Maryland

27-3099608

(State or other jurisdiction of

(IRS Employer Identification No.)

incorporation or organization)

~~Maryland~~

~~27-3099608~~

~~(State or other jurisdiction of~~

~~(IRS Employer Identification No.)~~

~~incorporation or organization)~~

One Federal Street

23rd Floor

Boston,

Massachusetts

02110

(Address of principal executive offices)

(Zip code)

(~~617~~) (617) 574-4777

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of common stock outstanding at ~~July~~April 29, ~~2019~~2020 was ~~127,148,836.~~

148,713,097.

Table of Contents

STAG ~~INDUSTRIAL, INC.~~Industrial, Inc.

Table of Contents




PART I.			Financial Information		~~Financial Information~~	3

Item 1.			Financial Statements (unaudited)		3

			Consolidated Balance Sheets as of ~~June 30, 2019~~March 3 1 , 20 20 and December 31, ~~2018~~2019		3

			Consolidated Statements of Operations for the Three ~~and Six~~ Months Ended ~~June 30, 2019~~March 3 1 , 20 20 and ~~2018~~2019		4

			Consolidated Statements of Comprehensive Income ~~(Loss)~~ for the Three ~~and Six~~ Months Ended ~~June 30, 2019~~March 3 1 , 20 20 and ~~2018~~2019		5

			Consolidated Statements of Equity for the Three ~~and Six~~ Months Ended ~~June 30, 2019~~March 3 1 , 20 20 and ~~2018~~2019		6

			Consolidated Statements of Cash Flows for the ~~Six~~Three Months Ended ~~June 30, 2019~~March 31 , 20 20 and ~~2018~~2019		7

			Notes to Consolidated Financial Statements		8

Item 2.			Management’s Discussion and Analysis of Financial Condition and Results of Operations		2524

Item 3.			Quantitative and Qualitative Disclosures about Market Risk		4542

Item 4.			Controls and Procedures		43

PART II.			Other Information		44

~~Item 4.~~			~~Controls and Procedures~~	46

~~PART II.~~	~~Other Information~~	47

Item 1.	Legal Proceedings			4744

Item 1A.			Risk Factors		4744

Item 2.			Unregistered Sales of Equity Securities and Use of Proceeds		4744

Item 3.			Defaults Upon Senior Securities		4745

Item 4.			Mine Safety Disclosures		45

Item 5.			Other Information		45

~~Item 4.~~			~~Mine Safety Disclosures~~	47

~~Item 5.~~	~~Other Information~~	47

Item 6.	Exhibits			4846

			SIGNATURES		4947

Table of Contents

Part I. Financial Information

Item 1. Financial Statements

STAG Industrial, Inc.

Consolidated Balance Sheets

(unaudited, in thousands, except share data)


	March 31, 2020		December 31, 2019
Assets
Rental Property:
Land	$	443,427	$	435,923
Buildings and improvements, net of accumulated depreciation of $416,654 and $387,633, respectively	3,155,744		3,087,435
Deferred leasing intangibles, net of accumulated amortization of $256,537 and $241,304, respectively	473,610		475,149
Total rental property, net	4,072,781		3,998,507
Cash and cash equivalents	324,877		9,041
Restricted cash	16,506		2,823
Tenant accounts receivable	62,144		57,592
Prepaid expenses and other assets	37,312		38,231
Interest rate swaps	—		303
Operating lease right-of-use assets	22,528		15,129
Assets held for sale, net	1,157		43,019
Total assets	$	4,537,305	$	4,164,645
Liabilities and Equity
Liabilities:
Unsecured credit facility	$	225,000	$	146,000
Unsecured term loans, net	971,701		871,375
Unsecured notes, net	572,982		572,883
Mortgage notes, net	54,289		54,755
Accounts payable, accrued expenses and other liabilities	55,404		53,737
Interest rate swaps	48,714		18,819
Tenant prepaid rent and security deposits	21,552		21,993
Dividends and distributions payable	18,301		17,465
Deferred leasing intangibles, net of accumulated amortization of $13,357 and $12,064, respectively	27,784		26,738
Operating lease liabilities	24,464		16,989
Total liabilities	2,020,191		1,800,754
Commitments and contingencies (Note 11)
Equity:
Preferred stock, par value $0.01 per share, 20,000,000 shares authorized at March 31, 2020 and December 31, 2019, respectively,
Series C, 3,000,000 shares (liquidation preference of $25.00 per share) issued and outstanding at March 31, 2020 and December 31, 2019	75,000		75,000
Common stock, par value $0.01 per share, 300,000,000 shares authorized at March 31, 2020 and December 31, 2019, respectively, 148,708,031 and 142,815,593 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively	1,487		1,428
Additional paid-in capital	3,142,495		2,970,553
Cumulative dividends in excess of earnings	(714,799)		(723,027)
Accumulated other comprehensive loss	(47,860)		(18,426)
Total stockholders’ equity	2,456,323		2,305,528
Noncontrolling interest	60,791		58,363
Total equity	2,517,114		2,363,891
Total liabilities and equity	$	4,537,305	$	4,164,645

June 30, 2019
December 31, 2018
Assets
Rental Property:
Land $ 397,193

$ 364,023
Buildings and improvements, net of accumulated depreciation of $344,597 and $316,930, respectively 2,574,746

2,285,663
Deferred leasing intangibles, net of accumulated amortization of $229,864 and $246,502, respectively 381,133

342,015
Total rental property, net 3,353,072

2,991,701
Cash and cash equivalents 5,092

7,968
Restricted cash 4,503

14,574
Tenant accounts receivable 45,871

42,236
Prepaid expenses and other assets 36,919

36,902
Interest rate swaps 983

9,151
Operating lease right-of-use assets 15,717
—
Total assets $ 3,462,157

$ 3,102,532
Liabilities and Equity
Liabilities:
Unsecured credit facility $ 129,000

$ 100,500
Unsecured term loans, net 596,879

596,360
Unsecured notes, net 572,684

572,488
Mortgage notes, net 55,659

56,560
Accounts payable, accrued expenses and other liabilities 49,911

45,507
Interest rate swaps 18,865

4,011
Tenant prepaid rent and security deposits 21,220

22,153
Dividends and distributions payable 16,822

13,754
Deferred leasing intangibles, net of accumulated amortization of $10,854 and $12,764, respectively 20,340

21,567
Operating lease liabilities 17,525
—
Total liabilities 1,498,905

1,432,900
Commitments and contingencies (Note 11)
Equity:
Preferred stock, par value $0.01 per share, 20,000,000 and 15,000,000 shares authorized at June 30, 2019 and December 31, 2018, respectively,
Series C, 3,000,000 shares (liquidation preference of $25.00 per share) issued and outstanding at June 30, 2019 and December 31, 2018 75,000

75,000
Common stock, par value $0.01 per share, 300,000,000 and 150,000,000 shares authorized at June 30, 2019 and December 31, 2018, respectively, 126,372,945 and 112,165,786 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively 1,264

1,122
Additional paid-in capital 2,501,013

2,118,179
Cumulative dividends in excess of earnings (653,759 )
(584,979 )
Accumulated other comprehensive income (loss) (17,771 )
4,481
Total stockholders’ equity 1,905,747

1,613,803
Noncontrolling interest 57,505

55,829
Total equity 1,963,252

1,669,632
Total liabilities and equity $ 3,462,157

$ 3,102,532

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

Table of Contents

STAG Industrial, Inc.

Consolidated Statements of Operations

(unaudited, in thousands, except per share data)


	Three months ended March 31,
	2020		2019
Revenue
Rental income	$	118,339	$	95,615
Other income	209		87
Total revenue	118,548		95,702
Expenses
Property	21,947		19,511
General and administrative	10,373		9,212

Depreciation and amortization	52,688		42,303
Loss on impairments	—		5,344

Other expenses	476		399
Total expenses	85,484		76,769
Other income (expense)
Interest and other income	79		16
Interest expense	(14,864)		(12,834)

Gain on the sales of rental property, net	46,759		1,274
Total other income (expense)	31,974		(11,544)
Net income	$	65,038	$	7,389
Less: income attributable to noncontrolling interest after preferred stock dividends	1,598		214
Net income attributable to STAG Industrial, Inc.	$	63,440	$	7,175
Less: preferred stock dividends	1,289		1,289

Less: amount allocated to participating securities	79		79
Net income attributable to common stockholders	$	62,072	$	5,807
Weighted average common shares outstanding — basic	147,570		114,721
Weighted average common shares outstanding — diluted	147,656		114,993
Net income per share — basic and diluted


Net income per share attributable to common stockholders — basic	$	0.42	$	0.05
Net income per share attributable to common stockholders — diluted	$	0.42	$	0.05

Three months ended June 30,
Six months ended June 30,
2019
2018
2019 2018
Revenue





Rental income $ 96,362

$ 84,866

$ 191,977
$ 167,993
Other income 284

608

371
764
Total revenue 96,646

85,474

192,348
168,757
Expenses

Property 16,955

16,124

36,466
33,623
General and administrative 8,587

7,978

17,799
16,726
Depreciation and amortization 44,633

40,901

86,936
80,866
Loss on impairments —

—

5,344
2,934
Other expenses 427

350

826
641
Total expenses 70,602

65,353

147,371
134,790
Other income (expense)

