2021 ANNUAL REPORTSTAGINDUSTRIAL.COMOne Federal Street, 23rd FloorBoston, MA 0211061 7–574–4777 2021 LEASING ACTIVITY 13.7M*This was achieved primarily through energy efficiency, optimization, and on-site renewables. Remaining scope 1 and scope 2 emissions were neutralized through the generation or purchase of credible and verifiable renewable energy certificates (RECs) and carbon offsets. We plan to decelerate our use of RECs and carbon offsets as we increase investments and efforts in energy efficiency, electrification and on-site renewables. To formalize an even deeper commitment, STAG has set a long-term goal in alignment with, and approved by, the Science-Based Targets Initiative (SBTi), the world’s most widely respected organization tasked with the responsibility of vetting science-based emissions reduction targets from the private sector. STAG formally commits to reducing absolute scope 1 and scope 2 GHG emissions 50% by 2030 from a 2018 baseline, and to measure and reduce scope 3 emissions,which primarily come from our tenants’ energy use. As mandated by SBTi, STAG’s GHG inventory and management practices follow the rules and standards of the GHG Protocol and the accomplishment of its targets, excluding the use of carbon offsets.CAPITALIZATION RATE 5.2%BUILDINGS 742021 FFO GROWTH 19.2%STRAIGHT-LINE RENT CHANGE 17.6%SQ. FT.2021 CASH NOI GROWTH13.5%2021 ACQUISITIONS ACTIVITY$1.3BSQUARE FEET 109MSTATES 40TENANTS 532OPERATING PORTFOLIO HIGHLIGHTS97.4%DONATIONS AND FUNDRAISINGS$1.2M VOLUNTEER HOURS1,650WOMEN AND/OR MINORITIES 33% AVERAGE TENURE7.5 YEARS AUDIT COMMITTEE FINANCIAL EXPERTS80% INDEPENDENT89% LED LIGHTING SYSTEMS AS A % OF PORTFOLIO41% CAPACITY FROM EXISTING PHOTOVOLTAIC SOLAR PROJECTS25.5 MW REFLECTIVE ROOFING AS A % OF PORTFOLIO48% HVAC SYSTEM UPGRADES SINCE 2016$6.2MENVIRONMENTALGOVERNANCESOCIALCOMPANY OVERVIEWPORTFOLIO ENVIRONMENTAL STATISTICSDIRECTORS SNAPSHOTSOCIAL HIGHLIGHTSCORPORATE INFORMATIONBENJAMIN S. BUTCHERChairman of the BoardChief Executive OfficerWILLIAM R. CROOKERPresidentMATTS S. PINARDChief Financial OfficerExecutive Vice President & TreasurerSTEPHEN C. MECKEChief Operating OfficerExecutive Vice PresidentJEFFREY M. SULLIVANGeneral Counsel & SecretaryExecutive Vice PresidentJACLYN M. PAULChief Accounting OfficerSenior Vice PresidentMICHAEL C. CHASEChief Investment OfficerSenior Vice PresidentBENJAMIN S. BUTCHERChairman of the BoardChief Executive OfficerDR. JIT KEE CHINChief Data & Innovation Officer & Executive Vice PresidentSuffolk ConstructionVIRGIS W. COLBERTFormer Executive Vice PresidentWorld Wide OperationsMiller Brewing CompanyMICHELLE S. DILLEYChief Executive OfficerAwesome Leaders, NFPJEFFREY D. FURBERGlobal Chief Executive OfficerAEWLARRY T. GUILLEMETTEFormer Chairman of the BoardFormer Chief Executive Officer & President Amtrol, Inc.FRANCIS X. JACOBY IIIChief Financial Officer & Executive Vice PresidentLeggat McCall Properties, LLCCHRISTOPHER P. MARRChief Executive Officer & President CubeSmartHANS S. WEGERStrategic ConsultantMANAGEMENT TEAMBOARD OFDIRECTORSUnder the Greenhouse Gas (GHG) Protocol’s market-based methodology, STAG achieved operational carbon neutrality in 2021 for our 2020 operating year.*STAG takes a proactive and transparent approach to governance, aiming to provide our stakeholders with checks and balances that both reduce risk and leverage opportunities. We are therefore committed to conducting our business honestly, ethically, and in a manner that considers the interests of all our stakeholders: tenants, shareholders, employees, service providers, partners, local communities and the public at large.As an expression of our commitment to good corporate citizenship, we established the STAG Industrial Charitable Fund in 2020 to promote equality and inspire children and young adults — particularly those at risk — to realize their potential and benefit future generations.STAG Industrial, Inc. (NYSE: STAG) is a real estate investment trust (REIT) focused on the acquisition and operation of industrial properties throughout the United States.OCCUPIEDEXECUTIVE OFFICESOne Federal Street, 23rd FloorBoston, MA 02110617-574-4777 · stagindustrial.comINVESTOR RELATIONS617-226-4987 · InvestorRelations@stagindustrial.comINDEPENDENT ACCOUNTANTSPricewaterhouseCoopers LLP · Boston, MAOUTSIDE CORPORATE COUNSELDLA Piper LLP (US) · New York, NYTRANSFER AGENTContinental Stock & Trust Company1 State Street, 30th Floor New York, NY 10004212-509-4000 · continentalstock.com I want to start this annual letter thanking all of the stakeholders in STAG including our shareholders, board members and employees for the opportunity to be their CEO since I founded the company over 18 years ago. My transition from CEO to Executive Chairman is somewhat bittersweet in that I am proud of what we as a company have been able to build as both a private company and more importantly as a public company over the past two decades. I will miss the day-to- day interactions with the STAG stakeholders but as I look forward to transitioning my role from your CEO to the Executive Chairman of the Board, I am excited for the next phase of STAG’s journey as a public company. Bill Crooker, who will succeed me as your CEO, has been with STAG since the IPO — initially as our Chief Accounting Officer, moving to the CFO role and more recently becoming our President. Bill has the respect and admiration of not only his STAG colleagues but also the analyst and investment communities as well. He will lead STAG forward along the same successful path we have pursued since our IPO.The elevation of Matts Pinard to CFO is further evidence of our culture and commitment to employee development at STAG. The fact that we are able to fill these two important roles internally is a source of pride for me personally and for the organization. Like Bill, Matts is respected and admired by both his colleagues at STAG and the investment community. Under the leadership of these two and the other leaders at STAG, our organization is poised for further success.During this past year (2021), we celebrated our 10th anniversary as a public company. These ten years have confirmed the validity of the three principal reasons we decided to enter the public markets more than a decade ago. The first two (access to capital and establishing a stronger/more resilient entity) were almost assured by our making the move. The improved access to capital has provided the underpinning for our substantial growth — both on absolute and per share basis. By developing an investment grade balance sheet, we have been able to lower the cost of the capital that funded our growth.The third reason for entering the public market, and in retrospect, the most important, was an opportunity to build a great organization under the ‘permanent’ capital format of a public company. On this measure, becoming a public company has exceeded all of my expectations. In the prior, private iteration of STAG (an episodic fund raiser), this would not have been possible. Given this opportunity, we have built a company whose hallmarks are integrity and creativity, that continues to exceed operational expectations and is genuinely a great place to work and grow. We have focused on hiring younger candidates, and then developing them into highly skilled employees. This commitment to employee development has provided us with a deep and talented bench of colleagues.The fundamentals of our industry are strong and are projected to remain strong for some time. Our investment thesis and execution have proven to be both effective and resilient. This is reflected in our recent, strong operational results and in our guidance for 2022. I will depart the CEO role, in July, with no regrets and no worries for the future.Your grateful CEO,Benjamin S. ButcherCEOSTAG IndustrialDEAR SHAREHOLDERS UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission file number 1-34907
STAG INDUSTRIAL, INC.
(Exact name of registrant as specified in its charter)
Maryland
(State or other jurisdiction of
incorporation or organization)
One Federal Street
23rd Floor
Boston, Massachusetts
(Address of principal executive offices)
27-3099608
(IRS Employer Identification No.)
02110
(Zip code)
(617) 574-4777
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value
STAG
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T
(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging
growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of
the Exchange Act.
Large accelerated filer ☒ Accelerated filer ☐
Non-accelerated filer ☐ Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised
financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report.
☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately $5,991 million based on the closing
price on the New York Stock Exchange as of June 30, 2021.
Number of shares of the registrant’s common stock outstanding as of February 15, 2022: 177,952,678
Portions of the registrant’s definitive Proxy Statement with respect to its 2022 Annual Meeting of Stockholders to be filed not later than 120 days after the end of the
registrant’s fiscal year are incorporated by reference into Part II, Item 5 and Part III, Items 10, 11, 12, 13 and 14 hereof as noted therein.
DOCUMENTS INCORPORATED BY REFERENCE
STAG INDUSTRIAL, INC.
Table of Contents
PART I.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
PART II.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Reserved
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III.
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accountant Fees and Services
PART IV.
Exhibits and Financial Statement Schedules
Form 10-K Summary
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Item 15.
Item 16.
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Introduction
PART I.
As used herein, except where the context otherwise requires, “Company,” “we,” “our” and “us,” refer to STAG Industrial, Inc.
and our consolidated subsidiaries and partnerships, including our operating partnership, STAG Industrial Operating Partnership,
L.P. (“Operating Partnership”).
Forward-Looking Statements
This report, including the information incorporated by reference, contains “forward-looking statements” within the meaning of
the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set
forth in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)). You can identify forward-looking statements by the use of words
such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “seeks,” “should,” “will,” and
variations of such words or similar expressions. Forward-looking statements in this report include, among others, statements
about our future financial condition, results of operations, capitalization rates on future acquisitions, our business strategy and
objectives, including our acquisition strategy, occupancy and leasing rates and trends, and expected liquidity needs and sources
(including capital expenditures and the ability to obtain financing or raise capital). Our forward-looking statements reflect our
current views about our plans, intentions, expectations, strategies and prospects, which are based on the information currently
available to us and on assumptions we have made. Although we believe that our plans, intentions, expectations, strategies and
prospects as reflected in or suggested by our forward-looking statements are reasonable, we can give no assurance that our
plans, intentions, expectations, strategies or prospects will be attained or achieved and you should not place undue reliance on
these forward‑looking statements. Furthermore, actual results may differ materially from those described in the forward‑looking
statements and may be affected by a variety of risks and factors including, without limitation:
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the factors included in this report, including those set forth under the headings “Business,” “Risk Factors,” and
“Management’s Discussion and Analysis of Financial Condition and Results of Operations;”
the ongoing adverse effects of the novel coronavirus (“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;
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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.
Item 1. Business
Certain Definitions
In this report:
We define “GAAP” as generally accepted accounting principles in the United States.
We define “total annualized base rental revenue” as the contractual monthly base rent as of December 31, 2021 (which differs
from rent calculated in accordance with GAAP) multiplied by 12. If a tenant is in a free rent period as of December 31, 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 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.
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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 a “New Lease” as any lease that is signed for an initial term equal to or greater than 12 months for any vacant space,
including a lease signed by a new tenant or an existing tenant that is expanding into new (additional) space.
We define “Renewal Lease” as a lease signed by an existing tenant to extend the term for 12 months or more, including (i) a
renewal of the same space as the current lease at lease expiration, (ii) a renewal of only a portion of the current space at lease
expiration, or (iii) an early renewal or workout, which ultimately does extend the original term for 12 months or more.
Overview
We are a REIT focused on the acquisition, ownership and operation of industrial properties throughout the United States. We
seek to (i) identify properties for acquisition that offer relative value across all locations, industrial property types, and tenants
through the principled application of our proprietary risk assessment model, (ii) operate our properties in an efficient, cost-
effective manner, and (iii) capitalize our business appropriately given the characteristics of our assets. We are a Maryland
corporation and our common stock is publicly traded on the New York Stock Exchange (“NYSE”) under the symbol “STAG.”
We are organized and conduct our operations to qualify as a REIT under Sections 856 through 860 of the Internal Revenue
Code of 1986, as amended (the “Code”), and generally are not subject to federal income tax to the extent we currently distribute
our income to our stockholders and maintain our qualification as a REIT. We remain subject to state and local taxes on our
income and property and to U.S. federal income and excise taxes on our undistributed income.
As of December 31, 2021, we owned 544 buildings in 40 states with approximately 108.6 million rentable square feet,
consisting of 459 warehouse/distribution buildings, 74 light manufacturing buildings, two flex/office buildings, and nine Value
Add Portfolio buildings. We own both single- and multi-tenant properties, although the majority of our portfolio is single-
tenant. As of December 31, 2021, our buildings were approximately 96.9% leased to 532 tenants, with no single tenant
accounting for more than approximately 3.2% of our total annualized base rental revenue and no single industry accounting for
more than approximately 11.3% of our total annualized base rental revenue. We intend to maintain a diversified mix of tenants
to limit our exposure to any single tenant.
As of December 31, 2021, our Operating Portfolio was approximately 97.4% leased and our SL Rent Change on new and
renewal leases together grew approximately 17.6% and 8.2% during the years ended December 31, 2021 and 2020, respectively
and our Cash Rent Change on new and renewal leases together grew approximately 10.4% and 2.2% during the years ended
December 31, 2021 and 2020, respectively.
We have a fully-integrated acquisition, leasing and asset management platform, and our senior management team has a
significant amount of industrial real estate experience. Our mission is to continue to be a disciplined, relative value investor and
a leading owner and operator of industrial properties in the United States. We seek to deliver attractive stockholder returns in
all market environments by providing a covered dividend combined with accretive growth.
We are structured as an umbrella partnership REIT, also known as an UPREIT, and own all of our properties and conduct
substantially all of our business through our Operating Partnership, which we control and manage. As of December 31, 2021,
we owned approximately 98.1% of the common units of our Operating Partnership, and our current and former executive
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officers, directors, employees and their affiliates, and third parties owned the remaining 1.9%. “Common units” are units of
limited partnership interest in our Operating Partnership that are not designated as preferred with respect to distributions. We
completed our initial public offering of common stock and related formation transactions, pursuant to which we succeeded our
predecessor, on April 20, 2011.
Our Strategy
Our primary business objectives are to own and operate a balanced and diversified portfolio of binary risk investments
(individual industrial properties) that maximize cash flows available for distribution to our stockholders, and to enhance
stockholder value over time by achieving sustainable long-term growth in distributable cash flow from operations per share.
We believe that our focus on owning and operating a portfolio of individually-acquired industrial properties throughout the
United States will, when compared to other real estate portfolios, generate returns for our stockholders that are attractive in light
of the associated risks for the following reasons.
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Buyers tend to price an individual industrial property according to the binary nature of its cash flows; with only
typically one potential tenant as many industrial properties are single-tenant, any one property is either generating
revenue or not. Furthermore, tenants typically cover operating expenses at a property and when a property is not
generating revenue, we, as owners, are responsible for paying these expenses. We believe the market prices these
properties are based upon a higher risk profile due to the single-tenant nature of these properties and therefore
applies a lower value relative to a diversified cash flowing investment.
The acquisition and contribution of these primarily single-tenant properties to an aggregated portfolio of these
individual binary risk cash flows creates diversification, thereby lowering risk and creating value.
Industrial properties generally require less capital expenditure than other commercial property types and single-
tenant properties generally require less expenditure for leasing, operating and capital costs per property than multi-
tenant properties.
Other institutional, industrial real estate buyers tend to focus on properties and portfolios in a select few primary
markets. In contrast, we focus on individual properties across many markets. As a result, our typical competitors
are local investors who often do not have the same access to debt or equity capital as us. In our fragmented,
predominantly non-institutional environment, a sophisticated, institutional platform with access to capital has
execution and operational advantages.
While our portfolio does consist primarily of single-tenant properties, this is not exclusive; we also own many multi-tenant
properties, as a result of acquiring properties with more than one tenant or of originally single-tenant properties re-leasing to
multiple tenants.
Regulation
General
We are subject to various laws, ordinances, rules and regulations of the United States and the states and local municipalities in
which we own properties, including regulations relating to common areas and fire and safety requirements. We believe that we
or our tenants, as applicable, have the necessary permits and approvals to operate each of our properties.
Americans with Disabilities Act
Our properties must comply with Title III of the Americans with Disabilities Act of 1990, as amended (the “ADA”) to the
extent that such properties are “public accommodations” as defined under the ADA. Under the ADA, places of public
accommodation must meet certain federal requirements related to access and use by disabled persons. The ADA may require
removal of structural barriers to access by persons with disabilities in certain public areas of our properties where such removal
is readily achievable. Although we believe that the properties in our portfolio in the aggregate substantially comply with current
requirements of the ADA, and we have not received any notice for correction from any regulatory agency, we have not
conducted a comprehensive audit or investigation of all of our properties to determine whether we are in compliance and
therefore we may own properties that are not in compliance with the ADA.
ADA compliance is dependent upon the tenant’s specific use of the property, and as the use of a property changes or
improvements to existing spaces are made, we will take steps to ensure compliance. Noncompliance with the ADA could result
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in additional costs to attain compliance, the imposition of fines by the federal government or the award of damages or
attorney’s fees to private litigants. The obligation to make readily achievable accommodations is an ongoing one, and we will
continue to assess our properties and to make alterations to achieve compliance as necessary.
Environmental Matters
Our properties are subject to various federal, state and local environmental laws. Under these laws, courts and government
agencies have the authority to require us, as the owner of a contaminated property, to clean up the property, even if we did not
know of or were not responsible for the contamination. These laws also apply to persons who owned a property at the time it
became contaminated, and therefore it is possible we could incur these costs even after we sell a property. In addition to the
costs of cleanup, environmental contamination can affect the value of a property and, therefore, an owner’s ability to borrow
using the property as collateral or to sell the property. Under applicable environmental laws, courts and government agencies
also have the authority to require that a person who sent waste to a waste disposal facility, such as a landfill or an incinerator,
pay for the clean-up of that facility if it becomes contaminated and threatens human health or the environment. We invest in
properties historically used for industrial, light manufacturing and commercial purposes. Some of our properties contain, or
may have contained, or are adjacent to or near other properties that have contained or currently contain, underground storage
tanks used to store petroleum products and other hazardous or toxic substances, which create a potential for the release of
petroleum products or other hazardous or toxic substances. We also own properties that are on or are adjacent to or near other
properties upon which other persons, including former owners or tenants of our properties, have engaged, or may in the future
engage, in activities that may generate or release petroleum products or other hazardous or toxic substances.
Environmental laws in the United States also require that owners of buildings containing asbestos properly manage and
maintain the asbestos, adequately inform or train those who may come into contact with asbestos and undertake special
precautions, including removal or other abatement, in the event that asbestos is disturbed during building renovation or
demolition. These laws may impose fines and penalties on owners or who fail to comply with these requirements and may
allow third parties to seek recovery from owners for personal injury associated with exposure to asbestos. Some of our
buildings are known to have asbestos containing materials, and others, due to the age of the building and observed conditions,
are suspected of having asbestos containing materials. We do not believe these conditions will materially and adversely affect
us. In most or all instances, no immediate action was recommended to address the conditions.
Furthermore, various court decisions have established that third parties may recover damages for injury caused by property
contamination. For instance, a person exposed to asbestos at one of our properties may seek to recover damages if he or she
suffers injury from the asbestos. Lastly, some of these environmental laws restrict the use of a property or place conditions on
various activities. An example would be laws that require a business using chemicals to manage them carefully and to notify
local officials that the chemicals are being used.
We could be responsible for any of the costs discussed above. The costs to clean up a contaminated property, to defend against
a claim, or to comply with environmental laws could be material and could adversely affect the funds available for distribution
to our stockholders. All of our properties were subject to a Phase I or similar environmental assessment by independent
environmental consultants at the time of acquisition. We generally expect to continue to obtain a Phase I or similar
environmental assessment by independent environmental consultants on each property prior to acquiring it. However, these
environmental assessments may not reveal all environmental costs that might have a material adverse effect on our business,
assets, results of operations or liquidity and may not identify all potential environmental liabilities.
At the time of acquisition, we add each property to our portfolio environmental insurance policy that provides coverage for
potential environmental liabilities, subject to the policy’s coverage conditions and limitations.
Compliance with these environmental laws, rules and regulations has not had, and is not expected to have, a material effect on
our capital expenditures, results of operations and competitive position as compared to prior periods. We can make no
assurances that future laws, ordinances or regulations will not impose material environmental liabilities on us, or the current
environmental condition of our properties will not be affected by tenants, the condition of land or operations in the vicinity of
our properties (such as releases from underground storage tanks), or by third parties unrelated to us.
Insurance
We carry comprehensive general liability, fire, extended coverage and rental loss insurance covering all of the properties in our
portfolio under a blanket insurance policy. In addition, we maintain a portfolio environmental insurance policy that provides
coverage for potential environmental liabilities, subject to the policy’s coverage conditions and limitations. Generally, we do
not carry insurance for certain losses, including, but not limited to, losses caused by floods (unless the property is located in a
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flood plain), earthquakes, acts of war, acts of terrorism or riots. We carry employment practices liability insurance that covers
us against claims by employees, former employees or potential employees for various employment related matters including
wrongful termination, discrimination, sexual harassment in the workplace, hostile work environment, and retaliation, subject to
the policy’s coverage conditions and limitations. We carry comprehensive cyber liability insurance coverage that covers us
against claims related to certain first party and third party losses including data restoration costs, crisis management expenses,
credit monitoring costs, failure to implement and maintain reasonable security procedures, invasion of customer’s privacy and
negligence, subject to the policy’s coverage conditions and limitations. We also carry directors and officers insurance. We
believe the policy specifications and insured limits are appropriate and adequate given the relative risk of loss, the cost of the
coverage and standard industry practice; however, our insurance coverage may not be sufficient to cover all of our losses.
Competition
In acquiring our target properties, we compete primarily with local or regional operators due to the smaller, single asset (versus
portfolio) focus of our acquisition strategy. From time to time we compete with other public industrial property sector REITs,
single-tenant REITs, income oriented non-traded REITs, and private real estate funds. Local real estate investors historically
have represented our predominant competition for deals and they typically do not have the same access to capital that we do as
a publicly traded institution. We also face significant competition from owners and managers of competing properties in leasing
our properties to prospective tenants and in re-leasing space to existing tenants.
Operating Segments
We manage our operations on an aggregated, single segment basis for purposes of assessing performance and making operating
decisions, and accordingly, have only one reporting and operating segment. See Note 2 in the accompanying Notes to
Consolidated Financial Statements under “Segment Reporting.”
Corporate Responsibility Program
We are committed to having a robust corporate responsibility program that incorporates environmental, social and governance
(“ESG”) strategies into our overall business strategy, investment decisions and asset management strategies to increase both the
sustainability and the value of our portfolio. We are also committed to transparent reporting of our ESG initiatives. In
December 2021, we published our inaugural 2020-2021 Environmental, Social and Governance Report, which includes
information regarding our ESG policies and programs, historic results and performance targets, including a new long-term
greenhouse gas (GHG) reduction goal as approved by the Science-Based Targets Initiative (SBTi). In addition, annually we
participate in the public disclosure rating process of the Global Real Estate Sustainability Benchmark, which is an entity that
provides a ranking system to evaluate and compared ESG efforts in the real estate industry.
Additional information regarding our corporate responsibility program will be included in our definitive Proxy Statement for
our 2022 Annual Meeting of Stockholders and our 2020-2021 Environmental, Social and Governance Report is currently
available under the “Corporate Responsibility” section of our website at www.stagindustrial.com. However, the information
located on, or accessible from, our website, including our sustainability report, is not, and should not be deemed to be, part of
this report or incorporated into any other filing that we submit to the Securities and Exchange Commission (“SEC”).
Human Capital Management
We believe that demonstrating strong financial performance while also promoting awareness and respect for fundamental
human rights is important to long-term value creation, business continuity and corporate success. As part of our commitment to
providing a work environment that attracts, develops and retains high-performing individuals and that treats employees with
dignity and respect:
• We offer equal employment opportunities to all of our employees and seek to foster a diverse and vibrant workplace
with employees who possess a broad range of experiences, backgrounds and skills. We continually assess and strive to
enhance employee satisfaction and engagement. Our employees, many of whom have a relatively long tenure with our
company, are offered regular opportunities to participate in personal growth and professional development programs
and social or team building events. We seek to identify and develop future leaders within our company and
periodically review with our Chief Executive Officer and board of directors the identity, skills and characteristics of
those persons who could succeed to senior and executive positions.
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• We endeavor to maintain a workplace free from discrimination or harassment on the basis of race, color, religion,
creed, gender, gender identity or expression, sexual orientation, genetic information, national origin, ancestry, age,
disability, military or veteran status, and political affiliate or activities, among others. We conduct training to prevent
discrimination and harassment and monitor and address employee conduct.
• We are committed to compensating our employees well and at competitive industry rates while, at the same time,
monitoring our compensation programs to ensure that we are continuously attracting and retaining top talent. We also
provide our employees with highly competitive health and wellness benefits, including medical, dental, vision, life and
short-term disability insurance, with the premiums therefor entirely paid by the Company. We also offer flexible
spending accounts for medical and dependent care, a program to pay commuting and office parking costs with pre-tax
income and a competitive vacation policy, including paid holidays, personal time off and a variety of leave benefits.
In addition, throughout the COVID-19 pandemic, we have prioritized the health and safety of our employees and
provided employees the option to work remotely with no disruption to our financial, operational, communications and
other systems.
• We seek to foster a corporate culture where our many stakeholders, including our employees, engage in the topic of
community development and collaborate to extend resources towards the advancement of this principle. In furtherance
of this commitment, we partner with and support local charitable organizations that we believe are contributing to the
growth and development of the community, particularly at-risk youth. In recent years, our employees have donated and
coordinated substantial fundraising and have spent many hours volunteering to support children and young adults
through a variety of charities with which we partner.
As of December 31, 2021, we employed 86 employees. None of our employees are represented by a labor union.
Additional information regarding our human capital programs and initiatives will be included in our definitive Proxy Statement
for our 2022 Annual Meeting of Stockholders and is currently available under the “Corporate Responsibility” section of our
website at www.stagindustrial.com. However, the information located on, or accessible from, our website is not, and should not
be deemed to be, part of this report or incorporated into any other filing that we submit to the SEC.
Our Corporate Structure
We were incorporated in Maryland on July 21, 2010, and our Operating Partnership was formed as a Delaware limited
partnership on December 21, 2009.
We are structured as an UPREIT; our publicly-traded entity, STAG Industrial, Inc., is the REIT in the UPREIT structure, and
our Operating Partnership is the umbrella partnership. We own a majority, but not all, of our Operating Partnership. We also
wholly own the sole general partner (the manager) of our Operating Partnership. Substantially all of our assets are held in, and
substantially all of our operations are conducted through, our Operating Partnership. Shares of our common stock are traded on
the NYSE under the symbol “STAG.” The common units in our Operating Partnership are not and cannot be publicly traded,
although they may provide liquidity through an exchange feature described below. Our UPREIT structure allows us to acquire
properties on a tax-deferred basis by issuing common units in exchange for the property.
The common units in our Operating Partnership correlate on a one-for-one economic basis to the shares of common stock in the
REIT. Each common unit receives the same distribution as a share of our common stock, the value of each common unit is tied
to the value of a share of our common stock and each common unit, after one year, generally may be redeemed (that is,
exchanged) for cash in an amount equivalent to the value of a share of common stock or, if we choose, for a share of common
stock on a one-for-one basis. When redeeming common units for cash, the value of a share of common stock is calculated as the
average common stock closing price on the NYSE for the 10 trading days immediately preceding the redemption notice date.
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The following is a simplified diagram of our UPREIT structure at December 31, 2021.
Additional Information
Our principal executive offices are located at One Federal Street, 23rd Floor, Boston, Massachusetts 02110. Our telephone
number is (617) 574-4777.
Our website is www.stagindustrial.com. Our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current
Reports on Form 8-K and any amendments to any of those reports that we file with the SEC are available free of charge as soon
as reasonably practicable through our website at www.stagindustrial.com. Also posted on our website, and available in print
upon request, are charters of each committee of the board of directors, our code of business conduct and ethics and our
corporate governance guidelines. Within the time period required by the SEC, we will post on our website any amendment to
the code of business conduct and ethics and any waiver applicable to any executive officer, director or senior financial officer.
The information found on, or otherwise accessible through, our website is not incorporated into, and does not form a part of,
this report or any other report or document we file with or furnish to the SEC.
All reports, proxy and information statements and other information we file with the SEC are also available free of charge
through the SEC’s website at www.sec.gov.
Item 1A. Risk Factors
The following risk factors and other information included in this Annual Report on Form 10-K should be carefully considered.
The risks and uncertainties described below are not the only risks we face. Additional risks and uncertainties not presently
known to us or that we may currently deem immaterial also may impair our business operations.
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Risks Related to Our Business and Operations
The COVID-19 pandemic or any future pandemic, epidemic or outbreak of infectious disease could have material and
adverse effects on our business, operating results, financial condition and cash flows.
The COVID-19 pandemic has severely affected global economic activity, caused significant volatility and negative pressure in
financial markets and has had adverse effects on almost every industry, directly or indirectly. The COVID-19 pandemic or any
future pandemic, epidemic or outbreak of infectious disease could have material and adverse effects on our business, operating
results, financial condition and cash flows due to, among other factors: (i) government authorities requiring the closure of
offices or other businesses or instituting quarantines of personnel; (ii) disruption in global supply and delivery chains; (iii) a
general decline in business activity and demand for real estate; (iv) the repurposing or redevelopment of retail properties made
defunct by the pandemic into industrial properties; (v) reduced economic activity, general economic decline or recession, which
may impact our tenants’ businesses 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; (vi) difficulty accessing debt and equity capital on attractive
terms, or at all; and (vii) the potential negative impact on the health of our personnel or our ability to recruit and retain key
employees, including as a result of any applicable federal, state or local vaccine mandates or other requirements, which may
result in disruptions to certain operations. The extent to which the ongoing COVID-19 pandemic will ultimately affect our
business, operating results, financial condition and cash flows will depend on many factors and future developments, including
new information about COVID-19 and its variants, additional surges in infection rates, vaccine efforts and any new government
regulations which may emerge to contain the virus, among others. Many risk factors set forth below should be interpreted as
heightened risks because of the COVID-19 pandemic.
Adverse economic conditions may adversely affect our operating results and financial condition.
Our operating results and financial condition may be affected by market and economic challenges and uncertainties, which may
result from a general economic downturn experienced by the nation as a whole, by the local economies where our properties are
located or our tenants conduct business, or by the real estate industry, including the following: (i) poor economic conditions
may result in tenant defaults under leases and extended vacancies at our properties; (ii) re-leasing may require concessions or
reduced rental rates under the new leases due to reduced demand; (iii) adverse capital and credit market conditions may restrict
our operating activities; and (iv) constricted access to credit may result in tenant defaults, non-renewals under leases or inability
of potential buyers to acquire properties held for sale.
Also, to the extent we purchase real estate in an unstable market, we are subject to the risk that if the real estate market ceases to
attract the same level of capital investment in the future, or the number of companies seeking to acquire properties decreases,
the value of our investments may not appreciate or may decrease significantly below the amount we paid for these investments.
Our operating results and financial condition could be negatively affected to the extent that an economic slowdown or downturn
is prolonged or becomes more severe.
Our investments are concentrated in the industrial real estate sector, and we would be adversely affected by an economic
downturn in that sector.
As of December 31, 2021, the majority of our buildings were industrial properties. This concentration may expose us to the
risk of economic downturns in the industrial real estate sector to a greater extent than if our properties were more diversified
across other sectors of the real estate industry.
We are subject to geographic and industry concentrations that make us susceptible to adverse events with respect to certain
markets and industries.
We are subject to certain geographic and industry concentrations with respect to our properties. As a result of these
concentrations, any adverse event or downturn in local economic conditions or industry conditions, changes in state or local
governmental rules and regulations, acts of nature, epidemics, pandemics or other public health crises (including the COVID-19
pandemic) and actions taken in response thereto, and other factors affecting these markets or industries could adversely affect
us and our tenants operating in those markets or industries. If any tenant is unable to withstand such adverse event or downturn
or is otherwise unable to compete effectively in its market or business, it may be unable to meet its rental obligations, seek
rental concessions, be unable to enter into new leases or forced to declare bankruptcy and reject our leases, which could
materially and adversely affect us.
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We have owned many of our properties for a limited time, and we may not be aware of characteristics or deficiencies
involving any one or all of them.
Of the properties in our portfolio at December 31, 2021, 292 buildings totaling approximately 58.7 million rentable square feet
have been acquired in the past five years. These properties may have characteristics or deficiencies unknown to us that could
affect their valuation or revenue potential and such properties may not ultimately perform up to our expectations. We cannot
assure you that the operating performance of the properties will not decline under our management.
Our growth depends upon future acquisitions of properties, and we may be unable to consummate acquisitions on
advantageous terms and acquisitions may not perform as we expect.
The acquisition of properties entails various risks, including the risk that our investments may not perform as we expect. Our
ability to continue to acquire properties in our pipeline that we believe to be suitable and compatible with our growth strategy
may be constrained by numerous factors, including our ability to negotiate and execute a mutually-acceptable definitive
purchase and sale agreement with the seller, our completion of satisfactory due diligence and the satisfaction of customary
closing conditions, including the receipt of third-party consents and approvals. Further, we face competition for attractive
investment opportunities from other well-capitalized real estate investors, including publicly-traded and non-traded REITs,
private equity investors and other institutional investment funds that may have greater financial resources and a greater ability
to borrow funds to acquire properties, the ability to offer more attractive terms to prospective tenants and the willingness to
accept greater risk or lower returns than we can prudently manage. This competition may increase the demand for our target
properties and, therefore, reduce the number of, or increase the price for, suitable acquisition opportunities, all of which could
materially and adversely affect us. This competition will increase as investments in real estate become increasingly attractive
relative to other forms of investment. In addition, we expect to finance future acquisitions through a combination of secured and
unsecured borrowings, proceeds from equity or debt offerings by us or our Operating Partnership or its subsidiaries and
proceeds from property contributions and divestitures which may not be available and which could adversely affect our cash
flows.
We may face risks associated with acquiring properties in unfamiliar markets.
We have acquired, and may continue to acquire, properties in markets that are new to us. When we acquire properties located in
these markets, we face risks associated with a lack of market knowledge or understanding of the local economy (including that
competitors and counterparties may have much greater knowledge and understanding), forging new business relationships in
the area and unfamiliarity with local government and laws.
