For the transition period from to .
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.
Part I. Financial Information
STAG Industrial, Inc.
The accompanying notes are an integral part of these consolidated financial statements.
STAG Industrial, Inc.
The accompanying notes are an integral part of these consolidated financial statements.
STAG Industrial, Inc.
The accompanying notes are an integral part of these consolidated financial statements.
STAG Industrial, Inc.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
STAG Industrial, Inc.
Notes to Consolidated Financial Statements
(unaudited)
1. OrganizationandDescription of Business
STAG Industrial, Inc. (the “Company”) is an industrial real estate operating company focused on the acquisition and operation of single-tenant, industrial properties throughout the United States. The Company was formed as a Maryland corporation and has elected to be treated and intends to continue to qualify as a real estate investment trust (“REIT”) under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended. The Company is structured as an umbrella partnership REIT, commonly called an UPREIT, and owns substantially all of its assets and conducts substantially all of its business through its operating partnership, STAG Industrial Operating Partnership, L.P., a Delaware limited partnership (the “Operating Partnership”). As of September 30, 20182019 and December 31, 2017,2018, the Company owned a 96.4%97.2% and 95.9%96.5%, respectively, common equity interest in the Operating Partnership. The Company, through its wholly owned subsidiary, is the sole general partner of the Operating Partnership. As used herein, the “Company” refers to STAG Industrial, Inc. and its consolidated subsidiaries and partnerships, including the Operating Partnership, except where context otherwise requires.
As of September 30, 2018,2019, the Company owned 381430 buildings in 37 states with approximately 75.486.0 million rentable square feet, consisting of 313356 warehouse/distribution buildings, 5966 light manufacturing buildings, and 98 flex/office buildings. The Company’s buildings were approximately 95.4% leased to 330 tenants as of September 30, 2018.
2. Summary of Significant Accounting Policies
Interim Financial Information
The accompanying interim financial statements have been presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and with the instructions to Form 10-Q and Regulation S-X for interim financial information. Accordingly, these statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, the accompanying interim financial statements include all adjustments, consisting of normal recurring items, necessary for their fair statement in conformity with GAAP. Interim results are not necessarily indicative of results for a full year. The year-end consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017.2018.
Basis of Presentation
The Company’s consolidated financial statements include the accounts of the Company, the Operating Partnership, and their subsidiaries. Interests in the Operating Partnership not owned by the Company are referred to as “Noncontrolling Common Units.” These Noncontrolling Common Units are held by other limited partners in the form of common units (“Other Common Units”) and long term incentive plan units (“LTIP units”) issued pursuant to the STAG Industrial, Inc. 2011 Equity Incentive Plan, as amended and restated (the “2011 Plan”). All significant intercompany balances and transactions have been eliminated in the consolidation of entities. The financial statements of the Company are presented on a consolidated basis for all periods presented.
Reclassifications and New Accounting Standards and Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
New Accounting Standards Adopted
In August 2017,July 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-12, Derivatives and Hedging (Topic 815):Targeted Improvements to Accounting for Hedging Activities. The purpose of this updated guidance is to better align a company’s financial reporting for hedging activities with the economic objectives of those activities. This standard is effective for fiscal years beginning after December 15, 2018 and interim periods within those years, with early adoption permitted, and the Company adopted this standard effective January 1, 2018 using the modified retrospective transition method. The adoption of this standard resulted in a cumulative effect adjustment of approximately $0.3 million recorded as an increase to cumulative dividends in excess of earnings and an increase to accumulated other comprehensive income as of January 1, 2018 in the accompanying Consolidated Statements of Equity.
In May 2017, the FASB issued ASU 2017-09, Stock Compensation (Topic 718): Scope of Modification Accounting, which provides updated guidance about which changes to the terms or conditions of a share-based payment award would require an entity to apply modification accounting under the topic. This standard is effective for fiscal years beginning after December 15, 2017 and interim periods within those years, and the Company adopted this standard prospectively effective January 1, 2018. The adoption of this standard did not have a material effect on the Company's consolidated financial statements.
In February 2017, the FASB issued ASU 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets, which provides guidance for recognizing gains and losses from the transfer of nonfinancial assets in contracts with non-customers. The new standard was issued as part of the new revenue standard (ASU 2014-09, as discussed below), and defines “in substance nonfinancial asset,” unifies guidance related to partial sales of nonfinancial assets, eliminates rules specifically addressing sales of real estate, removes exceptions to the financial asset derecognition model, and clarifies the accounting for contributions of nonfinancial assets to joint ventures. As a result of the new guidance, the guidance specific to real estate sales in Subtopic 360-20 was eliminated, and sales and partial sales of real estate assets will now be subject to the same derecognition model as all other nonfinancial assets. This standard is effective at the same time an entity adopts ASU 2014-09, which the Company adopted effective January 1, 2018. The Company adopted this standard effective January 1, 2018 using the modified retrospective approach. The adoption of this standard did not have a material effect on the Company's consolidated financial statements.
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business. The new standard provides a screen to determine when a set of assets and activities is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired or disposed of is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This standard is effective for annual periods beginning after December 15, 2017 and interim periods within those periods, and the Company adopted this standard prospectively effective January 1, 2018. As a result, it is expected that the majority of the Company's acquisitions will be accounted for as asset acquisitions, whereas under the former guidance the majority of the Company's acquisitions had been accounted for as business combinations. The most significant difference between the two accounting models that impacts the Company's consolidated financial statements is that in an asset acquisition, property acquisition costs are generally a component of the consideration transferred to acquire a group of assets and are capitalized as a component of the cost of the assets, whereas in a business combination, property acquisition costs are expensed and not included as part of the consideration transferred.
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash.The new standard requires that the statement of cash flows explain the changes during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This standard is effective for fiscal years beginning after December 15, 2017 and the Company adopted this standard effective January 1, 2018. As a result, the Company has included restricted cash with cash and cash equivalents when reconciling the beginning and end of period total amounts on the accompanying Consolidated Statements of Cash Flows. The effects of this standard were applied retrospectively to all prior periods presented. For the nine months ended September 30, 2017, the effect of the change in accounting principle was a decrease in cash provided by operating activities of approximately $0.5 million and an increase in cash used in investing activities of approximately $5.6 million on the accompanying Consolidated Statements of Cash Flows.
In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities (Subtopic 825-10). The amendments in ASU 2016-01 address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The standard primarily affects the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. ASU 2016-01 is effective for the annual periods beginning after December 31, 2017 and for annual periods and interim periods within those years, and the Company adopted this standard prospectively effective January 1, 2018. The adoption of this standard did not have a material effect on the Company's consolidated financial statements.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers(Topic 606). ASU 2014-09 is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. Additionally, the new revenue guidance requires improved disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company adopted this standard effective January 1, 2018 using the modified retrospective approach. The adoption of this standard did not have a material effect on the Company's consolidated financial statements.
New Accounting Standards Issued but not yet Adopted
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), and various subsequent ASU’s, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). Topic 842 supersedes the previous leases standard, Topic 840, Leases. The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. ASU 2016-02 is expected to impact the Company’s consolidated financial statements as the Company has certain operating and land lease arrangements for which it is the lessee, which will result in the recording of a right of use asset and the related lease liability. The standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. The new standard must be adopted using the modified retrospective transition method by recognizing a cumulative effect adjustment to the opening balance of cumulative dividends in excess of earnings, by either applying the new guidance at the beginning of the earliest comparative period or by applying the new guidance at the adoption date. The Company intends to adopt available practical expedients which allows the Company to 1) not reassess whether any expired or existing contracts are or contain leases; 2) not reassess the lease classification for any expired or existing leases; and 3) not reassess initial direct costs for any existing leases. The Company is currently in the process of evaluating the impact the adoption of ASU 2016-02 will have on the Company’s financial position or results of operations, and plans to adopt this standard effective January 1, 2019.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers(Topic 606), which the Company adopted on January 1, 2018, as discussedin “New Accounting Standards Adopted” above. While lease contracts with customers, which constitute a vast majority of the Company’s revenues, are specifically excluded from the model’s scope, once the new leases standard under ASU 2016-02 is adopted by the Company, the new revenue standard may apply to executory costs and other components of revenue due under leases that are deemed to be non-lease components (such as common area maintenance and provision of utilities), even when the revenue for such activities is not separately stipulated in the lease. In that case, revenue from these items previously recognized on a straight-line basis under current lease guidance would be recognized under the new revenue guidance as the related services are delivered. As a result, while the total revenue recognized over time would not differ under the new guidance, the recognition pattern may be different. In July 2018, the FASB issued ASU 2018-11 which amends Topic 842, Leases, and provides lessors with a practical expedient, by class of underlying asset, to not separate non-lease components from the associated lease component and, instead, to account for those components as a single component if the non-lease components otherwise would be accounted for under the new revenue guidance and both of the following are met: i) the timing and pattern of transfer of the non-lease component(s) and associated lease component are the same; and ii) the lease component, if accounted for separately, would be classified as an operating lease. Under this new expedient, if the non-lease components associated with the lease component are the predominant component of the combined component, a company should account for the combined component in accordance with Topic 606.606, Revenue from Contracts with Customers. Otherwise, the company should account for the combined component as an operating lease in accordance with Topic 842. In December 2018, the FASB issued ASU 2018-20 which amends Topic 842, Leases, and allows lessors to continue to exclude from revenue the lessor costs that are paid by lessees directly to third parties. The Company adopted Topic 842 on
January 1, 2019, using the practical expedient, and it did not have a material impact on the Company’s consolidated financial statements. The Company determined that for all leases where the Company is currentlythe lessor, that the timing and pattern of transfer of the non-lease components and associated lease components are the same, and that the lease components, if accounted for separately, would be classified as an operating lease. Accordingly, the Company has made an accounting policy election to recognize the combined component in accordance with Topic 842 as rental income on the accompanying Consolidated Statements of Operations.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), and various subsequent ASU’s, which set out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e. lessees and lessors). Topic 842 superseded the previous leases standard, Topic 840, Leases. The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification determines whether lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less are accounted for similar to the previous guidance for operating leases. The new standard requires lessors to account for leases using an approach that is substantially equivalent to the previous guidance for sales-type leases, direct financing leases and operating leases. ASU 2016-02 impacted the Company’s consolidated financial statements as the Company has ground leases and its corporate office lease for which it is the lessee, which resulted in the processrecording of evaluatinga right-of-use asset and the impactrelated lease liability.
The Company adopted ASU 2016-02 on January 1, 2019, using the modified retrospective transition method. The adoption of this standard resulted in a cumulative effect adjustment of approximately $0.2 million recorded as an increase to cumulative dividends in excess of earnings as of January 1, 2019 in the accompanying Consolidated Statements of Equity. The cumulative effect adjustment related to initial direct costs of leases where the Company is the lessor and that, as of January 1, 2019, had not begun to amortize and are no longer allowed to be capitalized under the new standard. On January 1, 2019, the Company recognized operating lease right-of-use assets of approximately $16.3 million and related operating lease liabilities of approximately $18.0 million on the accompanying Consolidated Balance Sheets, related to the leases where the Company is the lessee. The Company adopted the new standard using the practical expedient package which allowed the Company to (i) not reassess whether any expired or existing contracts are or contain leases; (ii) not reassess the lease classification for any expired or existing leases; and (iii) not reassess initial direct costs for any existing leases. This practical expedient allows the Company to continue to account for its ground leases as operating leases. Prospectively, any new or modified ground leases may be classified as a financing lease. The adoption of this standard by the Company has been applied as of January 1, 2019, and the comparative periods have not been restated.
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 operating right-of-use asset and lease liability for the Company’s existing operating leases upon the adoption of the new lease guidance, the Company was required to estimate an appropriate incremental borrowing rate on a fully-collateralized basis for the terms of the leases. The Company utilized a market-based approach to estimate the incremental borrowing rate for each individual lease. Since the terms under the ground leases are significantly longer than the terms of borrowings available to the Company on a fully-collateralized basis, the estimate of this rate required significant judgment, and considered factors such as yields on outstanding public debt and other market based pricing on longer duration financing instruments.
The new leases standard requires the Company to evaluate cash basis versus accrual basis of rental income recognition based on the collectability of future lease payments.
Reclassifications
Prior period amounts have been reclassified to conform to the current year presentation due to the adoption of ASU 2016-02 will have2016-02. Amounts previously classified as rental income and tenant recoveries in the prior period are now classified as rental income on the Company’s financial position or resultsaccompanying Consolidated Statements of operations, and plansOperations, as the Company has made an accounting policy election to adopt this standard effective January 1, 2019.combine these amounts that are accounted for under the new leases standard.
Certain other prior period amounts have been reclassified to conform to the current year presentation.
Restricted Cash
Restricted cash may include tenant security deposits and cash held in escrow for real estate taxes and capital improvements as required in various mortgage note agreements. Restricted cash also may include amounts held by the Company’s transfer agent for preferred stock dividends that are distributed subsequent to period end. 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) | | September 30, 2018 | | December 31, 2017 | Reconciliation of cash and cash equivalents and restricted cash (in thousands) | | September 30, 2019 | | December 31, 2018 | |
| Cash and cash equivalents | | $ | 6,024 |
| | $ | 24,562 |
| Cash and cash equivalents | | $ | 6,540 | | | $ | 7,968 | | |
| Restricted cash | | 5,231 |
| | 3,567 |
| Restricted cash | | 2,733 | | | 14,574 | | |
| Total cash and cash equivalents and restricted cash | | $ | 11,255 |
| | $ | 28,129 |
| Total cash and cash equivalents and restricted cash | | $ | 9,273 | | | $ | 22,542 | | |
Tenant Accounts Receivable,Taxes
Federal Income Taxes
The Company’s taxable REIT subsidiaries recognized net
As of September 30, 2018 and December 31, 2017, the Company had an allowance for doubtful accounts income (loss) of approximately $0.6$0, $0.3 million, $(22,000) and $0.1 million, respectively.
As of September 30, 2018 and December 31, 2017, the Company had accrued rental income, net of allowance of approximately $30.7 million and $24.7 million, respectively. As of September 30, 2018 and December 31, 2017, the Company had an allowance on accrued rental income of $0.2 million and $0.2 million, respectively.
As of September 30, 2018 and December 31, 2017, the Company had approximately $14.6 million and $12.7 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 September 30, 2018 and December 31, 2017, 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 September 30, 2018 and December 31, 2017, the Company's total liability associated with these lease security deposits was approximately $8.7 million and $8.1 million, respectively, and is included in tenant prepaid rent and security deposits on the accompanying Consolidated Balance Sheets.
Revenue Recognition
Tenant Recoveries
The Company estimates that 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, were approximately $3.8 million, $10.9 million, $2.9 million and $9.2$(0.1) million for the three and nine months ended September 30, 20182019 and 2017, respectively. These amounts would have been the maximum real estate tax expense of the Company, excluding any penalties or interest, had the tenants not met their contractual obligations for these periods.
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.
Taxes
Federal Income Taxes
The Company's taxable REIT subsidiaries recognized a net loss of approximately $22,000, $0.1 million, $0.2 million and $0.4 million for the three and nine months ended September 30, 2018, and 2017, respectively, which has been included on the accompanying Consolidated Statements of Operations.
State and Local Income, Excise, and Franchise Tax
State and local income, excise, and franchise taxes in the amount of $0.3 million, $0.9 million, $0.1 million $0.6 million, $0.3 million and $0.7$0.6 million have been recorded in other expenses on the accompanying Consolidated Statements of Operations for the three and nine months ended September 30, 20182019 and 2017,2018, respectively.
Uncertain Tax Positions
As of September 30, 20182019 and December 31, 2017,2018, there were no0 liabilities for uncertain tax positions.
Concentrations of Credit Risk
Management believes the current credit risk of the Company’s portfolio is reasonably well diversified and does not contain any unusual concentration of credit risk.
3. Rental Property
The following table summarizes the components of rental property as of September 30, 20182019 and December 31, 2017.2018.
| | | | | | | | | | | | | | |
| Rental Property (in thousands) | | September 30, 2019 | | December 31, 2018 |
| Land | | $ | 420,215 | | | $ | 364,023 | |
| Buildings, net of accumulated depreciation of $240,968 and $199,497, respectively | | 2,520,684 | | | 2,082,781 | |
| Tenant improvements, net of accumulated depreciation of $20,979 and $36,450, respectively | | 33,829 | | | 30,704 | |
| Building and land improvements, net of accumulated depreciation of $105,141 and $80,983, respectively | | 210,558 | | | 168,229 | |
| Construction in progress | | 23,695 | | | 3,949 | |
| Deferred leasing intangibles, net of accumulated amortization of $241,323 and $246,502, respectively | | 413,955 | | | 342,015 | |
| Total rental property, net | | $ | 3,622,936 | | | $ | 2,991,701 | |
|
| | | | | | | | |
| Rental Property (in thousands) | | September 30, 2018 | | December 31, 2017 |
| Land | | $ | 355,590 |
| | $ | 321,560 |
|
| Buildings, net of accumulated depreciation of $190,538 and $160,281, respectively | | 2,006,013 |
| | 1,756,579 |
|
| Tenant improvements, net of accumulated depreciation of $35,495 and $32,714, respectively | | 30,577 |
| | 30,138 |
|
| Building and land improvements, net of accumulated depreciation of $75,754 and $56,062, respectively | | 160,496 |
| | 143,170 |
|
| Construction in progress | | 5,669 |
| | 2,877 |
|
| Deferred leasing intangibles, net of accumulated amortization of $237,892 and $280,642, respectively | | 327,734 |
| | 313,253 |
|
| Total rental property, net | | $ | 2,886,079 |
| | $ | 2,567,577 |
|
Acquisitions
The following table summarizes the acquisitions of the Company during the three and nine months ended September 30, 2018.2019.
| | Market (1) | | Date Acquired | | Square Feet | | Buildings | | Purchase Price
(in thousands) | Market (1) | | Date Acquired | | Square Feet | | Buildings | | Purchase Price
(in thousands) |
| Cincinnati/Dayton, OH | | Cincinnati/Dayton, OH | | January 24, 2019 | | 176,000 | | | 1 | | | $ | 9,965 | |
| Pittsburgh, PA | | Pittsburgh, PA | | February 21, 2019 | | 455,000 | | | 1 | | | 28,676 | |
| Boston, MA | | Boston, MA | | February 21, 2019 | | 349,870 | | | 1 | | | 26,483 | |
| Minneapolis/St Paul, MN | | Minneapolis/St Paul, MN | | February 28, 2019 | | 248,816 | | | 1 | | | 21,955 | |
| Greenville/Spartanburg, SC | | January 11, 2018 | | 203,000 |
| | 1 |
| | $ | 10,755 |
| Greenville/Spartanburg, SC | | March 7, 2019 | | 331,845 | | | 1 | | | 24,536 | |
| Philadelphia, PA | | Philadelphia, PA | | March 7, 2019 | | 148,300 | | | 1 | | | 10,546 | |
| Omaha/Council Bluffs, NE-IA | | Omaha/Council Bluffs, NE-IA | | March 11, 2019 | | 237,632 | | | 1 | | | 20,005 | |
| Houston, TX | | Houston, TX | | March 28, 2019 | | 132,000 | | | 1 | | | 17,307 | |
| Baltimore, MD | | Baltimore, MD | | March 28, 2019 | | 167,410 | | | 1 | | | 13,648 | |
| Houston, TX | | Houston, TX | | March 28, 2019 | | 116,750 | | | 1 | | | 12,242 | |
| Three months ended March 31, 2019 | | Three months ended March 31, 2019 | | 2,363,623 | | | 10 | | | 185,363 | |
| Minneapolis/St Paul, MN | | January 26, 2018 | | 145,351 |
| | 1 |
| | 13,538 |
| Minneapolis/St Paul, MN | | April 2, 2019 | | 100,600 | | | 1 | | | 9,045 | |
| West Michigan, MI | | West Michigan, MI | | April 8, 2019 | | 230,200 | | | 1 | | | 15,786 | |
| Greensboro/Winston-Salem, NC | | Greensboro/Winston-Salem, NC | | April 12, 2019 | | 129,600 | | | 1 | | | 7,771 | |
| Greenville/Spartanburg, SC | | Greenville/Spartanburg, SC | | April 25, 2019 | | 319,660 | | | 2 | | | 15,432 | |
| Charleston/N Charleston, SC | | Charleston/N Charleston, SC | | April 29, 2019 | | 500,355 | | | 1 | | | 40,522 | |
| Houston, TX | | Houston, TX | | April 29, 2019 | | 128,136 | | | 1 | | | 13,649 | |
| Richmond, VA | | Richmond, VA | | May 16, 2019 | | 109,520 | | | 1 | | | 9,467 | |
| Laredo, TX | | Laredo, TX | | June 6, 2019 | | 213,982 | | | 1 | | | 18,972 | |
| Baton Rouge, LA | | Baton Rouge, LA | | June 18, 2019 | | 252,800 | | | 2 | | | 20,041 | |
| Philadelphia, PA | | February 1, 2018 | | 278,582 |
| | 1 |
| | 18,277 |
| Philadelphia, PA | | June 19, 2019 | | 187,569 | | | 2 | | | 13,645 | |
| Columbus, OH | | Columbus, OH | | June 28, 2019 | | 857,390 | | | 1 | | | 95,828 | |
| Three months ended June 30, 2019 | | Three months ended June 30, 2019 | | 3,029,812 | | | 14 | | | 260,158 | |
| Kansas City, MO | | Kansas City, MO | | July 10, 2019 | | 304,840 | | | 1 | | | 13,450 | |
| Houston, TX | | February 22, 2018 | | 242,225 |
| | 2 |
| | 22,478 |
| Houston, TX | | July 22, 2019 | | 199,903 | | | 1 | | | 11,287 | |
| Greenville/Spartanburg, SC | | March 30, 2018 | | 222,710 |
| | 1 |
| | 13,773 |
| |
| Three months ended March 31, 2018 | | 1,091,868 |
| | 6 |
| | 78,821 |
| |
| Chicago, IL | | April 23, 2018 | | 169,311 |
| | 2 |
| | 10,975 |
| |
| Charleston/N Charleston, SC | | Charleston/N Charleston, SC | | July 22, 2019 | | 88,583 | | | 1 | | | 7,166 | |
| Tampa, FL | | Tampa, FL | | August 5, 2019 | | 78,560 | | | 1 | | | 8,168 | |
| Philadelphia, PA | | Philadelphia, PA | | August 6, 2019 | | 120,000 | | | 1 | | | 10,880 | |
| Milwaukee/Madison, WI | | April 26, 2018 | | 53,680 |
| | 1 |
| | 4,316 |
| Milwaukee/Madison, WI | | August 16, 2019 | | 224,940 | | | 3 | | | 13,981 | |
| Houston, TX | | Houston, TX | | August 19, 2019 | | 45,000 | | | 1 | | | 6,190 | |
| West Michigan, MI | | West Michigan, MI | | August 19, 2019 | | 210,120 | | | 1 | | | 10,407 | |
| Pittsburgh, PA | | April 30, 2018 | | 175,000 |
| | 1 |
| | 15,380 |
| Pittsburgh, PA | | August 21, 2019 | | 410,389 | | | 1 | | | 31,219 | |
| Detroit, MI | | May 9, 2018 | | 274,500 |
| | 1 |
| | 19,328 |
| |
| Minneapolis/St Paul, MN | | May 15, 2018 | | 509,910 |
| | 2 |
| | 26,983 |
| |
| Cincinnati/Dayton, OH | | May 23, 2018 | | 158,500 |
| | 1 |
| | 7,317 |
| |
| Baton Rouge, LA | | May 31, 2018 | | 279,236 |
| | 1 |
| | 21,379 |
| |
| Boston, MA | | Boston, MA | | August 22, 2019 | | 80,100 | | | 1 | | | 14,253 | |
| Las Vegas, NV | | June 12, 2018 | | 122,472 |
| | 1 |
| | 17,920 |
| Las Vegas, NV | | August 27, 2019 | | 80,422 | | | 2 | | | 12,602 | |
| Greenville/Spartanburg, SC | | June 15, 2018 | | 131,805 |
| | 1 |
| | 5,621 |
| |
| Denver, CO | | June 18, 2018 | | 64,750 |
| | 1 |
| | 7,044 |
| |
| Cincinnati/Dayton, OH | | June 25, 2018 | | 465,136 |
| | 1 |
| | 16,421 |
| |
| Charlotte, NC | | June 29, 2018 | | 69,200 |
| | 1 |
| | 5,446 |
| |
| Houston, TX | | June 29, 2018 | | 252,662 |
| | 1 |
| | 27,170 |
| |
| Three months ended June 30, 2018 | | 2,726,162 |
| | 15 |
| | 185,300 |
| |
| Knoxville, TN | | July 10, 2018 | | 106,000 |
| | 1 |
| | 6,477 |
| |
| Nashville, TN | | Nashville, TN | | August 29, 2019 | | 348,880 | | | 1 | | | 20,267 | |
| Columbia, SC | | Columbia, SC | | August 30, 2019 | | 200,000 | | | 1 | | | 13,670 | |
| Pittsburgh, PA | | August 2, 2018 | | 265,568 |
| | 1 |
| | 19,186 |
| Pittsburgh, PA | | September 6, 2019 | | 138,270 | | | 1 | | | 9,323 | |
| Raleigh/Durham, NC | | August 2, 2018 | | 365,000 |
| | 1 |
| | 21,067 |
| |
| Detroit, MI | | August 6, 2018 | | 439,150 |
| | 1 |
| | 21,077 |
| |
| Des Moines, IA | | August 8, 2018 | | 121,922 |
| | 1 |
| | 6,053 |
| |
| McAllen/Edinburg/Pharr, TX | | August 9, 2018 | | 270,084 |
| | 1 |
| | 18,523 |
| |
| Omaha/Council Bluffs, NE-IA | | Omaha/Council Bluffs, NE-IA | | September 11, 2019 | | 128,200 | | | 2 | | | 8,509 | |
| Pittsburgh, PA | | August 15, 2018 | | 200,500 |
| | 1 |
| | 11,327 |
| Pittsburgh, PA | | September 16, 2019 | | 315,634 | | | 1 | | | 28,712 | |
| Minneapolis/St Paul, MN | | August 24, 2018 | | 120,606 |
| | 1 |
| | 8,422 |
| |
| Milwaukee/Madison, WI | | September 28, 2018 | | 100,800 |
| | 1 |
| | 7,484 |
| |
| Milwaukee/Madison, WI | | September 28, 2018 | | 174,633 |
| | 2 |
| | 13,288 |
| |
| Chicago, IL | | September 28, 2018 | | 105,637 |
| | 1 |
| | 6,368 |
| |
| Indianapolis, IN | | September 28, 2018 | | 478,721 |
| | 1 |
| | 29,085 |
| |
| Augusta/Richmond County, GA | | September 28, 2018 | | 203,726 |
| | 1 |
| | 9,379 |
| |
| Charlotte, NC | | September 28, 2018 | | 301,000 |
| | 1 |
| | 16,807 |
| |
| Three months ended September 30, 2018 | | 3,253,347 |
| | 15 |
| | 194,543 |
| |
| Nine months ended September 30, 2018 | | 7,071,377 |
| | 36 |
| | $ | 458,664 |
| |
| Memphis, TN | | Memphis, TN | | September 19, 2019 | | 1,135,453 | | | 1 | | | 50,941 | |
| Memphis, TN | | Memphis, TN | | September 26, 2019 | | 629,086 | | | 1 | | | 31,542 | |
| Three months ended September 30, 2019 | | Three months ended September 30, 2019 | | 4,738,380 | | | 22 | | | 302,567 | |
| Nine months ended September 30, 2019 | | Nine months ended September 30, 2019 | | 10,131,815 | | | 46 | | | $ | 748,088 | |
(1) As defined by CoStar Realty Information Inc.Inc (“CoStar”). If the building is located outside of a CoStar defined market, the city and state is reflected.
The following table summarizes the allocation of the consideration paid at the date of acquisition during the nine months ended September 30, 20182019 for the acquired assets and liabilities in connection with the acquisitions identified in the table above.
| | | Acquired Assets and Liabilities | | Purchase Price (in thousands) | | Weighted Average Amortization Period (years) of Intangibles at Acquisition | Acquired Assets and Liabilities | | Purchase Price (in thousands) | | Weighted Average Amortization Period (years) of Intangibles at Acquisition | |
| Land | | $ | 39,340 |
| | N/A | Land | | $ | 63,317 | | | N/A | |
| Buildings | | 317,293 |
| | N/A | Buildings | | 499,255 | | | N/A | |
| Tenant improvements | | 4,849 |
| | N/A | Tenant improvements | | 6,246 | | | N/A | |
| Building and land improvements | | 21,731 |
| | N/A | Building and land improvements | | 45,869 | | | N/A | |
| Construction in progress | | Construction in progress | | 2,032 | | | N/A | |
| Other assets | | Other assets | | 2,513 | | | N/A | |
| Deferred leasing intangibles - In-place leases | | 52,276 |
| | 8.7 | Deferred leasing intangibles - In-place leases | | 76,628 | | | 8.9 | |
| Deferred leasing intangibles - Tenant relationships | | 21,861 |
| | 11.8 | Deferred leasing intangibles - Tenant relationships | | 36,008 | | | 11.7 | |
| Deferred leasing intangibles - Above market leases | | 4,062 |
| | 8.2 | Deferred leasing intangibles - Above market leases | | 19,449 | | | 12.8 | |
| Deferred leasing intangibles - Below market leases | | (3,122 | ) | | 6.7 | Deferred leasing intangibles - Below market leases | | (3,229) | | | 6.9 | |
| Deferred leasing intangibles - Above market ground leases | | (178 | ) | | 48.1 | |
| Other assets | | 794 |
| | N/A | |
| Other liabilities | | (242 | ) | | N/A | |
| | Total purchase price | | $ | 458,664 |
| | | Total purchase price | | $ | 748,088 | | | | |
|
The following table below sets forthsummarizes the results of operations for the three and nine months ended September 30, 20182019 for the buildings acquired during the nine months ended September 30, 20182019 included in the Company’s Consolidated Statements of Operations from the date of acquisition.
| | | Results of Operations (in thousands) | | Three months ended September 30, 2018 | | Nine months ended September 30, 2018 | Results of Operations (in thousands) | | Three months ended September 30, 2019 | | Nine months ended September 30, 2019 |
| Total revenue | | $ | 7,122 |
| | $ | 11,156 |
| Total revenue | | $ | 10,616 | | | $ | 17,307 | |
| Net income | | $ | 1,556 |
| | $ | 1,642 |
| Net income | | | $ | 2,173 | | | $ | 2,985 | |
Dispositions
During the nine months ended September 30, 2018,2019, the Company sold 116 buildings and 2 land parcels comprised of approximately 2.01.1 million rentable square feet with a net book value of approximately $57.1$20.4 million to third parties. These buildings and land parcels contributed approximately $0.1$20,000, $0.8 million, $2.7 million, $2.6$1.5 million, and $7.7$5.3 million to revenue for the three and nine months ended September 30, 20182019 and 2017,2018, respectively. These buildings and land parcels contributed approximately $5,000, $0.1$(0.1) million, $(0.2) million, $0.5 million, and $1.4$0.9 million to net income (loss) (exclusive of loss on involuntary conversion, loss on impairments and gain on the sales of rental property, net) for the three and nine months ended September 30, 20182019 and 2017,2018, respectively. Net proceeds from the sales of rental property were approximately $89.4$23.7 million and the Company recognized the full gain on the sales of rental property, net, of approximately $32.3$3.3 million for the nine months ended September 30, 2018.2019.