Interest and other income 2
7
18
13
Interest expense (12,193 )
(11,512 )
(25,027 ) (22,904 )
Gain on the sales of rental property, net 317

6,348

1,591
29,037
Total other income (expense) (11,874 )
(5,157 )
(23,418 ) 6,146
Net income $ 14,170

$ 14,964

$ 21,559
$ 40,113
Less: income attributable to noncontrolling interest after preferred stock dividends 408

392

622
1,334
Net income attributable to STAG Industrial, Inc. $ 13,762

$ 14,572

$ 20,937
$ 38,779
Less: preferred stock dividends 1,289

2,578

2,578
5,026
Less: redemption of preferred stock —
2,661
—
2,661
Less: amount allocated to participating securities 79

69

158
140
Net income attributable to common stockholders $ 12,394

$ 9,264

$ 18,201
$ 30,952
Weighted average common shares outstanding — basic 125,251

100,386

120,015
98,713
Weighted average common shares outstanding — diluted 125,560

100,733

120,306
99,037
Net income per share — basic and diluted

Net income per share attributable to common stockholders — basic $ 0.10
$ 0.09
$ 0.15
$ 0.31
Net income per share attributable to common stockholders — diluted $ 0.10
$ 0.09
$ 0.15
$ 0.31

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

Table of Contents

STAG Industrial, Inc.

Consolidated Statements of Comprehensive Income ~~(Loss)~~

(unaudited, in thousands)


	Three months ended March 31,
	2020		2019
Net income	$	65,038	$	7,389
Other comprehensive loss:
Loss on interest rate swaps	(30,191)		(6,978)
Other comprehensive loss	(30,191)		(6,978)
Comprehensive income	34,847		411
Income attributable to noncontrolling interest after preferred stock dividends	(1,598)		(214)
Other comprehensive loss attributable to noncontrolling interest	757		244
Comprehensive income attributable to STAG Industrial, Inc.	$	34,006	$	441

Three months ended June 30, Six months ended June 30,
2019 2018 2019 2018
Net income $ 14,170
$ 14,964
$ 21,559
$ 40,113
Other comprehensive income (loss):
Income (loss) on interest rate swaps (16,028 ) 3,028
(23,006 ) 10,751
Other comprehensive income (loss) (16,028 ) 3,028
(23,006 ) 10,751
Comprehensive income (loss) (1,858 ) 17,992
(1,447 ) 50,864
Income attributable to noncontrolling interest after preferred stock dividends (408 ) (392 ) (622 ) (1,334 )
Other comprehensive (income) loss attributable to noncontrolling interest 510
(122 ) 754
(442 )
Comprehensive income (loss) attributable to STAG Industrial, Inc. $ (1,756 ) $ 17,478
$ (1,315 ) $ 49,088

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

Table of Contents

STAG Industrial, Inc.

Consolidated Statements of Equity

(unaudited, in thousands, except share data)


																													Preferred Stock		Common Stock							Additional Paid-in Capital		Cumulative Dividends in Excess of Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity		Noncontrolling Interest - Unit Holders in Operating Partnership		Total Equity
	Preferred Stock			Common Stock			Additional Paid-in Capital			Cumulative Dividends in Excess of Earnings				Accumulated Other Comprehensive Income (Loss)				Total Stockholders’ Equity				Noncontrolling Interest - Unit Holders in Operating Partnership			Total Equity							Shares			Amount
				Shares	Amount
Three months ended June 30, 2019
Balance, March 31, 2019	$	75,000		118,174,102	$	1,182	$	2,266,695			$	(621,225	)				$	(2,253	)		$			1,719,399		$	55,442		$	1,774,841

Three months ended March 31, 2020																												Three months ended March 31, 2020
Balance, December 31, 2019																												Balance, December 31, 2019	$	75,000	142,815,593		$	1,428		$	2,970,553	$	(723,027)	$	(18,426)	$	2,305,528	$	58,363	$	2,363,891
Proceeds from sales of common stock, net	—			8,180,794	82		236,254			—				—				236,336				—			236,336			Proceeds from sales of common stock, net	—		5,600,000		56			172,667		—		—		172,723		—		172,723

Dividends and distributions, net	—			—	—		—			(46,296		)		—				(46,296		)		(2,326		)	(48,622		)	Dividends and distributions, net	—		—		—			—		(54,822)		—		(54,822)		(896)		(55,718)
Non-cash compensation activity, net	—			3,190	—		1,656			—				—				1,656				899			2,555			Non-cash compensation activity, net	—		73,048		1			(858)		(390)		—		(1,247)		2,618		1,371
Redemption of common units to common stock	—			14,859	—		207			—				—				207				(207		)	—			Redemption of common units to common stock	—		219,390		2			3,426		—		—		3,428		(3,428)		—

Rebalancing of noncontrolling interest	—			—	—		(3,799		)	—				—				(3,799		)		3,799			—			Rebalancing of noncontrolling interest	—		—		—			(3,293)		—		—		(3,293)		3,293		—
Other comprehensive loss	—			—	—		—			—				(15,518		)		(15,518		)		(510		)	(16,028		)	Other comprehensive loss	—		—		—			—		—		(29,434)		(29,434)		(757)		(30,191)
Net income	—			—	—		—			13,762				—				13,762				408			14,170			Net income	—		—		—			—		63,440		—		63,440		1,598		65,038
Balance, June 30, 2019	$	75,000		126,372,945	$	1,264	$	2,501,013		$	(653,759	)		$	(17,771	)		$	1,905,747			$	57,505		$	1,963,252
Three months ended June 30, 2018
Balance, March 31, 2018	$	145,000		97,229,588	$	972	$	1,724,627		$	(530,257	)		$	11,581			$	1,351,923			$	53,076		$	1,404,999
Balance, March 31, 2020																												Balance, March 31, 2020	$	75,000	148,708,031		$	1,487		$	3,142,495	$	(714,799)	$	(47,860)	$	2,456,323	$	60,791	$	2,517,114
Three months ended March 31, 2019																												Three months ended March 31, 2019
Balance, December 31, 2018																												Balance, December 31, 2018	$	75,000	112,165,786		$	1,122		$	2,118,179	$	(584,979)	$	4,481	$	1,613,803	$	55,829	$	1,669,632
Leases cumulative effect adjustment																												Leases cumulative effect adjustment	—		—		—			—		(214)		—		(214)		—		(214)
Proceeds from sales of common stock, net	—			6,819,580	68		174,850			—				—				174,918				—			174,918			Proceeds from sales of common stock, net	—		5,441,409		55			148,474		—		—		148,529		—		148,529
Redemption of preferred stock	(70,000		)	—	—		5,141			(5,158		)		—				(70,017		)		—			(70,017		)

Dividends and distributions, net	—			—	—		—			(38,481		)		—				(38,481		)		(1,997		)	(40,478		)	Dividends and distributions, net	—		—		—			—		(42,834)		—		(42,834)		(1,546)		(44,380)
Non-cash compensation activity, net	—			2,615	—		1,323			—				—				1,323				890			2,213			Non-cash compensation activity, net	—		127,836		1			(1,133)		(373)		—		(1,505)		2,368		863
Redemption of common units to common stock	—			186,383	2		2,314			—				—				2,316				(2,316		)	—			Redemption of common units to common stock	—		439,071		4			6,024		—		—		6,028		(6,028)		—
Rebalancing of noncontrolling interest	—			—	—		(3,253		)	—				—				(3,253		)		3,253			—
Other comprehensive income	—			—	—		—			—				2,911				2,911				117			3,028
Net income	—			—	—		—			14,584				—				14,584				380			14,964
Balance, June 30, 2018	$	75,000		104,238,166	$	1,042	$	1,905,002		$	(559,312	)		$	14,492			$	1,436,224			$	53,403		$	1,489,627

Six months ended June 30, 2019
Balance, December 31, 2018	$	75,000		112,165,786	$	1,122	$	2,118,179		$	(584,979	)		$	4,481			$	1,613,803			$	55,829		$	1,669,632
Leases cumulative effect adjustment (Note 2)	—			—	—		—			(214		)		—				(214		)		—			(214		)
Proceeds from sales of common stock, net	—			13,622,203	137		384,728			—				—				384,865				—			384,865
Dividends and distributions, net	—			—	—		—			(89,130		)		—				(89,130		)		(3,872		)	(93,002		)
Non-cash compensation activity, net	—			131,026	1		523			(373		)		—				151				3,267			3,418
Redemption of common units to common stock	—			453,930	4		6,231			—				—				6,235				(6,235		)	—