A significant portion of our properties have leases that expire in the next two years and we may be unable to renew leases,
lease vacant space or re-lease space on favorable terms
Our operating results, cash flows, cash available for distribution, and the market price of our securities would be adversely
affected if we are unable to lease, on economically favorable terms, a significant amount of space in our properties. Our
properties may have some level of vacancy at the time of our acquisition and may incur a vacancy either by the continued
default of a tenant under its lease or the expiration of one of our leases. As of December 31, 2021, leases with respect to
approximately 18.2% (excluding month-to-month leases) of our total annualized base rental revenue will expire before
December 31, 2023. We cannot assure you that expiring leases will be renewed or that our properties will be re-leased at base
rental rates equal to or above the current market rental rates. In addition, our ability to release space at attractive rental rates will
depend on (i) whether the property is specifically suited to the particular needs of a tenant and (ii) the number of vacant or
partially vacant industrial properties in a market or sub-market. In connection with a vacancy at one of our properties, we may
face difficulty obtaining, or be unable to obtain, a new tenant for the vacant space. If the vacancy continues for a long period of
time, we may suffer reduced revenue resulting in less cash available for distribution to stockholders and the resale value of the
property could be diminished.
We face significant competition for tenants, which may negatively impact the occupancy and rental rates at our properties.
We compete with other owners, operators and developers of real estate, some of which own industrial properties in the same
markets and sub-markets in which our properties are located. If our competitors offer space at rental rates below current market
rates or below the rental rates we currently charge our tenants, we may lose potential tenants, and we may be pressured to lower
our rental rates or to offer more substantial tenant improvements, early termination rights, below-market renewal options or
other lease incentive payments to remain competitive. Competition for tenants could negatively impact the occupancy and
rental rates of our properties.
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Default by one or more of our tenants could materially and adversely affect us, and bankruptcy laws limit our remedies in
the event of a tenant default.
Any of our tenants may experience an adverse event or downturn in its business at any time that may significantly weaken its
financial condition or cause its failure, as has occurred during the pendency of the COVID-19 pandemic. As a result, such a
tenant may fail to make rental payments when due, decline to extend or renew its lease upon expiration and/or declare
bankruptcy and reject our lease. The default, financial distress or bankruptcy of a tenant could cause interruptions in the receipt
of rental revenue and/or result in a vacancy, which is, in the case of a single-tenant property, likely to result in the complete
reduction in the operating cash flows generated by the property and may decrease the value of that property. In addition, a
majority of our leases generally require the tenant to pay all or substantially all of the operating expenses associated with the
ownership of the property, such as utilities, real estate taxes, insurance and routine maintenance. Following a vacancy at a
single-tenant property, we will be responsible for all of the operating costs at such property until it can be re-let, if at all.
The bankruptcy or insolvency of a tenant could diminish the income we receive from that tenant’s lease and we may not be able
to evict a tenant solely because of its bankruptcy filing. On the other hand, a bankruptcy court might authorize the tenant to
terminate its lease with us. If that happens, our claim against the bankrupt tenant for unpaid future rent would be an unsecured
pre-petition claim, subject to statutory limitations, and therefore such amounts received in bankruptcy are likely to be
substantially less than the remaining rent we otherwise were owed under the lease. In addition, any claim we have for unpaid
past rent could be substantially less than the amount owed.
If our tenants are unable to obtain financing necessary to continue to operate their businesses and pay us rent, we could be
materially and adversely affected.
Many of our tenants rely on external sources of financing to operate their businesses. The U.S. financial and credit markets may
experience liquidity disruptions, resulting in the unavailability of financing for many businesses. If any of these tenants is
unable to obtain financing necessary to continue to operate its business, it may be unable to meet its rental obligations, unable to
enter into new leases or forced to declare bankruptcy and reject our leases, which could materially and adversely affect us.
Risks Related to Our Organization and Structure
Our growth depends on external sources of capital, which are outside of our control and affect our ability to finance
acquisitions, take advantage of strategic opportunities, satisfy debt obligations and make distributions to stockholders.
In order to maintain our qualification as a REIT, we are generally required under the Code to annually distribute at least 90% of
our net taxable income, determined without regard to the dividends paid deduction and excluding any net capital gain. In
addition, we will be subject to federal income tax at regular corporate rates to the extent that we distribute less than 100% of our
net taxable income, including any net capital gains. Because of these requirements, we may not be able to fund future capital
needs, including acquisition financing, from operating cash flow and rely on third-party sources to fund our capital needs. Our
access to third-party sources of capital depends, in part, on general market conditions, the market’s perception of our growth
potential, our current debt levels, our current and expected future earnings, our cash flow and distributions and the market price
of our common stock. If we cannot raise equity or obtain financing from third-party sources on favorable terms, or at all, we
may not be able to acquire properties when opportunities exist, meet the capital and operating needs of our existing properties
or satisfy our debt service obligations. To the extent that capital is not available to acquire properties, profits may not be
realized or their realization may be delayed, which could result in an earnings stream that is less predictable than some of our
competitors or a failure to meet our projected earnings and distributable cash flow levels in a particular reporting period.
Further, in order to meet the REIT distribution requirements and avoid the payment of income and excise taxes, we may need to
borrow funds on a short-term basis even if the then-prevailing market conditions are not favorable for these borrowings. These
short-term borrowing needs could result from differences in timing between the actual receipt of cash and inclusion of income
for federal income tax purposes or the effect of non-deductible capital expenditures, the creation of reserves, certain restrictions
on distributions under loan documents or required debt or amortization payments.
Certain provisions of our governing documents and Maryland law may delay or prevent a transaction or a change of control
that might be in the best interest of stockholders.
Our charter and bylaws, the Operating Partnership agreement and Maryland law contain provisions that may delay or prevent a
transaction or a change of control, including, among other provisions, the following:
Our charter contains 9.8% ownership limits. Our charter, subject to certain exceptions, authorizes our directors to take such
actions as are necessary and desirable to limit any person to actual or constructive ownership of no more than 9.8% in value or
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in number of shares, whichever is more restrictive, of the outstanding shares of our capital stock and no more than 9.8% in
value or in number of shares, whichever is more restrictive, of the outstanding shares of our common stock. While our board of
directors, in its sole discretion, may exempt a proposed transferee from the ownership limits, it may not grant an exemption to
any proposed transferee whose ownership could jeopardize our REIT status. These ownership limits may delay or prevent a
transaction or a change of control that might be in the best interest of stockholders.
Our board of directors may create and issue a class or series of preferred stock without stockholder approval. Our board of
directors may amend our charter, without stockholder approval, to (i) increase or decrease the aggregate number of shares of
common stock or the number of shares of stock of any class or series, (ii) designate and issue from time to time one or more
classes or series of preferred stock, (iii) classify or reclassify any unissued shares of stock, and (iv) determine the relative rights,
preferences and privileges of any class or series of preferred stock. The issuance of preferred stock could have the effect of
delaying or preventing a transaction or a change of control that might be in the best interests of stockholders.
Certain provisions in the Operating Partnership agreement may delay or prevent a change of control. Provisions in the
Operating Partnership agreement could discourage third parties from making proposals involving an unsolicited acquisition or
change of control transaction, although some stockholders might consider such proposals, if made, desirable. These provisions
include, among others, redemption rights, transfer restrictions on the common units, the ability of the general partner to amend
certain provisions in the Operating Partnership agreement without the consent of limited partners and the right of limited
partners to consent to certain mergers and transfers of the general partnership interest. In addition, any potential change of
control transaction may be further limited as a result of provisions related to the long-term incentive plan units in our Operating
Partnership (“LTIP units”) granted under the STAG Industrial, Inc. 2011 Equity Incentive Plan, as amended and restated (the
“2011 Plan”), which require us to preserve the rights of LTIP unit holders and may restrict us from amending the Operating
Partnership agreement in a manner that would have an adverse effect on the rights of LTIP unit holders.
Certain provisions of Maryland law could delay or prevent a change in control. Title 8, Subtitle 3 of the Maryland General
Corporation Law (“MGCL”), permits our board of directors, without stockholder approval and regardless of what is currently
provided in our charter or bylaws, to implement takeover defenses, some of which (for example, a classified board) we do not
currently have. These provisions and other provisions of Maryland law may have the effect of inhibiting a third party from
making an acquisition proposal for our company or delaying or preventing a change of control under circumstances that might
be in the best interest of stockholders.
Our board of directors can take many actions without stockholder approval.
Our board of directors has the general authority to oversee our operations and determine our major corporate policies. This
authority includes significant flexibility and allows the board to take many actions, without stockholder approval, that could
increase our operating expenses, impact our ability to make distributions or reduce the value of our assets. For example, our
board of directors can, among other things, (i) change our investment, financing and borrowing strategies and our policies with
respect to all other activities, including distributions, leasing, debt, capitalization and operations (including creditworthiness
standards with respect to our tenants), (ii) subject to provisions in our charter, prevent the ownership, transfer and accumulation
of shares in order to protect our status as a REIT or for any other reason deemed to be in the best interests of us and our
stockholders, (iii) issue additional shares (which could dilute the ownership of existing stockholders) and increase or decrease
the aggregate number of shares or the number of shares of any class or series or classify or reclassify any unissued shares,
without obtaining stockholder approval, and (iv) determine that it is no longer in our best interests to continue to qualify as a
REIT.
Our rights and the rights of our stockholders to take action against our directors and officers are limited.
Maryland law provides that a director or officer has no liability in that capacity if he or she performs his or her duties in good
faith, in a manner he or she reasonably believes to be in our best interests and with the care that an ordinarily prudent person in
a like position would use under similar circumstances. In addition, our charter eliminates our directors’ and officers’ liability to
us and our stockholders for monetary damages, except for liability resulting from actual receipt of an improper benefit or profit
in money, property or services or active and deliberate dishonesty established by a final judgment and which is material to the
cause of action. Our bylaws require us to indemnify our directors and officers to the maximum extent permitted by Maryland
law for liability actually incurred in connection with any proceeding to which they may be made, or threatened to be made, a
party, except to the extent that the act or omission of the director or officer was material to the matter giving rise to the
proceeding and was either committed in bad faith or was the result of active and deliberate dishonesty, the director or officer
actually received an improper personal benefit in money, property or services, or, in the case of any criminal proceeding, the
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director or officer had reasonable cause to believe that the act or omission was unlawful. Additionally, the Operating
Partnership agreement limits our liability and requires our Operating Partnership to indemnify us and our directors and officers
to the maximum extent permitted by Delaware law against all claims that relate to the operations of our Operating Partnership,
except for actions taken in bad faith, or with gross negligence or willful misconduct. As a result, we and our stockholders may
have more limited rights against our directors and officers than might otherwise exist under common law. In addition, we may
be obligated to fund the defense costs incurred by our directors and officers.
Our fiduciary duties as sole member of the general partner of our Operating Partnership could create conflicts of interest,
which may impede business decisions that could benefit our stockholders.
We have fiduciary duties to the other limited partners in our Operating Partnership, including members of our senior
management team and board who are limited partners in our Operating Partnership through the receipt of common units or
LTIP units, the discharge of which may conflict with the interests of our stockholders. In addition, those persons holding
common units will have the right to vote on certain amendments to the Operating Partnership agreement. These voting rights
may be exercised in a manner that conflicts with the interests of our stockholders. For example, we are unable to modify the
rights of limited partners to receive distributions as set forth in the Operating Partnership agreement in a manner that adversely
affects their rights without their consent, even though such modification might be in the best interest of our stockholders.
Conflicts also may arise when the interests of our stockholders and the limited partners of our Operating Partnership diverge,
particularly in circumstances in which there may be an adverse tax consequence to the limited partners. As a result of unrealized
built-in gain attributable to contributed properties at the time of contribution, some holders of common units, including
members of our management team, may suffer more adverse tax consequences than our stockholders upon the sale or
refinancing of certain properties, including disproportionately greater allocations of items of taxable income and gain upon a
realization event. As those holders will not receive a correspondingly greater distribution of cash proceeds, they may have
different objectives regarding the appropriate pricing, timing and other material terms of any sale or refinancing of certain
properties, or whether to sell or refinance such properties at all.
We are subject to financial reporting and other requirements for which our accounting, internal audit and other systems
and resources may not be adequately prepared and we may not be able to accurately report our financial results.
We are subject to reporting and other obligations under the Exchange Act, including the requirements of Section 404 of the
Sarbanes-Oxley Act of 2002. Section 404 requires annual management assessments of the effectiveness of our internal controls
over financial reporting and a report by our independent registered public accounting firm addressing these assessments. These
reporting and other obligations place significant demands on our management, administrative, operational, internal audit and
accounting resources and cause us to incur significant expenses. We may need to upgrade our systems or create new systems;
implement additional financial and management controls, reporting systems and procedures; expand our internal audit function;
or hire additional accounting, internal audit and finance staff. Any failure to maintain effective internal controls could have a
material adverse effect on our business, operating results and market prices of our securities.
Risks Related to Ownership of Our Common Stock
The market price and trading volume of our common stock may be volatile.
The market price for our common stock, particularly at the beginning of the COVID-19 pandemic, has experienced significant
price and volume fluctuations, often without regard to our operating performance. If the market price of our common stock
declines significantly, you may be unable to sell your shares at or above the price at which you acquired them. A number of
factors could negatively affect the market price or trading volume of our common stock, many of which are out of our control,
including:
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actual or anticipated variations in our quarterly operating results or those of our competitors;
publication of research reports about us, our competitors, our tenants or the real estate industry;
changes in our distribution policy;
increases in market interest rates that lead purchasers of our shares to demand a higher yield;
the market’s perception of equity investments in REITs and changes in market valuations of similar REITs;
difficulties or inability to access capital or extend or refinance existing debt or an adverse market reaction to any
increased indebtedness we incur in the future;
a change in credit ratings issued by analysts or nationally recognized statistical rating organizations;
additions or departures of key management personnel;
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actions by institutional stockholders or speculation in the press or investment community; and
general U.S. and worldwide market and economic conditions.
The cash available for distribution to stockholders may not be sufficient to make distributions at expected levels, nor can we
assure you of our ability to make distributions in the future.
Distributions will be authorized and determined by our board of directors in its sole discretion from time to time and will
depend upon a number of factors, including cash available for distribution, our operating results, operating expenses and
financial condition (especially in relation to our anticipated future capital needs), REIT distribution requirements under the
Code and other factors the board deems relevant. Consequently, our distribution levels may fluctuate. In addition, to the extent
that we make distributions in excess of our current and accumulated earnings and profits, such distributions would generally be
considered a return of capital for federal income tax purposes to the extent of the holder’s adjusted tax basis in its shares. A
return of capital is not taxable, but it has the effect of reducing the holder’s adjusted tax basis in its investment. To the extent
that distributions exceed the adjusted tax basis of a holder’s shares, they will be treated as gain from the sale or exchange of
such stock. Further, if we borrow funds to make distributions, our future interest costs would increase, thereby reducing our
earnings and cash available for distribution from what they otherwise would have been.
Future offerings of debt or equity securities may adversely affect the market prices of our securities.
In the future, we may attempt to increase our capital resources by making additional offerings of debt securities, which would
be senior to our common stock upon liquidation (including commercial paper, medium-term notes and senior or subordinated
notes), or equity securities, which would dilute our existing stockholders and may be senior to our common stock for the
purposes of distributions. Upon liquidation, holders of our debt securities and shares of preferred stock and lenders with respect
to other borrowings will receive a distribution of our available assets prior to the holders of our common stock. Additional
equity offerings may dilute the holdings of our existing stockholders or reduce the market prices of our securities, or both.
Holders of our common stock are not entitled to preemptive rights or other protections against dilution. Any future issuances of
preferred stock will rank, senior to our common stock and will have, a preference upon our dissolution, liquidation or winding
up of our affairs and a preference on distribution payments that could limit our ability to make distributions to holders of
common stock. Because our decision to issue securities in any future offering will depend on market conditions and other
factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, our
stockholders bear the risk of our future offerings reducing the market prices of our securities and diluting their proportionate
ownership.
The number of shares of our common stock available for future sale could adversely affect the market price of our common
stock, and future sales of common stock may be dilutive to existing stockholders.
Sales of a substantial number of shares of our common stock (or the perception that such sales might occur), the vesting of
equity awards granted under the 2011 Plan, the issuance of common stock or common units in connection with acquisitions and
other issuances of common stock or common units could have an adverse effect on the market price of our common stock and
may be dilutive to existing stockholders. The existence of common stock reserved for issuance under the 2011 Plan or upon
exchange of common units may adversely affect the terms upon which we may be able to obtain additional capital through the
sale of equity securities. We also file registration statements with the SEC allowing us to offer, from time to time, an indefinite
amount of equity securities on an as-needed basis. Our board of directors has authorized us to issue shares of common stock in
our at-the market (“ATM”) common stock offering program under our registration statements. Our ability to execute our
business strategy depends on our access to an appropriate blend of debt financing, including unsecured lines of credit and other
forms of secured and unsecured debt, and equity financing. No prediction can be made about the effect that future distributions
or sales of our common stock will have on the market price of our common stock.
We have in the past entered, and may in the future enter, into forward sale transactions that subject us to certain risks.
We have previously entered into forward sale agreements and may in the future enter into additional forward sale agreements,
including under our ATM common stock offering program or in follow-on offerings, that subject us to certain risks. As of
December 31, 2021, we remained obligated to issue (subject to our right to elect cash settlement or net share settlement) a total
of 1,200,000 shares of our common stock pursuant to outstanding forward sale agreements. These forward sale agreements
subject us to the following risks:
Settlement of forward sale agreements could result in substantial dilution, substantial cash payment obligations and may be
accelerated under certain circumstances. We generally expect that our forward sale agreements will be physically settled by
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delivery of common stock. The future issuance of any shares of common stock upon settlement of any forward sale agreement
will result in dilution to our earnings per share, return on equity, and dividends per share. If we elect cash settlement and the
market value of our common stock during the relevant period is above the applicable forward sale price, we will pay the
forward purchaser an amount in cash equal to the difference. The purchase of common stock in connection with the unwinding
of the forward purchaser’s hedge position could cause our stock price to increase (or prevent a decrease) over such time,
thereby increasing the amount of cash we would owe (or decreasing the amount of cash owed to us) upon a cash settlement. In
addition, pursuant to each forward sale agreement, the relevant forward purchaser will have the right to accelerate the
settlement of the forward sale agreement in connection with certain specified events. In such cases, we could be required to
settle that particular forward sale agreement and issue common stock irrespective of our capital needs.
In the case of our bankruptcy or insolvency, forward sale agreements will automatically terminate. If we file or consent to a
proceeding seeking a judgment in bankruptcy or insolvency or any other relief under any similar law affecting creditors’ rights,
or we or a regulatory authority presents a petition for our winding-up or liquidation, and we consent to such a petition, any
outstanding forward sale agreement will automatically terminate. In that that case, we would not be obligated to deliver to the
relevant forward purchaser any common stock not previously delivered, and the relevant forward purchaser would be
discharged from its obligation to pay the forward sale price in respect of any shares not previously settled.
The U.S. federal income tax treatment of the cash received from cash settlement is unclear. In the event that we elect to
settle any forward sale agreements for cash and the settlement price is below the applicable forward sale price, we would be
entitled to receive a cash payment from the relevant forward purchaser. Under Section 1032 of the Code, generally, no gains
and losses are recognized by a corporation in dealing in its own shares, including pursuant to a “securities futures contract,” as
defined in the Code. However, because it is not entirely clear whether a forward sale agreement qualifies as a “securities futures
contract,” the U.S. federal income tax treatment of any cash settlement payment we receive is uncertain. In the event that we
recognize a significant gain from the cash settlement of a forward sale agreement, we may not be able to satisfy the gross
income requirements applicable to REITs under the Code and may not be able to rely upon the relief provisions under the Code.
Even if the relief provisions apply, we would be subject to a tax based on the amount of non-qualifying income. In the event
that these relief provisions were not available, we could lose our REIT status under the Code.
General Real Estate Risks
Our performance is subject to general economic conditions and risks associated with our real estate assets.
The investment returns available from equity investments in real estate depend on the amount of income earned and capital
appreciation generated by the properties, as well as the expenses incurred in connection with the properties. If our properties do
not generate income sufficient to meet operating expenses, including debt service and capital expenditures, then our ability to
make distributions to stockholders could be adversely affected. In addition, there are significant expenditures associated with an
investment in real estate (such as mortgage payments, real estate taxes and maintenance costs) that generally do not decline
when circumstances reduce the income from the property. Income from and the value of our properties may be adversely
affected by, among other things:
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a global economic crisis that results in increased budget deficits and weakened financial condition of international,
national and local governments, which may lead to reduced governmental spending, tax increases, public sector job
losses, increased interest rates, currency devaluations, defaults on debt obligations or other adverse economic events;
other periods of economic slowdown or recession, rising interest rates or declining demand for real estate, or the public
perception that any of these events may occur;
tenant turnover, the attractiveness of our properties to potential tenants and changes in supply of, or demand for,
similar or competing properties in an area (including from general overbuilding or excess supply in the market);
technological changes, such as reconfiguration of supply chains, autonomous vehicles, drones, robotics, 3D printing,
online marketplaces for industrial space, or other developments;
our ability to control rental rates and changes in operating costs and expenses, including costs of compliance with tax,
real estate, environmental and zoning laws, rules and regulations and our potential liability thereunder;
changes in the cost or availability of insurance, including coverage for mold or asbestos;
unanticipated changes in costs associated with known adverse environmental conditions or retained liabilities for such
conditions;
periods of high interest rates and tight money supply;
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future terrorist attacks, which may result in declining economic activity, which could reduce the demand for, and the
value of, our properties, and may adversely affect our tenants’ business and their ability to continue to honor their
existing leases; and
disruptions in the global supply chain caused by political, regulatory or other factors, including geopolitical
developments outside the United States.
Real estate investments are not as liquid as other types of investments.
The lack of liquidity in real estate investments may limit our ability to vary our portfolio and react promptly to changes in
economic or other conditions. In addition, significant expenditures associated with real estate investments, such as mortgage
payments, real estate taxes and maintenance costs, are generally not reduced when circumstances cause a reduction in income
from the investments. We intend to comply with the safe harbor rules relating to the number of properties that can be sold each
year, the tax basis and the costs of improvements made to such sale properties, and other items that enable a REIT to avoid
punitive taxation on property sales. Thus, our ability at any time to sell properties or contribute properties to real estate funds or
other entities in which we have an ownership interest may be restricted.
Uninsured losses may adversely affect your returns.
There are certain losses, including losses from floods, earthquakes, acts of war, acts of terrorism or riots, that are not generally
insured against or that are not generally fully insured against because it is not deemed economically feasible or prudent to do so.
In addition, changes in the cost or availability of insurance could expose us to uninsured casualty losses. In the event that any of
our properties incurs a casualty loss that is not fully covered by insurance, the value of our assets will be reduced by the amount
of any such uninsured loss, we could experience a significant loss of invested capital and potential revenue in the property, we
could remain obligated under any recourse debt associated with the property, and we may have no source of funding to repair or
reconstruct the damaged property. Moreover, we may be liable for our Operating Partnership’s unsatisfied recourse obligations,
including any obligations incurred by our Operating Partnership as the general partner of joint ventures.
Environmentally hazardous conditions may adversely affect our operating results.
Under various federal, state and local environmental laws, a current or previous owner of real property may be liable for the
cost of remediation or removing hazardous or toxic substances on such property. Such laws often impose liability whether or
not the owner knew of, or was responsible for, the presence of such hazardous or toxic substances. Even if more than one
person may have been responsible for the contamination, each person covered by the environmental laws may be held
responsible for all of the clean‑up costs incurred. In addition, third parties may sue the property owner for damages based on
personal injury, natural resources, property damage or other costs, including investigation and clean‑up costs, resulting from the
environmental contamination. The presence of hazardous or toxic substances on one of our properties, or the failure to properly
remediate a contaminated property, could give rise to a lien in favor of the government for costs it may incur to address the
contamination, or otherwise adversely affect our ability to sell or lease the property or borrow using the property as collateral.
Environmental laws also may impose restrictions on the manner in which property may be used or businesses may be operated.
A property owner who violates environmental laws may be subject to sanctions which may be enforced by governmental
agencies or, in certain circumstances, private parties. In connection with the acquisition and ownership of our properties, we
may be exposed to such costs. The costs of compliance with environmental regulatory requirements, defending against
environmental claims or remediation of any contaminated property could materially adversely affect our business, operating
results and cash available for distribution to stockholders.
Some of our properties contain asbestos‑containing building materials. Environmental laws require owners of buildings
containing asbestos properly manage and maintain the asbestos, adequately inform or train those who may come into contact
with asbestos and undertake special precautions in the event that asbestos is disturbed during building renovation or demolition.
These laws may impose fines and penalties on owners who fail to comply with these requirements and may allow third parties
to seek recovery from owners for personal injury associated with exposure to asbestos. In addition, some of our properties
contain, or may have contained, or are adjacent to or near other properties that have contained or currently contain, underground
storage tanks used to store petroleum products and other hazardous or toxic substances, which create a potential for the release
of petroleum products or other hazardous or toxic substances. We also own properties that are on or are adjacent to or near
other properties upon which other persons, including former owners or tenants of our properties, have engaged, or may in the
future engage, in activities that may release petroleum products or other hazardous or toxic substances.
Before acquiring a property, we typically obtain a preliminary assessment of environmental conditions at the property, often
referred to as “Phase I environmental site assessment.” However, this environmental assessment does not include soil sampling
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or subsurface investigations and typically does not include an asbestos survey. We may acquire properties with known adverse
environmental conditions and/or material environmental conditions, liabilities or compliance concerns may arise after the
environmental assessment has been completed. Further, in connection with property dispositions, we may agree to remain
responsible for, and to bear the cost of, remediating or monitoring certain environmental conditions on the properties.
Moreover, there can be no assurance that future laws, ordinances or regulations will not impose any material environmental
liability, or the current environmental condition of our properties will not be affected by tenants, by the condition of land or
operations in the vicinity of our properties (such as releases from underground storage tanks), or by third parties unrelated to us.
We are exposed to the potential impacts of future climate change and climate change-related risks.
Our properties may be exposed to rare catastrophic weather events, such as severe storms, floods or wildfires. If the frequency
of extreme weather events increases due to climate change, our exposure to these events could increase. In addition, in
connection with any development, redevelopment or renovation project, we may be harmed by potential changes to the supply
chain or stricter energy efficiency standards for industrial buildings. To the extent climate change causes shifts in weather
patterns, our markets could experience negative consequences, including declining demand for industrial space and our inability
to operate our buildings. Climate change may also have indirect negative effects on our business by increasing the cost of, or
decreasing the availability of, property insurance on terms we find acceptable and increasing the cost of energy, building
materials and snow removal at our properties. In addition, compliance with new laws or regulations relating to climate change,
including compliance with “green” building codes, may require us to make improvements to our existing properties or result in
increased operating costs that we may not be able to effectively pass on to our tenants. Any such laws or regulations could also
impose substantial costs on our tenants, thereby impacting the financial condition of our tenants and their ability to meet their
lease obligations and to lease or re-lease our properties.
Compliance or failure to comply with the ADA and other regulations could result in substantial costs.
Under the ADA, places of public accommodation must meet certain federal requirements related to access and use by disabled
persons. Noncompliance with these requirements could result in additional costs to attain compliance, the imposition of fines by
the federal government or the award of damages or attorney’s fees to private litigants. If we are required to make unanticipated
expenditures to comply with the ADA or other regulations, including removing access barriers, then our cash flows and cash
available for distribution may be adversely affected. In addition, changes to the requirements set forth in the ADA or other
regulations or the adoption of new requirements could require us to make significant unanticipated expenditures.
The ownership of properties subject to ground leases exposes us to certain risks.
We currently own and may acquire additional properties subject to ground leases, or leasehold interests in the land underlying
the building. As lessee under a ground lease, we are exposed to the possibility of losing the property upon expiration, or an
earlier breach by us, of the ground lease. Our ground leases may also contain provisions that limit our ability to sell the property
or require us to obtain the consent of the landlord in order to assign or transfer our rights and obligations under the ground lease
in connection with a sale of the property, which could adversely impact the price realized from any such sale. We also own
properties that benefit from payment in lieu of tax (“PILOT”) programs or similar programs through leasehold interests with the
relevant municipality serving as lessor. While we have the right to purchase the fee interests in these properties for a nominal
purchase price, in the event of such a conversion of our ownership interests, any preferential tax treatment offered by the
PILOT programs will be lost.
We may be unable to sell properties, including as a result of uncertain market conditions.
We expect to hold our properties until a sale or other disposition is appropriate given our investment objectives. Our ability to
dispose of any property on advantageous terms depends on factors beyond our control, including competition from other sellers
and the availability of attractive financing for potential buyers. Due to the uncertainty of market conditions that may affect
future property dispositions, we cannot assure you that we will be able to sell our properties at a profit. Accordingly, the extent
to which you will receive cash distributions and realize potential appreciation on our investments will be dependent upon
fluctuating market conditions. Furthermore, we cannot assure you that we will have the funds that may be required to correct
defects or to make improvements before a property can be sold.
If we sell properties and provide financing to purchasers, defaults by the purchasers would adversely affect our cash flows.
Under certain circumstances, we may sell properties by providing financing to purchasers. If we provide financing to
purchasers, we will bear the risk that the purchaser may default, which could adversely affect our cash flows and ability to make
distributions to stockholders and may result in litigation and increased expenses. Even in the absence of a purchaser default, the
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reinvestment or distribution of the sales proceeds will be delayed until the promissory notes (or other property we may accept
upon a sale) are actually paid, sold or refinanced.
Joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on co-
venturers’ financial condition and disputes between us and our co-venturers.
We may in the future selectively acquire, own and/or develop properties through partnerships, joint ventures or other co-
investment entities with third parties when we deem such transactions are warranted by the circumstances. In such event, we
would not be in a position to exercise sole decision-making authority regarding the property, partnership, joint venture or other
entity, involving risks not present were a third party not involved, including the possibility that partners or co-venturers might
become bankrupt or fail to fund their share of required capital contributions, disputes and litigation. Partners or co-venturers
may have economic or other business interests or goals which are inconsistent with our business interests or goals, and may be
in a position to take actions contrary to our policies or objectives, and they may have competing interests in our markets that
could create conflict of interest issues. Such investments may also have the potential risk of impasses on decisions, such as a
sale, because neither we nor the partner or co-venturer would have full control over the partnership or joint venture. In addition,
prior consent of our joint venture partners may be required for a sale or transfer to a third party of our interests in the joint
venture, which would restrict our ability to dispose of our interest in the joint venture. In addition, we may in certain
circumstances be liable for the actions of our third-party partners or co-venturers. Our joint ventures may be subject to debt and,
in volatile credit markets, the refinancing of such debt may require equity capital calls.
Risks Related to Our Debt Financings
Our operating results and financial condition could be adversely affected if we are unable to make required payments on
our debt.
Our charter and bylaws do not limit the amount of indebtedness we may incur, and we are subject to risks normally associated
with debt financing, including the risk that our cash flows will be insufficient to meet required payments of principal and
interest. There can be no assurance that we will be able to refinance any maturing indebtedness, that such refinancing would be
on terms as favorable as the terms of the maturing indebtedness or that we will be able to otherwise obtain funds by selling
assets or raising equity to make required payments on maturing indebtedness. In particular, loans obtained to fund property
acquisitions may be secured by first mortgages on such properties. If we are unable to make our debt service payments as
required, a lender could foreclose on the properties securing its debt, which would cause us to lose part or all of our investment.
Certain of our existing secured indebtedness is, and future secured indebtedness may be, cross-collateralized and, consequently,
a default on this indebtedness could cause us to lose part or all of our investment in multiple properties.
Increases in interest rates could increase our required debt payments and adversely affect our ability to make distributions to
stockholders.
As of December 31, 2021, we had total outstanding debt of approximately $2.2 billion, including $296.0 million of debt subject
to variable interest rates (excluding amounts that were hedged to fix rates), and we expect that we will incur additional
indebtedness in the future. Interest we pay on outstanding debt reduces our cash available for distribution. Since we have
incurred and may continue to incur variable rate debt, increases in interest rates by the Federal Reserve or changes in the
London Interbank Offered Rate (“LIBOR”), or its replacement, would raise our interest costs, which reduces our cash flows and
our ability to make distributions. If we are unable to refinance our indebtedness at maturity or meet our payment obligations,
our financial condition and cash flows would be adversely affected, and we may lose the properties securing such indebtedness.
In addition, if we need to repay existing debt during periods of rising interest rates, we could be required to sell one or more of
our properties at times which may not permit realization of the maximum return on such investments.
We may be adversely affected by developments in the LIBOR market or the use of alternative reference rates.
As of December 31, 2021, approximately 57.1% or $1.3 billion of our outstanding debt had variable interest rates indexed to
LIBOR. On March 5, 2021, the Financial Conduct Authority (the “FCA”), which regulates LIBOR, announced that U.S. dollar
LIBOR will no longer be published after June 30, 2023. Additionally, banking regulators are encouraging banks to discontinue
new LIBOR debt issuances by December 31, 2021. While there is no consensus on what rate or rates may become accepted
alternatives to LIBOR, the U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering
committee comprising large U.S. financial institutions, has identified the Secured Overnight Financing Rate (“SOFR”), a new
index calculated by short-term repurchase agreements backed by U.S. Treasury securities, as its preferred alternative rate for
LIBOR. While we expect LIBOR to be available in substantially its current form until June 30, 2023, it is possible that LIBOR
will become unavailable prior to that date. For example, if sufficient banks decline to make submissions to the LIBOR
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administrator, LIBOR may become unavailable and the risks associated with the transition to an alternative reference rate will
be accelerated and magnified.
We are monitoring and evaluating the risks related to our debt indexed to LIBOR, which include interest on loans or amounts
received and paid on derivative instruments. These risks arise in connection with transitioning contracts to an alternative rate,
including any resulting value transfer that may occur, and are likely to vary by contract. The value of loans, securities, or
derivative instruments tied to LIBOR, as well as interest rates on our current or future indebtedness, may also be impacted if
LIBOR is limited or discontinued. For some instruments, the method of transitioning to an alternative reference rate may be
challenging, especially if we cannot agree with the respective counterparty about how to make the transition.
As a result, there can be no assurance that any of the aforementioned developments or changes will not result in financial
market disruptions, significant increases in benchmark interest rates, substantially higher financing costs or a shortage of
available debt financing, any of which could have an adverse effect on us.
Our loan covenants could limit our flexibility and adversely affect our financial condition and ability to make distributions.
Our existing mortgage notes and unsecured loan agreements require us to comply with certain financial and other covenants,
including loan-to-collateral-value ratios, debt service coverage ratios, leverage ratios, fixed charge coverage ratios and, in the
case of an event of default, limitations on our ability to make distributions. In addition, our existing unsecured loan agreements
contain, and future borrowing facilities may contain, certain cross-default provisions which are triggered in the event that other
material indebtedness is in default. These cross-default provisions may require us to repay or restructure the facilities in
addition to any mortgage or other debt that is in default. New indebtedness that we may incur in the future may contain
financial or other covenants more restrictive than those in our existing loan agreements.
