-15-2025
|
|
Bank of Montreal
|
|
Jul-16-2019
|
|
Jul-15-2020
|
|
$
|
50,000
|
|
|
$
|
(1,990)
|
|
|
1.7165
|
%
|
|
One-month L
|
|
Jan-15-2025
|
|
U.S. Bank, N.A.
|
|
Feb-17-2021
|
|
Apr-18-2023
|
|
$
|
150,000
|
|
|
$
|
848
|
|
|
0.9385
|
%
|
|
One-month L
|
|
Feb-5-2026
|
|
Wells Fargo Bank, N.A.
|
|
Feb-17-2021
|
|
Apr-18-2023
|
|
$
|
75,000
|
|
|
$
|
428
|
|
|
0.9365
|
%
|
|
One-month L
|
|
Feb-5-2026
|
|
The Toronto-Dominion Bank
|
|
Feb-17-2021
|
|
Apr-18-2023
|
|
$
|
75,000
|
|
|
$
|
428
|
|
|
0.9360
|
%
|
|
One-month L
|
|
Feb-5-2026
|
The following table summarizes the fair value of the interest rate swaps outstanding as of June 30, 2021 and December 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Line Item (in thousands)
|
|
Notional Amount June 30, 2021
|
|
Fair Value June 30, 2021
|
|
Notional Amount December 31, 2020
|
|
Fair Value December 31, 2020
|
|
Interest rate swaps-Asset
|
|
$
|
300,000
|
|
|
$
|
1,704
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Interest rate swaps-Liability
|
|
$
|
975,000
|
|
|
$
|
(28,795)
|
|
|
$
|
1,125,000
|
|
|
$
|
(40,656)
|
|
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.
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 (loss) and subsequently reclassified into interest expense in the same periods 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 $14.6 million will be reclassified from accumulated other comprehensive loss 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 three and six months ended June 30, 2021 and 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
|
Effect of Cash Flow Hedge Accounting (in thousands)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Income (loss) recognized in accumulated other comprehensive loss on interest rate swaps
|
|
$
|
(2,501)
|
|
|
$
|
(5,249)
|
|
|
$
|
5,249
|
|
|
$
|
(36,336)
|
|
|
Loss reclassified from accumulated other comprehensive loss into income as interest expense
|
|
$
|
3,933
|
|
|
$
|
3,240
|
|
|
$
|
8,333
|
|
|
$
|
4,136
|
|
|
Total interest expense presented in the Consolidated Statements of Operations in which the effects of cash flow hedges are recorded
|
|
$
|
15,273
|
|
|
$
|
15,333
|
|
|
$
|
30,631
|
|
|
$
|
30,197
|
|
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 June 30, 2021, the Company had not breached the provisions of these agreements and had not posted any collateral related to these agreements. If the Company had breached any of these provisions at June 30, 2021, 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 $27.8 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 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 June 30, 2021 and December 31, 2020, 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 table summarizes the Company’s financial instruments that are accounted for at fair value on a recurring basis as of June 30, 2021 and December 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements as of June 30, 2021 Using
|
|
Balance Sheet Line Item (in thousands)
|
|
Fair Value June 30, 2021
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Interest rate swaps-Asset
|
|
$
|
1,704
|
|
|
$
|
—
|
|
|
$
|
1,704
|
|
|
$
|
—
|
|
|
Interest rate swaps-Liability
|
|
$
|
(28,795)
|
|
|
$
|
—
|
|
|
$
|
(28,795)
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements as of December 31, 2020 Using
|
|
Balance Sheet Line Item (in thousands)
|
|
Fair Value December 31, 2020
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Interest rate swaps-Asset
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Interest rate swaps-Liability
|
|
$
|
(40,656)
|
|
|
$
|
—
|
|
|
$
|
(40,656)
|
|
|
$
|
—
|
|
6. Equity
Preferred Stock
On March 1, 2021, the Company gave notice to redeem all 3,000,000 issued and outstanding shares of the 6.875% Series C Cumulative Redeemable Preferred Stock ("Series C Preferred Stock") on March 31, 2021. The Company redeemed the Series C Preferred Stock on March 31, 2021 at a cash redemption price of $25.00 per share, plus accrued and unpaid dividends to but excluding, the redemption date. The Company recognized a deemed dividend to the holders of the Series C Preferred Stock of approximately $2.6 million on the accompanying Consolidated Statements of Operations for the six months ended June 30, 2021 related to redemption costs and the original issuance costs of the Series C Preferred Stock.
The Company has no outstanding preferred stock issuances as of June 30, 2021.
The following tables summarize the dividends attributable to the Company’s outstanding preferred stock issuances during the three months ended March 31, 2021 and the year ended December 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended 2021
|
|
Declaration Date
|
|
Series C
Preferred Stock Per Share
|
|
Payment Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31
|
|
January 11, 2021
|
|
$
|
0.4296875
|
|
|
March 31, 2021
|
|
Total
|
|
|
|
$
|
0.4296875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended 2020
|
|
Declaration Date
|
|
Series C
Preferred Stock Per Share
|
|
Payment Date
|
|
|
|
|
|
|
|
|
|
December 31
|
|
October 9, 2020
|
|
$
|
0.4296875
|
|
|
December 31, 2020
|
|
September 30
|
|
July 9, 2020
|
|
0.4296875
|
|
|
September 30, 2020
|
|
June 30
|
|
April 9, 2020
|
|
0.4296875
|
|
|
June 30, 2020
|
|
March 31
|
|
January 8, 2020
|
|
0.4296875
|
|
|
March 31, 2020
|
|
Total
|
|
|
|
$
|
1.7187500
|
|
|
|
Common Stock
The following table summarizes the terms of the Company’s at-the market (“ATM”) common stock offering program as of June 30, 2021.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ATM Common Stock Offering Program
|
|
Date
|
|
Maximum Aggregate Offering Price (in thousands)
|
|
Aggregate Common Stock Available as of June 30, 2021 (in thousands)
|
|
2019 $600 million ATM
|
|
February 14, 2019
|
|
$
|
600,000
|
|
|
$
|
204,023
|
|
The table below summarizes the activity under the ATM common stock offering program during the six months ended June 30, 2021 (in thousands, except share data). There was no activity under the ATM common stock offering program during the year ended December 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, 2021
|
|
ATM Common Stock Offering Program(1)
|
|
Shares
Sold
|
|
Weighted Average Price Per Share
|
|
|
|
|
|
Net
Proceeds
|
|
2019 $600 million ATM
|
|
1,888,290
|
|
|
$
|
34.01
|
|
|
|
|
|
|
$
|
63,583
|
|
|
Total/weighted average
|
|
1,888,290
|
|
|
$
|
34.01
|
|
|
|
|
|
|
$
|
63,583
|
|
(1)Includes transactions settled during the period and excludes ATM issuances on a forward basis.
On April 5, 2021, the Company sold 1,446,760 shares on a forward basis under the ATM common stock offering program at a price of $34.56 per share, or $50.0 million, and $34.2144 per share net of sales agent fees. The Company does not initially receive any proceeds from the sale of shares on a forward basis. The Company may elect to cash settle or net share settle the forward sale agreement at any time through the scheduled maturity date of April 5, 2022.
Subsequent to June 30, 2021, the Company sold 1,719,849 shares under the ATM common stock offering program at a price of $37.98 per share, or $65.3 million, and $37.67 per share net of sales agent fees.
The following tables summarize the dividends attributable to the Company’s outstanding shares of common stock that were declared during the six months ended June 30, 2021 and the year ended December 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Month Ended 2021
|
|
Declaration Date
|
|
Record Date
|
|
Per Share
|
|
Payment Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30
|
|
April 12, 2021
|
|
June 30, 2021
|
|
$
|
0.120833
|
|
|
July 15, 2021
|
|
May 31
|
|
April 12, 2021
|
|
May 28, 2021
|
|
0.120833
|
|
|
June 15, 2021
|
|
April 30
|
|
April 12, 2021
|
|
April 30, 2021
|
|
0.120833
|
|
|
May 17, 2021
|
|
March 31
|
|
January 11, 2021
|
|
March 31, 2021
|
|
0.120833
|
|
|
April 15, 2021
|
|
February 28
|
|
January 11, 2021
|
|
February 26, 2021
|
|
0.120833
|
|
|
March 15, 2021
|
|
January 31
|
|
January 11, 2021
|
|
January 29, 2021
|
|
0.120833
|
|
|
February 16, 2021
|
|
Total
|
|
|
|
|
|
$
|
0.724998
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Month Ended 2020
|
|
Declaration Date
|
|
Record Date
|
|
Per Share
|
|
Payment Date
|
|
December 31
|
|
October 9, 2020
|
|
December 31, 2020
|
|
$
|
0.12
|
|
|
January 15, 2021
|
|
November 30
|
|
October 9, 2020
|
|
November 30, 2020
|
|
0.12
|
|
|
December 15, 2020
|
|
October 31
|
|
October 9, 2020
|
|
October 30, 2020
|
|
0.12
|
|
|
November 16, 2020
|
|
September 30
|
|
July 9, 2020
|
|
September 30, 2020
|
|
0.12
|
|
|
October 15, 2020
|
|
August 31
|
|
July 9, 2020
|
|
August 31, 2020
|
|
0.12
|
|
|
September 15, 2020
|
|
July 31
|
|
July 9, 2020
|
|
July 31, 2020
|
|
0.12
|
|
|
August 17, 2020
|
|
June 30
|
|
April 9, 2020
|
|
June 30, 2020
|
|
0.12
|
|
|
July 15, 2020
|
|
May 31
|
|
April 9, 2020
|
|
May 29, 2020
|
|
0.12
|
|
|
June 15, 2020
|
|
April 30
|
|
April 9, 2020
|
|
April 30, 2020
|
|
0.12
|
|
|
May 15, 2020
|
|
March 31
|
|
January 8, 2020
|
|
March 31, 2020
|
|
0.12
|
|
|
April 15, 2020
|
|
February 29
|
|
January 8, 2020
|
|
February 28, 2020
|
|
0.12
|
|
|
March 16, 2020
|
|
January 31
|
|
January 8, 2020
|
|
January 31, 2020
|
|
0.12
|
|
|
February 18, 2020
|
|
Total
|
|
|
|
|
|
$
|
1.44
|
|
|
|
On July 13, 2021, the Company’s board of directors declared the common stock dividends for the months ending July 31, 2021, August 31, 2021, and September 30, 2021 at a monthly rate of $0.120833 per share of common stock.
Restricted Shares of Common Stock
Restricted shares of common stock granted on January 7, 2021 to certain employees of the Company, subject to the recipient’s continued employment, will vest over four years in equal installments on January 1 of each year beginning in 2022. Refer to Note 8 for a discussion of the restricted shares of common stock granted on January 7, 2021 pursuant to the 2018 performance units. The following table summarizes activity related to the Company’s unvested restricted shares of common stock for the six months ended June 30, 2021 and the year ended December 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested Restricted Shares of Common Stock
|
|
Shares
|
|
Weighted Average Grant Date Fair Value per Share
|
|
Balance at December 31, 2019
|
|
193,045
|
|
|
$
|
24.38
|
|
|
Granted
|
|
75,419
|
|
(1)
|
$
|
31.60
|
|
|
Vested
|
|
(81,408)
|
|
(2)
|
$
|
23.46
|
|
|
Forfeited
|
|
(2,166)
|
|
|
$
|
26.92
|
|
|
Balance at December 31, 2020
|
|
184,890
|
|
|
$
|
27.70
|
|
|
Granted
|
|
90,304
|
|
(1)
|
$
|
29.77
|
|
|
Vested
|
|
(72,788)
|
|
(2)
|
$
|
26.76
|
|
|
Forfeited
|
|
(521)
|
|
|
$
|
28.06
|
|
|
Balance at June 30, 2021
|
|
201,885
|
|
|
$
|
28.96
|
|
(1)The fair value per share on the grant date of January 7, 2021, February 13, 2020, and January 8, 2020, was $29.77, $32.64, and $31.49, respectively.