Rebalancing of noncontrolling interest	—			—	—		(8,648		)	—				—				(8,648		)		8,648			—			Rebalancing of noncontrolling interest	—		—		—			(4,849)		—		—		(4,849)		4,849		—
Other comprehensive loss	—			—	—		—			—				(22,252		)		(22,252		)		(754		)	(23,006		)	Other comprehensive loss	—		—		—			—		—		(6,734)		(6,734)		(244)		(6,978)
Net income	—			—	—		—			20,937				—				20,937				622			21,559			Net income	—		—		—			—		7,175		—		7,175		214		7,389
Balance, June 30, 2019	$	75,000		126,372,945	$	1,264	$	2,501,013		$	(653,759	)		$	(17,771	)		$	1,905,747			$	57,505		$	1,963,252
Six months ended June 30, 2018
Balance, December 31, 2017	$	145,000		97,012,543	$	970	$	1,725,825		$	(516,691	)		$	3,936			$	1,359,040			$	51,267		$	1,410,307
Cash flow hedging instruments cumulative effect adjustment	—			—	—		—			(258		)		247				(11		)		11			—
Proceeds from sales of common stock, net	—			6,819,580	68		174,743			—				—				174,811				—			174,811
Redemption of preferred stock	(70,000		)	—	—		5,141			(5,158		)		—				(70,017		)		—			(70,017		)
Dividends and distributions, net	—			—	—		—			(75,447		)		—				(75,447		)		(3,810		)	(79,257		)
Non-cash compensation activity, net	—			73,988	1		468			(537		)		—				(68		)		2,987			2,919
Redemption of common units to common stock	—			332,055	3		4,137			—				—				4,140				(4,140		)	—
Rebalancing of noncontrolling interest	—			—	—		(5,312		)	—				—				(5,312		)		5,312			—
Other comprehensive income	—			—	—		—			—				10,309				10,309				442			10,751
Net income	—			—	—		—			38,779				—				38,779				1,334			40,113
Balance, June 30, 2018	$	75,000		104,238,166	$	1,042	$	1,905,002		$	(559,312	)		$	14,492			$	1,436,224			$	53,403		$	1,489,627
Balance, March 31, 2019																												Balance, March 31, 2019	$	75,000	118,174,102		$	1,182		$	2,266,695	$	(621,225)	$	(2,253)	$	1,719,399	$	55,442	$	1,774,841

Table of ~~June 30, 2019, the Company has a development commitment related to a building expansion under a tenant lease of approximately $3.1 million.~~Contents

12. Subsequent Events

The following non-recognized subsequent events were noted.

On ~~July 12, 2019,~~April 17, 2020, the Company entered into a ~~$200.0~~$300.0 million unsecured term loan agreement. In connection with the new unsecured term loan agreement, the $150.0 million Unsecured Term Loan B and the $150.0 million Unsecured Term Loan C were repaid in full. The new unsecured term loan bears a current interest rate of LIBOR plus a spread of ~~1.00%~~1.5% based on the Company’s debt rating, as defined in the loan agreement, and subject to a minimum rate for LIBOR of 0.25%. The new unsecured term loan matures on ~~January 12, 2025.~~April 16, 2021, subject to two one year extension options at the Company's discretion, and subject to certain conditions (other than lender discretion) such as the absence of default and the payment of an extension fee. On ~~July 16, 2019,~~April 20, 2020, the Company entered into an4 interest rate ~~swap~~swaps with a total notional amount of ~~$50.0~~$300.0 million which ~~in conjunction with the interest rate swaps entered into on May 2, 2019,~~ fix LIBOR at ~~2.113575%~~0.27725% on the new unsecured term loan. The interest rate swaps do not cover the interest rate floor. As a result, the Company’s effective interest rate will be 1.77725% plus the amount, if any, by which LIBOR is below 0.25%. The interest rate swaps become effective on ~~July 15,~~September 29, 2020 and ~~expire~~March 19, 2021 upon the maturity of the interest rate swaps previously designated to the Unsecured Term Loan B and Unsecured Term Loan C and mature on ~~January 15, 2025.~~April 18, 2023.

COVID-19 Pandemic

The Company is closely monitoring the impact of the COVID-19 pandemic on all aspects of its business, including how the pandemic will impact its tenants and business partners. While the Company did not incur significant disruptions from the COVID-19 pandemic during the three months ended March 31, 2020, a number of the Company’s tenants have recently requested rent deferral or rent abatement as a result of the pandemic, and therefore, the Company is unable to predict the impact that the pandemic will have on its financial condition, results of operations and cash flows due to numerous uncertainties. The Company is evaluating each tenant rent relief request on an individual basis, considering a number of factors. Not all tenant requests will ultimately result in modified agreements, nor is the Company forgoing its contractual rights under its lease agreements. The extent to which the COVID-19 pandemic impacts the Company’s operations and those of its tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion with the financial statements and related notes included elsewhere in Item 1 of this report and the audited financial statements and related notes thereto included in our most recent Annual Report on Form 10-K.

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

Forward-Looking Statements

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

•the factors included in our Annual Report on Form 10-K for the year ended December 31, ~~2018,~~2019, 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;”

•the potential adverse effect of the ongoing public health crisis of the novel coronavirus disease (“COVID-19”) pandemic, or any future pandemic, epidemic or outbreak of infectious disease, on the financial condition, results of operations, cash flows and performance of the Company and its tenants, the real estate market and the global economy and financial markets;

•our ability to raise equity capital on attractive terms;

•the competitive environment in which we operate;

•real estate risks, including fluctuations in real estate values 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, epidemics, pandemics, and other potentially catastrophic events such as acts of war and/or terrorism;

•international, national, regional and local economic conditions;

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•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;

25•

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

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

•how and when pending forward equity sales may settle;

•lack of or insufficient amounts of insurance;

•our ability to maintain our qualification as a REIT;

•our ability to retain key personnel;

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

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

Any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise over time, and it is not possible for us to predict those events or how they may affect us. Moreover, you should interpret many of the risks identified in this report, as well as the risks set forth above, as being heightened as a result of the ongoing and numerous adverse impacts of the COVID-19 pandemic. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Certain Definitions

In this report:

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

We define “total annualized base rental revenue” as the contractual monthly base rent as of ~~June 30, 2019~~March 31, 2020 (which differs from rent calculated in accordance with GAAP) multiplied by 12. If a tenant is in a free rent period as of ~~June 30, 2019,~~March 31, 2020, 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.

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We define the “Operating Portfolio” as all warehouse and light manufacturing assets that were acquired stabilized or have achieved Stabilization. The Operating Portfolio excludes non-core flex/office assets, ~~and~~ assets contained in the Value Add ~~Portfolio.~~Portfolio, and assets classified at held for sale.

We define a “Comparable Lease” as a lease in the same space with a similar lease structure as compared to the previous in-place lease, excluding new leases for space that was not occupied under our ownership.

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~~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.

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

Overview

We are a REIT focused on the acquisition, ownership, and operation of single-tenant, industrial properties throughout the United States. We are a Maryland corporation and our common stock is publicly traded on the New York Stock Exchange under the symbol “STAG.”

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

Factors That May Influence Future Results of Operations

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

COVID-19 Pandemic

Since initially being reported in December 2019, COVID-19 has spread around the world, including to every state in the United States. On March 11, 2020, the World Health Organization declared COVID-19 a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to COVID-19. The COVID-19 pandemic has severely impacted global economic activity and caused significant volatility and negative pressure in financial markets. The global impact of the pandemic is rapidly evolving and many countries, including the United States, have reacted by instituting quarantines, mandating business and school closures and restricting travel. As a result, the COVID-19 pandemic is negatively impacting almost every industry, including the real estate industry and the industries of our tenants, directly or indirectly. The rapid development and fluidity of the COVID-19 pandemic precludes any prediction as to the ultimate adverse impact the pandemic may have on our business, financial condition, results of operations and cash flows.

The COVID-19 pandemic or a future pandemic, epidemic or outbreak of infectious disease affecting states or regions in which we or our tenants operate could have material and adverse effects on our business, financial condition, results of operations and cash flows due to, among other factors: health or other government authorities requiring the closure of offices or other businesses or instituting quarantines of personnel as the result of, or in order to avoid, exposure to a contagious disease; disruption in supply and delivery chains; a general decline in business activity and demand for real estate; reduced economic

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activity, general economic decline or recession, which may impact our tenants’ businesses, financial condition and liquidity and may cause one or more of our tenants to be unable to make rent payments to us timely, or at all, or to otherwise seek modifications of lease obligations; difficulty accessing debt and equity capital on attractive terms, or at all, and a severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions, which may affect our access to capital necessary to fund business operations or address maturing liabilities on a timely basis; and the potential negative impact on the health of our personnel, particularly if a significant number of our employees are impacted, which would result in a deterioration in our ability to ensure business continuity during a disruption.

The extent to which the COVID-19 pandemic or any other pandemic, epidemic or disease impacts our operations and those of our tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. Nevertheless, the COVID-19 pandemic (or a future pandemic, epidemic or disease) presents material uncertainty and risk with respect to our business, financial condition, results of operations and cash flows.

Outlook

~~The outlook for our~~Our business, ~~remains positive, albeit on a moderated basis in light of over nine years of economic growth, some~~like all businesses, is being impacted by the uncertainty regarding the COVID-19 pandemic, the effectiveness of policies introduced to neutralize the disease, and the impact of those policies on economic activity. While there are weakening macroeconomic conditions and some negative impact to our tenants, we have a well-diversified portfolio across industry, market, and lease term. Additionally, we strongly believe the current economic environment is likely to curb new industrial supply in the near term and to accelerate a number of trends that positively impact industrial demand.