We are a holding company and conduct substantially all of our business through our Operating Partnership. As a result, we rely
on distributions from our Operating Partnership to pay dividends (including distributions required to maintain our REIT status)
and to meet our debt service and other obligations. The ability of our Operating Partnership to make distributions to us depends
on the operating results of our Operating Partnership and its subsidiaries and on the terms of any loans that encumber the
properties owned by them. Such loans may contain lock box arrangements, reserve requirements, financial covenants and other
provisions that restrict the distribution of funds in the event of a default. For example, our mortgage notes prohibit, in the event
of default, the distribution of any cash from the defaulting borrower subsidiary to our Operating Partnership. As a result, a
default under any of these loans by the borrower subsidiaries could cause us to have insufficient cash to make the distributions
and meet our debt service and other obligations.
If debt is unavailable at reasonable rates, we may not be able to finance acquisitions or refinance our existing debt.
If debt is unavailable at reasonable rates, we may not be able to finance acquisitions or refinance existing debt when the loans
come due on favorable terms, or at all. Most of our financing arrangements require us to make a lump-sum or “balloon”
payment at maturity. Our ability to make a balloon payment at maturity is uncertain and, in the event that we do not have
sufficient funds to repay the debt at maturity, we will need to refinance this debt. If interest rates are higher when we refinance
such debt, our net income could be reduced. If the credit environment is constrained at the time the balloon payment is due, we
may not be able to refinance the existing financing on acceptable terms and may be forced to choose from a number of
unfavorable options, including agreeing to unfavorable financing terms, selling one or more properties on disadvantageous
terms or defaulting on the loan and permitting the lender to foreclose. In addition, we locked in our fixed-rate debt at a point in
time when we were able to obtain favorable interest rates, principal amortization and other terms. When we refinance this debt,
prevailing interest rates and other factors may result in paying a greater amount of debt service, which will adversely affect our
cash flow, and, consequently, our cash available for distribution to stockholders.
Our hedging strategies may not be successful in mitigating our risks associated with interest rates.
Our various derivative financial instruments involve certain risks, such as the risk that the counterparties may fail to honor their
obligations under these arrangements, that these arrangements may not be effective in reducing our exposure to interest rate
changes and that a court could rule that such agreements are not legally enforceable. These instruments may also generate
income that may not be treated as qualifying REIT income for purposes of REIT income tests. In addition, the nature, timing
and costs of hedging transactions may influence the effectiveness of our hedging strategies. Poorly designed strategies or
improperly executed transactions could actually increase our risk and losses. We cannot assure you that our hedging strategies
and derivative financial instruments will adequately offset the risk of interest rate volatility or that such instruments will not
result in losses that may adversely impact our financial condition.
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Adverse changes in our credit ratings could negatively affect our financing activity.
The credit ratings of our unsecured debt are based on our operating performance, liquidity and leverage ratios, overall financial
position and other factors employed by the credit rating agencies. Our credit ratings can affect the amount of capital we can
access, as well as the terms and pricing of any debt we may incur. There can be no assurance that we will be able to maintain
our current credit ratings, and in the event our credit ratings are downgraded, we would incur greater borrowing costs and may
encounter difficulty in obtaining additional financing. Also, a downgrade in our credit ratings may trigger additional payments
or other negative consequences under our unsecured credit facility and other debt instruments. Adverse changes in our credit
ratings could harm our business and, in particular, our financing, refinancing and other capital market activities, ability to
manage debt maturities, future growth and acquisition activity.
U.S. Federal Income Tax Risks
Failure to qualify as a REIT would reduce our net earnings available for investment or distribution.
Our qualification as a REIT will depend upon our ability to meet requirements regarding our organization and ownership,
distributions of our income, the nature and diversification of our income and assets and other tests imposed by the Code. If we
fail to qualify as a REIT for any taxable year after electing REIT status, we will be subject to federal income tax on our taxable
income at regular corporate rates. In addition, we would generally be disqualified from treatment as a REIT for the four taxable
years following the year in which we failed to qualify as a REIT. Losing our REIT status would reduce our net earnings
available for investment or distribution to stockholders because of the additional tax liability. In addition, dividends to
stockholders would no longer qualify for the dividends‑paid deduction and we would no longer be required to make
distributions. If this occurs, we might be required to borrow funds or liquidate some investments in order to pay the applicable
tax.
Even if we maintain our qualification as a REIT for federal income tax purposes, we may be subject to other tax liabilities
that reduce our cash flow and our ability to make distributions to stockholders.
Even if we maintain our qualification as a REIT for federal income tax purposes, we may be subject to some federal, state and
local taxes.
For example, (i) we will be subject to federal corporate income tax on the undistributed income to the extent that we satisfy the
REIT distribution requirements but distribute less than 100% of our REIT taxable income, (ii) we will be subject to a 4%
nondeductible excise tax on the amount, if any, by which distributions we pay in any calendar year are less than the sum of 85%
of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years, (iii) we
will be subject to the highest corporate income tax rate if we have net income from the sale of foreclosure property that we hold
primarily for sale to customers in the ordinary course of business or other non‑qualifying income from foreclosure property, (iv)
we will be subject to a 100% “prohibited transaction” tax on our gain from an asset sale, other than foreclosure property, that
we hold primarily for sale to customers in the ordinary course of business, unless such sale were made by our taxable REIT
subsidiary (“TRS”) or if we qualify for a safe harbor; and (v) our TRS will be subject to federal, state and local income tax at
regular corporate rates on any income that it earns.
REIT distribution requirements could adversely affect our ability to execute our business plan.
From time to time, we may generate taxable income greater than our income for financial reporting purposes, or our taxable
income may be greater than our cash available for distribution to stockholders. If we do not have other funds available in these
situations, we could be required to borrow or raise equity on unfavorable terms, sell investments at disadvantageous prices,
make taxable distributions of our stock or debt securities or find another alternative source of funds to distribute enough of our
taxable income to satisfy the REIT distribution requirement and to avoid corporate income tax and the 4% excise tax in a
particular year. These alternatives could increase our costs or reduce the value of our equity. In addition, to maintain our
qualification as a REIT, we must satisfy certain tests on an ongoing basis concerning, among other things, the sources of our
income, nature of our assets and the amounts we distribute to our stockholders. We may be required to make distributions to
stockholders at times when it would be more advantageous to reinvest cash in our business or when we do not have funds
readily available for distribution. Thus, compliance with the REIT requirements may hinder our ability to operate solely on the
basis of maximizing profits and the value of our stockholders’ investment.
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Re-characterization of sale‑leaseback transactions may cause us to lose our REIT status.
In certain circumstances, we expect to purchase properties and lease them back to the sellers of such properties. While we
intend to structure such a sale‑leaseback transaction such that the lease will be characterized as a “true lease” for tax purposes,
we cannot assure you that the Internal Revenue Service (“IRS”) will not challenge such characterization. In the event that any
such sale‑leaseback transaction is challenged and re-characterized as a financing transaction or loan for federal income tax
purposes, deductions for depreciation and cost recovery relating to such property would be disallowed. If a sale‑leaseback
transaction were so re-characterized, we might fail to satisfy the REIT qualification “asset tests” or “income tests” and,
consequently, lose our REIT status effective with the year of re-characterization. Alternatively, the amount of our REIT taxable
income could be recalculated which might also cause us to fail to meet the distribution requirement for a taxable year.
The prohibited transactions tax may limit our ability to engage in certain transactions.
A REIT’s net income from prohibited transactions is subject to a 100% tax. In general, prohibited transactions are dispositions
of property, other than foreclosure property, held primarily for sale to customers in the ordinary course of business. Although a
safe harbor to the characterization of a disposition as a prohibited transaction is available, we cannot assure you that we can
comply with the safe harbor or that we will avoid owning property that may be characterized as held primarily for sale to
customers in the ordinary course of business. Consequently, we may choose not to engage in certain dispositions or may
conduct such dispositions through a TRS.
We may be subject to adverse legislative or regulatory tax changes.
Federal income taxation rules are constantly under review by the IRS, the U.S. Department of the Treasury and persons
involved in the legislative process. Changes to tax laws, with or without retroactive application, through new legislation,
Treasury Regulations, administrative interpretations or court decisions could adversely affect us or our stockholders, including
by negatively affecting our ability to qualify as a REIT or the federal income tax consequences of such qualification, or
reducing the relative attractiveness of an investment in a REIT compared to a corporation not qualified as a REIT. In addition,
several proposals have been made that would make substantial changes to the federal income tax laws generally. We cannot
predict whether any of the proposed changes will become law, and we cannot predict how such changes might affect us or our
stockholders.
Other General Risks
We face risks associated with system failures through security breaches or cyber-attacks, as well as other significant
disruptions of our information technology (“IT”) networks and related systems.
We face risks associated with security breaches, whether through cyber-attacks, computer viruses, attachments to e-mails,
phishing schemes, persons inside our organization or persons with access to systems inside of our organization, and other
significant disruptions of our IT networks and related systems. The risk of a security breach or disruption, particularly through
cyber-attack, has generally increased as the number, intensity and sophistication of attempted attacks from around the world
have increased. There can be no assurance that our security measures taken to manage the risk of a security breach or disruption
will be effective or that attempted security breaches or disruptions would not be successful or damaging. A security breach or
disruption involving our IT networks and related systems could disrupt the proper functioning of our networks and systems;
result in misstated financial reports, violations of loan covenants and/or missed reporting deadlines; result in our inability to
monitor our compliance with REIT qualification rules and regulations; result in the unauthorized access to, and destruction,
loss, theft, misappropriation or release of proprietary, confidential, sensitive or otherwise valuable information, which others
could use to compete against us or for disruptive, destructive or otherwise harmful purposes; require significant management
attention and resources to remedy any damages that result; subject us to claims for breach of contract or failure to safeguard
personal information, damages, credits, penalties or termination of leases or other agreements; or damage our reputation among
our tenants and investors generally. Additionally, we face potential heightened cybersecurity risks during the COVID-19
pandemic as our level of dependence on our IT networks and related systems has increased, stemming from employees working
remotely, and the number of malware campaigns and phishing attacks has also increased.
We depend on key personnel; the loss of their full service could adversely affect us.
Our success depends to a significant degree upon the continued contributions of certain key personnel including, but not limited
to, our executive officers, whose continued service is not guaranteed, and each of whom would be difficult to replace. Our
ability to retain our management team or to attract suitable replacements should any members of the management team leave is
23
dependent on the competitive nature of the employment market. The loss of services from key members of the management
team or a limitation in their availability could adversely impact our operating results, financial condition and cash flows.
Further, such a loss could be negatively perceived in the capital markets. Each executive officer may terminate his employment
at any time and, under certain conditions, may receive cash severance, immediate vesting of equity awards and other benefits
under employment agreements, equity award agreements and our retirement vesting program. In addition, in the case of certain
terminations, executive officers would not be restricted from competing with us after their departure. As of December 31, 2021,
we have not obtained and do not expect to obtain key man life insurance on any of our key personnel. We also believe that, as
we expand, our future success depends, in large part, upon our ability to hire and retain highly skilled managerial, investment,
financing, operational and marketing personnel. Competition for such personnel is intense, and we cannot assure you that we
will be successful in attracting and retaining such skilled personnel.
An increased focus on metrics and reporting related to corporate responsibility, specifically related to ESG factors, may
impose additional costs and expose us to new risks.
Investors and other stakeholders have focused on how companies address a variety of ESG matters and look to rating systems
developed by third party groups to allow comparisons between companies. Although we participate in some of these rating
systems, we do not participate, and may not score well, in all of them. Further, the criteria used in these rating systems change
frequently, and our scores may drop as the criteria changes. We supplement our participation in these ratings systems with
public disclosures regarding our ESG activities, but investors and stakeholders may look for specific disclosures that we do not
provide. Our failure to participate, or score well, in certain ratings systems or to provide certain ESG disclosures and engage in
certain ESG initiatives could result in reputational harm and could cause certain investors to be unwilling to invest in our stock,
which could impair our ability to raise capital.
Our compensation plans may not be tied to or correspond with our improved financial results or the market prices for our
securities, which may adversely affect us.
The compensation committee of our board of directors is responsible for overseeing our compensation and employee benefit
plans and practices, including our executive compensation plans and our incentive compensation and equity-based
compensation plans. The compensation committee has significant discretion in structuring these compensation packages and
may make compensation decisions based on any number of factors. As a result, compensation awards may not be tied to or
correspond with improved financial results at our company or the market prices for our securities.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
As of December 31, 2021, we owned the properties in the following table.
State
Alabama
Arkansas
Arizona
California
City
Birmingham
Montgomery
Moody
Phenix City
Bryant
Rogers
Avondale
Chandler
Gilbert
Mesa
Tucson
Lodi
McClellan
Morgan Hill
Rancho Cordova
Roseville
Number of
Buildings
3
1
1
1
1
1
1
1
1
1
1
1
1
2
2
1
Asset Type
Total Rentable
Square Feet
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse/ Distribution
Warehouse / Distribution
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
24
295,748
332,000
595,346
117,568
300,160
400,000
186,643
104,352
41,504
71,030
129,047
400,340
160,534
107,126
106,663
114,597
State
Colorado
Connecticut
City
Sacramento
Sacramento
San Diego
Stockton
Grand Junction
Johnstown
Longmont
Loveland
Avon
East Windsor
Milford
North Haven
Wallingford
Delaware
New Castle
Florida
Georgia
Iowa
Idaho
Illinois
Daytona Beach
Fort Myers
Jacksonville
Lake Worth
Lake Worth
Lakeland
Ocala
Orlando
Orlando
Tampa
West Palm Beach
Augusta
Buford
Calhoun
Dallas
Forest Park
Norcross
Savannah
Shannon
Smyrna
Statham
Stone Mountain
Ankeny
Council Bluffs
Des Moines
Marion
Idaho Falls
Bartlett
Batavia
Batavia
Belvidere
Cary
Crystal Lake
DeKalb
Elgin
Elgin
Gurnee
Harvard
Number of
Buildings
6
1
1
3
1
1
1
2
1
2
2
3
1
1
1
1
5
2
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
2
1
2
1
1
1
2
1
9
1
4
1
2
1
1
1
Asset Type
Total Rentable
Square Feet
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Light Manufacturing
25
749,709
130,000
205,440
263,716
82,800
132,194
64,750
195,674
78,400
271,111
367,700
824,727
105,000
485,987
142,857
260,620
1,256,750
157,758
42,158
215,280
619,466
155,000
215,900
78,560
112,353
203,726
103,720
151,200
92,807
373,900
152,036
504,300
568,516
102,000
225,692
78,000
400,968
90,000
301,381
95,500
78,690
207,223
204,642
56,676
1,364,222
79,049
506,096
146,740
383,856
41,007
338,740
126,304
State
Indiana
Kansas
Kentucky
Louisiana
Massachusetts
Maryland
City
Hodgkins
Itasca
Libertyville
Lisle
Machesney Park
McHenry
Montgomery
Saint Charles
Sauk Village
Schaumburg
Vernon Hills
Waukegan
West Chicago
West Chicago
West Dundee
Wood Dale
Woodstock
Albion
Elkhart
Fort Wayne
Goshen
Greenwood
Indianapolis
Lafayette
Lebanon
Marion
Portage
South Bend
Yoder
Edwardsville
Lenexa
Olathe
Wichita
Bardstown
Danville
Erlanger
Florence
Hebron
Louisville
Baton Rouge
Shreveport
Chicopee
Hudson
Malden
Middleborough
Norton
South Easton
Sterling
Stoughton
Westborough
Elkridge
Hagerstown
Hampstead
Hunt Valley
Number of
Buildings
2
3
1
1
1
2
1
1
1
1
1
1
1
5
1
1
1
2
2
1
1
2
1
3
3
1
2
1
1
1
3
2
3
1
1
1
2
1
2
3
1
1
1
2
1
1
1
1
2
1
1
3
1
1
Asset Type
Total Rentable
Square Feet
Warehouse / Distribution
Warehouse / Distribution
Flex Office
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Light Manufacturing
Light Manufacturing
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Light Manufacturing
Light Manufacturing
Light Manufacturing
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
26
518,109
311,355
35,141
105,925
80,000
169,311
584,301
102,000
375,785
67,817
95,482
131,252
249,470
305,874
154,475
137,607
129,803
96,778
170,100
108,800
366,000
600,940
78,600
466,400
2,065,393
249,920
786,249
225,000
764,177
270,869
581,059
725,839
248,550
102,318
757,047
108,620
641,136
109,000
499,217
532,036
420,259
217,000
128,000
109,943
80,100
200,000
86,000
119,056
258,213
121,700
167,410
1,424,620
1,035,249
46,851
State
Maine
Michigan
Minnesota
Missouri
City
White Marsh
Biddeford
Gardiner
Lewiston
Portland
Belleville
Canton
Chesterfield
Grand Rapids
Holland
Kentwood
Kentwood
Lansing
Livonia
Marshall
Novi
Plymouth
Redford
Romulus
Romulus
Sterling Heights
Walker
Warren
Wixom
Zeeland
Blaine
Bloomington
Brooklyn Park
Carlos
Eagan
Inver Grove Heigh
Maple Grove
Mendota Heights
New Hope
Newport
Oakdale
Plymouth
Savage
Shakopee
South Saint Paul
Saint Paul
Berkeley
Earth City
Fenton
Hazelwood
O'Fallon
Mississippi
Southaven
North Carolina
Catawba
Charlotte
Durham
Garner
Greensboro
Huntersville
Lexington
Number of
Buildings
1
2
1
1
1
1
1
4
2
1
2
1
4
2
1
3
1
1
1
1
1
1
4
1
1
1
1
1
1
1
1
2
1
1
1
2
3
1
1
1
1
1
1
1
1
2
1
1
3
1
1
1
1
1
Asset Type
Total Rentable
Square Feet
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Flex Office
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
27
102,000
265,126
265,000
60,000
100,600
160,464
491,049
478,803
445,137
195,000
370,020
85,157
770,425
285,306
57,025
685,010
125,214
135,728
303,760
274,500
108,000
210,000
981,540
126,720
230,200
248,816
145,351
200,720
196,270
276,550
80,655
207,875
87,183
107,348
83,000
210,044
357,085
244,050
136,589
422,727
316,636
121,223
116,783
127,464
305,550
186,854
556,600
137,785
243,880
80,600
150,000
128,287
185,570
201,800
State
Nebraska
New Hampshire
New Jersey
Nevada
New York
Ohio
City
Mebane
Mebane
Mocksville
Mooresville
Mountain Home
Newton
Pineville
Rural Hall
Salisbury
Smithfield
Troutman
Winston-Salem
Youngsville
Bellevue
La Vista
Omaha
Londonderry
Nashua
Branchburg
Burlington
Franklin Township
Lopatcong
Lumberton
Moorestown
Mt. Laurel
Pedricktown
Swedesboro
Westampton
Fernley
Las Vegas
Las Vegas
Paradise
Reno
Sparks
Buffalo
Cheektowaga
Farmington
Gloversville
Johnstown
Johnstown
Rochester
Ronkonkoma
Bedford Heights
Boardman
Canal Winchester
Columbus
Dayton
Etna
Fairborn
Fairfield
Gahanna
Groveport
Hilliard
Macedonia
Number of
Buildings
2
1
1
2
1
1
1
1
1
1
1
1
1
1
1
5
1
1
1
2
1
1
1
2
1
1
1
1
1
1
1
2
1
1
1
1
1
3
2
1
2
1
1
1
2
3
2
1
1
2
1
1
1
1
Asset Type
Total Rentable
Square Feet
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Light Manufacturing
Light Manufacturing
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
28
606,840
202,691
129,600
799,200
146,014
217,200
75,400
250,000
288,000
307,845
301,000
385,000
365,000
370,000
178,368
465,448
125,060
337,391
113,973
756,990
183,000
237,500
120,000
187,569
112,294
245,749
123,962
128,959
183,435
34,916
122,472
80,422
87,264
161,986
117,000
121,760
149,657
211,554
117,102
42,325
252,860
64,224
173,034
168,111
814,265
1,348,237
775,727
1,232,149
259,369
364,948
383,000
320,657
237,500
201,497
State
Oklahoma
City
Maple Heights
Mason
North Jackson
Oakwood Village
Salem
Seville
Streetsboro
Strongsville
Toledo
Twinsburg
West Chester
West Jefferson
Oklahoma City
Tulsa
Oregon
Salem
Pennsylvania
South Carolina
Allentown
Burgettstown
Charleroi
Clinton
Croydon
Elizabethtown
Export
Hazleton
Imperial
Lancaster
Langhorne
Langhorne
Lebanon
Mechanicsburg
Muhlenberg Township
New Galilee
New Kensington
New Kingstown
O'Hara Township
Pittston
Reading
Warrendale
Williamsport
York
Columbia
Duncan
Edgefield
Fountain Inn
Fountain Inn
Gaffney
Goose Creek
Greenwood
Greer
Laurens
Piedmont
Rock Hill
Simpsonville
Spartanburg
Summerville
Ware Shoals
West Columbia
Number of
Buildings
1
1
2
1
1
1
1
2
1
2
1
1
2
2
2
1
1
1
6
1
1
1
1
1
1
2
2
1
3
1
1
1
1
1
1
1
1
1
5
1
3
1
2
1
1
1
2
7
1
5
3
3
9
1
1
6
Asset Type
Total Rentable
Square Feet
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
29
170,000
116,200
517,150
75,000
271,000
75,000
343,416
341,561
177,500
426,974
269,868
857,390
303,740
309,600
155,900
289,900
455,000
119,161
1,131,972
101,869
206,236
138,270
589,580
315,634
240,528
180,000
287,647
211,358
747,054
392,107
410,389
200,500
330,000
887,084
437,446
248,000
179,394
250,000
1,306,834
185,600
996,841
126,190
442,472
203,000
226,968
500,355
175,055
877,628
125,000
942,736
720,120
1,138,494
1,802,623
88,583
20,514
1,163,822
State
Tennessee
Texas
City
West Columbia
Chattanooga
Cleveland
Clinton
Jackson
Knoxville
Knoxville
Lebanon
Loudon
Madison
Mascot
Mascot
Memphis
Murfreesboro
Nashville
Vonore
Arlington
Cedar Hill
Conroe
El Paso
Garland
Grapevine
Houston
Houston
Humble
Katy
Laredo
McAllen
Mission
Rockwall
Stafford
Waco
Utah
Provo
Virginia
Chester
Harrisonburg
Independence
N. Chesterfield
Richmond
Washington
Ridgefield
Wisconsin
Appleton
Caledonia
Cudahy
De Pere
DeForest
Delavan
East Troy
Elkhorn
Elkhorn
Franklin
Germantown
Hartland
Hudson
Janesville
Number of
Buildings
1
Light Manufacturing
Asset Type
Total Rentable
Square Feet
464,206
3
1
1
1
2
1
2
1
1
1
1
1
1
1
1
2
1
1
9
1
2
8
3
1
2
2
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
2
1
1
1
1
4
1
1
1
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
30
646,200
151,704
166,000
216,902
335,550
106,000
407,552
104,000
418,406
130,560
130,560
1,135,453
102,505
154,485
342,700
290,132
420,000
252,662
2,179,393
253,900
202,140
999,124
597,935
289,200
244,903
462,658
301,200
270,084
389,546
68,300
66,400
177,071
100,000
357,673
120,000
109,520
78,128
141,400
152,000
53,680
128,000
200,000
262,521
146,400
149,624
111,000
78,540
156,482
520,163
121,050
139,875
700,000
State
City
Kenosha
Madison
Mayville
Mukwonago
Muskego
New Berlin
Oak Creek
Pewaukee
Pleasant Prairie
Pleasant Prairie
Sun Prairie
West Allis
Yorkville
Number of
Buildings
1
2
1
1
1
3
2
2
1
1
1
4
1
544
Asset Type
Total Rentable
Square Feet
Light Manufacturing
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
Light Manufacturing
Warehouse / Distribution
Warehouse / Distribution
Warehouse / Distribution
175,052
283,000
339,179
157,438
81,230
590,663
232,144
288,201
291,599
105,637
427,000
243,478
98,151
108,554,840
Not reflected in the table above is one building under development located in West Sacramento, CA.
As of December 31, 2021, 25 of our 544 buildings were encumbered by mortgage indebtedness totaling approximately $55.0
million (excluding unamortized deferred financing fees, debt issuance costs, and fair market value premiums). See Note 4 in the
accompanying Notes to the Consolidated Financial Statements and the accompanying Schedule III for additional information.
Portfolio Summary
The following table summarizes information relating to diversification by building type in our portfolio as of December 31,
2021.
Square Footage
Annualized Base Rental Revenue
Building Type
Warehouse/Distribution
Light Manufacturing
Total Operating Portfolio/weighted average
Value Add/Other
Flex/Office
Total portfolio/weighted average
Number of
Buildings
459
74
533
9
2
544
%
89.1 %
9.5 %
98.6 %
1.3 %
0.1 %
100.0 %
Amount
97,985,062
8,721,979
106,707,041
%
90.3 %
8.0 %
98.3 %
Occupancy
Rate
Amount
(in thousands)
441,131
47,029
488,160
97.2 % $
99.2 %
97.4 % $
1,752,658
95,141
108,554,840
1.6 %
0.1 %
100.0 %
66.3 %
63.1 %
96.9 % $
6,392
573
495,125
31
Geographic Diversification
The following table summarizes information about the 20 largest markets in our portfolio based on total annualized base rental
revenue as of December 31, 2021.
Top 20 Markets(1)
Chicago, IL
Philadelphia, PA
Greenville/Spartanburg, SC
Milwaukee/Madison, WI
Detroit, MI
Columbus, OH
Minneapolis/St Paul, MN
Pittsburgh, PA
Houston, TX
Charlotte, NC
West Michigan, MI
Indianapolis, IN
El Paso, TX
Cincinnati/Dayton, OH
Boston, MA
Cleveland, OH
Westchester/So Connecticut, CT/NY
Washington, DC
Columbia, SC
Raleigh/Durham, NC
Total
(1) As defined by CoStar Realty Information, Inc.
Industry Diversification
% of Total
Annualized Base
Rental Revenue
7.9 %
6.7 %
5.1 %
4.5 %
4.2 %
4.1 %
3.9 %
3.9 %
3.0 %
2.5 %
2.4 %
2.3 %
2.3 %
2.0 %
1.9 %
1.9 %
1.6 %
1.6 %
1.6 %
1.5 %
64.9 %
The following table summarizes information about the 20 largest tenant industries in our portfolio based on total annualized
base rental revenue as of December 31, 2021.
Top 20 Tenant Industries(1)
Air Freight & Logistics
Containers & Packaging
Auto Components
Trading Companies & Distributors (Industrial Goods)
Commercial Services & Supplies
Internet & Direct Mkt Retail
Machinery
Household Durables
Distributors (Consumer Goods)
Food & Staples Retailing
Media
Building Products
Chemicals
Specialty Retail
Electronic Equip, Instruments
Food Products
Beverages
Road & Rail
Textiles, Apparel, Luxury Good
Household Products
Total
(1) Industry classification based on Global Industry Classification Standard methodology.
32
% of Total
Annualized Base
Rental Revenue
11.3 %
8.8 %
7.2 %
5.4 %
5.2 %
5.0 %
4.7 %
4.7 %
4.3 %
3.8 %
3.4 %
3.3 %
2.4 %
2.3 %
2.1 %
2.0 %
1.9 %
1.9 %
1.8 %
1.7 %
83.2 %
Tenant Diversification
The following table summarizes information about the 20 largest tenants in our portfolio based on total annualized base rental
revenue as of December 31, 2021.
Top 20 Tenants(1)
Amazon
Eastern Metal Supply, Inc.
GXO Logistics, Inc.
American Tire Distributors Inc
FedEx Corporation
Tempur Sealy International Inc
Lippert Component Manufacturing
Kenco Logistic Services, LLC
Penguin Random House LLC
Westrock Company
DS Smith North America
DHL Supply Chain
LKQ Corporation
Yanfeng US Automotive Interior
Costco Wholesale Corporation
Ford Motor Company
Hachette Book Group, Inc.
Carolina Beverage Group
Packaging Corp of America
Schneider Electric USA, Inc.
Total
Number of
Leases
7
5
3
7
4
2
5
3
1
7
2
4
4
2
2
1
1
3
5
3
71
% of Total
Annualized Base
Rental Revenue
3.2 %
1.0 %
1.0 %
1.0 %
0.9 %
0.9 %
0.8 %
0.8 %
0.8 %
0.8 %
0.7 %
0.7 %
0.7 %
0.7 %
0.7 %
0.7 %
0.7 %
0.7 %
0.7 %
0.6 %
18.1 %
(1) Includes tenants, guarantors, and/or non-guarantor parents.
Scheduled Lease Expirations
As of December 31, 2021, our weighted average lease term was approximately 5.1 years. We define weighted average lease
term as the contractual lease term in years, assuming that tenants exercise no renewal options, purchase options, or early
termination rights, weighted by square footage. The following table summarizes lease expirations for leases in place as of
December 31, 2021, plus available space, for each of the ten calendar years beginning with 2022 and thereafter in our portfolio.
Lease Expiration Year
Available
Month-to-month leases
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
Thereafter
Total/weighted average
Item 3. Legal Proceedings
Number of
Leases
Expiring
—
4
60
103
97
85
93
62
38
36
27
37
39
681
Total Rentable
Square Feet
3,403,037
121,097
6,801,303
13,774,659
13,719,494
12,567,456
14,228,309
9,845,704
6,098,986
6,574,891
3,710,937
7,003,482
10,705,485
108,554,840
% of Total
Occupied
Square Feet
—
$
0.1 %
6.5 %
13.1 %
13.0 %
12.0 %
13.5 %
9.4 %
5.8 %
6.2 %
3.5 %
6.7 %
10.2 %
100.0 % $
Total Annualized
Base Rental Revenue
(in thousands)
% of Total Annualized
Base Rental Revenue
—
0.1 %
6.3 %
11.9 %
12.9 %
11.3 %
13.9 %
9.5 %
5.6 %
6.4 %
4.2 %
6.8 %
11.1 %
100.0 %
—
558
31,421
59,180
63,701
55,972
68,938
46,835
27,540
31,521
21,003
33,503
54,953
495,125
From time to time, we are a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of our
business. We are not currently a party, as plaintiff or defendant, to any legal proceedings that, individually or in the aggregate,
would be expected to have a material effect on our business, financial condition or results of operations if determined adversely
to our company.
33
Item 4. Mine Safety Disclosures
Not applicable.
PART II.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Information about our equity compensation plans and other related stockholder matters is incorporated by reference to our
definitive Proxy Statement for our 2022 Annual Meeting of Stockholders.
Market Information
Our common stock is listed on the NYSE and is traded under the symbol “STAG.”
Holders of Our Common Stock
As of February 15, 2022, we had 86 stockholders of record. This figure does not reflect the beneficial ownership of shares held
in the nominee name.
Dividends
To maintain our qualification as a REIT, we must make annual distributions to our stockholders of at least 90% of our taxable
net income (not including net capital gains). Dividends are declared at the discretion of our board of directors and depend on
actual and anticipated cash from operations, our financial condition, capital requirements, the annual distribution requirements
under the REIT provisions of the Code and other factors our board of directors may consider relevant.
Unregistered Sales of Equity Securities and Use of Proceeds
Recent Sales of Unregistered Equity Securities
All issuances of unregistered securities during the quarter ended December 31, 2021, if any, have previously been disclosed in
filings with the SEC.
Issuer Purchases of Equity Securities
Period
October 1, 2021 - October 31, 2021
November 1, 2021 - November 30, 2021
December 1, 2021 - December 31, 2021
Total/weighted average
Total Number of Shares
Purchased(1)
Average Price Paid per
Share(1)
— $
— $
1,886 $
1,886 $
—
—
47.48
47.48
Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs
Approximate Dollar
Value of Shares that
May Yet be Purchased
Under the Plans or
Programs
— $
— $
— $
— $
—
—
—
—
(1) Reflects shares surrendered to the Company for payment of tax withholdings obligations in connection with the vesting of shares of common stock issued
pursuant to the 2011 Plan. The average price paid reflects the average market value of shares withheld for tax purposes.
34
Performance Graph
The following graph provides a comparison of the cumulative total return on our common stock with the cumulative total return
on the Standard & Poor’s 500 Index and the MSCI US REIT Index. The MSCI US REIT Index represents performance of
publicly-traded REITs. Returns over the indicated period are based on historical data and should not be considered indicative of
future returns. The graph covers the period from December 31, 2016 to December 31, 2021 and assumes that $100 was invested
in our common stock and in each index on December 31, 2016 and that all dividends were reinvested.
Cumulative Total Return
Based upon an inital investment of $100 on December 31, 2016 with dividends reinvested
$260
$250
$240
$230
$220
$210
$200
$190
$180
$170
$160
$150
$140
$130
$120
$110
$100
1 2/3 1/2 0 1 6
$256.18
$233.41
$166.84
$181.35
$161.05
$116.62
1 2/3 1/2 0 2 0
1 2/3 1/2 0 2 1
$154.58
$153.17
$126.18
$116.49
$116.07
$100.27
1 2/3 1/2 0 1 8
1 2/3 1/2 0 1 9
$121.83
$120.69
$105.07
1 2/3 1/2 0 1 7
STAG Industrial, Inc.
Standard & Poor 500
MSCI US REIT Index
This performance graph shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or incorporated by
reference into any filing by us under the Securities Act, except as shall be expressly set forth by specific reference in such
filing.
Item 6. Reserved
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of our financial condition and results of operations should be read in conjunction with our
consolidated financial statements and related notes included elsewhere in this report. For the definitions of certain terms used
in the following discussion, refer to Item 1, “Business - Certain Definitions” included elsewhere in this Annual Report on
Form 10-K.
35
Overview
We are a REIT focused on the acquisition, ownership, and operation of industrial properties throughout the United States. We
seek to (i) identify properties that offer relative value across all locations, industrial property types, and tenants through the
principled application of our proprietary risk assessment model, (ii) operate our properties in an efficient, cost-effective manner,
and (iii) capitalize our business appropriately given the characteristics of our assets. We are a Maryland corporation and our
common stock is publicly traded on the NYSE under the symbol “STAG.”
We are organized and conduct our operations to qualify as a REIT under Sections 856 through 860 of the Code, and generally
are not subject to federal income tax to the extent we currently distribute our income to our stockholders and maintain our
qualification as a REIT. We remain subject to state and local taxes on our income and property and to U.S. federal income and
excise taxes on our undistributed income.
Our qualification and taxation as a REIT depend upon our ability to meet on a continuing basis, through actual annual operating
results, qualification tests in the federal income tax laws. Those tests involve the percentage of income that we earn from
specified sources, the percentage of our assets that falls within specified categories, the diversity of our capital stock ownership
and the percentage of our earnings that we distribute.
As of December 31, 2021, we owned 544 buildings in 40 states with approximately 108.6 million rentable square feet,
consisting of 459 warehouse/distribution buildings, 74 light manufacturing buildings, two flex/office buildings, and nine Value
Add Portfolio buildings. We own both single- and multi-tenant properties, although the majority of our portfolio is single-
tenant.