(2)The Company repurchased and retired 25,840 and 34,117 restricted shares of common stock that vested during the six months ended June 30, 2021 and the year ended December 31, 2020, respectively.
The unrecognized compensation expense associated with the Company’s restricted shares of common stock at June 30, 2021 was approximately $4.4 million and is expected to be recognized over a weighted average period of approximately 2.6 years.
The following table summarizes the fair value at vesting for the restricted shares of common stock that vested during the three and six months ended June 30, 2021 and 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
|
Vested Restricted Shares of Common Stock
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
Vested restricted shares of common stock
|
|
—
|
|
|
—
|
|
|
72,788
|
|
|
78,010
|
|
|
|
|
Fair value of vested restricted shares of common stock (in thousands)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,280
|
|
|
$
|
2,463
|
|
|
|
7. Noncontrolling Interest
The following table summarizes the activity for noncontrolling interest in the Company for the six months ended June 30, 2021 and the year ended December 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling Interest
|
|
LTIP Units
|
|
Other
Common Units
|
|
Total
Noncontrolling Common Units
|
|
Noncontrolling Interest
|
|
Balance at December 31, 2019
|
|
1,697,358
|
|
|
2,039,494
|
|
|
3,736,852
|
|
|
2.5
|
%
|
|
Granted/Issued
|
|
278,806
|
|
|
—
|
|
|
278,806
|
|
|
N/A
|
|
Forfeited
|
|
—
|
|
|
—
|
|
|
—
|
|
|
N/A
|
|
Conversions from LTIP units to Other Common Units
|
|
(283,741)
|
|
|
283,741
|
|
|
—
|
|
|
N/A
|
|
Redemptions from Other Common Units to common stock
|
|
—
|
|
|
(730,420)
|
|
|
(730,420)
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2020
|
|
1,692,423
|
|
|
1,592,815
|
|
|
3,285,238
|
|
|
2.0
|
%
|
|
Granted/Issued
|
|
405,844
|
|
|
—
|
|
|
405,844
|
|
|
N/A
|
|
Forfeited
|
|
—
|
|
|
—
|
|
|
—
|
|
|
N/A
|
|
Conversions from LTIP units to Other Common Units
|
|
(97,159)
|
|
|
97,159
|
|
|
—
|
|
|
N/A
|
|
Redemptions from Other Common Units to common stock
|
|
—
|
|
|
(119,334)
|
|
|
(119,334)
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2021
|
|
2,001,108
|
|
|
1,570,640
|
|
|
3,571,748
|
|
|
2.2
|
%
|
LTIP Units
LTIP units granted on January 7, 2021 to non-employee, independent directors, subject to the recipient’s continued service, will vest on January 1, 2022. LTIP units granted on January 7, 2021 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, 2021. Refer to Note 8 for a discussion of the LTIP units granted on January 7, 2021 pursuant to the 2018 performance units.
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 the six months ended June 30, 2021 (excluding those LTIP units granted pursuant to the 2018 performance units; refer to Note 8 for details).
|
|
|
|
|
|
|
|
|
|
|
LTIP Units
|
|
Assumptions
|
|
Grant date
|
|
January 7, 2021
|
|
Expected term (years)
|
|
10
|
|
Expected volatility
|
|
34.0
|
%
|
|
Expected dividend yield
|
|
5.0
|
%
|
|
Risk-free interest rate
|
|
0.229
|
%
|
|
Fair value of LTIP units at issuance (in thousands)
|
|
$
|
4,316
|
|
|
LTIP units at issuance
|
|
153,430
|
|
|
Fair value unit price per LTIP unit at issuance
|
|
$
|
28.13
|
|
The following table summarizes activity related to the Company’s unvested LTIP units for the six months ended June 30, 2021 and the year ended December 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested LTIP Units
|
|
LTIP Units
|
|
Weighted Average Grant Date Fair Value per Share
|
|
Balance at December 31, 2019
|
|
227,348
|
|
|
$
|
23.37
|
|
|
Granted
|
|
278,806
|
|
|
$
|
29.47
|
|
|
Vested
|
|
(294,706)
|
|
|
$
|
26.87
|
|
|
Forfeited
|
|
—
|
|
|
$
|
—
|
|
|
Balance at December 31, 2020
|
|
211,448
|
|
|
$
|
26.54
|
|
|
Granted
|
|
405,844
|
|
|
$
|
28.13
|
|
|
Vested
|
|
(228,821)
|
|
|
$
|
27.33
|
|
|
Forfeited
|
|
—
|
|
|
$
|
—
|
|
|
Balance at June 30, 2021
|
|
388,471
|
|
|
$
|
27.74
|
|
The unrecognized compensation expense associated with the Company’s LTIP units at June 30, 2021 was approximately $4.1 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 for the LTIP units that vested during the three and six months ended June 30, 2021 and 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
|
Vested LTIP units
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Vested LTIP units
|
|
45,335
|
|
|
43,958
|
|
|
228,821
|
|
|
174,145
|
|
|
Fair value of vested LTIP units (in thousands)
|
|
$
|
1,686
|
|
|
$
|
1,213
|
|
|
$
|
7,369
|
|
|
$
|
5,074
|
|
8. Equity Incentive Plan
On January 7, 2021, 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 terms of the performance units granted on January 7, 2021 are substantially the same as the terms of the performance units granted on January 8, 2020, except that the measuring period commenced on January 1, 2021 and ends on December 31, 2023.
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 is based on Level 3 inputs and are non-recurring fair value measurements. The performance unit equity compensation expense is recognized ratably from the grant date into earnings over the vesting period. The following table summarizes the assumptions used in valuing the performance units granted during the six months ended June 30, 2021.
|
|
|
|
|
|
|
|
|
|
|
Performance Units
|
|
Assumptions
|
|
Grant date
|
|
January 7, 2021
|
|
Expected volatility
|
|
34.4
|
%
|
|
Expected dividend yield
|
|
5.0
|
%
|
|
Risk-free interest rate
|
|
0.2271
|
%
|
|
Fair value of performance units grant (in thousands)
|
|
$
|
5,522
|
|
On December 31, 2020, the measuring period pursuant to the 2018 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 127,671 vested LTIP units and 44,591 vested shares of common stock to the participants (of which 17,731 shares of common stock were repurchased and retired), which were issued on January 7, 2021. The compensation committee of the board of directors also approved the issuance of 124,743 LTIP units and 6,352 restricted shares of common stock that will vest in one year on December 31, 2021, which were issued on January 7, 2021.
The unrecognized compensation expense associated with the Company’s performance units at June 30, 2021 was approximately $8.5 million and is expected to be recognized over a weighted average period of approximately 1.9 years.
Non-cash Compensation Expense
The following table summarizes the amount 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 units, and the Company’s director compensation for the three and six months ended June 30, 2021 and 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
|
Non-Cash Compensation Expense (in thousands)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Restricted shares of common stock
|
|
$
|
586
|
|
|
$
|
481
|
|
|
$
|
1,237
|
|
|
$
|
948
|
|
|
LTIP units
|
|
2,346
|
|
|
978
|
|
|
4,754
|
|
|
1,942
|
|
|
Performance units
|
|
1,484
|
|
|
1,341
|
|
|
2,922
|
|
|
2,648
|
|
|
Director compensation (1)
|
|
123
|
|
|
138
|
|
|
241
|
|
|
252
|
|
|
Total non-cash compensation expense
|
|
$
|
4,539
|
|
|
$
|
2,938
|
|
|
$
|
9,154
|
|
|
$
|
5,790
|
|
(1)All of the Company’s independent directors elected to receive shares of common stock in lieu of cash for their service during the three and six months ended June 30, 2021 and 2020. The number of shares of common stock granted is calculated based on the trailing ten 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”). Billings for real estate taxes and other expenses are also considered to be variable lease payments. 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 three and six months ended June 30, 2021 and 2020 included in the accompanying Consolidated Statements of Operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
|
Rental Income (in thousands)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Fixed lease payments
|
|
$
|
103,778
|
|
|
$
|
91,234
|
|
|
$
|
204,957
|
|
|
$
|
181,630
|
|
|
Variable lease payments
|
|
29,639
|
|
|
25,588
|
|
|
58,883
|
|
|
50,594
|
|
|
Straight-line rental income
|
|
4,718
|
|
|
1,823
|
|
|
9,600
|
|
|
5,750
|
|
|
Net decrease to rental income related to above and below market lease amortization
|
|
(330)
|
|
|
(1,174)
|
|
|
(1,810)
|
|
|
(2,164)
|
|
|
Total rental income
|
|
$
|
137,805
|
|
|
$
|
117,471
|
|
|
$
|
271,630
|
|
|
$
|
235,810
|
|
The Company evaluates its operating leases to determine if it is probable it will collect substantially all of the lessee's remaining lease payments under the lease term. For those that are not probable of collection, the Company converts to the cash basis of accounting. If the Company subsequently determines that it is probable it will collect substantially all of the lessee's remaining lease payments under the lease term, the Company will reinstate the accrued rent balance adjusting for the amount related to the period when the lease was accounted for on a cash basis. During the three and six months ended June 30, 2021, this resulted in a net increase of rental income of approximately $0 and $0.1 million for the three and six months ended June 30, 2021 due to the reversal of a net accrued rent liability and tenants converting from cash basis accounting to accrual basis accounting. Additionally, there was $0.3 million and $1.7 million of contractual rental income not received from cash basis tenants partially offset by $0.1 million and $1.3 million of previously unrecognized rental income payments received from tenants under the cash basis of accounting during the three and six months ended June 30, 2021. During the three and six months ended June 30, 2020, the Company converted to the cash basis of accounting for certain leases which resulted in a reduction of rental income of approximately $1.2 million and $0.9 million for three and six months ended June 30, 2020, due to the reversal of accrued rent. Additionally, there was $0.6 million and $0.6 million of contractual rental income that was not recognized for payments that were not received from the tenants for the three and six months ended June 30, 2020.
As of June 30, 2021 and December 31, 2020, the Company had accrued rental income of approximately $68.7 million and $60.0 million, respectively, included in tenant accounts receivable on the accompanying Consolidated Balance Sheets.
As of June 30, 2021 and December 31, 2020, the Company had approximately $29.8 million and $30.1 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 June 30, 2021 and December 31, 2020, 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. These funds may be used to settle tenant accounts receivables in the event of a default under the related lease. As of June 30, 2021 and December 31, 2020, the Company’s total liability associated with these lease security deposits was approximately $11.6 million and $11.0 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 $5.3 million, $10.4 million, $4.9 million and $9.7 million for the three and six months ended June 30, 2021 and 2020, 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.