Loss on Impairments
The following table summarizes the Company'sCompany’s loss on impairments for assets held and used during the nine months ended September 30, 2018.2019.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Market(1) | | Buildings | | Event or Change in Circumstance Leading to Impairment Evaluation(2) | | Valuation technique utilized to estimate fair value | | Fair Value(3) | | Loss on Impairments |
| | | | | | | | (in thousands) | | |
Rapid City, SD(4) | | 1 | | | Change in estimated hold period | (5) | Discounted cash flows | (6) | | | |
| Three months ended March 31, 2019 | | | | | | | | $ | 4,373 | | | $ | 5,344 | |
Belfast, ME(4) | | 5 | | | Market leasing conditions | | Discounted cash flows | (7) | | | |
| Three months ended September 30, 2019 | | | | | | | | $ | 5,950 | | | $ | 4,413 | |
| Nine months ended September 30, 2019 | | | | | | | | $ | 10,323 | | | $ | 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. Level 3 is defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
(4)Flex/office buildings.
(5)This property was sold during the three months ended September 30, 2019.
(6)Level 3 inputs used to determine fair value for the property impaired for the three months ended March 31, 2019: discount rate of 12.0% and exit capitalization rate of 12.0%.
(7)Level 3 inputs used to determine fair value for the property impaired for the three months ended September 30, 2019: discount rate of 13.0% and exit capitalization rate of 12.0%.
|
| | | | | | | | | | | | | | |
Market (1) | | Buildings | | Event or Change in Circumstance Leading to Impairment Evaluation(2) | | Valuation technique utilized to estimate fair value | | Fair Value(3) | | Loss on Impairments |
| (in thousands) |
Buena Vista, VA(4) | | 1 | | Change in estimated hold period | (5) | Discounted cash flows | (6) | | | |
Sergeant Bluff, IA(4) | | 1 | | Change in estimated hold period | (5) | Discounted cash flows | (6) | | | |
| Three months ended March 31, 2018 | | | | $ | 3,176 |
| | $ | 2,934 |
|
| Nine months ended September 30, 2018 | | | | $ | 3,176 |
| | $ | 2,934 |
|
| |
(1) | As defined by CoStar Realty Information Inc. |
| |
(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 assets held and used is based on Level 3 inputs and is a non-recurring fair value measurement. Level 3 is defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. |
| |
(4) | These buildings do not have markets as defined by CoStar Realty Information Inc. |
| |
(5) | This property was sold during the nine months ended September 30, 2018. |
| |
(6) | Level 3 inputs used to determine fair value for the impaired assets held and used for the three months ended March 31, 2018: discount rates ranged from 11.0% to 14.5% and exit capitalization rates ranged from 11.0% to 13.0%. |
Deferred Leasing Intangibles
The following table sets forthsummarizes the deferred leasing intangibles on the accompanying Consolidated Balance Sheets as of September 30, 20182019 and December 31, 2017.2018.
| | | | | September 30, 2018 | | December 31, 2017 | | September 30, 2019 | | | December 31, 2018 | |
| Deferred Leasing Intangibles (in thousands) | | Gross | | Accumulated Amortization | | Net | | Gross | | Accumulated Amortization | | Net | Deferred Leasing Intangibles (in thousands) | | Gross | | | Accumulated Amortization | | | Net | | Gross | | Accumulated Amortization | | Net |
| Above market leases | | $ | 70,454 |
| | $ | (31,663 | ) | | $ | 38,791 |
| | $ | 78,558 |
| | $ | (36,810 | ) | | $ | 41,748 |
| Above market leases | | $ | 88,388 | | | $ | (33,439) | | | $ | 54,949 | | | $ | 73,122 | | | $ | (31,059) | | | $ | 42,063 | |
| Other intangible lease assets | | 495,172 |
| | (206,229 | ) | | 288,943 |
| | 515,337 |
| | (243,832 | ) | | 271,505 |
| Other intangible lease assets | | 566,890 | | | (207,884) | | | 359,006 | | | 515,395 | | | (215,443) | | | 299,952 | |
| Total deferred leasing intangible assets | | $ | 565,626 |
| | $ | (237,892 | ) | | $ | 327,734 |
| | $ | 593,895 |
| | $ | (280,642 | ) | | $ | 313,253 |
| Total deferred leasing intangible assets | | $ | 655,278 | | | $ | (241,323) | | | $ | 413,955 | | | $ | 588,517 | | | $ | (246,502) | | | $ | 342,015 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Below market leases | | $ | 33,751 |
| | $ | (13,043 | ) | | $ | 20,708 |
| | $ | 34,776 |
| | $ | (13,555 | ) | | $ | 21,221 |
| Below market leases | | $ | 31,496 | | | $ | (11,259) | | | $ | 20,237 | | | $ | 34,331 | | | $ | (12,764) | | | $ | 21,567 | |
| Total deferred leasing intangible liabilities | | $ | 33,751 |
| | $ | (13,043 | ) | | $ | 20,708 |
| | $ | 34,776 |
| | $ | (13,555 | ) | | $ | 21,221 |
| Total deferred leasing intangible liabilities | | $ | 31,496 | | | $ | (11,259) | | | $ | 20,237 | | | $ | 34,331 | | | $ | (12,764) | | | $ | 21,567 | |
The following table sets forthsummarizes the amortization expense and the net decrease to rental income for the amortization of deferred leasing intangibles during the three and nine months ended September 30, 20182019 and 2017.2018.
| | | | | Three months ended September 30, | | Nine months ended September 30, | | | Three months ended September 30, | | | Nine months ended September 30, | |
| Deferred Leasing Intangibles Amortization (in thousands) | | 2018 | | 2017 | | 2018 | | 2017 | Deferred Leasing Intangibles Amortization (in thousands) | | 2019 | | 2018 | | 2019 | | 2018 |
| Net decrease to rental income related to above and below market lease amortization | | $ | 1,150 |
| | $ | 1,318 |
| | $ | 3,206 |
| | $ | 3,873 |
| Net decrease to rental income related to above and below market lease amortization | | $ | 1,248 | | | $ | 1,150 | | | $ | 3,361 | | | $ | 3,206 | |
| Amortization expense related to other intangible lease assets | | $ | 20,361 |
| | $ | 17,934 |
| | $ | 56,698 |
| | $ | 53,747 |
| Amortization expense related to other intangible lease assets | | $ | 18,472 | | | $ | 20,361 | | | $ | 53,185 | | | $ | 56,698 | |
The following table sets forthsummarizes the amortization of deferred leasing intangibles over the next five calendar years beginning with 20182019 as of September 30, 2018.2019.
| | | | | | | | | | | | | | |
| Year | | Amortization Expense Related to Other Intangible Lease Assets (in thousands) | | Net Decrease to Rental Income Related to Above and Below Market Lease Amortization (in thousands) |
| Remainder of 2019 | | $ | 18,698 | | | $ | 1,283 | |
| 2020 | | $ | 66,090 | | | $ | 4,870 | |
| 2021 | | $ | 54,264 | | | $ | 3,559 | |
| 2022 | | $ | 45,234 | | | $ | 2,657 | |
| 2023 | | $ | 37,492 | | | $ | 2,608 | |
|
| | | | | | | | |
| Year | | Amortization Expense Related to Other Intangible Lease Assets (in thousands) | | Net Decrease to Rental Income Related to Above and Below Market Lease Amortization (in thousands) |
| Remainder of 2018 | | $ | 17,263 |
| | $ | 927 |
|
| 2019 | | $ | 57,841 |
| | $ | 3,926 |
|
| 2020 | | $ | 47,750 |
| | $ | 3,546 |
|
| 2021 | | $ | 37,229 |
| | $ | 2,163 |
|
| 2022 | | $ | 29,690 |
| | $ | 1,154 |
|
4. Debt
The following table sets forth a summary ofsummarizes the Company’s outstanding indebtedness, including borrowings under the Company’s unsecured credit facility, unsecured term loans, unsecured notes, and mortgage notes as of September 30, 20182019 and December 31, 2017.2018.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Loan | | Principal Outstanding as of September 30, 2019 (in thousands) | | Principal Outstanding as of December 31, 2018 (in thousands) | | Interest Rate (1)(2) | | Maturity Date | | | Prepayment Terms (3) |
| Unsecured credit facility: | | | | | | | | | | |
Unsecured Credit Facility (4) | | $ | 78,000 | | | $ | 100,500 | | | L + 0.90% | | | January 15, 2023 | | i |
| Total unsecured credit facility | | 78,000 | | | 100,500 | | | | | | | | |
| | | | | | | | | | |
| Unsecured term loans: | | | | | | | | | | | |
| Unsecured Term Loan C | | 150,000 | | | 150,000 | | | 2.39 | % | | September 29, 2020 | | i |
| Unsecured Term Loan B | | 150,000 | | | 150,000 | | | 3.05 | % | | March 21, 2021 | | i |
| Unsecured Term Loan A | | 150,000 | | | 150,000 | | | 2.70 | % | | March 31, 2022 | | i |
| Unsecured Term Loan D | | 150,000 | | | 150,000 | | | 2.85 | % | | January 4, 2023 | | i |
| Unsecured Term Loan E | | 175,000 | | | — | | | 3.92 | % | | January 15, 2024 | | i |
Unsecured Term Loan F (5) | | — | | | — | | | 3.11 | % | | January 12, 2025 | | i |
| Total unsecured term loans | | 775,000 | | | 600,000 | | | | | | | |
| Less: Total unamortized deferred financing fees and debt issuance costs | | (3,963) | | | (3,640) | | | | | | | |
| Total carrying value unsecured term loans, net | | 771,037 | | | 596,360 | | | | | | | | |
| | | | | | | | | | |
| Unsecured notes: | | | | | | | | | | | |
| Series F Unsecured Notes | | 100,000 | | | 100,000 | | | 3.98 | % |
| January 5, 2023 | | ii |
| Series A Unsecured Notes | | 50,000 | | | 50,000 | | | 4.98 | % | | October 1, 2024 | | ii |
| Series D Unsecured Notes | | 100,000 | | | 100,000 | | | 4.32 | % | | February 20, 2025 | | ii |
| Series G Unsecured Notes | | 75,000 | | | 75,000 | | | 4.10 | % | | June 13, 2025 | | ii |
| Series B Unsecured Notes | | 50,000 | | | 50,000 | | | 4.98 | % | | July 1, 2026 | | ii |
| Series C Unsecured Notes | | 80,000 | | | 80,000 | | | 4.42 | % | | December 30, 2026 | | ii |
| Series E Unsecured Notes | | 20,000 | | | 20,000 | | | 4.42 | % | | February 20, 2027 | | ii |
| Series H Unsecured Notes | | 100,000 | | | 100,000 | | | 4.27 | % | | June 13, 2028 | | ii |
| Total unsecured notes | | 575,000 | | | 575,000 | | | |
| | | |
| Less: Total unamortized deferred financing fees and debt issuance costs | | (2,217) | | | (2,512) | | | |
| | | |
| Total carrying value unsecured notes, net | | 572,783 | | | 572,488 | | | | |
| | | |
| | | | | | |
| | | |
| Mortgage notes (secured debt): | | | | | | | | |
| | | |
| Wells Fargo Bank, National Association CMBS Loan | | 51,861 | | | 53,216 | | | | 4.31 | % | | December 1, 2022 | | iii |
| Thrivent Financial for Lutherans | | 3,709 | | | 3,795 | | | 4.78 | % | | December 15, 2023 | | iv |
| Total mortgage notes | | 55,570 | | | 57,011 | | | | | | | | |
| Add: Total unamortized fair market value premiums | | 42 | | | 50 | | | | | | | |
| Less: Total unamortized deferred financing fees and debt issuance costs | | (402) | | | (501) | | | | | | | |
| Total carrying value mortgage notes, net | | 55,210 | | | 56,560 | | | | | | | |
Total / weighted average interest rate (6) | | $ | 1,477,030 | | | $ | 1,325,908 | | | 3.58 | % | | | | |
(1)Interest rate as of September 30, 2019. At September 30, 2019, the one-month LIBOR (“L”) was 2.01563%. 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)As of September 30, 2019, one-month LIBOR for the Unsecured Term Loans A, B, C, D, E, and F was swapped to a fixed rate of 1.70%, 2.05%, 1.39%, 1.85%, 2.92%, and 2.11%, respectively.
(3)Prepayment terms consist of (i) pre-payable with no penalty; (ii) pre-payable with penalty; (iii) pre-payable without penalty three months prior to the maturity date, however can be defeased; and (iv) pre-payable without penalty three months prior to the maturity date.
(4)The capacity of the unsecured credit facility is $500.0 million. Deferred financing fees and debt issuance costs, net of accumulated amortization related to the unsecured credit facility of approximately $2.6 million and $3.2 million is included in prepaid expenses and other assets on the accompanying Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018, respectively.
(5)Capacity of $200.0 million, which the Company has until July 12, 2020 to draw.
(6)The weighted average interest rate was calculated using the fixed interest rate swapped on the notional amount of $775.0 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.
|
| | | | | | | | | | | | | | | |
| Loan |
| Principal Outstanding as of September 30, 2018 (in thousands) | | Principal Outstanding as of December 31, 2017 (in thousands) | | Interest
Rate (1) | | Maturity Date | | Prepayment Terms (2) |
| Unsecured credit facility: |
|
| |
| |
|
|
|
|
|
Unsecured Credit Facility (3) |
| $ | 95,000 |
| | $ | 271,000 |
| | L + 1.05% |
|
| Jan-15-2023 |
| i |
| Total unsecured credit facility |
| 95,000 |
| | 271,000 |
| | |
|
| |
| |
| |
|
| |
| |
|
|
|
|
|
| Unsecured term loans: |
| |
| |
|
| | |
|
| |
| |
| Unsecured Term Loan C |
| 150,000 |
| | 150,000 |
| | L + 1.30% |
|
| Sep-29-2020 |
| i |
| Unsecured Term Loan B |
| 150,000 |
| | 150,000 |
| | L + 1.30% |
|
| Mar-21-2021 |
| i |
| Unsecured Term Loan A |
| 150,000 |
| | 150,000 |
| | L + 1.30% |
|
| Mar-31-2022 |
| i |
| Unsecured Term Loan D | | 150,000 |
| | — |
| | L + 1.30% |
| | Jan-04-2023 | | i |
Unsecured Term Loan E (4) | | — |
| | — |
| | L + 1.20% |
| | Jan-15-2024 | | i |
| Total unsecured term loans |
| 600,000 |
| | 450,000 |
| |
|
|
|
|
|
|
| Less: Total unamortized deferred financing fees and debt issuance costs |
| (3,915 | ) | | (3,735 | ) | |
|
|
|
|
|
|
| Total carrying value unsecured term loans, net |
| 596,085 |
| | 446,265 |
| | |
|
| |
| |
| |
|
| |
| |
|
|
|
|
|
| Unsecured notes: |
| |
| |
|
| | |
|
| |
| |
| Series F Unsecured Notes |
| 100,000 |
| | 100,000 |
| | 3.98 | % |
| Jan-05-2023 |
| ii |
| Series A Unsecured Notes |
| 50,000 |
| | 50,000 |
| | 4.98 | % |
| Oct-1-2024 |
| ii |
| Series D Unsecured Notes |
| 100,000 |
| | 100,000 |
| �� | 4.32 | % |
| Feb-20-2025 |
| ii |
| Series G Unsecured Notes | | 75,000 |
| | — |
| | 4.10 | % | | Jun-13-2025 | | ii |
| Series B Unsecured Notes |
| 50,000 |
| | 50,000 |
| | 4.98 | % |
| Jul-1-2026 |
| ii |
| Series C Unsecured Notes |
| 80,000 |
| | 80,000 |
| | 4.42 | % |
| Dec-30-2026 |
| ii |
| Series E Unsecured Notes |
| 20,000 |
| | 20,000 |
| | 4.42 | % |
| Feb-20-2027 |
| ii |
| Series H Unsecured Notes | | 100,000 |
| | — |
| | 4.27 | % | | Jun-13-2028 | | ii |
| Total unsecured notes |
| 575,000 |
| | 400,000 |
| |
|
|
|
|
|
|
| Less: Total unamortized deferred financing fees and debt issuance costs |
| (2,611 | ) | | (1,766 | ) | |
|
|
|
|
|
|
| Total carrying value unsecured notes, net |
| 572,389 |
| | 398,234 |
| | |
|
| |
| |
| |
|
| |
| |
|
|
|
|
|
| Mortgage notes (secured debt): |
| |
| |
|
| | |
|
| |
| |
| Wells Fargo Bank, National Association CMBS Loan |
| 53,652 |
| | 54,949 |
| | 4.31 | % |
| Dec-1-2022 |
| iii |
| Thrivent Financial for Lutherans | | 3,824 |
| | 3,906 |
| | 4.78 | % | | Dec-15-2023 | | iv |
| Total mortgage notes |
| 57,476 |
| | 58,855 |
| | |
|
|
|
|
|
| Add: Total unamortized fair market value premiums |
| 52 |
| | 61 |
| | |
|
|
|
|
|
Less: Total unamortized deferred financing fees and debt issuance costs |
| (535 | ) | | (634 | ) | |
|
|
|
|
|
|
| Total carrying value mortgage notes, net |
| 56,993 |
| | 58,282 |
| | |
|
|
|
|
|
Total / weighted average interest rate (5) |
| $ | 1,320,467 |
| | $ | 1,173,781 |
| | 3.69 | % |
|
|
|
|
| |
(1) | Interest rate as of September 30, 2018. At September 30, 2018, the one-month LIBOR (“L”) was 2.26056%. The interest rate is not adjusted to include the amortization of deferred financing fees or debt issuance costs incurred in obtaining debt or any unamortized fair market value premiums. The spread over the applicable rate for the Company's unsecured credit facility and unsecured term loans is based on the Company's consolidated leverage ratio, as defined in the respective loan agreements. |
| |
(2) | 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 beginning January 1, 2016; and (iv) pre-payable without penalty three months prior to the maturity date. |
| |
(3) | The capacity of the unsecured credit facility is $500.0 million. Deferred financing fees and debt issuance costs, net of accumulated amortization related to the unsecured credit facility of approximately $3.4 million and $1.5 million is included in prepaid expenses and other assets on the accompanying Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017, respectively. |
| |
(4) | Capacity of $175.0 million, which the Company has until July 25, 2019 to draw. |
| |
(5) | The weighted average interest rate was calculated using the fixed interest rate swapped on the notional amount of $600.0 million of debt that was in effect as of September 30, 2018, 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. |
The aggregate undrawn nominal commitment on the unsecured credit facility and unsecured term loans as of September 30, 20182019 was approximately $574.4$616.0 million, including issued letters of credit. The Company'sCompany’s actual borrowing capacity at any given point in time may be less and is restricted to a maximum amount based on the Company'sCompany’s debt covenant compliance. Total accrued interest for the Company'sCompany’s indebtedness was approximately $7.7$7.6 million and $5.6$5.9 million as of September 30, 20182019 and December 31, 2017,2018, respectively, and is included in accounts payable, accrued expenses and other liabilities on the accompanying Consolidated Balance Sheets.
The following table below sets forthsummarizes the costs included in interest expense related to the Company'sCompany’s debt arrangements on the accompanying Consolidated Statement of Operations for the three and nine months ended September 30, 20182019 and 2017.2018.
| | | | | Three months ended September 30, | | Nine months ended September 30, | | Three months ended September 30, | | | Nine months ended September 30, | |
| Costs Included in Interest Expense (in thousands) | | 2018 | | 2017 | | 2018 | | 2017 | Costs Included in Interest Expense (in thousands) | | 2019 | | 2018 | | 2019 | | 2018 |
| Amortization of deferred financing fees and debt issuance costs and fair market value premiums | | $ | 617 |
| | $ | 546 |
| | $ | 1,698 |
| | $ | 1,553 |
| Amortization of deferred financing fees and debt issuance costs and fair market value premiums | | $ | 673 | | | $ | 617 | | | $ | 1,909 | | | $ | 1,698 | |
| Facility fees and unused fees | | $ | 275 |
| | $ | 286 |
| | $ | 928 |
| | $ | 839 |
| |
| Facility, unused, and other fees | | Facility, unused, and other fees | | $ | 348 | | | $ | 275 | | | $ | 1,118 | | | $ | 928 | |
On July 26, 2018,25, 2019, the Company closeddrew $175.0 million of the $175.0 million Unsecured Term Loan E that was entered into on July 26, 2018.
On July 12, 2019, the refinancing of itsCompany entered into the $200.0 million unsecured credit facility. The refinancing transaction included extending the maturity date to January 15, 2023, increasing the capacity to $500.0 million, and reducing the annual interest rate.Unsecured Term Loan F. As of September 30, 2018, the interest rate on the unsecured credit facility was LIBOR plus a spread of 1.05% based on the Company’s consolidated leverage ratio, as defined in the credit agreement. The Company recognized a loss of approximately $13,000 as a result of the acceleration of unamortized deferred financing fees, which is included in loss on extinguishment of debt in the accompanying Consolidated Statements of Operations. The remaining unamortized deferred financing fees were carried over and will be amortized with any new deferred financing fees through the new maturity date of the unsecured credit facility. As of September 30, 2018, the unsecured credit facility has an annual facility fee of 0.15% based on the Company’s consolidated leverage ratio, as defined in the credit agreement, of total commitments that is due and payable quarterly. The Company also is required to pay an annual fee of $50,000.
On July 26, 2018, the Company entered into a $175.0 million unsecured term loan agreement ("Unsecured Term Loan E"). As of September 30, 2018,2019, the interest rate on the Unsecured Term Loan EF was LIBOR plus a spread of 1.20%1.00% based on the Company's consolidated leverage ratio,Company’s debt rating, as defined in the loan agreement. Unless otherwise terminated pursuant to the loan agreement, the Unsecured Term Loan EF will mature on January 15, 2024.12, 2025. The Unsecured Term Loan EF has an accordiona feature that allows the Company to request an increase its borrowing capacityin the aggregate size of the unsecured term loan of up to $350.0$400.0 million, subject to the satisfaction of certain conditions and lender consents. The agreement includes a delayed draw feature that allows the Company to draw up to six6 advances of at least $25.0 million each until July 25, 2019.12, 2020. To the extent that the Company does not request advances of the $175.0$200.0 million of aggregate commitments by July 25, 2019,12, 2020, the unadvanced commitments terminate. The Unsecured Term Loan EF has an unused commitment fee equal to 0.15% of its unused commitments, which began to accrue on October 24, 201810, 2019 and is due and payable monthly until the earlier of (i) the date that aggregate commitments of $175.0$200.0 million have been fully advanced, (ii) July 26, 2019,12, 2020, and (iii) the date that aggregate commitments of $175.0 million have been reduced to zero pursuant to the terms of the agreement. The Company also is required to pay an annual administrative agent fee of $35,000. The Company and certain wholly owned subsidiaries of the Operating Partnership are guarantors of the Unsecured Term Loan E.F. The agreement also contains financial and other covenants substantially similar to the covenants in the Company's unsecured credit facility.
On July 26, 2018, the Company entered into amendments to its unsecured term loan agreements to conform certain provisions to As of September 30, 2019, no amounts were outstanding under the Unsecured Term Loan E agreement and the new unsecured credit facility agreement.F.
On April 10, 2018, the Company entered into a note purchase agreement (“NPA”) for the private placement by the Operating Partnership of $75.0 million senior unsecured notes (“Series G Unsecured Notes”) maturing June 13, 2025 with a fixed annual interest rate of 4.10%, and $100.0 million senior unsecured notes (“Series H Unsecured Notes”) maturing June 13, 2028 with a fixed annual interest rate of 4.27%. The NPA contains a number of financial covenants substantially similar to the financial covenants contained in the Company’s unsecured credit facility and other unsecured notes. The Operating Partnership issued the Series G Unsecured Notes and the Series H Unsecured Notes on June 13, 2018. In addition, on April 10, 2018, the Company entered into amendments to the note purchase agreements related to the Company’s outstanding unsecured notes to conform certain provisions in the agreements to the provisions in the NPA.
On March 28, 2018, the Company drew $75.0 million of the $150.0 million unsecured term loan that was entered into on July 28, 2017. On July 27, 2018, the Company drew the remaining $75.0 million of the $150.0 million unsecured term loan.
Financial Covenant Considerations
The Company was in compliance with all financial and other covenants as of September 30, 20182019 and December 31, 20172018 related to its unsecured credit facility, unsecured term loans, unsecured notes, and mortgage notes. The real estate net book value of the properties that are collateral for the Company’s debt arrangements was approximately $88.4$86.0 million and $90.9$88.2 million at September 30, 20182019 and December 31, 2017,2018, respectively, and is limited to senior, property-level secured debt financing arrangements.
Fair Value of Debt
The following table presentssummarizes the aggregate principal outstanding under the Company’s debt arrangements and the corresponding estimate of fair value as of September 30, 20182019 and December 31, 2017 (in thousands).2018.
| | | | | | | | | | | | | September 30, 2019 | | | December 31, 2018 | |
| | | September 30, 2018 | | December 31, 2017 | |
| | | Principal Outstanding | | Fair Value | | Principal Outstanding | | Fair Value | |
| Indebtedness (in thousands) | | Indebtedness (in thousands) | | Principal Outstanding | | Fair Value | | Principal Outstanding | | Fair Value |
| Unsecured credit facility | | $ | 95,000 |
| | $ | 95,000 |
| | $ | 271,000 |
| | $ | 271,528 |
| Unsecured credit facility | | $ | 78,000 | | | $ | 78,000 | | | $ | 100,500 | | | $ | 100,500 | |
| Unsecured term loans | | 600,000 |
| | 607,663 |
| | 450,000 |
| | 451,463 |
| Unsecured term loans | | 775,000 | | | 775,000 | | | 600,000 | | | 600,000 | |
| Unsecured notes | | 575,000 |
| | 569,493 |
| | 400,000 |
| | 415,599 |
| Unsecured notes | | 575,000 | | | 618,594 | | | 575,000 | | | 585,292 | |
| Mortgage notes | | 57,476 |
| | 57,608 |
| | 58,855 |
| | 59,769 |
| Mortgage notes | | 55,570 | | | 56,627 | | | 57,011 | | | 57,289 | |
| Total principal amount | | 1,327,476 |
| | $ | 1,329,764 |
| | 1,179,855 |
| | $ | 1,198,359 |
| Total principal amount | | 1,483,570 | | | $ | 1,528,221 | | | 1,332,511 | | | $ | 1,343,081 | |
| Add: Total unamortized fair market value premiums | | 52 |
| | | | 61 |
| | | Add: Total unamortized fair market value premiums | | 42 | | | | | 50 | | | |
| Less: Total unamortized deferred financing fees and debt issuance costs | | (7,061 | ) | | | | (6,135 | ) | | | Less: Total unamortized deferred financing fees and debt issuance costs | | (6,582) | | | (6,653) | | |
| Total carrying value | | $ | 1,320,467 |
| | | | $ | 1,173,781 |
| | | Total carrying value | | $ | 1,477,030 | | | $ | 1,325,908 | | |
The applicable fair value guidance establishes a three tier value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. The fair value of the Company’s debt is based on Level 3 inputs.
5. Use of 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 detailssummarizes the Company’s outstanding interest rate swaps as of September 30, 2018.2019. All of the Company’s interest rate swaps are designated as qualifying cash flow hedges.