As of December 31, 2021, our buildings were approximately 96.9% leased to 532 tenants, with no single tenant accounting for
more than approximately 3.2% of our total annualized base rental revenue and no single industry accounting for more than
approximately 11.3% of our total annualized base rental revenue.
We own the interests in all of our properties and conduct substantially all of our business through our Operating Partnership.
We are the sole member of the sole general partner of our Operating Partnership. As of December 31, 2021, we owned
approximately 98.1% of the common units in our Operating Partnership, and our current and former executive officers,
directors, senior employees and their affiliates, and other third parties owned the remaining 1.9% of the common units.
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 year ended December 31, 2021. In addition,
we did not enter into any rent deferral agreements during the year ended December 31, 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
36
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 and its side-effects such as supply-chain bottlenecks and inflation. While the pandemic
continues to evolve and impact 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 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. Then, in November 2021, a $1.0 trillion
infrastructure bill was passed to support the economy and job growth. In addition to fiscal support, the Federal Reserve
completed two emergency fed funds rate cuts in March 2020 to a range between 0% to 0.25% and continued to be
accommodative throughout pandemic. Given recent high inflation levels and strong employment reports, we expect monetary
policy to shift toward a tightening stance with higher interest rates. Fiscal policy is likely to remain accommodative, as needed,
to counteract COVID-19 variants.
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 and recent U.S. infrastructure bill, 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
37
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.
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 year ended December 31,
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
Year ended December 31, 2021
New Leases
Renewal Leases
Total/weighted average
Cash
Basis
Rent Per
Square
Foot
Square
Feet
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)
4,257,914 $
9,448,145 $
13,706,059 $
4.19 $
4.64 $
4.50 $
4.33 $
4.83 $
4.67 $
2.07
1.11
1.40
9.6 %
10.7 %
10.4 %
14.9 %
18.6 %
17.6 %
5.3 $
5.2 $
5.2 $
0.48
0.16
0.26
(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 year ended December 31, 2021, leases commenced totaling 385,150 square feet 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
6.3% of our total annualized base rental revenue will expire during the period from January 1, 2022 to December 31, 2022,
38
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 moderately higher than the rates
under existing leases expiring during the period January 1, 2022 to December 31, 2022, thereby resulting in a moderate increase
in revenue from the same space.
Critical Accounting Estimates
The preparation of our consolidated financial statements in conformity with GAAP requires us to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and expenses during the reported period. Certain
estimates, judgments and assumptions are inherently subjective and based on the existing business and market conditions, and
are therefore continually evaluated based upon available information and experience. The following items require significant
estimation or judgement.
Purchase Price Accounting
We have determined that judgments regarding the allocation of the purchase price of properties based upon the fair value of the
assets acquired and liabilities assume represents a critical accounting estimate that has the potential to be material in future
periods and has been material in all periods presented in this Form 10-K. As discussed below in “Critical Accounting Policies,”
we allocate the purchase price of properties based upon the fair value of the assets acquired and liabilities assumed, which
generally consist of land, buildings, tenant improvements, mortgage debt assumed, and deferred leasing intangibles, which
includes in-place leases, above market and below market leases, and tenant relationships, and is therefore subject to subjective
analysis and uncertainty. The process for determining the allocation to these components requires estimates and assumptions,
including rental rates, discount rates, exit capitalization rates, and land value per square foot. We do not believe that the
conclusions we reached regarding the allocation of the purchase price of properties, in the current economic and operating
environment, would result in a materially different conclusion within any reasonable range of assumptions that could have been
applied. As discussed below, we continuously assess our portfolio for the impairment of tangible and intangible rental property
and deferred leasing intangible liabilities.
Rental Property and Deferred Leasing Intangible Liabilities Impairment Assessment
We have determined that judgments regarding the impairment of tangible and intangible rental property and deferred leasing
intangible liabilities represents a critical accounting estimate that has the potential to be material in future periods and has been
material in certain periods presented in this Form 10-K. As discussed below in “Critical Accounting Policies,” we evaluate the
carrying value of all tangible and intangible rental property assets and deferred leasing intangible liabilities (collectively, the
“property”) held for use for possible impairment when an event or change in circumstance has occurred that indicates their
carrying value may not be recoverable. The evaluation includes estimating and reviewing anticipated future undiscounted cash
flows to be derived from the property. If such cash flows are less than the property’s carrying value, an impairment charge is
recognized to the extent by which the asset’s carrying value exceeds the estimated fair value. Estimating future cash flows is
highly subjective and is based in part on assumptions related to anticipated hold period, future occupancy, rental rates, capital
requirements, and exit capitalization rates that could differ from actual results. The discount rate used to present value the cash
flows for determining fair value is also subjective. We do not believe that the conclusions we reached regarding the assessment
of our rental property assets for impairment, in the current economic and operating environment, would result in a materially
different conclusion within any reasonable range of assumptions that could have been applied. Should economic conditions
worsen, and the values of industrial assets decline in future periods, then the assumptions and estimates we may make in future
impairment analyses, and potential future measurement of impairment charges, could be sensitive and could result in a material
change in the range of potential outcomes.
Critical Accounting Policies
The preparation of financial statements in conformity with GAAP requires management to use judgment in the application of
accounting policies, including making estimates and assumptions. We base our estimates on historical experience and on
various other assumptions believed to be reasonable under the circumstances. These judgments affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported
amounts of revenue and expenses during the reporting periods. If our judgment or interpretation of the facts and circumstances
relating to various transactions had been different, it is possible that different accounting policies would have been applied
resulting in a different presentation of our financial statements. From time to time, we evaluate our estimates and assumptions.
In the event estimates or assumptions prove to be different from actual results, adjustments are made in subsequent periods to
39
reflect more current information. Below is a discussion of accounting policies that we consider critical in that they may require
complex judgment in their application or require estimates about matters that are inherently uncertain.
Rental Property and Deferred Leasing Intangibles
Rental property is carried at cost less accumulated depreciation and amortization. Expenditures for maintenance and repairs are
expensed as incurred. Significant renovations and betterments that extend the economic useful lives of assets are capitalized.
We capitalize costs directly and indirectly related to the development, pre-development, redevelopment, or improvement of
rental property. Real estate taxes, compensation costs of development personnel, insurance, interest, and other directly related
costs during construction periods are capitalized as incurred, with depreciation commencing with the date the property is
substantially completed. Such costs begin to be capitalized to the development projects from the point we are undergoing the
necessary activities to get the development project ready for its intended use and cease when the development projects are
substantially completed and held available for occupancy. Interest is capitalized based on actual capital expenditures from the
period when development or redevelopment commences until the asset is ready for its intended use, at the weighted average
borrowing rate of our unsecured indebtedness during the period.
For properties classified as held for sale, we cease depreciating and amortizing the rental property and value the rental property
at the lower of depreciated and amortized cost or fair value less costs to dispose. We present those properties classified as held
for sale with any qualifying assets and liabilities associated with those properties as held for sale in the accompanying
Consolidated Balance Sheets.
Using information available at the time of acquisition, we allocate the purchase price of properties acquired based upon the fair
value of the assets acquired and liabilities assumed, which generally consist of land, buildings, tenant improvements, mortgage
debt assumed, and deferred leasing intangibles, which includes in-place leases, above market and below market leases, and
tenant relationships. The process for determining the allocation to these components requires estimates and assumptions,
including rental rates, discount rates and exit capitalization rates, and land value per square foot, as well as available market
information, and is therefore subject to subjective analysis and uncertainty. The fair value of the tangible assets of an acquired
property considers the value of the property as if it were vacant. The portion of the purchase price that is allocated to above and
below market leases is valued based on the present value of the difference between prevailing market rates and the in-place
rates measured over a period equal to the remaining term of the lease term plus the term of any bargain renewal options. The
purchase price is further allocated to in-place lease values and tenant relationships based on our evaluation of the specific
characteristics of each tenant’s lease and its overall relationship with the respective tenant.
The above and below market lease values are amortized into rental income over the remaining lease term. The value of in-place
lease intangibles and tenant relationships are amortized over the remaining lease term (and expected renewal period of the
respective lease for tenant relationships) as increases to depreciation and amortization expense. The remaining lease terms are
adjusted for bargain renewal options or assumed exercises of early termination options, as applicable. If a tenant subsequently
terminates its lease, any unamortized portion of above and below market leases is accelerated into rental income and the in-
place lease value and tenant relationships are accelerated into depreciation and amortization expense over the shortened lease
term.
The purchase price allocated to deferred leasing intangible assets are included in rental property, net on the accompanying
Consolidated Balance Sheets and the purchase price allocated to deferred leasing intangible liabilities are included in deferred
leasing intangibles, net on the accompanying Consolidated Balance Sheets under the liabilities section.
In determining the fair value of the debt assumed, we discount the spread between the future contractual interest payments and
hypothetical future interest payments on mortgage debt based on a current market rate. The associated fair market value debt
adjustment is amortized through interest expense over the life of the debt on a basis which approximates the effective interest
method.
We evaluate the carrying value of all tangible and intangible rental property assets and deferred leasing intangible liabilities
(collectively, the “property”) held for use for possible impairment when an event or change in circumstance has occurred that
indicates their carrying value may not be recoverable. The evaluation includes estimating and reviewing anticipated future
undiscounted cash flows to be derived from the property. If such cash flows are less than the property’s carrying value, an
impairment charge is recognized to the extent by which the property’s carrying value exceeds the estimated fair value.
Estimating future cash flows is highly subjective and is based in part on assumptions regarding anticipated hold period, future
occupancy, rental rates, capital requirements, and exit capitalization rates that could differ from actual results. The discount rate
used to present value the cash flows for determining fair value is also subjective.
40
Depreciation expense is computed using the straight-line method based on the following estimated useful lives.
Description
Building
Building and land improvements (maximum)
Tenant improvements
Leases
Estimated Useful Life
40 Years
20 years
Shorter of useful life or terms of related lease
For leases in which we are the lessee, we recognize a right-of-use asset and corresponding lease liability on the accompanying
Consolidated Balance Sheets equal to the present value of the fixed lease payments. In determining operating right-of-use asset
and lease liability for our operating leases, we estimate an appropriate incremental borrowing rate on a fully-collateralized basis
for the terms of the leases. We utilize a market-based approach to estimate the incremental borrowing rate for each individual
lease. Since the terms under our ground leases are significantly longer than the terms of borrowings available to us on a fully-
collateralized basis, the estimate of this rate required significant judgment, and considered factors such as yields on outstanding
public debt and other market based pricing on longer duration financing instruments.
Goodwill
The excess of the cost of an acquired business over the net of the amounts assigned to assets acquired (including identified
intangible assets) and liabilities assumed is recorded as goodwill. Our goodwill of approximately $4.9 million represents
amounts allocated to the assembled workforce from the acquired management company, and is presented in prepaid expenses
and other assets on the accompanying Consolidated Balance Sheets. Our goodwill has an indeterminate life and is not
amortized, but is tested for impairment on an annual basis at December 31, or more frequently if events or changes in
circumstances indicate that the asset might be impaired. We take a qualitative approach to consider whether an impairment of
goodwill exists prior to quantitatively determining the fair value of the reporting unit in step one of the impairment test. We
have recorded no impairments to goodwill as of December 31, 2021.
Use of Derivative Financial Instruments
We record all derivatives on the accompanying Consolidated Balance Sheets at fair value. The accounting for changes in the
fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate a derivative in a
hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to
apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an
asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges.
Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of
forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing
of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or
liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions
in a cash flow hedge. We may enter into derivative contracts that are intended to economically hedge certain of its risks, even
though hedge accounting does not apply or we elect not to apply hedge accounting.
In accordance with fair value measurement guidance, we made an accounting policy election to measure the credit risk of our
derivative financial instruments that are subject to master netting arrangements on a net basis by counterparty portfolio. Credit
risk is the risk of failure of the counterparty to perform under the terms of the contract. We minimize the credit risk in our
derivative financial instruments by entering into transactions with various high-quality counterparties. Our exposure to credit
risk at any point is generally limited to amounts recorded as assets on the accompanying Consolidated Balance Sheets.
Fair Value of Financial Instruments
Financial instruments include cash and cash equivalents, restricted cash, tenant accounts receivable, interest rate swaps,
accounts payable, accrued expenses, unsecured credit facility, unsecured term loans, unsecured notes, and mortgage notes. See
Note 4 in the accompanying Notes to Consolidated Financial Statements for the fair value of our indebtedness. See Note 5 in
the accompanying Notes to Consolidated Financial Statements for the fair value of our interest rate swaps.
We adopted fair value measurement provisions for our financial instruments recorded at fair value. The guidance establishes a
three-tier value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as
41
observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets
that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data
exists, therefore requiring an entity to develop its own assumptions.
Incentive and Equity-Based Employee Compensation Plans
We grant equity-based compensation awards to our employees and directors in the form of restricted shares of common stock,
LTIP units, and performance units. See Notes 6, 7 and 8 in the accompanying Notes to Consolidated Financial Statements for
further discussion of restricted shares of common stock, LTIP units, and performance units, respectively. We measure equity-
based compensation expense based on the fair value of the awards on the grant date and recognize the expense ratably over the
vesting period, and forfeitures are recognized in the period in which they occur.
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.
Revenue Recognition
All current leases are classified as operating leases and rental income is recognized on a straight-line basis over the term of the
lease (and expected bargain renewal terms or assumed exercise of early termination options) when collectability is reasonably
assured. Differences between rental income earned and amounts due under the lease are charged or credited, as applicable, to
accrued rental income.
We determined that for all leases where we are the lessor, that the timing and pattern of transfer of the non-lease components
and associated lease components are the same, and that the lease components, if accounted for separately, would be classified as
an operating lease. Accordingly, we have made an accounting policy election to recognize the combined component in
accordance with Accounting Standards Codification Topic 842 as rental income on the accompanying Consolidated Statements
of Operations.
Rental income recognition commences when the tenant takes possession of or controls the physical use of the leased space and
the leased space is substantially complete and ready for its intended use. In order to determine whether the leased space is
substantially complete and ready for its intended use, we determine whether we or the tenant own the tenant improvements.
When it is determined that we are the owner of the tenant improvements, rental income recognition begins when the tenant
takes possession of or controls the physical use of the finished space, which is generally when our owned tenant improvements
are completed. In instances when it is determined that the tenant is the owner of tenant improvements, rental income recognition
begins when the tenant takes possession of or controls the physical use of the leased space.
When we are the owner of tenant improvements or other capital items, the cost to construct the tenant improvements or other
capital items, including costs paid for or reimbursed by the tenants, is recorded as capital assets. For these tenant improvements
or other capital items, the amount funded by or reimbursed by the tenants are recorded as deferred revenue, which is amortized
on a straight-line basis as income over the shorter of the useful life of the capital asset or the term of the related lease.
Early lease termination fees are recorded in rental income on a straight-line basis from the notification date of such termination
to the then remaining (not the original) lease term, if any, or upon collection if collection is not reasonably assured.
We evaluate cash basis versus accrual basis of rental income recognition based on the collectability of future lease payments.
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.
42
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 or transferred from the Value Add Portfolio to the Operating Portfolio after December 31, 2019. On
December 31, 2021, we owned 412 industrial buildings consisting of approximately 83.9 million square feet, which represents
approximately 77.3% of our total portfolio, that are considered our same store portfolio in the analysis below. Same store
occupancy decreased approximately 0.6% to 97.1% as of December 31, 2021 compared to 97.7% as of December 31, 2020.
Discussions of selected operating information for our same store portfolio and our total portfolio for the comparison of the
years ended December 31, 2020 and 2019 that are not included in this Form 10-K can be found in “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the
year ended December 31, 2020, which was filed with the SEC on February 10, 2021.
Comparison of the year ended December 31, 2021 to the year ended December 31, 2020
The following table summarizes selected operating information for our same store portfolio and our total portfolio for the years
ended December 31, 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 years ended December 31, 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.
43
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44
Net Income
Net income for our total portfolio decreased by $10.4 million or 5.0% to $196.4 million for the year ended December 31, 2021
compared to $206.8 million for the year ended December 31, 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 $16.5 million
or 3.8% to $450.3 million for the year ended December 31, 2021 compared to $433.9 million for the year ended December 31,
2020.
Same store lease income increased by $10.6 million or 2.9% to $375.5 million for the year ended December 31, 2021 compared
to $364.9 million for the year ended December 31, 2020. Approximately $9.1 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 $0.8 million. These increases were also attributable to an increase in
rental income of approximately $3.3 million at properties in which, during the year ended December 31, 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 the
year ended December 31, 2021. These increases were partially offset by the reduction of base rent of approximately $4.1
million due to tenant vacancy.
Same store other billings increased by $5.8 million or 8.5% to $74.8 million for the year ended December 31, 2021 compared to
$69.0 million for the year ended December 31, 2020. The increase was attributable to an increase of approximately $3.6 million
related to other expense reimbursements due to an increase in corresponding expenses and changes to lease terms where we
began paying the operating expenses on behalf of tenants that had previously paid its operating expenses directly to respective
vendors. 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 directly to the taxing authority of
approximately $2.2 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 portfolio operating expenses to net income, see the table above.
Total same store operating expenses increased by $7.7 million or 10.1% to $83.8 million for the year ended December 31, 2021
compared to $76.1 million for the year ended December 31, 2020. This increase was primarily related to an increase in real
estate taxes of approximately $2.9 million 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 directly to the taxing authority. The increase was also
attributable to an increase of $1.8 million in repairs and maintenance expense, an increase in utility expense of $1.1 million, and
an increase of $1.9 million related to insurance, snow removal, and other expenses.
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 111 buildings consisting of approximately 20.7 million square feet (excluding
11 buildings that were included in the Value Add Portfolio at December 31, 2021 or transferred from the Value Add Portfolio
to the Operating Portfolio after December 31, 2019), and sold 29 buildings consisting of approximately 6.1 million square feet.
For the years ended December 31, 2021 and 2020, the buildings acquired after December 31, 2019 contributed approximately
45
$69.5 million and $13.6 million to NOI, respectively. For the years ended December 31, 2021 and 2020, the buildings sold after
December 31, 2019 contributed approximately $3.2 million and $15.4 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, buildings classified as held for sale, and Operating
Portfolio buildings with expansions placed in service or transferred from the Value Add Portfolio to the Operating Portfolio
after December 31, 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 December 31, 2021 we owned two flex/office buildings consisting of approximately 0.1 million square feet, nine buildings
in our Value Add Portfolio consisting of approximately 1.8 million square feet, and 10 buildings consisting of approximately
2.1 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 $11.2 million and
$6.0 million to NOI for the years ended December 31, 2021 and 2020, respectively. Additionally, there was $3.4 million and
$1.0 million of termination, solar, and other income adjustments from certain buildings in our same store portfolio for the years
ended December 31, 2021 and December 31, 2020, respectively.
Total Other Expenses
Total other expenses consist of general and administrative expenses, depreciation and amortization, loss on impairments, and
other expenses.
Total other expenses increased $27.8 million or 10.6% for the year ended December 31, 2021 to $290.2 million compared to
$262.4 million for the year ended December 31, 2020. This is primarily a result of an increase in depreciation and amortization
of approximately $24.0 million as a result of net acquisitions that increased the depreciable asset base. General and
administrative expenses increased by approximately $8.6 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 $2.3 million. Additionally, general and administrative expenses increased by approximately $2.1 million related
to the severance costs of a former executive officer, as discussed in Note 7 in the accompanying Notes to Consolidated
Financial Statements. General and administrative expenses also increased due to increases in compensation and other payroll
costs. Other expenses also increased, and approximately $0.3 million of the increase was primarily due to the settlement of
litigation related to a terminated acquisition contract during the COVID-19 pandemic. These increases were partially offset by a
decrease in loss on impairments of approximately $5.6 million as there were no loss on impairments recognized during the year
ended December 31, 2021.
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 income decreased $42.7 million or 56.8% to $32.5 million total other income for the year ended December 31,
2021 compared to $75.2 million total other expense for the year ended December 31, 2020. This decrease is primarily the result
of an decrease in gain on the sales of rental property, net of approximately $37.8 million and a decrease in gain on involuntary
conversion of approximately $2.2 million related to an eminent domain taking of a portion of a parcel of land that occurred
during the year ended December 31, 2020. There was also an increase in interest expense of approximately $1.1 million which
was primarily attributable to the funding of unsecured term loans on September 28, 2021 and March 25, 2020. Debt
extinguishment and modification expenses also increased approximately $1.3 million during the year ended December 31, 2021
that was primarily related to the refinance of the Unsecured Term Loans on October 26, 2021, as discussed in Note 4 of the
accompanying Notes to Consolidated Financial Statements. Additionally, there was a decrease of approximately $0.3 million in
interest and other income due to a decreased cash and cash equivalents balance during the year ended December 31, 2021
compared to the year ended December 31, 2020.
46
Non-GAAP Financial Measures
In this report, we disclose funds from operations (“FFO”) and NOI, which meet the definition of “non-GAAP financial
measures” as set forth in Item 10(e) of Regulation S-K promulgated by the SEC. As a result, we are required to include in this
report a statement of why management believes that presentation of these measures provides useful information to investors.
Funds From Operations
FFO should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of our
performance, and we believe that to understand our performance further, FFO should be compared with our reported net income
(loss) in accordance with GAAP, as presented in our consolidated financial statements included in this report.
We calculate FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts
(“NAREIT”). FFO represents GAAP net income (loss), excluding gains (or losses) from sales of depreciable operating
buildings, impairment write-downs of depreciable real estate, real estate related depreciation and amortization (excluding
amortization of deferred financing costs and fair market value of debt adjustment) and after adjustments for unconsolidated
partnerships and joint ventures.
Management uses FFO as a supplemental performance measure because it is a widely recognized measure of the performance
of REITs. FFO may be used by investors as a basis to compare our operating performance with that of other REITs.
However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our buildings
that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain
the operating performance of our buildings, all of which have real economic effects and could materially impact our results
from operations, the utility of FFO as a measure of our performance is limited. In addition, other REITs may not calculate FFO
in accordance with the NAREIT definition, and, accordingly, our FFO may not be comparable to such other REITs’ FFO. FFO
should not be used as a measure of our liquidity, and is not indicative of funds available for our cash needs, including our
ability to pay dividends.
The following table summarizes a reconciliation of our FFO attributable to common stockholders and unit holders for the
periods presented to net income, the nearest GAAP equivalent.
Reconciliation of Net Income to FFO (in thousands)
Net income
Rental property depreciation and amortization
Loss on impairments
Gain on the sales of rental property, net
FFO
Preferred stock dividends
Redemption of preferred stock
Amount allocated to restricted shares of common stock and unvested units
FFO attributable to common stockholders and unit holders
Net Operating Income
Year ended December 31,
2020
2019
2021
$
$
$
196,432 $
238,487
—
(97,980)
336,939 $
(1,289)
(2,582)
(838)
332,230 $
206,795 $
214,464
5,577
(135,733)
291,103 $
(5,156)
—
(756)
285,191 $
50,665
185,154
9,757
(7,392)
238,184
(5,156)
—
(891)
232,137
We consider NOI to be an appropriate supplemental performance measure to net income (loss) because we believe it helps
investors and management understand the core operations of our buildings. NOI is defined as rental income, which includes
billings for common area maintenance, real estate taxes and insurance, less property expenses. NOI should not be viewed as an
alternative measure of our financial performance since it excludes expenses which could materially impact our results of
operations. Further, our NOI may not be comparable to that of other real estate companies, as they may use different
methodologies for calculating NOI.
47
The following table summarizes a reconciliation of our NOI for the periods presented to net income, the nearest GAAP
equivalent.
Reconciliation of Net Income to NOI (in thousands)
Net income
General and administrative
Transaction costs
Depreciation and amortization
Interest and other income
Interest expense
Loss on impairments
Gain on involuntary conversion
Debt extinguishment and modification expenses
Other expenses
Gain on the sales of rental property, net
Net operating income
Cash Flows
Year ended December 31,
2020
2019
2021
$
$
196,432 $
48,629
347
238,699
(121)
63,484
—
—
2,152
2,531
(97,980)
454,173 $
206,795 $
40,072
159
214,738
(446)
62,343
5,577
(2,157)
834
1,870
(135,733)
394,052 $
50,665
35,946
346
185,450
(87)
54,647
9,757
—
—
1,439
(7,392)
330,771
Comparison of the year ended December 31, 2021 to the year ended December 31, 2020
The following table summarizes our cash flows for the year ended December 31, 2021 compared to the year ended
December 31, 2020.
Cash Flows (dollars in thousands)
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by financing activities
Year ended December 31,
2020
2021
$
$
$
336,154 $
1,220,420 $
887,123 $
293,922 $
554,623 $
269,176 $
Change
$
42,232
665,797
617,947
%
14.4 %
120.0 %
229.6 %
Net cash provided by operating activities increased $42.2 million to $336.2 million for the year ended December 31, 2021,
compared to $293.9 million for the year ended December 31, 2020. The increase was primarily attributable to incremental
operating cash flows from property acquisitions completed after December 31, 2020, and operating performance at existing
properties. These increases were partially offset by the loss of cash flows from property dispositions completed after
December 31, 2020 and fluctuations in working capital due to timing of payments and rental receipts.
Net cash used in investing activities increased by $665.8 million to $1,220.4 million for the year ended December 31, 2021,
compared to $554.6 million for the year ended December 31, 2020. The increase was primarily attributable to the acquisition of
74 buildings during the year ended December 31, 2021 of approximately $1,365.8 million, compared to the acquisition of 48
buildings during the year ended December 31, 2020 of approximately $773.3 million. The increase is also attributable to an
decrease in net proceeds from the sale of 22 buildings during the year ended December 31, 2021 for net proceeds of
approximately $188.0 million, compared to the year ended December 31, 2020 where we sold seven buildings for net proceeds
of approximately $273.6 million.
Net cash provided by financing activities increased $617.9 million to $887.1 million for the year ended December 31, 2021,
compared to $269.2 million for the year ended December 31, 2020. The increase is primarily attributable to funding of the
Series I Unsecured Notes and Series J Unsecured Notes (each as defined below) of $325.0 million, as well as a net cash inflow
of approximately $228.0 million from our unsecured credit facility. The increase is also attributable to an increase of net
proceeds from the sales of common stock of approximately $268.5 million. These increases were partially offset by the
redemption of the Series C Preferred Stock (as defined below) of $75.0 million, and an increase of approximately $21.4 million
in dividends paid during the year ended December 31, 2021 compared to the year ended December 31, 2020. Additionally, the
funding of the Unsecured Term Loan F of $100.0 million did not recur during the year ended December 31, 2021 compared to
the year ended December 31, 2020.
48
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 our
Operating Partnership.
Since the start of the COVID-19 pandemic in early-2020, we have worked to ensure that we maintain adequate liquidity. In
February 2021 and October 2021, we refinanced our unsecured credit facility and several unsecured term loans and on
September 28, 2021, we issued the Series I Unsecured Notes and Series J Unsecured Notes, as discussed in “Indebtedness
Outstanding” below. As of December 31, 2021, we had total immediate liquidity of approximately $469.4 million, comprised of
$19.0 million of cash and cash equivalents and $450.4 million of immediate availability on our unsecured credit facility. When
incorporating the remaining undrawn balance available on our unsecured credit facility and the approximately $50.1 million of
forward equity proceeds available to us at our option through November 3, 2022, our total liquidity as of December 31, 2021
was approximately $519.5 million.
In addition, we require funds for future dividends to be paid to our common stockholders and common unit holders in our
Operating Partnership. These distributions on our common stock are voluntary (at the discretion of our board of directors), to
the extent in excess of distribution requirements in order to maintain our REIT status for federal income tax purposes, and the
excess portion may be reduced or stopped if needed to fund other liquidity requirements or for other reasons. The following
table summarizes the dividends attributable to our common stock that were declared or paid during the year ended
December 31, 2021.
Month Ended 2021
December 31
November 30
October 31
September 30
August 31
July 31
June 30
May 31
April 30
March 31
February 28
January 31
Total
Declaration Date
Record Date
Per Share
Payment Date
October 13, 2021
October 13, 2021
October 13, 2021
July 13, 2021
July 13, 2021
July 13, 2021
April 12, 2021
April 12, 2021
April 12, 2021
January 11, 2021
January 11, 2021
January 11, 2021
December 31, 2021
November 30, 2021
October 29, 2021
September 30, 2021
August 31, 2021
July 30, 2021
June 30, 2021
May 28, 2021
April 30, 2021
March 31, 2021
February 26, 2021
January 29, 2021
$
$
January 18, 2022
0.120833
0.120833 December 15, 2021
0.120833 November 15, 2021
0.120833 October 15, 2021
0.120833 September 15, 2021
0.120833 August 16, 2021
July 15, 2021
0.120833
0.120833
June 15, 2021
0.120833 May 17, 2021
0.120833 April 15, 2021
0.120833 March 15, 2021
0.120833 February 16, 2021
1.449996
On January 10, 2022, our board of directors declared the common stock dividends for the months ending January 31, 2022,
February 28, 2022 and March 31, 2022 at a monthly rate of $0.121667 per share of common stock.
On March 31, 2021, we redeemed all 3,000,000 issued and outstanding shares of 6.875% Series C Cumulative Redeemable
Preferred Stock, par value $0.01 per share (“Series C Preferred Stock”), at a cash redemption price of $25.00 per share, plus
49
accrued and unpaid dividends to, but excluding, the redemption date. The following table summarizes the dividends paid on the
Series C Preferred Stock during the year ended December 31, 2021.
Quarter Ended 2021
March 31
Total
Indebtedness Outstanding
Declaration Date
January 11, 2021
Series C
Preferred Stock
Per Share
$
$
0.4296875
0.4296875
Payment Date
March 31, 2021
The following table summarizes certain information with respect to the indebtedness outstanding as of December 31, 2021.
Loan
Unsecured credit facility:
Unsecured Credit Facility(4)
Total unsecured credit facility
Unsecured term loans:
Unsecured Term Loan D
Unsecured Term Loan E
Unsecured Term Loan F
Unsecured Term Loan G
Unsecured Term Loan A
Total unsecured term loans
Total unamortized deferred financing fees and debt issuance costs
Total carrying value unsecured term loans, net
Unsecured notes:
Series F Unsecured Notes
Series A Unsecured Notes
Series D Unsecured Notes
Series G Unsecured Notes
Series B Unsecured Notes
Series C Unsecured Notes
Series E Unsecured Notes
Series H Unsecured Notes
Series I Unsecured Notes
Series J Unsecured Notes
Total unsecured notes
Total unamortized deferred financing fees and debt issuance costs
Total carrying value unsecured notes, net
Mortgage notes (secured debt):
Wells Fargo Bank, National Association CMBS Loan
Thrivent Financial for Lutherans
United of Omaha Life Insurance Company
Total mortgage notes
Net unamortized fair market value premium (discount)
Total unamortized deferred financing fees and debt issuance costs
Total carrying value mortgage notes, net
Total / weighted average interest rate(5)
Principal
Outstanding as of
December 31, 2021
(in thousands)
$
296,000
296,000
150,000
175,000
200,000
300,000
150,000
975,000
(4,423)
970,577
100,000
50,000
100,000
75,000
50,000
80,000
20,000
100,000
275,000
50,000
900,000
(3,059)
896,941
46,610
3,430
4,943
54,983
(136)
(103)
54,744
2,218,262
$
Interest
Rate(1)(2)
Maturity Date
Prepayment
Terms(3)
L + 0.775% October 23, 2026
2.85 % January 4, 2023
3.77 % January 15, 2024
2.96 % January 12, 2025
1.13 % February 5, 2026
3.23 % March 15, 2027
3.98 % January 5, 2023
4.98 % October 1, 2024
4.32 % February 20, 2025
4.10 % June 13, 2025
4.98 % July 1, 2026
4.42 % December 30, 2026
4.42 % February 20, 2027
4.27 % June 13, 2028
2.80 % September 29, 2031
2.95 % September 28, 2033
i
i
i
i
i
i
ii
ii
ii
ii
ii
ii
ii
ii
ii
ii
4.31 % December 1, 2022
4.78 % December 15, 2023
3.71 % October 1, 2039
iii
iv
ii
2.88 %
(1)
Interest rate as of December 31, 2021. At December 31, 2021, the one-month LIBOR (“L”) was 0.10125%. 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 0.85%, with the exception of Unsecured Term Loan D which
has a stated interest rate of one-month LIBOR plus a spread of 1.0%. As of December 31, 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 A
will be swapped to a fixed rate of 1.30% effective April 1, 2022. One-month LIBOR for the Unsecured Term Loan G will be swapped to a fixed rate of
0.94% effective April 18, 2023.
50
(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 October 24, 2025, or such later date which may be extended
pursuant to two six-month extension options exercisable by us in 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 December 31,
2021 was approximately $450.4 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.
Unsecured Credit Facility
On October 26, 2021, we entered into an amendment to the unsecured credit facility (the “October 2021 Credit Facility
Amendment”). The October 2021 Credit Facility Amendment provides for an extension of the maturity date to October 24,
2025, with two six-month extension options, subject to certain conditions, and a reduced current interest rate of LIBOR plus a
spread of 0.775% and facility fee of 0.15%, each based on our current debt rating (as defined in the credit agreement) and
leverage level. As of December 31, 2021, the unsecured credit facility bore an interest rate of LIBOR plus a spread of 0.775%
based on our debt rating, as defined in the loan agreement. In connection with the October 2021 Credit Facility Amendment, we
incurred approximately $3.7 million in costs which are being deferred and amortized through the maturity date of the unsecured
credit facility. We also incurred approximately $0.1 million of modification expenses which were recognized in debt
extinguishment and modification expenses in the accompanying Consolidated Statements of Operations. Other than the
maturity and interest rate provisions described above, the material terms of the unsecured credit facility remain unchanged.
On February 5, 2021, we entered into an amendment to the unsecured credit facility (the “February 2021 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. In connection with the February 2021 Credit
Facility Amendment, we incurred approximately $1.2 million in costs, which are being deferred and amortized through the
maturity date of our unsecured credit facility. Other than the increase in the borrowing commitments, the material terms of our
unsecured credit facility were not changed by the February 2021 Credit Facility Amendment.
Unsecured Term Loans
On October 26, 2021,we entered into an amendment to the Unsecured Term Loan A (the “Amendment to Unsecured Term
Loan A”). The Amendment to Unsecured Term Loan A provides for an extension of the maturity date to March 15, 2027 and a
reduced current interest rate of LIBOR plus a spread of 0.85% based on our current debt rating (as defined in the loan
agreement) and leverage level. In connection with the Amendment to Unsecured Term Loan A, we incurred approximately
$0.6 million in costs which are being deferred and amortized through the new maturity date of March 15, 2027. We also
incurred approximately $0.2 million of modification expenses which were recognized in debt extinguishment and modification
expenses in the accompanying Consolidated Statements of Operations. Other than the maturity and interest rate provisions
described above, the material terms of the Unsecured Term Loan A remain unchanged.