The U.S. ~~presidential administration~~federal and ~~its~~state governments, as well as the Federal Reserve, responded to the uncertain economic outlook with a series of policies to ease the economic burden of COVID-19 closures on businesses and individuals. The major U.S. congressional policy ~~initiatives,~~action known as the Coronavirus, Aid, Relief and ~~continued asset appreciation. In~~Economic Security Act, or the ~~second quarter of 2019, the~~CARES Act, allocated $2 trillion in federal ~~funds target rate was unchanged at a target range of 2.25%~~aid to ~~2.50%.~~specific industries, small businesses and individuals. The Federal Reserve ~~has signaled it will support economic growth as needed. The~~also took major actions in response to the COVID-19 pandemic, including the completion of two emergency federal funds rate cuts in March 2020 to a range between 0% to 0.25%, adding liquidity to the bond market, establishing new lending facilities, and expanding its bond buying program to include mortgage backed securities, investment grade corporate debt, and high yield corporate ETFs.

We believe the current economic ~~growth combined with~~circumstances, while challenging, will provide an opportunity to demonstrate the ~~favorable industrial supply demand balance should translate to a net positive result for~~diversification of our ~~business.~~portfolio. Specifically, our existing portfolio should benefit from ~~rising~~competitive rental rates and strong occupancy. Furthermore, we believe certain characteristics of our business should position us well in an uncertain ~~interest rate~~ environment, including the fact that we have a highly diversified portfolio, minimal floating rate debt exposure (taking into account our hedging activities), strong liquidity, access to capital, and that many of our competitors for the assets we purchase tend to be smaller local and regional investors who are likely to be more heavily impacted by interest ~~rates.~~rates and availability of capital.

~~Several~~

Due to the COVID-19 pandemic, we expect acceleration in a number of industrial specific trends ~~contribute~~ to ~~the expected strong~~support stronger long-term demand, including:

•the rise of e-commerce (as compared to the traditional retail store distribution model) and the concomitant demand by e-commerce industry participants for well-located, functional distribution space;

•the increasing attractiveness of the ~~U.S.~~United States as a manufacturing and distribution location because of the size of the ~~U.S.~~United States consumer market, an increase in overseas labor costs and the overall cost of supplying and shipping goods (i.e. the shortening and fattening of the supply chain); and

•the overall quality of the transportation infrastructure in the ~~U.S.~~United States.

Our portfolio continues to benefit from historically low availability throughout the national industrial market. AtWe expect a near-term reduction in demand, in the ~~end~~aggregate, brought on by COVID-19. Certain industries and geographies are expected to be more heavily impacted. We believe the diversification of ~~the second quarter, demand for space has continued~~our portfolio by market, tenant industry, and tenant credit will prove to ~~outpace new supply supporting an accommodative environment for owners. Development activity has steadily increased over the past several years and is now reaching material levels~~be a strength in ~~a growing number of primary industrial markets. Though availability remains historically low,~~ this ~~is a trend we will monitor closely. In addition, currently, the supply remains fairly~~environment. Industrial development continues to be concentrated in the larger primary ~~industrial~~ markets, ~~and we~~but it is likely to decelerate in the near-term. We have limited exposure to many of ~~these~~the most active development 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.

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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, epidemics, and other factors in these markets may affect our overall performance.

Rental Income

We receive income primarily in the form of rental income from the tenants who occupy our buildings. The amount of rental income generated by the buildings in our portfolio depends principally on occupancy and rental rates. As of ~~June 30, 2019,~~March 31, 2020, our Operating Portfolio was approximately ~~95.8%~~97.0% leased and our SL Rent Change on new and renewal leases together grew approximately ~~18.6% and 21.4%~~11.2% during the three ~~and six~~ months ended ~~June 30, 2019, respectively.~~March 31, 2020 and our Cash Rent Change on new and renewal leases together grew approximately 3.3% during the three months ended March 31, 2020.

Future economic downturns or regional downturns affecting our submarkets that impair our ability to renew or re-lease space and the ability of our tenants to fulfill their lease commitments, as in the case of tenant bankruptcies, including those brought on by the COVID-19 pandemic, could adversely affect our ability to maintain or increase rental rates at our buildings. Our ability to lease our properties and the attendant rental rate is dependent upon, among other things, (i) the overall economy, (ii) the supply/demand dynamic in our markets, (iii) the quality of our properties, including age, clear height, and configuration, and (iv) our tenants’ ability to meet their contractual obligations to us.

The following table summarizes our Operating Portfolio leases that commenced during the three ~~and six~~ months ended ~~June 30, 2019.~~March 31, 2020. 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 March 31, 2020
New Leases	427,471	$	4.18	$	4.38	$	1.56	(2.0)	%	4.5	%	4.9	$	0.55
Renewal Leases	1,346,254	$	4.56	$	4.72	$	0.66	4.9	%	13.2	%	4.1	$	0.05
Total/weighted average	1,773,725	$	4.47	$	4.64	$	0.88	3.3	%	11.2	%	4.3	$	0.17

Operating Portfolio Square Feet Cash
Basis Rent Per
Square Foot SL Rent Per
Square Foot
Total Costs Per
Square
Foot⁽¹⁾
Cash
Rent Change SL Rent Change
Weighted Average Lease
Term⁽²⁾(years)

Rental Concessions per Square Foot⁽³⁾

Three months ended June 30, 2019
New Leases 554,717
$ 3.56
$ 3.70
$ 1.58
22.8 % 34.2 % 5.9
$ 0.77
Renewal Leases 1,954,251
$ 4.17
$ 4.35
$ 0.93
5.8 % 15.4 % 4.1
$ —
Total/weighted average 2,508,968
$ 4.03
$ 4.20
$ 1.08
8.7 % 18.6 % 4.5
$ 0.17
Six months ended June 30, 2019
New Leases 677,907
$ 3.66
$ 3.81
$ 1.66
18.3 % 30.3 % 6.0
$ 0.83
Renewal Leases 4,422,414
$ 4.04
$ 4.21
$ 0.73
10.9 % 20.3 % 4.1
$ —
Total/weighted average 5,100,321
$ 3.99
$ 4.16
$ 0.86
11.7 % 21.4 % 4.4
$ 0.11


~~(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.~~

(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.

Property Operating Expenses

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

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Scheduled Lease Expirations

Our ability to re-lease space subject to expiring leases will impact our results of operations and is affected by economic and competitive conditions in our markets and by the desirability of our individual buildings. Leases that comprise approximately ~~6.3%~~8.9% of our annualized base rental revenue will expire during the period from ~~July~~April 1, ~~2019~~2020 to ~~June 30, 2020,~~March 31, 2021, excluding month-to-month leases. We assume, based upon internal renewal probability estimates that some of our tenants will renew and others will vacate and the associated space will be re-let subject to downtime assumptions. Using the aforementioned assumptions, we expect that the rental rates on the respective new leases will generally be the same as the rates under existing leases expiring during the period ~~July~~April 1, ~~2019~~2020 to ~~June 30, 2020,~~March 31, 2021, thereby resulting in approximately the same revenue from the same space.

The following table summarizes lease expirations for leases in place as of ~~June 30, 2019,~~March 31, 2020, plus available space, for each of the ten calendar years beginning with ~~2019~~2020 and thereafter in our portfolio. The information in the table assumes that tenants exercise no renewal options and no early termination rights.


Lease Expiration Year	Number of Leases Expiring	Total Rentable Square Feet	% of Total Occupied Square Feet		Total Annualized Base Rental Revenue (in thousands)		% of Total Annualized Base Rental Revenue
Available	—	3,476,265	—		—		—
Month-to-month leases	2	22,800	—	%	$	54	—	%
Remainder of 2020	28	5,998,351	6.8	%	27,490		7.0	%
2021	69	10,910,117	12.4	%	48,291		12.3	%
2022	72	9,001,575	10.2	%	40,007		10.2	%
2023	79	11,742,191	13.3	%	46,476		11.9	%
2024	63	11,337,734	12.8	%	48,596		12.4	%
2025	48	8,128,115	9.2	%	35,600		9.1	%
2026	43	6,916,716	7.8	%	31,586		8.1	%
2027	23	3,316,401	3.8	%	16,692		4.3	%
2028	25	4,716,771	5.3	%	20,231		5.2	%
2029	22	4,055,023	4.6	%	19,895		5.1	%
Thereafter	45	12,162,813	13.8	%	56,951		14.4	%
Total	519	91,784,872	100.0	%	$	391,869	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 — 4,100,751
—
—
—
Month-to-month leases 3 57,220
0.1 % $ 196
0.1 %
Remainder of 2019 16 2,692,603
3.5 % 12,211
3.7 %
2020 46 8,039,236
10.4 % 35,060
10.5 %
2021 73 11,473,541
14.9 % 49,564
14.9 %
2022 65 7,874,863
10.2 % 34,589
10.4 %
2023 63 10,283,686
13.3 % 39,801
11.9 %
2024 47 8,273,432
10.7 % 35,774
10.7 %
2025 30 5,530,685
7.2 % 23,165
6.9 %
2026 29 5,432,364
7.0 % 24,424
7.3 %
2027 15 2,298,498
3.0 % 11,358
3.4 %
2028 23 4,589,199
6.0 % 19,255
5.8 %
Thereafter 40 10,570,297
13.7 % 48,289
14.4 %
Total 450 81,216,375
100.0 % $ 333,686
100.0 %

Portfolio Summary

The following table summarizes information relating to diversification by building type in our portfolio as of ~~June 30, 2019.~~March 31, 2020.