| | Interest Rate
Derivative Counterparty | | Trade Date | | Effective Date | | Notional Amount
(in thousands) | | Fair Value
(in thousands) | | Pay Fixed Interest Rate | | Receive Variable Interest Rate | | Maturity Date | Interest Rate
Derivative Counterparty | | Trade Date | | Effective Date | | Notional Amount
(in thousands) | | | Fair Value
(in thousands) | | Pay Fixed Interest Rate | | Receive Variable Interest Rate | | Maturity Date |
| Regions Bank | | Mar-01-2013 | | Mar-01-2013 | | $ | 25,000 |
| | $ | 471 |
| | 1.3300 | % | | One-month L | | Feb-14-2020 | Regions Bank | | Mar-01-2013 | | Mar-01-2013 | | | $ | 25,000 | | | $ | 51 | | | 1.3300 | % | | One-month L | | Feb-14-2020 |
| Capital One, N.A. | | Jun-13-2013 | | Jul-01-2013 | | $ | 50,000 |
| | $ | 703 |
| | 1.6810 | % | | One-month L | | Feb-14-2020 | Capital One, N.A. | | Jun-13-2013 | | Jul-01-2013 | | | $ | 50,000 | | | $ | 35 | | | 1.6810 | % | | One-month L | | Feb-14-2020 |
| Capital One, N.A. | | Jun-13-2013 | | Aug-01-2013 | | $ | 25,000 |
| | $ | 344 |
| | 1.7030 | % | | One-month L | | Feb-14-2020 | Capital One, N.A. | | Jun-13-2013 | | Aug-01-2013 | | | $ | 25,000 | | | $ | 16 | | | 1.7030 | % | | One-month L | | Feb-14-2020 |
| Regions Bank | | Sep-30-2013 | | Feb-03-2014 | | $ | 25,000 |
| | $ | 245 |
| | 1.9925 | % | | One-month L | | Feb-14-2020 | Regions Bank | | Sep-30-2013 | | Feb-03-2014 | | | $ | 25,000 | | | $ | (12) | | | 1.9925 | % | | One-month L | | Feb-14-2020 |
| The Toronto-Dominion Bank | | Oct-14-2015 | | Sep-29-2016 | | $ | 25,000 |
| | $ | 700 |
| | 1.3830 | % | | One-month L | | Sep-29-2020 | The Toronto-Dominion Bank | | Oct-14-2015 | | Sep-29-2016 | | | $ | 25,000 | | | $ | 66 | | | 1.3830 | % | | One-month L | | Sep-29-2020 |
| PNC Bank, N.A. | | Oct-14-2015 | | Sep-29-2016 | | $ | 50,000 |
| | $ | 1,391 |
| | 1.3906 | % | | One-month L | | Sep-29-2020 | PNC Bank, N.A. | | Oct-14-2015 | | Sep-29-2016 | | | $ | 50,000 | | | $ | 128 | | | 1.3906 | % | | One-month L | | Sep-29-2020 |
| Regions Bank | | Oct-14-2015 | | Sep-29-2016 | | $ | 35,000 |
| | $ | 978 |
| | 1.3858 | % | | One-month L | | Sep-29-2020 | Regions Bank | | Oct-14-2015 | | Sep-29-2016 | | | $ | 35,000 | | | $ | 91 | | | 1.3858 | % | | One-month L | | Sep-29-2020 |
| U.S. Bank, N.A. | | Oct-14-2015 | | Sep-29-2016 | | $ | 25,000 |
| | $ | 695 |
| | 1.3950 | % | | One-month L | | Sep-29-2020 | U.S. Bank, N.A. | | Oct-14-2015 | | Sep-29-2016 | | | $ | 25,000 | | | $ | 63 | | | 1.3950 | % | | One-month L | | Sep-29-2020 |
| Capital One, N.A. | | Oct-14-2015 | | Sep-29-2016 | | $ | 15,000 |
| | $ | 417 |
| | 1.3950 | % | | One-month L | | Sep-29-2020 | Capital One, N.A. | | Oct-14-2015 | | Sep-29-2016 | | | $ | 15,000 | | | $ | 38 | | | 1.3950 | % | | One-month L | | Sep-29-2020 |
| Royal Bank of Canada | | Jan-08-2015 | | Mar-20-2015 | | $ | 25,000 |
| | $ | 684 |
| | 1.7090 | % | | One-month L | | Mar-21-2021 | Royal Bank of Canada | | Jan-08-2015 | | Mar-20-2015 | | | $ | 25,000 | | | $ | (56) | | | 1.7090 | % | | One-month L | | Mar-21-2021 |
| The Toronto-Dominion Bank | | Jan-08-2015 | | Mar-20-2015 | | $ | 25,000 |
| | $ | 682 |
| | 1.7105 | % | | One-month L | | Mar-21-2021 | The Toronto-Dominion Bank | | Jan-08-2015 | | Mar-20-2015 | | | $ | 25,000 | | | $ | (57) | | | 1.7105 | % | | One-month L | | Mar-21-2021 |
| The Toronto-Dominion Bank | | Jan-08-2015 | | Sep-10-2017 | | $ | 100,000 |
| | $ | 1,488 |
| | 2.2255 | % | | One-month L | | Mar-21-2021 | The Toronto-Dominion Bank | | Jan-08-2015 | | Sep-10-2017 | | | $ | 100,000 | | | $ | (982) | | | 2.2255 | % | | One-month L | | Mar-21-2021 |
| Wells Fargo, N.A. | | Jan-08-2015 | | Mar-20-2015 | | $ | 25,000 |
| | $ | 886 |
| | 1.8280 | % | | One-month L | | Mar-31-2022 | Wells Fargo, N.A. | | Jan-08-2015 | | Mar-20-2015 | | | $ | 25,000 | | | $ | (246) | | | 1.8280 | % | | One-month L | | Mar-31-2022 |
| The Toronto-Dominion Bank | | Jan-08-2015 | | Feb-14-2020 | | $ | 25,000 |
| | $ | 271 |
| | 2.4535 | % | | One-month L | | Mar-31-2022 | The Toronto-Dominion Bank | | Jan-08-2015 | | Feb-14-2020 | | | $ | 25,000 | | | $ | (579) | | | 2.4535 | % | | One-month L | | Mar-31-2022 |
| Regions Bank | | Jan-08-2015 | | Feb-14-2020 | | $ | 50,000 |
| | $ | 520 |
| | 2.4750 | % | | One-month L | | Mar-31-2022 | Regions Bank | | Jan-08-2015 | | Feb-14-2020 | | | $ | 50,000 | | | $ | (1,181) | | | 2.4750 | % | | One-month L | | Mar-31-2022 |
| Capital One, N.A. | | Jan-08-2015 | | Feb-14-2020 | | $ | 50,000 |
| | $ | 467 |
| | 2.5300 | % | | One-month L | | Mar-31-2022 | Capital One, N.A. | | Jan-08-2015 | | Feb-14-2020 | | | $ | 50,000 | | | $ | (1,238) | | | 2.5300 | % | | One-month L | | Mar-31-2022 |
| The Toronto-Dominion Bank | | Jul-20-2017 | | Oct-30-2017 | | $ | 25,000 |
| | $ | 1,054 |
| | 1.8485 | % | | One-month L | | Jan-04-2023 | The Toronto-Dominion Bank | | Jul-20-2017 | | Oct-30-2017 | | | $ | 25,000 | | | $ | (362) | | | 1.8485 | % | | One-month L | | Jan-04-2023 |
| Royal Bank of Canada | | Jul-20-2017 | | Oct-30-2017 | | $ | 25,000 |
| | $ | 1,054 |
| | 1.8505 | % | | One-month L | | Jan-04-2023 | Royal Bank of Canada | | Jul-20-2017 | | Oct-30-2017 | | | $ | 25,000 | | | $ | (364) | | | 1.8505 | % | | One-month L | | Jan-04-2023 |
| Wells Fargo, N.A. | | Jul-20-2017 | | Oct-30-2017 | | $ | 25,000 |
| | $ | 1,055 |
| | 1.8505 | % | | One-month L | | Jan-04-2023 | Wells Fargo, N.A. | | Jul-20-2017 | | Oct-30-2017 | | | $ | 25,000 | | | $ | (364) | | | 1.8505 | % | | One-month L | | Jan-04-2023 |
| PNC Bank, N.A. | | Jul-20-2017 | | Oct-30-2017 | | $ | 25,000 |
| | $ | 1,052 |
| | 1.8485 | % | | One-month L | | Jan-04-2023 | PNC Bank, N.A. | | Jul-20-2017 | | Oct-30-2017 | | | $ | 25,000 | | | $ | (362) | | | 1.8485 | % | | One-month L | | Jan-04-2023 |
| PNC Bank, N.A. | | Jul-20-2017 | | Oct-30-2017 | | $ | 50,000 |
| | $ | 2,105 |
| | 1.8475 | % | | One-month L | | Jan-04-2023 | PNC Bank, N.A. | | Jul-20-2017 | | Oct-30-2017 | | | $ | 50,000 | | | $ | (723) | | | 1.8475 | % | | One-month L | | Jan-04-2023 |
| The Toronto-Dominion Bank | | Jul-24-2018 | | Jul-26-2019 | | $ | 50,000 |
| | $ | 111 |
| | 2.9180 | % | | One-month L | | Jan-12-2024 | The Toronto-Dominion Bank | | Jul-24-2018 | | Jul-26-2019 | | | $ | 50,000 | | | $ | (3,229) | | | 2.9180 | % | | One-month L | | Jan-12-2024 |
| PNC Bank, N.A. | | Jul-24-2018 | | Jul-26-2019 | | $ | 50,000 |
| | $ | 106 |
| | 2.9190 | % | | One-month L | | Jan-12-2024 | PNC Bank, N.A. | | Jul-24-2018 | | Jul-26-2019 | | | $ | 50,000 | | | $ | (3,232) | | | 2.9190 | % | | One-month L | | Jan-12-2024 |
| Bank of Montreal | | Jul-24-2018 | | Jul-26-2019 | | $ | 50,000 |
| | $ | 113 |
| | 2.9190 | % | | One-month L | | Jan-12-2024 | Bank of Montreal | | Jul-24-2018 | | Jul-26-2019 | | | $ | 50,000 | | | $ | (3,232) | | | 2.9190 | % | | One-month L | | Jan-12-2024 |
| U.S. Bank, N.A. | | Jul-24-2018 | | Jul-26-2019 | | $ | 25,000 |
| | $ | 57 |
| | 2.9190 | % | | One-month L | | Jan-12-2024 | U.S. Bank, N.A. | | Jul-24-2018 | | Jul-26-2019 | | | $ | 25,000 | | | $ | (1,616) | | | 2.9190 | % | | One-month L | | Jan-12-2024 |
| Wells Fargo, N.A. | | Wells Fargo, N.A. | | May-02-2019 | | Jul-15-2020 | | | $ | 50,000 | | | $ | (2,030) | | | 2.2460 | % | | One-month L | | Jan-15-2025 |
| U.S. Bank, N.A. | | U.S. Bank, N.A. | | May-02-2019 | | Jul-15-2020 | | | $ | 50,000 | | | $ | (2,029) | | | 2.2459 | % | | One-month L | | Jan-15-2025 |
| Regions Bank | | Regions Bank | | May-02-2019 | | Jul-15-2020 | | | $ | 50,000 | | | $ | (2,032) | | | 2.2459 | % | | One-month L | | Jan-15-2025 |
| Bank of Montreal | | Bank of Montreal | | Jul-16-2019 | | Jul-15-2020 | | | $ | 50,000 | | | $ | (886) | | | 1.7165 | % | | One-month L | | Jan-15-2025 |
The following table summarizes the fair value of the interest rate swaps outstanding as of September 30, 20182019 and December 31, 2017 was as follows.2018.
| | | Balance Sheet Line Item (in thousands) | | Notional Amount September 30, 2018 | | Fair Value
September 30, 2018 | | Notional Amount December 31, 2017 | | Fair Value December 31, 2017 | Balance Sheet Line Item (in thousands) | | Notional Amount September 30, 2019 | | Fair Value September 30, 2019 | | Notional Amount December 31, 2018 | | Fair Value December 31, 2018 |
| Interest rate swaps-Asset | | $ | 900,000 |
| | $ | 17,649 |
| | $ | 475,000 |
| | $ | 6,079 |
| Interest rate swaps-Asset | | $ | 250,000 | | | $ | 488 | | | $ | 600,000 | | | $ | 9,151 | |
| Interest rate swaps-Liability | | $ | — |
| | $ | — |
| | $ | 250,000 |
| | $ | (1,217 | ) | Interest rate swaps-Liability | | $ | 850,000 | | | $ | (24,812) | | | $ | 300,000 | | | $ | (4,011) | |
Cash Flow Hedges of Interest Rate Risk
The Company’s objectives in using interest rate swaps are to add stability to interest expense and to manage its exposure to interest rate movements.
For derivatives designated and that qualify as cash flow hedges of interest rate risk, the gain or loss on the derivative is recorded in accumulated other comprehensive income (loss) and subsequently reclassified into interest expense in the same periods during which the hedged transaction affects earnings.
Amounts reported in accumulated other comprehensive income (loss) related to derivatives designated as qualifying cash flow hedges will be reclassified to interest expense as interest payments are made on the Company'sCompany’s variable rate debt. The Company estimates that approximately $5.1$3.8 million will be reclassified from accumulated other comprehensive income (loss) as a decreasean increase to interest expense over the next 12 months.
The
following table
below presentssummarizes the effect of cash flow hedge accounting and the location in the consolidated financial statements for the three and nine months ended September 30,
20182019 and
2017.2018. |
| | | | | | | | | | | | | | | | |
| | | Three months ended September 30, | | Nine months ended September 30, |
| Effect of Cash Flow Hedge Accounting (in thousands) | | 2018 | | 2017 | | 2018 | | 2017 |
| Income (loss) recognized in accumulated other comprehensive income on interest rate swaps | | $ | 2,572 |
| | $ | 316 |
| | $ | 13,349 |
| | $ | (1,126 | ) |
| Income (loss) reclassified from accumulated other comprehensive income into income (loss) as interest expense | | $ | 512 |
| | $ | (282 | ) | | $ | 538 |
| | $ | (1,426 | ) |
Total interest expense presented in the Consolidated Statements of Operations in which the effects of cash flow hedges are recorded
| | $ | 12,698 |
| | $ | 10,446 |
| | $ | 35,602 |
| | $ | 31,557 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended September 30, | | | | Nine months ended September 30, | | |
| Effect of Cash Flow Hedge Accounting (in thousands) | | 2019 | | 2018 | | 2019 | | 2018 |
| Income (loss) recognized in accumulated other comprehensive income (loss) on interest rate swaps | | | $ | (5,913) | | | $ | 2,572 | | | $ | (26,715) | | | $ | 13,349 | |
| Income reclassified from accumulated other comprehensive income (loss) into income as interest expense | | $ | 522 | | | $ | 512 | | | $ | 2,726 | | | $ | 538 | |
Total interest expense presented in the Consolidated Statements of Operations in which the effects of cash flow hedges are recorded
| | $ | 14,053 | | | $ | 12,698 | | | $ | 39,080 | | | $ | 35,602 | |
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'sCompany’s default on the indebtedness.
As of September 30, 2018,2019, the Company had no derivatives that werenot breached the provisions of these agreements and had not posted any collateral related to these agreements. If the Company had breached any of these provisions at September 30, 2019, it could have been required to settle its obligations under the agreement of the interest rate swaps in a net liability position by counterparty.counterparty plus accrued interest for approximately $24.6 million.
Fair Value of Interest Rate Swaps
The Company’s valuation of the interest rate swaps is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs including interest rate curves.
The Company incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of its derivative contracts for the effect of nonperformance risk, the Company has considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.
Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of September 30, 20182019 and December 31, 2017,2018, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.
The following sets forthtable summarizes the Company’s financial instruments that are accounted for at fair value on a recurring basis as of September 30, 20182019 and December 31, 2017.2018.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Fair Value Measurements as of September 30, 2019 Using | | | | |
| Balance Sheet Line Item (in thousands) | | Fair Value September 30, 2019 | | Level 1 | | Level 2 | | Level 3 |
| Interest rate swaps-Asset | | $ | 488 | | | $ | — | | | $ | 488 | | | $ | — | |
| Interest rate swaps-Liability | | $ | (24,812) | | | $ | — | | | $ | (24,812) | | | $ | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Fair Value Measurements as ofDecember 31, 2018 Using | | | | |
| Balance Sheet Line Item (in thousands) | | Fair Value December 31, 2018 | | Level 1 | | Level 2 | | Level 3 |
| Interest rate swaps-Asset | | $ | 9,151 | | | $ | — | | | $ | 9,151 | | | $ | — | |
| Interest rate swaps-Liability | | $ | (4,011) | | | $ | — | | | $ | (4,011) | | | $ | — | |
|
| | | | | | | | | | | | | | | | |
| | | | | Fair Value Measurements as of
September 30, 2018 Using |
| Balance Sheet Line Item (in thousands) | | Fair Value
September 30, 2018 | | Level 1 | | Level 2 | | Level 3 |
| Interest rate swaps-Asset | | $ | 17,649 |
| | $ | — |
| | $ | 17,649 |
| | $ | — |
|
| Interest rate swaps-Liability | | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
|
| | | | | | | | | | | | | | | | |
| | | | | Fair Value Measurements as of
December 31, 2017 Using |
| Balance Sheet Line Item (in thousands) | | Fair Value December 31, 2017 | | Level 1 | | Level 2 | | Level 3 |
| Interest rate swaps-Asset | | $ | 6,079 |
| | $ | — |
| | $ | 6,079 |
| | $ | — |
|
| Interest rate swaps-Liability | | $ | (1,217 | ) | | $ | — |
| | $ | (1,217 | ) | | $ | — |
|
6. Equity
Preferred Stock
On April 30, 2019, the Company filed Articles of Amendment to its Articles of Amendment and Restatement to increase the number of authorized shares of preferred stock from 15,000,000 to 20,000,000.
The following table summarizes the Company’s outstanding preferred stock issuances as of September 30, 2019.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Preferred Stock Issuances | | Issuance Date | | Number of Shares | | Liquidation Value Per Share | | Interest Rate |
| | | | | | | | |
| 6.875% Series C Cumulative Redeemable Preferred Stock ("Series C Preferred Stock") | | March 17, 2016 | | 3,000,000 | | | $ | 25.00 | | | 6.875 | % |
The following tables summarize the dividends attributable to the Company’s outstanding preferred stock issuances during the nine months ended September 30, 2019 and the year ended December 31, 2018.
| | | | | | | | | | | | | | | | | | | | |
| Quarter Ended 2019 | | Declaration Date | | Series C
Preferred Stock Per Share | | Payment Date |
| | | | | | |
| | | | | | |
| September 30 | | July 15, 2019 | | $ | 0.4296875 | | | September 30, 2019 |
| June 30 | | April 9, 2019 | | 0.4296875 | | | July 1, 2019 |
| March 31 | | January 10, 2019 | | 0.4296875 | | | April 1, 2019 |
| Total | | | | $ | 1.2890625 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Quarter Ended 2018 | | Declaration Date | | Series B
Preferred Stock Per Share | | Series C
Preferred Stock Per Share | | Payment Date |
| | | | | | | | |
| December 31 | | October 10, 2018 | | $ | — | | | $ | 0.4296875 | | | December 31, 2018 |
| September 30 | | July 11, 2018 | | 0.0460069 | | (1) | 0.4296875 | | | October 1, 2018 |
| June 30 | | April 10, 2018 | | 0.4140625 | | | 0.4296875 | | | July 2, 2018 |
| March 31 | | February 14, 2018 | | 0.4140625 | | | 0.4296875 | | | April 2, 2018 |
| Total | | | | $ | 0.8741319 | | | $ | 1.7187500 | | | |
(1)On June 11, 2018, the Company gave notice to redeem all 2,800,000 issued and outstanding shares of the 6.625% Series B Cumulative Redeemable Preferred Stock (“Series B Preferred Stock”). The Company recognized a deemed dividend to the holders of the Series B Preferred Stock of approximately $2.7 million on the accompanying Consolidated Statements of Operations for the nine months ended September 30, 2018 related to redemption costs and the original issuance costs of the Series B Preferred Stock. On July 11, 2018, the Company redeemed all of the Series B Preferred Stock.Stock at a cash redemption price of $25.00 per share, plus accrued and unpaid dividends to but excluding the redemption date, without interest.
The table below sets forth the Company’s outstanding preferred stock issuances as of September 30, 2018.
|
| | | | | | | | | | | | |
| Preferred Stock Issuances | | Issuance Date | | Number of Shares | | Liquidation Value Per Share | | Interest Rate |
| 6.875% Series C Cumulative Redeemable Preferred Stock (“Series C Preferred Stock”) | | March 17, 2016 | | 3,000,000 |
| | $ | 25.00 |
| | 6.875 | % |
The tables below set forth the dividends attributable to the Company's outstanding preferred stock issuances during the nine months ended September 30, 2018 and the year ended December 31, 2017.
|
| | | | | | | | | | | | |
| Quarter Ended 2018 | | Declaration Date | | Series B
Preferred Stock Per Share | | Series C
Preferred Stock Per Share | | Payment Date |
| September 30 | | July 11, 2018 |
| $ | 0.0460069 |
| (1) | $ | 0.4296875 |
| | October 1, 2018 |
| June 30 | | April 10, 2018 |
| 0.4140625 |
| | 0.4296875 |
|
| July 2, 2018 |
| March 31 | | February 14, 2018 |
| 0.4140625 |
|
| 0.4296875 |
|
| April 2, 2018 |
| Total | | |
| $ | 0.8741319 |
|
| $ | 1.2890625 |
|
| |
| |
(1) | On June 11, 2018, the Company gave notice to redeem all 2,800,000 issued and outstanding shares of the Series B Preferred Stock. On July 11, 2018, the Company redeemed all of the Series B Preferred Stock at a cash redemption price of $25.00 per share, plus accrued and unpaid dividends to but excluding the redemption date, without interest. |
|
| | | | | | | | | | | | |
| Quarter Ended 2017 | | Declaration Date | | Series B Preferred Stock Per Share | | Series C Preferred Stock Per Share | | Payment Date |
| December 31 | | November 2, 2017 | | $ | 0.4140625 |
| | $ | 0.4296875 |
| | December 29, 2017 |
| September 30 | | July 31, 2017 | | 0.4140625 |
| | 0.4296875 |
| | September 29, 2017 |
| June 30 | | May 1, 2017 | | 0.4140625 |
| | 0.4296875 |
| | June 30, 2017 |
| March 31 | | February 15, 2017 | | 0.4140625 |
| | 0.4296875 |
| | March 31, 2017 |
| Total | | | | $ | 1.6562500 |
| | $ | 1.7187500 |
| | |
On October 10, 2018,15, 2019, the Company’s board of directors declared the Series C Preferred Stock dividends for the quarter ending December 31, 20182019 at a quarterly rate of $0.4296875 per share.
Common Stock
On April 30, 2019, the Company filed Articles of Amendment to its Articles of Amendment and Restatement to increase the number of authorized shares of the Company’s common stock from 150,000,000 to 300,000,000.
The following table sets forthsummarizes the terms of the Company’s at-the market (“ATM”) common stock offering program as of September 30, 2018.2019.
| | | | | | | | | | | | | | | | | | | | |
| ATM Common Stock Offering Program | | Date | | Maximum Aggregate Offering Price (in thousands) | | Aggregate Common Stock Available as of September 30, 2019 (in thousands) |
| 2019 $600 million ATM | | February 14, 2019 | | $ | 600,000 | | | $ | 401,137 | |
|
| | | | | | | | | | |
| ATM Common Stock Offering Program | | Date | | Maximum Aggregate Offering Price (in thousands) |
| Aggregate Common Stock Available as of
September 30, 2018 (in thousands) |
| 2017 $500 million ATM | | November 13, 2017 | | $ | 500,000 |
| | $ | 213,217 |
|
The table below set forthfollowing tables summarize the activity under the ATM common stock offering programs during the nine months ended September 30, 20182019 and year ended December 31, 20172018 (in thousands, except share data).
| | | | | Nine months ended September 30, 2018 | | | Nine months ended September 30, 2019 | |
| ATM Common Stock Offering Program | | Shares
Sold | | Weighted Average Price Per Share | | Gross
Proceeds | | Sales
Agents’ Fee | | Net
Proceeds | ATM Common Stock Offering Program | | Shares
Sold | | Weighted Average Price Per Share | | | Net
Proceeds |
| 2017 $500 million ATM | | 10,387,962 |
| | $ | 26.61 |
| | $ | 276,457 |
| | $ | 2,888 |
| | $ | 273,569 |
| |
| 2019 $600 million ATM | | 2019 $600 million ATM | | 7,022,332 | | | $ | 28.32 | | | | $ | 197,074 | |
| Total/weighted average | | 10,387,962 |
| | $ | 26.61 |
| | $ | 276,457 |
| | $ | 2,888 |
| | $ | 273,569 |
| Total/weighted average | | 7,022,332 | | | $ | 28.32 | | | | $ | 197,074 | |
|
| | | | | | | | | | | | | | | | | | | |
| | | Year ended December 31, 2017 |
| ATM Common Stock Offering Program | | Shares
Sold | | Weighted Average Price Per Share | | Gross
Proceeds | | Sales
Agents’ Fee | | Net
Proceeds |
| 2017 $500 million ATM | | 363,843 |
| | $ | 28.38 |
| | $ | 10,326 |
| | $ | 129 |
| | $ | 10,197 |
|
2017 $300 million ATM(1) | | 11,098,748 |
| | $ | 27.03 |
| | 300,000 |
| | 3,637 |
| | 296,363 |
|
2016 $228 million ATM(1) | | 4,799,784 |
| | $ | 24.42 |
| | 117,216 |
| | 1,604 |
| | 115,612 |
|
| Total/weighted average | | 16,262,375 |
| | $ | 26.29 |
| | $ | 427,542 |
| | $ | 5,370 |
| | $ | 422,172 |
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | Year ended December 31, 2018 | | | | | | | | |
| ATM Common Stock Offering Program | | Shares
Sold | | Weighted Average Price Per Share | | | | | | Net
Proceeds |
2017 $500 million ATM (1) | | 14,724,614 | | | $ | 26.52 | | | | | | | $ | 386,407 | |
| Total/weighted average | | 14,724,614 | | | $ | 26.52 | | | | | | | $ | 386,407 | |
| |
(1) | These programs ended before December 31, 2017. |
(1) This program ended in February 2019.
On September 24, 2019, the Company completed an underwritten public offering of an aggregate 12,650,000 shares of common stock at a price to the underwriters of $28.60 per share, consisting of (i) 5,500,000 shares offered directly by the Company and (ii) 7,150,000 shares offered by the forward dealer in connection with certain forward sale agreements (including 1,650,000 shares offered pursuant to the underwriters’ option to purchase additional shares, which option was exercised in full). The offering closed on September 27, 2019 and the Company received net proceeds from the sale of shares offered directly by the Company of $157.3 million. Subject to the Company's right to elect cash or net share settlement, the Company has the ability to settle the forward sales agreements at any time through scheduled maturity date of the forward sale agreements of September 24, 2020.
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.
The table below sets forthfollowing tables summarize the dividends attributable to the Company'sCompany’s outstanding shares of common stock that were declared during the nine months ended September 30, 20182019 and the year ended December 31, 2017.2018.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Month Ended 2019 | | Declaration Date | | Record Date | | Per Share | | Payment Date |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| September 30 | | July 15, 2019 | | September 30, 2019 | | $ | 0.119167 | | | October 15, 2019 |
| August 31 | | July 15, 2019 | | August 30, 2019 | | 0.119167 | | | September 16, 2019 |
| July 31 | | July 15, 2019 | | July 31, 2019 | | 0.119167 | | | August 15, 2019 |
| June 30 | | April 9, 2019 | | June 28, 2019 | | 0.119167 | | | July 15, 2019 |
| May 31 | | April 9, 2019 | | May 31, 2019 | | 0.119167 | | | June 17, 2019 |
| April 30 | | April 9, 2019 | | April 30, 2019 | | 0.119167 | | | May 15, 2019 |
| March 31 | | January 10, 2019 | | March 29, 2019 | | 0.119167 | | | April 15, 2019 |
| February 28 | | January 10, 2019 | | February 28, 2019 | | 0.119167 | | | March 15, 2019 |
| January 31 | | January 10, 2019 | | January 31, 2019 | | 0.119167 | | | February 15, 2019 |
| Total | | | | | | $ | 1.072503 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Month Ended 2018 | | Declaration Date | | Record Date | | Per Share | | Payment Date |
| December 31 | | October 10, 2018 | | December 31, 2018 | | $ | 0.118333 | | | January 15, 2019 |
| November 30 | | October 10, 2018 | | November 30, 2018 | | 0.118333 | | | December 17, 2018 |
| October 31 | | October 10, 2018 | | October 31, 2018 | | 0.118333 | | | November 15, 2018 |
| September 30 | | July 11, 2018 | | September 28, 2018 | | 0.118333 | | | October 15, 2018 |
| August 31 | | July 11, 2018 | | August 31, 2018 | | 0.118333 | | | September 17, 2018 |
| July 31 | | July 11, 2018 | | July 31, 2018 | | 0.118333 | | | August 15, 2018 |
| June 30 | | April 10, 2018 | | June 29, 2018 | | 0.118333 | | | July 16, 2018 |
| May 31 | | April 10, 2018 | | May 31, 2018 | | 0.118333 | | | June 15, 2018 |
| April 30 | | April 10, 2018 | | April 30, 2018 | | 0.118333 | | | May 15, 2018 |
| March 31 | | November 2, 2017 | | March 29, 2018 | | 0.118333 | | | April 16, 2018 |
| February 28 | | November 2, 2017 | | February 28, 2018 | | 0.118333 | | | March 15, 2018 |
| January 31 | | November 2, 2017 | | January 31, 2018 | | 0.118333 | | | February 15, 2018 |
| Total | | | | | | $ | 1.419996 | | | |
|
| | | | | | | | | | |
| Month Ended 2018 |
| Declaration Date | | Record Date | | Per Share | | Payment Date |
| September 30 |
| July 11, 2018 |
| September 28, 2018 |
| $ | 0.118333 |
|
| October 15, 2018 |
| August 31 |
| July 11, 2018 |
| August 31, 2018 |
| 0.118333 |
|
| September 17, 2018 |
| July 31 |
| July 11, 2018 |
| July 31, 2018 |
| 0.118333 |
|
| August 15, 2018 |
| June 30 |
| April 10, 2018 |
| June 29, 2018 |
| 0.118333 |
|
| July 16, 2018 |
| May 31 |
| April 10, 2018 |
| May 31, 2018 |
| 0.118333 |
|
| June 15, 2018 |
| April 30 |
| April 10, 2018 |
| April 30, 2018 |
| 0.118333 |
|
| May 15, 2018 |
| March 31 |
| November 2, 2017 |
| March 29, 2018 |
| 0.118333 |
|
| April 16, 2018 |
| February 28 |
| November 2, 2017 |
| February 28, 2018 |
| 0.118333 |
|
| March 15, 2018 |
| January 31 |
| November 2, 2017 |
| January 31, 2018 |
| 0.118333 |
|
| February 15, 2018 |
| Total |
| | | |
| $ | 1.064997 |
|
| |
|
| | | | | | | | | | |
| Month Ended 2017 | | Declaration Date | | Record Date | | Per Share | | Payment Date |
| December 31 | | July 31, 2017 | | December 29, 2017 | | $ | 0.117500 |
| | January 16, 2018 |
| November 30 | | July 31, 2017 | | November 30, 2017 | | 0.117500 |
| | December 15, 2017 |
| October 31 | | July 31, 2017 | | October 31, 2017 | | 0.117500 |
| | November 15, 2017 |
| September 30 | | May 1, 2017 | | September 29, 2017 | | 0.117500 |
| | October 16, 2017 |
| August 31 | | May 1, 2017 | | August 31, 2017 | | 0.117500 |
| | September 15, 2017 |
| July 31 | | May 1, 2017 | | July 31, 2017 | | 0.117500 |
| | August 15, 2017 |
| June 30 | | February 15, 2017 | | June 30, 2017 | | 0.116667 |
| | July 17, 2017 |
| May 31 | | February 15, 2017 | | May 31, 2017 | | 0.116667 |
| | June 15, 2017 |
| April 30 | | February 15, 2017 | | April 28, 2017 | | 0.116667 |
| | May 15, 2017 |
| March 31 | | November 2, 2016 | | March 31, 2017 | | 0.116667 |
| | April 17, 2017 |
| February 28 | | November 2, 2016 | | February 28, 2017 | | 0.116667 |
| | March 15, 2017 |
| January 31 | | November 2, 2016 | | January 31, 2017 | | 0.116667 |
| | February 15, 2017 |
| Total | | | | | | $ | 1.405002 |
| | |
On October 10, 2018,15, 2019, the Company’s board of directors declared the common stock dividends for the months ending October 31, 2018,2019, November 30, 20182019, and December 31, 20182019 at a monthly rate of $0.118333$0.119167 per share of common stock.
Restricted Stock-Based CompensationShares of Common Stock
Restricted shares of common stock granted on January 5, 20187, 2019 to certain employees of the Company, subject to the recipient’s continued employment, will vest in four equal installments on January 1 of each year beginning in 2019.2020. Refer to Note 8 for a discussion of the restricted shares of common stock granted on January 7, 2019 pursuant to the March 8, 2016 performance units. The following table summarizes activity related to the Company’s unvested restricted shares of common stock for the nine months ended September 30, 20182019 and the year ended December 31, 2017.2018.
| | | Unvested Restricted Shares of Common Stock | | Shares | | Unvested Restricted Shares of Common Stock | | Shares | |
| Balance at December 31, 2016 | | 272,337 |
| | |
| Granted | | 75,001 |
| (1) | |
| Vested | | (109,209 | ) | (2) | |
| Forfeited | | (922 | ) | | |
| Balance at December 31, 2017 | | 237,207 |
| | Balance at December 31, 2017 | | 237,207 | | |
| Granted | | 76,659 |
| (1) | Granted | | 76,659 | | (1) | |
| Vested | | (112,405 | ) | (2) | Vested | | (112,405) | | (2) | |
| Forfeited | | (10,630 | ) | | Forfeited | | (10,999) | | |
| Balance at September 30, 2018 | | 190,831 |
| | |
| Balance at December 31, 2018 | | Balance at December 31, 2018 | | 190,462 | | |
| Granted | | Granted | | 110,830 | | (1) | |
| Vested | | Vested | | (78,431) | | (2) | |
| Forfeited | | Forfeited | | (2,589) | | |
| Balance at September 30, 2019 | | Balance at September 30, 2019 | | 220,272 | | |
| |
(1) | The fair value per share on the grant date of January 5, 2018 and January 6, 2017 was $26.40 and $24.41, respectively. |
| |
(2) | The Company repurchased and retired 41,975 and 40,836 restricted shares of common stock that vested during the nine months ended September 30, 2018 and the year ended December 31, 2017, respectively. |
(1)The fair value per share on the grant date of January 7, 2019 and January 5, 2018 was $24.85 and $26.40, respectively.
(2)The Company repurchased and retired 58,697 and 41,975 restricted shares of common stock that vested during the nine months ended September 30, 2019 and the year ended December 31, 2018, respectively.
The unrecognized compensation expense associated with the Company’s restricted shares of common stock at September 30, 20182019 was approximately $3.1$3.4 million and is expected to be recognized over a weighted average period of approximately 2.5 years.