On October 26, 2021, we entered into amendments to the Unsecured Term Loan E, the Unsecured Term Loan F, and the
Unsecured Term Loan G (“Term Loan Amendments”) that provide for reduced current interest rates on each of the loans of
LIBOR plus a spread of 0.85% based on our current debt rating (as defined in each loan agreement) and leverage level. In
connection with the Term Loan Amendments, we incurred approximately $0.6 million in costs which are being deferred and
amortized the respective maturity dates. We also incurred approximately $1.2 million of modification expenses which were
recognized in debt extinguishment and modification expenses in the accompanying Consolidated Statements of Operations.
Other than the interest rate provisions described above, the material terms of the Unsecured Term Loan E, the Unsecured Term
Loan F, and the Unsecured Term Loan G remain unchanged.
On October 26, 2021, we entered into an amendment to the Unsecured Term Loan D to conform certain provisions of such loan
agreement to the unsecured credit facility.
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%. In connection with the Amendment to
51
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 were not changed by the Amendment to Unsecured Term Loan G.
Unsecured Notes
On July 8, 2021, we entered into a note purchase agreement (the “July 2021 NPA”) for the private placement by our Operating
Partnership of $275.0 million senior unsecured notes (the “Series I Unsecured Notes”) maturing September 29, 2031, with a
fixed annual interest rate of 2.80%, and $50.0 million senior unsecured notes (the “Series J Unsecured Notes”) maturing
September 28, 2033, with a fixed annual interest rate of 2.95%. The July 2021 NPA contains a number of financial covenants
substantially similar to the financial covenants contained in our unsecured credit facility and other unsecured notes, plus a
financial covenant that requires us to maintain a minimum interest coverage ratio of not less than 1.50:1.00. Our Operating
Partnership issued the Series I Unsecured Notes and the Series J Unsecured Notes on September 28, 2021. The Company and
certain wholly owned subsidiaries of our Operating Partnership are guarantors of the unsecured notes.
Mortgage 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.
The Wells Fargo Bank, National Association CMBS loan agreement is a commercial mortgage backed security that provides
for a secured loan. There are 23 properties that are collateral for the CMBS loan. Our Operating Partnership guarantees the
obligations under the CMBS loan.
The following table summarizes our debt capital structure as of December 31, 2021.
Debt Capital Structure
Total principal outstanding (in thousands)
Weighted average duration (years)
% Secured debt
% Debt maturing next 12 months
Net Debt to Real Estate Cost Basis (1)
$
December 31, 2021
2,225,983
4.6
2.5 %
2.1 %
34.2 %
(1) We define Net Debt as our amounts outstanding under our unsecured credit facility, unsecured term loans, unsecured notes, and mortgage notes, less cash
and cash equivalents. We define Real Estate Cost Basis as the book value of rental property and deferred leasing intangibles, exclusive of the related
accumulated depreciation and amortization.
We regularly pursue new financing opportunities to ensure an appropriate balance sheet position. As a result of these dedicated
efforts, we are confident in our ability to meet future debt maturities and building acquisition funding needs. We believe that
our current balance sheet is in an adequate position at the date of this filing, despite possible volatility in the credit markets.
Our interest rate exposure as it relates to interest expense payments on our floating rate debt is managed through our use of
interest rate swaps, which fix the rate of our long term floating rate debt. For a detailed discussion on our use of interest rate
swaps, see “Interest Rate Risk” below.
Unsecured Credit Facility, Unsecured Term Loans, and Unsecured Notes
The unsecured credit facility provides for a facility fee payable by us to the lenders at a rate per annum of 0.1% to 0.3%,
depending on our debt rating, as defined in the credit agreement, of the aggregate commitments (currently $750.0 million). The
facility fee is due and payable quarterly.
Covenants: Our ability to borrow, maintain borrowings and avoid default under the unsecured credit facility, the unsecured
term loans, and unsecured notes is subject to our ongoing compliance with a number of financial covenants, including:
52
•
•
•
•
•
a maximum consolidated leverage ratio of not greater than 0.60:1.00;
a maximum secured leverage ratio of not greater than 0.40:1.00;
a maximum unencumbered leverage ratio of not greater than 0.60:1.00;
a minimum fixed charge ratio of not less than or equal to 1.50:1.00; and
a minimum unsecured interest coverage ratio of not less than or equal to 1.75:1.00.
The respective note purchase agreements additionally contain a financial covenant that requires us to maintain a minimum
interest coverage ratio of not less than 1.50:1.00.
Pursuant to the terms of our unsecured debt agreements, we may not pay distributions that exceed the minimum amount
required for us to qualify and maintain our status as a REIT if a default or event of default occurs and is continuing.
Our unsecured credit facility, unsecured term loans, unsecured notes, and mortgage notes are subject to ongoing compliance
with a number of financial and other covenants. As of December 31, 2021, we were in compliance with the applicable financial
covenants.
Events of Default: Our unsecured credit facility and unsecured term loans contain customary events of default, including but not
limited to non-payment of principal, interest, fees or other amounts, defaults in the compliance with the covenants contained in
the documents evidencing the unsecured credit facility and the unsecured term loans, cross-defaults to other material debt and
bankruptcy or other insolvency events.
Borrower and Guarantors: Our Operating Partnership is the borrower under the unsecured credit facility, the unsecured term
loans and is the issuer of the unsecured notes. The Company and certain of its subsidiaries guarantee the obligations under our
unsecured debt agreements.
Equity
Preferred Stock
On March 31, 2021, we redeemed all 3,000,000 issued and outstanding shares of the Series C Preferred Stock 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 December 31, 2021.
Common Stock
The following table summarizes our ATM common stock offering program as of December 31, 2021. We may from time to
time sell common stock through sales agents under the ATM program. There was no activity under the ATM common stock
offering program during the three months ended December 31, 2021.
ATM Common Stock Offering Program
2019 $600 million ATM
Date
February 14, 2019
Maximum Aggregate Offering Price
(in thousands)
Aggregate Common Stock
Available as of December 31, 2021
(in thousands)
$
600,000 $
76,482
Subsequent to December 31, 2021, we sold 128,335 shares under the ATM common stock offering program at a price of $45.03
per share, or $5.8 million, and $44.58 per share net of sales agent fees.
On November 3, 2021, we completed an underwritten public offering of an aggregate of 8,000,000 shares of common stock at a
price to the underwriters of $41.99 per share, consisting of (i) 5,250,000 shares offered directly us and (ii) 2,750,000 shares
offered by the forward dealer in connection with certain forward sale agreements. The offering closed on November 8, 2021
and we received net proceeds from the sale of shares offered directly by us of approximately $220.4 million. On December 1,
2021, the underwriters exercised their option to purchase an additional 1,200,000 shares for an offering price of $41.87 per
share and the underwriters’ option closed on December 3, 2021. On December 27, 2021, we partially physically settled the
forward sales agreements in full by issuing 2,750,000 shares of common stock and received net proceeds of approximately
$115.0 million. Subject to the our right to elect cash or net share settlement, we have the ability to settle the remaining forward
sales agreements at any time through scheduled maturity date of the forward sale agreements of November 3, 2022.
53
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 did not initially receive any proceeds
from the sale of shares on a forward basis. On September 29, 2021, we physically settled in full the forward sales agreements
under the ATM common stock offering program by issuing 1,446,760 shares of common stock and received net proceeds of
approximately $48.4 million, or $33.4585 per share.
Noncontrolling Interests
We own our interests in all of our properties and conduct substantially all of our business through our Operating Partnership.
We are the sole member of the sole general partner of our Operating Partnership. As of December 31, 2021, we owned
approximately 98.1% of the common units in our Operating Partnership, and our current and former executive officers,
directors, senior employees and their affiliates, and other third parties owned the remaining 1.9% of the common units.
Interest Rate Risk
We use interest rate swaps to fix the rate of our variable rate debt. As of December 31, 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, Fitch Ratings, or other nationally recognized rating agencies.
The following table summarizes our outstanding interest rate swaps as of December 31, 2021.
Interest Rate
Derivative Counterparty
Wells Fargo Bank, N.A.
The Toronto-Dominion Bank
Regions Bank
Capital One, N.A.
The Toronto-Dominion Bank
Royal Bank of Canada
Wells Fargo Bank, N.A.
PNC Bank, N.A.
PNC Bank, N.A.
The Toronto-Dominion Bank
Wells Fargo Bank, N.A.
The Toronto-Dominion Bank
Wells Fargo Bank, N.A.
The Toronto-Dominion Bank
PNC Bank, N.A.
Bank of Montreal
U.S. Bank, N.A.
Wells Fargo Bank, N.A.
U.S. Bank, N.A.
Regions Bank
Bank of Montreal
U.S. Bank, N.A.
Wells Fargo Bank, N.A.
The Toronto-Dominion Bank
Regions Bank
Bank of Montreal
PNC Bank, N.A.
Trade Date
Jan-08-2015
Jan-08-2015
Jan-08-2015
Jan-08-2015
Jul-20-2017
Jul-20-2017
Jul-20-2017
Jul-20-2017
Jul-20-2017
Apr-20-2020
Apr-20-2020
Apr-20-2020
Apr-20-2020
Jul-24-2018
Jul-24-2018
Jul-24-2018
Jul-24-2018
May-02-2019
May-02-2019
May-02-2019
Jul-16-2019
Feb-17-2021
Feb-17-2021
Feb-17-2021
Oct-26-2021
Oct-26-2021
Oct-26-2021
Effective Date
Notional
Amount
(in thousands)
Fair Value
(in thousands)
Pay Fixed
Interest Rate
Receive
Variable
Interest Rate
(105)
(143)
(289)
(296)
(353)
(354)
(354)
(353)
(706)
299
295
299
294
(2,128)
(2,128)
(2,128)
(1,064)
(1,827)
(1,826)
(1,825)
(1,022)
2,014
1,009
1,010
(54)
(45)
(52)
1.8280 % One-month L
2.4535 % One-month L
2.4750 % One-month L
2.5300 % One-month L
1.8485 % One-month L
1.8505 % One-month L
1.8505 % One-month L
1.8485 % One-month L
1.8475 % One-month L
0.2750 % One-month L
0.2790 % One-month L
0.2750 % One-month L
0.2800 % One-month L
2.9180 % One-month L
2.9190 % One-month L
2.9190 % One-month L
2.9190 % One-month L
2.2460 % One-month L
2.2459 % One-month L
2.2459 % One-month L
1.7165 % One-month L
0.9385 % One-month L
0.9365 % One-month L
0.9360 % One-month L
1.3045 % One-month L
1.3045 % One-month L
1.3045 % One-month L
Mar-20-2015 $
Feb-14-2020 $
Feb-14-2020 $
Feb-14-2020 $
Oct-30-2017 $
Oct-30-2017 $
Oct-30-2017 $
Oct-30-2017 $
Oct-30-2017 $
Sep-29-2020 $
Sep-29-2020 $
Mar-19-2021 $
Mar-19-2021 $
Jul-26-2019 $
Jul-26-2019 $
Jul-26-2019 $
Jul-26-2019 $
Jul-15-2020 $
Jul-15-2020 $
Jul-15-2020 $
Jul-15-2020 $
Apr-18-2023 $
Apr-18-2023 $
Apr-18-2023 $
Apr-01-2022 $
Apr-01-2022 $
Apr-01-2022 $
25,000 $
25,000 $
50,000 $
50,000 $
25,000 $
25,000 $
25,000 $
25,000 $
50,000 $
75,000 $
75,000 $
75,000 $
75,000 $
50,000 $
50,000 $
50,000 $
25,000 $
50,000 $
50,000 $
50,000 $
50,000 $
150,000 $
75,000 $
75,000 $
50,000 $
50,000 $
50,000 $
54
Maturity
Date
Mar-31-2022
Mar-31-2022
Mar-31-2022
Mar-31-2022
Jan-04-2023
Jan-04-2023
Jan-04-2023
Jan-04-2023
Jan-04-2023
Apr-18-2023
Apr-18-2023
Apr-18-2023
Apr-18-2023
Jan-12-2024
Jan-12-2024
Jan-12-2024
Jan-12-2024
Jan-15-2025
Jan-15-2025
Jan-15-2025
Jan-15-2025
Feb-5-2026
Feb-5-2026
Feb-5-2026
Mar-15-2027
Mar-15-2027
Mar-15-2027
The swaps outlined in the above table were all designated as cash flow hedges of interest rate risk, and all are valued as Level 2
financial instruments. Level 2 financial instruments are defined as significant other observable inputs. As of December 31,
2021, the fair value of seven of our interest rate swaps were in a asset position of approximately $5.2 million, including any
adjustment for nonperformance risk related to these agreements. The remaining 20 interest rate swaps were in a liability
position of approximately $17.1 million, including any adjustment for nonperformance risk related to these agreements.
As of December 31, 2021, we had $1,271.0 million of variable rate debt. As of December 31, 2021, all of our outstanding
variable rate debt, with 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 December 31, 2021, we had letters of credit related to development projects and certain other agreements of
approximately $3.6 million. As of December 31, 2021, we had no other material off-balance sheet arrangements.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Our future income, cash flows and fair values relevant to financial instruments are dependent upon prevailing market interest
rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates. The primary market risk we
are exposed to is interest rate risk. We have used derivative financial instruments to manage, or hedge, interest rate risks related
to our borrowings, primarily through interest rate swaps.
As of December 31, 2021, we had $1,271.0 million of variable rate debt outstanding. As of December 31, 2021, all of our
outstanding variable rate debt, with the exception of our unsecured credit facility which had a balance of $296.0 million, was
fixed with interest rate swaps through maturity. To the extent we undertake additional variable rate indebtedness, if interest
rates increase, then so will the interest costs on our unhedged variable rate debt, which could adversely affect our cash flow and
our ability to pay principal and interest on our debt and our ability to make distributions to our security holders. Further, rising
interest rates could limit our ability to refinance existing debt when it matures or significantly increase our future interest
expense. From time to time, we enter into interest rate swap agreements and other interest rate hedging contracts, including
swaps, caps and floors. While these agreements are intended to lessen the impact of rising interest rates on us, they also expose
us to the risk that the other parties to the agreements will not perform, we could incur significant costs associated with the
settlement of the agreements, the agreements will be unenforceable and the underlying transactions will fail to qualify as
highly-effective cash flow hedges under GAAP. In addition, an increase in interest rates could decrease the amounts third
parties are willing to pay for our assets, thereby limiting our ability to change our portfolio promptly in response to changes in
economic or other conditions. In addition, an increase in interest rates could decrease the amounts third parties are willing to
pay for our assets, thereby limiting our ability to change our portfolio promptly in response to changes in economic or other
conditions. If interest rates increased by 100 basis points and assuming we had an outstanding balance of $296.0 million on our
unsecured credit facility for the year ended December 31, 2021, our interest expense would have increased by approximately
$3.0 million for the year ended December 31, 2021.
Item 8. Financial Statements and Supplementary Data
The required response under this Item is submitted in a separate section of this report. See Index to Consolidated Financial
Statements on page F-1.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
55
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As required by SEC Rule 13a-15(b), we have evaluated, under the supervision of and with the participation of management,
including our Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of our
disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, as of December 31, 2021.
Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and
procedures for the periods covered by this report were effective to provide reasonable assurance that information required to be
disclosed by our Company in reports that we file or submit under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in SEC rules and forms and is accumulated and communicated to our management,
including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required
disclosure.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term
is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the
effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our
evaluation under the framework in Internal Control—Integrated Framework (2013), our management concluded that our
internal control over financial reporting was effective as of December 31, 2021.
The effectiveness of our internal control over financial reporting as of December 31, 2021 has been audited by
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which appears on
page F-2 of this Annual Report on Form 10‑K.
Changes in Internal Controls
There was no change to our internal control over financial reporting during the fourth quarter ended December 31, 2021 that
has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not Applicable.
Item 10. Directors, Executive Officers and Corporate Governance
PART III.
The information required by Item 10 will be included in the Proxy Statement to be filed relating to our 2022 Annual Meeting of
Stockholders and is incorporated herein by reference.
Item 11. Executive Compensation
The information required by Item 11 will be included in the Proxy Statement to be filed relating to our 2022 Annual Meeting of
Stockholders and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by Item 12 will be included in the Proxy Statement to be filed relating to our 2022 Annual Meeting of
Stockholders and is incorporated herein by reference.
56
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by Item 13 will be included in the Proxy Statement to be filed relating to our 2022 Annual Meeting of
Stockholders and is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services
The information required by Item 14 will be included in the Proxy Statement to be filed relating to our 2022 Annual Meeting of
Stockholders and is incorporated herein by reference.
Item 15. Exhibits and Financial Statement Schedules
1. Consolidated Financial Statements
PART IV.
The financial statements listed in the accompanying Index to Consolidated Financial Statements on page F-1 are
filed as a part of this report.
2. Financial Statement Schedules
The financial statement schedules required by this Item are filed with this report and listed in the accompanying
Index to Consolidated Financial Statements on page F-1. All other financial statement schedules are not
applicable.
3. Exhibits
The following exhibits are filed as part of this report:
Exhibit
Number
Description of Document
3.1 Articles of Amendment and Restatement (including all articles of amendment and articles supplementary)
(incorporated by reference to the Quarterly Report on Form 10-Q filed with the SEC on July 30, 2019)
3.2 Third Amended and Restated Bylaws (incorporated by reference to the Current Report on Form 8-K filed with the
SEC on May 1, 2018)
4.1 Form of Common Stock Certificate (incorporated by reference to the Registration Statement on Form S-11/A (File
No. 333-168368) filed with the SEC on September 24, 2010.)
4.2 Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Exchange Act
10.1 Amended and Restated Agreement of Limited Partnership, dated as of April 20, 2011 (incorporated by reference to
the Current Report on Form 8-K filed with the SEC on April 21, 2011)
10.2 First Amendment to the Amended and Restated Agreement of Limited Partnership, dated as of November 2, 2011
(incorporated by reference to the Current Report on Form 8-K filed with the SEC on November 2, 2011)
10.3 Second Amendment to the Amended and Restated Agreement of Limited Partnership, dated as of April 16, 2013
(incorporated by reference to the Current Report on Form 8-K filed with the SEC on April 16, 2013)
10.4 Third Amendment to the Amended and Restated Agreement of Limited Partnership, dated as of March 17, 2016
(incorporated by reference to the Current Report on Form 8-K filed with the SEC on March 18, 2016)
10.5 STAG Industrial, Inc. 2011 Equity Incentive Plan, effective April 1, 2011 (incorporated by reference to the
Registration Statement on Form S-11/A (File No. 333-168368) filed with the SEC on April 5, 2011)*
10.6 Amendment to the 2011 Equity Incentive Plan, dated as of May 6, 2013 (incorporated by reference to the Current
Report on Form 8-K filed with the SEC on May 6, 2013)*
10.7 Second Amendment to the 2011 Equity Incentive Plan, dated as of February 20, 2015 (incorporated by reference to
the Annual Report on Form 10-K filed with the SEC on February 23, 2015)*
10.8 Amended and Restated STAG Industrial, Inc. 2011 Equity Incentive Plan, effective April 30, 2018 (incorporated by
reference to the Current Report on Form 8-K filed with the SEC on May 1, 2018)*
10.9 Form of LTIP Unit Agreement (incorporated by reference to the Registration Statement on Form S-11/A (File No.
333-168368) filed with the SEC on April 5, 2011)*
10.10 Form of Performance Award Agreement (incorporated by reference to the Quarterly Report on Form 10-Q filed
with the SEC on May 3, 2016)*
57
Exhibit
Number
10.11 STAG Industrial Inc. Employee Retirement Vesting Program, effective January 7, 2021 (incorporated by reference
Description of Document
to the Current Report on Form 8-K filed with the SEC on January 13, 2021)*
10.12 Amended and Restated Executive Employment Agreement with Benjamin S. Butcher, dated May 4, 2015
(incorporated by reference to the Quarterly Report on Form 10-Q filed with the SEC on July 23, 2015)*
10.13 Executive Employment Agreement with William R. Crooker, dated February 25, 2016 (incorporated by reference to
the Quarterly Report on Form 10-Q filed with the SEC on May 3, 2016)*
10.14 Executive Employment Agreement with Matts S. Pinard, dated January 10, 2022 (incorporated by reference to the
Current Report on Form 8-K filed with the SEC on January 12, 2022)*
10.15 Executive Employment Agreement with Stephen C. Mecke, dated April 20, 2011 (incorporated by reference to the
Current Report on Form 8-K filed with the SEC on April 21, 2011)*
10.16 Executive Employment Agreement with Jeffrey M. Sullivan, dated October 27, 2014 (incorporated by reference to
the Quarterly Report on Form 10-Q filed with the SEC on October 31, 2014)*
10.17 Form of Indemnification Agreement (incorporated by reference to the Registration Statement on Form S-11/A (File
No. 333-168368) filed with the SEC on February 16, 2011)*
10.18 Registration Rights Agreement, dated April 20, 2011 (incorporated by reference to the Current Report on Form 8-K
filed with the SEC on April 21, 2011)
10.19 Unsecured Credit Facility: Credit Agreement, dated as of July 26, 2018 (incorporated by reference to the Current
Report on Form 8-K filed with the SEC on July 31, 2018)
10.20 Unsecured Credit Facility: First Amendment to Credit Agreement, dated as of February 5, 2021 (incorporated by
reference to the Quarterly Report on Form 10-Q filed with the SEC on May 4, 2021)
10.21 Unsecured Credit Facility: Second Amendment to Credit Agreement, dated as of October 26, 2021
10.22 Unsecured Term Loan A: Amended and Restated Term Loan Agreement, dated as of December 20, 2016
(incorporated by reference to the Current Report on Form 8-K filed with the SEC on December 27, 2016)
10.23 Unsecured Term Loan A: First Amendment to Amended and Restated Term Loan Agreement, dated as of July 28,
2017 (incorporated by reference to the Quarterly Report on Form 10-Q filed with the SEC on November 2, 2017)
10.24 Unsecured Term Loan A: Second Amendment to Amended and Restated Term Loan Agreement, dated as of July
26, 2018 (incorporated by reference to the Current Report on Form 8-K filed with the SEC on July 30, 2019)
10.25 Unsecured Term Loan A: Amendment to Amended and Restated Term Loan Agreement, dated as of October 26,
2021
10.26 Unsecured Term Loan D: Term Loan Agreement, dated as of July 28, 2017 (incorporated by reference to the
Quarterly Report on Form 10-Q filed with the SEC on November 2, 2017)
10.27 Unsecured Term Loan D: First Amendment to Term Loan Agreement, dated as of July 26, 2018 (incorporated by
reference to the Current Report on Form 8-K filed with the SEC on July 30, 2019)
10.28 Unsecured Term Loan D: Second Amendment to Term Loan Agreement, dated as of October 26, 2021
10.29 Unsecured Term Loan E: Term Loan Agreement, dated as of July 26, 2018 (incorporated by reference to the
Current Report on Form 8-K filed with the SEC on July 31, 2018)
10.30 Unsecured Term Loan E: First Amendment to Term Loan Agreement, dated as of October 26, 2021
10.31 Unsecured Term Loan F: Term Loan Agreement, dated as of July 12, 2019 (incorporated by reference to the
Current Report on Form 8-K filed with the SEC on July 30, 2019)
10.32 Unsecured Term Loan F: First Amendment to Term Loan Agreement, dated as of October 26, 2021
10.33 Unsecured Term Loan G: Term Loan Agreement, dated as of April 17, 2020 (incorporated by reference to the
Quarterly Report on Form 10-Q filed with the SEC on July 28, 2020)
10.34 Unsecured Term Loan G: First Amendment to Term Loan Agreement, dated as of February 5, 2021 (incorporated
by reference to the Quarterly Report on Form 10-Q filed with the SEC on May 4, 2021)
10.35 Unsecured Term Loan G: Second Amendment to Term Loan Agreement, dated as of October 26, 2021
10.36 Series A Unsecured Notes, Series B Unsecured Notes: Note Purchase Agreement, dated as of April 16, 2014
(incorporated by reference to the Current Report on Form 8-K filed with the SEC on April 22, 2014)
10.37 Series A Unsecured Notes, Series B Unsecured Notes: First Amendment to Note Purchase Agreement, dated as
of December 18, 2014 (incorporated by reference to the Current Report on Form 8-K filed with the SEC on
December 19, 2014)
10.38 Series A Unsecured Notes, Series B Unsecured Notes: Second Amendment to Note Purchase Agreement, dated
as of December 1, 2015 (incorporated by reference to the Current Report on Form 8-K filed with the SEC on
December 4, 2015)
58
Exhibit
Number
10.39 Series A Unsecured Notes, Series B Unsecured Notes: Third Amendment to Note Purchase Agreement, dated as
Description of Document
of April 10, 2018 (incorporated by reference to the Current Report on Form 8-K filed with the SEC on April 13,
2018)
10.40 Series C Unsecured Notes, Series D Unsecured Notes, Series E Unsecured Notes: Note Purchase Agreement,
dated as of December 18, 2014 (incorporated by reference to the Current Report on Form 8-K filed with the SEC on
December 19, 2014)
10.41 Series C Unsecured Notes, Series D Unsecured Notes, Series E Unsecured Notes: First Amendment to Note
Purchase Agreement, dated as of December 1, 2015 (incorporated by reference to the Current Report on Form 8-K
filed with the SEC on December 4, 2015)
10.42 Series C Unsecured Notes, Series D Unsecured Notes, Series E Unsecured Notes: Second Amendment to Note
Purchase Agreement, dated as of April 10, 2018 (incorporated by reference to the Current Report on Form 8-K filed
with the SEC on April 13, 2018)
10.43 Series F Unsecured Notes: Note Purchase Agreement, dated as of December 1, 2015 (incorporated by reference to
the Current Report on Form 8-K filed with the SEC on December 4, 2015)
10.44 Series F Unsecured Notes: First Amendment to Note Purchase Agreement, dated as of April 10, 2018
(incorporated by reference to the Current Report on Form 8-K filed with the SEC on April 13, 2018)
10.45 Series G Unsecured Notes, Series H Unsecured Notes: Note Purchase Agreement, dated as of April 10, 2018
(incorporated by reference to the Current Report on Form 8-K filed with the SEC on April 13, 2018)
10.46 Series I Unsecured Notes, Series J Unsecured Notes: Note Purchase Agreement, dated as of July 8, 2021
(incorporated by reference to the Quarterly Report on Form 10-Q filed with the SEC on October 28, 2021)
21.1 Subsidiaries of STAG Industrial, Inc.
23.1 Consent of PricewaterhouseCoopers LLP
24.1 Power of Attorney (included on signature page)
31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101 The following materials from STAG Industrial, Inc.’s Annual Report on Form 10-K for the year ended
December 31, 2021 formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the Consolidated
Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive
Income, (vi) the Consolidated Statements of Equity, (v) the Consolidated Statements of Cash Flows, and (vi) related
notes to these consolidated financial statements.
104 Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).
* Represents management contract or compensatory plan or arrangement.
Item 16. Form 10-K Summary
None.
59
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Dated: February 16, 2022
STAG INDUSTRIAL, INC.
By:
/s/ Benjamin S. Butcher
Benjamin S. Butcher
Chairman and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and directors of STAG Industrial, Inc.,
hereby severally constitute Benjamin S. Butcher and Matts S. Pinard, and each of them singly, our true and lawful attorneys
with full power to them, and each of them singly, to sign for us and in our names in the capacities indicated below, the
Form 10-K filed herewith and any and all amendments to said Form 10-K, and generally to do all such things in our names and
in our capacities as officers and directors to enable STAG Industrial, Inc. to comply with the provisions of the Securities
Exchange Act of 1934, as amended, and all requirements of the Securities and Exchange Commission, hereby ratifying and
confirming our signatures as they may be signed by our said attorneys, or any of them, to said Form 10-K and any and all
amendments thereto.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and dates indicated.
Date
Signature
Title
February 16, 2022
February 16, 2022
February 16, 2022
February 16, 2022
February 16, 2022
February 16, 2022
February 16, 2022
February 16, 2022
February 16, 2022
February 16, 2022
February 16, 2022
Chairman and Chief Executive Officer
(principal executive officer)
Director
Director
Director
Director
Director
Director
Director
Director
Chief Financial Officer, Executive Vice President and
Treasurer (principal financial officer)
Senior Vice President and Chief Accounting Officer
(principal accounting officer)
/s/ Benjamin S. Butcher
Benjamin S. Butcher
/s/ Jit Kee Chin
Jit Kee Chin
/s/ Virgis W. Colbert
Virgis W. Colbert
/s/ Michelle S. Dilley
Michelle S. Dilley
/s/ Jeffrey D. Furber
Jeffrey D. Furber
/s/ Larry T. Guillemette
Larry T. Guillemette
/s/ Francis X. Jacoby III
Francis X. Jacoby III
/s/ Christopher P. Marr
Christopher P. Marr
/s/ Hans S. Weger
Hans S. Weger
/s/ Matts S. Pinard
Matts S. Pinard
/s/ Jaclyn M. Paul
Jaclyn M. Paul
60
STAG INDUSTRIAL, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)
Consolidated Balance Sheets as of December 31, 2021 and 2020
Consolidated Statements of Operations for the years ended December 31, 2021, 2020 and 2019
Consolidated Statements of Comprehensive Income for the years ended December 31, 2021, 2020 and 2019
Consolidated Statements of Equity for the years ended December 31, 2021, 2020 and 2019
Consolidated Statements of Cash Flows for the years ended December 31, 2021, 2020 and 2019
Notes to Consolidated Financial Statements
Financial Statement Schedule—Schedule II—Valuation and Qualifying Accounts for the years ended December 31,
2021, 2020 and 2019
Financial Statement Schedule—Schedule III—Real Estate and Accumulated Depreciation as of December 31, 2021
2
4
5
6
7
8
9
39
40
F-1
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of STAG Industrial, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of STAG Industrial, Inc. and its subsidiaries (the “Company”)
as of December 31, 2021 and 2020, and the related consolidated statements of operations, of comprehensive income, of equity
and of cash flows for each of the three years in the period ended December 31, 2021, including the related notes and financial
statement schedules listed in the accompanying index (collectively referred to as the “consolidated financial statements”). We
also have audited the Company's internal control over financial reporting as of December 31, 2021, based on criteria established
in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United
States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the COSO.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included
in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express
opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting
based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,
whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material
respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement
of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.
Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the
risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
F-2
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial
statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or
disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or
complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Purchase Price Accounting
As described in Notes 2 and 3 to the consolidated financial statements, during 2021, the Company completed 74 property
acquisitions for consideration of approximately $1,372.6 million, of which approximately $137.8 million of land, $1,078.9
million of buildings and improvements, $155.7 million of net leasing intangibles, and $1.0 million of other assets were
recorded. Management allocates the purchase price of properties based upon the fair value of the assets acquired and liabilities
assumed, which generally consist of land, buildings, tenant improvements, mortgage debt assumed, and deferred leasing
intangibles, which includes in-place leases, above market and below market leases, and tenant relationships. The process for
determining the allocation to these components requires estimates and assumptions, including rental rates, discount rates, exit
capitalization rates, and land value per square foot.
The principal considerations for our determination that performing procedures relating to purchase price accounting is a critical
audit matter are (i) there was significant judgment by management when developing the fair value measurement of the tangible
and intangible assets acquired and liabilities assumed, which resulted in a high degree of auditor judgment and subjectivity in
performing procedures relating to these estimates, (ii) significant audit effort was necessary in evaluating the significant
assumptions, including rental rates, discount rates, exit capitalization rates, and land value per square foot, (iii) significant
auditor judgment was necessary in evaluating audit evidence, and (iv) the audit effort included the involvement of professionals
with specialized skill and knowledge to assist in evaluating the audit evidence obtained.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall
opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to
purchase price accounting, including controls over the allocation of the purchase price to the assets acquired and liabilities
assumed. These procedures also included, among others, testing management’s process for estimating the fair value of assets
acquired and liabilities assumed by (i) reading the purchase agreements and (ii) evaluating the appropriateness of methods and,
for a sample of acquisitions, the reasonableness of significant assumptions used by management in developing the fair value
measurement including rental rates, discount rates, exit capitalization rates, and land value per square foot. Evaluating these
assumptions involved evaluating whether the assumptions used were reasonable considering past performance of the tangible
and intangible assets acquired and liabilities assumed, consistency with external market and industry data, and considering
whether the assumptions were consistent with evidence obtained in other areas of the audit. Procedures were also performed to
test the completeness and accuracy of data provided by management. For certain acquisitions, professionals with specialized
skill and knowledge were used to assist in evaluating the appropriateness of management’s methods and evaluating the
reasonableness of the assumptions related to the rental rates, discount rates, exit capitalization rates, and land value per square
foot.
/s/PricewaterhouseCoopers LLP
Boston, Massachusetts
February 16, 2022
We have served as the Company’s or its predecessor’s auditor since 2009.
F-3
STAG Industrial, Inc.
Consolidated Balance Sheets
(in thousands, except share data)
December 31, 2021
December 31, 2020
$
617,297 $
Assets
Rental Property:
Land
Buildings and improvements, net of accumulated depreciation of $611,867 and $495,348, respectively
Deferred leasing intangibles, net of accumulated amortization of $282,038 and $258,005, respectively
Total rental property, net
Cash and cash equivalents
Restricted cash
Tenant accounts receivable
Prepaid expenses and other assets
Interest rate swaps
Operating lease right-of-use assets
Assets held for sale, net
Total assets
Liabilities and Equity
Liabilities:
Unsecured credit facility
Unsecured term loans, net
Unsecured notes, net
Mortgage notes, net
Accounts payable, accrued expenses and other liabilities
Interest rate swaps
Tenant prepaid rent and security deposits
Dividends and distributions payable
Deferred leasing intangibles, net of accumulated amortization of $21,136 and $15,759, respectively
Operating lease liabilities
Total liabilities
Commitments and contingencies (Note 11)
Equity:
Preferred stock, par value $0.01 per share, 20,000,000 shares authorized at December 31, 2021 and
December 31, 2020,
Series C, -0- and 3,000,000 shares (liquidation preference of $25.00 per share) issued and outstanding at
December 31, 2021 and December 31, 2020, respectively
Common stock, par value $0.01 per share, 300,000,000 shares authorized at December 31, 2021 and
December 31, 2020, 177,769,342 and 158,209,823 shares issued and outstanding at December 31, 2021 and
December 31, 2020, respectively
Additional paid-in capital
Cumulative dividends in excess of earnings
Accumulated other comprehensive loss
Total stockholders’ equity
Noncontrolling interest
Total equity
Total liabilities and equity
$
$
$
4,435,743
567,658
5,620,698
18,981
4,215
93,600
60,953
5,220
29,582
—
5,833,249 $
296,000 $
970,577
896,941
54,744
76,475
17,052
37,138
21,906
35,721
33,108
2,439,662
492,783
3,532,608
499,802
4,525,193
15,666
4,673
77,796
43,471
—
25,403
444
4,692,646
107,000
971,111
573,281
51,898
69,765
40,656
27,844
19,379
32,762
27,898
1,921,594
—
75,000
1,777
4,130,038
(792,332)
(11,783)
3,327,700
65,887
3,393,587
5,833,249 $
1,582
3,421,721
(742,071)
(40,025)
2,716,207
54,845
2,771,052
4,692,646
The accompanying notes are an integral part of these consolidated financial statements.