		Square Footage							Annualized Base Rental Revenue
Building Type	Number of Buildings	Amount	%		Occupancy Rate		Amount (in thousands)		%
Warehouse/Distribution	372	82,319,155	89.7	%	96.9	%	$	347,114	88.6	%
Light Manufacturing	70	7,902,777	8.6	%	98.1	%	38,214		9.8	%
Total Operating Portfolio/weighted average	442	90,221,932	98.3	%	97.0	%	$	385,328	98.4	%

Value Add/Other	6	1,130,625	1.2	%	50.6	%	3,287		0.8	%
Flex/Office	8	432,315	0.5	%	58.1	%	3,254		0.8	%
Total portfolio/weighted average	456	91,784,872	100.0	%	96.2	%	$	391,869	100.0	%

Square Footage Annualized Base Rental Revenue
Building Type Number of Buildings Amount % Occupancy Rate
Amount
(in thousands)
%
Warehouse/Distribution 337
73,113,633
90.0 % 95.6 % $ 298,955
89.6 %
Light Manufacturing 59
6,612,467
8.1 % 97.7 % 29,667
8.9 %
Total Operating Portfolio/weighted average
396
79,726,100
98.1 % 95.8 % $ 328,622
98.5 %

Value Add 4
925,595
1.1 % 52.1 % 1,700
0.5 %
Flex/Office 9
564,680
0.8 % 47.1 % 3,364
1.0 %
Total portfolio/weighted average
409
81,216,375
100.0 % 95.0 % $ 333,686
100.0 %

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Portfolio Acquisitions

The following table summarizes our acquisitions during the three ~~and six~~ months ended ~~June 30, 2019.~~March 31, 2020.

Market⁽¹⁾
Date Acquired Square Feet Buildings Purchase Price
(in thousands)
Cincinnati/Dayton, OH January 24, 2019 176,000
1
$ 9,965
Pittsburgh, PA February 21, 2019 455,000
1
28,676
Boston, MA February 21, 2019 349,870
1
26,483
Minneapolis/St Paul, MN February 28, 2019 248,816
1
21,955
Greenville/Spartanburg, SC March 7, 2019 331,845
1
24,536
Philadelphia, PA March 7, 2019 148,300
1
10,546
Omaha/Council Bluffs, NE-IA March 11, 2019 237,632
1
20,005
Houston, TX March 28, 2019 132,000
1
17,307
Baltimore, MD March 28, 2019 167,410
1
13,648
Houston, TX March 28, 2019 116,750
1
12,242
Three months ended March 31, 2019 2,363,623
10
185,363
Minneapolis/St Paul, MN April 2, 2019 100,600
1
9,045
West Michigan, MI April 8, 2019 230,200
1
15,786
Greensboro/Winston-Salem, NC April 12, 2019 129,600
1
7,771
Greenville/Spartanburg, SC April 25, 2019 319,660
2
15,432
Charleston/N Charleston, SC April 29, 2019 500,355
1
40,522
Houston, TX April 29, 2019 128,136
1
13,649
Richmond, VA May 16, 2019 109,520
1
9,467
Laredo, TX June 6, 2019 213,982
1
18,972
Baton Rouge, LA June 18, 2019 252,800
2
20,041
Philadelphia, PA June 19, 2019 187,569
2
13,645
Columbus, OH June 28, 2019 857,390
1
95,828
Three months ended June 30, 2019 3,029,812
14
260,158
Six months ended June 30, 2019 5,393,435
24
$ 445,521



Market⁽¹⁾	Date Acquired	Square Feet	Buildings	Purchase Price (in thousands)
Detroit, MI	January 10, 2020	491,049	1	$	29,543
Rochester, NY	January 10, 2020	124,850	1	8,565
Minneapolis/St Paul, MN	February 6, 2020	139,875	1	10,460
Sacramento, CA	February 6, 2020	160,534	1	18,468
Richmond, VA	February 6, 2020	78,128	1	5,481
Milwaukee/Madison, WI	February 7, 2020	81,230	1	7,219
Detroit, MI	February 11, 2020	311,123	1	23,141
Philadelphia, PA	March 9, 2020	78,000	1	6,571
Tulsa, OK	March 9, 2020	134,600	1	9,895
































Three months ended March 31, 2020		1,599,389	9	$	119,343

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

Portfolio Dispositions

During the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, we sold ~~five~~three buildings ~~and two land parcels~~ comprised of approximately ~~1.0~~1.2 million rentable square feet with a net book value of approximately ~~$16.1~~$52.9 million to third parties. Net proceeds from the sales of rental property were approximately ~~$17.7~~$99.7 million and we recognized the full gain on the sales of rental property, net, of approximately ~~$1.6~~$46.8 million for the ~~six~~three months ended ~~June 30, 2019.~~March 31, 2020.

Geographic Diversification

The following table summarizes information about the 20 largest markets in our portfolio based on total annualized base rental revenue as of ~~June 30, 2019.~~

March 31, 2020.



Top 20 Markets⁽¹⁾									% of Total Annualized Base Rental Revenue
Philadelphia, PA					~~9.2~~				8.5	%
Chicago, IL					~~7.7~~				7.3	%
Greenville/Spartanburg, SC					~~6.0~~				5.4	%
Detroit, MI					~~4.1~~				4.6	%
Pittsburgh, PA									4.4	%
Milwaukee/Madison, WI					~~4.0~~				4.3	%
~~Pittsburgh, PA~~			~~3.8~~	%
Minneapolis/St Paul, MN			~~3.6~~					4.2	%
~~Charlotte, NC~~Houston, TX					~~3.1~~				3.6	%
~~Houston, TX~~Charlotte, NC					~~3.0~~				2.7	%
Indianapolis, IN									2.6	%
Cincinnati/Dayton, OH					~~2.9~~				2.5	%
~~Columbus, OH~~Boston, MA					~~2.6~~				2.5	%
West Michigan, MI					~~2.5~~				2.4	%
Columbus, OH									2.3	%
El Paso, TX					~~2.4~~				2.3	%
~~Boston, MA~~Columbia, SC					~~2.3~~				1.8	%
Westchester/So Connecticut, CT/NY					~~2.0~~				1.7	%
Raleigh/Durham, NC					~~1.8~~				1.5	%
~~Cleveland, OH~~Memphis, TN					~~1.7~~				1.4	%
~~Baltimore, MD~~Kansas City, MO					~~1.6~~				1.4	%
~~Dallas/Ft Worth, TX~~Total					~~1.5~~		%
~~Atlanta, GA~~			~~1.4~~			%
~~Total~~67.4	~~67.2~~	%

(1) As defined by CoStar.

Table of Contents

Industry Diversification

The following table summarizes information about the 20 largest tenant industries in our portfolio based on total annualized base rental revenue as of ~~June 30, 2019.~~

March 31, 2020.



Top 20 Tenant Industries ⁽¹⁾									% of Total Annualized Base Rental Revenue
Auto Components					~~12.5~~				11.6	%
Air Freight & Logistics					~~8.8~~				8.4	%
Commercial Services & Supplies					~~7.7~~				7.3	%
Containers & Packaging					~~6.3~~				7.3	%
~~Household Durables~~Machinery					~~5.2~~				4.7	%
~~Machinery~~Food Products					~~4.8~~				4.6	%
~~Building Products~~Household Durables					~~4.7~~				4.6	%
~~Food~~Building Products					~~4.3~~				4.5	%
Electrical Equipment									3.7	%
Food & Staples Retailing					~~3.8~~				3.4	%
~~Electrical Equipment~~			~~3.7~~	%
~~Household Products~~	~~3.7~~	%
Internet & Direct Mkt Retail			~~3.2~~					3.3	%
~~Beverages~~Media					~~3.1~~				3.0	%
Beverages									2.8	%
Household Products									2.8	%
Electronic Equip, Instruments									2.3	%
Chemicals									2.1	%
Specialty Retail									2.0	%
Textiles, Apparel, Luxury Good					~~2.8~~				1.9	%
~~Chemicals~~			~~1.8~~	%
Metals & Mining			~~1.8~~					1.7	%
Pharmaceuticals					~~1.7~~				1.6	%
~~Specialty Retail~~Total					~~1.5~~		%
~~Energy Equipment & Services~~			~~1.5~~			%
~~Media~~83.6	~~1.5~~	%
~~Total~~	~~84.4~~	%

(1) Industry classification based on Global Industry Classification Standard methodology.

Tenant Diversification

The following table summarizes information about the 20 largest tenants in our portfolio based on total annualized base rental revenue as of ~~June 30, 2019.~~March 31, 2020.