The following table summarizes the fair value at vesting for the restricted shares of common stock that vested during the three and nine months ended September 30, 20182019 and 2017. 2018.
|
| | | | | | | | | | | | | | | | |
| | | Three months ended September 30, | | Nine months ended September 30, |
| | | 2018 | | 2017 | | 2018 | | 2017 |
| Vested restricted shares of common stock | | — |
| | — |
| | 112,405 |
| | 109,209 |
|
| Fair value of vested restricted shares of common stock (in thousands) | | $ | — |
| | $ | — |
| | $ | 3,002 |
| | $ | 2,591 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended September 30, | | | | Nine months ended September 30, | | | | |
| Vested Restricted Shares of Common Stock | | 2019 | | 2018 | | 2019 | | 2018 | | |
| Vested restricted shares of common stock | | — | | | — | | | 78,431 | | | 112,405 | | | |
| Fair value of vested restricted shares of common stock (in thousands) | | $ | — | | | $ | — | | | $ | 1,951 | | | $ | 3,002 | | | |
7. Noncontrolling Interest
The following table below summarizes the activity for noncontrolling interest in the Company for the nine months ended September 30, 20182019 and the year ended December 31, 2017.2018.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Noncontrolling Interest | | LTIP Units | | Other
Common Units | | Total
Noncontrolling Common Units | | Noncontrolling Interest |
| Balance at December 31, 2017 | | 1,457,070 | | | 2,639,617 | | | 4,096,687 | | | 4.1 | % |
| Granted/Issued | | 324,802 | | | — | | | 324,802 | | | N/A |
| Forfeited | | — | | | — | | | — | | | N/A |
| Conversions from LTIP units to Other Common Units | | (165,672) | | | 165,672 | | | — | | | N/A |
| Redemptions from Other Common Units to common stock | | — | | | (352,055) | | | (352,055) | | | N/A |
| | | | | | | | |
| Balance at December 31, 2018 | | 1,616,200 | | | 2,453,234 | | | 4,069,434 | | | 3.5 | % |
| Granted/Issued | | 364,173 | | | — | | | 364,173 | | | N/A |
| Forfeited | | (10,208) | | | — | | | (10,208) | | | N/A |
| Conversions from LTIP units to Other Common Units | | (262,847) | | | 262,847 | | | — | | | N/A |
| Redemptions from Other Common Units to common stock | | — | | | (661,082) | | | (661,082) | | | N/A |
| | | | | | | | |
| Balance at September 30, 2019 | | 1,707,318 | | | 2,054,999 | | | 3,762,317 | | | 2.8 | % |
|
| | | | | | | | | | | |
| | LTIP Units | | Other Common Units | | Total Noncontrolling Common Units | | Noncontrolling Interest |
| Balance at December 31, 2016 | 1,576,516 |
| | 2,057,365 |
| | 3,633,881 |
| | 4.3 | % |
| Granted/Issued | 126,239 |
| | 687,827 |
| | 814,066 |
| | N/A |
|
| Forfeited | — |
| | — |
| | — |
| | N/A |
|
| Conversions from LTIP units to Other Common Units | (245,685 | ) | | 245,685 |
| | — |
| | N/A |
|
| Redemptions from Other Common Units to common stock | — |
| | (351,260 | ) | | (351,260 | ) | | N/A |
|
| Balance at December 31, 2017 | 1,457,070 |
| | 2,639,617 |
| | 4,096,687 |
| | 4.1 | % |
| Granted/Issued | 324,802 |
| | — |
| | 324,802 |
| | N/A |
|
| Forfeited | — |
| | — |
| | — |
| | N/A |
|
| Conversions from LTIP units to Other Common Units | (165,672 | ) | | 165,672 |
| | — |
| | N/A |
|
| Redemptions from Other Common Units to common stock | — |
| | (352,055 | ) | | (352,055 | ) | | N/A |
|
| Balance at September 30, 2018 | 1,616,200 |
| | 2,453,234 |
| | 4,069,434 |
| | 3.6 | % |
LTIP Units
On March 12, 2018, the Company's board of directors appointed Michelle Dilley to serve as director of the Company. On March 12, 2018, Ms. Dilley was granted 3,930 LTIP units which, subject to Ms. Dilley's continued service, will vest on January 1, 2019.
LTIP units granted on January 5, 20187, 2019 to non-employee, independent directors, subject to the recipient’s continued service, will vest on January 1, 2019.2020. LTIP units granted on January 5, 20187, 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, 2018.2019. Refer to Note 8 for a discussion of vestedthe LTIP units granted on January 5, 20187, 2019 pursuant to the 2015 Outperformance Program (the “2015 OPP”).March 8, 2016 performance units.
The fair value of the LTIP units at the date of grant was determined by a lattice-binomial option-pricing model based on a Monte Carlo simulation. The fair value of the LTIP units are based on Level 3 inputs and are non-recurring fair value measurements. The following table below sets forthsummarizes the assumptions used in valuing such LTIP units granted during the nine months ended September 30, 20182019 (excluding those vested LTIP units granted pursuant to the 2015 OPP;March 8, 2016 performance units; refer to Note 8 for details).
|
| | | | | | | | |
| LTIP Units | | Assumptions |
| Grant date | | March 12, 2018 |
| | January 5, 2018 |
|
| Expected term (years) | | 10 |
| | 10 |
|
| Expected volatility | | 22.0 | % | | 22.0 | % |
| Expected dividend yield | | 6.0 | % | | 6.0 | % |
| Risk-free interest rate | | 2.46 | % | | 2.09 | % |
| Fair value of LTIP units at issuance (in thousands) | | $ | 90 |
| | $ | 3,447 |
|
| LTIP units at issuance | | 3,930 |
| | 137,616 |
|
| Fair value unit price per LTIP unit at issuance | | $ | 22.90 |
| | $ | 25.05 |
|
| | | | | | | | |
| LTIP Units | | Assumptions |
| Grant date | | January 7, 2019 |
| Expected term (years) | | 10 |
| Expected volatility | | 19.0 | % |
| Expected dividend yield | | 6.0 | % |
| Risk-free interest rate | | 2.57 | % |
| Fair value of LTIP units at issuance (in thousands) | | $ | 3,636 | |
| LTIP units at issuance | | 154,649 | |
| Fair value unit price per LTIP unit at issuance | | $ | 23.51 | |
The following table summarizes activity related to the Company’s unvested LTIP units for the nine months ended September 30, 20182019 and the year ended December 31, 2017.2018.
|
| | | | | | | |
| Unvested LTIP Units | | LTIP Units |
Balance at December 31, 2016 | | 403,423 |
|
Granted | | 126,239 |
|
Vested | | (229,355 | ) |
Forfeited | | — |
|
| Balance at December 31, 2017 | | 300,307 |
|
| Granted | | 324,802 |
|
| Vested | | (342,940(373,893) | ) |
| Forfeited | | — |
|
| Balance at December 31, 2018 | | 251,216 | |
| Granted | | 364,173 | |
| Vested | | (234,330) | |
| Forfeited | | (10,208) | |
Balance at September 30, 20182019 | | 282,169370,851 |
|
The unrecognized compensation expense associated with the Company’s LTIP units at September 30, 20182019 was approximately $5.7$5.5 million and is expected to be recognized over a weighted average period of approximately 2.52.3 years.
The following table summarizes the fair value at vesting for the LTIP units that vested during the three and nine months ended September 30, 20182019 and 2017.2018.
| | | | | Three months ended September 30, | | Nine months ended September 30, | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2018 | | 2017 | | 2018 | | 2017 | | | Three months ended September 30, | | | Nine months ended September 30, | |
| Vested LTIP units | | 30,949 |
| | 44,942 |
| | 342,940 |
| | 157,816 |
| Vested LTIP units | | 2019 | | 2018 | | 2019 | | 2018 |
| Vested LTIP units | | Vested LTIP units | | 29,989 | | | 30,949 | | | 234,330 | | | 342,940 | |
| Fair value of vested LTIP units (in thousands) | | $ | 851 |
| | $ | 1,235 |
| | $ | 9,002 |
| | $ | 4,146 |
| Fair value of vested LTIP units (in thousands) | | $ | 884 | | | $ | 851 | | | $ | 6,348 | | | $ | 9,002 | |
8. Equity Incentive Plan
At the Company’s annual meeting of stockholders held on April 30, 2018, the Company’s stockholders approved an amendment and restatement of the 2011 Plan, under which the Company may issue 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, to executive officers, directors, employees and other individuals providing bona fide services to or for the Company or its affiliates. The amendment increased the total number of shares of common stock authorized and reserved for issuance under the 2011 Plan by 3,000,000 shares to an aggregate of 6,642,461 shares, subject to certain adjustments as described in the 2011 Plan. Awards previously granted under the 2011 Plan will remain in effect pursuant to their terms.
On January 5, 2018,7, 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 terms of the performance units granted on January 5, 20187, 2019 are substantially the same as the terms of the performance units granted on January 5, 2018 and January 6, 2017, and March 8, 2016, except that the measuring period commences on January 1, 20182019 and ends on December 31, 2020.2021, and the award shares are immediately vested at the end of the measuring period.
The fair value of the performance units at the date of grant was determined by a lattice-binomial option-pricing model based on a Monte Carlo simulation. The fair value of the performance units are based on Level 3 inputs and are non-recurring fair value measurements. The performance unit equity compensation expense is recognized into earnings ratably from the grant date into earnings over the respective vesting periods.period. The following table below sets forthsummarizes the assumptions used in valuing the performance units granted during the nine months ended September 30, 2018.2019.
|
| | | | |
| Performance Units | | Assumptions |
| Grant date | | January 5, 2018 |
|
| Expected volatility | | 22.0 | % |
| Expected dividend yield | | 6.0 | % |
| Risk-free interest rate | | 2.09 | % |
| Fair value of performance units grant (in thousands) | | $ | 5,456 |
|
| | | | | | | | |
| Performance Units | | Assumptions |
| Grant date | | January 7, 2019 |
| Expected volatility | | 20.7 | % |
| Expected dividend yield | | 6.0 | % |
| Risk-free interest rate | | 2.56 | % |
| Fair value of performance units grant (in thousands) | | $ | 5,620 | |
On January 1,December 31, 2018, the Company’s three year measurement period pursuant to the 2015 OPPMarch 8, 2016 performance units concluded. It was determined that the Company'sCompany’s total stockholder return exceeded the threshold percentage and return hurdle and a pool of approximately $6.2 million was awarded to the participants.hurdle. The compensation committee of the board of directors approved the issuance of 183,256102,216 vested LTIP units and 53,72274,032 vested shares of common stock (of which 15,18330,193 shares of common stock were repurchased and retired) to the participants, all of which were issued on January 5, 2018.7, 2019. The compensation committee of the board of directors also approved the issuance of 107,308 LTIP units and 22,678 restricted shares of common stock that will vest on December 31, 2019, which were issued on January 7, 2019.
The unrecognized compensation expense associated with the Company'sCompany’s performance units at September 30, 20182019 was approximately $6.1$7.0 million and is expected to be recognized over a weighted average period of approximately 2.32.0 years.
Non-cash Compensation Expense
The following table summarizes the amount recorded in general and administrative expenses in the accompanying Consolidated Statements of Operations for the amortization of restricted shares of common stock, LTIP units, performance units, the 2015 OPP (performance units and the 2015 OPP, collectively the “Performance-based Compensation Plans”), and the Company’s director compensation for the three and nine months ended September 30, 20182019 and 2017.2018.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three months ended September 30, | | | | Nine months ended September 30, | | |
| Non-Cash Compensation Expense (in thousands) | | 2019 | | 2018 | | 2019 | | 2018 |
| Restricted shares of common stock | | $ | 447 | | | $ | 406 | | | $ | 1,318 | | | $ | 1,269 | |
| LTIP units | | 901 | |
| 893 | | | 2,687 | |
| 2,654 | |
| Performance units | | 1,107 | | | 838 | | | 3,062 | | | 2,463 | |
Director compensation (1) | | 101 | |
| 99 | | | 304 | | | 285 | |
| Total non-cash compensation expense | | $ | 2,556 | | | $ | 2,236 | | | $ | 7,371 | | | $ | 6,671 | |
(1)All of the Company’s independent directors elected to receive shares of common stock in lieu of cash for their service during the three and nine months ended September 30, 2019 and 2018. 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.
|
| | | | | | | | | | | | | | | | |
| | | Three months ended September 30, | | Nine months ended September 30, |
| Non-Cash Compensation Expense (in thousands) | | 2018 | | 2017 | | 2018 | | 2017 |
| Restricted shares of common stock | | $ | 406 |
| | $ | 594 |
| | $ | 1,269 |
| | $ | 1,776 |
|
| LTIP units | | 893 |
| | 1,167 |
| | 2,654 |
| | 3,508 |
|
| Performance-based Compensation Plans | | 838 |
| | 536 |
| | 2,463 |
| | 1,610 |
|
Director compensation (1) | | 99 |
| | 87 |
| | 285 |
| | 265 |
|
| Total non-cash compensation expense | | $ | 2,236 |
| | $ | 2,384 |
| | $ | 6,671 |
| | $ | 7,159 |
|
| | | | | | | | | | | | | | |
| | | Three months ended September 30, | | Nine months ended September 30, |
| Rental Income (in thousands) | | 2019 | | 2019 |
| Fixed lease payments | | $ | 80,262 | | | $ | 227,337 | |
| Variable lease payments | | 20,189 | | | 61,628 | |
| Straight-line rental income | | 3,091 | | | 8,667 | |
| Net decrease to rental income related to above and below market lease amortization | | (1,248) | | | (3,361) | |
| Total rental income | | $ | 102,294 | | | $ | 294,271 | |
As of September 30, 2019, the Company had accrued rental income of approximately $40.2 million included in tenant accounts receivable on the accompanying Consolidated Balance Sheets. As of December 31, 2018, the Company had accrued rental income of approximately $32.4 million, net of allowance for doubtful accounts of approximately $0.8 million, included in tenant accounts receivable on the accompanying Consolidated Balance Sheets.
As of September 30, 2019 and December 31, 2018, the Company had approximately $20.5 million and $18.3 million, respectively, of total lease security deposits available in the form of existing letters of credit, which are not reflected on the accompanying Consolidated Balance Sheets. As of September 30, 2019 and December 31, 2018, the Company had approximately $0.7 million and $0.7 million, respectively, of lease security deposits available in cash, which are included in restricted cash on the accompanying Consolidated Balance Sheets. The Company’s remaining lease security deposits are commingled in cash and cash equivalents. These funds may be used to settle tenant accounts receivables in the event of a default under the related lease. As of September 30, 2019 and December 31, 2018, the Company’s total liability associated with these lease security deposits was approximately $9.2 million and $8.4 million, respectively, and is included in tenant prepaid rent and security deposits on the accompanying Consolidated Balance Sheets.
The Company estimates that billings for real estate taxes, which are the responsibility of certain tenants under the terms of their leases and are not reflected on the Company’s consolidated financial statements, was approximately $5.1 million, $13.1 million, $3.8 million and $10.9 million for the three and nine months ended September 30, 2019 and 2018, 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 September 30, 2019.
| | | | | | | | |
| Year (as of September 30, 2019) | | Maturity of Fixed Lease Payments (in thousands) | |
| Remainder of 2019 | | $ | 82,584 | |
| 2020 | | $ | 325,907 | |
| 2021 | | $ | 285,414 | |
| 2022 | | $ | 249,287 | |
| 2023 | | $ | 208,011 | |
| Thereafter | | $ | 761,469 | |
The following table summarizes the minimum contractual lease payments under the superseded leases standard, Topic 840, as of December 31, 2018.
| | | | | | | | |
| Year (as of December 31, 2018) | | Future Minimum Rents (in thousands) | |
| 2019 | | $ | 299,978 | |
| 2020 | | $ | 271,936 | |
| 2021 | | $ | 226,970 | |
| 2022 | | $ | 188,707 | |
| 2023 | | $ | 152,814 | |
| Thereafter | | $ | 535,192 | |
Lessee Leases
The Company has operating leases in which it is the lessee for ground leases and its corporate office lease. These leases have remaining lease terms of approximately 1.5 years to 47.3 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 September 30, 2019.
| | | | | | | | |
(1)Operating Lease Term and Discount Rate | All of the Company’s independent directors elected to receive shares of common stock in lieu of cash for their service | September 30, 2019 |
| Weighted average remaining lease term (years) | | 35.7 |
| Weighted average discount rate | | 7.1 | % |
The following table summarizes the operating lease cost recognized during the three and nine months ended September 30, 2019 included in the Company’s Consolidated Statements of Operations.
| | | | | | | | | | | | | | |
| | | Three months ended September 30, | | Nine months ended September 30, |
| Operating Lease Cost (in thousands) | | 2019 | | 2019 |
| Operating lease cost included in property expense attributable to ground leases | | $ | 331 | | | $ | 993 | |
| Operating lease cost included in general and administrative expense attributable to corporate office lease | | 266 | | | 799 | |
| Total operating lease cost | | $ | 597 | | | $ | 1,792 | |
The following table summarizes supplemental cash flow information related to operating leases recognized during the nine months ended September 30, 2019 in the Company’s Consolidated Statements of Cash Flows.
| | | | | | | | |
| | Nine months ended September 30, 2018 and 2017. The number |
| Operating Leases (in thousands) | | 2019 |
Cash paid for amounts included in the measurement 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.lease liabilities (operating cash flows) | | $ | 1,711 | |
| | |
9.The following table summarizes the maturity of operating lease liabilities under the Company’s ground leases and corporate office lease as of September 30, 2019.
| | | | | | | | |
| Year (as of September 30, 2019) | | Maturity of Operating Lease Liabilities(1) (in thousands) |
| Remainder of 2019 | | $ | 571 | |
| 2020 | | 2,294 | |
| 2021 | | 1,400 | |
| 2022 | | 1,107 | |
| 2023 | | 1,116 | |
| Thereafter | | 48,155 | |
| Total lease payments | | 54,643 | |
| Less: Imputed interest | | (37,384) | |
| Present value of operating lease liabilities | | $ | 17,259 | |
(1)Operating lease liabilities do not include estimates of CPI rent changes required by certain ground lease agreements. Therefore, actual payments may differ than those presented.
The following table summarizes the minimum contractual lease payments under the superseded leases standard, Topic 840, as of December 31, 2018.
| | | | | | | | |
| Year (as of December 31, 2018) | | Future Minimum Rental Payments (1) (in thousands) |
| 2019 | | $ | 2,110 | |
| 2020 | | $ | 2,122 | |
| 2021 | | $ | 1,227 | |
| 2022 | | $ | 935 | |
| 2023 | | $ | 944 | |
| Thereafter | | $ | 45,580 | |
(1)Future minimum rental payments do not include estimates of CPI rent changes required by certain lease agreements. Therefore, actual minimum rental payments may differ than those presented.
10. Earnings Per Share
During the three and nine months ended September 30, 20182019 and 2017,2018, there were 220,284, 218,231, 193,117 196,871, 237,207 and 238,129,196,871, respectively, of unvested restricted shares of common stock on a weighted average basis that were considered participating securities.
The following table sets forthreconciles the numerators and denominators in the computation of basic and diluted earnings per common share for the three and nine months ended September 30, 2019 and 2018.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, | | | | Nine months ended September 30, | | |
| Earnings Per Share (in thousands, except per share data) | | 2019 | | 2018 | | 2019 | | 2018 |
| Numerator | | | | | | | | |
| Net income attributable to common stockholders | | | $ | 9,533 | | | $ | 7,237 | | | $ | 27,734 | | | $ | 38,215 | |
| Denominator | | | | | | | | |
| Weighted average common shares outstanding — basic | | 127,272 | | | 105,783 | | | 122,460 | | | 101,095 | |
Effect of dilutive securities(1) | | | | | | | | |
| Share-based compensation | | | 178 | | | 550 | | | 254 | | | 400 | |
| Shares issuable under forward sales agreements | | | 19 | | | — | | | 6 | | | — | |
| Weighted average common shares outstanding — diluted | | | 127,469 | | | 106,333 | | | 122,720 | | | 101,495 | |
| Net income per share — basic and diluted | | | | | | | | | |
| Net income per share attributable to common stockholders — basic | | | $ | 0.07 | | | $ | 0.07 | | | $ | 0.23 | | | $ | 0.38 | |
| Net income per share attributable to common stockholders — diluted | | | $ | 0.07 | | | $ | 0.07 | | | $ | 0.23 | | | $ | 0.38 | |
(1)During the three and nine months ended September 30, 2019 and 2018, there were 220, 218, 193 and 2017.197, 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.
|
| | | | | | | | | | | | | | | |
| | Three months ended September 30, | | Nine months ended September 30, |
| Earnings Per Share (in thousands, except per share data) | 2018 | | 2017 | | 2018 | | 2017 |
| Numerator | | | | | | | |
| Net income | $ | 8,876 |
| | $ | 21,839 |
| | $ | 48,989 |
| | $ | 23,276 |
|
| Less: preferred stock dividends | 1,289 |
| | 2,449 |
| | 6,315 |
| | 7,345 |
|
| Less: redemption of preferred stock | — |
| | — |
| | 2,661 |
| | — |
|
| Less: amount allocated to participating securities | 69 |
| | 84 |
| | 209 |
| | 250 |
|
| Less: income attributable to noncontrolling interest after preferred stock dividends | 281 |
| | 828 |
| | 1,589 |
| | 673 |
|
| Net income attributable to common stockholders | $ | 7,237 |
|
| $ | 18,478 |
| | $ | 38,215 |
| | $ | 15,008 |
|
| Denominator | |
| | | | | | |
| Weighted average common shares outstanding — basic | 105,783 |
| | 92,787 |
| | 101,095 |
| | 87,632 |
|
Effect of dilutive securities(1) | | | | | | | |
| Share-based compensation | 550 |
| | 648 |
| | 400 |
| | 606 |
|
| Weighted average common shares outstanding — diluted | 106,333 |
| | 93,435 |
| | 101,495 |
| | 88,238 |
|
| Net income per share — basic and diluted | | | | | | | |
| Net income per share attributable to common stockholders — basic | $ | 0.07 |
| | $ | 0.20 |
| | $ | 0.38 |
| | $ | 0.17 |
|
| Net income per share attributable to common stockholders — diluted | $ | 0.07 |
| | $ | 0.20 |
| | $ | 0.38 |
| | $ | 0.17 |
|
| |
(1) | During the three and nine months ended September 30, 2018 and 2017, there were approximately 193, 197, 237 and 238, respectively, unvested restricted shares of common stock on a weighted average basis that were not included in the computation of diluted earnings per share because to do so would have been antidilutive for the period. |
10.11. Commitments and Contingencies
The Company is subject to various legal proceedings and claims that arise in the ordinary course of business. These matters are generally covered by insurance subject to deductible requirements. Management believes that the ultimate settlement of these actions will not have a material adverse effect on the Company’s financial position, results of operations, or cash flows.
The Company has letters of credit of approximately $5.6$6.0 million as of September 30, 20182019 related to construction projects and certain other agreements. As of September 30, 2019, the Company has a development commitment related to a building expansion under a tenant lease of approximately $3.1 million.
11.12. Subsequent Events
There were no recognized or non-recognized subsequent events.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion with the financial statements and related notes included elsewhere in Item 1 of this report and the audited financial statements and related notes thereto included in our most recent Annual Report on Form 10-K.
As used herein, except where the context otherwise requires, “Company,” “we,” “our” and “us,” refer to STAG Industrial, Inc. and our consolidated subsidiaries and partnerships, including our operating partnership,STAG Industrial Operating Partnership, L.P. (“Operating(the “Operating Partnership”).
Forward-Looking Statements
This report contains “forward-looking statements” within the meaning of the safe harbor from civil liability provided for such statements by the Private Securities Litigation Reform Act of 1995 (set forth in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). You can identify forward-looking statements by the use of words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “seeks,” “should,” “will,” and variations of such words or similar expressions. Forward-looking statements in this report include, among others, statements about our future financial condition, results of operations, capitalization rates on future acquisitions, our business strategy and objectives, including our acquisition strategy, occupancy and leasing rates and trends, and expected liquidity needs and sources (including capital expenditures and the ability to obtain financing or raise capital). Our forward-looking statements reflect our current views about our plans, intentions, expectations, strategies and prospects, which are based on the information currently available to us and on assumptions we have made. Although we believe that our plans, intentions, expectations, strategies and prospects as reflected in or suggested by our forward-looking statements are reasonable, we can give no assurance that our plans, intentions, expectations, strategies or prospects will be attained or achieved and you should not place undue reliance on these forward‑lookingforward-looking statements. Furthermore, actual results may differ materially from those described in the forward‑lookingforward-looking statements and may be affected by a variety of risks and factors including, without limitation:
•the factors included in our Annual Report on Form 10-K for the year ended December 31, 2017,2018, as updated elsewhere in this report, including those set forth under the headings “Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations;”
•our ability to raise equity capital on attractive terms;
•the competitive environment in which we operate;
•real estate risks, including fluctuations in real estate values and the general economic climate in local markets and competition for tenants in such markets;
•decreased rental rates or increased vacancy rates;
•potential defaults (including bankruptcies or insolvency) on or non-renewal of leases by tenants;
•acquisition risks, including our ability to identify and complete accretive acquisitions and/or failure of such acquisitions to perform in accordance with projections;
•the timing of acquisitions and dispositions;
•technological developments, particularly those affecting supply chains and logistics;
•potential natural disasters and other potentially catastrophic events such as acts of war and/or terrorism;
•international, national, regional and local economic conditions;
•the general level of interest rates and currencies;
•potential changes in the law or governmental regulations and interpretations of those laws and regulations, including changes in real estate and zoning laws or real estate investment trust (“REIT”) or corporate income tax laws, and potential increases in real property tax rates;
•financing risks, including the risks that our cash flows from operations may be insufficient to meet required payments of principal and interest and we may be unable to refinance our existing debt upon maturity or obtain new financing on attractive terms or at all;
•credit risk in the event of non-performance by the counterparties to the interest rate swaps and revolving and unfunded debt;
•how and when pending forward equity sales may settle;
•lack of or insufficient amounts of insurance;
•our ability to maintain our qualification as a REIT;
•our ability to retain key personnel;
•litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; and
•possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by us.
Any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise over time, and it is not possible for us to predict those events or how they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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 September 30, 2019 (which differs from rent calculated in accordance with GAAP) multiplied by 12. If a tenant is in a free rent period as of September 30, 2019, the total annualized base rental revenue is calculated based on the first contractual monthly base rent amount multiplied by 12.
We define “occupancy rate” as the percentage of total leasable square footage for which either revenue recognition has commenced in accordance with GAAP or the lease term has commenced as of the close of the reporting period, whichever occurs earlier.
We define the “Value Add Portfolio” as properties that meet any of the following criteria: (i) less than 75% occupied as of the acquisition date; (ii) will be less than 75% occupied due to known move-outs within two years of the acquisition date; (iii) out of service with significant physical renovation of the asset; or (iv)development.
We define “Stabilization” for properties under development or being redeveloped as the earlier of achieving 90% occupancy or 12 months after completion. With respect to properties acquired and immediately added to the Value Add Portfolio, (i) if acquired with less than 75% occupancy as of the acquisition date, Stabilization will occur upon the earlier of achieving 90% occupancy or 12 months from the acquisition date; or (ii) if acquired and will be less than 75% occupied due to known move-outs within two years of the acquisition date, Stabilization will occur upon the earlier of achieving 90% occupancy after the known move-outs have occurred or 12 months after the known move-outs have occurred.
We define the “Operating Portfolio” as all warehouse and light manufacturing assets that were acquired stabilized or have achieved Stabilization. The Operating Portfolio excludes non-core flex/office assets and assets contained in the Value Add Portfolio.
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 and (iii) an early renewal or workout, which ultimately does extend the original term for 12 months or more.
Overview
We are a REIT focused on the acquisition, ownership, and operation of single-tenant, industrial properties throughout the United States. We are a Maryland corporation and our common stock is publicly traded on the New York Stock Exchange under the symbol “STAG.”
We are organized and conduct our operations to qualify as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended, and generally are not subject to federal income tax to the extent we currently distribute our income to our stockholders and maintain our qualification as a REIT. We remain subject to state and local taxes on our income and property and to U.S. federal income and excise taxes on our undistributed income.
Factors That May Influence Future Results of Operations
Our ability to increase revenues or cash flow will depend in part on our (i) external growth, specifically acquisition activity, and (ii) internal growth, specifically occupancy and rental rates on our portfolio. A variety of other factors, including those noted below, also affect our future results of operations.
As used herein “total annualized base rental revenue” refers to the contractual monthly base rent as of September 30, 2018 (which differs from rent calculated in accordance with generally accepted accounting principles in the United States of America (“GAAP”)) multiplied by 12. If a tenant is in a free rent period as of September 30, 2018, the annualized rent is calculated based on the first contractual monthly base rent amount multiplied by 12.
Outlook
The outlook for our business remains positive, albeit on a moderated basis in light of over eightten years of economic growth, some uncertainty regarding the current U.S. presidential administration and its policy initiatives, and continued asset appreciation. In September 2018,the third quarter of 2019, the federal funds target rate was raisedlowered twice, each by 25 basis points, to a target range of 2.00%1.75% to 2.25%2.0%. This announcementThe Federal Reserve has signaled that it will support economic growth as needed. The current economic growth combined with the unwinding of its balance sheet by selling Treasury securities and anticipation of one more rate increase in 2018 are signs of the Central Bank’s confidence in the economy. The current trajectory of the federal funds target rate aligns with the Central Bank’s consistent commentary that future rate increases would be gradual. If interest rates rise further as a result of Federal Reserve policy action (short-term interest rates) or changes in market expectations and capital flows (long-term interest rates), we believe strengthening economic conditions are likely to accompany these changes. This strengthening of economic conditions combined with the currently favorable industrial supply demand environmentbalance should translate to a net positive result for our business. Specifically, our existing portfolio should benefit from rising rental rates and our acquisition activity should benefit from higher yields.strong occupancy. Furthermore, we believe certain characteristics of our business should position us well in a risingan uncertain interest rate environment, including the fact that we have minimal floating rate debt exposure (taking into account our hedging activities) and that many of our competitors for the assets we purchase tend to be smaller local and regional investors who are likely to be more heavily impacted by interest rate increases.
rates.
Several industrial specific trends contribute to the expected strong demand, including:
•the rise of e-commerce (as compared to the traditional retail store distribution model) and the concomitant demand by e-commerce industry participants for well-located, functional distribution space;
•the increasing attractiveness of the U.S. as a manufacturing and distribution location because of the size of the U.S. consumer market, an increase in overseas labor costs and the overall cost of supplying and shipping goods (i.e. the shortening and fattening of the supply chain); and
•the overall quality of the transportation infrastructure in the U.S.
Furthermore,Our portfolio continues to benefit from historically low availability throughout the lacknational industrial market. As of the most recent data, demand for space continues to support new supply and an accommodative environment for owners. Development
activity has steadily increased over the past several years and is now reaching material speculative development and the broader failure of supply to keep pace with demand in many of our markets has improved and may continue to modestly improve occupancy levels and rental rates in our portfolio. We believe, however, that industrial supply, more so than other real estate property types, has historically had a short lead time and can appear quickly. We have started to see a notable pick-up in development activity in a growing number of the primary industrial markets. Though availability remains historically low, this is a trend we will monitor closely. In addition, currently, the supply remains fairly concentrated in the larger primary industrial markets and we have limited exposure to many of these markets. On the demand side, we note that the quality and availability of labor remains a key focus of tenants making occupancy decisions. We will continue to monitor the supply and demand fundamentals for industrial real estate and assess its impact on our business.
Conditions in Our Markets
The buildings in our portfolio are located in markets throughout the United States. Positive or negative changes in economic or other conditions, new supply, adverse weather conditions and natural disasters, and other factors in these markets may affect our overall performance.
Rental Income
We receive income primarily in the form of rental income from the tenants who occupy our buildings. The amount of rental income generated by the buildings in our portfolio depends principally on occupancy and rental rates. As of September 30, 2018,2019, our Operating Portfolio was approximately 96.0%95.6% leased and our straight-line (“SL”) rent change (as defined below)SL Rent Change on new and renewal leases together grew approximately 10.6%16.5% and 14.7%20.1% during the three and nine months ended September 30, 2018,2019, respectively.We define the Operating Portfolio as all warehouse and light manufacturing assets that were acquired stabilized or have achieved Stabilization. The Operating Portfolio excludes non-core flex/office assets and assets contained in the Value Add Portfolio.We define Stabilization for assets under redevelopment to occur upon the earlier of achieving 90% occupancy or 12 months after completion. Stabilization for assets that were acquired and immediately added to the Value Add Portfolio occurs under the following: (i) if acquired with less than 75% occupancy as of the acquisition date, Stabilization will occur upon the earlier of achieving 90% occupancy or 12 months from the acquisition date; or (ii) if acquired and will be less than 75% occupied due to known move-outs within two years of the acquisition date, Stabilization will occur upon the earlier of achieving 90% occupancy after the known move-outs have occurred or 12 months after the known move-outs have occurred.We define the 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; or (iii) out of service with significant physical renovation of the asset.