The following table summarizes the maturity of fixed lease payments under the Company’s leases as of June 30, 2021.
|
|
|
|
|
|
|
|
|
|
|
Year
|
|
Maturity of Fixed Lease Payments (in thousands)
|
|
Remainder of 2021
|
|
$
|
208,202
|
|
|
2022
|
|
$
|
396,672
|
|
|
2023
|
|
$
|
355,331
|
|
|
2024
|
|
$
|
304,926
|
|
|
2025
|
|
$
|
251,700
|
|
|
Thereafter
|
|
$
|
942,803
|
|
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 5.0 years to 48.4 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 June 30, 2021 and December 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Lease Term and Discount Rate
|
|
June 30, 2021
|
|
December 31, 2020
|
|
Weighted average remaining lease term (years)
|
|
29.6
|
|
29.9
|
|
Weighted average discount rate
|
|
6.8
|
%
|
|
6.8
|
%
|
The following table summarizes the operating lease cost recognized during the three and six months ended June 30, 2021 and 2020 included in the Company’s Consolidated Statements of Operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
|
Operating Lease Cost (in thousands)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Operating lease cost included in property expense attributable to ground leases
|
|
$
|
417
|
|
|
$
|
331
|
|
|
$
|
834
|
|
|
$
|
662
|
|
|
Operating lease cost included in general and administrative expense attributable to corporate office lease
|
|
429
|
|
|
423
|
|
|
858
|
|
|
741
|
|
|
Total operating lease cost
|
|
$
|
846
|
|
|
$
|
754
|
|
|
$
|
1,692
|
|
|
$
|
1,403
|
|
The following table summarizes supplemental cash flow information related to operating leases recognized during the six months ended June 30, 2021 and 2020 in the Company’s Consolidated Statements of Cash Flows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30,
|
|
Operating Leases (in thousands)
|
|
2021
|
|
2020
|
|
Cash paid for amounts included in the measurement of lease liabilities (operating cash flows)
|
|
$
|
952
|
|
|
$
|
1,143
|
|
|
Right-of-use assets obtained in exchange for new lease liabilities
|
|
$
|
—
|
|
|
$
|
7,718
|
|
The following table summarizes the maturity of operating lease liabilities under the Company’s ground leases and corporate office lease as of June 30, 2021.
|
|
|
|
|
|
|
|
|
|
|
Year
|
|
Maturity of Operating Lease Liabilities(1)
(in thousands)
|
|
Remainder of 2021
|
|
$
|
1,357
|
|
|
2022
|
|
3,188
|
|
|
2023
|
|
3,248
|
|
|
2024
|
|
3,291
|
|
|
2025
|
|
3,336
|
|
|
Thereafter
|
|
62,365
|
|
|
Total lease payments
|
|
76,785
|
|
|
Less: Imputed interest
|
|
(48,947)
|
|
|
Present value of operating lease liabilities
|
|
$
|
27,838
|
|
(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.
10. Earnings Per Share
During the three and six months ended June 30, 2021 and 2020, there were 202,171, 200,501, 189,895 and 185,821, respectively, of unvested restricted shares of common stock on a weighted average basis that were considered participating securities.
The following table reconciles the numerators and denominators in the computation of basic and diluted earnings per common share for the three and six months ended June 30, 2021 and 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
|
Earnings Per Share (in thousands, except per share data)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Numerator
|
|
|
|
|
|
|
|
|
|
Net income attributable to common stockholders
|
|
$
|
32,576
|
|
|
$
|
17,552
|
|
|
$
|
53,507
|
|
|
$
|
79,635
|
|
|
Denominator
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding — basic
|
|
159,736
|
|
|
148,663
|
|
|
159,086
|
|
|
148,116
|
|
|
Effect of dilutive securities(1)
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
584
|
|
|
364
|
|
|
467
|
|
|
225
|
|
|
Shares issuable under forward sales agreements
|
|
1,047
|
|
|
—
|
|
|
696
|
|
|
—
|
|
|
Weighted average common shares outstanding — diluted
|
|
161,367
|
|
|
149,027
|
|
|
160,249
|
|
|
148,341
|
|
|
Net income per share — basic and diluted
|
|
|
|
|
|
|
|
|
|
Net income per share attributable to common stockholders — basic
|
|
$
|
0.20
|
|
|
$
|
0.12
|
|
|
$
|
0.34
|
|
|
$
|
0.54
|
|
|
Net income per share attributable to common stockholders — diluted
|
|
$
|
0.20
|
|
|
$
|
0.12
|
|
|
$
|
0.33
|
|
|
$
|
0.54
|
|
(1)During the three and six months ended June 30, 2021 and 2020, there were approximately 202, 201, 190 and 186, 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.
The Company has letters of credit of approximately $2.9 million as of June 30, 2021 related to construction projects and certain other agreements.
12. Subsequent Events
The following non-recognized subsequent events were noted.
On July 8, 2021, the Company entered into a note purchase agreement for the future private placement by the Operating Partnership of $275.0 million senior unsecured notes, maturing September 29, 2031, with a fixed annual interest rate of 2.80%, and $50.0 million senior unsecured notes, maturing September 28, 2033, with a fixed annual interest rate of 2.95%. The notes are expected to be issued on or around September 28, 2021, subject to conditions.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion with the financial statements and related notes included elsewhere in Item 1 of this report and the audited financial statements and related notes thereto included in our most recent Annual Report on Form 10-K.
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. (the “Operating Partnership”).
Forward-Looking Statements
This report 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 our Annual Report on Form 10-K for the year ended December 31, 2020, as updated in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, including those set forth under the headings “Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations;”
•the ongoing adverse effects of the public health crisis of the novel coronavirus disease (“COVID-19”) pandemic, or any future pandemic, epidemic or outbreak of infectious disease, on the financial condition, results of operations, cash flows and performance of the Company and its tenants, the real estate market and the global economy and financial markets;
•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, the general economic climate in local markets and competition for tenants in such markets, and the repurposing or redevelopment of retail properties into industrial properties (in part or whole);
•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, epidemics, pandemics, 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;
•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. Moreover, you should interpret many of the risks identified in this report, as well as the risks set forth above, as being heightened as a result of the ongoing and numerous adverse impacts of the COVID-19 pandemic. 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.
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 June 30, 2021 (which differs from rent calculated in accordance with GAAP) multiplied by 12. If a tenant is in a free rent period as of June 30, 2021, 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 under development or 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 as 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.
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 “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 are a Maryland corporation and our common stock is publicly traded on the New York Stock Exchange 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, 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.
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.
COVID-19 Pandemic
Since March 2020, the COVID-19 pandemic has severely harmed global economic activity and caused significant volatility and negative pressure in financial markets. The global impact of the pandemic continues to evolve and many countries, including the United States, continue to react by instituting quarantines, mandating business and school closures and restricting travel. As a result, the COVID-19 pandemic is negatively impacting almost every industry, including the real estate industry and the industries of our tenants, directly or indirectly. The rapid development and fluidity of the COVID-19 pandemic precludes any prediction as to the ultimate adverse impact the pandemic may have on our business, financial condition, results of operations and cash flows.
We did not incur significant disruptions from the COVID-19 pandemic during the three and six months ended June 30, 2021. In addition, we did not enter into any rent deferral agreements during the three and six months ended June 30, 2021. We will continue to evaluate tenant rent relief requests on an individual basis, considering a number of factors. Not all tenant requests will ultimately result in modified agreements, nor are we foregoing our contractual rights under our lease agreements.
The COVID-19 pandemic or a future pandemic, epidemic or outbreak of infectious disease affecting states or regions in which we or our tenants operate could have material and adverse effects on our business, financial condition, results of operations and cash flows due to, among other factors: health or other government authorities requiring the closure of offices or other businesses or instituting quarantines of personnel as the result of, or in order to avoid, exposure to a contagious disease; disruption in supply and delivery chains; a general decline in business activity and demand for real estate; reduced economic activity, general economic decline or recession, which may impact our tenants’ businesses, financial condition and liquidity and may cause one or more of our tenants to be unable to make rent payments to us timely, or at all, or to otherwise seek modifications of lease obligations; difficulty accessing debt and equity capital on attractive terms, or at all, and a severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions, which may affect our access to capital necessary to fund business operations or address maturing liabilities on a timely basis; and the potential negative impact on the health of our personnel, particularly if a significant number of our employees are impacted, which would result in a deterioration in our ability to ensure business continuity during a disruption.
The extent to which the COVID-19 pandemic or any other pandemic, epidemic or disease impacts our operations and those of our tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. Nevertheless, the COVID-19 pandemic (or a future pandemic, epidemic or disease) presents material uncertainty and risk with respect to our business, financial condition, results of operations and cash flows.
Outlook
Our business is affected by the uncertainty regarding the current COVID-19 pandemic, the effectiveness of policies introduced to neutralize the disease, and the impact of those policies on economic activity. In June 2020, the National Bureau of Economic Research announced that the United States entered into a recession in February 2020. More recent economic measurements show that the U.S. economy is recovering. The ultimate shape of the recovery will depend on many factors, including the length and severity of the COVID-19 pandemic. While there has been a negative impact to our tenants, we believe we will continue to benefit from having a well-diversified portfolio across various markets, tenant industries, and lease terms. Additionally, we believe that the COVID-19 pandemic is accelerating a number of trends that positively impact industrial demand.
Over the course of the COVID-19 pandemic, the U.S. federal and state governments, as well as the Federal Reserve, responded to the profoundly uncertain outlook with a series of policies to ease the economic burden of COVID-19 closures on businesses and individuals. In March 2021, the latest major U.S. congressional policy action known as the American Rescue Plan, allocated $1.9 trillion in federal aid focused on individuals and state and local governments. The Federal Reserve continues to be accommodative since it completed two emergency federal funds rate cuts in March 2020 to a range between 0% to 0.25%. Additionally, since entering office in January 2021, the Biden administration and health organizations are heavily focused on curbing the spread of COVID-19 through vaccinations and have made progress toward reaching a large portion of the population. We expect supportive fiscal and monetary policy to continue as needed.
We believe that the current economic environment, while volatile, will provide us with an opportunity to demonstrate the diversification of our portfolio. Specifically, we believe our existing portfolio should benefit from competitive rental rates and strong occupancy. In addition to our diversified portfolio, we believe that certain characteristics of our business and capital structure should position us well in an uncertain environment, including the fact that we have minimal floating rate debt exposure (taking into account our hedging activities) and strong liquidity and access to capital, 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 and availability of capital.
Due to the COVID-19 pandemic, we expect acceleration in a number of industrial specific trends to support stronger long-term 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 U.S. consumer market, an increase in overseas labor costs, a desire for greater supply chain resilience and redundancy 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. The COVID-19 pandemic has caused both positive and negative impacts at varying levels across different industries and geographies. Ultimately, the acceleration in e-commerce brought on by the COVID-19 pandemic, actions taken by federal and state governments and the Federal Reserve in response to the pandemic, and the recent economic recovery has helped industrial space demand remain strong. We believe that the diversification of our portfolio by market, tenant industry, and tenant credit will prove to be a strength in this environment. Industrial development continues to be concentrated in the larger primary markets, and after a brief deceleration it has returned to pre-COVID-19 pandemic levels. 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, natural disasters, epidemics, 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. As of June 30, 2021, our Operating Portfolio was approximately 97.2% leased and our SL Rent Change on New Leases and Renewal Leases in our Operating Portfolio together grew approximately 15.1% and 16.5% during the three and six months ended June 30, 2021, respectively. Our Cash Rent Change on New Leases and Renewal Leases in our Operating Portfolio together grew approximately 8.1% and 8.7% during the three and six months ended June 30, 2021.
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, including those brought on by the COVID-19 pandemic, 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 age, clear height, and configuration, and (iv) our tenants’ ability to meet their contractual obligations to us.
The following table summarizes our Operating Portfolio leases that commenced during the three and six months ended June 30, 2021. 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)
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Leases
|
|
1,128,576
|
|
|
$
|
4.16
|
|
|
$
|
4.33
|
|
|
$
|
1.83
|
|
|
7.3
|
%
|
|
13.6
|
%
|
|
7.1
|
|
|
$
|
0.65
|
|
|
Renewal Leases
|
|
2,732,292
|
|
|
$
|
4.14
|
|
|
$
|
4.36
|
|
|
$
|
1.10
|
|
|
8.4
|
%
|
|
15.7
|
%
|
|
6.4
|
|
|
$
|
—
|
|
|
Total/weighted average
|
|
3,860,868
|
|
|
$
|
4.15
|
|
|
$
|
4.35
|
|
|
$
|
1.32
|
|
|
8.1
|
%
|
|
15.1
|
%
|
|
6.6
|
|
|
$
|
0.19
|
|
|
Six months ended June 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Leases
|
|
1,468,264
|
|
|
$
|
4.10
|
|
|
$
|
4.32
|
|
|
$
|
2.25
|
|
|
7.5
|
%
|
|
15.3
|
%
|
|
7.2
|
|
|
$
|
0.60
|
|
|
Renewal Leases
|
|
4,984,685
|
|
|
$
|
4.28
|
|
|
$
|
4.49
|
|
|
$
|
1.12
|
|
|
9.0
|
%
|
|
16.9
|
%
|
|
5.8
|
|
|
$
|
0.07
|
|
|
Total/weighted average
|
|
6,452,949
|
|
|
$
|
4.24
|
|
|
$
|
4.45
|
|
|
$
|
1.38
|
|
|
8.7
|
%
|
|
16.5
|
%
|
|
6.1
|
|
|
$
|
0.19
|
|
(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.