Top 20 Tenants ⁽¹⁾	Number of Leases	% of Total Annualized Base Rental Revenue		Top 20 Tenants ⁽¹⁾	Number of Leases	% of Total Annualized Base Rental Revenue
General Services Administration	1	2.1	%
Amazon	2	1.7	%	Amazon	3	1.9	%
General Service Administration				General Service Administration	1	1.8	%
XPO Logistics, Inc.	4	1.4	%	XPO Logistics, Inc.	5	1.3	%
DHL Supply Chain				DHL Supply Chain	5	1.0	%
TriMas Corporation				TriMas Corporation	4	1.0	%
Solo Cup				Solo Cup	1	1.0	%
DS Smith				DS Smith	2	0.9	%
Hachette Book Group, Inc.				Hachette Book Group, Inc.	1	0.8	%
Ford Motor Company				Ford Motor Company	1	0.8	%
American Tire Distributors Inc				American Tire Distributors Inc	5	0.8	%
Packaging Corp. of America				Packaging Corp. of America	5	0.8	%
Yanfeng US Automotive Interior	3	1.2	%	Yanfeng US Automotive Interior	2	0.8	%
Solo Cup	1	1.1	%
TriMas Corporation	4	1.1	%
DHL Supply Chain	4	1.0	%
Deckers Outdoor	1	0.9	%
Schneider Electric USA, Inc.				Schneider Electric USA, Inc.	3	0.8	%
FedEx Corporation				FedEx Corporation	3	0.8	%
WestRock Company	6	0.9	%	WestRock Company	6	0.8	%
Kenco Logistic Services, LLC	2	0.9	%	Kenco Logistic Services, LLC	2	0.8	%
Perrigo Company				Perrigo Company	2	0.7	%
Generation Brands	1	0.8	%	Generation Brands	1	0.7	%
Carolina Beverage Group	2	0.8	%	Carolina Beverage Group	2	0.7	%
Emerson Electric	2	0.8	%	Emerson Electric	2	0.7	%
Quoizel, Inc.	1	0.8	%
FedEx Corporation	2	0.8	%
Perrigo Company	2	0.7	%
Schneider Electric USA, Inc.	3	0.7	%
American Tire Distributors Inc	4	0.7	%
Coca-Cola Company	2	0.7	%
Sunland Logistics Solutions	1	0.7	%
Total	48	19.8	%	Total	56	18.9	%

(1) Includes tenants, guarantors, and/or non-guarantor parents.

Table of Contents

Critical Accounting Policies

See “Critical Accounting Policies” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, ~~2018,~~2019, for a discussion of our critical accounting policies and estimates.

~~On January 1, 2019, we adopted ASU 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.

We define same store properties as properties that were in the Operating Portfolio for the entirety of the comparative periods presented. Same Store excludes termination fees, solar income, and revenue associated with one-time tenant reimbursements of capital expenditures. Same store properties exclude Operating Portfolio properties with expansions placed into service after December 31, ~~2017.~~2018. On ~~June 30, 2019,~~March 31, 2020, we owned ~~317~~368 industrial buildings consisting of approximately ~~63.2~~73.4 million square feet, which represents approximately ~~77.8%~~80% of our total portfolio, that are considered our same store portfolio in the analysis below. Same store occupancy ~~decreased~~increased approximately ~~1.4%~~0.3% to ~~95.5%~~96.3% as of ~~June 30, 2019~~March 31, 2020 compared to ~~96.9%~~96.0% as of ~~June 30, 2018.~~March 31, 2019.

Comparison of the three months ended ~~June 30, 2019~~March 31, 2020 to the three months ended ~~June 30, 2018~~March 31, 2019

The following table summarizes selected operating information for our same store portfolio and our total portfolio for the three months ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018~~ (dollars in thousands). This table includes a reconciliation from our same store portfolio to our total portfolio by also providing information for the three months ended ~~June 30,~~March 31, 2020 and 2019 ~~and 2018~~ with respect to the buildings acquired and disposed of and Operating Portfolio buildings with expansions placed into service or transferred from the Value Add Portfolio to the Operating Portfolio after December 31, ~~2017~~2018 and our flex/office buildings and Value Add Portfolio.

Table of Contents

Same Store Portfolio Acquisitions/Dispositions Other Total Portfolio
Three months ended June 30, Change Three months ended June 30, Three months ended June 30, Three months ended June 30, Change
2019 2018 $ % 2019 2018 2019 2018 2019 2018 $ %
Revenue
Operating revenue
Rental income $ 74,709
$ 73,855
$ 854
1.2 % $ 18,427
$ 7,327
$ 3,226
$ 3,684
$ 96,362
$ 84,866
$ 11,496
13.5 %
Other income 271
379
(108 ) (28.5 )% 13
227
—
2
284
608
(324 ) (53.3 )%
Total operating revenue 74,980
74,234
746
1.0 % 18,440
7,554
3,226
3,686
96,646
85,474
11,172
13.1 %
Expenses

Property 13,277
12,653
624
4.9 % 2,168
2,013
1,510
1,458
16,955
16,124
831
5.2 %
Net operating income ⁽¹⁾
$ 61,703
$ 61,581
$ 122
0.2 % $ 16,272
$ 5,541
$ 1,716
$ 2,228
79,691
69,350
10,341
14.9 %
Other expenses
General and administrative 8,587
7,978
609
7.6 %
Depreciation and amortization 44,633
40,901
3,732
9.1 %
Other expenses 427
350
77
22.0 %
Total other expenses 53,647
49,229
4,418
9.0 %
Total expenses 70,602
65,353
5,249
8.0 %
Other income (expense)
Interest and other income 2
7
(5 ) (71.4 )%
Interest expense (12,193 ) (11,512 ) (681 ) 5.9 %
Gain on the sales of rental property, net 317
6,348
(6,031 ) (95.0 )%
Total other income (expense) (11,874 ) (5,157 ) (6,717 ) 130.3 %
Net income $ 14,170
$ 14,964
$ (794 ) (5.3 )%


~~(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 March 31,						Change						Three months ended March 31,								Three months ended March 31,												Three months ended March 31,		Change
	2020		2019		$		%		2020		2019		2020		2019		2020				2019				$				%
Revenue
Operating revenue
Rental income	$	91,559	$	90,864	$	695	0.8	%	$	24,128	$	3,228	$	2,652	$	1,523	$	118,339			$	95,615			$	22,724			23.8	%
Other income	168		49		119		242.9	%	6		38		35		—		209				87				122				140.2	%
Total operating revenue	91,727		90,913		814		0.9	%	24,134		3,266		2,687		1,523		118,548				95,702				22,846				23.9	%
Expenses
Property	16,830		17,641		(811)		(4.6)	%	3,768		968		1,349		902		21,947				19,511				2,436				12.5	%
Net operating income ⁽¹⁾	$	74,897	$	73,272	$	1,625	2.2	%	$	20,366	$	2,298	$	1,338	$	621	96,601				76,191				20,410				26.8	%
Other expenses
General and administrative																			10,373				9,212				1,161				12.6	%

Depreciation and amortization																			52,688				42,303				10,385				24.5	%
Loss on impairments																			—				5,344				(5,344)				(100.0)	%

Other expenses																			476				399				77				19.3	%
Total other expenses																			63,537				57,258				6,279				11.0	%
Total expenses																			85,484				76,769				8,715				11.4	%
Other income (expense)
Interest and other income																			79				16				63				393.8	%
Interest expense																			(14,864)				(12,834)				(2,030)				15.8	%

Gain on the sales of rental property, net																			46,759				1,274				45,485				3,570.3	%
Total other income (expense)																			31,974				(11,544)				43,518				377.0	%
Net income																			$	65,038			$	7,389			$	57,649			780.2	%

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

Table of Contents

Net Income

Net income for our total portfolio ~~decreased~~increased by ~~$0.8~~$57.6 million or ~~5.3%~~780.2% to ~~$14.2~~$65.0 million for the three months ended ~~June 30, 2019,~~March 31, 2020, compared to ~~$15.0~~$7.4 million for the three months ended ~~June 30, 2018.~~March 31, 2019.

Same Store Total Operating Revenue

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

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

Same store rental income, which is comprised of lease income and other billings as discussed below, increased by ~~$0.8~~$0.7 million or ~~1.2%~~0.8% to ~~$74.7~~$91.6 million for the three months ended ~~June 30, 2019~~March 31, 2020 compared to ~~$73.9~~$90.9 million for the three months ended ~~June 30, 2018.~~March 31, 2019.

Same store lease income increased by ~~$0.5~~$1.7 million or ~~0.5%~~2.2% to ~~$63.7~~$77.5 million for the three months ended ~~June 30, 2019~~March 31, 2020 compared to ~~$63.2~~$75.8 million for the three months ended ~~June 30, 2018.~~March 31, 2019. Approximately ~~$2.1~~$2.4 million of the increase was attributable to rental increases due to new leases and renewals of existing tenants, and approximately $0.1 million of the increase was due to a net decrease in the amortization of net above market leases. This increase was partially offset by an approximately ~~$1.7~~$0.8 million decrease due to a reduction of base rent due to tenants downsizing their spaces and vacancies.