Future economic downturns or regional downturns affecting our submarkets that impair our ability to renew or re-lease space and the ability of our tenants to fulfill their lease commitments, as in the case of tenant bankruptcies, could adversely affect our ability to maintain or increase rental rates at our buildings. Our ability to lease our properties and the attendant rental rate is dependent upon, among other things, (i) the overall economy, (ii) the supply/demand dynamic in our markets, (iii) the quality of our properties, including age, clear height, and configuration, and (iv) our tenants’ ability to meet their contractual obligations to us.
The following table provides a summary ofsummarizes our Operating Portfolio leases executedthat commenced during the three and nine months ended September 30, 2018.2019. Certain leases contain rental concessions; any such rental concessions are accounted for on a straight-line basis over the term of the lease.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Operating Portfolio | | Square Feet | | Cash
Basis Rent Per
Square Foot | | SL Rent Per
Square Foot | | Total Costs Per Square Foot(1) | | Cash
Rent Change | | SL Rent Change | | Weighted Average Lease Term(2) (years) | | Rental Concessions per Square Foot(3) |
| | | | | | | | | | | | | | | | |
| Three months ended September 30, 2019 | | | | | | | | | | | | | | | | |
| New Leases | | 490,935 | | | $ | 4.43 | | | $ | 4.58 | | | $ | 1.39 | | | 19.7 | % | | 24.7 | % | | 5.2 | | | $ | 0.69 | |
| Renewal Leases | | 1,583,107 | | | $ | 3.87 | | | $ | 4.03 | | | $ | 0.51 | | | 8.6 | % | | 14.8 | % | | 3.8 | | | $ | 0.05 | |
| Total/weighted average | | 2,074,042 | | | $ | 4.01 | | | $ | 4.16 | | | $ | 0.72 | | | 10.5 | % | | 16.5 | % | | 4.2 | | | $ | 0.20 | |
| Nine months ended September 30, 2019 | | | | | | | | | | | | | | | | |
| New Leases | | 1,168,842 | | | $ | 3.99 | | | $ | 4.14 | | | $ | 1.55 | | | 18.8 | % | | 28.2 | % | | 5.7 | | | $ | 0.77 | |
| Renewal Leases | | 6,005,521 | | | $ | 4.00 | | | $ | 4.16 | | | $ | 0.67 | | | 10.3 | % | | 18.9 | % | | 4.0 | | | $ | 0.01 | |
| Total/weighted average | | 7,174,363 | | | $ | 3.99 | | | $ | 4.16 | | | $ | 0.82 | | | 11.4 | % | | 20.1 | % | | 4.3 | | | $ | 0.14 | |
(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.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Operating Portfolio | | Square Feet | | Cash
Basis Rent Per
Square Foot | | SL Rent Per
Square Foot | | Total Costs Per
Square
Foot(1) | | Cash
Rent Change(2) | | SL Rent Change(3) | | Weighted Average Lease
Term(4)
(years) | | Rental Concessions per Square Foot(5) |
| | | | | | | | |
| Three months ended September 30, 2018 | | | | | | | | | | | | | | | | |
New Leases(6) | | 544,253 |
| | $ | 4.26 |
| | $ | 4.41 |
| | $ | 2.61 |
| | (4.1 | )% | | (0.4 | )% | | 5.6 |
| | $ | 0.54 |
|
Renewal Leases(7) | | 523,306 |
| | 4.37 |
| | 4.52 |
| | 0.56 |
| | 13.9 | % | | 19.5 | % | | 3.6 |
| | — |
|
| Total/weighted average | | 1,067,559 |
| | $ | 4.31 |
| | $ | 4.46 |
| | $ | 1.60 |
| | 5.9 | % | | 10.6 | % | | 4.6 |
| | $ | 0.27 |
|
| Nine months ended September 30, 2018 | | | | | | | | | | | | | | | | |
New Leases(6) | | 1,756,935 |
| | $ | 3.73 |
| | $ | 3.87 |
| | $ | 2.33 |
| | 9.9 | % | | 17.7 | % | | 6.8 |
| | $ | 0.75 |
|
Renewal Leases(7) | | 5,254,633 |
| | 3.98 |
| | 4.11 |
| | 0.62 |
| | 7.4 | % | | 14.1 | % | | 4.6 |
| | 0.07 |
|
| Total/weighted average | | 7,011,568 |
| | $ | 3.91 |
| | $ | 4.05 |
| | $ | 1.05 |
| | 7.9 | % | | 14.7 | % | | 5.1 |
| | $ | 0.24 |
|
30
| |
(1) | We define Total Costs as the costs for improvements of vacant and renewal spaces, as well as the legal fees and commissions for leasing transactions. Total Costs per square foot represent the total costs expected to be incurred on the leases signed during the period and do not reflect actual expenditures for the period. |
| |
(2) | We define Cash Rent Change as the percentage change in the base rent of the lease executed 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 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. This resulted in 192,707 and 1,532,343 square feet to be deemed non-comparable for three and nine months ended September 30, 2018, respectively.
|
| |
(3) | We define SL Rent Change as the percentage change in the average monthly base rent over the term of the lease, calculated on a straight-line basis, of the lease executed 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. |
| |
(4) | We define Weighted Average Lease Term as the contractual lease term in years as of the lease start date weighted by square footage. |
| |
(5) | Represents the total rental concessions for the entire lease term. |
| |
(6) | We define a New Lease as any lease that is signed for an initial term equal to or greater than twelve months for any vacant space; this includes a new tenant or an existing tenant that is expanding into new (additional) space. |
| |
(7) | We define a Renewal Lease as a lease signed by an existing tenant to extend the term for twelve months or more, including (i) a renewal of the same space as the current lease at lease expiration, (ii) a renewal of only a portion of the current space at lease expiration and (iii) an early renewal or workout, which ultimately does extend the original term for twelve months or more. |
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.costs, but typically excluding roof and building structure. However, we also have modified gross leases and gross leases in our building portfolio. The terms of those leases vary and on some occasions we may absorb certain building related expenses of our tenants. In our modified gross leases, we are responsible for some building related expenses during the lease term, but the cost of most of the expenses is passed through to the tenant for reimbursement to us. In our gross leases, we are responsible for all costs related to the building and its operation during the lease term. Our overall performance will be affected by the extent to which we are able to pass-through property operating expenses to our tenants.
Scheduled Lease Expirations
Our ability to re-lease space subject to expiring leases will impact our results of operations and is affected by economic and competitive conditions in our markets and by the desirability of our individual buildings. Leases that comprise approximately 9.7%6.6% of our annualized base rental revenue will expire during the period from October 1, 20182019 to September 30, 2019,2020, excluding month to monthmonth-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 higher thanthe same as the rates under existing leases expiring during the period October 1, 20182019 to September 30, 2019,2020, thereby resulting in higherapproximately the same revenue from the same space.
The following table sets forth a summary ofsummarizes lease expirations for leases in place as of September 30, 2018,2019, plus available space, for each of the ten calendar years beginning with 20182019 and thereafter in our portfolio. The information in the table assumes that tenants exercise no renewal options and no early termination rights.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Lease Expiration Year | | Number
of
Leases
Expiring | | Total Rentable
Square Feet | | % of
Total
Occupied
Square Feet | | Total Annualized
Base Rental
Revenue
(in thousands) | | % of Total
Annualized
Base Rental Revenue | | |
| Available | | — | | | 4,461,560 | | | — | | | — | | | — | | | |
| Month-to-month leases | | 3 | | | 149,663 | | | 0.2 | % | | $ | 735 | | | 0.2 | % | | |
| Remainder of 2019 | | 5 | | | 663,727 | | | 0.8 | % | | 2,651 | | | 0.7 | % | | |
| 2020 | | 44 | | | 7,300,692 | | | 8.9 | % | | 33,663 | | | 9.6 | % | | |
| 2021 | | 74 | | | 11,654,228 | | | 14.3 | % | | 50,740 | | | 14.3 | % | | |
| 2022 | | 71 | | | 8,954,925 | | | 11.0 | % | | 38,675 | | | 10.9 | % | | |
| 2023 | | 73 | | | 11,265,564 | | | 13.8 | % | | 43,763 | | | 12.4 | % | | |
| 2024 | | 55 | | | 10,507,744 | | | 12.9 | % | | 44,142 | | | 12.5 | % | | |
| 2025 | | 33 | | | 6,486,218 | | | 8.0 | % | | 27,023 | | | 7.6 | % | | |
| 2026 | | 34 | | | 5,988,185 | | | 7.3 | % | | 27,283 | | | 7.7 | % | | |
| 2027 | | 18 | | | 2,619,630 | | | 3.2 | % | | 12,847 | | | 3.6 | % | | |
| 2028 | | 24 | | | 4,619,199 | | | 5.7 | % | | 19,552 | | | 5.5 | % | | |
| Thereafter | | 47 | | | 11,322,032 | | | 13.9 | % | | 53,187 | | | 15.0 | % | | |
| Total | | 481 | | | 85,993,367 | | | 100.0 | % | | $ | 354,261 | | | 100.0 | % | | |
|
| | | | | | | | | | | | | | | |
| Lease Expiration Year | | Number of Leases Expiring | | Total Rentable Square Feet | | % of Total Occupied Square Feet | | Total Annualized Base Rental Revenue (in thousands) | | % of Total Annualized Base Rental Revenue |
| Available | | — | | 3,466,010 |
| | — |
| | — |
| | — |
|
| Month-to-month leases | | 5 | | 205,043 |
| | 0.3 | % | | $ | 828 |
| | 0.3 | % |
| Remainder of 2018 | | 4 | | 798,875 |
| | 1.1 | % | | 3,489 |
| | 1.2 | % |
| 2019 | | 53 | | 8,413,096 |
| | 11.7 | % | | 35,622 |
| | 11.8 | % |
| 2020 | | 50 | | 9,814,812 |
| | 13.6 | % | | 42,116 |
| | 14.0 | % |
| 2021 | | 69 | | 10,940,764 |
| | 15.2 | % | | 47,063 |
| | 15.6 | % |
| 2022 | | 51 | | 6,532,253 |
| | 9.1 | % | | 28,129 |
| | 9.3 | % |
| 2023 | | 46 | | 8,755,494 |
| | 12.2 | % | | 32,648 |
| | 10.9 | % |
| 2024 | | 28 | | 5,320,625 |
| | 7.4 | % | | 21,716 |
| | 7.2 | % |
| 2025 | | 23 | | 3,991,385 |
| | 5.5 | % | | 17,349 |
| | 5.8 | % |
| 2026 | | 23 | | 5,069,584 |
| | 7.0 | % | | 19,818 |
| | 6.6 | % |
| 2027 | | 12 | | 1,916,418 |
| | 2.7 | % | | 9,059 |
| | 3.0 | % |
| Thereafter | | 45 | | 10,161,454 |
| | 14.2 | % | | 43,022 |
| | 14.3 | % |
| Total | | 409 | | 75,385,813 |
| | 100.0 | % | | $ | 300,859 |
| | 100.0 | % |
Portfolio Summary
The following table sets forthsummarizes information relating to diversification by building type in our portfolio as of September 30, 2018.2019.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Square Footage | | | | | | Annualized Base Rental Revenue | | |
| Building Type | | Number of Buildings | | Amount | | % | | Occupancy Rate | | Amount
(in thousands) | | % |
| Warehouse/Distribution | | 352 | | | 77,360,328 | | | 90.0 | % | | 95.4 | % | | $ | 314,988 | | | 89.0 | % |
| Light Manufacturing | | 66 | | | 7,117,929 | | | 8.3 | % | | 97.9 | % | | 33,429 | | | 9.4 | % |
| Total Operating Portfolio/weighted average | | 418 | | | 84,478,257 | | | 98.3 | % | | 95.6 | % | | $ | 348,417 | | | 98.4 | % |
| | | | | | | | | | | | |
| Value Add | | 4 | | | 1,082,795 | | | 1.2 | % | | 44.5 | % | | 2,637 | | | 0.7 | % |
| Flex/Office | | 8 | | | 432,315 | | | 0.5 | % | | 58.1 | % | | 3,207 | | | 0.9 | % |
| Total portfolio/weighted average | | 430 | | | 85,993,367 | | | 100.0 | % | | 94.8 | % | | $ | 354,261 | | | 100.0 | % |
|
| | | | | | | | | | | | | | | | | | | |
| | | | | Square Footage | | | | Annualized Base Rental Revenue |
| Building Type | | Number of Buildings | | Amount | | % | | Occupancy Rate(1) | | Amount (in thousands) | | % |
| Warehouse/Distribution | | 309 |
| | 67,433,301 |
| | 89.5 | % | | 95.7 | % | | $ | 264,832 |
| | 88.1 | % |
| Light Manufacturing | | 59 |
| | 6,614,487 |
| | 8.8 | % | | 100.0 | % | | 29,615 |
| | 9.8 | % |
Total Operating Portfolio/weighted average | | 368 |
| | 74,047,788 |
| | 98.3 | % | | 96.0 | % | | $ | 294,447 |
| | 97.9 | % |
| | | | | | | | | | | | | |
| Value Add | | 4 |
| | 773,345 |
| | 1.0 | % | | 53.7 | % | | 1,792 |
| | 0.6 | % |
| Flex/Office | | 9 |
| | 564,680 |
| | 0.7 | % | | 67.9 | % | | 4,620 |
| | 1.5 | % |
Total portfolio/weighted average | | 381 |
| | 75,385,813 |
| | 100.0 | % | | 95.4 | % | | $ | 300,859 |
| | 100.0 | % |
| |
(1) | 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. |
Portfolio Acquisitions
The following table summarizes our acquisitions during the three and nine months endedSeptember 30, 2018.2019.
| | Market (1) | | Date Acquired | | Square Feet | | Buildings | | Purchase Price
(in thousands) | Market (1) | | Date Acquired | | Square Feet | | Buildings | | Purchase Price
(in thousands) |
| Cincinnati/Dayton, OH | | Cincinnati/Dayton, OH | | January 24, 2019 | | 176,000 | | | 1 | | | $ | 9,965 | |
| Pittsburgh, PA | | Pittsburgh, PA | | February 21, 2019 | | 455,000 | | | 1 | | | 28,676 | |
| Boston, MA | | Boston, MA | | February 21, 2019 | | 349,870 | | | 1 | | | 26,483 | |
| Minneapolis/St Paul, MN | | Minneapolis/St Paul, MN | | February 28, 2019 | | 248,816 | | | 1 | | | 21,955 | |
| Greenville/Spartanburg, SC | | January 11, 2018 | | 203,000 |
| | 1 |
| | $ | 10,755 |
| Greenville/Spartanburg, SC | | March 7, 2019 | | 331,845 | | | 1 | | | 24,536 | |
| Philadelphia, PA | | Philadelphia, PA | | March 7, 2019 | | 148,300 | | | 1 | | | 10,546 | |
| Omaha/Council Bluffs, NE-IA | | Omaha/Council Bluffs, NE-IA | | March 11, 2019 | | 237,632 | | | 1 | | | 20,005 | |
| Houston, TX | | Houston, TX | | March 28, 2019 | | 132,000 | | | 1 | | | 17,307 | |
| Baltimore, MD | | Baltimore, MD | | March 28, 2019 | | 167,410 | | | 1 | | | 13,648 | |
| Houston, TX | | Houston, TX | | March 28, 2019 | | 116,750 | | | 1 | | | 12,242 | |
| Three months ended March 31, 2019 | | Three months ended March 31, 2019 | | 2,363,623 | | | 10 | | | 185,363 | |
| Minneapolis/St Paul, MN | | January 26, 2018 | | 145,351 |
| | 1 |
| | 13,538 |
| Minneapolis/St Paul, MN | | April 2, 2019 | | 100,600 | | | 1 | | | 9,045 | |
| West Michigan, MI | | West Michigan, MI | | April 8, 2019 | | 230,200 | | | 1 | | | 15,786 | |
| Greensboro/Winston-Salem, NC | | Greensboro/Winston-Salem, NC | | April 12, 2019 | | 129,600 | | | 1 | | | 7,771 | |
| Greenville/Spartanburg, SC | | Greenville/Spartanburg, SC | | April 25, 2019 | | 319,660 | | | 2 | | | 15,432 | |
| Charleston/N Charleston, SC | | Charleston/N Charleston, SC | | April 29, 2019 | | 500,355 | | | 1 | | | 40,522 | |
| Houston, TX | | Houston, TX | | April 29, 2019 | | 128,136 | | | 1 | | | 13,649 | |
| Richmond, VA | | Richmond, VA | | May 16, 2019 | | 109,520 | | | 1 | | | 9,467 | |
| Laredo, TX | | Laredo, TX | | June 6, 2019 | | 213,982 | | | 1 | | | 18,972 | |
| Baton Rouge, LA | | Baton Rouge, LA | | June 18, 2019 | | 252,800 | | | 2 | | | 20,041 | |
| Philadelphia, PA | | February 1, 2018 | | 278,582 |
| | 1 |
| | 18,277 |
| Philadelphia, PA | | June 19, 2019 | | 187,569 | | | 2 | | | 13,645 | |
| Columbus, OH | | Columbus, OH | | June 28, 2019 | | 857,390 | | | 1 | | | 95,828 | |
| Three months ended June 30, 2019 | | Three months ended June 30, 2019 | | 3,029,812 | | | 14 | | | 260,158 | |
| Kansas City, MO | | Kansas City, MO | | July 10, 2019 | | 304,840 | | | 1 | | | 13,450 | |
| Houston, TX | | February 22, 2018 | | 242,225 |
| | 2 |
| | 22,478 |
| Houston, TX | | July 22, 2019 | | 199,903 | | | 1 | | | 11,287 | |
| Greenville/Spartanburg, SC | | March 30, 2018 | | 222,710 |
| | 1 |
| | 13,773 |
| |
| Three months ended March 31, 2018 | | 1,091,868 |
| | 6 |
| | 78,821 |
| |
| Chicago, IL | | April 23, 2018 | | 169,311 |
| | 2 |
| | 10,975 |
| |
| Charleston/N Charleston, SC | | Charleston/N Charleston, SC | | July 22, 2019 | | 88,583 | | | 1 | | | 7,166 | |
| Tampa, FL | | Tampa, FL | | August 5, 2019 | | 78,560 | | | 1 | | | 8,168 | |
| Philadelphia, PA | | Philadelphia, PA | | August 6, 2019 | | 120,000 | | | 1 | | | 10,880 | |
| Milwaukee/Madison, WI | | April 26, 2018 | | 53,680 |
| | 1 |
| | 4,316 |
| Milwaukee/Madison, WI | | August 16, 2019 | | 224,940 | | | 3 | | | 13,981 | |
| Houston, TX | | Houston, TX | | August 19, 2019 | | 45,000 | | | 1 | | | 6,190 | |
| West Michigan, MI | | West Michigan, MI | | August 19, 2019 | | 210,120 | | | 1 | | | 10,407 | |
| Pittsburgh, PA | | April 30, 2018 | | 175,000 |
| | 1 |
| | 15,380 |
| Pittsburgh, PA | | August 21, 2019 | | 410,389 | | | 1 | | | 31,219 | |
| Detroit, MI | | May 9, 2018 | | 274,500 |
| | 1 |
| | 19,328 |
| |
| Minneapolis/St Paul, MN | | May 15, 2018 | | 509,910 |
| | 2 |
| | 26,983 |
| |
| Cincinnati/Dayton, OH | | May 23, 2018 | | 158,500 |
| | 1 |
| | 7,317 |
| |
| Baton Rouge, LA | | May 31, 2018 | | 279,236 |
| | 1 |
| | 21,379 |
| |
| Boston, MA | | Boston, MA | | August 22, 2019 | | 80,100 | | | 1 | | | 14,253 | |
| Las Vegas, NV | | June 12, 2018 | | 122,472 |
| | 1 |
| | 17,920 |
| Las Vegas, NV | | August 27, 2019 | | 80,422 | | | 2 | | | 12,602 | |
| Greenville/Spartanburg, SC | | June 15, 2018 | | 131,805 |
| | 1 |
| | 5,621 |
| |
| Denver, CO | | June 18, 2018 | | 64,750 |
| | 1 |
| | 7,044 |
| |
| Cincinnati/Dayton, OH | | June 25, 2018 | | 465,136 |
| | 1 |
| | 16,421 |
| |
| Charlotte, NC | | June 29, 2018 | | 69,200 |
| | 1 |
| | 5,446 |
| |
| Houston, TX | | June 29, 2018 | | 252,662 |
| | 1 |
| | 27,170 |
| |
| Three months ended June 30, 2018 | | 2,726,162 |
| | 15 |
| | 185,300 |
| |
| Knoxville, TN | | July 10, 2018 | | 106,000 |
| | 1 |
| | 6,477 |
| |
| Nashville, TN | | Nashville, TN | | August 29, 2019 | | 348,880 | | | 1 | | | 20,267 | |
| Columbia, SC | | Columbia, SC | | August 30, 2019 | | 200,000 | | | 1 | | | 13,670 | |
| Pittsburgh, PA | | August 2, 2018 | | 265,568 |
| | 1 |
| | 19,186 |
| Pittsburgh, PA | | September 6, 2019 | | 138,270 | | | 1 | | | 9,323 | |
| Raleigh/Durham, NC | | August 2, 2018 | | 365,000 |
| | 1 |
| | 21,067 |
| |
| Detroit, MI | | August 6, 2018 | | 439,150 |
| | 1 |
| | 21,077 |
| |
| Des Moines, IA | | August 8, 2018 | | 121,922 |
| | 1 |
| | 6,053 |
| |
| McAllen/Edinburg/Pharr, TX | | August 9, 2018 | | 270,084 |
| | 1 |
| | 18,523 |
| |
| Omaha/Council Bluffs, NE-IA | | Omaha/Council Bluffs, NE-IA | | September 11, 2019 | | 128,200 | | | 2 | | | 8,509 | |
| Pittsburgh, PA | | August 15, 2018 | | 200,500 |
| | 1 |
| | 11,327 |
| Pittsburgh, PA | | September 16, 2019 | | 315,634 | | | 1 | | | 28,712 | |
| Minneapolis/St Paul, MN | | August 24, 2018 | | 120,606 |
| | 1 |
| | 8,422 |
| |
| Milwaukee/Madison, WI | | September 28, 2018 | | 100,800 |
| | 1 |
| | 7,484 |
| |
| Milwaukee/Madison, WI | | September 28, 2018 | | 174,633 |
| | 2 |
| | 13,288 |
| |
| Chicago, IL | | September 28, 2018 | | 105,637 |
| | 1 |
| | 6,368 |
| |
| Indianapolis, IN | | September 28, 2018 | | 478,721 |
| | 1 |
| | 29,085 |
| |
| Augusta/Richmond County, GA | | September 28, 2018 | | 203,726 |
| | 1 |
| | 9,379 |
| |
| Charlotte, NC | | September 28, 2018 | | 301,000 |
| | 1 |
| | 16,807 |
| |
| Three months ended September 30, 2018 | | 3,253,347 |
| | 15 |
| | 194,543 |
| |
| Nine months ended September 30, 2018 | | 7,071,377 |
| | 36 |
| | $ | 458,664 |
| |
| Memphis, TN | | Memphis, TN | | September 19, 2019 | | 1,135,453 | | | 1 | | | 50,941 | |
| Memphis, TN | | Memphis, TN | | September 26, 2019 | | 629,086 | | | 1 | | | 31,542 | |
| Three months ended September 30, 2019 | | Three months ended September 30, 2019 | | 4,738,380 | | | 22 | | | 302,567 | |
| Nine months ended September 30, 2019 | | Nine months ended September 30, 2019 | | 10,131,815 | | | 46 | | | $ | 748,088 | |
(1) As defined by CoStar Realty Information Inc.Inc (“CoStar”). If the building is located outside of a CoStar defined market, the city and state is reflected.
Portfolio Dispositions
During the nine months ended September 30, 2018,2019, we sold 11six buildings and two land parcels comprised of approximately 2.01.1 million rentable square feet with a net book value of approximately $57.1$20.4 million to third parties. Net proceeds from the sales of rental property were approximately $89.4$23.7 million and we recognized the full gain on the sales of rental property, net, of approximately $32.3$3.3 million for the nine months ended September 30, 2018.2019.
Geographic Diversification
The following table sets forthsummarizes information about the ten20 largest markets in our portfolio based on total annualized base rental revenue as of September 30, 2018.2019.
|
| | | | | | | | | | | |
Top Ten20 Markets (1) | | | | | | % of Total Annualized Base Rental Revenue |
| Philadelphia, PA | | 9.5 | | | | 9.0 | % |
| Chicago, IL | | 8.6 | | | | 7.3 | % |
| Greenville/Spartanburg, SC | | 4.8 | | | | 5.7 | % |
| Pittsburgh, PA | | | | | | 4.8 | % |
| Milwaukee/Madison, WI | | 4.1 | | | | 4.1 | % |
| Detroit, MI | | 3.9 | | | | 3.9 | % |
Cincinnati/Dayton, OH | | 3.3 | % |
Charlotte, NC | | 3.2 | % |
Houston, TX | | 3.2 | % |
| Minneapolis/St Paul, MN | | 3.0 | | | | 3.3 | % |
Pittsburgh, PAHouston, TX | | 2.8 | | | | 3.2 | % |
TotalCharlotte, NC | | 46.4 | | | | 2.9 | % |
| Cincinnati/Dayton, OH | | | | | | 2.7 | % |
| Boston, MA | | | | | | 2.7 | % |
| West Michigan, MI | | | | | | 2.6 | % |
| Columbus, OH | | | | | | 2.5 | % |
| El Paso, TX | | | | | | 2.4 | % |
| Westchester/So Connecticut, CT/NY | | | | | | 1.9 | % |
| Raleigh/Durham, NC | | | | | | 1.7 | % |
| Cleveland, OH | | | | | | 1.7 | % |
| Memphis, TN | | | | | | 1.6 | % |
| Baltimore, MD | | | | | | 1.5 | % |
| Dallas/Ft Worth, TX | | | | | | 1.4 | % |
| Total | | | | | | 66.9 | % |
(1) As defined by CoStar Realty Information Inc.CoStar.
Industry Diversification
The following table sets forthsummarizes information about the ten20 largest tenant industries in our portfolio based on total annualized base rental revenue as of September 30, 2018.2019.
|
| | | | | | | | | | | |
Top Ten20 Tenant Industries (1) | | | | | | % of Total Annualized Base Rental Revenue |
Capital GoodsAuto Components | | 14.8 | | | | 11.9 | % |
AutomobilesAir Freight & ComponentsLogistics | | 12.8 | | | | 8.6 | % |
MaterialsCommercial Services & Supplies | | 11.7 | | | | 7.5 | % |
TransportationContainers & Packaging | | 8.9 | | | | 6.2 | % |
Consumer Durables & ApparelMachinery | | 8.9 | | | | 5.1 | % |
Food, Beverage & TobaccoHousehold Durables | | 7.9 | | | | 5.0 | % |
Commercial & Prof ServicesBuilding Products | | 7.6 | | | | 4.8 | % |
RetailingFood Products | | 5.0 | | | | 4.5 | % |
Household & Personal Products | | 4.7 | % |
| Food & Staples Retailing | | 4.3 | | | | 3.6 | % |
TotalElectrical Equipment | | 86.6 | | | | 3.5 | % |
| Household Products | | | | | | 3.4 | % |
| Beverages | | | | | | 3.1 | % |
| Internet & Direct Mkt Retail | | | | | | 3.0 | % |
| Textiles, Apparel, Luxury Good | | | | | | 2.0 | % |
| Media | | | | | | 1.9 | % |
| Metals & Mining | | | | | | 1.9 | % |
| Electronic Equip, Instruments | | | | | | 1.8 | % |
| Specialty Retail | | | | | | 1.8 | % |
| Chemicals | | | | | | 1.7 | % |
| Pharmaceuticals | | | | | | 1.7 | % |
| Total | | | | | | 83.0 | % |
(1) Industry classification based on GICSGlobal Industry Classification Standard methodology.
Top Tenants
Tenant Diversification
The following table sets forthsummarizes information about the ten20 largest tenants in our portfolio based on total annualized base rental revenue as of September 30, 2018.2019.
| | Top Ten Tenants (1) | | Number of Leases | | % of Total Annualized Base Rental Revenue | |
Top 20 Tenants (1) | | Top 20 Tenants (1) | | Number of Leases | | | % of Total Annualized Base Rental Revenue |
| General Service Administration | | 1 |
| | 2.3 | % | General Service Administration | | 1 | | | 2.0 | % |
| XPO Logistics | | 4 |
| | 1.9 | % | |
| Deckers Outdoor | | 2 |
| | 1.4 | % | |
| Amazon | | Amazon | | 2 | | | 1.6 | % |
| XPO Logistics, Inc. | | XPO Logistics, Inc. | | 4 | | | 1.3 | % |
| DHL Supply Chain | | DHL Supply Chain | | 5 | | | 1.1 | % |
| Yanfeng US Automotive Interior | | 3 |
| | 1.3 | % | Yanfeng US Automotive Interior | | 3 | | | 1.1 | % |
| Solo Cup | | 1 |
| | 1.3 | % | Solo Cup | | 1 | | | 1.1 | % |
| TriMas Corporation | | 4 |
| | 1.2 | % | TriMas Corporation | | 4 | | | 1.1 | % |
| DHL | | 4 |
| | 1.0 | % | |
Ford Motor Company
| | Ford Motor Company
| | 1 | | | 0.9 | % |
| FedEx Corporation | | FedEx Corporation | | 3 | | | 0.9 | % |
| WestRock Company | | WestRock Company | | 6 | | | 0.8 | % |
| Kenco Logistic Services, LLC | | Kenco Logistic Services, LLC | | 2 | | | 0.8 | % |
| Generation Brands | | 1 |
| | 0.9 | % | Generation Brands | | 1 | | | 0.8 | % |
| Carolina Beverage Group | | Carolina Beverage Group | | 2 | | | 0.8 | % |
| Perrigo Company | | Perrigo Company | | 2 | | | 0.8 | % |
| Emerson Electric | | Emerson Electric | | 2 | | | 0.7 | % |
| Quoizel, Inc. | | Quoizel, Inc. | | 1 | | | 0.7 | % |
| Schneider Electric USA, Inc. | | 4 |
| | 0.9 | % | Schneider Electric USA, Inc. | | 3 | | | 0.7 | % |
| Carolina Beverage Group | | 2 |
| | 0.9 | % | |
| American Tire Distributors Inc | | American Tire Distributors Inc | | 4 | | | 0.7 | % |
| Coca-Cola Refreshments USA Inc | | Coca-Cola Refreshments USA Inc | | 2 | | | 0.6 | % |
| Medline Industries, Inc. | | Medline Industries, Inc. | | 1 | | | 0.6 | % |
| Total | | 26 |
| | 13.1 | % | Total | | 50 | | | 19.1 | % |
(1) Includes tenants, guarantors, and/or non-guarantor parents.
Critical Accounting Policies
See “Critical Accounting Policies” in “Management's“Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2017,2018, for a discussion of our critical accounting policies and estimates.
On January 1, 2019, we adopted Accounting Standards Update 2016-02, Leases (Topic 842); see Note 2 in the accompanying Notes to Consolidated Financial Statements under “New Accounting Standards and Reclassifications.”
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.