F-4
STAG Industrial, Inc.
Consolidated Statements of Operations
(in thousands, except share data)
Year ended December 31,
2020
2019
2021
Revenue
Rental income
Other income
Total revenue
Expenses
Property
General and administrative
Depreciation and amortization
Loss on impairments
Other expenses
Total expenses
Other income (expense)
Interest and other income
Interest expense
Debt extinguishment and modification expenses
Gain on involuntary conversion
Gain on the sales of rental property, net
Total other income (expense)
Net income
Less: income attributable to noncontrolling interest after preferred stock dividends
Net income attributable to STAG Industrial, Inc.
Less: preferred stock dividends
Less: redemption of preferred stock
Less: amount allocated to participating securities
Net income attributable to common stockholders
Weighted average common shares outstanding — basic
Weighted average common shares outstanding — diluted
Net income per share — basic and diluted
Net income per share attributable to common stockholders — basic
Net income per share attributable to common stockholders — diluted
$
$
$
$
$
$
559,432 $
2,727
562,159
482,825 $
586
483,411
107,986
48,629
238,699
—
2,878
398,192
121
(63,484)
(2,152)
—
97,980
32,465
89,359
40,072
214,738
5,577
2,029
351,775
446
(62,343)
(834)
2,157
135,733
75,159
196,432 $
4,098
192,334 $
1,289
2,582
288
188,175 $
163,442
164,090
206,795 $
4,648
202,147 $
5,156
—
271
196,720 $
148,791
149,215
405,350
600
405,950
75,179
35,946
185,450
9,757
1,785
308,117
87
(54,647)
—
—
7,392
(47,168)
50,665
1,384
49,281
5,156
—
314
43,811
125,389
125,678
1.15 $
1.15 $
1.32 $
1.32 $
0.35
0.35
The accompanying notes are an integral part of these consolidated financial statements.
F-5
STAG Industrial, Inc.
Consolidated Statements of Comprehensive Income
(in thousands)
Net income
Other comprehensive income (loss):
Income (loss) on interest rate swaps
Other comprehensive income (loss)
Comprehensive income
Income attributable to noncontrolling interest after preferred stock dividends
Other comprehensive (income) loss attributable to noncontrolling interest
Comprehensive income attributable to STAG Industrial, Inc.
Year ended December 31,
2020
2019
2021
$
196,432 $
206,795 $
50,665
28,856
28,856
225,288
(4,098)
(614)
220,576 $
(22,109)
(22,109)
184,686
(4,648)
510
180,548 $
(23,625)
(23,625)
27,040
(1,384)
718
26,374
$
The accompanying notes are an integral part of these consolidated financial statements.
F-6
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STAG Industrial, Inc.
Consolidated Statements of Cash Flows
(in thousands)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Year ended December 31,
2020
2019
2021
$
196,432
$
206,795
$
50,665
Depreciation and amortization
Loss on impairments
Gain on involuntary conversion
Non-cash portion of interest expense
Amortization of above and below market leases, net
Straight-line rent adjustments, net
Debt extinguishment and modification expenses
Gain on the sales of rental property, net
Non-cash compensation expense
Change in assets and liabilities:
Tenant accounts receivable
Prepaid expenses and other assets
Accounts payable, accrued expenses and other liabilities
Tenant prepaid rent and security deposits
Total adjustments
Net cash provided by operating activities
Cash flows from investing activities:
Acquisitions of land and buildings and improvements
Additions of land and building and improvements
Acquisitions of other assets
Acquisitions of operating lease right-of-use assets
Proceeds from sales of rental property, net
Proceeds from involuntary conversion
Acquisitions of tenant prepaid rent
Acquisition deposits, net
Acquisitions of deferred leasing intangibles
Acquisitions of operating lease liabilities
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from unsecured credit facility
Repayment of unsecured credit facility
Proceeds from unsecured term loans
Repayment of unsecured term loans
Proceeds from unsecured notes
Repayment of mortgage notes
Redemption of preferred stock
Payment of loan fees and costs
Payment of defeasance fees and other costs
Dividends and distributions
Proceeds from sales of common stock, net
Repurchase and retirement of share-based compensation
Net cash provided by financing activities
Increase in cash and cash equivalents and restricted cash
Cash and cash equivalents and restricted cash—beginning of period
Cash and cash equivalents and restricted cash—end of period
Supplemental disclosure:
Cash paid for interest, net of capitalized interest
Supplemental schedule of non-cash investing and financing activities
238,699
—
—
2,931
2,051
(17,516)
249
(97,980)
14,955
(36)
(18,664)
6,763
8,270
139,722
336,154
(1,211,023)
(39,503)
(1,004)
(5,627)
187,972
—
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(3,131)
(154,755)
5,627
(1,220,420)
2,665,000
(2,476,000)
1,125,000
(1,125,000)
325,000
(2,225)
(75,000)
(9,579)
—
(245,722)
706,991
(1,342)
887,123
2,857
20,339
23,196
$
214,738
5,577
(2,157)
2,922
4,341
(12,074)
834
(135,733)
11,681
(4,482)
(11,528)
7,157
5,851
87,127
293,922
(661,961)
(55,741)
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273,560
782
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(110,840)
3,984
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914,000
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400,000
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—
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(425)
(224,283)
438,499
(1,503)
269,176
8,475
11,864
20,339
58,392
$
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$
$
$
$
Additions to building and other capital improvements
Transfer of other assets to building and other capital improvements
Acquisitions of land and buildings and improvements
Acquisitions of deferred leasing intangibles
Change in additions of land, building, and improvements included in accounts payable, accrued expenses, and
$
other liabilities
$
Additions to building and other capital improvements from non-cash compensation
$
Assumption of mortgage notes
Fair market value adjustment to mortgage notes acquired
$
Change in loan fees, costs, and offering costs included in accounts payable, accrued expenses, and other liabilities $
$
Leases cumulative effect adjustment
$
Dividends and distributions accrued
$
$
$
$
(465) $
465
$
(5,990) $
(948) $
(1,285) $
(9) $
5,103
$
(161) $
$
930
$
—
$
21,906
(674) $
674
$
(2,202) $
(362) $
(3,714) $
(25) $
$
—
—
$
(1,065) $
$
—
$
19,379
The accompanying notes are an integral part of these consolidated financial statements.
F-8
185,450
9,757
—
2,583
4,862
(11,774)
—
(7,392)
9,926
(2,509)
(8,480)
429
(160)
182,692
233,357
(995,047)
(65,044)
(2,736)
—
42,028
—
—
3,846
(205,621)
—
(1,222,574)
1,568,000
(1,522,500)
275,000
—
—
(1,926)
—
(1,227)
—
(189,581)
852,375
(1,602)
978,539
(10,678)
22,542
11,864
51,490
(274)
274
(469)
(88)
(8,278)
(70)
—
—
(45)
(214)
17,465
STAG Industrial, Inc.
Notes to Consolidated Financial Statements
1. Organization and Description of Business
STAG Industrial, Inc. (the “Company”) is an industrial real estate operating company focused on the acquisition, ownership,
and operation of single-tenant, industrial properties throughout the United States. The Company was formed as a Maryland
corporation and has elected to be treated and intends to continue to qualify as a real estate investment trust (“REIT”) under
Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”). The Company is structured as an
umbrella partnership REIT, commonly called an UPREIT, and owns substantially all of its properties and conducts substantially
all of its business through its operating partnership, STAG Industrial Operating Partnership, L.P., a Delaware limited
partnership (the “Operating Partnership”). As of December 31, 2021 and 2020, the Company owned a 98.1% 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 December 31, 2021, the Company owned 544 buildings in 40 states with approximately 108.6 million rentable square feet
(square feet unaudited herein and throughout the Notes), consisting of 468 warehouse/distribution buildings, 74 light
manufacturing buildings, and two 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 years ended December 31, 2021 and 2020. The Company did not enter into any rent deferral agreements
during the year ended December 31, 2021. The Company entered into rent deferral agreements with certain tenants which
resulted in approximately $2.1 million in rent deferrals during the year ended December 31, 2020. 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
Basis of Presentation
The Company’s consolidated financial statements include the accounts of the Company, the Operating Partnership and their
subsidiaries. Interests in the Operating Partnership not owned by the Company are referred to as “Noncontrolling Common
Units.” These Noncontrolling Common Units are held by other limited partners in the form of common units (“Other Common
Units”) and long term incentive plan units (“LTIP units”) issued pursuant to the STAG Industrial, Inc. 2011 Equity Incentive
Plan, as amended (the “2011 Plan”). All significant intercompany balances and transactions have been eliminated in the
consolidation of entities. The financial statements of the Company are presented on a consolidated basis for all periods
presented.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
F-9
contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
Rental Property and Deferred Leasing Intangibles
Rental property is carried at cost less accumulated depreciation and amortization. Expenditures for maintenance and repairs are
expensed as incurred. Significant renovations and betterments that extend the economic useful lives of assets are capitalized.
The Company capitalizes costs directly and indirectly related to the development, pre-development, redevelopment, or
improvement of rental property. Real estate taxes, compensation costs of development personnel, insurance, interest, and other
directly related costs during construction periods are capitalized as incurred, with depreciation commencing with the date the
property is substantially completed. Such costs begin to be capitalized to the development projects from the point the Company
is undergoing the necessary activities to get the development project ready for its intended use and cease when the development
projects are substantially completed and held available for occupancy. Interest is capitalized based on actual capital
expenditures from the period when development or redevelopment commences until the asset is ready for its intended use, at
the weighted average borrowing rate of the Company’s unsecured indebtedness during the period.
For properties classified as held for sale, the Company ceases depreciating and amortizing the rental property and values the
rental property at the lower of depreciated and amortized cost or fair value less costs to dispose. The Company presents those
properties classified as held for sale with any qualifying assets and liabilities associated with those properties as held for sale in
the accompanying Consolidated Balance Sheets.
Using information available at the time of acquisition, the Company allocates the purchase price of properties acquired based
upon the fair value of the assets acquired and liabilities assumed, which generally consist of land, buildings, tenant
improvements, mortgage debt assumed, and deferred leasing intangibles, which includes in-place leases, above market and
below market leases, and tenant relationships. The process for determining the allocation to these components requires
estimates and assumptions, including rental rates, discount rates and exit capitalization rates, and land value per square foot, as
well as available market information, and is therefore subject to subjective analysis and uncertainty. The fair value of the
tangible assets of an acquired property considers the value of the property as if it were vacant. The portion of the purchase price
that is allocated to above and below market leases is valued based on the present value of the difference between prevailing
market rates and the in-place rates measured over a period equal to the remaining term of the lease term plus the term of any
bargain renewal options. The purchase price is further allocated to in-place lease values and tenant relationships based on the
Company’s evaluation of the specific characteristics of each tenant’s lease and its overall relationship with the respective
tenant.
The above and below market lease values are amortized into rental income over the remaining lease term. The value of in-place
lease intangibles and tenant relationships are amortized over the remaining lease term (and expected renewal period of the
respective lease for tenant relationships) as increases to depreciation and amortization expense. The remaining lease terms are
adjusted for bargain renewal options or assumed exercises of early termination options, as applicable. If a tenant subsequently
terminates its lease, any unamortized portion of above and below market leases is accelerated into rental income and the in-
place lease value and tenant relationships are accelerated into depreciation and amortization expense over the shortened lease
term.
The purchase price allocated to deferred leasing intangible assets are included in rental property, net on the accompanying
Consolidated Balance Sheets and the purchase price allocated to deferred leasing intangible liabilities are included in deferred
leasing intangibles, net on the accompanying Consolidated Balance Sheets under the liabilities section.
In determining the fair value of the debt assumed, the Company discounts the spread between the future contractual interest
payments and hypothetical future interest payments on mortgage debt based on a current market rate. The associated fair market
value debt adjustment is amortized through interest expense over the life of the debt on a basis which approximates the effective
interest method.
The Company evaluates the carrying value of all tangible and intangible rental property assets and deferred leasing intangible
liabilities (collectively, the “property”) held for use for possible impairment when an event or change in circumstance has
occurred that indicates their carrying value may not be recoverable. The evaluation includes estimating and reviewing
anticipated future undiscounted cash flows to be derived from the property. If such cash flows are less than the property’s
carrying value, an impairment charge is recognized to the extent by which the property’s carrying value exceeds the estimated
fair value. Estimating future cash flows is highly subjective and is based in part on assumptions regarding anticipated hold
F-10
period, future occupancy, rental rates, capital requirements, and exit capitalization rates that could differ from actual results.
The discount rate used to present value the cash flows for determining fair value is also subjective.
Depreciation expense is computed using the straight-line method based on the following estimated useful lives.
Description
Building
Building and land improvements (maximum)
Tenant improvements
Estimated Useful Life
40 Years
20 Years
Shorter of useful life or terms of related lease
Fully depreciated or amortized assets or liabilities and the associated accumulated depreciation or amortization are written-off.
The Company wrote-off fully depreciated or amortized tenant improvements, deferred leasing intangible assets, and deferred
leasing intangible liabilities of approximately $7.5 million, $72.9 million, $2.4 million, respectively, for the year ended
December 31, 2021 and approximately $5.0 million, $62.0 million, $2.3 million, respectively, for the year ended December 31,
2020.
Leases
For leases in which the Company is the lessee, the Company recognizes a right-of-use asset and corresponding lease liability on
the accompanying Consolidated Balance Sheets equal to the present value of the fixed lease payments. In determining the
operating right-of-use asset and lease liability for the Company’s operating leases, the Company estimates an appropriate
incremental borrowing rate on a fully-collateralized basis for the terms of the leases. The Company utilizes a market-based
approach to estimate the incremental borrowing rate for each individual lease. Additionally, since the terms of our ground
leases are significantly longer than the terms of borrowings available to the Company on a fully-collateralized basis, the
estimate of this rate required significant judgment, and considered factors such as yields on outstanding public debt and other
market based pricing on longer duration financing instruments.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and highly liquid short-term investments with original maturities of three months or
less. The Company maintains cash and cash equivalents in United States banking institutions that may exceed amounts insured
by the Federal Deposit Insurance Corporation. While the Company monitors the cash balances in its operating accounts, these
cash balances could be impacted if the underlying financial institutions fail or are subject to other adverse conditions in the
financial markets. To date, the Company has experienced no loss or lack of access to cash in its operating accounts, and
mitigates this risk by using nationally recognized banking institutions.
Restricted Cash
Restricted cash may include tenant security deposits, cash held in escrow for real estate taxes and capital improvements as
required in various mortgage note agreements, and cash held by the Company’s transfer agent for preferred stock dividends, if
any, that are distributed subsequent to period end. Restricted cash may also include cash held by qualified intermediaries to
facilitate a like-kind exchange of real estate under Section 1031 of the Code.
The following table presents a reconciliation of cash and cash equivalents and restricted cash reported on the accompanying
Consolidated Balance Sheets to amounts reported on the accompanying Consolidated Statements of Cash Flows.
Reconciliation of cash and cash equivalents and restricted cash (in thousands)
Cash and cash equivalents
Restricted cash
Total cash and cash equivalents and restricted cash
December 31, 2021
December 31, 2020
$
$
18,981 $
4,215
23,196 $
15,666
4,673
20,339
Deferred Costs
Deferred financing fees and debt issuance costs include costs incurred in obtaining debt that are capitalized and are presented as
a direct deduction from the carrying amount of the associated debt liability that is not a line-of-credit arrangement on the
accompanying Consolidated Balance Sheets. Deferred financing fees and debt issuance costs related to line-of-credit
arrangements are presented as an asset in prepaid expenses and other assets on the accompanying Consolidated Balance Sheets.
The deferred financing fees and debt issuance costs are amortized through interest expense over the life of the respective loans
F-11
on a basis which approximates the effective interest method. Any unamortized amounts upon early repayment of debt are
written off in the period of repayment as a loss on extinguishment of debt. Fully amortized deferred financing fees and debt
issuance costs are written off upon maturity of the underlying debt.
Leasing commissions include commissions and other direct and incremental costs incurred to obtain new tenant leases as well
as to renew existing tenant leases, and are presented in prepaid expenses and other assets on the accompanying Consolidated
Balance Sheets. Leasing commissions are capitalized and amortized over the terms of the related leases (and bargain renewal
terms or assumed exercise of early termination options) using the straight-line method. If a lease terminates prior to the
expiration of its initial term, any unamortized costs related to the lease are accelerated into amortization expense. Changes in
leasing commissions are presented in the cash flows from operating activities section of the accompanying Consolidated
Statements of Cash Flows.
Goodwill
The excess of the cost of an acquired business over the net of the amounts assigned to assets acquired (including identified
intangible assets) and liabilities assumed is recorded as goodwill. Goodwill of the Company of approximately $4.9 million
represents amounts allocated to the assembled workforce from the acquired management company, and is presented in prepaid
expenses and other assets on the accompanying Consolidated Balance Sheets. The Company’s goodwill has an indeterminate
life and is not amortized, but is tested for impairment on an annual basis at December 31, or more frequently if events or
changes in circumstances indicate that the asset might be impaired. The Company takes a qualitative approach to consider
whether an impairment of goodwill exists prior to quantitatively determining the fair value of the reporting unit in step one of
the impairment test. The Company has recorded no impairments to goodwill through December 31, 2021.
Use of Derivative Financial Instruments
The Company records all derivatives on the accompanying Consolidated Balance Sheets at fair value. The accounting for
changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to
designate a derivative in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied
the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in
the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered
fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows,
or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the
matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair
value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the
hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to
economically hedge certain of its risks, even though hedge accounting does not apply or the Company elects not to apply hedge
accounting.
In accordance with fair value measurement guidance, the Company made an accounting policy election to measure the credit
risk of its derivative financial instruments that are subject to master netting arrangements on a net basis by counterparty
portfolio. Credit risk is the risk of failure of the counterparty to perform under the terms of the contract. The Company
minimizes the credit risk in its derivative financial instruments by entering into transactions with various high-quality
counterparties. The Company’s exposure to credit risk at any point is generally limited to amounts recorded as assets on the
accompanying Consolidated Balance Sheets.
Fair Value of Financial Instruments
Financial instruments include cash and cash equivalents, restricted cash, tenant accounts receivable, interest rate swaps,
accounts payable, accrued expenses, unsecured credit facility, unsecured term loans, unsecured notes, and mortgage notes. See
Note 4 for the fair value of the Company’s indebtedness. See Note 5 for the fair value of the Company’s interest rate swaps.
The Company adopted fair value measurement provisions for its financial instruments recorded at fair value. The guidance
establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1,
defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in
active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no
market data exists, therefore requiring an entity to develop its own assumptions.
F-12
Offering Costs
Underwriting commissions and direct offering costs have been reflected as a reduction of additional paid-in capital on the
accompanying Consolidated Balance Sheets and Consolidated Statements of Equity. Indirect costs associated with equity
offerings are expensed as incurred and included in general and administrative expenses on the accompanying Consolidated
Statements of Operations.
Dividends
Earnings and profits, which determine the taxability of dividends to stockholders, will differ from income reported for financial
reporting purposes due to the differences for federal income tax purposes in the treatment of gains on the sale of real property,
revenue and expense recognition, and in the estimated useful lives and basis used to compute depreciation. In addition, the
Company’s distributions may include a return of capital. To the extent that the Company makes distributions in excess of its
current and accumulated earnings and profits, such distributions would generally be considered a return of capital for federal
income tax purposes to the extent of the holder’s adjusted tax basis in its shares. A return of capital may not be taxable. A return
of capital has the effect of reducing the holder’s adjusted tax basis in its investment, which may or may not be taxable to the
holder.
The Company paid dividends to holders of the 6.875% Series C Cumulative Redeemable Preferred Stock, par value $0.01 per
share (“Series C Preferred Stock”), of approximately $1.3 million ($0.429688 per share) during the year ended December 31,
2021, of which $0.400294 that were treated as ordinary income for tax purposes, $0.022149 per share was treated as
unrecaptured section 1250 capital gain for tax purposes, and $0.007245 per share was treated as other capital gain for income
tax purposes. The Company paid dividends to the holders of Series C Preferred Stock of approximately $5.2 million ($1.71875
per share) during the year ended December 31, 2020, of which $1.349944 that were treated as ordinary income for tax purposes,
$0.100392 per share was treated as unrecaptured section 1250 capital gain for tax purposes, and $0.268414 per share was
treated as other capital gain for income tax purposes. The Company paid dividends to the holders of the Series C Preferred
Stock of approximately $5.2 million ($1.71875 per share) during the year ended December 31, 2019, of which $1.71441 that
were treated as ordinary income for tax purposes and $0.00434 that were treated as qualified dividends for tax purposes.
The following table summarizes the tax treatment of dividends per shares of common stock for federal income tax purposes.
Federal Income Tax Treatment of Dividends per Common Share
Ordinary income
Return of capital
Unrecaptured section 1250 capital gain
Other capital gain
Qualified dividend
Total (1)
2021
Year ended December 31,
2020
2019
Per Share
$ 1.119899
0.175355
0.061970
0.020269
—
$ 1.377493
%
Per Share
81.3 % $ 1.186648
12.7 %
—
4.5 % 0.088246
1.5 % 0.235943
—
— %
100.0 % $ 1.510837
%
Per Share
78.5 % $ 0.888657
— % 0.538270
—
5.9 %
—
15.6 %
— % 0.002243
100.0 % $ 1.429170
%
62.2 %
37.7 %
— %
— %
0.1 %
100.0 %
(1) The December 2019 monthly common stock dividend of $0.119167 per share was included in the stockholder’s 2020 tax year. The December
2020 monthly common stock dividend of $0.12 per share was partially included in the stockholder's 2020 tax year in the amount of $0.07167 per share,
and the remainder was included in the stockholder's 2021 tax year. The December 2021 monthly common stock dividend of $0.120833 per share will be
included in the stockholder's 2022 tax year.
Revenue Recognition
All current leases are classified as operating leases and rental income is recognized on a straight-line basis over the term of the
lease (and expected bargain renewal terms or assumed exercise of early termination options) when collectability is reasonably
assured. Differences between rental income earned and amounts due under the lease are charged or credited, as applicable, to
accrued rental income.
The Company determined that for all leases where the Company is the lessor, that the timing and pattern of transfer of the non-
lease components and associated lease components are the same, and that the lease components, if accounted for separately,
would be classified as an operating lease. Accordingly, the Company has made an accounting policy election to recognize the
combined component in accordance with Accounting Standards Codification Topic 842 as rental income on the accompanying
Consolidated Statements of Operations.
F-13
Rental income recognition commences when the tenant takes possession of or controls the physical use of the leased space and
the leased space is substantially complete and ready for its intended use. In order to determine whether the leased space is
substantially complete and ready for its intended use, the Company determines whether the Company or the tenant own the
tenant improvements. When it is determined that the Company is the owner of the tenant improvements, rental income
recognition begins when the tenant takes possession of or controls the physical use of the finished space, which is generally
when the Company owned tenant improvements are completed. In instances when it is determined that the tenant is the owner
of tenant improvements, rental income recognition begins when the tenant takes possession of or controls the physical use of
the leased space.
When the Company is the owner of tenant improvements or other capital items, the cost to construct the tenant improvements
or other capital items, including costs paid for or reimbursed by the tenants, is recorded as capital assets. For these tenant
improvements or other capital items, the amount funded by or reimbursed by the tenants are recorded as deferred revenue,
which is amortized on a straight-line basis as income over the shorter of the useful life of the capital asset or the term of the
related lease.
Early lease termination fees are recorded in rental income on a straight-line basis from the notification date of such termination
to the then remaining (not the original) lease term, if any, or upon collection if collection is not reasonably assured.
The Company evaluates cash basis versus accrual basis of rental income recognition based on the collectability of future lease
payments.
Gain on the Sales of Rental Property, net
The timing of the derecognition of a rental property and the corresponding recognition of gain on the sales of rental property,
net is measured by various criteria related to the terms of the sale transaction, and if the Company has lost control of the
property and the acquirer has gained control of the property after the transaction. If the derecognition criteria is met, the full
gain is recognized.
Incentive and Equity-Based Employee Compensation Plans
The Company grants equity-based compensation awards to its employees and directors in the form of restricted shares of
common stock, LTIP units, and performance units. See Notes 6, 7 and 8 for further discussion of restricted shares of common
stock, LTIP units, and performance units, respectively. The Company measures equity-based compensation expense based on
the fair value of the awards on the grant date and recognizes the expense ratably over the vesting period, and forfeitures are
recognized in the period in which they occur.
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 $2.3 million for the year ended December 31, 2021 due to the acceleration of equity-based compensation
expense for certain eligible employees.
Related-Party Transactions
The Company did not have any related-party transactions during the years ended December 31, 2021, 2020 and 2019.
Taxes
Federal Income Taxes
The Company elected to be taxed as a REIT under the Code commencing with its taxable year ended December 31, 2011 and
intends to continue to qualify as a REIT. As a REIT, the Company is generally not subject to corporate level federal income tax
on the earnings distributed currently to its stockholders that it derives from its REIT qualifying activities. As a REIT, the
Company is required to distribute at least 90% of its REIT taxable income to its stockholders and meet the various other
requirements imposed by the Code relating to such matters as operating results, asset holdings, distribution levels and diversity
of stock ownership.
F-14
The Company will not be required to make distributions with respect to income derived from the activities conducted through
subsidiaries that the Company elects to treat as taxable REIT subsidiaries (“TRS”) for federal income tax purposes, nor will it
have to comply with income, assets, or ownership restrictions inside of the TRS. Certain activities that the Company undertakes
must or should be conducted by a TRS, such as performing non-customary services for its tenants and holding assets that it
cannot hold directly. A TRS is subject to federal and state income taxes. The Company’s TRS recognized a net income (loss) of
approximately $(8,000), $0 and $0.3 million, for the years ended December 31, 2021, 2020 and 2019, respectively, which has
been included on the accompanying Consolidated Statements of Operations.
State and Local Income, Excise, and Franchise Tax
The Company and certain of its subsidiaries are subject to certain state and local income, excise and franchise taxes. Taxes in
the amount of approximately $1.7 million, $1.7 million and $1.2 million have been recorded in other expenses on the
accompanying Consolidated Statements of Operations for the years ended December 31, 2021, 2020 and 2019, respectively.
Uncertain Tax Positions
Tax benefits of uncertain tax positions are recognized only if it is more likely than not that the tax position will be sustained
based solely on its technical merits, with the taxing authority having full knowledge of all relevant information. The
measurement of a tax benefit for an uncertain tax position that meets the “more likely than not” threshold is based on a
cumulative probability model under which the largest amount of tax benefit recognized is the amount with a greater than 50%
likelihood of being realized upon ultimate settlement with the taxing authority having full knowledge of all the relevant
information. As of December 31, 2021, 2020 and 2019, there were no liabilities for uncertain tax positions.
Earnings Per Share
The Company uses the two-class method of computing earnings per common share, which is an earnings allocation formula
that determines earnings per share for common stock and any participating securities according to dividends declared (whether
paid or unpaid) and participation rights in undistributed earnings. Basic net income per common share is computed by dividing
net income available to common stockholders by the weighted average number of shares of common stock outstanding for the
period. Diluted net income per common share is computed by dividing net income available to common stockholders by the
sum of the weighted average number of shares of common stock outstanding and any dilutive securities for the period.
Segment Reporting
The Company manages its operations on an aggregated, single segment basis for purposes of assessing performance and
making operating decisions and, accordingly, has only one reporting and operating segment.
Concentrations of Credit Risk
Concentrations of credit risk relevant to the Company may arise when a number of financing arrangements, including revolving
credit facilities or derivatives, are entered into with the same lenders or counterparties, and have similar economic features that
would cause their inability to meet contractual obligations. The Company mitigates the concentration of credit risk as it relates
to financing arrangements by entering into loan syndications with multiple, reputable financial institutions and diversifying its
debt counterparties. The Company also reduces exposure by diversifying its derivatives across multiple counterparties who
meet established credit and capital guidelines.
Concentrations of credit risk may also arise when the Company enters into leases with multiple tenants concentrated in the same
industry, or into a significant lease or multiple leases with a single tenant, or tenants are located in the same geographic region,
or have similar economic features that would cause their inability to meet contractual obligations, including those to the
Company, to be similarly affected. The Company regularly monitors its tenant base to assess potential concentrations of credit
risk through financial statement review, tenant management calls, and press releases. Management believes the current credit
risk portfolio is reasonably well diversified and does not contain any unusual concentration of credit risk.
F-15
3. Rental Property
The following table summarizes the components of rental property, net as of December 31, 2021 and 2020.
617,297 $
December 31, 2021 December 31, 2020
492,783
$
3,195,439
43,684
275,433
18,052
499,802
4,525,193
4,035,210
43,999
320,041
36,493
567,658
5,620,698 $
$
Rental Property, net (in thousands)
Land
Buildings, net of accumulated depreciation of $406,670 and $327,043, respectively
Tenant improvements, net of accumulated depreciation of $26,065 and $24,891, respectively
Building and land improvements, net of accumulated depreciation of $179,132 and $143,414, respectively
Construction in progress
Deferred leasing intangibles, net of accumulated amortization of $282,038 and $258,005, respectively
Total rental property, net
F-16
Acquisitions
The following tables summarize the acquisitions of the Company during the years ended December 31, 2021 and 2020.
Market(1)
Omaha/Council Bluffs, NE-IA
Minneapolis/St Paul, MN
Long Island, NY
Sacramento, CA
Little Rock/N Little Rock
Cleveland, OH
Three months ended March 31, 2021
Indianapolis, IN
Baltimore, MD
Detroit, MI
Green Bay, WI
Phoenix, AZ
Cleveland, OH
Reno/Sparks, NV
Washington, DC
Stockton/Modesto, CA
Three months ended June 30, 2021
Chicago, IL
Chicago, IL
Columbia, SC
South Bay/San Jose, CA
Columbus, OH
Salt Lake City, UT
Greenville/Spartanburg, SC
Indianapolis, IN
Birmingham, AL
Sacramento, CA
Chicago, IL
Chicago, IL
Milwaukee/Madison, WI
Denver, CO
Milwaukee/Madison, WI
Chicago, IL
Boston, MA
Three months ended September 30, 2021
Omaha/Council Bluffs, NE-IA
El Paso, TX
St. Louis, MO
South Bay/San Jose, CA
Chicago, IL
Dallas/Ft Worth, TX
Sacramento, CA
Detroit, MI
Philadelphia, PA
West Michigan, MI
Philadelphia, PA
Minneapolis/St Paul, MN
Chicago, IL
Philadelphia, PA
Sacramento, CA
Des Moines, IA
Greenville/Spartanburg, SC
Milwaukee/Madison, WI
Sacramento, CA
Sacramento, CA(2)
Des Moines, IA
Philadelphia, PA
Nashville, TN
Westchester/S. Connecticut, CT/NY
Washington, DC
Minneapolis/St Paul, MN
Chicago, IL
Omaha/Council Bluffs, NE-IA
Atlanta, GA
Three months ended December 31, 2021
Year ended December 31, 2021
Year ended December 31, 2021
Date Acquired
Square Feet
Number of Buildings
Purchase Price
(in thousands)
January 21, 2021
February 24, 2021
February 25, 2021
February 25, 2021
March 1, 2021
March 18, 2021
May 17, 2021
May 17, 2021
June 1, 2021
June 7, 2021
June 14, 2021
June 17, 2021
June 30, 2021
June 30, 2021
June 30, 2021
July 19, 2021
July 20, 2021
July 27, 2021
August 9, 2021
August 19, 2021
August 19, 2021
August 23, 2021
August 26, 2021
August 26, 2021
August 30, 2021
September 2, 2021
September 16, 2021
September 16, 2021
September 24, 2021
September 28, 2021
September 29, 2021
September 29, 2021
October 6, 2021
October 8, 2021
October 12, 2021
October 12, 2021
October 13, 2021
October 13, 2021
October 25, 2021
November 1, 2021
November 3, 2021
November 9, 2021
November 9, 2021
November 10, 2021
November 12, 2021
November 12, 2021
December 1, 2021
December 9, 2021
December 17, 2021
December 17, 2021
December 21, 2021
December 22, 2021
December 23, 2021
December 23, 2021
December 23, 2021
December 23, 2021
December 28, 2021
December 28, 2021
December 29, 2021
December 30, 2021
December 31, 2021
370,000
80,655
64,224
267,284
300,160
170,000
1,252,323
154,440
46,851
248,040
152,000
41,504
179,577
183,435
193,420
150,000
1,349,267
109,355
207,223
194,290
75,954
814,265
177,071
209,461
78,600
595,176
114,597
95,482
506,096
157,438
195,674
156,482
110,035
247,056
4,044,255
99,616
276,360
121,223
31,172
56,676
202,140
82,174
126,720
385,399
159,900
109,504
316,636
579,338
128,959
67,200
200,957
231,626
192,800
188,830
—
179,459
589,580
58,672
167,700
1,231,200
83,000
102,000
178,368
103,720
6,250,929
12,896,774
12,896,774
1 $
1
1
1
1
1
6
1
1
1
1
1
1
1
1
1
9
2
1
1
1
2
1
1
1
1
1
1
4
1
2
1
1
2
24
2
1
1
1
1
2
1
1
1
1
1
1
4
1
1
1
1
1
2
—
1
1
1
1
2
1
1
1
1
35
$
74 $
24,922
10,174
8,516
25,917
24,317
6,382
100,228
13,655
6,228
23,786
7,249
8,670
19,602
13,892
17,521
16,118
126,721
13,341
23,345
14,546
26,820
75,422
35,141
15,317
5,707
36,850
15,388
11,799
50,661
13,650
39,136
10,807
10,585
28,704
427,219
8,669
27,844
12,991
11,691
5,735
25,913
10,275
18,291
25,909
19,649
8,071
30,583
62,948
26,446
7,721
22,866
31,169
23,327
27,616
28,930
13,556
53,790
7,271
16,700
140,668
11,058
9,742
17,888
11,083
718,400
1,372,568
1,372,568
(1) As defined by CoStar Realty Information Inc. If the building is located outside of a CoStar defined market, the city and state is reflected.
(2) Acquired a building under development.