Additionally, for the three and six months ended June 30, 2021, leases commenced totaling 32,864 and 139,064 square feet, respectively, related to the Value Add Portfolio and first generation leasing and are excluded from the Operating Portfolio statistics above.
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 9.2% of our annualized base rental revenue will expire during the period from July 1, 2021 to June 30, 2022, 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 July 1, 2021 to June 30, 2022, thereby resulting in approximately the same revenue from the same space.
The following table summarizes lease expirations for leases in place as of June 30, 2021, plus available space, for each of the ten calendar years beginning with 2021 and thereafter in our portfolio. The information in the table assumes that tenants exercise no renewal options and no early termination rights.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
—
|
|
|
3,229,878
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
Month-to-month leases
|
|
4
|
|
|
231,953
|
|
|
0.2
|
%
|
|
$
|
1,110
|
|
|
0.2
|
%
|
|
|
|
Remainder of 2021
|
|
22
|
|
|
4,345,132
|
|
|
4.5
|
%
|
|
20,023
|
|
|
4.5
|
%
|
|
|
|
2022
|
|
78
|
|
|
8,667,176
|
|
|
9.0
|
%
|
|
39,282
|
|
|
8.8
|
%
|
|
|
|
2023
|
|
95
|
|
|
13,325,167
|
|
|
13.8
|
%
|
|
56,558
|
|
|
12.7
|
%
|
|
|
|
2024
|
|
81
|
|
|
12,294,728
|
|
|
12.7
|
%
|
|
55,844
|
|
|
12.6
|
%
|
|
|
|
2025
|
|
67
|
|
|
11,148,944
|
|
|
11.5
|
%
|
|
49,643
|
|
|
11.2
|
%
|
|
|
|
2026
|
|
66
|
|
|
10,475,464
|
|
|
10.8
|
%
|
|
50,530
|
|
|
11.4
|
%
|
|
|
|
2027
|
|
39
|
|
|
6,914,427
|
|
|
7.1
|
%
|
|
31,044
|
|
|
7.0
|
%
|
|
|
|
2028
|
|
27
|
|
|
4,929,994
|
|
|
5.1
|
%
|
|
21,854
|
|
|
4.9
|
%
|
|
|
|
2029
|
|
26
|
|
|
5,890,825
|
|
|
6.1
|
%
|
|
27,549
|
|
|
6.2
|
%
|
|
|
|
2030
|
|
23
|
|
|
4,111,782
|
|
|
4.2
|
%
|
|
21,371
|
|
|
4.8
|
%
|
|
|
|
Thereafter
|
|
57
|
|
|
14,508,634
|
|
|
15.0
|
%
|
|
69,900
|
|
|
15.7
|
%
|
|
|
|
Total
|
|
585
|
|
|
100,074,104
|
|
|
100.0
|
%
|
|
$
|
444,708
|
|
|
100.0
|
%
|
|
|
Portfolio Summary
The following table summarizes information relating to diversification by building type in our portfolio as of June 30, 2021.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Square Footage
|
|
|
|
Annualized Base Rental Revenue
|
|
Building Type
|
|
Number of Buildings
|
|
Amount
|
|
%
|
|
Occupancy Rate
|
|
Amount
(in thousands)
|
|
%
|
|
Warehouse/Distribution
|
|
418
|
|
|
90,960,967
|
|
|
90.9
|
%
|
|
97.0
|
%
|
|
$
|
400,040
|
|
|
90.0
|
%
|
|
Light Manufacturing
|
|
73
|
|
|
8,379,905
|
|
|
8.4
|
%
|
|
98.7
|
%
|
|
42,446
|
|
|
9.5
|
%
|
|
Total Operating Portfolio/weighted average
|
|
491
|
|
|
99,340,872
|
|
|
99.3
|
%
|
|
97.2
|
%
|
|
$
|
442,486
|
|
|
99.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value Add/Other
|
|
3
|
|
|
331,537
|
|
|
0.3
|
%
|
|
53.4
|
%
|
|
825
|
|
|
0.2
|
%
|
|
Flex/Office
|
|
7
|
|
|
401,695
|
|
|
0.4
|
%
|
|
37.4
|
%
|
|
1,397
|
|
|
0.3
|
%
|
|
Total portfolio/weighted average
|
|
501
|
|
|
100,074,104
|
|
|
100.0
|
%
|
|
96.8
|
%
|
|
$
|
444,708
|
|
|
100.0
|
%
|
Portfolio Acquisitions
The following table summarizes our acquisitions during the three and six months ended June 30, 2021.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market (1)
|
|
Date Acquired
|
|
Square Feet
|
|
Number of Buildings
|
|
Purchase Price
(in thousands)
|
|
Omaha/Council Bluffs, NE-IA
|
|
January 21, 2021
|
|
370,000
|
|
|
1
|
|
|
$
|
24,922
|
|
|
Minneapolis/St Paul, MN
|
|
February 24, 2021
|
|
80,655
|
|
|
1
|
|
|
10,174
|
|
|
Long Island, NY
|
|
February 25, 2021
|
|
64,224
|
|
|
1
|
|
|
8,516
|
|
|
Sacramento, CA
|
|
February 25, 2021
|
|
267,284
|
|
|
1
|
|
|
25,917
|
|
|
Little Rock/N Little Rock
|
|
March 1, 2021
|
|
300,160
|
|
|
1
|
|
|
24,317
|
|
|
Cleveland, OH
|
|
March 18, 2021
|
|
170,000
|
|
|
1
|
|
|
6,382
|
|
|
Three months ended March 31, 2021
|
|
|
|
1,252,323
|
|
|
6
|
|
|
100,228
|
|
|
Indianapolis, IN
|
|
May 17, 2021
|
|
154,440
|
|
|
1
|
|
|
13,655
|
|
|
Baltimore, MD
|
|
May 17, 2021
|
|
46,851
|
|
|
1
|
|
|
6,228
|
|
|
Detroit, MI
|
|
June 1, 2021
|
|
248,040
|
|
|
1
|
|
|
23,786
|
|
|
Green Bay, WI
|
|
June 7, 2021
|
|
152,000
|
|
|
1
|
|
|
7,249
|
|
|
Phoenix, AZ
|
|
June 14, 2021
|
|
41,504
|
|
|
1
|
|
|
8,670
|
|
|
Cleveland, OH
|
|
June 17, 2021
|
|
179,577
|
|
|
1
|
|
|
19,602
|
|
|
Reno/Sparks, NV
|
|
June 30, 2021
|
|
183,435
|
|
|
1
|
|
|
13,892
|
|
|
Washington, DC
|
|
June 30, 2021
|
|
193,420
|
|
|
1
|
|
|
17,521
|
|
|
Stockton/Modesto, CA
|
|
June 30, 2021
|
|
150,000
|
|
|
1
|
|
|
16,118
|
|
|
Three months ended June 30, 2021
|
|
|
|
1,349,267
|
|
|
9
|
|
|
126,721
|
|
|
Six months ended June 30, 2021
|
|
|
|
2,601,590
|
|
|
15
|
|
|
$
|
226,949
|
|
(1) As defined by CoStar Realty Information Inc (“CoStar”). If the building is located outside of a CoStar defined market, the city and state is reflected.
Portfolio Dispositions
During the six months ended June 30, 2021, we sold six buildings comprised of approximately 0.9 million rentable square feet with a net book value of approximately $27.2 million to third parties. Net proceeds from the sales of rental property were approximately $39.6 million and we recognized the full gain on the sales of rental property, net, of approximately $12.4 million for the six months ended June 30, 2021.
Geographic Diversification
The following table summarizes information about the 20 largest markets in our portfolio based on total annualized base rental revenue as of June 30, 2021.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Top 20 Markets (1)
|
|
|
|
|
|
% of Total Annualized Base Rental Revenue
|
|
Chicago, IL
|
|
|
|
|
|
7.0
|
%
|
|
Philadelphia, PA
|
|
|
|
|
|
6.0
|
%
|
|
Greenville/Spartanburg, SC
|
|
|
|
|
|
5.1
|
%
|
|
Pittsburgh, PA
|
|
|
|
|
|
4.7
|
%
|
|
Detroit, MI
|
|
|
|
|
|
4.5
|
%
|
|
Milwaukee/Madison, WI
|
|
|
|
|
|
4.4
|
%
|
|
Minneapolis/St Paul, MN
|
|
|
|
|
|
4.2
|
%
|
|
Columbus, OH
|
|
|
|
|
|
3.8
|
%
|
|
Houston, TX
|
|
|
|
|
|
3.3
|
%
|
|
Charlotte, NC
|
|
|
|
|
|
2.9
|
%
|
|
West Michigan, MI
|
|
|
|
|
|
2.4
|
%
|
|
Boston, MA
|
|
|
|
|
|
2.3
|
%
|
|
Indianapolis, IN
|
|
|
|
|
|
2.3
|
%
|
|
El Paso, TX
|
|
|
|
|
|
2.1
|
%
|
|
Cincinnati/Dayton, OH
|
|
|
|
|
|
2.0
|
%
|
|
Cleveland, OH
|
|
|
|
|
|
1.9
|
%
|
|
Raleigh/Durham, NC
|
|
|
|
|
|
1.6
|
%
|
|
Columbia, SC
|
|
|
|
|
|
1.6
|
%
|
|
Westchester/So Connecticut, CT/NY
|
|
|
|
|
|
1.6
|
%
|
|
Kansas City, MO
|
|
|
|
|
|
1.5
|
%
|
|
Total
|
|
|
|
|
|
65.2
|
%
|
(1) As defined by CoStar.
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 June 30, 2021.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Top 20 Tenant Industries (1)
|
|
|
|
|
|
% of Total Annualized Base Rental Revenue
|
|
Air Freight & Logistics
|
|
|
|
|
|
10.9
|
%
|
|
Containers & Packaging
|
|
|
|
|
|
9.0
|
%
|
|
Auto Components
|
|
|
|
|
|
7.8
|
%
|
|
Internet & Direct Mkt Retail
|
|
|
|
|
|
5.5
|
%
|
|
Trading Companies & Distributors (Industrial Goods)
|
|
|
|
|
|
5.4
|
%
|
|
Commercial Services & Supplies
|
|
|
|
|
|
5.1
|
%
|
|
Machinery
|
|
|
|
|
|
4.9
|
%
|
|
Household Durables
|
|
|
|
|
|
4.1
|
%
|
|
Media
|
|
|
|
|
|
4.1
|
%
|
|
Food & Staples Retailing
|
|
|
|
|
|
4.1
|
%
|
|
Distributors (Consumer Goods)
|
|
|
|
|
|
3.6
|
%
|
|
Building Products
|
|
|
|
|
|
3.1
|
%
|
|
Food Products
|
|
|
|
|
|
2.8
|
%
|
|
Specialty Retail
|
|
|
|
|
|
2.1
|
%
|
|
Beverages
|
|
|
|
|
|
2.1
|
%
|
|
Electronic Equip, Instruments
|
|
|
|
|
|
2.0
|
%
|
|
Textiles, Apparel, Luxury Good
|
|
|
|
|
|
2.0
|
%
|
|
Chemicals
|
|
|
|
|
|
1.8
|
%
|
|
Electrical Equipment
|
|
|
|
|
|
1.7
|
%
|
|
Health Care Equipment & Supplies
|
|
|
|
|
|
1.7
|
%
|
|
Total
|
|
|
|
|
|
83.8
|
%
|
(1) Industry classification based on Global Industry Classification Standard methodology.