Comparison of the three months ended September 30, 2018 to the three months ended September 30, 2017
We define same store properties as properties that were in the Operating Portfolio for the entirety of the comparative periods presented. Same store properties exclude Operating Portfolio properties with expansions placed into service after June 30,December 31, 2017. On September 30, 2018,2019, we owned 309317 industrial buildings consisting of approximately 61.863.2 million square feet, which represents approximately 82.0%73.5% of our total portfolio, that are considered our same store portfolio in the analysis below. Same store occupancy decreased approximately 0.3%1.9% to 96.1%94.6% as of September 30, 20182019 compared to 96.4%96.5% as of September 30, 2017.2018.
Comparison of the three months ended September 30, 2019 to the three months ended September 30, 2018
The following table summarizes selected operating information for our same store portfolio and our total portfolio for the three months ended September 30, 20182019 and 20172018 (dollars in thousands). This table includes a reconciliation from our same store portfolio to our total portfolio by also providing information for the three months ended September 30, 2019 and 2018 and 2017 with
respect to the buildings acquired and disposed of and Operating Portfolio buildings with expansions placed into service or transferred from the Value Add Portfolio to the Operating Portfolio after June 30,December 31, 2017 and our flex/office buildings and Value Add Portfolio.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Same Store Portfolio | | Acquisitions/Dispositions | | Other | | Total Portfolio |
| | Three months ended September 30, | | Change | | Three months ended September 30, | | Three months ended September 30, | | Three months ended September 30, | | Change |
| | 2018 | | 2017 | | $ | | % | | 2018 | | 2017 | | 2018 | | 2017 | | 2018 | | 2017 | | $ | | % |
| Revenue | | | | | | | | | | | | | | | | | | | | | | | |
| Operating revenue | | | | | | | | | | | | | | | | | | | | | | | |
| Rental income | $ | 61,926 |
| | $ | 60,611 |
| | $ | 1,315 |
| | 2.2 | % | | $ | 9,977 |
| | $ | 3,030 |
| | $ | 3,256 |
| | $ | 2,032 |
| | $ | 75,159 |
| | $ | 65,673 |
| | $ | 9,486 |
| | 14.4 | % |
| Tenant recoveries | 10,760 |
| | 11,239 |
| | (479 | ) | | (4.3 | )% | | 1,865 |
| | 620 |
| | 893 |
| | 507 |
| | 13,518 |
| | 12,366 |
| | 1,152 |
| | 9.3 | % |
| Other income | 254 |
| | 44 |
| | 210 |
| | 477.3 | % | | 15 |
| | 50 |
| | — |
| | 11 |
| | 269 |
| | 105 |
| | 164 |
| | 156.2 | % |
| Total operating revenue | 72,940 |
| | 71,894 |
| | 1,046 |
| | 1.5 | % | | 11,857 |
| | 3,700 |
| | 4,149 |
| | 2,550 |
| | 88,946 |
| | 78,144 |
| | 10,802 |
| | 13.8 | % |
| Expenses | | | | | | | | | | | | | | | | | | | | | |
| | |
| Property | 13,572 |
| | 13,388 |
| | 184 |
| | 1.4 | % | | 2,049 |
| | 993 |
| | 1,491 |
| | 1,020 |
| | 17,112 |
| | 15,401 |
| | 1,711 |
| | 11.1 | % |
Net operating income (1) | $ | 59,368 |
| | $ | 58,506 |
| | $ | 862 |
| | 1.5 | % | | $ | 9,808 |
| | $ | 2,707 |
| | $ | 2,658 |
| | $ | 1,530 |
| | 71,834 |
| | 62,743 |
| | 9,091 |
| | 14.5 | % |
| Other expenses | | | | | | | | | | | | | | | | | | | | | | | |
| General and administrative | | | | | | | | | | | | | | | | 8,911 |
| | 8,380 |
| | 531 |
| | 6.3 | % |
| Property acquisition costs | | | | | | | | | | | | | | | | — |
| | 1,386 |
| | (1,386 | ) | | (100.0 | )% |
| Depreciation and amortization | | | | | | | | | | | | | | | | 44,355 |
| | 38,186 |
| | 6,169 |
| | 16.2 | % |
| Other expenses | | | | | | | | | | | | | | | | 223 |
| | 58 |
| | 165 |
| | 284.5 | % |
| Total other expenses | | | | | | | | | | | | | | | | 53,489 |
| | 48,010 |
| | 5,479 |
| | 11.4 | % |
| Total expenses | | | | | | | | | | | | | | | | 70,601 |
| | 63,411 |
| | 7,190 |
| | 11.3 | % |
| Other income (expense) | | | | | | | | | | | | | | | | | | | | | | |
| Interest and other income | | | | | | | | | | | | | | | | 3 |
| | 2 |
| | 1 |
| | 50.0 | % |
| Interest expense | | | | | | | | | | | | | | | | (12,698 | ) | | (10,446 | ) | | (2,252 | ) | | 21.6 | % |
| Loss on extinguishment of debt | | | | | | | | | | | | | | | | (13 | ) | | (13 | ) | | — |
| | — | % |
| Gain on the sales of rental property, net | | | | | | | | | | | | | | | | 3,239 |
| | 17,563 |
| | (14,324 | ) | | (81.6 | )% |
| Total other income (expense) | | | | | | | | | | | | | | | | (9,469 | ) | | 7,106 |
| | (16,575 | ) | | (233.3 | )% |
| Net income | | | | | | | | | | | | | | | | $ | 8,876 |
| | $ | 21,839 |
| | $ | (12,963 | ) | | (59.4 | )% |
| |
(1) | For a detailed discussion of NOI, including the reasons management believes NOI is useful to investors, see “Non-GAAP Financial Measures” below. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Same Store Portfolio | | | | | | | | Acquisitions/Dispositions | | | | Other | | | | Total Portfolio | | | | | | |
| | Three months ended September 30, | | | | Change | | | | Three months ended September 30, | | | | Three months ended September 30, | | | | Three months ended September 30, | | | | Change | | |
| | 2019 | | 2018 | | $ | | % | | 2019 | | 2018 | | 2019 | | 2018 | | 2019 | | 2018 | | $ | | % |
| Revenue | | | | | | | | | | | | | | | | | | | | | | | |
| Operating revenue | | | | | | | | | | | | | | | | | | | | | | | |
| Rental income | $ | 75,376 | | | $ | 75,002 | | | $ | 374 | | | 0.5 | % | | $ | 23,611 | | | $ | 10,922 | | | $ | 3,307 | | | $ | 2,753 | | | $ | 102,294 | | | $ | 88,677 | | | $ | 13,617 | | | 15.4 | % |
| Other income | 55 | | | 255 | | | (200) | | | (78.4) | % | | 72 | | | 14 | | | — | | | — | | | 127 | | | 269 | | | (142) | | | (52.8) | % |
| Total operating revenue | 75,431 | | | 75,257 | | | 174 | | | 0.2 | % | | 23,683 | | | 10,936 | | | 3,307 | | | 2,753 | | | 102,421 | | | 88,946 | | | 13,475 | | | 15.1 | % |
| Expenses | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Property | 13,796 | | | 13,713 | | | 83 | | | 0.6 | % | | 3,078 | | | 2,235 | | | 1,283 | | | 1,164 | | | 18,157 | | | 17,112 | | | 1,045 | | | 6.1 | % |
Net operating income (1) | $ | 61,635 | | | $ | 61,544 | | | $ | 91 | | | 0.1 | % | | $ | 20,605 | | | $ | 8,701 | | | $ | 2,024 | | | $ | 1,589 | | | 84,264 | | | 71,834 | | | 12,430 | | | 17.3 | % |
| Other expenses | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| General and administrative | | | | | | | | | | | | | | | | | 8,924 | | | 8,911 | | | 13 | | | 0.1 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Depreciation and amortization | | | | | | | | | | | | | | | | | 46,908 | | | 44,355 | | | 2,553 | | | 5.8 | % |
| Loss on impairments | | | | | | | | | | | | | | | | | 4,413 | | | — | | | 4,413 | | | 100.0 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Other expenses | | | | | | | | | | | | | | | | | 458 | | | 223 | | | 235 | | | 105.4 | % |
| Total other expenses | | | | | | | | | | | | | | | | | 60,703 | | | 53,489 | | | 7,214 | | | 13.5 | % |
| Total expenses | | | | | | | | | | | | | | | | | 78,860 | | | 70,601 | | | 8,259 | | | 11.7 | % |
| Other income (expense) | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest and other income | | | | | | | | | | | | | | | | | 12 | | | 3 | | | 9 | | | 300.0 | % |
| Interest expense | | | | | | | | | | | | | | | | | (14,053) | | | (12,698) | | | (1,355) | | | 10.7 | % |
| Loss on extinguishment of debt | | | | | | | | | | | | | | | | | — | | | (13) | | | 13 | | | (100.0) | % |
| Gain on the sales of rental property, net | | | | | | | | | | | | | | | | | 1,670 | | | 3,239 | | | (1,569) | | | (48.4) | % |
| Total other income (expense) | | | | | | | | | | | | | | | | | (12,371) | | | (9,469) | | | (2,902) | | | 30.6 | % |
| Net income | | | | | | | | | | | | | | | | | | $ | 11,190 | | | $ | 8,876 | | | $ | 2,314 | | | 26.1 | % |
(1)For a detailed discussion of NOI, including the reasons management believes NOI is useful to investors, see “Non-GAAP Financial Measures” below.
Net Income
Net income for our total portfolio decreasedincreased by $13.0$2.3 million or 59.4%26.1% to $11.2 million for the three months ended September 30, 2019, compared to $8.9 million for the three months ended September 30, 2018, compared to $21.8 million for the three months ended September 30, 2017.2018.
Same Store Total Operating Revenue
Same store total operating revenue consists primarily of (i) rental income consisting of base rent,(i) fixed lease payments, variable lease payments, straight-line rentrental income, and above and below market lease amortization from our properties (“lease income”), and (ii) other tenant reimbursementsbillings for insurance, real estate taxes and certain other expenses (“tenant recoveries”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 $1.3$0.4 million or 2.2%0.5% to $61.9$75.4 million for the three months ended September 30, 20182019 compared to $60.6$75.0 million for the three months ended September 30, 2017.2018.
Same store lease income increased by $0.2 million or 0.4% to $64.0 million for the three months ended September 30, 2019 compared to $63.8 million for the three months ended September 30, 2018. Approximately $2.4$1.7 million of the increase was attributable to rental increases due to new leases and renewals of existing tenants. This increase was partially offset by an approximately $1.1$1.5 million decrease due to a reduction of base rent due to tenants downsizing their spaces and vacancies.
Same store tenant recoveries decreasedother billings increased by $0.5$0.2 million or 4.3%1.1% to $10.8$11.4 million for the three months ended September 30, 20182019 compared to $11.2 million for the three months ended September 30, 2017.2018. The decreaseincrease was primarily attributable to onean increase in real estate taxes levied by the taxing authority and changes to lease terms where we began paying the real estate taxes and operating expenses on behalf of our properties where ittenants that had previously paid its taxes and operating expenses directly to respective vendors of approximately $0.4 million. This increase was determined,partially offset by a decrease of approximately $0.2 million related to tenant specific billings that occurred during the three months ended September 30, 2017,2019 that did not recur during the tenant will not be ablethree months ended September 30, 2018.
Same store other income decreased by $0.2 million or 78.4% to meet its requirements set forth by the taxing authority to be entitled to an abatement of real estate taxes. The abatement was applicable to prior periods, and therefore the expense and related recovery recorded$0.1 million for the three months ended September 30, 2017 includes 36 months of real estate taxes, which attributed2019 compared to approximately $0.6$0.3 million of the decrease in same store tenant recoveries as it did not recur for the three months ended September 30, 2018. Additionally, approximately $0.3 millionThis decrease is primarily the result of the decrease related to the vacancy of previously occupied buildings and decreasesincome received in real estate taxes levied by the taxing authority. These decreases were partially offset by an increase of approximately $0.4 million related to increases2018 for settlements or other sums received from former tenants which did not recur in occupancy and real estate taxes levied by the taxing authority.2019.
Same Store Operating Expenses
Same store operating expenses consist primarily of property operating expenses and real estate taxes and insurance.
For a detailed reconciliation of our same store operating expenses to net income, see the table above.
Total same store property operating expenses increased by $0.2$0.1 million or 1.4%0.6% to $13.6$13.8 million for the three months ended September 30, 20182019 compared to $13.4$13.7 million for the three months ended September 30, 2017.2018. This increase was primarily related to increases in general repairs and maintenance and utilities expense of approximately $0.4 million and an increase in real estate taxes levied by the related taxing authority and changes to lease terms where we began paying the real estate taxes on behalf of tenants that had previously paid its taxes directly to the taxing authority of approximately $0.1 million. Additionally during the three months ended September 30, 2017$0.2 million and an increase in repairs and maintenance expense of approximately $0.3 million of previously recorded bad debt reserve was reversed, which did not recur during the three months ended September 30, 2018.million. These increases were partially offset by a decreasedecreases in real estate taxes attributable to oneinsurance expense of our properties where it was determined, during the three months ended September 30, 2017, that the tenant will not be able to meet its requirements set forth by the taxing authority to be entitled to an abatementapproximately $0.3 million and utility expense of real estate taxes. The abatement was applicable to prior periods, and therefore the expense and related recovery recorded for the three months ended September 30, 2017 includes 36 months of real estate taxes, which attributed to approximately $0.6 million of the decrease in same store operating expenses as it did not recur for the three months ended September 30, 2018.$0.1 million.
Acquisitions and Dispositions Net Operating Income
For a detailed reconciliation of our acquisitions and dispositions NOI to net income, see the table above.
Subsequent to June 30,December 31, 2017, we acquired 5395 buildings consisting of approximately 10.519.6 million square feet (excluding four buildings that were included in the Value Add Portfolio at September 30, 20182019 or transferred from the Value Add Portfolio to the Operating Portfolio after June 30,December 31, 2017), and sold 1825 buildings and two land parcels consisting of approximately 3.75.0 million square feet. For the three months ended September 30, 20182019 and 2017,2018, the buildings acquired after June 30,December 31, 2017 contributed approximately $9.8$20.7 million and $0.2$5.9 million to NOI, respectively. For the three months ended September 30, 20182019 and 2017,2018, the buildings sold after June 30,December 31, 2017 contributed approximately $(8,000)$(0.1) and $2.5$2.8 million to NOI, respectively.
Refer to Note 3 in the accompanying Notes to Consolidated Financial Statements for additional discussion regarding buildings acquired or sold.
Other Net Operating Income
Our other assets include our flex/office buildings, Value Add Portfolio, and Operating Portfolio buildings with expansions placed in service or transferred from the Value Add Portfolio to the Operating Portfolio after June 30,December 31, 2017. Other NOI also includes termination incomeadjustments from buildings in our same store portfolio.
For a detailed reconciliation of our other NOI to net income, see the table above.
At September 30, 2018,2019, we owned nineeight flex/office buildings consisting of approximately 0.60.4 million square feet, four buildings in our Value Add Portfolio consisting of approximately 0.81.1 million square feet, and six buildings consisting of approximately 1.81.7 million square feet that were Operating Portfolio buildings with expansions placed in service or transferred from the Value Add Portfolio to the Operating Portfolio after June 30,December 31, 2017. These buildings contributed approximately $2.5$2.0 million and $1.3$1.9 million to NOI for the three months ended September 30, 20182019 and 2017,2018, respectively. Additionally, there was $0.2 millionapproximately $(16,000) and $0.2$(0.3) million of termination fee incomeadjustments from certain buildings in our same store portfolio for the three months ended September 30, 20182019 and 2017,2018, respectively.
Total Other Expenses
Total other expenses consist of general and administrative expenses, property acquisition costs, depreciation and amortization, loss on impairments, and other expenses.
Total other expenses increased $5.5$7.2 million or 11.4%13.5% for the three months ended September 30, 20182019 to $53.5$60.7 million compared to $48.0$53.5 million for the three months ended September 30, 2017.2018. This is primarily a result of an increase in loss on impairments of approximately $4.4 million related to the property in Belfast, ME that is in our flex/office building portfolio, as well as an increase in depreciation and amortization of approximately $6.2$2.6 million due to an increase in the depreciable asset base as a result of acquisitions increased the depreciable asset base. General and administrative expenses increased by approximately $0.5 million due to increases in compensation and other payroll costs. Additionally, other expenses increased by approximately $0.2 million primarily due to a gain on incentive fee of approximately $0.2 million during the three months ended September 30, 2017 due to the finalization of a one-time incentive fee payable to Columbus Nova Real Estate Acquisition Group, LLC, which did not recur during the three months ended September 30, 2018. These increases were partially offset by a decrease in property acquisition costs of approximately $1.4 million due to the adoption of Accounting Standards Update 2017-01, as discussed in Note 2 of the accompanying Notes to Consolidated Financial Statements.net acquisitions.
Total Other Income (Expense)
Total other income (expense) consists of interest and other income, interest expense, loss on extinguishment of debt, and gain on the sales of rental property, net. Interest expense includes interest incurred during the period as well as adjustments related to amortization of financing fees and debt issuance costs, and amortization of fair market value adjustments associated with the assumption of debt.
Total net other income decreased $16.6expense increased $2.9 million or 233.3%30.6% for the three months ended September 30, 2019 to a net other expense position of$12.4 million compared $9.5 million for the three months ended September 30, 2018 compared a net other income of $7.1 million for the three months ended September 30, 2017.2018. This decreaseincrease is primarily the result of a decrease in the gain on the sales of rental property, net of approximately $14.3$1.6 million. This decreaseincrease is also attributable to an increase in interest expense of approximately $2.3$1.4 million which was primarily attributable to the issuancefunding of newan unsecured term loans on July 27, 2018 and July 25, 2019 and a higher average unsecured notescredit facility balance during the three months ended September 30, 2019 as discussed in Note 4 ofcompared the accompanying Notes to Consolidated Financial Statements.three months ended September 30, 2018.
Comparison of the nine months ended September 30, 20182019 to the nine months ended September 30, 20172018
We define same store properties as properties that were in the Operating Portfolio for the entirety of the comparative periods presented. Same store properties exclude Operating Portfolio properties with expansions placed into service after December 31, 2016. On September 30, 2018, we owned 278 industrial buildings consisting of approximately 55.1 million square feet, which represents approximately 73.1% of our total portfolio, that are considered our same store portfolio in the analysis below. Same store occupancy decreased approximately 0.4% to 95.6% as of September 30, 2018 compared to 96.0% as of September 30, 2017.
The following table summarizes selected operating information for our same store portfolio and our total portfolio for the nine months ended September 30, 20182019 and 20172018 (dollars in thousands). This table includes a reconciliation from our same store portfolio to our total portfolio by also providing information for the nine months ended September 30, 20182019 and 20172018 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, 20162017 and our flex/office buildings and Value Add Portfolio.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Same Store Portfolio | | Acquisitions/Dispositions | | Other | | Total Portfolio |
| | Nine months ended September 30, | | Change | | Nine months ended September 30, | | Nine months ended September 30, | | Nine months ended September 30, | | Change |
| | 2018 | | 2017 | | $ | | % | | 2018 | | 2017 | | 2018 | | 2017 | | 2018 | | 2017 | | $ | | % |
| Revenue | | | | | | | | | | | | | | | | | | | | | | | |
| Operating revenue | |
| | |
| | |
| | |
| | |
| | |
| | | | | | |
| | |
| | | | |
|
| Rental income | $ | 162,063 |
| | $ | 158,798 |
| | $ | 3,265 |
| | 2.1 | % | | $ | 44,984 |
| | $ | 21,629 |
| | $ | 10,180 |
| | $ | 6,194 |
| | $ | 217,227 |
| | $ | 186,621 |
| | $ | 30,606 |
| | 16.4 | % |
| Tenant recoveries | 28,341 |
| | 27,519 |
| | 822 |
| | 3.0 | % | | 8,693 |
| | 4,004 |
| | 2,409 |
| | 1,429 |
| | 39,443 |
| | 32,952 |
| | 6,491 |
| | 19.7 | % |
| Other income | 725 |
| | 118 |
| | 607 |
| | 514.4 | % | | 216 |
| | 70 |
| | 92 |
| | 56 |
| | 1,033 |
| | 244 |
| | 789 |
| | 323.4 | % |
| Total operating revenue | 191,129 |
| | 186,435 |
| | 4,694 |
| | 2.5 | % | | 53,893 |
| | 25,703 |
| | 12,681 |
| | 7,679 |
| | 257,703 |
| | 219,817 |
| | 37,886 |
| | 17.2 | % |
| Expenses | | | | | | | | | | | | | | | | | | | | | |
| | |
| Property | 35,947 |
| | 33,839 |
| | 2,108 |
| | 6.2 | % | | 10,337 |
| | 5,317 |
| | 4,451 |
| | 3,156 |
| | 50,735 |
| | 42,312 |
| | 8,423 |
| | 19.9 | % |
Net operating income (1) | $ | 155,182 |
| | $ | 152,596 |
| | $ | 2,586 |
| | 1.7 | % | | $ | 43,556 |
| | $ | 20,386 |
| | $ | 8,230 |
| | $ | 4,523 |
| | 206,968 |
| | 177,505 |
| | 29,463 |
| | 16.6 | % |
| Other expenses | |
| | |
| | |
| | |
| | |
| | |
| | | | | | | | | | |
| | |
| General and administrative | | |
| | |
| | |
| | |
| | |
| | | | | | 25,637 |
| | 25,090 |
| | 547 |
| | 2.2 | % |
| Property acquisition costs | | |
| | |
| | |
| | |
| | |
| | | | | | — |
| | 4,684 |
| | (4,684 | ) | | (100.0 | )% |
| Depreciation and amortization | | |
| | |
| | |
| | |
| | |
| | | | | | 125,221 |
| | 110,286 |
| | 14,935 |
| | 13.5 | % |
| Loss on impairments | | |
| | |
| | |
| | |
| | |
| | | | | | 2,934 |
| | — |
| | 2,934 |
| | 100.0 | % |
| Loss on involuntary conversion | | |
| | |
| | |
| | |
| | |
| | | | | | — |
| | 330 |
| | (330 | ) | | (100.0 | )% |
| Other expenses | | |
| | |
| | |
| | |
| | |
| | | | | | 864 |
| | 1,502 |
| | (638 | ) | | (42.5 | )% |
| Total other expenses | | |
| | |
| | |
| | |
| | |
| | | | | | 154,656 |
| | 141,892 |
| | 12,764 |
| | 9.0 | % |
| Total expenses | | |
| | |
| | |
| | |
| | |
| | | | | | 205,391 |
| | 184,204 |
| | 21,187 |
| | 11.5 | % |
| Other income (expense) | | |
| | |
| | |
| | |
| | |
| | | | | | | | | | | | |
| Interest and other income | | | | | | | | | | | | | | | | 16 |
| | 10 |
| | 6 |
| | 60.0 | % |
| Interest expense | | |
| | |
| | |
| | |
| | |
| | | | | | (35,602 | ) | | (31,557 | ) | | (4,045 | ) | | 12.8 | % |
| Loss on extinguishment of debt | | |
| | |
| | |
| | |
| | |
| | | | | | (13 | ) | | (15 | ) | | 2 |
| | (13.3 | )% |
| Gain on the sales of rental property, net | | |
| | |
| | |
| | |
| | |
| | | | | | 32,276 |
| | 19,225 |
| | 13,051 |
| | 67.9 | % |
| Total other income (expense) | | |
| | |
| | |
| | |
| | |
| | | | | | (3,323 | ) | | (12,337 | ) | | 9,014 |
| | 73.1 | % |
| Net income | | |
| | |
| | |
| | |
| | |
| | | | | | $ | 48,989 |
| | $ | 23,276 |
| | $ | 25,713 |
| | 110.5 | % |
| |
(1) | For a detailed discussion of NOI, including the reasons management believes NOI is useful to investors, see “Non-GAAP Financial Measures” below. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Same Store Portfolio | | | | | | | | Acquisitions/Dispositions | | | | Other | | | | Total Portfolio | | | | | | |
| | Nine months ended September 30, | | | | Change | | | | Nine months ended September 30, | | | | Nine months ended September 30, | | | | Nine months ended September 30, | | | | Change | | |
| | 2019 | | 2018 | | $ | | % | | 2019 | | 2018 | | 2019 | | 2018 | | 2019 | | 2018 | | $ | | % |
| Revenue | | | | | | | | | | | | | | | | | | | | | | | |
| Operating revenue | | | | | | | | | | | | | | | | | | | | | | | |
| Rental income | $ | 226,878 | | | $ | 222,636 | | | $ | 4,242 | | | 1.9 | % | | $ | 57,960 | | | $ | 25,327 | | | $ | 9,433 | | | $ | 8,707 | | | $ | 294,271 | | | $ | 256,670 | | | $ | 37,601 | | | 14.6 | % |
| Other income | 394 | | | 787 | | | (393) | | | (49.9) | % | | 104 | | | 243 | | | — | | | 3 | | | 498 | | | 1,033 | | | (535) | | | (51.8) | % |
| Total operating revenue | 227,272 | | | 223,423 | | | 3,849 | | | 1.7 | % | | 58,064 | | | 25,570 | | | 9,433 | | | 8,710 | | | 294,769 | | | 257,703 | | | 37,066 | | | 14.4 | % |
| Expenses | | | | | | | | | | | | | | | | | | | | | | | |
| Property | 42,585 | | | 40,326 | | | 2,259 | | | 5.6 | % | | 8,080 | | | 6,752 | | | 3,958 | | | 3,657 | | | 54,623 | | | 50,735 | | | 3,888 | | | 7.7 | % |
Net operating income (1) | $ | 184,687 | | | $ | 183,097 | | | $ | 1,590 | | | 0.9 | % | | $ | 49,984 | | | $ | 18,818 | | | $ | 5,475 | | | $ | 5,053 | | | 240,146 | | | 206,968 | | | 33,178 | | | 16.0 | % |
| Other expenses | | | | | | | | | | | | | | | | | | | | | | | |
| General and administrative | | | | | | | | | | | | | | | | | 26,723 | | | 25,637 | | | 1,086 | | | 4.2 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Depreciation and amortization | | | | | | | | | | | | | | | | | 133,844 | | | 125,221 | | | 8,623 | | | 6.9 | % |
| Loss on impairments | | | | | | | | | | | | | | | | | 9,757 | | | 2,934 | | | 6,823 | | | 232.5 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Other expenses | | | | | | | | | | | | | | | | | 1,284 | | | 864 | | | 420 | | | 48.6 | % |
| Total other expenses | | | | | | | | | | | | | | | | | 171,608 | | | 154,656 | | | 16,952 | | | 11.0 | % |
| Total expenses | | | | | | | | | | | | | | | | | 226,231 | | | 205,391 | | | 20,840 | | | 10.1 | % |
| Other income (expense) | | | | | | | | | | | | | | | | | | | | | | | | | |
| Interest and other income | | | | | | | | | | | | | | | | | 30 | | | 16 | | | 14 | | | 87.5 | % |
| Interest expense | | | | | | | | | | | | | | | | | (39,080) | | | (35,602) | | | (3,478) | | | 9.8 | % |
| Loss on extinguishment of debt | | | | | | | | | | | | | | | | | — | | | (13) | | | 13 | | | (100.0) | % |
| Gain on the sales of rental property, net | | | | | | | | | | | | | | | | | 3,261 | | | 32,276 | | | (29,015) | | | (89.9) | % |
| Total other income (expense) | | | | | | | | | | | | | | | | | (35,789) | | | (3,323) | | | (32,466) | | | 977.0 | % |
| Net income | | | | | | | | | | | | | | | | | | $ | 32,749 | | | $ | 48,989 | | | $ | (16,240) | | | (33.2) | % |
(1)For a detailed discussion of NOI, including the reasons management believes NOI is useful to investors, see “Non-GAAP Financial Measures” below.
Net Income
Net income for our total portfolio increaseddecreased by $25.7$16.2 million or 110.5%33.2% to $32.7 million for the nine months ended September 30, 2019 compared to $49.0 million for the nine months ended September 30, 2018 compared to $23.3 million for the nine months ended September 30, 2017.2018.
Same Store Total Operating Revenue
Same store total operating revenue consists primarily of (i) rental income consisting of base rent,(i) fixed lease payments, variable lease payments, straight-line rentrental income, and above and below market lease amortization from our properties (“lease income”), and (ii) other tenant recoveries.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 $3.3$4.2 million or 2.1%1.9% to $162.1$226.9 million for the nine months ended September 30, 20182019 compared to $158.8$222.6 million for the nine months ended September 30, 2017.2018.
Same store lease income increased by $2.0 million or 1.1% to $191.3 million for the nine months ended September 30, 2019 compared to $189.3 million for the nine months ended September 30, 2018. Approximately $5.9$5.8 million of the increase was attributable to rental increases due to new leases and renewals of existing tenants. Same store rental income also increased bytenants and approximately $0.5$0.3 million due to a net decrease in the amortization of net above market leases. These increases wereThis increase was partially offset by an approximately $3.1$4.1 million decrease due to a reduction of base rent due to tenants downsizing their spaces and vacancies.
Same store tenant recoveriesother billings increased by $0.8$2.2 million or 3.0%6.6% to $28.3$35.5 million for the nine months ended September 30, 20182019 compared to $27.5$33.3 million for the nine months ended September 30, 2017. Approximately $2.7 million of the2018. The increase was primarily dueattributable to increasesan increase in occupancy and real estate taxes levied by the taxing authority as well asand changes to lease terms where we began paying the real estate taxes and operating expenses on behalf of tenants that had previously paid its taxes and operating expenses directly to respective vendors.vendors of approximately $2.4 million. This increase was partially offset by a decrease of approximately $1.3$0.2 million related to vacancy of previously occupied buildings and decreases in real estate taxes levied by the taxing authority. These increases were also partially offset by one of our properties where it was determined,tenant specific billings that occurred during the nine months ended September 30, 2017,2019 that did not recur during the tenant will not be ablenine months ended September 30, 2018.
Same store other income decreased by $0.4 million or 49.9% to meet its requirements set forth by the taxing authority to be entitled to an abatement of real estate taxes. The abatement was applicable to prior periods, and therefore the expense and related recovery recorded$0.4 million for the nine months ended September 30, 2017 includes 36 months of real estate taxes, which attributed2019 compared to approximately $0.6$0.8 million of the decrease in same store tenant recoveries as it did not recur for the nine months ended September 30, 2018. This decrease is primarily the result of income received in 2018 for settlements or other sums received from former tenants which did not recur in 2019.
Same Store Operating Expenses
Same store operating expenses consist primarily of property operating expenses and real estate taxes and insurance.
For a detailed reconciliation of our same store operating expenses to net income, see the table above.
Total same store operating expenses increased by $2.1$2.3 million or 6.2%5.6% to $35.9$42.6 million for the nine months ended September 30, 20182019 compared to $33.8$40.3 million for the nine months ended September 30, 2017.2018. This increase was primarily related to increases in general repairs and maintenance expense of approximately $0.4 million, an increase in real estate taxes levied by the related taxing authority and changes to lease terms where we began paying the real estate taxes on behalf of tenants that had previously paid its taxes directly to the taxing authority of approximately $0.8$2.8 million, an increase of approximately $0.6 million in snow removal and utilitiesother expenses of approximately $0.5 million, and an increase in repairs and maintenance expense of approximately $0.6 million of bad debt expense. Additionally during the nine months ended September 30, 2017 approximately $0.3 million of previously recorded bad debt reserve was reversed, which did not recur during the nine months ended September 30, 2018.$0.4 million. These increases were partially offset by a decrease in real estate taxes attributable to oneinsurance and utility expenses of our properties where it was determined, during the nine months ended September 30, 2017, that the tenant will not be able to meet its requirements set forth by the taxing authority to be entitled to an abatement of real estate taxes. The abatement was applicable to prior periods, and therefore the expense and related recovery recorded for the nine months ended September 30, 2017 includes 36 months of real estate taxes, which attributed to approximately $0.6 million of the decrease in same store operating expenses as it did not recur for the three months ended September 30, 2018.$1.4 million.