F-17
Market(1)
Detroit, MI
Rochester, NY
Minneapolis/St Paul, MN
Sacramento, CA
Richmond, VA
Milwaukee/Madison, WI
Detroit, MI
Philadelphia, PA
Tulsa, OK
Three months ended March 31, 2020
Sacramento, CA
Chicago, IL
Three months ended June 30, 2020
Philadelphia, PA
Pittsburgh, PA
Pittsburgh, PA
Charlotte, NC
Cleveland, OH
Three months ended September 30, 2020
Pittsburgh, PA
Milwaukee/Madison, WI
Memphis, TN
West Michigan, MI
Columbus, OH
Stockton/Modesto, CA
Charlotte, NC
Fort Wayne, IN
Sacramento, CA
Charlotte, NC
Stockton/Modesto, CA
Minneapolis/St Paul, MN
Phoenix, AZ
Raleigh/Durham, NC
Chicago, IL
Columbus, OH
Birmingham, AL
Chicago, IL
Rochester, NY
McAllen/Edinburg/Pharr,TX
Southwest Florida, FL
Tampa, FL
South Florida, FL
Phoenix, AZ
Sacramento, CA
Three months ended December 31, 2020
Year ended December 31, 2020
Year ended December 31, 2020
Date Acquired
Square Feet
Number of
Buildings
Purchase Price
(in thousands)
January 10, 2020
January 10, 2020
February 6, 2020
February 6, 2020
February 6, 2020
February 7, 2020
February 11, 2020
March 9, 2020
March 9, 2020
June 11, 2020
June 29, 2020
August 31, 2020
September 3, 2020
September 24, 2020
September 28, 2020
September 29, 2020
October 1, 2020
October 9, 2020
October 19, 2020
October 20, 2020
October 22, 2020
October 23, 2020
October 27, 2020
October 28, 2020
October 29, 2020
November 12, 2020
November 23, 2020
December 1, 2020
December 15, 2020
December 17, 2020
December 22, 2020
December 22, 2020
December 28, 2020
December 28, 2020
December 28, 2020
December 29, 2020
December 30, 2020
December 30, 2020
December 30, 2020
December 30, 2020
December 30, 2020
491,049
124,850
139,875
160,534
78,128
81,230
311,123
78,000
134,600
1,599,389
54,463
67,817
122,280
112,294
125,000
66,387
50,000
276,000
629,681
202,817
128,000
556,600
143,820
1,232,149
400,340
137,785
764,177
126,381
129,600
113,716
99,247
104,352
150,000
181,191
1,014,592
295,748
408,074
128,010
301,200
260,620
215,280
312,269
71,030
52,200
7,529,198
9,880,548
1 $
1
1
1
1
1
1
1
1
9
1
1
2
1
1
1
1
1
5
1
1
1
1
1
1
1
1
1
1
2
1
1
1
2
1
3
1
1
1
1
1
4
1
1
32
48 $
29,543
8,565
10,460
18,468
5,481
7,219
23,141
6,571
9,895
119,343
5,730
6,184
11,914
8,427
15,580
6,685
5,729
28,261
64,682
22,888
7,196
33,605
9,486
86,205
44,664
11,375
31,851
10,549
14,783
10,364
14,640
14,341
16,596
15,504
55,300
23,634
39,114
8,915
16,546
27,846
17,567
31,692
9,551
5,664
579,876
775,815
(1) As defined by CoStar Realty Information Inc. If the building is located outside of a CoStar defined market, the city and state is reflected.
F-18
The following table summarizes the allocation of the consideration paid at the date of acquisition during the years ended
December 31, 2021 and 2020, for the acquired assets and liabilities in connection with the acquisitions identified in the tables
above.
Year ended December 31, 2021
Year ended December 31, 2020
Acquired Assets and Liabilities
Land
Buildings
Tenant improvements
Building and land improvements
Construction in progress
Other assets
Operating lease right-of-use assets
Deferred leasing intangibles - In-place leases
Deferred leasing intangibles - Tenant relationships
Deferred leasing intangibles - Above market leases
Deferred leasing intangibles - Below market leases
Operating lease liabilities
Below market assumed debt adjustment
Tenant prepaid rent
Total purchase price
Less: Mortgage notes assumed
Net assets acquired
Purchase price
(in thousands)
137,827
$
988,456
7,356
58,504
24,581
1,004
5,627
103,051
52,579
10,764
(10,691)
(5,627)
161
(1,024)
1,372,568
(5,103)
1,367,465
$
Weighted average
amortization period
(years) of intangibles
at acquisition
N/A $
N/A
N/A
N/A
N/A
N/A
N/A
7.8
10.6
11.4
6.1
N/A
18.8
N/A
Purchase price
(in thousands)
67,937
546,808
7,388
41,361
669
450
3,984
76,881
37,603
8,779
(12,061)
(3,984)
—
—
775,815
—
775,815
$
Weighted average
amortization period
(years) of intangibles
at acquisition
N/A
N/A
N/A
N/A
N/A
N/A
N/A
8.0
11.2
12.6
6.5
N/A
N/A
N/A
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 years ended December 31, 2021 and 2020 for the properties
acquired during the years ended December 31, 2021 and 2020, respectively, included in the Company’s Consolidated
Statements of Operations from the date of acquisition.
Results of Operations (in thousands)
Total revenue
Net income
Year ended December 31, 2021
Year ended December 31, 2020
$
$
23,395 $
307 $
16,957
2,194
Dispositions
During the year ended December 31, 2021, the Company sold 22 buildings comprised of approximately 2.7 million square feet
with a net book value of approximately $90.0 million to third parties. These buildings contributed approximately $7.0 million,
$11.8 million and $13.1 million to revenue for the years ended December 31, 2021, 2020 and 2019, respectively. These
buildings contributed approximately $0.9 million, $3.6 million and $5.4 million to net income (exclusive of loss on impairment;
gain on involuntary conversion and gain on the sales of rental property, net) for the years ended December 31, 2021, 2020 and
2019, respectively. Net proceeds from the sales of rental property were approximately $188.0 million and the Company
recognized the full gain on the sales of rental property, net of approximately $98.0 million for the year ended December 31,
2021. All of the dispositions were accounted for under the full accrual method.
During the year ended December 31, 2020, the Company sold seven buildings comprised of approximately 3.4 million square
feet with a net book value of approximately $137.9 million to third parties. These buildings contributed approximately $10.8
million and $13.4 million to revenue for the years ended December 31, 2020 and 2019, respectively. These buildings
contributed approximately $1.8 million and $1.3 million to net income (exclusive of loss on extinguishment of debt and gain on
the sales of rental property, net) for the years ended December 31, 2020 and 2019, respectively. Net proceeds from the sales of
rental property were approximately $273.6 million and the Company recognized a gain on the sales of rental property, net of
approximately $135.7 million for the year ended December 31, 2020. All of the dispositions were accounted for under the full
accrual method.
F-19
During the year ended December 31, 2019, the Company sold nine buildings and two land parcels comprised of
approximately 1.6 million square feet with a net book value of approximately $34.6 million to third parties. These buildings
contributed approximately $0.8 million to revenue for the year ended December 31, 2019. These buildings contributed
approximately $2.5 million to net loss (exclusive of loss on impairments and gain on the sales of rental property, net) for the
year ended December 31, 2019. Net proceeds from the sales of rental property were approximately $42.0 million and the
Company recognized a gain on the sales of rental property, net of approximately $7.4 million for the year ended December 31,
2019. All of the dispositions were accounted for under the full accrual method.
Gain on Involuntary Conversion
The Company recognized a gain on involuntary conversion of approximately $0, $2.2 million, and $0 during the years ended
December 31, 2021, 2020 and 2019, respectively. The gain on involuntary conversion during the year ended December 31,
2020 related to an eminent domain taking of a portion of a parcel of land
Loss on Impairments
The following table summarizes the Company’s loss on impairments for assets held and used during the years ended December
31, 2020 and 2019. The Company did not recognize a loss on impairments during the year ended December 31, 2021.
Buildings
Market (1)
Williamsport, PA
1
Three months ended September 30, 2020
Albion, IN
5
Three months ended December 31, 2020
Year ended December 31, 2020
Rapid City, SD(7)
Three months ended March 31, 2019
Belfast, ME(7)
5
Three months ended September 30, 2019
Year ended December 31, 2019
1
Event or Change in
Circumstance Leading to
Impairment Evaluation(2)
Change in estimated hold period
Valuation technique utilized
to estimate fair value
Discounted cash flows
Change in estimated hold period (5) Discounted cash flows
Change in estimated hold period (8) Discounted cash flows
Market leasing conditions
(10) Discounted cash flows
Fair
Value(3)
Loss on
Impairments
(in thousands)
(4)
(6)
(9)
(11)
$
$
$
$
5,019 $
3,172
1,252 $
$
$
2,405
5,577
5,577
4,373 $
5,344
5,950 $
$
$
4,413
9,757
9,757
(1) As defined by CoStar. If the building is located outside of a CoStar defined market, the city and state is reflected.
(2) The Company tested the asset group for impairment utilizing a probability weighted recovery analysis of certain scenarios, and it was determined that the
carrying value of the property and intangibles were not recoverable from the estimated future undiscounted cash flows.
(3) The estimated fair value of the property is based on Level 3 inputs and is a non-recurring fair value measurement.
(4) Level 3 inputs used to determine fair value for the property impaired for the three months ended September 30, 2020: discount rate of 10.5% and exit
capitalization rate of 10.0%.
(5) Four of the buildings were sold during the year ended December 31, 2021.
(6) Level 3 inputs used to determine fair value for the property impaired for the three months ended December 31, 2020: discount rate of 11.0% and exit
capitalization rate of 10.0%.
(7) Flex/office buildings.
(8) This property was sold during the year ended December 31, 2019.
(9) Level 3 inputs used to determine fair value for the property impaired for the three months ended March 31, 2019: discount rate of 12.0% and exit
capitalization rate of 12.0%.
(10) This property was sold during the year ended December 31, 2021.
(11) Level 3 inputs used to determine fair value for the property impaired for the three months ended September 30, 2019: discount rate of 13.0% and exit
capitalization rate of 12.0%.
Deferred Leasing Intangibles
The following table summarizes the deferred leasing intangibles on the accompanying Consolidated Balance Sheets as of
December 31, 2021 and 2020.
Deferred Leasing Intangibles (in thousands)
Above market leases
Other intangible lease assets
Total deferred leasing intangible assets
Below market leases
Total deferred leasing intangible liabilities
Gross
$ 91,565
758,131
$ 849,696
$ 56,857
$ 56,857
December 31, 2021
Accumulated
Amortization
(32,110)
(249,928)
(282,038)
Net
$ 59,455
508,203
$ 567,658
Gross
$ 92,125
665,682
$ 757,807
December 31, 2020
Accumulated
Amortization
$
(33,629)
(224,376)
(258,005)
$
Net
58,496
441,306
$ 499,802
(21,136)
(21,136)
$ 35,721
$ 35,721
$ 48,521
$ 48,521
(15,759)
(15,759)
$
$
32,762
32,762
$
$
$
$
$
$
$
F-20
The following table summarizes the amortization expense and the net decrease to rental income for the amortization of deferred
leasing intangibles during the years ended December 31, 2021, 2020 and 2019.
Deferred Leasing Intangibles Amortization (in thousands)
Net decrease to rental income related to above and below market lease amortization
Amortization expense related to other intangible lease assets
Year ended December 31,
2020
2019
2021
$
$
2,073 $
88,729 $
4,363 $
83,160 $
4,884
73,726
The following table summarizes the amortization of deferred leasing intangibles over the next five calendar years as of
December 31, 2021.
Year
2022
2023
2024
2025
2026
$
$
$
$
$
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)
88,712 $
77,554 $
66,597 $
57,915 $
49,679 $
15
624
1,258
1,074
1,497
F-21
4. Debt
The following table summarizes the Company’s outstanding indebtedness, including borrowings under the Company’s
unsecured credit facility, unsecured term loans, unsecured notes, and mortgage notes as of December 31, 2021 and 2020.
Principal
Outstanding as of
December 31, 2021
(in thousands)
Principal
Outstanding as of
December 31, 2020
(in thousands)
Interest
Rate(1)(2)
Maturity Date
Prepayment
Terms(3)
$
296,000 $
296,000
107,000 L + 0.775% October 23, 2026
107,000
2.85 % January 4, 2023
3.77 % January 15, 2024
2.96 % January 12, 2025
1.13 % February 5, 2026
3.23 % March 15, 2027
3.98 % January 5, 2023
4.98 % October 1, 2024
4.32 % February 20, 2025
4.10 % June 13, 2025
4.98 % July 1, 2026
4.42 % December 30, 2026
4.42 % February 20, 2027
4.27 % June 13, 2028
2.80 % September 29, 2031
2.95 % September 28, 2033
i
i
i
i
i
i
ii
ii
ii
ii
ii
ii
ii
ii
ii
ii
4.31 % December 1, 2022
4.78 % December 15, 2023
3.71 % October 1, 2039
iii
iv
ii
150,000
175,000
200,000
300,000
150,000
975,000
(4,423)
970,577
100,000
50,000
100,000
75,000
50,000
80,000
20,000
100,000
275,000
50,000
900,000
(3,059)
896,941
46,610
3,430
4,943
54,983
(136)
150,000
175,000
200,000
300,000
150,000
975,000
(3,889)
971,111
100,000
50,000
100,000
75,000
50,000
80,000
20,000
100,000
—
—
575,000
(1,719)
573,281
48,546
3,556
—
52,102
29
Loan
Unsecured credit facility:
Unsecured Credit Facility(4)
Total unsecured credit facility
Unsecured term loans:
Unsecured Term Loan D
Unsecured Term Loan E
Unsecured Term Loan F
Unsecured Term Loan G
Unsecured Term Loan A
Total unsecured term loans
Total unamortized deferred financing fees and debt
issuance costs
Total carrying value unsecured term loans, net
Unsecured notes:
Series F Unsecured Notes
Series A Unsecured Notes
Series D Unsecured Notes
Series G Unsecured Notes
Series B Unsecured Notes
Series C Unsecured Notes
Series E Unsecured Notes
Series H Unsecured Notes
Series I Unsecured Notes
Series J Unsecured Notes
Total unsecured notes
Total unamortized deferred financing fees and debt
issuance costs
Total carrying value unsecured notes, net
Mortgage notes (secured debt):
Wells Fargo Bank, National Association CMBS Loan
Thrivent Financial for Lutherans
United of Omaha Life Insurance Company
Total mortgage notes
Net unamortized fair market value premium (discount)
Total unamortized deferred financing fees and debt
issuance costs
Total carrying value mortgage notes, net
Total / weighted average interest rate(5)
(103)
54,744
2,218,262
(233)
51,898
1,703,290
2.88 %
(1)
Interest rate as of December 31, 2021. At December 31, 2021, the one-month LIBOR (“L”) was 0.10125%. 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 0.85%, with the exception of Unsecured Term Loan D which
has a stated interest rate of one-month LIBOR plus a spread of 1.0%. As of December 31, 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 A
will be swapped to a fixed rate of 1.30% effective April 1, 2022. 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 $5.2 million and $1.6 million is included in prepaid expenses and other assets on the accompanying
Consolidated Balance Sheets as of December 31, 2021 and December 31, 2020, respectively. The initial maturity date is October 24, 2025, or such later
date 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.
F-22
(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 December 31, 2021 was approximately
$450.4 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 $8.6 million and $6.3 million as of December 31, 2021 and 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 years ended December 31, 2021, 2020 and 2019.
Costs Included in Interest Expense (in thousands)
Year ended December 31,
2020
2019
2021
Amortization of deferred financing fees and debt issuance costs and fair market value premiums/
discounts
Facility, unused, and other fees
$
$
2,931 $
1,642 $
2,922 $
1,311 $
2,583
1,513
2021 Debt Activity
On October 26, 2021, the Company entered into an amendment to the unsecured credit facility (the “October 2021 Credit
Facility Amendment”). The October 2021 Credit Facility Amendment provides for an extension of the maturity date to October
24, 2025, with two six-month extension options, subject to certain conditions, and a reduced current interest rate of LIBOR plus
a spread of 0.775% and facility fee of 0.15%, each based on the Company’s current debt rating (as defined in the credit
agreement) and leverage level. In connection with the October 2021 Credit Facility Amendment, the Company incurred
approximately $3.7 million in costs which are being deferred and amortized through the maturity date of the unsecured credit
facility. The Company also incurred approximately $0.1 million of modification expenses which were recognized in debt
extinguishment and modification expenses in the accompanying Consolidated Statements of Operations. Other than the
maturity and interest rate provisions described above, the material terms of the unsecured credit facility remain unchanged.
On October 26, 2021, the Company entered into an amendment to the Unsecured Term Loan A (the “Amendment to Unsecured
Term Loan A”). The Amendment to Unsecured Term Loan A provides for an extension of the maturity date to March 15, 2027
and a reduced current interest rate of LIBOR plus a spread of 0.85% based on the Company’s current debt rating (as defined in
the loan agreement) and leverage level. In connection with the Amendment to Unsecured Term Loan A, the Company incurred
approximately $0.6 million in costs which are being deferred and amortized through the new maturity date. The Company also
incurred approximately $0.2 million of modification expenses which were recognized in debt extinguishment and modification
expenses in the accompanying Consolidated Statements of Operations. Other than the maturity and interest rate provisions
described above, the material terms of the Unsecured Term Loan A remain unchanged.
On October 26, 2021, the Company entered into amendments to the Unsecured Term Loan E, the Unsecured Term Loan F, and
the Unsecured Term Loan G (“Term Loan Amendments”) that provide for reduced current interest rates on each of the loans of
LIBOR plus a spread of 0.85% based on the Company’s current debt rating (as defined in each loan agreement) and leverage
level. In connection with the Term Loan Amendments, the Company incurred approximately $0.6 million in costs which are
being deferred and amortized through the respective maturity dates. The Company also incurred approximately $1.2 million of
modification expenses which were recognized in debt extinguishment and modification expenses in the accompanying
Consolidated Statements of Operations. Other than the interest rate provisions described above, the material terms of the
Unsecured Term Loan E, the Unsecured Term Loan F, and the Unsecured Term Loan G remain unchanged.
On October 26, 2021, the Company entered into an amendment to the Unsecured Term Loan D to conform certain provisions of
such loan agreement to the unsecured credit facility.
On July 8, 2021, the Company entered into a note purchase agreement (the “July 2021 NPA”) for the private placement by the
Operating Partnership of $275.0 million senior unsecured notes (the “Series I Unsecured Notes”) maturing September 29, 2031,
with a fixed annual interest rate of 2.80%, and $50.0 million senior unsecured notes (the “Series J Unsecured Notes”) maturing
September 28, 2033, with a fixed annual interest rate of 2.95%. The July 2021 NPA contains a number of financial covenants
substantially similar to the financial covenants contained in the Company’s unsecured credit facility and other unsecured notes,
plus a financial covenant that requires the Company to maintain a minimum interest coverage ratio of not less than 1.50:1.00.
The Operating Partnership issued the Series I Unsecured Notes and Series J Unsecured Notes on September 28, 2021. The
Company and certain wholly owned subsidiaries of the Operating Partnership are guarantors of the unsecured notes.
F-23
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. 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 provided for an increase in the aggregate commitments available for borrowing
under the unsecured credit facility from $500 million to up to $750 million. 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 provided 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%. 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.
2020 Debt Activity
On April 29, 2020, the mortgage note associated with the Wells Fargo Bank, National Association CMBS Loan was partially
defeased in the amount of approximately $1.0 million in connection with the sale of the Johnstown, NY property, which had
served as partial collateral for the mortgage note. The associated defeasance fees and unamortized deferred financing fees and
debt issuance costs of approximately $0.1 million were written off to debt extinguishment and modification expenses in the
accompanying Consolidated Statement of Operations during the year ended December 31, 2020.
On April 17, 2020, the Company entered into the $300.0 million Unsecured Term Loan G with Wells Fargo Bank, National
Association, as administrative agent on behalf of the various lenders under the agreement. In connection with execution of the
Unsecured Term Loan G, the Unsecured Term Loan B and Unsecured Term Loan C were paid in full. As of December 31,
2020, the Unsecured Term Loan G bore an interest rate of LIBOR plus a spread of 1.5% based on the Company’s debt rating, as
defined in the loan agreement, and subject to a minimum rate for LIBOR of 0.25%. The Unsecured Term Loan G matures on
April 16, 2021, subject to two one year extension options at the Company's discretion, and subject to certain conditions (other
than lender discretion) such as the absence of default and the payment of an extension fee. At execution, the Company intended
to exercise both extension options. To exercise the extension options the Company is required pay a fee equal to (i) 0.15% of
the outstanding amount on the effective day of the first extension period and (ii) 0.20% of the outstanding amount on the
effective day of the second extension period. In connection with the refinancing, the Company incurred approximately
$2.1 million in deferred financing fees, including approximately $1.1 million of accrued extension fees, which are being
amortized through the extended maturity date of April 18, 2023. In connection with the refinancing, the Company also
recognized debt extinguishment and modification expenses of approximately $0.7 million related to associated unamortized
deferred financing fees and debt issuance costs related to the Unsecured Term Loan B and the Unsecured Term Loan C and
other third-party costs. The Company is required to pay an annual fee of $35,000. The Unsecured Term Loan G has an
accordion feature that allows the Company to increase its borrowing capacity to $600.0 million, subject to the satisfaction of
certain conditions and lender consents. The Company and certain wholly owned subsidiaries of the Operating Partnership are
guarantors of the Unsecured Term Loan G. The agreement also contains financial and other covenants substantially similar to
the covenants in the Company's unsecured credit facility.
On March 25, 2020, the Company drew the remaining $100.0 million of the $200.0 million Unsecured Term Loan F that was
entered into on July 12, 2019.
F-24
Financial Covenant Considerations
The Company’s ability to borrow under the unsecured credit facility, unsecured term loans, and unsecured notes are subject to
its ongoing compliance with a number of customary financial covenants, including:
•
•
•
•
•
a maximum consolidated leverage ratio of not greater than 0.60:1.00;
a maximum secured leverage ratio of not greater than 0.40:1.00;
a maximum unencumbered leverage ratio of not greater than 0.60:1.00;
a minimum fixed charge ratio of not less than or equal to 1.50:1.00; and
a minimum unsecured interest coverage ratio of not less than or equal to 1.75:1.00.
The unsecured notes are also subject to a minimum interest coverage ratio of not less than 1.50:1.00. The Company was in
compliance with all such applicable restrictions and financial covenants as of December 31, 2021 and 2020. In the event of a
default under the unsecured credit facility or the unsecured term loans, the Company’s dividend distributions are limited to the
minimum amount necessary for the Company to maintain its status as a REIT.
Each of the Company’s mortgage notes has specific properties and assignments of rents and leases that are collateral for these
loans. These debt facilities contain certain financial and other covenants. The Company was in compliance with all such
applicable restrictions and financial covenants as of December 31, 2021 and 2020. The real estate net book value of the
properties that are collateral for the Company’s mortgage notes was approximately $88.5 million and $81.4 million at
December 31, 2021 and 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 of the Company’s debt and the corresponding estimate of
fair value as of December 31, 2021 and 2020. The fair value of the Company’s debt is based on Level 3 inputs.
Indebtedness (in thousands)
Unsecured credit facility
Unsecured term loans
Unsecured notes
Mortgage notes
Total principal amount
Net unamortized fair market value premium (discount)
Total unamortized deferred financing fees and debt issuance costs
Total carrying value
Future Principal Payments of Debt
December 31, 2021
December 31, 2020
Principal
Outstanding
Fair Value
Principal
Outstanding
Fair Value
$
$
296,000 $
975,000
900,000
54,983
2,225,983 $
(136)
(7,585)
2,218,262
296,000 $
975,224
937,183
56,323
2,264,730
$
107,000 $
975,000
575,000
52,102
1,709,102 $
29
(5,841)
1,703,290
107,000
978,448
628,575
54,485
1,768,508
The following table summarizes the Company’s aggregate future principal payments of the Company’s debt at December 31,
2021.
Year
2022
2023
2024
2025
2026
Thereafter
Total aggregate principal payments
Future Principal
Payments of Debt
(in thousands)
$
$
46,944
253,501
225,215
671,223
430,231
598,869
2,225,983
F-25
5. Derivative Financial Instruments
Risk Management Objective of Using Derivatives
The Company’s use of derivative instruments is limited to the utilization of interest rate swaps to manage interest rate risk
exposure on existing and future liabilities and not for speculative purposes. The principal objective of such arrangements is to
minimize the risks and related costs associated with the Company’s operating and financial structure.
The following table summarizes the Company’s outstanding interest rate swaps as of December 31, 2021. All of the Company’s
interest rate swaps are designated as qualifying cash flow hedges.
Interest Rate
Derivative Counterparty
Wells Fargo Bank, N.A.
The Toronto-Dominion Bank
Regions Bank
Capital One, N.A.
The Toronto-Dominion Bank
Royal Bank of Canada
Wells Fargo Bank, N.A.
PNC Bank, N.A.
PNC Bank, N.A.
The Toronto-Dominion Bank
Wells Fargo Bank, N.A.
The Toronto-Dominion Bank
Wells Fargo Bank, N.A.
The Toronto-Dominion Bank
PNC Bank, N.A.
Bank of Montreal
U.S. Bank, N.A.
Wells Fargo Bank, N.A.
U.S. Bank, N.A.
Regions Bank
Bank of Montreal
U.S. Bank, N.A.
Wells Fargo Bank, N.A.
The Toronto-Dominion Bank
Regions Bank
Bank of Montreal
PNC Bank, N.A.
Effective
Date
Trade Date
Jan-08-2015 Mar-20-2015
Feb-14-2020
Jan-08-2015
Feb-14-2020
Jan-08-2015
Feb-14-2020
Jan-08-2015
Oct-30-2017
Jul-20-2017
Oct-30-2017
Jul-20-2017
Oct-30-2017
Jul-20-2017
Oct-30-2017
Jul-20-2017
Oct-30-2017
Jul-20-2017
Sep-29-2020
Apr-20-2020
Apr-20-2020
Sep-29-2020
Apr-20-2020 Mar-19-2021
Apr-20-2020 Mar-19-2021
Jul-24-2018
Jul-24-2018
Jul-24-2018
Jul-24-2018
May-02-2019
May-02-2019
May-02-2019
Jul-16-2019
Feb-17-2021
Feb-17-2021
Feb-17-2021
Oct-26-2021
Oct-26-2021
Oct-26-2021
Jul-26-2019
Jul-26-2019
Jul-26-2019
Jul-26-2019
Jul-15-2020
Jul-15-2020
Jul-15-2020
Jul-15-2020
Apr-18-2023
Apr-18-2023
Apr-18-2023
Apr-01-2022
Apr-01-2022
Apr-01-2022
Notional
Amount
(in thousands)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
25,000 $
25,000 $
50,000 $
50,000 $
25,000 $
25,000 $
25,000 $
25,000 $
50,000 $
75,000 $
75,000 $
75,000 $
75,000 $
50,000 $
50,000 $
50,000 $
25,000 $
50,000 $
50,000 $
50,000 $
50,000 $
150,000 $
75,000 $
75,000 $
50,000 $
50,000 $
50,000 $
Fair Value
(in thousands)
Pay Fixed
Interest Rate
Receive
Variable
Interest Rate Maturity Date
(105)
(143)
(289)
(296)
(353)
(354)
(354)
(353)
(706)
299
295
299
294
(2,128)
(2,128)
(2,128)
(1,064)
(1,827)
(1,826)
(1,825)
(1,022)
2,014
1,009
1,010
(54)
(45)
(52)
1.8280 % One-month L
2.4535 % One-month L
2.4750 % One-month L
2.5300 % One-month L
1.8485 % One-month L
1.8505 % One-month L
1.8505 % One-month L
1.8485 % One-month L
1.8475 % One-month L
0.2750 % One-month L
0.2790 % One-month L
0.2750 % One-month L
0.2800 % One-month L
2.9180 % One-month L
2.9190 % One-month L
2.9190 % One-month L
2.9190 % One-month L
2.2460 % One-month L
2.2459 % One-month L
2.2459 % One-month L
1.7165 % One-month L
0.9385 % One-month L
0.9365 % One-month L
0.9360 % One-month L
1.3045 % One-month L
1.3045 % One-month L
1.3045 % One-month L
Mar-31-2022
Mar-31-2022
Mar-31-2022
Mar-31-2022
Jan-04-2023
Jan-04-2023
Jan-04-2023
Jan-04-2023
Jan-04-2023
Apr-18-2023
Apr-18-2023
Apr-18-2023
Apr-18-2023
Jan-12-2024
Jan-12-2024
Jan-12-2024
Jan-12-2024
Jan-15-2025
Jan-15-2025
Jan-15-2025
Jan-15-2025
Feb-5-2026
Feb-5-2026
Feb-5-2026
Mar-15-2027
Mar-15-2027
Mar-15-2027
The following table summarizes the fair value of the interest rate swaps outstanding as of December 31, 2021 and 2020.
Balance Sheet Line Item (in thousands)
Interest rate swaps-Asset
Interest rate swaps-Liability
Cash Flow Hedges of Interest Rate Risk
Notional Amount
December 31, 2021
$
$
600,000 $
825,000 $
Fair Value
December 31, 2021
Notional Amount
December 31, 2020
5,220 $
(17,052) $
— $
1,125,000 $
Fair Value
December 31, 2020
—
(40,656)
The Company’s objectives in using interest rate swaps are to add stability to interest expense and to manage its exposure to
interest rate movements. The Company uses interest rate swaps to fix the rate of its long term variable rate debt. Interest rate
swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the
Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.
For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded
in accumulated other comprehensive income and subsequently reclassified into interest expense in the same period during
which the hedged transaction affects earnings.
F-26
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 $11.0 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 years ended December 31, 2021, 2020 and 2019.
Effect of Cash Flow Hedge Accounting (in thousands)
Income (loss) recognized in accumulated other comprehensive loss on interest rate swaps
Income (loss) reclassified from accumulated other comprehensive loss into income as interest expense
Total interest expense presented in the Consolidated Statements of Operations in which the effects of cash
flow hedges are recorded
Year ended December 31,
2020
2019
2021
12,520 $
(35,548) $
(21,248)
(16,336) $
(13,439) $
2,377
63,484 $
62,343 $
54,647
$
$
$
Credit-risk-related Contingent Features
The Company has agreements with each of its derivative counterparties that contain a provision where the Company could be
declared in default on its derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to
the Company’s default on the indebtedness. As of December 31, 2021, the Company had not breached the provisions of these
agreements and has not posted any collateral related to these agreements. If the Company had breached any of its provisions at
December 31, 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 $12.4 million.
Fair Value of Interest Rate Swaps
The Company’s valuation of the interest rate swaps is determined using widely accepted valuation techniques including
discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the
derivatives, including the period to maturity, and uses observable market-based inputs including interest rate curves. The fair
values of interest rate swaps are determined by using the market standard methodology of netting the discounted future fixed
cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on an expectation of
future interest rates (forward curves) derived from observable market interest rate curves.
The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the
respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative
contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit
enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.
Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair
value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of
current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of December 31, 2021
and 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.
F-27
The following tables summarize the Company’s financial instruments that are accounted for at fair value on a recurring basis as
of December 31, 2021 and 2020.
Balance Sheet Line Item (in thousands)
Interest rate swaps-Asset
Interest rate swaps-Liability
Balance Sheet Line Item (in thousands)
Interest rate swaps-Asset
Interest rate swaps-Liability
6. Equity
Preferred Stock
Fair Value Measurements as of December 31,
2021
Fair Value
December 31, 2021
Level 1
Level 2
Level 3
$
$
5,220 $
(17,052) $
— $
— $
5,220 $
(17,052) $
—
—
Fair Value Measurements as of December 31,
2020
Fair Value
December 31, 2020
Level 1
Level 2
Level 3
$
$
— $
(40,656) $
— $
— $
— $
(40,656) $
—
—
On March 1, 2021, the Company gave notice to redeem all 3,000,000 issued and outstanding shares of the 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 year ended December 31, 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 December 31, 2021.
The following tables summarize the dividends attributable to the Company’s preferred stock issuances during the years ended
December 31, 2021 and 2020.
Quarter Ended 2021
March 31
Total
Quarter Ended 2020
December 31
September 30
June 30
March 31
Total
Common Stock
Declaration Date
January 11, 2021
Declaration Date
October 9, 2020
July 9, 2020
April 9, 2020
January 8, 2020
Series C
Preferred Stock
Per Share
$
$
0.4296875
0.4296875
Series C
Preferred Stock
Per Share
$
$
0.4296875
0.4296875
0.4296875
0.4296875
1.7187500
Payment Date
March 31, 2021
Payment Date
December 31, 2020
September 30, 2020
June 30, 2020
March 31, 2020
The following table summarizes the terms of the Company’s at-the market (“ATM”) common stock offering program as of
December 31, 2021.
Maximum Aggregate
Offering Price (in thousands)
$
600,000 $
Aggregate Common Stock
Available as of December 31, 2021
(in thousands)
76,482
ATM Common Stock Offering Program
2019 $600 million ATM
Date
February 14, 2019
F-28
The following table summarizes the activity for the ATM common stock offering program during the year ended December 31,
2021 (in thousands, except share data). There was no activity under the ATM common stock offering program during the year
ended December 31, 2020.
ATM Common Stock Offering Program(1)
2019 $600 million ATM
Total/weighted average
Year ended December 31, 2021
Shares
Sold
Weighted Average
Price Per Share
Net
Proceeds
5,110,002 $
5,110,002 $
37.53 $
37.53 $
189,974
189,974
(1) Excludes ATM issuances on a forward basis that were settled during the period, which are discussed below.
Subsequent to December 31, 2021, the Company sold 128,335 shares under the ATM common stock offering program at a
price of $45.03 per share, or $5.8 million, and $44.58 per share net of sales agent fees.
On November 3, 2021, the Company completed an underwritten public offering of an aggregate of 8,000,000 shares of common
stock at a price to the underwriters of $41.99 per share, consisting of (i) 5,250,000 shares offered directly by the Company and
(ii) 2,750,000 shares offered by the forward dealer in connection with certain forward sales agreements. The offering closed on
November 8, 2021 and the Company received net proceeds from the sale of shares offered directly by the Company of
approximately $220.4 million. On December 1, 2021, the underwriters exercised their option to purchase an additional
1,200,000 offered by the forward dealer in connection with certain forward sales agreements for an offering price of $41.87 per
share and the underwriters’ option closed on December 3, 2021. On December 27, 2021, the Company partially physically
settled the forward sales agreement by issuing 2,750,000 shares of common stock and received net proceeds of approximately
$115.0 million. Subject to the Company’s right to elect cash or net share settlement, the Company has the ability to settle the
remaining forward sales agreement at any time through scheduled maturity date of the forward sales agreement of November 3,
2022.