Same store other billings ~~increased~~decreased by ~~$0.3~~$1.0 million or ~~3.0%~~6.3% to ~~$11.0~~$14.1 million for the three months ended ~~June 30, 2019~~March 31, 2020 compared to ~~$10.7~~$15.1 million for the three months ended ~~June 30, 2018.~~March 31, 2019. The ~~increase~~decrease was primarily attributable to ~~an increase~~a decrease in real estate taxes levied by the taxing authority and changes to lease terms where wethe tenants began paying the real estate taxes ~~and operating expenses~~that we had previously paid on behalf of ~~tenants that had previously paid its taxes and operating expenses directly~~the tenant to ~~respective vendors~~the taxing authority of approximately ~~$0.9~~$0.7 million. ~~This increase~~The decrease was ~~partially offset by~~also attributable to a decrease of approximately ~~$0.6~~$0.3 million related to tenant specific ~~billings that occurred during the three months ended June 30, 2019 that did not recur during the three months ended June 30, 2018.~~billings.

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~~decreased by ~~$0.6~~$0.8 million or ~~4.9%~~4.6% to ~~$13.3~~$16.8 million for the three months ended ~~June 30, 2019~~March 31, 2020 compared to ~~$12.7~~$17.6 million for the three months ended ~~June 30, 2018.~~March 31, 2019. This ~~increase~~decrease was primarily related to ~~increases~~a decrease in snow removal expense of approximately $1.0 million and a decrease in real estate taxes levied by the ~~related~~ taxing authority and changes to lease terms where wethe tenants began paying the real estate taxes that we had previously paid on behalf of ~~tenants that had previously paid its taxes directly~~the tenant to the taxing authority of approximately ~~$1.0 million and~~$0.5 million. These decreases were partially offset by an increase in repairs and maintenance and other expense of approximately ~~$0.3 million. These increases were partially offset by a decrease in insurance expense and utility expense of approximately $0.5 million and a decrease in snow removal expense of approximately $0.2~~$0.7 million.

Acquisitions and Dispositions Net Operating Income

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

Subsequent to December 31, ~~2017,~~2018, we acquired 73 buildings consisting of approximately ~~14.9~~16.5 million square feet (excluding ~~four~~five buildings that were included in the Value Add Portfolio at ~~June 30, 2019~~March 31, 2020 or transferred from the Value Add Portfolio to the Operating Portfolio after December 31, ~~2017)~~2018), and sold 2412 buildings and two land parcels consisting of approximately ~~4.9~~2.8 million square feet. For the three months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018,~~ the buildings acquired after December 31, ~~2017~~2018 contributed approximately ~~$16.3~~$20.5 million and ~~$2.4~~$0.8 million to NOI, respectively. For the three months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018,~~ the buildings sold after December 31, ~~2017~~2018 contributed approximately ~~$(19,000)~~$(0.1) and ~~$3.1~~$1.5 million to NOI, respectively. Refer to Note 3 in the accompanying Notes to Consolidated Financial Statements for additional discussion regarding buildings acquired or sold.

Table of Contents

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, ~~2017.~~2018. Other NOI also includes termination adjustments from buildings in our same store portfolio.

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

At ~~June 30, 2019,~~March 31, 2020, we owned ~~nine~~eight flex/office buildings consisting of approximately ~~0.6~~0.4 million square feet, ~~four~~five buildings in our Value Add Portfolio consisting of approximately ~~0.9~~1.1 million square feet, one building classified as held for sale consisting of approximately 0.1 million square feet, and ~~six buildings~~one building consisting of approximately ~~1.6~~0.3 million square feet that ~~were~~was an Operating Portfolio ~~buildings~~building with ~~expansions~~expansion placed in service or transferred from the Value Add Portfolio to the Operating Portfolio after December 31, ~~2017.~~2018. These buildings contributed approximately ~~$1.9~~$1.2 million and ~~$2.2~~$0.5 million to NOI for the three months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively. Additionally, there was approximately ~~$(0.2)~~$0.1 million and ~~$29,000~~$0.1 million of ~~termination~~one-time adjustments from certain buildings in our same store portfolio for the three months ended ~~June 30,~~March 31, 2020 and 2019, ~~and 2018,~~ respectively.

Total Other Expenses

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

Total other expenses increased ~~$4.4~~$6.3 million or ~~9.0%~~11.0% for the three months ended ~~June 30, 2019~~March 31, 2020 to ~~$53.6~~$63.5 million compared to ~~$49.2~~$57.3 million for the three months ended ~~June 30, 2018. This~~March 31, 2019. The increase is primarily a result of an increase in depreciation and amortization of approximately ~~$3.7~~$10.4 million due to an increase in the depreciable asset base as a result of net acquisitions. Additionally, general and administrative expenses increased by approximately ~~$0.6~~$1.2 million primarily due to increases in compensation and other payroll costs. These increases were partially offset by a decrease in loss on impairments of approximately $5.3 million.

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 expense increased ~~$6.7~~$43.5 million or ~~130.3% for the three months ended June 30, 2019~~377.0% to ~~$11.9 million compared $5.2~~total other income of $32.0 million for the three months ended ~~June 30, 2018.~~March 31, 2020 compared $11.5 million total other expense for the three months ended March 31, 2019. This increase is primarily the result of ~~a decrease~~an increase in the gain on the sales of rental property, net of approximately ~~$6.0~~$45.5 million. This increase ~~is also attributable~~was partially offset due to an increase in interest expense of approximately ~~$0.7~~$2.0 million which was primarily attributable to the funding of an unsecured term ~~loan on July 27, 2018 and the funding of unsecured notes on June 13, 2018.~~

~~Comparison of the six months ended June 30, 2019 to the six months ended June 30, 2018~~

The following table summarizes selected operating information for our same store portfolio and our total portfolio for the six months ended June 30, 2019 and 2018 (dollars in thousands). This table includes a reconciliation from our same store portfolio to our total portfolio by also providing information for the six months ended June 30, 2019 and 2018 with respect to the buildings acquired and disposed of and Operating Portfolio buildings with expansions placed into service or transferred from the Value Add Portfolio to the Operating Portfolio after December 31, 2017 and our flex/office buildings and Value Add Portfolio.

Same Store Portfolio Acquisitions/Dispositions Other Total Portfolio
Six months ended June 30, Change Six months ended June 30, Six months ended June 30, Six months ended June 30, Change
2019 2018 $ % 2019 2018 2019 2018 2019 2018 $ %
Revenue
Operating revenue

Rental income $ 151,499
$ 147,632
$ 3,867
2.6 % $ 33,674
$ 13,120
$ 6,804
$ 7,241
$ 191,977
$ 167,993
$ 23,984
14.3 %
Other income 339
532
(193 ) (36.3 )% 32
228
—
4
371
764
(393 ) (51.4 )%
Total operating revenue 151,838
148,164
3,674
2.5 % 33,706
13,348
6,804
7,245
192,348
168,757
23,591
14.0 %
Expenses

Property 28,788
26,613
2,175
8.2 % 4,589
3,952
3,089
3,058
36,466
33,623
2,843
8.5 %
Net operating income ⁽¹⁾
$ 123,050
$ 121,551
$ 1,499
1.2 % $ 29,117
$ 9,396
$ 3,715
$ 4,187
155,882
135,134
20,748
15.4 %
Other expenses

General and administrative

17,799
16,726
1,073
6.4 %
Depreciation and amortization

86,936
80,866
6,070
7.5 %
Loss on impairments

5,344
2,934
2,410
82.1 %
Other expenses

826
641
185
28.9 %
Total other expenses

110,905
101,167
9,738
9.6 %
Total expenses

147,371
134,790
12,581
9.3 %
Other income (expense)

Interest and other income 18
13
5
38.5 %
Interest expense

(25,027 ) (22,904 ) (2,123 ) 9.3 %
Gain on the sales of rental property, net

1,591
29,037
(27,446 ) (94.5 )%
Total other income (expense)

(23,418 ) 6,146
(29,564 ) (481.0 )%
Net income

$ 21,559
$ 40,113
$ (18,554 ) (46.3 )%


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

~~Net Income~~

~~Net income for our total portfolio decreased by $18.6 million or 46.3% to $21.6 million for the six months ended June 30, 2019 compared to $40.1 million for the six months ended June 30, 2018.~~

~~Same Store Total Operating Revenue~~

~~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 $3.9 million or 2.6% to $151.5 million for the six months ended June 30, 2019 compared to $147.6 million for the six months ended June 30, 2018.

Same store lease income increased by $1.8 million or 1.3% to $127.3 million for the six months ended June 30, 2019 compared to $125.5 million for the six months ended June 30, 2018. Approximately $4.6 million of the increase was attributable to rental increases due to new leases and renewals of existing tenants and approximately $0.3 million due to a net decrease in the amortization of net above market leases. This increase was partially offset by an approximately $3.1 million decrease due to a reduction of base rent due to tenants downsizing their spaces and vacancies.

Same store other billings increased by $2.1 million or 9.4% to $24.2 million for the six months ended June 30, 2019 compared to $22.1 million for the six months ended June 30, 2018. The increase was primarily attributable to an increase in real estate taxes levied by the taxing authority and changes to lease terms where we began paying the real estate taxes and operating expenses on behalf of tenants that had previously paid its taxes and operating expenses directly to respective vendors of approximately $2.1 million.