Tenant Diversification
The following table summarizes information about the 20 largest tenants in our portfolio based on total annualized base rental revenue as of June 30, 2021.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Top 20 Tenants (1)
|
|
Number of Leases
|
|
|
|
|
|
% of Total Annualized Base Rental Revenue
|
|
Amazon
|
|
7
|
|
|
|
|
|
3.9
|
%
|
|
XPO Logistics, Inc.
|
|
5
|
|
|
|
|
|
1.2
|
%
|
|
Eastern Metal Supply, Inc.
|
|
5
|
|
|
|
|
|
1.1
|
%
|
|
FedEx Corporation
|
|
4
|
|
|
|
|
|
1.0
|
%
|
|
American Tire Distributors Inc
|
|
6
|
|
|
|
|
|
0.9
|
%
|
|
Westrock Company
|
|
7
|
|
|
|
|
|
0.9
|
%
|
|
Penguin Random House LLC
|
|
1
|
|
|
|
|
|
0.9
|
%
|
|
DS Smith North America
|
|
2
|
|
|
|
|
|
0.8
|
%
|
|
Lippert Component Manufact
|
|
4
|
|
|
|
|
|
0.8
|
%
|
|
Ford Motor Company
|
|
1
|
|
|
|
|
|
0.8
|
%
|
|
Carolina Beverage Group
|
|
2
|
|
|
|
|
|
0.8
|
%
|
|
Hachette Book Group, Inc.
|
|
1
|
|
|
|
|
|
0.8
|
%
|
|
Costco Wholesale Corporation
|
|
2
|
|
|
|
|
|
0.7
|
%
|
|
Packaging Corp of America
|
|
5
|
|
|
|
|
|
0.7
|
%
|
|
Yanfeng US Automotive Interior
|
|
2
|
|
|
|
|
|
0.7
|
%
|
|
Schneider Electric USA, Inc.
|
|
3
|
|
|
|
|
|
0.7
|
%
|
|
Kenco Logistic Services, LLC
|
|
2
|
|
|
|
|
|
0.7
|
%
|
|
Perrigo Company
|
|
2
|
|
|
|
|
|
0.7
|
%
|
|
TriMas Corporation
|
|
3
|
|
|
|
|
|
0.7
|
%
|
|
Generation Brands
|
|
1
|
|
|
|
|
|
0.6
|
%
|
|
Total
|
|
65
|
|
|
|
|
|
19.4
|
%
|
(1) Includes tenants, guarantors, and/or non-guarantor parents.
Critical Accounting Policies
See “Critical Accounting Policies” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2020, for a discussion of our critical accounting policies and estimates.
Incentive and Equity-Based Employee Compensation Plans
On January 7, 2021, we adopted the STAG Industrial, Inc. Employee Retirement Vesting Program (the “Vesting Program”) to provide supplemental retirement benefits for eligible employees. For those employees who are retirement eligible or will become retirement eligible during the applicable vesting period under the terms of the Vesting Program, we accelerate equity-based compensation through the employee’s six-month retirement notification period or retirement eligibility date, respectively. The adoption of the Vesting Program resulted in an increase to general and administrative expenses of approximately $1.4 million and $2.9 million for the three and six months ended June 30, 2021, respectively, due to the acceleration of equity-based compensation expense for certain eligible employees. We estimate that the adoption of the Vesting Program will result in an increase in general and administrative expenses of approximately $2.4 million for the year ending December 31, 2021.
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. The results for same store properties exclude termination fees, solar income, and revenue associated with one-time tenant reimbursements of capital expenditures. Same store properties exclude Operating Portfolio properties with expansions placed into service after December 31, 2019. On June 30, 2021, we owned 421 industrial buildings consisting of 85.0 million square feet, which represents approximately 84.9% of our total portfolio, that are considered our same store portfolio in the analysis below. Same store occupancy decreased approximately 0.8% to 96.8% as of June 30, 2021 compared to 97.6% as of June 30, 2020.
Comparison of the three months ended June 30, 2021 to the three months ended June 30, 2020
The following table summarizes selected operating information for our same store portfolio and our total portfolio for the three months ended June 30, 2021 and 2020 (dollars in thousands). This table includes a reconciliation from our same store portfolio to our total portfolio by also providing information for the three months ended June 30, 2021 and 2020 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, 2019 and our flex/office buildings, Value Add Portfolio, and buildings classified as held for sale.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Store Portfolio
|
|
Acquisitions/Dispositions
|
|
Other
|
|
Total Portfolio
|
|
|
Three months ended June 30,
|
|
Change
|
|
Three months ended June 30,
|
|
Three months ended June 30,
|
|
Three months ended June 30,
|
|
Change
|
|
|
2021
|
|
2020
|
|
$
|
|
%
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
$
|
|
%
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income
|
$
|
114,243
|
|
|
$
|
106,963
|
|
|
$
|
7,280
|
|
|
6.8
|
%
|
|
$
|
18,376
|
|
|
$
|
6,779
|
|
|
$
|
5,186
|
|
|
$
|
3,729
|
|
|
$
|
137,805
|
|
|
$
|
117,471
|
|
|
$
|
20,334
|
|
|
17.3
|
%
|
|
Other income
|
142
|
|
|
112
|
|
|
30
|
|
|
26.8
|
%
|
|
30
|
|
|
17
|
|
|
450
|
|
|
17
|
|
|
622
|
|
|
146
|
|
|
476
|
|
|
326.0
|
%
|
|
Total operating revenue
|
114,385
|
|
|
107,075
|
|
|
7,310
|
|
|
6.8
|
%
|
|
18,406
|
|
|
6,796
|
|
|
5,636
|
|
|
3,746
|
|
|
138,427
|
|
|
117,617
|
|
|
20,810
|
|
|
17.7
|
%
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
|
20,348
|
|
|
17,757
|
|
|
2,591
|
|
|
14.6
|
%
|
|
3,631
|
|
|
1,541
|
|
|
1,377
|
|
|
1,094
|
|
|
25,356
|
|
|
20,392
|
|
|
4,964
|
|
|
24.3
|
%
|
|
Net operating income (1)
|
$
|
94,037
|
|
|
$
|
89,318
|
|
|
$
|
4,719
|
|
|
5.3
|
%
|
|
$
|
14,775
|
|
|
$
|
5,255
|
|
|
$
|
4,259
|
|
|
$
|
2,652
|
|
|
113,071
|
|
|
97,225
|
|
|
15,846
|
|
|
16.3
|
%
|
|
Other expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,578
|
|
|
9,406
|
|
|
3,172
|
|
|
33.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,332
|
|
|
53,606
|
|
|
3,726
|
|
|
7.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
511
|
|
|
588
|
|
|
(77)
|
|
|
(13.1)
|
%
|
|
Total other expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70,421
|
|
|
63,600
|
|
|
6,821
|
|
|
10.7
|
%
|
|
Total expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95,777
|
|
|
83,992
|
|
|
11,785
|
|
|
14.0
|
%
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30
|
|
|
156
|
|
|
(126)
|
|
|
(80.8)
|
%
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,273)
|
|
|
(15,333)
|
|
|
60
|
|
|
(0.4)
|
%
|
|
Debt extinguishment and modification expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
(834)
|
|
|
834
|
|
|
(100.0)
|
%
|
|
Gain on involuntary conversion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
657
|
|
|
(657)
|
|
|
(100.0)
|
%
|
|
Gain on the sales of rental property, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,976
|
|
|
1,045
|
|
|
4,931
|
|
|
471.9
|
%
|
|
Total other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,267)
|
|
|
(14,309)
|
|
|
5,042
|
|
|
(35.2)
|
%
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
33,383
|
|
|
$
|
19,316
|
|
|
$
|
14,067
|
|
|
72.8
|
%
|
(1)For a detailed discussion of NOI, including the reasons management believes NOI is useful to investors, see “Non-GAAP Financial Measures” below.
Net Income
Net income for our total portfolio increased by $14.1 million, or 72.8%, to $33.4 million for the three months ended June 30, 2021, compared to $19.3 million for the three months ended June 30, 2020.
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 $7.3 million, or 6.8%, to $114.2 million for the three months ended June 30, 2021 compared to $107.0 million for the three months ended June 30, 2020.
Same store lease income increased by $4.3 million, or 4.7%, to $95.2 million for the three months ended June 30, 2021 compared to $90.9 million for the three months ended June 30, 2020. The increase is primarily due to an increase in rental income of approximately $3.0 million due to the execution of new leases and lease renewals with existing tenants, an increase of approximately $1.5 million due the to impact of inheriting the ownership of a solar panel array on one of our buildings, and a net decrease in the amortization of net above market leases of approximately $0.3 million. These increases were also attributable to an increase in rental income of approximately $1.4 million at properties in which, during the three months ended June 30, 2020, we determined that the future collectability was not reasonably assured, and accordingly, we converted to the cash basis of accounting and reversed any accounts receivable and accrued rent balances into rental income and did not recognize revenue for payments that were not received from the tenants. These reversals of accounts receivable and accrued rent balances decreased during the three months ended June 30, 2021. These increases were partially offset by the reduction of base rent of approximately $1.9 million due to tenant vacancy.
Same store other billings increased by $2.9 million, or 18.7%, to $19.0 million for the three months ended June 30, 2021 compared to $16.1 million for the three months ended June 30, 2020. The increase was attributable to an increase of approximately $1.3 million related to other expense reimbursements due to an increase in corresponding expenses. Additionally, there was an increase in real estate taxes levied by the taxing authority of approximately of approximately $1.6 million.
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 operating expenses to net income, see the table above.
Total same store property operating expenses increased by $2.6 million, or 14.6%, to $20.3 million for the three months ended June 30, 2021 compared to $17.8 million for the three months ended June 30, 2020. This increase was primarily related to an increase in real estate taxes levied by the taxing authority of approximately $1.5 million, an increase of $0.8 million related to insurance, utility, and other expenses, and an increase of $0.3 million in repairs and maintenance expense.
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, 2019, we acquired 61 buildings consisting of approximately 12.2 million square feet (excluding two buildings that were included in the Value Add Portfolio at June 30, 2021 or transferred from the Value Add Portfolio to the Operating Portfolio after December 31, 2019), and sold 13 buildings consisting of approximately 4.3 million square feet. For the three months ended June 30, 2021 and 2020, the buildings acquired after December 31, 2019 contributed approximately $14.7 million and $2.3 million to NOI, respectively. For the three months ended June 30, 2021 and 2020, the buildings sold after December 31, 2019 contributed approximately $0.1 million and $3.0 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, 2019. Other NOI also includes termination, solar, and other income adjustments from buildings in our same store portfolio.
For a detailed reconciliation of our other NOI to net income, see the table above.
At June 30, 2021, we owned seven flex/office buildings consisting of approximately 0.4 million square feet, two buildings in our Value Add Portfolio consisting of approximately 0.2 million square feet, one building classified as held for sale consisting of approximately 0.1 million square feet, and nine buildings consisting of approximately 2.2 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, 2019. These buildings contributed approximately $3.4 million and $2.0 million to NOI for the three months ended June 30, 2021 and 2020, respectively. Additionally, there was approximately $0.9 million and $0.7 million of termination, solar, and other income adjustments from certain buildings in our same store portfolio for the three months ended June 30, 2021 and 2020, respectively.
Total Other Expenses
Total other expenses consist of general and administrative expenses, depreciation and amortization, and other expenses.
Total other expenses increased $6.8 million, or 10.7%, for the three months ended June 30, 2021 to $70.4 million compared to $63.6 million for the three months ended June 30, 2020. The increase is primarily a result of an increase in depreciation and amortization of approximately $3.7 million due to an increase in the depreciable asset base as a result of net acquisitions. Additionally, general and administrative expenses increased by approximately $3.2 million primarily due to the acceleration of equity-based compensation expense for certain eligible employees related to the adoption of the Vesting Program in the amount of approximately $1.4 million. General and administrative expenses also increased 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, debt extinguishment and modification expenses, gain on involuntary conversion, 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 expense decreased $5.0 million, or 35.2%, for the three months ended June 30, 2021 to $9.3 million compared $14.3 million for the three months ended June 30, 2020. This decrease is primarily a result of an increase in the gain on the sales of rental property, net of approximately $4.9 million.