Acquisitionsand DispositionsNet Operating Income
For a detailed reconciliation of our acquisitions and dispositions NOI to net income, see the table above.
Subsequent to December 31, 2016,2017, we acquired 8395 buildings consisting of approximately 17.019.6 million square feet (excluding sixfour buildings that were included in the Value Add Portfolio at September 30, 20182019 or transferred from the Value Add Portfolio to the Operating Portfolio after December 31, 2016)2017), and sold 2225 buildings and two land parcels consisting of approximately 3.95.0 million square feet. For the nine months ended September 30, 20182019 and September 30, 2017,2018, the buildings acquired after December 31, 20162017 contributed approximately $42.2$49.9 million and $12.1$9.0 million to NOI, respectively. For the nine months ended
September 30, 2019 and September 30, 2018, and
September 30, 2017, the buildings sold after December 31, 20162017 contributed approximately $1.4$0.1 million and $8.3$9.8 million to NOI, respectively. Refer to Note 3 in the accompanying Notes to Consolidated Financial Statements for additional discussion regarding buildings acquired or sold.
Other Net Operating Income
Our other assets include our flex/office buildings, Value Add Portfolio, and Operating Portfolio buildings with expansions placed in service or transferred from the Value Add Portfolio to the Operating Portfolio after December 31, 2016.2017. Other NOI also includes termination incomeadjustments from buildings fromin our same store portfolio.
For a detailed reconciliation of our other NOI to net income, see the table above.
At September 30, 20182019, we owned nineeight flex/office buildings consisting of approximately 0.60.4 million square feet, four buildings in our Value Add Portfolio consisting of approximately 0.81.1 million square feet, and sevensix buildings consisting of approximately 2.01.7 million square feet that were Operating Portfolio buildings with expansions placed in service or transferred from the Value Add Portfolio to the Operating Portfolio after December 31, 2016.2017. These buildings contributed approximately $7.8$5.7 million and $3.8$5.4 million to NOI for the nine months ended September 30, 20182019 and September 30, 2017,2018, respectively. Additionally, there was $0.4$(0.2) million and $0.7$(0.3) million of termination fee incomeadjustments from certain buildings in our same store portfolio for the nine months ended September 30, 20182019 and September 30, 2017,2018, respectively.
Total Other Expenses
Total other expenses consist of general and administrative expenses, property acquisition costs, depreciation and amortization, loss on impairments, loss on involuntary conversion, and other expenses.
Total other expenses increased $12.8$17.0 million or 9.0%11.0% to $171.6 million for the nine months ended September 30, 2019 compared to $154.7 million for the nine months ended September 30, 2018 compared to $141.9 million for the nine months ended September 30, 2017.2018. This is primarily a result of an increase in depreciation and amortization of approximately $14.9$8.6 million as a result of net acquisitions that increased the depreciable asset base. Thebase, as well as an increase was also attributable to two buildings that were impaired in the amount of approximately $2.9$6.8 million during the nine months ended September 30, 2018, whereas there were no buildings impaired during the nine months ended September 30, 2017.in loss on impairments. General and administrative expenses increased by approximately $0.5$1.1 million primarily due to increases in compensation and other payroll costs. These increases were partially offset by a decrease in property acquisition costs of approximately $4.7 million due to the adoption of Accounting Standards Update 2017-01, as discussed in Note 2 of the accompanying Notes to Consolidated Financial Statements. Additionally, loss on involuntary conversion decreased approximately $0.3 million as there were no involuntary conversion events during the nine months ended September 30, 2018, and other expenses decreased by approximately $0.6 million primarily due to the finalization of a one-time incentive fee during the nine months ended September 30, 2017 payable to Columbus Nova Real Estate Acquisition Group, LLC, which did not recur for the nine months ended September 30, 2018.
Total Other Income (Expense)
Total other income (expense) consists of interest and other income, interest expense, loss on extinguishment of debt, and gain on the sales of rental property, net. Interest expense includes interest incurred during the period as well as adjustments related to amortization of financing fees and debt issuance costs, and amortization of fair market value adjustments associated with the assumption of debt.
Total other expenses decreased $9.0expense increased $32.5 million or 73.1%977.0% to $35.8 million for the nine months ended September 30, 2019 compared to $3.3 million for the nine months ended September 30, 2018 compared to $12.3 million for the nine months ended September 30, 2017.2018. This decrease wasincrease is primarily the result of an increasea decrease in the gain on the sales of rental property, net of approximately $13.1$29.0 million. This was partially offset byincrease is also attributable to an increase in interest expense of approximately $4.0$3.5 million which was primarily attributable to a higherthe funding of unsecured credit facility balanceterm loans on March 28, 2018, July 27, 2018, and July 25, 2019, and the funding of unsecured notes on June 13, 2018 during the nine months ended September 30, 20182019 as compared to the nine months ended September 30, 2017, and the issuance of new unsecured term loans and unsecured notes as discussed in Note 4 of the accompanying Notes to Consolidated Financial Statements. The increase in interest expense was slightly offset by the repayment of several mortgage notes during the year ended December 31, 2017.2018.
Non-GAAP Financial Measures
In this report, we disclose funds from operations (“FFO”) and NOI, which meet the definition of “non-GAAP financial measures” as set forth in Item 10(e) of Regulation S-K promulgated by the Securities and Exchange Commission (“SEC”). As a result, we are required to include in this report a statement of why management believes that presentation of these measures provides useful information to investors.
Funds From Operations
FFO should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of our performance, and we believe that to understand our performance further, FFO should be compared with our reported net income (loss) in accordance with GAAP, as presented in our consolidated financial statements included in this report.
We calculate FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts (“NAREIT”). FFO represents GAAP net income (loss), excluding gains (or losses) from sales of depreciable operating buildings, land sales, impairment write-downs of depreciable real estate, real estate related depreciation and amortization (excluding amortization of deferred financing costs and fair market value of debt adjustment) and after adjustments for unconsolidated partnerships and joint ventures.
Management uses FFO as a supplemental performance measure because it is a widely recognized measure of the performance of REITs. FFO may be used by investors as a basis to compare our operating performance with that of other REITs.
However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our buildings that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our buildings, all of which have real economic effects and could materially impact our results from operations, the utility of FFO as a measure of our performance is limited. In addition, other REITs may not calculate FFO in accordance with the NAREIT definition, and, accordingly, our FFO may not be comparable to such other REITs’ FFO. FFO should not be used as a measure of our liquidity, and is not indicative of funds available for our cash needs, including our ability to pay dividends.
The following table sets forth a reconciliation of our FFO attributable to common stockholders and unit holders for the periods presented to net income, the nearest GAAP equivalent.
| | | | | Three months ended September 30, | | Nine months ended September 30, | | Three months ended September 30, | | | Nine months ended September 30, | |
| Reconciliation of Net Income to FFO (in thousands) | | 2018 | | 2017 | | 2018 | | 2017 | Reconciliation of Net Income to FFO (in thousands) | | | 2019 | | 2018 | | 2019 | | 2018 |
| Net income | | $ | 8,876 |
| | $ | 21,839 |
| | $ | 48,989 |
| | $ | 23,276 |
| Net income | | | $ | 11,190 | | | $ | 8,876 | | | $ | 32,749 | | | $ | 48,989 | |
| Rental property depreciation and amortization | | 44,281 |
| | 38,114 |
| | 124,999 |
| | 110,069 |
| Rental property depreciation and amortization | | 46,834 | | | 44,281 | | | 133,622 | | | 124,999 | |
| Loss on impairments | | — |
| | — |
| | 2,934 |
| | — |
| Loss on impairments | | 4,413 | | | — | | | 9,757 | | | 2,934 | |
| Gain on the sales of rental property, net | | (3,239 | ) | | (17,563 | ) | | (32,276 | ) | | (19,225 | ) | Gain on the sales of rental property, net | | (1,670) | | | (3,239) | | | (3,261) | | | (32,276) | |
| FFO | | 49,918 |
| | 42,390 |
| | 144,646 |
| | 114,120 |
| FFO | | 60,767 | | | 49,918 | | | 172,867 | | | 144,646 | |
| Preferred stock dividends | | (1,289 | ) | | (2,449 | ) | | (6,315 | ) | | (7,345 | ) | Preferred stock dividends | | (1,289) | | | (1,289) | | | (3,867) | | | (6,315) | |
| Redemption of preferred stock | | — |
| | — |
| | (2,661 | ) | | — |
| Redemption of preferred stock | | — | | | — | | | — | | | (2,661) | |
| Amount allocated to restricted shares of common stock and unvested units | | Amount allocated to restricted shares of common stock and unvested units | | (218) | | | (172) | | | (697) | | | (587) | |
| FFO attributable to common stockholders and unit holders | | $ | 48,629 |
| | $ | 39,941 |
| | $ | 135,670 |
| | $ | 106,775 |
| FFO attributable to common stockholders and unit holders | | | $ | 59,260 | | | $ | 48,457 | | | $ | 168,303 | | | $ | 135,083 | |
Net Operating Income
We consider NOI to be an appropriate supplemental performance measure to net income (loss) because we believe it helps investors and management understand the core operations of our buildings. NOI is defined as rental revenue, including reimbursementsincome, which includes billings for common area maintenance, real estate taxes and other income,insurance, less property expenses and real estate taxes and insurance. NOI should not be viewed as an alternative measure of our financial performance since it excludes expenses which could materially impact our results of operations. Further, our NOI may not be comparable to that of other real estate companies, as they may use different methodologies for calculating NOI.
The following table sets forth a reconciliation of our NOI for the periods presented to net income, the nearest GAAP equivalent.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended September 30, | | | | Nine months ended September 30, | | |
| Reconciliation of Net Income to NOI (in thousands) | | 2019 | | 2018 | | 2019 | | 2018 |
| Net income | | | $ | 11,190 | | | $ | 8,876 | | | $ | 32,749 | | | $ | 48,989 | |
| | | | | | | | |
| General and administrative | | 8,924 | | | 8,911 | | | 26,723 | | | 25,637 | |
| Transaction costs | | 94 | | | 94 | | | 247 | | | 170 | |
| Depreciation and amortization | | 46,908 | | | 44,355 | | | 133,844 | | | 125,221 | |
| Interest and other income | | (12) | | | (3) | | | (30) | | | (16) | |
| Interest expense | | 14,053 | | | 12,698 | | | 39,080 | | | 35,602 | |
| Loss on impairments | | 4,413 | | | — | | | 9,757 | | | 2,934 | |
| | | | | | | | |
| Loss on extinguishment of debt | | — | | | 13 | | | — | | | 13 | |
| Other expenses | | 364 | | | 129 | | | 1,037 | | | 694 | |
| | | | | | | | |
| Gain on the sales of rental property, net | | (1,670) | | | (3,239) | | | (3,261) | | | (32,276) | |
| Net operating income | | $ | 84,264 | | | $ | 71,834 | | | $ | 240,146 | | | $ | 206,968 | |
|
| | | | | | | | | | | | | | | | |
| | | Three months ended September 30, | | Nine months ended September 30, |
| Reconciliation of Net Income to NOI (in thousands) | | 2018 | | 2017 | | 2018 | | 2017 |
| Net income | | $ | 8,876 |
| | $ | 21,839 |
| | $ | 48,989 |
| | $ | 23,276 |
|
| Asset management fee income | | — |
| | (9 | ) | | — |
| | (52 | ) |
| General and administrative | | 8,911 |
| | 8,380 |
| | 25,637 |
| | 25,090 |
|
| Property acquisition costs | | 94 |
| | 1,386 |
| | 170 |
| | 4,684 |
|
| Depreciation and amortization | | 44,355 |
| | 38,186 |
| | 125,221 |
| | 110,286 |
|
| Interest and other income | | (3 | ) | | (2 | ) | | (16 | ) | | (10 | ) |
| Interest expense | | 12,698 |
| | 10,446 |
| | 35,602 |
| | 31,557 |
|
| Loss on impairments | | — |
| | — |
| | 2,934 |
| | — |
|
| Loss on involuntary conversion | | — |
| | — |
| | — |
| | 330 |
|
| Loss on extinguishment of debt | | 13 |
| | 13 |
| | 13 |
| | 15 |
|
| Other expenses | | 129 |
| | 260 |
| | 694 |
| | 813 |
|
| (Gain) loss on incentive fee | | — |
| | (202 | ) | | — |
| | 689 |
|
| Gain on the sales of rental property, net | | (3,239 | ) | | (17,563 | ) | | (32,276 | ) | | (19,225 | ) |
| Net operating income | | $ | 71,834 |
| | $ | 62,734 |
| | $ | 206,968 |
| | $ | 177,453 |
|
Cash Flows
Comparison of the nine months ended September 30, 20182019 to the nine months ended September 30, 20172018
The following table summarizes our cash flows for the nine months ended September 30, 20182019 compared to the nine months ended September 30, 2017.2018.
| | | | | Nine months ended September 30, | | Change | | | Nine months ended September 30, | | | Change | |
| Cash Flows (dollars in thousands) | | 2018 | | 2017 | | $ | | % | Cash Flows (dollars in thousands) | | 2019 | | 2018 | | $ | | % |
| Net cash provided by operating activities | | $ | 148,610 |
| | $ | 120,034 |
| | $ | 28,576 |
| | 23.8 | % | Net cash provided by operating activities | | | $ | 174,930 | | | $ | 148,610 | | | $ | 26,320 | | | 17.7 | % |
| Net cash used in investing activities | | $ | 393,250 |
| | $ | 468,294 |
| | $ | (75,044 | ) | | (16.0 | )% | Net cash used in investing activities | | | $ | 765,675 | | | $ | 393,250 | | | $ | 372,425 | | | 94.7 | % |
| Net cash provided by financing activities | | $ | 227,766 |
| | $ | 341,042 |
| | $ | (113,276 | ) | | (33.2 | )% | Net cash provided by financing activities | | | $ | 577,476 | | | $ | 227,766 | | | $ | 349,710 | | | 153.5 | % |
Net cash provided by operating activities increased $28.6$26.3 million to $174.9 million for the nine months ended September 30, 2019 compared to $148.6 million for the nine months ended September 30, 2018 compared to $120.0 million for the nine months ended September 30, 2017.2018. The increase was primarily attributable to incremental operating cash flows from property acquisitions completed after December 31, 2016,September 30, 2018, and operating performance at existing properties. These increases were partially offset by the loss of cash flows from property dispositions completed after December 31, 2016September 30, 2018 and fluctuations in working capital due to timing of payments and rental receipts.
Net cash used in investing activities decreased $75.0increased $372.4 million to $765.7 million for the nine months ended September 30, 2019 compared to $393.3 million for the nine months ended September 30, 2018 compared2018. The increased cash outflow was primarily due to $468.3the acquisition of 46 buildings for a total cash consideration of approximately $748.0 million for the nine months ended September 30, 2017. The decreased cash outflow was primarily due2019 compared to the acquisition of 36 buildings for a total cash consideration of approximately $458.4 million for the nine months ended September 30, 2018 compared to the acquisition of 42 buildings for a total cash consideration of approximately $485.8 million for the nine months ended September 30, 2017.2018. The decreaseincrease is also attributable to a decrease in net proceeds from the salesales of 11rental property, net related to the disposition of six buildings and two land parcels during the nine months ended September 30, 20182019 for net proceeds of approximately $89.4$23.7 million, compared to the nine months ended September 30, 20172018 where we sold nine11 buildings for net proceeds of approximately $43.5$89.4 million.
Net cash provided by financing activities decreased $113.3increased $349.7 million to $577.5 million for the nine months ended September 30, 2019 compared to $227.8 million for the nine months ended September 30, 2018 compared to $341.0 million for the nine months ended September 30, 2017.2018. The decrease wasincrease is primarily dueattributable to an increase inof net proceeds from the sales of common stock of approximately $295.1 million and a decrease of net cash outflow on our unsecured credit facility of approximately $393.0$153.5 million during the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. Additionally, the increase is also attributable to a decrease in cash used for the redemption of preferred stock of $70.0 million during the nine months ended September 30, 2018 which did not recur during the nine months ended September 30, 2019, and an increase of proceeds from unsecured term loans of approximately $25.0 million during the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. These increases were partially offset by a decrease in proceeds from salesunsecured term notes of common stock of approximately $63.2$175.0 million as well asand an approximately $13.5$22.2 million increase in dividends paid during the nine months ended September 30, 20182019 compared to the nine months ended September 30, 2017 and the redemption of the 6.625% Series B Cumulative Redeemable Preferred Stock (“Series B Preferred Stock”) of $70.0 million on July 11, 2018. These increases in net cash outflow were partially offset by the $150.0 million draw on the unsecured term loan that was entered into on July 28, 2017, the funding of the unsecured notes that were entered into on April 10, 2018 of $175.0 million, as well as a decrease in the repayment of mortgage notes of approximately $103.6 million during the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017.
Liquidity and Capital Resources
We believe that our liquidity needs will be satisfied through cash flows generated by operations, disposition proceeds, and financing activities. Operating cash flow is primarily rental income, expense recoveries from tenants, and other income from operations and is our principal source of funds that we use to pay operating expenses, debt service, recurring capital expenditures and the distributions required to maintain our REIT qualification. We look to the capital markets (common equity, preferred equity, and debt) to primarily fund our acquisition activity. We seek to increase cash flows from our properties by maintaining quality standards for our buildings that promote high occupancy rates and permit increases in rental rates while reducing tenant turnover and controlling operating expenses. We believe that our revenue, together with proceeds from building sales and debt and equity financings, will continue to provide funds for our short-term and medium-term liquidity needs.
Our short-term liquidity requirements consist primarily of funds to pay for operating expenses and other expenditures directly associated with our buildings, including interest expense, interest rate swap payments, scheduled principal payments on outstanding indebtedness, funding of property acquisitions under contract, general and administrative expenses, and capital expenditures for tenant improvements and leasing commissions.
Our long-term liquidity needs, in addition to recurring short-term liquidity needs as discussed above, consist primarily of funds necessary to pay for acquisitions, non-recurring capital expenditures, and scheduled debt maturities. We intend to satisfy our
long-term liquidity needs through cash flow from operations, the issuance of equity or debt securities, other borrowings, property dispositions, or, in connection with acquisitions of certain additional buildings, the issuance of common units in the Operating Partnership.
As of September 30, 2018,2019, we had total immediate liquidity of approximately $580.4$622.5 million, comprised of $6.0$6.5 million of cash and cash equivalents and $574.4$616.0 million of immediate availability on our unsecured credit facility and unsecured term loans.
In addition, we require funds for future dividends to be paid to our common and preferred stockholders and common unit holders in ourthe Operating Partnership. The table below sets forth the dividends attributable to our outstanding common stock that had a record date during the nine months ended September 30, 2018. These distributions on our common stock are voluntary (at the discretion of our board of directors), to the extent we have satisfied distribution requirements in order to maintain our REIT status for federal income tax purposes, and may be reduced or stopped if needed to fund other liquidity requirements or for other reasons. The following table summarizes the dividends attributable to our outstanding common stock that had a record date during the nine months ended September 30, 2019.
|
| | | | | | | | | | |
| Month Ended 2018 | | Declaration Date | | Record Date | | Per Share | | Payment Date |
| September 30 | | July 11, 2018 | | September 28, 2018 | | $ | 0.118333 |
| | October 15, 2018 |
| August 31 | | July 11, 2018 | | August 31, 2018 | | 0.118333 |
| | September 17, 2018 |
| July 31 | | July 11, 2018 | | July 31, 2018 | | 0.118333 |
| | August 15, 2018 |
| June 30 | | April 10, 2018 | | June 29, 2018 | | 0.118333 |
| | July 16, 2018 |
| May 31 | | April 10, 2018 | | May 31, 2018 | | 0.118333 |
| | June 15, 2018 |
| April 30 | | April 10, 2018 | | April 30, 2018 | | 0.118333 |
| | May 15, 2018 |
| March 31 | | November 2, 2017 | | March 29, 2018 | | 0.118333 |
| | April 16, 2018 |
| February 28 | | November 2, 2017 | | February 28, 2018 | | 0.118333 |
| | March 15, 2018 |
| January 31 | | November 2, 2017 | | January 31, 2018 | | 0.118333 |
| | February 15, 2018 |
| Total | | | | | | $ | 1.064997 |
| | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Month Ended 2019 | | Declaration Date | | Record Date | | Per Share | | Payment Date |
| | | | | | | | |
| | | | | | | | |
| | | | | | | | |
| September 30 | | July 15, 2019 | | September 30, 2019 | | $ | 0.119167 | | | October 15, 2019 |
| August 31 | | July 15, 2019 | | August 30, 2019 | | 0.119167 | | | September 16, 2019 |
| July 31 | | July 15, 2019 | | July 31, 2019 | | 0.119167 | | | August 15, 2019 |
| June 30 | | April 9, 2019 | | June 28, 2019 | | 0.119167 | | | July 15, 2019 |
| May 31 | | April 9, 2019 | | May 31, 2019 | | 0.119167 | | | June 17, 2019 |
| April 30 | | April 9, 2019 | | April 30, 2019 | | 0.119167 | | | May 15, 2019 |
| March 31 | | January 10, 2019 | | March 29, 2019 | | 0.119167 | | | April 15, 2019 |
| February 28 | | January 10, 2019 | | February 28, 2019 | | 0.119167 | | | March 15, 2019 |
| January 31 | | January 10, 2019 | | January 31, 2019 | | 0.119167 | | | February 15, 2019 |
| Total | | | | | | $ | 1.072503 | | | |
On October 10, 2018,15, 2019, our board of directors declared the common stock dividends for the months ending October 31, 2018,2019, November 30, 20182019, and December 31, 20182019 at a monthly rate of $0.118333$0.119167 per share of common stock.
During the nine months ended September 30, 2018,2019, we paiddeclared quarterly cumulative dividends on the Series B Preferred Stock and the 6.875% Series C Cumulative Redeemable Preferred Stock (“Series C Preferred Stock,” and together with Series B Preferred Stock, the “Preferred Stock Issuances”Stock”) at a rate equivalent to the fixed annual rate of $1.65625 and $1.71875 per share, respectively.share. The following table below sets forthsummarizes the dividends on the Series C Preferred Stock Issuances during the nine months ended September 30, 2018.2019.
|
| | | | | | | | | | | | |
| Quarter Ended 2018 | | Declaration Date | | Series B
Preferred Stock Per Share | | Series C
Preferred Stock Per Share | | Payment Date |
| September 30 | | July 11, 2018 | | $ | 0.0460069 |
| (1) | $ | 0.4296875 |
| | October 1, 2018 |
| June 30 | | April 10, 2018 | | 0.4140625 |
| | 0.4296875 |
| | July 2, 2018 |
| March 31 | | February 14, 2018 | | 0.4140625 |
| | 0.4296875 |
| | April 2, 2018 |
| Total | | | | $ | 0.8741319 |
| | $ | 1.2890625 |
| | |
| | | | | | | | | | | | | | | | | | | | |
(1)Quarter Ended 2019 | On June 11, 2018, we gave notice to redeem all 2,800,000 issued and outstanding shares of the | Declaration Date | | Series B Preferred Stock. On July 11, 2018, we redeemed all of the Series B C
Preferred Stock at a cash redemption price of $25.00 per share, plus accrued and unpaid dividends to but excluding the redemption date, without interest.Per Share | | Payment Date |
| | | | | | |
| | | | | | |
| September 30 | | July 15, 2019 | | $ | 0.4296875 | | | September 30, 2019 |
| June 30 | | April 9, 2019 | | 0.4296875 | | | July 1, 2019 |
| March 31 | | January 10, 2019 | | 0.4296875 | | | April 1, 2019 |
| Total | | | | $ | 1.2890625 | | | |
On October 10, 2018,15, 2019, our board of directors declared the Series C Preferred Stock dividends for the quarter ending December 31, 20182019 at a quarterly rate of $0.4296875 per share.
Indebtedness Outstanding
The following table sets forthsummarizes certain information with respect to our indebtedness outstanding as of September 30, 2018.2019
| | | Loan | | Principal Outstanding (in thousands) | | Interest
Rate (1) | | Maturity Date | | Prepayment Terms (2) | Loan | | Principal Outstanding as of September 30, 2019 (in thousands) | | Interest Rate (1)(2) | | Maturity Date | | | Prepayment Terms (3) |
| Unsecured credit facility: | | | | | | Unsecured credit facility: | | | | | | | | |
Unsecured Credit Facility (3) | | $ | 95,000 |
| | L + 1.05% |
| | Jan-15-2023 | | i | |
Unsecured Credit Facility (4) | | Unsecured Credit Facility (4) | | $ | 78,000 | | | L + 0.90% | | | January 15, 2023 | | i |
| Total unsecured credit facility | | 95,000 |
| | |
| | | | | Total unsecured credit facility | | 78,000 | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Unsecured term loans: | | |
| | |
| | | | | Unsecured term loans: | | | | | | | | | |
| Unsecured Term Loan C | | 150,000 |
| | L + 1.30% |
| | Sep-29-2020 | | i | Unsecured Term Loan C | | | 150,000 | | | 2.39 | % | | September 29, 2020 | | i |
| Unsecured Term Loan B | | 150,000 |
| | L + 1.30% |
| | Mar-21-2021 | | i | Unsecured Term Loan B | | | 150,000 | | | 3.05 | % | | March 21, 2021 | | i |
| Unsecured Term Loan A | | 150,000 |
| | L + 1.30% |
| | Mar-31-2022 | | i | Unsecured Term Loan A | | | 150,000 | | | 2.70 | % | | March 31, 2022 | | i |
| Unsecured Term Loan D | | 150,000 |
| | L + 1.30% |
| | Jan-04-2023 | | i | Unsecured Term Loan D | | 150,000 | | | 2.85 | % | | January 4, 2023 | | i |
Unsecured Term Loan E (4) | | — |
| | L + 1.20% |
| | Jan-15-2024 | | i | |
| Unsecured Term Loan E | | Unsecured Term Loan E | | 175,000 | | | 3.92 | % | | January 15, 2024 | | i |
Unsecured Term Loan F (5) | | Unsecured Term Loan F (5) | | — | | | 3.11 | % | | January 12, 2025 | | i |
| Total unsecured term loans | | 600,000 |
| | | | Total unsecured term loans | | 775,000 | | | | | | | | |
| Less: Total unamortized deferred financing fees and debt issuance costs | | (3,915 | ) | | | | Less: Total unamortized deferred financing fees and debt issuance costs | | (3,963) | | | | | | | | |
| Total carrying value unsecured term loans, net | | 596,085 |
| | |
| | | | | Total carrying value unsecured term loans, net | | 771,037 | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Unsecured notes: | | |
| | |
| | | | | Unsecured notes: | | | | | | | | | |
| Series F Unsecured Notes | | 100,000 |
| | 3.98 | % | | Jan-05-2023 | | ii | Series F Unsecured Notes | | | 100,000 | | | 3.98 | % |
| January 5, 2023 | | ii |
| Series A Unsecured Notes | | 50,000 |
| | 4.98 | % | | Oct-1-2024 | | ii | Series A Unsecured Notes | | | 50,000 | | | 4.98 | % | | October 1, 2024 | | ii |
| Series D Unsecured Notes | | 100,000 |
| | 4.32 | % | | Feb-20-2025 | | ii | Series D Unsecured Notes | | | 100,000 | | | 4.32 | % | | February 20, 2025 | | ii |
| Series G Unsecured Notes | | 75,000 |
| | 4.10 | % | | Jun-13-2025 | | ii | Series G Unsecured Notes | | 75,000 | | | 4.10 | % | | June 13, 2025 | | ii |
| Series B Unsecured Notes | | 50,000 |
| | 4.98 | % | | Jul-1-2026 | | ii | Series B Unsecured Notes | | | 50,000 | | | 4.98 | % | | July 1, 2026 | | ii |
| Series C Unsecured Notes | | 80,000 |
| | 4.42 | % | | Dec-30-2026 | | ii | Series C Unsecured Notes | | | 80,000 | | | 4.42 | % | | December 30, 2026 | | ii |
| Series E Unsecured Notes | | 20,000 |
| | 4.42 | % | | Feb-20-2027 | | ii | Series E Unsecured Notes | | | 20,000 | | | 4.42 | % | | February 20, 2027 | | ii |
| Series H Unsecured Notes | | 100,000 |
| | 4.27 | % | | Jun-13-2028 | | ii | Series H Unsecured Notes | | 100,000 | | | 4.27 | % | | June 13, 2028 | | ii |
| Total unsecured notes | | 575,000 |
| | | | Total unsecured notes | | 575,000 | | | | |
| | | |
| Less: Total unamortized deferred financing fees and debt issuance costs | | (2,611 | ) | | | | Less: Total unamortized deferred financing fees and debt issuance costs | | (2,217) | | | | |
| | | |
| Total carrying value unsecured notes, net | | 572,389 |
| | |
| | | | | Total carrying value unsecured notes, net | | 572,783 | | | | |
| | | |
| | | | | | | | | | | | |
| | | |
| Mortgage notes (secured debt): | | |
| | |
| | | | | Mortgage notes (secured debt): | | | | | | |
| | | |
| Wells Fargo Bank, National Association CMBS Loan | | 53,652 |
| | 4.31 | % | | Dec-1-2022 | | iii | Wells Fargo Bank, National Association CMBS Loan | | 51,861 | | | 4.31 | % | | December 1, 2022 | | iii |
| Thrivent Financial for Lutherans | | 3,824 |
| | 4.78 | % | | Dec-15-2023 | | iv | Thrivent Financial for Lutherans | | 3,709 | | | 4.78 | % | | December 15, 2023 | | iv |
| Total mortgage notes | | 57,476 |
| | |
| | Total mortgage notes | | 55,570 | | | | | | | |
| Add: Total unamortized fair market value premiums | | 52 |
| | |
| | Add: Total unamortized fair market value premiums | | 42 | | | | | | | |
Less: Total unamortized deferred financing fees and debt issuance costs | | (535 | ) | | | | Less: Total unamortized deferred financing fees and debt issuance costs | | (402) | | | | | | | |
| Total carrying value mortgage notes, net | | 56,993 |
| | |
| | Total carrying value mortgage notes, net | | 55,210 | | | | | | | |
Total / weighted average interest rate (5)(6) | | $ | 1,320,467 |
| | 3.69 | % | | | $ | 1,477,030 | | | 3.58 | % | | | |
| |
(1) | Interest rate as of September 30, 2018. At September 30, 2018, the one-month LIBOR (“L”) was 2.26056%. The interest rate is not adjusted to include the amortization of deferred financing fees or debt issuance costs incurred in obtaining debt or any unamortized fair market value premiums. The spread over the applicable rate for our unsecured credit facility and unsecured term loans is based on our consolidated leverage ratio, as defined in the respective loan agreements. |
| |
(2) | 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 beginning January 1, 2016; and (iv) pre-payable without penalty three months prior to the maturity date. |
| |
(3) | The capacity of the unsecured credit facility is $500.0 million. |
| |
(4) | Capacity of $175.0 million, which we have until July 25, 2019 to draw. |
| |
(5) | The weighted average interest rate was calculated using the fixed interest rate swapped on the notional amount of $600.0 million of debt that was in effect as of September 30, 2018, 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. |
(1)Interest rate as of September 30, 2019. At September 30, 2019, the one-month LIBOR (“L”) was 2.01563%. 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)As of September 30, 2019, one-month LIBOR for the Unsecured Term Loans A, B, C, D, E, and F was swapped to a fixed rate of 1.70%, 2.05%, 1.39%, 1.85%, 2.92%, and 2.11%, respectively.
(3)Prepayment terms consist of (i) pre-payable with no penalty; (ii) pre-payable with penalty; (iii) pre-payable without penalty three months prior to the maturity date, however can be defeased; and (iv) pre-payable without penalty three months prior to the maturity date.