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. On September 29, 2021, the Company physically settled in full
the forward sales agreements under the ATM common stock offering program by issuing 1,446,760 shares of common stock
and received net proceeds of approximately $48.4 million, or $33.4585 per share.
On November 16, 2020, the Company completed an underwritten public offering of an aggregate of 8,000,000 shares of
common stock offered by the forward dealer in connection with certain forward sale agreements at a price to the underwriters of
$30.02 per share. On December 15, 2020, the underwriters exercised their option to purchase an additional 1,200,000 shares for
an offering price of $29.90 per share. The offering closed on November 19, 2020 and the underwriters’ option closed on
December 17, 2020. On December 23, 2020, the Company partially physically settled the forward sales agreements by issuing
4,518,077 shares of common stock and received net proceeds of approximately $135.0 million. On September 29, 2021, the
Company physically settled in full the forward sales agreements by issuing the remaining 4,681,923 shares of common stock
and received net proceeds of approximately $133.8 million, or $28.5791 per share.
On January 13, 2020, the Company completed an underwritten public offering of an aggregate of 10,062,500 shares of common
stock at a price to the underwriters of $30.9022 per share, consisting of (i) 5,600,000 shares offered directly by the Company
and (ii) 4,462,500 shares offered by the forward dealer in connection with certain forward sale agreements (including 1,312,500
shares offered pursuant to the underwriters’ option to purchase additional shares, which option was exercised in full). The
offering closed on January 16, 2020 and the Company received net proceeds from the sale of shares offered directly by the
Company of approximately $173.1 million. On December 23, 2020, the Company physically settled the forward sales
agreements in full by issuing 4,462,500 shares of common stock and received net proceeds of approximately $131.2 million.
On September 24, 2019, the Company completed an underwritten public offering of an aggregate of 12,650,000 shares of
common stock at a price to the underwriters of $28.60 per share, consisting of (i) 5,500,000 shares offered directly by the
Company and (ii) 7,150,000 shares offered by the forward dealer in connection with certain forward sale agreements (including
1,650,000 shares offered pursuant to the underwriters’ option to purchase additional shares, which option was exercised in full).
The offering closed on September 27, 2019 and the Company received net proceeds from the sale of shares offered directly by
the Company of $157.3 million. On December 26, 2019, the Company physically settled the forward sales agreements in full by
issuing 7,150,000 shares of common stock and received net proceeds of approximately $202.3 million.
On April 1, 2019, the Company completed an underwritten public offering of 7,475,000 shares of common stock (including
975,000 shares issued pursuant to the underwriters’ option to purchase additional shares, which option was exercised in full) at
a price to the underwriters of $28.72 per share. The offering closed on April 4, 2019 and the Company received net proceeds of
approximately $214.7 million.
F-29
Dividends
Record Date
Declaration Date
The following tables summarize the dividends attributable to the Company’s outstanding shares of common stock that were
declared during the years ended December 31, 2021 and 2020. The Company’s board of directors may alter the amounts of
dividends paid or suspend dividend payments at any time and therefore dividend payments are not assured.
Month Ended 2021
December 31
November 30
October 31
September 30
August 31
July 31
June 30
May 31
April 30
March 31
February 28
January 31
Total
0.120833
0.120833 December 15, 2021
0.120833 November 15, 2021
0.120833 October 15, 2021
0.120833 September 15, 2021
0.120833 August 16, 2021
0.120833
July 15, 2021
0.120833
June 15, 2021
0.120833 May 17, 2021
0.120833 April 15, 2021
0.120833 March 15, 2021
0.120833 February 16, 2021
1.449996
December 31, 2021
November 30, 2021
October 29, 2021
September 30, 2021
August 31, 2021
July 30, 2021
June 30, 2021
May 28, 2021
April 30, 2021
March 31, 2021
February 26, 2021
January 29, 2021
October 13, 2021
October 13, 2021
October 13, 2021
July 13, 2021
July 13, 2021
July 13, 2021
April 12, 2021
April 12, 2021
April 12, 2021
January 11, 2021
January 11, 2021
January 11, 2021
January 18, 2022
Payment Date
Per Share
$
$
Month Ended 2020
December 31
November 30
October 31
September 30
August 31
July 31
June 30
May 31
April 30
March 31
February 29
January 31
Total
Declaration Date
Record Date
Per Share
Payment Date
October 9, 2020
October 9, 2020
October 9, 2020
July 9, 2020
July 9, 2020
July 9, 2020
April 9, 2020
April 9, 2020
April 9, 2020
January 8, 2020
January 8, 2020
January 8, 2020
December 31, 2020
November 30, 2020
October 30, 2020
September 30, 2020
August 31, 2020
July 31, 2020
June 30, 2020
May 29, 2020
April 30, 2020
March 31, 2020
February 28, 2020
January 31, 2020
$
$
January 15, 2021
0.12
0.12 December 15, 2020
0.12 November 16, 2020
0.12 October 15, 2020
0.12 September 15, 2020
0.12 August 17, 2020
July 15, 2020
0.12
June 15, 2020
0.12
0.12 May 15, 2020
0.12 April 15, 2020
0.12 March 16, 2020
0.12 February 18, 2020
1.44
On January 10, 2022, the Company’s board of directors declared the common stock dividends for the months ending
January 31, 2022, February 28, 2022 and March 31, 2022 at a monthly rate of $0.121667 per share of common stock.
Restricted Stock-Based Compensation
Pursuant to the 2011 Plan, the Company grants restricted shares of common stock to certain employees of the Company. The
restricted shares of common stock are subject to time-based vesting. Restricted shares of common stock granted in 2021, 2020,
and 2019, subject to the recipient’s continued employment, will vest over four years in equal installments on January 1 of each
year beginning in 2022, 2021, and 2020, respectively. Refer to Note 8 for details on restricted shares of common stock granted
in connection with the settlement of certain performance units. Holders of restricted shares of common stock have voting rights
and rights to receive dividends. Restricted shares of common stock may not be sold, assigned, transferred, pledged or otherwise
disposed of and are subject to a risk of forfeiture prior to the expiration of the applicable vesting period.
F-30
The following table summarizes activity related to the Company’s unvested restricted shares of common stock for the years
ended December 31, 2021, 2020 and 2019.
Unvested Restricted Shares of Common Stock
Balance at December 31, 2018
Granted
Vested
Forfeited
Balance at December 31, 2019
Granted
Vested
Forfeited
Balance at December 31, 2020
Granted
Vested
Forfeited
Balance at December 31, 2021
Shares
Weighted Average
Grant Date Fair
Value per Share
$
190,462
110,830
$
(101,109) (1) $
$
(7,138)
$
193,045
75,419
$
(81,408) (1) $
$
(2,166)
$
184,890
90,304
$
(79,140) (1) $
$
(10,339)
$
185,715
23.10
24.85
22.52
23.78
24.38
31.60
23.46
26.92
27.70
29.77
27.01
30.32
28.86
(1) The Company repurchased and retired 27,706, 34,117, and 58,697, restricted shares of common stock that vested during the years ended December 31,
2021, 2020, and 2019, respectively.
The unrecognized compensation expense associated with the Company’s restricted shares of common stock at December 31,
2021 was approximately $3.1 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 the vesting date) for the restricted shares of common stock that vested during
the years ended December 31, 2021, 2020 and 2019.
Vested Restricted Shares of Common Stock
Vested restricted shares of common stock
Fair value of vested restricted shares of common stock (in thousands)
7. Noncontrolling Interest
Year ended December 31,
2020
2019
2021
79,140
2,581 $
81,408
2,568 $
101,109
2,658
$
The following table summarizes the activity for noncontrolling interest in the Company for the years ended December 31, 2021,
2020 and 2019.
Noncontrolling Interest
Balance at December 31, 2018
Granted/Issued
Forfeited
Conversions from LTIP units to Other Common Units
Redemptions from Other Common Units to common stock
Balance at December 31, 2019
Granted/Issued
Forfeited
Conversions from LTIP units to Other Common Units
Redemptions from Other Common Units to common stock
Balance at December 31, 2020
Granted/Issued
Forfeited
Conversions from LTIP units to Other Common Units
Redemptions from Other Common Units to common stock
Balance at December 31, 2021
LTIP Units
Other
Common Units
Total
Noncontrolling
Common Units
Noncontrolling
Interest
Percentage
1,616,200
364,173
(16,618)
(266,397)
—
1,697,358
278,806
—
(283,741)
—
1,692,423
405,844
—
(149,143)
—
1,949,124
2,453,234
—
—
266,397
(680,137)
2,039,494
—
—
283,741
(730,420)
1,592,815
—
—
149,143
(171,318)
1,570,640
4,069,434
364,173
(16,618)
—
(680,137)
3,736,852
278,806
—
—
(730,420)
3,285,238
405,844
—
—
(171,318)
3,519,764
3.5 %
N/A
N/A
N/A
N/A
2.5 %
N/A
N/A
N/A
N/A
2.0 %
N/A
N/A
N/A
N/A
1.9 %
The Company adjusts the carrying value of noncontrolling interest to reflect its share of the book value of the Operating
Partnership when there has been a change in the Company’s ownership of the Operating Partnership. Such adjustments are
recorded to additional paid-in capital as a rebalancing of noncontrolling interest on the accompanying Consolidated Statements
of Equity.
F-31
LTIP Units
LTIP units are granted to certain executive officers and senior employees of the Company as part of their compensation, and to
independent directors for their service. LTIP units are valued by reference to the value of the Company’s common stock and are
subject to such conditions and restrictions as the compensation committee of the board of directors may determine, including
continued employment or service. Vested LTIP units can be converted to Other Common Units on a one-for-one basis once a
material equity transaction has occurred that results in the accretion of the member’s capital account to the economic equivalent
of an Other Common Unit. All LTIP units, whether vested or not, will receive the same monthly per unit distributions as Other
Common Units, which equal per share dividends on common stock.
LTIP units granted in January 2021, 2020, and 2019 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,
2020, and 2019, respectively. LTIP units granted in January 2021, 2020, and 2019 to independent directors, subject to the
recipient’s continued service, will vest on January 1, 2022, 2021, and 2019, respectively.
Refer to Note 8 for a discussion of the LTIP units granted in January 2022, 2021, and 2020, pursuant to the January 2019, 2018,
and 2017 performance units, respectively.
The fair value of the LTIP units at the date of grant was determined by a lattice-binomial option-pricing model based on a
Monte Carlo simulation. The fair value of the LTIP units is based on Level 3 inputs and is a non-recurring fair value
measurement. The following table summarizes the assumptions used in valuing such LTIP units granted during years ended
December 31, 2021, 2020 and 2019 (excluding those LTIP units granted pursuant to the settlements of performance units; refer
to Note 8 for details).
LTIP Units
Grant date
Expected term (years)
Expected volatility
Expected dividend yield
Risk-free interest rate
Fair value of LTIP units at issuance (in thousands)
LTIP units at issuance
Fair value unit price per LTIP unit at issuance
January 7, 2021
January 8, 2020
January 7, 2019
10
34.0 %
5.0 %
0.229 %
4,316
153,430
28.13
$
$
10
18.0 %
5.75 %
1.61 %
10
19.0 %
6.0 %
2.57 %
$
$
4,030
136,741
29.47
$
$
3,636
154,649
23.51
The expected share price volatilities are based on a mix of the historical and implied volatilities of the Company and certain
peer group companies. The expected dividend yield is based on the Company’s average historical dividend yield and dividend
yield as of the valuation date for each award. The risk-free interest rate is based on U.S. Treasury note yields matching a three-
year time period.
On August 17, 2021, the Company and David G. King, the Company’s Executive Vice President and Director of Real Estate
Operations, agreed that Mr. King’s employment with the Company would terminate effective September 17, 2021. Pursuant to
the terms and conditions of the executive employment agreement and the several LTIP unit agreements and performance award
agreements between the Company and Mr. King, Mr. King received a severance package from the Company, including a lump
sum cash payment, the continuation of certain insurance benefits, immediate vesting of outstanding LTIP units and eligibility to
receive a pro-rated award payment for outstanding performance units. Accordingly, the Company accelerated the expense
recognition of Mr. King's unvested LTIP units in the amount of approximately $0.5 million, which is included in general and
administrative expenses for the year ended December 31, 2021 on the accompanying Consolidated Statements of Operations.
Additionally, the unrecognized compensation expense associated with Mr. King’s performance units will not be recognized.
The Company also incurred approximately $1.6 million related to the lump sum cash payment and continuation of certain
insurance benefits, which is included in general and administrative expenses during the year ended December 31, 2021 on the
accompanying Consolidated Statements of Operations. On October 15, 2021, Mr. King received 57,100 shares of common
stock for his pro-rated award payment for outstanding performance units.
F-32
The following table summarizes activity related to the Company’s unvested LTIP units for the years ended December 31, 2021,
2020 and 2019
Unvested LTIP Units
Balance at December 31, 2018
Granted
Vested
Forfeited
Balance at December 31, 2019
Granted
Vested
Forfeited
Balance at December 31, 2020
Granted
Vested
Forfeited
Balance at December 31, 2021
LTIP Units
Weighted Average
Grant Date Fair
Value per Share
251,216 $
364,173 $
(371,423) $
(16,618) $
227,348 $
278,806 $
(294,706) $
— $
211,448 $
405,844 $
(427,184) $
— $
190,108 $
22.52
23.51
22.91
23.92
23.37
29.47
26.87
—
26.54
28.13
27.47
—
27.84
The unrecognized compensation expense associated with the Company’s LTIP units at December 31, 2021 was approximately
$2.4 million and is expected to be recognized over a weighted average period of approximately 2.4 years.
The following table summarizes the aggregate fair value (at the vesting date) for the LTIP units that vested during years ended
December 31, 2021, 2020 and 2019.
Vested LTIP units
Vested LTIP units
Fair value of vested LTIP units (in thousands)
Other Common Units
Year ended December 31,
2020
2019
2021
427,184
16,390 $
294,706
8,805 $
371,423
10,620
$
Other Common Units and shares of the Company’s common stock have essentially the same economic characteristics in that
Other Common Units directly, and shares of the Company’s common stock indirectly, through the Company’s interest in the
Operating Partnership, share equally in the total net income or loss distributions of the Operating Partnership. Subject to certain
restrictions, investors who own Other Common Units have the right to cause the Operating Partnership to redeem any or all of
their Other Common Units for cash equal to the then-current value of one share of the Company’s common stock, or, at the
Company’s election, shares of common stock on a one-for-one basis. When redeeming the Other Common Unit for cash, the
value of a share of common stock is calculated as the average common stock closing price on the NYSE for the 10 days
immediately preceding the redemption notice date. Each Other Common Unit receives the same monthly distribution as a share
of common stock.
8. Equity Incentive Plan
The 2011 Plan provides for the issuance of equity-based awards, including stock options, stock appreciation rights, restricted
stock, restricted stock units, unrestricted stock awards and other awards based on shares of the Company’s common stock, such
as LTIP units in the Operating Partnership, that may be made by the Company directly to the executive officers, directors,
employees, and other individuals providing bona fide services to or for the Company.
Subject to certain adjustments identified within the 2011 Plan, the aggregate number of shares of the Company’s common stock
that may be awarded under the 2011 Plan is 6,642,461 shares. Under the 2011 Plan, each LTIP unit awarded will be equivalent
to an award of one share of common stock reserved under the 2011 Plan, thereby reducing the number of shares of common
stock available for other equity awards on a one-for-one basis.
The 2011 Plan may be terminated, amended, modified or suspended at any time by the board of directors, subject to stockholder
approval as required by law or stock exchange rules. The 2011 Plan expires on April 30, 2028.
Under the 2011 Plan, the Company grants performance units to certain key employees of the Company. The ultimate value of
the performance units depends on the Company’s total stockholder return (“TSR”) over a three-year period (the “measuring
F-33
period”). At the end of the measuring period, the performance units convert into shares of common stock, or, at the Company’s
election and with the award recipient’s consent, LTIP units or other securities (“Award Shares”), at a rate depending on the
Company’s TSR over the measuring period as compared to three different benchmarks and on the absolute amount of the
Company’s TSR. A recipient of performance units may receive as few as zero shares or as many as 250% of the number of
target units, plus deemed dividends. The target amount of the performance units is nominally allocated as: (i) 25% to the
Company’s TSR compared to the TSR of an industry peer group; (ii) 25% to the Company’s TSR compared to the TSR of a
size-based peer group; and (iii) 50% to the Company’s TSR compared to the TSR of the companies in the MSCI US REIT
index.
No dividends are paid to the recipient during the measuring period. At the end of the measuring period, if the Company’s TSR
is such that the recipient earns Award Shares, the recipient will receive additional Award Shares relating to dividends deemed
to have been paid and reinvested on the Award Shares. The Company, in the discretion of the compensation committee of the
board of directors, may pay the cash value of the deemed dividends instead of issuing additional Award Shares. The Award
Shares are immediately vested at the end of the measuring period.
In January 2021, 2020, and 2019, the Company granted performance units approved by the compensation committee of the
board of directors, under the 2011 Plan to certain key employees of the Company. The measuring periods commenced on
January 1, 2021, 2020, and 2019, respectively, and end on December 31, 2023, 2022, and 2021, respectively.
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 is a non-recurring fair value
measurement. The performance unit equity compensation expense is recognized into earnings ratably from the grant date over
the respective vesting periods. The following table summarizes the assumptions used in valuing the performance units granted
during the years ended December 31, 2021, 2020 and 2019.
Performance Units
Grant date
Expected volatility
Expected dividend yield
Risk-free interest rate
Fair value of performance units grant (in thousands)
January 7, 2021
34.4 %
5.0 %
0.2271 %
5,522
$
Assumptions
January 8, 2020
17.4 %
5.75 %
1.59 %
5,389
$
January 7, 2019
20.7 %
6.0 %
2.56 %
5,620
$
The expected share price volatilities are based on a mix of the historical and implied volatilities of the Company and the peer
group companies. The expected dividend yield is based on the Company’s average historical dividend yield and dividend yield
as of the valuation date for each award. The risk-free interest rate is based on U.S. Treasury note yields matching the three-year
time period of the performance period.
On December 31, 2021, the measuring period pursuant to the 2019 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 365,996 vested LTIP units and 27,934 vested shares of common stock to the
participants (of which 8,257 shares of common stock were repurchased and retired), which were issued on January 10, 2022.
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 vested in one year on December 31, 2021, which were issued on January 7, 2021.
On December 31, 2019, the measuring period pursuant to the 2017 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 76,096 vested LTIP units and 46,376 vested shares of common stock to the
participants (of which 18,241 shares of common stock were repurchased and retired), which were issued on January 8, 2020.
The compensation committee of the board of directors also approved the issuance of 65,969 LTIP units and 3,398 restricted
shares of common stock that vested in one year on December 31, 2020, which were issued on January 8, 2020.
The unrecognized compensation expense associated with the Company’s performance units at December 31, 2021 was
approximately $5.1 million and is expected to be recognized over a weighted average period of approximately 1.7 years.
F-34
At December 31, 2021 and 2020, the number of shares available for issuance under the 2011 Plan were 1,634,019 and
2,325,389, respectively. The number of shares available for issuance under the 2011 Plan as of December 31, 2021 do not
include an allocation for the 2021 and 2020 performance units as the awards were not determinable as of December 31, 2021.
The number of shares available for issuance under the 2011 Plan as December 31, 2020 do not include an allocation for the
2020 and 2019 performance units as the awards were not determinable as of December 31, 2020.
Non-cash Compensation Expense
The following table summarizes the amounts recorded in general and administrative expenses in the accompanying
Consolidated Statements of Operations for the amortization of restricted shares of common stock, LTIP units, performance
units, and the Company’s director compensation for the years ended December 31, 2021, 2020 and 2019.
Non-Cash Compensation Expense (in thousands)
Restricted shares of common stock
LTIP units
Performance units
Directors compensation (2)
Total non-cash compensation expense
2021
Year ended December 31,
2020
2019
$
$
(1)
2,236
6,489
5,730
488
14,943
$
$
1,924
3,903
5,358
496
11,681
$
$
1,732
3,583
4,169
404
9,888
(1) Inclusive of approximately $0.5 million non-cash compensation expense during the year ended December 31, 2021 associated with the severance cost of an
executive officer, as discussed in Note 7.
(2) All of the Company’s independent directors elected to receive shares of common stock in lieu of cash for their service during the years ended December 31,
2021, 2020 and 2019. The number of shares of common stock granted is calculated based on the trailing 10 days average common stock price ending on the
third business day preceding the grant date.
9. Leases
Lessor Leases
The Company has operating leases in which it is the lessor for its rental property. Certain leases contain variable lease payments
based upon changes in the Consumer Price Index (“CPI”). Certain leases contain options to renew or terminate the lease, and
options for the lessee to purchase the rental property, all of which are predominately at the sole discretion of the lessee.
The following table summarizes the components of rental income recognized during the years ended December 31, 2021, 2020
and 2019 included in the accompanying Consolidated Statements of Operations.
Rental Income (in thousands)
Fixed lease payments
Variable lease payments
Straight-line rental income
Net decrease to rental income related to above and below market lease amortization
Total rental income
Year ended December 31,
2020
2019
2021
$
$
424,356 $
118,584
18,565
(2,073)
559,432 $
371,088 $
103,389
12,711
(4,363)
482,825 $
313,426
84,927
11,881
(4,884)
405,350
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 year ended December 31, 2021, 2020 and 2019 this
resulted in a net increase (decrease) of rental income of approximately $34,000, $(1.7) million and $0 for the years ended
December 31, 2021, 2020 and 2019, respectively, due to the reversal of a net accrued rent liability and tenants converting from
cash basis accounting to accrual basis accounting. Additionally, there was $2.4 million, $2.2 million and $0 of contractual
rental income not received from cash basis tenants partially offset by $2.0 million, $0 and $0 of previously unrecognized rental
income payments received from tenants under the cash basis of accounting during the year ended December 31, 2021, 2020 and
2019, respectively.
As of December 31, 2021 and December 31, 2020, the Company had accrued rental income of approximately $75.8 million and
$60.0 million, respectively, included in tenant accounts receivable on the accompanying Consolidated Balance Sheets.
F-35
As of December 31, 2021 and December 31, 2020, the Company had approximately $32.9 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 December 31, 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 December 31, 2021 and December 31, 2020, the Company’s total liability associated with
these lease security deposits was approximately $15.2 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 $21.2 million, $21.1
million and $19.1 million for the years ended December 31, 2021, 2020 and 2019, 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 December 31, 2021.
Year
2022
2023
2024
2025
2026
Thereafter
Lessee Leases
Maturity of Fixed Lease Payments (in
thousands)
$
$
$
$
$
$
472,360
436,762
384,548
325,660
270,401
928,383
The Company has operating leases in which it is the lessee for ground leases and its corporate office leases. These leases have
remaining lease terms of approximately 1.4 years to 47.9 years. Certain ground leases contain options to extend the leases for
ten years to 20 years, all of which are reasonably certain to be exercised, and are included in the computation of the Company’s
right-of-use assets and operating lease liabilities.
The following table summarizes supplemental information related to operating lease right-of-use assets and operating lease
liabilities recognized in the Company’s Consolidated Balance Sheets as of December 31, 2021 and December 31, 2020.
Operating Lease Term and Discount Rate
Weighted average remaining lease term (years)
Weighted average discount rate
December 31, 2021
December 31, 2020
29.0
6.6 %
29.9
6.8 %
The following table summarizes the operating lease cost recognized during the years ended December 31, 2021, 2020 and 2019
included in the Company’s Consolidated Statements of Operations.
Operating Lease Cost (in thousands)
Operating lease cost included in property expense attributable to ground leases
Operating lease cost included in general and administrative expense attributable to corporate office
lease
Total operating lease cost
Year ended December 31,
2020
2019
2021
1,740 $
1,424 $
1,324
1,735
3,475 $
1,592
3,016 $
1,065
2,389
$
$
The following table summarizes supplemental cash flow information related to operating leases recognized during the year
ended December 31, 2021, 2020 and 2019 in the Company’s Consolidated Statements of Cash Flows.
Operating Leases (in thousands)
Cash paid for amounts included in the measurement of lease liabilities (operating cash flows)
Leased assets obtained in exchange for new lease liabilities
Year ended December 31,
2020
2019
2021
$
$
2,426 $
146 $
2,355 $
7,718 $
2,282
—
F-36
The following table summarizes the maturity of operating lease liabilities under the Company’s ground leases and corporate
office lease as of December 31, 2021.
Year
2022
2023
2024
2025
2026
Thereafter
Total lease payments
Less: Imputed interest
Present value of operating lease liabilities
Maturity of Operating Lease Liabilities(1)
(in thousands)
$
$
3,628
3,660
3,699
3,744
2,778
68,807
86,316
(53,208)
33,108
(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
The Company uses the two-class method of computing earnings per common share, which is an earnings allocation formula
that determines earnings per share for common stock and any participating securities according to dividends declared (whether
paid or unpaid) and participation rights in undistributed earnings. Basic net income per common share is computed by dividing
net income available to common stockholders by the weighted average number of shares of common stock outstanding for the
period. Diluted net income per common share is computed by dividing net income available to common stockholders by the
sum of the weighted average number of shares of common stock outstanding and any dilutive securities for the period.
Restricted shares of common stock are considered participating securities as these stock-based awards contain non-forfeitable
rights to dividends, unless and until a forfeiture occurs, and these awards must be included in the computation of earnings per
share pursuant to the two-class method. During the years ended December 31, 2021, 2020 and 2019, there were 198,171,
187,283 and 217,623, respectively, unvested shares of restricted stock on a weighted average basis that were considered
participating securities. Participating securities are included in the computation of diluted earnings per share using the treasury
stock method if the impact is more dilutive than the two-class method. Other potentially dilutive shares of common stock from
the Company’s performance units and forward sales agreements are considered when calculating diluted earnings per share.
The following table reconciles the numerators and denominators in the computation of basic and diluted earnings per common
share for the years ended December 31, 2021, 2020 and 2019.
Earnings Per Share (in thousands, except per share data)
Numerator
Net income attributable to common stockholders
Denominator
Weighted average common shares outstanding — basic
Effect of dilutive securities(1)
Share-based compensation
Shares issuable under forward sales agreements
Weighted average common shares outstanding — diluted
Net income per share — basic and diluted
Net income per share attributable to common stockholders — basic
Net income per share attributable to common stockholders — diluted
Year ended December 31,
2021
2020
2019
$
188,175 $
196,720 $
43,811
163,442
148,791
125,389
640
8
164,090
412
12
149,215
$
$
1.15 $
1.15 $
1.32 $
1.32 $
284
5
125,678
0.35
0.35
(1) During the years ended December 31, 2021, 2020, and 2019, there were 198, 187, and 218, 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.
F-37
The Company has letters of credit of approximately $3.6 million as of December 31, 2021 related to construction projects and
certain other agreements.
12. Employee Benefit Plans
Effective April 20, 2011, the Company adopted a 401(k) Defined Contribution Savings Plan (the “Plan”) for its employees.
Under the Plan, as amended, employees, as defined, are eligible to participate in the Plan after they have completed three
months of service. The Company provides a discretionary match of 50% of the employee’s contributions annually up to 6.0%
of the employee’s annual compensation, subject to a cap imposed by federal tax law. The Company’s aggregate matching
contribution for the years ended December 31, 2021, 2020 and 2019 was approximately $0.5 million, $0.3 million and $0.4
million, respectively. The Company’s contribution is subject to vest over three years, such that employees who have been with
the Company for three years are fully vested in past and future contributions.
13. Subsequent Events
The Company identified the following events subsequent to December 31, 2021 that are not recognized in the financial
statements.
On January 10, 2022, the Company granted 58,580 restricted shares of common stock to certain employees of the Company
pursuant to the 2011 Plan. The restricted shares of common stock granted will vest over four years in equal installments on
January 1 of each year beginning January 1, 2023. The fair value of the restricted shares of common stock at the date of grant
was $44.19 per share.
On January 10, 2022, the Company granted 20,920 LTIP units to non-employee, independent directors, and 83,321 LTIP units
to certain executive officers and senior employees pursuant to the 2011 Plan. The LTIP units granted to non-employee,
independent directors will vest on January 1, 2023. The LTIP units granted to certain executive officers and senior employees
will vest in equal quarterly installments over four years, with the first vesting date being March 31, 2022. The aggregate fair
value of the LTIP units at the date of grant was approximately $4.4 million, as determined by a lattice-binomial option-pricing
model based on a Monte Carlo simulation using an expected term of ten years, a weighted average volatility factor of 34.0%, a
weighted average expected dividend yield of 4.0%, and a weighted average risk-free interest rate of 1.204%. The fair value of
the LTIP units is based on Level 3 inputs and is a non-recurring fair value measurement.
On January 10, 2022, the Company granted performance units to certain executive officers and senior employees pursuant to
the 2011 Plan. The terms of the January 10, 2022 performance units are substantially the same as the performance units
discussed in Note 8, except that the measuring period commenced on January 1, 2022 and ends on December 31, 2024. The
aggregate fair value of the performance units at the date of grant was approximately $6.3 million, as determined by a lattice-
binomial option-pricing model based on a Monte Carlo simulation using a weighted average volatility factor of 34.1%, a
weighted average expected dividend yield of 4.0%, and a weighted average risk-free interest rate of 1.1979%. The fair value of
the performance units is based on Level 3 inputs and is a non-recurring fair value measurement.
F-38
STAG Industrial, Inc.
Schedule II—Valuation and Qualifying Accounts
(in thousands)
Allowance for Doubtful Receivables and Accrued Rent Reserves
STAG Industrial, Inc.
Beginning
of Period
Costs and
Expenses
Amounts
Written Off
Balance at
End of Period
—
—
—
— $
— $
(758) $
December 31, 2021
December 31, 2020
December 31, 2019
$
$
$
— $
— $
758 $
— $
— $
— $
F-39
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F-54
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2021 LEASING ACTIVITY 13.7M*This was achieved primarily through energy efficiency, optimization, and on-site renewables. Remaining scope 1 and scope 2 emissions were neutralized through the generation or purchase of credible and verifiable renewable energy certificates (RECs) and carbon offsets. We plan to decelerate our use of RECs and carbon offsets as we increase investments and efforts in energy efficiency, electrification and on-site renewables. To formalize an even deeper commitment, STAG has set a long-term goal in alignment with, and approved by, the Science-Based Targets Initiative (SBTi), the world’s most widely respected organization tasked with the responsibility of vetting science-based emissions reduction targets from the private sector. STAG formally commits to reducing absolute scope 1 and scope 2 GHG emissions 50% by 2030 from a 2018 baseline, and to measure and reduce scope 3 emissions,which primarily come from our tenants’ energy use. As mandated by SBTi, STAG’s GHG inventory and management practices follow the rules and standards of the GHG Protocol and the accomplishment of its targets, excluding the use of carbon offsets.CAPITALIZATION RATE 5.2%BUILDINGS 742021 FFO GROWTH 19.2%STRAIGHT-LINE RENT CHANGE 17.6%SQ. FT.2021 CASH NOI GROWTH13.5%2021 ACQUISITIONS ACTIVITY$1.3BSQUARE FEET 109MSTATES 40TENANTS 532OPERATING PORTFOLIO HIGHLIGHTS97.4%DONATIONS AND FUNDRAISINGS$1.2M VOLUNTEER HOURS1,650WOMEN AND/OR MINORITIES 33% AVERAGE TENURE7.5 YEARS AUDIT COMMITTEE FINANCIAL EXPERTS80% INDEPENDENT89% LED LIGHTING SYSTEMS AS A % OF PORTFOLIO41% CAPACITY FROM EXISTING PHOTOVOLTAIC SOLAR PROJECTS25.5 MW REFLECTIVE ROOFING AS A % OF PORTFOLIO48% HVAC SYSTEM UPGRADES SINCE 2016$6.2MENVIRONMENTALGOVERNANCESOCIALCOMPANY OVERVIEWPORTFOLIO ENVIRONMENTAL STATISTICSDIRECTORS SNAPSHOTSOCIAL HIGHLIGHTSCORPORATE INFORMATIONBENJAMIN S. BUTCHERChairman of the BoardChief Executive OfficerWILLIAM R. CROOKERPresidentMATTS S. PINARDChief Financial OfficerExecutive Vice President & TreasurerSTEPHEN C. MECKEChief Operating OfficerExecutive Vice PresidentJEFFREY M. SULLIVANGeneral Counsel & SecretaryExecutive Vice PresidentJACLYN M. PAULChief Accounting OfficerSenior Vice PresidentMICHAEL C. CHASEChief Investment OfficerSenior Vice PresidentBENJAMIN S. BUTCHERChairman of the BoardChief Executive OfficerDR. JIT KEE CHINChief Data & Innovation Officer & Executive Vice PresidentSuffolk ConstructionVIRGIS W. COLBERTFormer Executive Vice PresidentWorld Wide OperationsMiller Brewing CompanyMICHELLE S. DILLEYChief Executive OfficerAwesome Leaders, NFPJEFFREY D. FURBERGlobal Chief Executive OfficerAEWLARRY T. GUILLEMETTEFormer Chairman of the BoardFormer Chief Executive Officer & President Amtrol, Inc.FRANCIS X. JACOBY IIIChief Financial Officer & Executive Vice PresidentLeggat McCall Properties, LLCCHRISTOPHER P. MARRChief Executive Officer & President CubeSmartHANS S. WEGERStrategic ConsultantMANAGEMENT TEAMBOARD OFDIRECTORSUnder the Greenhouse Gas (GHG) Protocol’s market-based methodology, STAG achieved operational carbon neutrality in 2021 for our 2020 operating year.*STAG takes a proactive and transparent approach to governance, aiming to provide our stakeholders with checks and balances that both reduce risk and leverage opportunities. We are therefore committed to conducting our business honestly, ethically, and in a manner that considers the interests of all our stakeholders: tenants, shareholders, employees, service providers, partners, local communities and the public at large.As an expression of our commitment to good corporate citizenship, we established the STAG Industrial Charitable Fund in 2020 to promote equality and inspire children and young adults — particularly those at risk — to realize their potential and benefit future generations.STAG Industrial, Inc. (NYSE: STAG) is a real estate investment trust (REIT) focused on the acquisition and operation of industrial properties throughout the United States.OCCUPIEDEXECUTIVE OFFICESOne Federal Street, 23rd FloorBoston, MA 02110617-574-4777 · stagindustrial.comINVESTOR RELATIONS617-226-4987 · InvestorRelations@stagindustrial.comINDEPENDENT ACCOUNTANTSPricewaterhouseCoopers LLP · Boston, MAOUTSIDE CORPORATE COUNSELDLA Piper LLP (US) · New York, NYTRANSFER AGENTContinental Stock & Trust Company1 State Street, 30th Floor New York, NY 10004212-509-4000 · continentalstock.com 2021 ANNUAL REPORTSTAGINDUSTRIAL.COMOne Federal Street, 23rd FloorBoston, MA 0211061 7–574–4777