Comparison of the six months ended June 30, 2021 to the six months ended June 30, 2020
The following table summarizes selected operating information for our same store portfolio and our total portfolio for the six months ended June 30, 2021 and 2020 (dollars in thousands). This table includes a reconciliation from our same store portfolio to our total portfolio by also providing information for the six months ended June 30, 2021 and 2020 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, 2019 and our flex/office buildings, Value Add Portfolio and buildings classified as held for sale.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Store Portfolio
|
|
Acquisitions/Dispositions
|
|
Other
|
|
Total Portfolio
|
|
|
Six months ended June 30,
|
|
Change
|
|
Six months ended June 30,
|
|
Six months ended June 30,
|
|
Six months ended June 30,
|
|
Change
|
|
|
2021
|
|
2020
|
|
$
|
|
%
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
$
|
|
%
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income
|
$
|
226,675
|
|
|
$
|
216,444
|
|
|
$
|
10,231
|
|
|
4.7
|
%
|
|
$
|
35,693
|
|
|
$
|
12,717
|
|
|
$
|
9,262
|
|
|
$
|
6,649
|
|
|
$
|
271,630
|
|
|
$
|
235,810
|
|
|
$
|
35,820
|
|
|
15.2
|
%
|
|
Other income
|
198
|
|
|
283
|
|
|
(85)
|
|
|
(30.0)
|
%
|
|
144
|
|
|
21
|
|
|
450
|
|
|
51
|
|
|
792
|
|
|
355
|
|
|
437
|
|
|
123.1
|
%
|
|
Total operating revenue
|
226,873
|
|
|
216,727
|
|
|
10,146
|
|
|
4.7
|
%
|
|
35,837
|
|
|
12,738
|
|
|
9,712
|
|
|
6,700
|
|
|
272,422
|
|
|
236,165
|
|
|
36,257
|
|
|
15.4
|
%
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
|
42,201
|
|
|
36,796
|
|
|
5,405
|
|
|
14.7
|
%
|
|
7,186
|
|
|
3,145
|
|
|
2,971
|
|
|
2,398
|
|
|
52,358
|
|
|
42,339
|
|
|
10,019
|
|
|
23.7
|
%
|
|
Net operating income (1)
|
$
|
184,672
|
|
|
$
|
179,931
|
|
|
$
|
4,741
|
|
|
2.6
|
%
|
|
$
|
28,651
|
|
|
$
|
9,593
|
|
|
$
|
6,741
|
|
|
$
|
4,302
|
|
|
220,064
|
|
|
193,826
|
|
|
26,238
|
|
|
13.5
|
%
|
|
Other expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,368
|
|
|
19,779
|
|
|
5,589
|
|
|
28.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115,739
|
|
|
106,294
|
|
|
9,445
|
|
|
8.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,363
|
|
|
1,064
|
|
|
299
|
|
|
28.1
|
%
|
|
Total other expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
142,470
|
|
|
127,137
|
|
|
15,333
|
|
|
12.1
|
%
|
|
Total expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
194,828
|
|
|
169,476
|
|
|
25,352
|
|
|
15.0
|
%
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and other income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62
|
|
|
235
|
|
|
(173)
|
|
|
(73.6)
|
%
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(30,631)
|
|
|
(30,197)
|
|
|
(434)
|
|
|
1.4
|
%
|
|
Debt extinguishment and modification expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(679)
|
|
|
(834)
|
|
|
155
|
|
|
(18.6)
|
%
|
|
Gain on involuntary conversion
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
657
|
|
|
(657)
|
|
|
(100.0)
|
%
|
|
Gain on the sales of rental property, net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,385
|
|
|
47,804
|
|
|
(35,419)
|
|
|
(74.1)
|
%
|
|
Total other income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(18,863)
|
|
|
17,665
|
|
|
(36,528)
|
|
|
(206.8)
|
%
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
58,731
|
|
|
$
|
84,354
|
|
|
$
|
(25,623)
|
|
|
(30.4)
|
%
|
(1)For a detailed discussion of NOI, including the reasons management believes NOI is useful to investors, see “Non-GAAP Financial Measures” below.
Net Income
Net income for our total portfolio decreased by $25.6 million, or 30.4%, to $58.7 million for the six months ended June 30, 2021 compared to $84.4 million for the six months ended June 30, 2020.
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 $10.2 million, or 4.7%, to $226.7 million for the six months ended June 30, 2021 compared to $216.4 million for the six months ended June 30, 2020.
Same store lease income increased by $5.6 million, or 3.0%, to $189.3 million for the six months ended June 30, 2021 compared to $183.7 million for the six months ended June 30, 2020. Approximately $4.9 million of the increase was attributable to rental increases due to the execution of new leases and lease renewals with existing tenants, an increase of approximately $1.5 million due the to impact of inheriting the ownership of a solar panel array on one of our buildings, and a net decrease in the amortization of net above market leases of approximately $0.5 million. These increases were also attributable to an increase in rental income of approximately $2.2 million at properties in which, during the six months ended June 30, 2020, we determined that the future collectability was not reasonably assured, and accordingly, we converted to the cash basis of accounting and reversed any accounts receivable and accrued rent balances into rental income and did not recognize revenue for payments that were not received from the tenants. These reversals of accounts receivable and accrued rent balances decreased during the six months ended June 30, 2021. These increases were partially offset by the reduction of base rent of approximately $3.5 million due to tenant vacancy.
Same store other billings increased by $4.7 million, or 14.2%, to $37.4 million for the six months ended June 30, 2021 compared to $32.7 million for the six months ended June 30, 2020. The increase was attributable to an increase of approximately $2.2 million related to other expense reimbursements due to an increase in corresponding expenses. Additionally, there was an increase in real estate taxes levied by the 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 and operating expenses directly to respective vendors of approximately of approximately $2.5 million.
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 operating expenses to net income, see the table above.
Total same store operating expenses increased by $5.4 million or 14.7% to $42.2 million for the six months ended June 30, 2021 compared to $36.8 million for the six months ended June 30, 2020. This increase was primarily related to an increase in real estate taxes levied by the taxing authority of approximately $2.9 million, an increase of $0.8 million related to snow removal expense, an increase of $1.3 million in utility, insurance, and other expense, and an increase of $0.4 million in repairs and maintenance expense.
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, 2019, we acquired 61 buildings consisting of approximately 12.2 million square feet (excluding two buildings that were included in the Value Add Portfolio at June 30, 2021 or transferred from the Value Add Portfolio to the Operating Portfolio after December 31, 2019), and sold 13 buildings consisting of approximately 4.3 million square feet. For the six months ended June 30, 2021 and June 30, 2020, the buildings acquired after December 31, 2019 contributed approximately $28.4 million and $3.8 million to NOI, respectively. For the six months ended June 30, 2021 and June 30, 2020, the buildings sold after December 31, 2019 contributed approximately $0.3 million and $5.8 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, 2019. Other NOI also includes termination, solar, and other income adjustments from buildings in our same store portfolio.
For a detailed reconciliation of our other NOI to net income, see the table above.
At June 30, 2021, we owned seven flex/office buildings consisting of approximately 0.4 million square feet, two buildings in our Value Add Portfolio consisting of approximately 0.2 million square feet, one building classified as held for sale consisting of approximately 0.1 million square feet, and nine buildings consisting of approximately 2.2 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, 2019. These buildings contributed approximately $6.3 million and $3.5 million to NOI for the six months ended June 30, 2021 and June 30, 2020, respectively. Additionally, there was $0.4 million and $0.8 million of termination, solar, and other income adjustments from certain buildings in our same store portfolio for the six months ended June 30, 2021 and June 30, 2020, respectively.
Total Other Expenses
Total other expenses consist of general and administrative expenses, depreciation and amortization, and other expenses.
Total other expenses increased $15.3 million, or 12.1%, to $142.5 million for the six months ended June 30, 2021 compared to $127.1 million for the six months ended June 30, 2020. This is primarily a result of an increase in depreciation and amortization of approximately $9.4 million as a result of net acquisitions that increased the depreciable asset base. Additionally, general and administrative expenses increased by approximately $5.6 million primarily due to the acceleration of equity-based compensation expense for certain eligible employees related to the adoption of the Vesting Program in the amount of approximately $2.9 million. General and administrative expenses also increased due to increases in compensation and other payroll costs. Additionally, other expenses increased approximately $0.3 million that was primarily due to the settlement of litigation related to a terminated acquisition contract during the COVID-19 pandemic.
Total Other Income (Expense)
Total other income (expense) consists of interest and other income, interest expense, debt extinguishment and modification expenses, gain on involuntary conversion, 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 other income (expense) decreased $36.5 million, or 206.8%, to a total net other expense of $18.9 million for the six months ended June 30, 2021 compared to $17.7 million total net other income for the six months ended June 30, 2020. This decrease is primarily the result of an decrease in gain on the sales of rental property, net of approximately $35.4 million and a decrease in gain on involuntary conversion of approximately $0.7 million related to an eminent domain taking of a portion of a parcel of land that occurred during the six months ended June 30, 2020. Additionally, there was an decrease of approximately $0.2 million in interest and other income due to a decreased cash and cash equivalents balance during the six months ended June 30, 2021 compared to the six months ended June 30, 2020. There was also an increase in interest expense of approximately $0.4 million which was primarily attributable to the funding of the Unsecured Term Loan F on March 25, 2020.
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 Securities and Exchange Commission (“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.
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, land sales, 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 sets forth a reconciliation of our FFO attributable to common stockholders and unit holders for the periods presented to net income, the nearest GAAP equivalent.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
|
Reconciliation of Net Income to FFO (in thousands)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Net income
|
|
$
|
33,383
|
|
|
$
|
19,316
|
|
|
$
|
58,731
|
|
|
$
|
84,354
|
|
|
Rental property depreciation and amortization
|
|
57,291
|
|
|
53,537
|
|
|
115,630
|
|
|
106,154
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on the sales of rental property, net
|
|
(5,976)
|
|
|
(1,045)
|
|
|
(12,385)
|
|
|
(47,804)
|
|
|
FFO
|
|
84,698
|
|
|
71,808
|
|
|
161,976
|
|
|
142,704
|
|
|
Preferred stock dividends
|
|
—
|
|
|
(1,289)
|
|
|
(1,289)
|
|
|
(2,578)
|
|
|
Redemption of preferred stock
|
|
—
|
|
|
—
|
|
|
(2,582)
|
|
|
—
|
|
|
Amount allocated to restricted shares of common stock and unvested units
|
|
(224)
|
|
|
(196)
|
|
|
(461)
|
|
|
(406)
|
|
|
FFO attributable to common stockholders and unit holders
|
|
$
|
84,474
|
|
|
$
|
70,323
|
|
|
$
|
157,644
|
|
|
$
|
139,720
|
|
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 and real estate taxes and insurance. 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.