(4)The capacity of the unsecured credit facility is $500.0 million.
(5)Capacity of $200.0 million, which we have until July 12, 2020 to draw.
(6)The weighted average interest rate was calculated using the fixed interest rate swapped on the notional amount of $775.0 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.
The aggregate undrawn nominal commitments on the unsecured credit facility and unsecured term loans as of September 30, 20182019 was approximately $574.4$616.0 million, including issued letters of credit. Our actual borrowing capacity at any given point in time may be less and is restricted to a maximum amount based on our debt covenant compliance.
On July 25, 2019, we drew $175.0 million of the $175.0 million Unsecured Term Loan E that was entered into on July 26, 2018.
On July 12, 2019, we entered into the $200.0 million Unsecured Term Loan F. As of September 30, 2019, the interest rate on the Unsecured Term Loan F was LIBOR plus a spread of 1.00% based on the Company's debt rating, as defined in the loan agreement. Unless otherwise terminated pursuant to the loan agreement, the Unsecured Term Loan F will mature on January 12, 2025. The Unsecured Term Loan F has a feature that allows us to request an increase in the aggregate size of the unsecured term loan of up to $400.0 million, subject to the satisfaction of certain conditions and lender consents. The agreement includes a delayed draw feature that allows us to draw up to six advances of at least $25.0 million each until July 12, 2020. To the extent that we do not request advances of the $200.0 million of aggregate commitments by July 12, 2020, the unadvanced commitments terminate. The Unsecured Term Loan F has an unused commitment fee equal to 0.15% of its unused commitments, which began to accrue on October 10, 2019 and is due and payable monthly until the earlier of (i) the date that commitments of $200.0 million have been fully advanced, (ii) July 12, 2020, and (iii) the date that commitments of $200.0 million have been reduced to zero pursuant to the terms of the agreement. We are required to pay an annual fee of $35,000. We and certain wholly owned subsidiaries of the Operating Partnership are guarantors of the Unsecured Term Loan F. The agreement also contains financial and other covenants substantially similar to the covenants in our unsecured credit facility. As of September 30, 2019, there were no amounts outstanding under the Unsecured Term Loan F.
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 September 30, 2018,2019, we were in compliance with the applicable financial covenants.
On July 26, 2018, we closed on the refinancing of the unsecured credit facility. The refinancing transaction included extending the maturity date to January 15, 2023, increasing the capacity to $500.0 million, and reducing the annual interest rate. As of September 30, 2018, the interest rate on the unsecured credit facility was LIBOR plus a spread of 1.05% based on the Company’s consolidated leverage ratio, as defined in the credit agreement.
On July 26, 2018, we entered into a $175.0 million unsecured term loan agreement. As of September 30, 2018, the interest rate on the new term loan was LIBOR plus a spread of 1.20% based on the Company's consolidated leverage ratio, as defined in the loan agreement. On July 24, 2018, we entered into four interest rate swaps with a total notional amount of $175.0 million to fix LIBOR at 2.9187% on the new unsecured term loan. The interest rate swaps will become effective on July 26, 2019 and expire on January 12, 2024.
On July 26, 2018, we entered into amendments to our unsecured term loan agreements to conform certain provisions to the new unsecured term loan agreement and the new unsecured credit facility agreement.
On April 10, 2018, we entered into a note purchase agreement for the private placement by the Operating Partnership of $75.0 million senior unsecured notes (“Series G Unsecured Notes”) maturing June 13, 2025 with a fixed annual interest rate of 4.10%, and $100.0 million senior unsecured notes (“Series H Unsecured Notes”) maturing June 13, 2028 with a fixed annual interest rate of 4.27%. We issued the Series G Unsecured Notes and the Series H Unsecured Notes on June 13, 2018. In addition, on April 10, 2018, we entered into amendments to the note purchase agreements related to our outstanding unsecured notes to conform certain provisions in the agreements to the provisions in the new note purchase agreement.
On March 28, 2018, we drew $75.0 million of the $150.0 million unsecured term loan that was entered into on July 28, 2017. On July 27, 2018, we drew the remaining $75.0 million of the $150.0 million unsecured term loan.
The chart below detailsfollowing table summarizes our debt capital structure as of September 30, 2018.2019.
|
| | | | |
| Debt Capital Structure | | September 30, 2018 |
| Total principal outstanding (in thousands) | | $ | 1,327,476 |
|
| Weighted average duration (years) | | 4.9 |
|
| % Secured debt | | 4 | % |
| % Debt maturing next 12 months | | — | % |
Net Debt to Real Estate Cost Basis (1) | | 39 | % |
| | | | | | | | |
(1)Debt Capital Structure | | September 30, 2019 |
| Total principal outstanding (in thousands) | | $ | 1,483,570 | |
| Weighted average duration (years) | | 4.0 | |
| | |
| % Secured debt | | 4 | % |
| % Debt maturing next 12 months | | 10 | % |
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 defineto Real Estate Cost Basis as the book value of rental property and deferred leasing intangibles, exclusive of the related accumulated depreciation and amortization.(1)
| | 35 | % |
(1)We define Net Debt as our amounts outstanding under our unsecured credit facility, unsecured term loans, unsecured notes, and mortgage notes, less cash and cash equivalents. We define Real Estate Cost Basis as the book value of rental property and deferred leasing intangibles, exclusive of the related accumulated depreciation and amortization.
We regularly pursue new financing opportunities to ensure an appropriate balance sheet position. As a result of these dedicated efforts, we are confident in our ability to meet future debt maturities and building acquisition funding needs. We believe that our current balance sheet is in an adequate position at the date of this filing, despite possible volatility in the credit markets.
Our interest rate exposure as it relates to interest expense payments on our floating rate debt is managed through our use of interest rate swaps, which fix the rate of our long term floating rate debt. For a detailed discussion on our use of interest rate swaps, see “Interest Rate Risk” below.
Equity
Preferred Stock
On June 11, 2018, we gave notice to redeem all 2,800,000 issued and outstanding shares of the Series B Preferred Stock. We recognized a deemed dividend to the holders of the Series B Preferred Stock of approximately $2.7 million on the accompanying Consolidated Statements of Operations for the nine months ended September 30, 2018 related to redemption costs and the original issuance costs of the Series B Preferred Stock. On July 11, 2018, we redeemed all of the Series B Preferred Stock.
The following table below sets forthsummarizes our outstanding preferred stock issuances as of September 30, 2018.2019.
| | Preferred Stock Issuances | | Preferred Stock Issuances | | Issuance Date | | Number of Shares | | Liquidation Value Per Share | | Interest Rate |
| | | Preferred Stock Issuances | | Issuance Date | | Number of Shares | | Liquidation Value Per Share | | Interest Rate | |
| Series C Preferred Stock | | March 17, 2016 | | 3,000,000 |
| | $ | 25.00 |
| | 6.875 | % | Series C Preferred Stock | | March 17, 2016 | | 3,000,000 | | | $ | 25.00 | | | 6.875 | % |
The Series C Preferred Stock ranks seniorOn April 30, 2019, we filed Articles of Amendment to our common stock with respectArticles of Amendment and Restatement to dividend rights and rights uponincrease the liquidation, dissolution or winding upnumber of authorized shares of our affairs. The Series C Preferred Stock has no stated maturity date and is not subjectpreferred stock from 15,000,000 to mandatory redemption or any sinking fund. Generally, we are not permitted to redeem the Series C Preferred Stock prior to March 17, 2021, except in limited circumstances relating to our ability to qualify as a REIT and in certain other circumstances related to a change20,000,000.
Common Stock
The following sets forthtable summarizes our at-the-market (“ATM”) common stock offering programprograms as of September 30, 2018.2019. We may from time to time sell common stock through sales agents under the program.
| | | ATM Common Stock Offering Program | | Date | | Maximum Aggregate Offering Price (in thousands) | | Aggregate Common Stock Available as of
September 30, 2018 (in thousands) | ATM Common Stock Offering Program | | Date | | Maximum Aggregate Offering Price (in thousands) | | Aggregate Common Stock Available as of September 30, 2019 (in thousands) |
| 2017 $500 million ATM | | November 13, 2017 | | $ | 500,000 |
| | $ | 213,217 |
| |
| 2019 $600 million ATM | | 2019 $600 million ATM | | February 14, 2019 | | $ | 600,000 | | | $ | 401,137 | |
On April 30, 2019, we filed Articles of Amendment to our Articles of Amendment and Restatement to increase the number of authorized shares of our common stock from 150,000,000 to 300,000,000.
The following table below set forthsummarizes the activity for the ATM common stock offering programs during the three and nine months ended September 30, 20182019 (in thousands, except share data).
| | | | | Three months ended September 30, 2018 | | | Three months ended September 30, 2019 | |
| ATM Common Stock Offering Program | | Shares
Sold | | Weighted Average Price Per Share | | Gross
Proceeds | | Sales
Agents’ Fee | | Net
Proceeds | ATM Common Stock Offering Program | | Shares
Sold | | Weighted Average Price Per Share | | | Net
Proceeds |
| 2017 $500 million ATM | | 3,568,382 |
| | $ | 27.94 |
| | $ | 99,695 |
| | $ | 1,129 |
| | $ | 98,566 |
| |
| 2019 $600 million ATM | | 2019 $600 million ATM | | 875,129 | | | $ | 30.39 | | | | $ | 26,326 | |
| | Total/weighted average | | 3,568,382 |
| | $ | 27.94 |
| | $ | 99,695 |
| | $ | 1,129 |
| | $ | 98,566 |
| Total/weighted average | | 875,129 | | | $ | 30.39 | | | | $ | 26,326 | |
| | | | | Nine months ended September 30, 2018 | | | Nine months ended September 30, 2019 | |
| ATM Common Stock Offering Program | | Shares
Sold | | Weighted Average Price Per Share | | Gross
Proceeds | | Sales
Agents’ Fee | | Net
Proceeds | ATM Common Stock Offering Program | | Shares
Sold | | Weighted Average Price Per Share | | | Net
Proceeds |
| 2017 $500 million ATM | | 10,387,962 |
| | $ | 26.61 |
| | $ | 276,457 |
| | $ | 2,888 |
| | $ | 273,569 |
| |
| 2019 $600 million ATM | | 2019 $600 million ATM | | 7,022,332 | | | $ | 28.32 | | | | $ | 197,074 | |
| | Total/weighted average | | 10,387,962 |
| | $ | 26.61 |
| | $ | 276,457 |
| | $ | 2,888 |
| | $ | 273,569 |
| Total/weighted average | | 7,022,332 | | | $ | 28.32 | | | | $ | 197,074 | |
On September 24, 2019, we completed an underwritten public offering of an aggregate 12,650,000 shares of common stock at a price to the underwriters of $28.60 per share, consisting of (i) 5,500,000 shares offered directly by us and (ii) 7,150,000 shares offered by the forward dealer in connection with certain forward sale agreements (including 1,650,000 shares offered pursuant to the underwriters’ option to purchase additional shares, which option was exercised in full). The offering closed on September 27, 2019 and we received net proceeds from the sale of shares offered directly by us of $157.3 million. Subject to our right to elect cash or net share settlement, we expect to settle the forward sales agreements and receive proceeds, subject to certain adjustments, from the sale of the those shares of common stock upon one or more such physical settlements within approximately six months from the date of the prospectus supplement relating to the offering, earlier than the scheduled maturity date of the forward sale agreements of September 24, 2020.
On April 1, 2019, we completed an underwritten public offering of 7,475,000 shares of common stock (including 975,000 shares issued pursuant to the underwriters’ option to purchase additional shares, which option was exercised in full) at a price to the underwriters of $28.72 per share. The offering closed on April 4, 2019 and we received net proceeds of approximately $214.7 million.
Noncontrolling Interest
We own our interests in all of our properties and conduct substantially all of our business through ourthe Operating Partnership. We are the sole member of the sole general partner of the Operating Partnership. As of September 30, 2018,2019, we owned approximately 96.4%97.2% of the common units of our Operating Partnership, and our current and former executive officers, directors, senior employees and their affiliates, and third parties who contributed properties to us in exchange for common units in our Operating Partnership, owned the remaining 3.6%2.8%.
Interest Rate Risk
We use interest rate swaps to fix the rate of our variable rate debt. As of September 30, 2018,2019, all of our outstanding variable rate debt, with the exception of our unsecured credit facility, was fixed with interest rate swaps.swaps through maturity.
We recognize all derivatives on the balance sheet at fair value. If the derivative is designated as a hedge, depending on the nature of the hedge, changes in the fair value of derivatives are either offset against the change in fair value of the hedged
assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income (loss), which is a component of equity. Derivatives that are not designated as hedges must be adjusted to fair value and the changes in fair value must be reflected as income or expense.
We have established criteria for suitable counterparties in relation to various specific types of risk. We only use counterparties that have a credit rating of no lower than investment grade at swap inception from Moody’s Investor Services, Standard & Poor’s, or Fitch Ratings or other nationally recognized rating agencies.
The following table details our outstanding interest rate swaps as of September 30, 2018.2019.
| | Interest Rate
Derivative Counterparty | | Trade Date | | Effective Date | | Notional Amount
(in thousands) | | Fair Value
(in thousands) | | Pay Fixed Interest Rate | | Receive Variable Interest Rate | | Maturity Date | Interest Rate
Derivative Counterparty | | Trade Date | | Effective Date | | Notional Amount
(in thousands) | | | Fair Value
(in thousands) | | Pay Fixed Interest Rate | | Receive Variable Interest Rate | | Maturity Date |
| Regions Bank | | Mar-01-2013 | | Mar-01-2013 | | $ | 25,000 |
| | $ | 471 |
| | 1.3300 | % | | One-month L | | Feb-14-2020 | Regions Bank | | Mar-01-2013 | | Mar-01-2013 | | | $ | 25,000 | | | $ | 51 | | | 1.3300 | % | | One-month L | | Feb-14-2020 |
| Capital One, N.A. | | Jun-13-2013 | | Jul-01-2013 | | $ | 50,000 |
| | $ | 703 |
| | 1.6810 | % | | One-month L | | Feb-14-2020 | Capital One, N.A. | | Jun-13-2013 | | Jul-01-2013 | | | $ | 50,000 | | | $ | 35 | | | 1.6810 | % | | One-month L | | Feb-14-2020 |
| Capital One, N.A. | | Jun-13-2013 | | Aug-01-2013 | | $ | 25,000 |
| | $ | 344 |
| | 1.7030 | % | | One-month L | | Feb-14-2020 | Capital One, N.A. | | Jun-13-2013 | | Aug-01-2013 | | | $ | 25,000 | | | $ | 16 | | | 1.7030 | % | | One-month L | | Feb-14-2020 |
| Regions Bank | | Sep-30-2013 | | Feb-03-2014 | | $ | 25,000 |
| | $ | 245 |
| | 1.9925 | % | | One-month L | | Feb-14-2020 | Regions Bank | | Sep-30-2013 | | Feb-03-2014 | | | $ | 25,000 | | | $ | (12) | | | 1.9925 | % | | One-month L | | Feb-14-2020 |
| The Toronto-Dominion Bank | | Oct-14-2015 | | Sep-29-2016 | | $ | 25,000 |
| | $ | 700 |
| | 1.3830 | % | | One-month L | | Sep-29-2020 | The Toronto-Dominion Bank | | Oct-14-2015 | | Sep-29-2016 | | | $ | 25,000 | | | $ | 66 | | | 1.3830 | % | | One-month L | | Sep-29-2020 |
| PNC Bank, N.A. | | Oct-14-2015 | | Sep-29-2016 | | $ | 50,000 |
| | $ | 1,391 |
| | 1.3906 | % | | One-month L | | Sep-29-2020 | PNC Bank, N.A. | | Oct-14-2015 | | Sep-29-2016 | | | $ | 50,000 | | | $ | 128 | | | 1.3906 | % | | One-month L | | Sep-29-2020 |
| Regions Bank | | Oct-14-2015 | | Sep-29-2016 | | $ | 35,000 |
| | $ | 978 |
| | 1.3858 | % | | One-month L | | Sep-29-2020 | Regions Bank | | Oct-14-2015 | | Sep-29-2016 | | | $ | 35,000 | | | $ | 91 | | | 1.3858 | % | | One-month L | | Sep-29-2020 |
| U.S. Bank, N.A. | | Oct-14-2015 | | Sep-29-2016 | | $ | 25,000 |
| | $ | 695 |
| | 1.3950 | % | | One-month L | | Sep-29-2020 | U.S. Bank, N.A. | | Oct-14-2015 | | Sep-29-2016 | | | $ | 25,000 | | | $ | 63 | | | 1.3950 | % | | One-month L | | Sep-29-2020 |
| Capital One, N.A. | | Oct-14-2015 | | Sep-29-2016 | | $ | 15,000 |
| | $ | 417 |
| | 1.3950 | % | | One-month L | | Sep-29-2020 | Capital One, N.A. | | Oct-14-2015 | | Sep-29-2016 | | | $ | 15,000 | | | $ | 38 | | | 1.3950 | % | | One-month L | | Sep-29-2020 |
| Royal Bank of Canada | | Jan-08-2015 | | Mar-20-2015 | | $ | 25,000 |
| | $ | 684 |
| | 1.7090 | % | | One-month L | | Mar-21-2021 | Royal Bank of Canada | | Jan-08-2015 | | Mar-20-2015 | | | $ | 25,000 | | | $ | (56) | | | 1.7090 | % | | One-month L | | Mar-21-2021 |
| The Toronto-Dominion Bank | | Jan-08-2015 | | Mar-20-2015 | | $ | 25,000 |
| | $ | 682 |
| | 1.7105 | % | | One-month L | | Mar-21-2021 | The Toronto-Dominion Bank | | Jan-08-2015 | | Mar-20-2015 | | | $ | 25,000 | | | $ | (57) | | | 1.7105 | % | | One-month L | | Mar-21-2021 |
| The Toronto-Dominion Bank | | Jan-08-2015 | | Sep-10-2017 | | $ | 100,000 |
| | $ | 1,488 |
| | 2.2255 | % | | One-month L | | Mar-21-2021 | The Toronto-Dominion Bank | | Jan-08-2015 | | Sep-10-2017 | | | $ | 100,000 | | | $ | (982) | | | 2.2255 | % | | One-month L | | Mar-21-2021 |
| Wells Fargo, N.A. | | Jan-08-2015 | | Mar-20-2015 | | $ | 25,000 |
| | $ | 886 |
| | 1.8280 | % | | One-month L | | Mar-31-2022 | Wells Fargo, N.A. | | Jan-08-2015 | | Mar-20-2015 | | | $ | 25,000 | | | $ | (246) | | | 1.8280 | % | | One-month L | | Mar-31-2022 |
| The Toronto-Dominion Bank | | Jan-08-2015 | | Feb-14-2020 | | $ | 25,000 |
| | $ | 271 |
| | 2.4535 | % | | One-month L | | Mar-31-2022 | The Toronto-Dominion Bank | | Jan-08-2015 | | Feb-14-2020 | | | $ | 25,000 | | | $ | (579) | | | 2.4535 | % | | One-month L | | Mar-31-2022 |
| Regions Bank | | Jan-08-2015 | | Feb-14-2020 | | $ | 50,000 |
| | $ | 520 |
| | 2.4750 | % | | One-month L | | Mar-31-2022 | Regions Bank | | Jan-08-2015 | | Feb-14-2020 | | | $ | 50,000 | | | $ | (1,181) | | | 2.4750 | % | | One-month L | | Mar-31-2022 |
| Capital One, N.A. | | Jan-08-2015 | | Feb-14-2020 | | $ | 50,000 |
| | $ | 467 |
| | 2.5300 | % | | One-month L | | Mar-31-2022 | Capital One, N.A. | | Jan-08-2015 | | Feb-14-2020 | | | $ | 50,000 | | | $ | (1,238) | | | 2.5300 | % | | One-month L | | Mar-31-2022 |
| The Toronto-Dominion Bank | | Jul-20-2017 | | Oct-30-2017 | | $ | 25,000 |
| | $ | 1,054 |
| | 1.8485 | % | | One-month L | | Jan-04-2023 | The Toronto-Dominion Bank | | Jul-20-2017 | | Oct-30-2017 | | | $ | 25,000 | | | $ | (362) | | | 1.8485 | % | | One-month L | | Jan-04-2023 |
| Royal Bank of Canada | | Jul-20-2017 | | Oct-30-2017 | | $ | 25,000 |
| | $ | 1,054 |
| | 1.8505 | % | | One-month L | | Jan-04-2023 | Royal Bank of Canada | | Jul-20-2017 | | Oct-30-2017 | | | $ | 25,000 | | | $ | (364) | | | 1.8505 | % | | One-month L | | Jan-04-2023 |
| Wells Fargo, N.A. | | Jul-20-2017 | | Oct-30-2017 | | $ | 25,000 |
| | $ | 1,055 |
| | 1.8505 | % | | One-month L | | Jan-04-2023 | Wells Fargo, N.A. | | Jul-20-2017 | | Oct-30-2017 | | | $ | 25,000 | | | $ | (364) | | | 1.8505 | % | | One-month L | | Jan-04-2023 |
| PNC Bank, N.A. | | Jul-20-2017 | | Oct-30-2017 | | $ | 25,000 |
| | $ | 1,052 |
| | 1.8485 | % | | One-month L | | Jan-04-2023 | PNC Bank, N.A. | | Jul-20-2017 | | Oct-30-2017 | | | $ | 25,000 | | | $ | (362) | | | 1.8485 | % | | One-month L | | Jan-04-2023 |
| PNC Bank, N.A. | | Jul-20-2017 | | Oct-30-2017 | | $ | 50,000 |
| | $ | 2,105 |
| | 1.8475 | % | | One-month L | | Jan-04-2023 | PNC Bank, N.A. | | Jul-20-2017 | | Oct-30-2017 | | | $ | 50,000 | | | $ | (723) | | | 1.8475 | % | | One-month L | | Jan-04-2023 |
| The Toronto-Dominion Bank | | Jul-24-2018 | | Jul-26-2019 | | $ | 50,000 |
| | $ | 111 |
| | 2.9180 | % | | One-month L | | Jan-12-2024 | The Toronto-Dominion Bank | | Jul-24-2018 | | Jul-26-2019 | | | $ | 50,000 | | | $ | (3,229) | | | 2.9180 | % | | One-month L | | Jan-12-2024 |
| PNC Bank, N.A. | | Jul-24-2018 | | Jul-26-2019 | | $ | 50,000 |
| | $ | 106 |
| | 2.9190 | % | | One-month L | | Jan-12-2024 | PNC Bank, N.A. | | Jul-24-2018 | | Jul-26-2019 | | | $ | 50,000 | | | $ | (3,232) | | | 2.9190 | % | | One-month L | | Jan-12-2024 |
| Bank of Montreal | | Jul-24-2018 | | Jul-26-2019 | | $ | 50,000 |
| | $ | 113 |
| | 2.9190 | % | | One-month L | | Jan-12-2024 | Bank of Montreal | | Jul-24-2018 | | Jul-26-2019 | | | $ | 50,000 | | | $ | (3,232) | | | 2.9190 | % | | One-month L | | Jan-12-2024 |
| U.S. Bank, N.A. | | Jul-24-2018 | | Jul-26-2019 | | $ | 25,000 |
| | $ | 57 |
| | 2.9190 | % | | One-month L | | Jan-12-2024 | U.S. Bank, N.A. | | Jul-24-2018 | | Jul-26-2019 | | | $ | 25,000 | | | $ | (1,616) | | | 2.9190 | % | | One-month L | | Jan-12-2024 |
| Wells Fargo, N.A. | | Wells Fargo, N.A. | | May-02-2019 | | Jul-15-2020 | | | $ | 50,000 | | | $ | (2,030) | | | 2.2460 | % | | One-month L | | Jan-15-2025 |
| U.S. Bank, N.A. | | U.S. Bank, N.A. | | May-02-2019 | | Jul-15-2020 | | | $ | 50,000 | | | $ | (2,029) | | | 2.2459 | % | | One-month L | | Jan-15-2025 |
| Regions Bank | | Regions Bank | | May-02-2019 | | Jul-15-2020 | | | $ | 50,000 | | | $ | (2,032) | | | 2.2459 | % | | One-month L | | Jan-15-2025 |
| Bank of Montreal | | Bank of Montreal | | Jul-16-2019 | | Jul-15-2020 | | | $ | 50,000 | | | $ | (886) | | | 1.7165 | % | | One-month L | | Jan-15-2025 |
The swaps outlined in the above table were all designated as cash flow hedges of interest rate risk, and all are valued as Level 2 financial instruments. Level 2 financial instruments are defined as significant other observable inputs. As of September 30, 2018,2019, the fair value of alleight of our 25 interest rate swaps were in an asset position of approximately $17.6$0.5 million and the fair value of 21 of our interest rate swaps were in a liability position of approximately $24.8 million, including any adjustment for nonperformance risk related to these agreements.
As of September 30, 2018,2019, we had $695.0$853.0 million of variable rate debt. As of September 30, 2018,2019, all of our outstanding variable rate debt, with the exception of our unsecured credit facility, was fixed with interest rate swaps.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 September 30, 2018,2019, we had letters of credit related to development projects and certain other agreements of approximately $5.6$6.0 million and a development commitment related to a building expansion under a tenant lease of approximately $3.1 million. As of September 30, 2018,2019, we had no other material off-balance sheet arrangements.
Item 3. Quantitativeand 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 September 30, 2018,2019, we had $695.0$853.0 million of variable rate debt outstanding. As of September 30, 2018,2019, all of our outstanding variable rate debt, with the exception of $95.0$78.0 million outstanding under our unsecured credit facility, was fixed with interest rate swaps. To the extent we undertake additional variable rate indebtedness, if interest rates increase, then so will the interest costs on our unhedged variable rate debt, which could adversely affect our cash flow and our ability to pay principal and interest on our debt and our ability to make distributions to our security holders. Further, rising interest rates could limit our ability to refinance
existing debt when it matures or significantly increase our future interest expense. From time to time, we enter into interest rate swap agreements and other interest rate hedging contracts, including swaps, caps and floors. While these agreements are intended to lessen the impact of rising interest rates on us, they also expose us to the risk that the other parties to the agreements will not perform, we could incur significant costs associated with the settlement of the agreements, the agreements will be unenforceable and the underlying transactions will fail to qualify as highly-effective cash flow hedges under GAAP. In addition, an increase in interest rates could decrease the amounts third parties are willing to pay for our assets, thereby limiting our ability to change our portfolio promptly in response to changes in economic or other conditions. If interest rates increased by 100 basispoints and assuming we had an outstanding balance of $95.0$78.0 million on our unsecured credit facility (the portion outstanding at September 30, 20182019 not fixed by interest rate swaps) for the nine months ended September 30, 2018,2019, our interest expense would have increased by approximately $0.7$0.6 million for the nine months ended September 30, 2018.2019.
Item 4. 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 September 30, 2018.2019. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures for the periods covered by this report were effective to provide reasonable assurance that information required to be disclosed by our Company in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Controls
There was no change to our internal control over financial reporting during the quarter ended September 30, 20182019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II. Other Information
Item 1. Legal Proceedings
From time to time, we are a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of our business. We are not currently a party, as plaintiff or defendant, to any legal proceedings which, 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.
Item 1A. Risk Factors
There have been no material changes from the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 20172018 filed with the SEC on February 15, 2018.13, 2019.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.Recent Sales of Unregistered Equity Securities
During the quarter ended September 30, 2019, the Operating Partnership issued 45,815 common units in the Operating Partnership upon exchange of outstanding long term incentive plan units pursuant to the STAG Industrial, Inc. 2011 Equity Incentive Plan, as amended and restated. Subject to certain restrictions, common units in the Operating Partnership may be redeemed for cash in an amount equal to the value of a share of common stock or, at our election, for a share of common stock on a one-for-one basis.
During the quarter ended September 30, 2019, we issued 207,152 shares of common stock upon redemption of 207,152 common units in the Operating Partnership held by various limited partners. The issuance of such shares of common stock was either registered under the Securities Act or effected in reliance upon an exemption from registration provided by Section 4(a)(2) under the Securities Act and the rules and regulations promulgated thereunder. We relied on the exemption based on representations given by the holders of the common units.
All other issuances of unregistered securities during the quarter ended September 30, 2019, if any, have previously been disclosed in filings with the SEC.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine SafetyDisclosures
Not applicable.
Item 5. Other Information
None.
Item 6. Exhibits
|
| | | | | | | |
Exhibit
Number | | Description of Document |
| 10.1 | | | CreditTerm Loan Agreement, dated as of July 26, 2018,12, 2019, by and among STAG Industrial Operating Partnership, L.P., as Borrower, STAG Industrial, Inc., as a Guarantor, Wells Fargo Bank, National Association, as Administrative Agent, and the other lenders party thereto (1) |
10.231.1 * | | | Term Loan Agreement, dated as of July 26, 2018, by and among STAG Industrial Operating Partnership, L.P., as Borrower, STAG Industrial, Inc., as a Guarantor, Wells Fargo Bank, National Association, as Administrative Agent, and the other lenders party thereto (1) |
10.3 | | Second Amendment to Amended and Restated Term Loan Agreement, dated as of July 26, 2018, by and among STAG Industrial Operating Partnership, L.P., as Borrower, STAG Industrial, Inc., as a Guarantor, Wells Fargo Bank, National Association, as Administrative Agent, and the other lenders party thereto (1) |
10.4 | | Second Amendment to Second Amended and Restated Term Loan Agreement, dated as of July 26, 2018, by and among STAG Industrial Operating Partnership, L.P., as Borrower, STAG Industrial, Inc., as a Guarantor, Wells Fargo Bank, National Association, as Administrative Agent, and the other lenders party thereto (1) |
10.5 | | Third Amendment to Term Loan Agreement, dated as of July 26, 2018, by and among STAG Industrial Operating Partnership, L.P., as Borrower, STAG Industrial, Inc., as a Guarantor, Wells Fargo Bank, National Association, as Administrative Agent, and the other lenders party thereto (1) |
10.6 | | First Amendment to Term Loan Agreement, dated as of July 26, 2018, by and among STAG Industrial Operating Partnership, L.P., as Borrower, STAG Industrial, Inc., as a Guarantor, Bank of America, N.A., as Administrative Agent, and the other lenders party thereto (1) |
31.1 | | |
| 31.2 * | | | |
| 32.1 ** | | | |
101101.INS * | | The following materials from STAG Industrial, Inc.’s Quarterly Report on Form 10-Q for | XBRL Instance Document - the quarter ended September 30, 2018 formattedinstance document does not appear in the Interactive Data File because its XBRL (eXtensible Business Reporting Language): (i)tags are embedded within the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income (Loss), (iv) the Consolidated Statements of Equity, (v) the Consolidated Statements of Cash Flows,Inline XBRL document |
| 101.SCH * | | | XBRL Taxonomy Extension Schema Document |
| 101.CAL * | | | XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF * | | | XBRL Taxonomy Extension Definition Linkbase Document |
| 101.LAB * | | | XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE * | | | XBRL Taxonomy Extension Presentation Linkbase Document |
| 104 * | | | Cover Page Interactive Date File (formatted as Inline XBRL and (vi) related notes to Consolidated Financial Statementscontained in Exhibit 101) |
| |
(1) | Incorporated by reference to STAG Industrial, Inc.’s Current Report on Form 8-K filed with the SEC on July 31, 2018. |
* Filed herewith.
** Furnished herewith.
(1) Incorporated by reference to STAG Industrial, Inc.’s Current Report on Form 8-K filed with the SEC on July 30, 2019.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
| | | | | | | |
| | STAG INDUSTRIAL, INC. |
| | |
Date: November 1, 2018October 30, 2019 | BY: | /s/ WILLIAM R. CROOKER |
| | William R. Crooker |
| | Chief Financial Officer, Executive Vice President and Treasurer (Principal Financial Officer and Principal Accounting Officer) |