The following table sets forth a reconciliation of our NOI for the periods presented to net income, the nearest GAAP equivalent.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30,
|
|
Six months ended June 30,
|
|
Reconciliation of Net Income to NOI (in thousands)
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
Net income
|
|
$
|
33,383
|
|
|
$
|
19,316
|
|
|
$
|
58,731
|
|
|
$
|
84,354
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
12,578
|
|
|
9,406
|
|
|
25,368
|
|
|
19,779
|
|
|
Transaction costs
|
|
59
|
|
|
8
|
|
|
79
|
|
|
59
|
|
|
Depreciation and amortization
|
|
57,332
|
|
|
53,606
|
|
|
115,739
|
|
|
106,294
|
|
|
Interest and other income
|
|
(30)
|
|
|
(156)
|
|
|
(62)
|
|
|
(235)
|
|
|
Interest expense
|
|
15,273
|
|
|
15,333
|
|
|
30,631
|
|
|
30,197
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on involuntary conversion
|
|
—
|
|
|
(657)
|
|
|
—
|
|
|
(657)
|
|
|
Debt extinguishment and modification expenses
|
|
—
|
|
|
834
|
|
|
679
|
|
|
834
|
|
|
Other expenses
|
|
452
|
|
|
580
|
|
|
1,284
|
|
|
1,005
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on the sales of rental property, net
|
|
(5,976)
|
|
|
(1,045)
|
|
|
(12,385)
|
|
|
(47,804)
|
|
|
Net operating income
|
|
$
|
113,071
|
|
|
$
|
97,225
|
|
|
$
|
220,064
|
|
|
$
|
193,826
|
|
Cash Flows
Comparison of the six months ended June 30, 2021 to the six months ended June 30, 2020
The following table summarizes our cash flows for the six months ended June 30, 2021 compared to the six months ended June 30, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30,
|
|
Change
|
|
Cash Flows (dollars in thousands)
|
|
2021
|
|
2020
|
|
$
|
|
%
|
|
Net cash provided by operating activities
|
|
$
|
162,373
|
|
|
$
|
148,088
|
|
|
$
|
14,285
|
|
|
9.6
|
%
|
|
Net cash used in investing activities
|
|
$
|
202,017
|
|
|
$
|
55,089
|
|
|
$
|
146,928
|
|
|
266.7
|
%
|
|
Net cash provided by financing activities
|
|
$
|
37,820
|
|
|
$
|
9,739
|
|
|
$
|
28,081
|
|
|
288.3
|
%
|
Net cash provided by operating activities increased $14.3 million to $162.4 million for the six months ended June 30, 2021 compared to $148.1 million for the six months ended June 30, 2020. The increase was primarily attributable to incremental operating cash flows from property acquisitions completed after June 30, 2020, and operating performance at existing properties. These increases were partially offset by the loss of cash flows from property dispositions completed after June 30, 2020 and fluctuations in working capital due to timing of payments and rental receipts.
Net cash used in investing activities increased $146.9 million to $202.0 million for the six months ended June 30, 2021 compared to $55.1 million for the six months ended June 30, 2020. The increase was primarily attributable to the acquisition of 15 buildings for a total cash consideration of approximately $221.8 million for the six months ended June 30, 2021 compared to the acquisition of 11 buildings for a total cash consideration of approximately $131.1 million for the six months ended June 30, 2020. The increase is also attributable to a decrease in proceeds from sales of rental property, net related to the disposition of six buildings during the six months ended June 30, 2021 for net proceeds of approximately $39.6 million, compared to the six months ended June 30, 2020 where we sold four buildings for net proceeds of approximately $101.9 million.
Net cash provided by financing activities increased $28.1 million to $37.8 million for the six months ended June 30, 2021 compared to $9.7 million for the six months ended June 30, 2020. The increase is primarily attributable to a net cash inflow of approximately $323.0 million from our unsecured credit facility. This increase was partially offset by a decrease of net proceeds from the sales of common stock of approximately $109.3 million, the redemption of the Series C Preferred Stock (as defined below) of $75.0 million, and an increase of approximately $10.3 million in dividends paid during the six months ended June 30, 2021 compared to the six months ended June 30, 2020. Additionally, the funding of the Unsecured Term Loan F of $100.0 million did not recur during the six months ended June 30, 2021 compared to the six months ended June 30, 2020.
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.
Since the COVID-19 pandemic, we have worked to ensure that we maintain adequate liquidity. On February 5, 2021 we refinanced the Unsecured Credit Facility and the Unsecured Term Loan G, as discussed in “Indebtedness Outstanding” below. As of June 30, 2021, we had total immediate liquidity of approximately $477.7 million, comprised of $14.6 million of cash and cash equivalents and $463.1 million of immediate availability on our unsecured credit facility. When incorporating the remaining undrawn balance available on our unsecured credit facility, the approximately $135.2 million of forward equity proceeds available to us at our option through November 16, 2021, and the approximately $48.9 million of forward equity proceeds available to us at our option through April 5, 2022, our total liquidity as of June 30, 2021 was approximately $661.8 million. Additionally, subsequent to June 30, 2021, on July 8, 2021, we entered into a note purchase agreement for the future private placement by the Operating Partnership of $325.0 million senior unsecured notes, which are expected to be issued on or around September 28, 2021, subject to conditions, as discussed in “Indebtedness Outstanding” below.
In addition, we require funds for future dividends to be paid to our common and preferred stockholders and unit holders in the Operating Partnership. These distributions on our common stock are voluntary (at the discretion of our board of directors), to the extent we have satisfied distribution requirements in order to maintain our REIT status for federal income tax purposes, and 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 outstanding common stock that had a record date during the six months ended June 30, 2021.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Month Ended 2021
|
|
Declaration Date
|
|
Record Date
|
|
Per Share
|
|
Payment Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30
|
|
April 12, 2021
|
|
June 30, 2021
|
|
$
|
0.120833
|
|
|
July 15, 2021
|
|
May 31
|
|
April 12, 2021
|
|
May 28, 2021
|
|
0.120833
|
|
|
June 15, 2021
|
|
April 30
|
|
April 12, 2021
|
|
April 30, 2021
|
|
0.120833
|
|
|
May 17, 2021
|
|
March 31
|
|
January 11, 2021
|
|
March 31, 2021
|
|
0.120833
|
|
|
April 15, 2021
|
|
February 28
|
|
January 11, 2021
|
|
February 26, 2021
|
|
0.120833
|
|
|
March 15, 2021
|
|
January 31
|
|
January 11, 2021
|
|
January 29, 2021
|
|
0.120833
|
|
|
February 16, 2021
|
|
Total
|
|
|
|
|
|
$
|
0.724998
|
|
|
|
On July 13, 2021, our board of directors declared the common stock dividends for the months ending July 31, 2021, August 31, 2021, and September 30, 2021 at a monthly rate of $0.120833 per share of common stock.
During the three months ended March 31, 2021, we declared quarterly cumulative dividends on the 6.875% Series C Cumulative Redeemable Preferred Stock (“Series C Preferred Stock”) at a rate equivalent to the fixed annual rate of $1.71875 per share. The following table summarizes the dividends on the Series C Preferred Stock during the six months ended June 30, 2021.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended 2021
|
|
Declaration Date
|
|
Series C
Preferred Stock Per Share
|
|
Payment Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31
|
|
January 11, 2021
|
|
$
|
0.4296875
|
|
|
March 31, 2021
|
|
Total
|
|
|
|
$
|
0.4296875
|
|
|
|
On March 1, 2021, we gave notice to redeem all 3,000,000 issued and outstanding shares of the Series C Preferred Stock on March 31, 2021. We redeemed the Series C Preferred Stock on March 31, 2021 at a cash redemption price of $25.00 per share, plus accrued and unpaid dividends to, but excluding, the redemption date.
Indebtedness Outstanding
The following table summarizes certain information with respect to our indebtedness outstanding as of June 30, 2021.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan
|
|
Principal Outstanding as of June 30, 2021 (in thousands)
|
|
Interest
Rate(1)(2)
|
|
Maturity Date
|
|
Prepayment Terms(3)
|
|
|
|
Unsecured credit facility:
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured Credit Facility(4)
|
|
$
|
284,000
|
|
|
L + 0.90%
|
|
January 12, 2024
|
|
i
|
|
|
|
Total unsecured credit facility
|
|
284,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured term loans:
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured Term Loan A
|
|
150,000
|
|
|
3.38
|
%
|
|
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
|
|
200,000
|
|
|
3.11
|
%
|
|
January 12, 2025
|
|
i
|
|
|
|
Unsecured Term Loan G
|
|
300,000
|
|
|
1.28
|
%
|
|
February 5, 2026
|
|
i
|
|
|
|
Total unsecured term loans
|
|
975,000
|
|
|
|
|
|
|
|
|
|
|
Total unamortized deferred financing fees and debt issuance costs
|
|
(4,070)
|
|
|
|
|
|
|
|
|
|
|
Total carrying value unsecured term loans, net
|
|
970,930
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
Total unamortized deferred financing fees and debt issuance costs
|
|
(1,610)
|
|
|
|
|
|
|
|
|
|
|
Total carrying value unsecured notes, net
|
|
573,390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage notes (secured debt):
|
|
|
|
|
|
|
|
|
|
|
|
Wells Fargo Bank, National Association CMBS Loan
|
|
47,580
|
|
|
4.31
|
%
|
|
December 1, 2022
|
|
iii
|
|
|
|
Thrivent Financial for Lutherans
|
|
3,494
|
|
|
4.78
|
%
|
|
December 15, 2023
|
|
iv
|
|
|
|
United of Omaha Life Insurance Company
|
|
5,040
|
|
|
3.71
|
%
|
|
October 1, 2039
|
|
ii
|
|
|
|
Total mortgage notes
|
|
56,114
|
|
|
|
|
|
|
|
|
|
|
Less: Net unamortized fair market value discount
|
|
(134)
|
|
|
|
|
|
|
|
|
|
|
Total unamortized deferred financing fees and debt issuance costs
|
|
(169)
|
|
|
|
|
|
|
|
|
|
|
Total carrying value mortgage notes, net
|
|
55,811
|
|
|
|
|
|
|
|
|
|
|
Total / weighted average interest rate(5)
|
|
$
|
1,884,131
|
|
|
2.99
|
%
|
|
|
|
|
|
|
(1)Interest rate as of June 30, 2021. At June 30, 2021, the one-month LIBOR (“L”) was 0.10050%. The current 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 the 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 June 30, 2021, one-month LIBOR for the Unsecured Term Loans A, D, E, F, and G was swapped to a fixed rate of 2.38%, 1.85%, 2.92%, 2.11%, and 0.28%, respectively. One-month LIBOR for the Unsecured Term Loan G will be swapped to a fixed rate of 0.94% effective April 18, 2023.
(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 $750.0 million. The initial maturity date is January 15, 2023, which may be extended pursuant to two six-month extension options exercisable at our discretion upon advance written notice. Exercise of each six-month option is subject to the following conditions: (i) absence of a default immediately before the extension and immediately after giving effect to the extension, (ii) accuracy of representations and warranties as of the extension date (both immediately before and after the extension), as if made on the extension date, and (iii) payment of a fee. Neither extension option is subject to lender consent, assuming proper notice and satisfaction of the conditions.
(5)The weighted average interest rate was calculated using the fixed interest rate swapped on the notional amount of $975.0 million of debt, and 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 or discounts.
The aggregate undrawn nominal commitments on the unsecured credit facility and unsecured term loans as of June 30, 2021 was approximately $463.1 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.
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 June 30, 2021, we were in compliance with the applicable financial covenants.
Subsequent to June 30, 2021, on July 8, 2021, we entered into a note purchase agreement for the future private placement by the Operating Partnership of $275.0 million senior unsecured notes, maturing September 29, 2031, with a fixed annual interest rate of 2.80%, and $50.0 million senior unsecured notes, maturing September 28, 2033, with a fixed annual interest rate of 2.95%. The notes are expected to be issued on or around September 28, 2021, subject to conditions. The note purchase agreement contains a number of financial covenants substantially similar to the financial covenants contained in our unsecured credit facility, plus a financial covenant that requires us to maintain a minimum interest coverage ratio of not less than 1.50:1.00. The Company and certain of its subsidiaries will guarantee the obligations under the notes.
On February 25, 2021, we assumed a mortgage note with United of Omaha Life Insurance Company of approximately $5.1 million in connection with the acquisition of the property located in Long Island, NY, which serves as collateral for the debt. The debt matures on October 1, 2039 and bears interest at 3.71% per annum. The assumed debt was recorded at fair value and a fair value discount of approximately $0.2 million was recorded. The fair value of debt was determined by discounting the future cash flows using the current rate of approximately 4.10% at which loans would be made to borrowers with similar credit ratings for loans with similar remaining maturities, terms, and loan-to-value ratios. The fair value of the debt is based on Level 3 inputs and is a nonrecurring fair value measurement.
On February 5, 2021, we entered into an amendment to the unsecured credit facility (the “Credit Facility Amendment”). The Credit Facility Amendment provides for an increase in the aggregate commitments available for borrowing under the unsecured credit facility from $500 million to up to $750 million. As of June 30, 2021, the unsecured credit facility bore an interest rate of LIBOR plus a spread of 0.90% based on our debt rating, as defined in the loan agreement. In connection with the Credit Facility Amendment, we incurred approximately $1.2 million in costs which are being deferred and amortized through the maturity date of the unsecured credit facility. Other than the increase in the borrowing commitments, the material terms of the unsecured credit facility remain unchanged.
On February 5, 2021, we entered into an amendment to the Unsecured Term Loan G (the “Amendment to Unsecured Term Loan G”). The Amendment to Unsecured Term Loan G provides for an extension of the maturity date to February 5, 2026 and a reduced stated interest rate of one-month LIBOR plus a spread that ranges from 0.85% to 1.65% for LIBOR borrowings based on our debt ratings. The Amendment to Unsecured Term Loan G also amended the provision for a minimum interest rate, or floor, for LIBOR borrowings to 0.00% and for Base Rate borrowings to 1.00%. As of June 30, 2021, borrowings under the Unsecured Term Loan G bore interest at LIBOR plus 1.00%. In connection with the Amendment to Unsecured Term Loan G, we incurred approximately $1.6 million in costs which are being deferred and amortized through the new maturity date of February 5, 2026. We also incurred approximately $0.7 million of modification expenses which were recognized in debt extinguishment and modification expenses in the accompanying Consolidated Statements of Operations. Additionally, we reversed the previously accrued extension fees of approximately $1.1 million from an amendment to the Unsecured Term Loan G that was entered into on April 17, 2020, which resulted in a decrease to interest expense of approximately $0.3 million. Other than the maturity and interest rate provisions described above, the material terms of the Unsecured Term Loan G remain unchanged.
The following table summarizes our debt capital structure as of June 30, 2021.
|
|
|
|
|
|
|
|
|
|
|
Debt Capital Structure
|
|
June 30, 2021
|
|
Total principal outstanding (in thousands)
|
|
$
|
1,890,114
|
|
|
Weighted average duration (years)
|
|
3.3
|
|
|
|
|
|
|
% Secured debt
|
|
3.0
|
%
|
|
% Debt maturing next 12 months
|
|
7.9
|
%
|
|
Net Debt to Real Estate Cost Basis(1)
|
|
34.8
|
%
|
(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.
Equity
Preferred Stock
On March 1, 2021, we gave notice to redeem all 3,000,000 issued and outstanding shares of the Series C Preferred Stock on March 31, 2021. We redeemed the Series C Preferred Stock on March 31, 2021 at a cash redemption price of $25.00 per share, plus accrued and unpaid dividends to, but excluding, the redemption date. We have no outstanding preferred stock issuances as of June 30, 2021.
Common Stock
The following table summarizes our at-the-market (“ATM”) common stock offering program as of June 30, 2021. 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 June 30, 2021 (in thousands)
|
|
2019 $600 million ATM
|
|
February 14, 2019
|
|
$
|
600,000
|
|
|
$
|
204,023
|
|
The table below sets forth the activity for the ATM common stock offering programs during the three months ended June 30, 2021 (in thousands, except share data).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, 2021
|
|
ATM Common Stock Offering Program(1)
|
|
Shares
Sold
|
|
Weighted Average Price Per Share
|
|
|
|
Sales
Agents’ Fees
|
|
Net
Proceeds
|
|
2019 $600 million ATM
|
|
1,208,014
|
|
|
$
|
34.95
|
|
|
|
|
$
|
422
|
|
|
$
|
41,799
|
|
|
Total/weighted average
|
|
1,208,014
|
|
|
$
|
34.95
|
|
|
|
|
$
|
422
|
|
|
$
|
41,799
|
|
(1)Includes transactions settled during the period and excludes ATM issuances on a forward basis.
On April 5, 2021, we sold 1,446,760 shares on a forward basis under the ATM common stock offering program at a price of $34.56 per share, or $50.0 million, and $34.2144 per share net of sales agent fees. We do not initially receive any proceeds from the sale of shares on a forward basis. We may elect to cash settle or net share settle the forward sale agreement at any time through the scheduled maturity date of April 5, 2022.
Subsequent to June 30, 2021, we sold 1,719,849 shares under the ATM common stock offering program at a price of $37.98 per share, or $65.3 million, and $37.67 per share net of sales agent fees.
Noncontrolling Interest
We own our interests in all of our properties and conduct substantially all of our business through the Operating Partnership. We are the sole member of the sole general partner of the Operating Partnership. As of June 30, 2021, we owned approximately 97.8% of the 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 2.2%.
Interest Rate Risk
We use interest rate swaps to fix the rate of our variable rate debt. As of June 30, 2021, all of our outstanding variable rate debt, with the exception of our unsecured credit facility, was fixed with interest rate swaps 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, or Fitch Ratings or other nationally recognized rating agencies.
The following table details our outstanding interest rate swaps as of June 30, 2021.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
Wells Fargo Bank, N.A.
|
|
Jan-08-2015
|
|
Mar-20-2015
|
|
$
|
25,000
|
|
|
$
|
(324)
|
|
|
1.8280
|
%
|
|
One-month L
|
|
Mar-31-2022
|
|
The Toronto-Dominion Bank
|
|
Jan-08-2015
|
|
Feb-14-2020
|
|
$
|
25,000
|
|
|
$
|
(441)
|
|
|
2.4535
|
%
|
|
One-month L
|
|
Mar-31-2022
|
|
Regions Bank
|
|
Jan-08-2015
|
|
Feb-14-2020
|
|
$
|
50,000
|
|
|
$
|
(891)
|
|
|
2.4750
|
%
|
|
One-month L
|
|
Mar-31-2022
|
|
Capital One, N.A.
|
|
Jan-08-2015
|
|
Feb-14-2020
|
|
$
|
50,000
|
|
|
$
|
(912)
|
|
|
2.5300
|
%
|
|
One-month L
|
|
Mar-31-2022
|
|
The Toronto-Dominion Bank
|
|
Jul-20-2017
|
|
Oct-30-2017
|
|
$
|
25,000
|
|
|
$
|
(637)
|
|
|
1.8485
|
%
|
|
One-month L
|
|
Jan-04-2023
|
|
Royal Bank of Canada
|
|
Jul-20-2017
|
|
Oct-30-2017
|
|
$
|
25,000
|
|
|
$
|
(638)
|
|
|
1.8505
|
%
|
|
One-month L
|
|
Jan-04-2023
|
|
Wells Fargo Bank, N.A.
|
|
Jul-20-2017
|
|
Oct-30-2017
|
|
$
|
25,000
|
|
|
$
|
(638)
|
|
|
1.8505
|
%
|
|
One-month L
|
|
Jan-04-2023
|
|
PNC Bank, N.A.
|
|
Jul-20-2017
|
|
Oct-30-2017
|
|
$
|
25,000
|
|
|
$
|
(637)
|
|
|
1.8485
|
%
|
|
One-month L
|
|
Jan-04-2023
|
|
PNC Bank, N.A.
|
|
Jul-20-2017
|
|
Oct-30-2017
|
|
$
|
50,000
|
|
|
$
|
(1,273)
|
|
|
1.8475
|
%
|
|
One-month L
|
|
Jan-04-2023
|
|
The Toronto-Dominion Bank
|
|
Apr-20-2020
|
|
Sep-29-2020
|
|
$
|
75,000
|
|
|
$
|
(64)
|
|
|
0.2750
|
%
|
|
One-month L
|
|
Apr-18-2023
|
|
Wells Fargo Bank, N.A.
|
|
Apr-20-2020
|
|
Sep-29-2020
|
|
$
|
75,000
|
|
|
$
|
(70)
|
|
|
0.2790
|
%
|
|
One-month L
|
|
Apr-18-2023
|
|
The Toronto-Dominion Bank
|
|
Apr-20-2020
|
|
Mar-19-2021
|
|
$
|
75,000
|
|
|
$
|
(64)
|
|
|
0.2750
|
%
|
|
One-month L
|
|
Apr-18-2023
|
|
Wells Fargo Bank, N.A.
|
|
Apr-20-2020
|
|
Mar-19-2021
|
|
$
|
75,000
|
|
|
$
|
(71)
|
|
|
0.2800
|
%
|
|
One-month L
|
|
Apr-18-2023
|
|
The Toronto-Dominion Bank
|
|
Jul-24-2018
|
|
Jul-26-2019
|
|
$
|
50,000
|
|
|
$
|
(3,243)
|
|
|
2.9180
|
%
|
|
One-month L
|
|
Jan-12-2024
|
|
PNC Bank, N.A.
|
|
Jul-24-2018
|
|
Jul-26-2019
|
|
$
|
50,000
|
|
|
$
|
(3,243)
|
|
|
2.9190
|
%
|
|
One-month L
|
|
Jan-12-2024
|
|
Bank of Montreal
|
|
Jul-24-2018
|
|
Jul-26-2019
|
|
$
|
50,000
|
|
|
$
|
(3,243)
|
|
|
2.9190
|
%
|
|
One-month L
|
|
Jan-12-2024
|
|
U.S. Bank, N.A.
|
|
Jul-24-2018
|
|
Jul-26-2019
|
|
$
|
25,000
|
|
|
$
|
(1,622)
|
|
|
2.9190
|
%
|
|
One-month L
|
|
Jan-12-2024
|
|
Wells Fargo Bank, N.A.
|
|
May-02-2019
|
|
Jul-15-2020
|
|
$
|
50,000
|
|
|
$
|
(2,932)
|
|
|
2.2460
|
%
|
|
One-month L
|
|
Jan-15-2025
|
|
U.S. Bank, N.A.
|
|
May-02-2019
|
|
Jul-15-2020
|
|
$
|
50,000
|
|
|
$
|
(2,932)
|
|
|
2.2459
|
%
|
|
One-month L
|
|
Jan-15-2025
|
|
Regions Bank
|
|
May-02-2019
|
|
Jul-15-2020
|
|
$
|
50,000
|
|
|
$
|
(2,930)
|
|
|
2.2459
|
%
|
|
One-month L
|
|
Jan-15-2025
|
|
Bank of Montreal
|
|
Jul-16-2019
|
|
Jul-15-2020
|
|
$
|
50,000
|
|
|
$
|
(1,990)
|
|
|
1.7165
|
%
|
|
One-month L
|
|
Jan-15-2025
|
|
U.S. Bank, N.A.
|
|
Feb-17-2021
|
|
Apr-18-2023
|
|
$
|
150,000
|
|
|
$
|
848
|
|
|
0.9385
|
%
|
|
One-month L
|
|
Feb-5-2026
|
|
Wells Fargo Bank, N.A.
|
|
Feb-17-2021
|
|
Apr-18-2023
|
|
$
|
75,000
|
|
|
$
|
428
|
|
|
0.9365
|
%
|
|
One-month L
|
|
Feb-5-2026
|
|
The Toronto-Dominion Bank
|
|
Feb-17-2021
|
|
Apr-18-2023
|
|
$
|
75,000
|
|
|
$
|
428
|
|
|
0.9360
|
%
|
|
One-month L
|
|
Feb-5-2026
|
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 June 30, 2021, the fair value of three of our interest rate swaps were in an asset position of approximately $1.7 million, including any adjustment for nonperformance risk related to these agreements. The remaining 21 interest rate swaps were in a liability position of approximately $28.8 million, including any adjustment for nonperformance risk related to these agreements.
As of June 30, 2021, we had $1,259.0 million of variable rate debt. As of June 30, 2021, all of our outstanding variable rate debt, with the exception of our unsecured credit facility, was fixed with interest rate swaps 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.
Off-balance Sheet Arrangements
As of June 30, 2021, we had letters of credit related to development projects and certain other agreements of approximately $2.9 million. As of June 30, 2021, we had no other material off-balance sheet arrangements.