~~Same Store Operating Expenses~~

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

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

Total same store operating expenses increased by $2.2 million or 8.2% to $28.8 million for the six months ended June 30, 2019 compared to $26.6 million for the six months ended June 30, 2018. This increase was primarily related to increases in real estate taxes levied by the related taxing authority and changes to lease terms where we began paying the real estate taxes on behalf of tenants that had previously paid its taxes directly to the taxing authority of approximately $2.7 million and an increase in snow removal and other expenses of approximately $0.5 million. These increases were partially offset by a decrease in insurance and utility expenses of approximately $1.0 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, 2017, we acquired 73 buildings consisting of approximately 14.9 million square feet (excluding four buildings that were included in the Value Add Portfolio at June 30, 2019 or transferred from the Value Add Portfolio to the Operating Portfolio after December 31, 2017), and sold 24 buildings and two land parcels consisting of approximately 4.9 million square feet. For the six months ended June 30, 2019 and June 30, 2018, the buildings acquired after December 31, 2017 contributed approximately $29.2 million and $3.1 million to NOI, respectively. For the six months ended June 30, 2019 and June 30, 2018, the buildings sold after December 31, 2017 contributed approximately $(0.1) million and $6.3 million to NOI, respectively. Refer to Note 3 in the accompanying Notes to Consolidated Financial Statements for additional discussion regarding buildings acquired or sold.

~~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, 2017. Other NOI also includes termination adjustments from buildings in our same store portfolio.

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

At June 30, 2019, we owned nine flex/office buildings consisting of approximately 0.6 million square feet, four buildings in our Value Add Portfolio consisting of approximately 0.9 million square feet, and six buildings consisting of approximately 1.6 million square feet that were Operating Portfolio buildings with expansions placed in service or transferred from the Value Add Portfolio to the Operating Portfolio after December 31, 2017. These buildings contributed approximately $3.9 million and $4.1 million to NOI for the six months ended June 30, 2019 and June 30, 2018, respectively. Additionally, there was $(0.2) million and $43,000 of termination adjustments from certain buildings in our same store portfolio for the six months ended June 30, 2019 and June 30, 2018, respectively.

~~Total Other Expenses~~

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

Total other expenses increased $9.7 million or 9.6% to $110.9 million for the six months ended June 30, 2019 compared to $101.2 million for the six months ended June 30, 2018. This is primarily a result of an increase in depreciation and amortization of approximately $6.1 million as a result of acquisitions that increased the depreciable asset base, as well as an increase of approximately $2.4 million in loss on impairments. General and administrative expenses increased by approximately $1.1 million primarily due to increases in compensation and other payroll costs.

~~Total Other Income (Expense)~~

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

Total other income (expense) decreased $29.6 million or 481.0% to a total other expense position of $23.4 million for the six months ended June 30, 2019 compared to a total other income position of $6.1 million for the six months ended June 30, 2018. This decrease is primarily the result of a decrease in the gain on the sales of rental property, net of approximately $27.4 million. This decrease is also attributable to an increase in interest expense of approximately $2.1 million which was primarily attributable to the funding of unsecured term loans on March ~~28, 2018~~25, 2020, December 18, 2019, and July ~~27, 2018 and the funding of unsecured notes on June 13, 2018.~~25, 2019.

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~~

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(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 March 31,
Reconciliation of Net Income to FFO (in thousands)	2020		2019
Net income	$	65,038	$	7,389
Rental property depreciation and amortization	52,617		42,229
Loss on impairments	—		5,344
Gain on the sales of rental property, net	(46,759)		(1,274)
FFO	70,896		53,688
Preferred stock dividends	(1,289)		(1,289)

Amount allocated to restricted shares of common stock and unvested units	(221)		(247)
FFO attributable to common stockholders and unit holders	$	69,386	$	52,152

Three months ended June 30, Six months ended June 30,
Reconciliation of Net Income to FFO (in thousands) 2019 2018 2019 2018
Net income $ 14,170
$ 14,964
$ 21,559
$ 40,113
Rental property depreciation and amortization 44,559
40,826
86,788
80,718
Loss on impairments —
—
5,344
2,934
Gain on the sales of rental property, net (317 ) (6,348 ) (1,591 ) (29,037 )
FFO 58,412
49,442
112,100
94,728
Preferred stock dividends (1,289 ) (2,578 ) (2,578 ) (5,026 )
Redemption of preferred stock —
(2,661 ) —
(2,661 )
Amount allocated to restricted shares of common stock and unvested units (232 ) (198 ) (479 ) (415 )
FFO attributable to common stockholders and unit holders $ 56,891
$ 44,005
$ 109,043
$ 86,626

Net Operating Income

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

The following table sets forth a reconciliation of our NOI for the periods presented to net income, the nearest GAAP equivalent.


	Three months ended March 31,
Reconciliation of Net Income to NOI (in thousands)	2020		2019
Net income	$	65,038	$	7,389

General and administrative	10,373		9,212
Transaction costs	51		74
Depreciation and amortization	52,688		42,303
Interest and other income	(79)		(16)
Interest expense	14,864		12,834
Loss on impairments	—		5,344


Other expenses	425		325

Gain on the sales of rental property, net	(46,759)		(1,274)
Net operating income	$	96,601	$	76,191

Three months ended June 30, Six months ended June 30,
Reconciliation of Net Income to NOI (in thousands) 2019 2018 2019 2018
Net income $ 14,170
$ 14,964
$ 21,559
$ 40,113
General and administrative 8,587
7,978
17,799
16,726
Transaction costs 79
76
153
76
Depreciation and amortization 44,633
40,901
86,936
80,866
Interest and other income (2 ) (7 ) (18 ) (13 )
Interest expense 12,193
11,512
25,027
22,904
Loss on impairments —
—
5,344
2,934
Other expenses 348
274
673
565
Gain on the sales of rental property, net (317 ) (6,348 ) (1,591 ) (29,037 )
Net operating income $ 79,691
$ 69,350
$ 155,882
$ 135,134

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Cash Flows

Comparison of the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 to the ~~six~~three months ended ~~June 30, 2018~~March 31, 2019

The following table summarizes our cash flows for the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 compared to the ~~six~~three months ended ~~June 30, 2018.~~March 31, 2019.


	Six months ended June 30,				Change					Three months ended March 31,						Change
Cash Flows (dollars in thousands)	2019		2018		$		%		Cash Flows (dollars in thousands)	2020		2019		$		%
Net cash provided by operating activities	$	110,571	$	97,321	$	13,250	13.6	%	Net cash provided by operating activities	$	70,580	$	47,150	$	23,430	49.7	%
Net cash used in investing activities	$	444,544	$	198,935	$	245,609	123.5	%	Net cash used in investing activities	$	35,980	$	176,816	$	(140,836)	(79.7)	%
Net cash provided by financing activities	$	321,026	$	91,541	$	229,485	250.7	%	Net cash provided by financing activities	$	294,919	$	119,432	$	175,487	146.9	%

Net cash provided by operating activities increased ~~$13.3~~$23.4 million to ~~$110.6~~$70.6 million for the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 compared to ~~$97.3~~$47.2 million for the ~~six~~three months ended ~~June 30, 2018.~~March 31, 2019. The increase was primarily attributable to incremental operating cash flows from property acquisitions completed after ~~June 30, 2018,~~March 31, 2019, and operating performance at existing properties. These increases were partially offset by the loss of cash flows from property dispositions completed after ~~June 30, 2018~~March 31, 2019 and fluctuations in working capital due to timing of payments and rental receipts.

Net cash used in investing activities ~~increased $245.6~~decreased $140.8 million to ~~$444.5~~$36.0 million for the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 compared to ~~$198.9~~$176.8 million for the ~~six~~three months ended ~~June 30, 2018.~~March 31, 2019. The ~~increased cash outflow~~decrease was primarily due to the acquisition of 24 buildings for a total cash consideration of approximately $445.4 million for the six months ended June 30, 2019 compared to the acquisition of 21 buildings for a total cash consideration of approximately $264.1 million for the six months ended June 30, 2018. The increase is also attributable to ~~a decrease~~an increase in ~~net~~ proceeds from ~~the~~ sales of rental property, net related to the disposition of ~~five~~three buildings ~~and two land parcels~~ during the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 for net proceeds of approximately ~~$17.7~~$99.7 million, compared to the ~~six~~three months ended ~~June 30, 2018~~March 31, 2019 where we sold ~~seven~~five buildings for net proceeds of approximately ~~$79.7~~$16.6 million.

The decrease was also attributable to the acquisition of nine buildings for a total cash consideration of approximately $119.3 million for the three months ended March 31, 2020 compared to the acquisition of ten buildings for a total cash consideration of approximately $185.4 million for the three months ended March 31, 2019.

Net cash provided by financing activities increased ~~$229.5~~$175.5 million to ~~$321.0~~$294.9 million for the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 compared to ~~$91.5~~$119.4 million for the ~~six~~three months ended ~~June 30, 2018.~~March 31, 2019. The increase is primarily attributable to an increase of net proceeds from the sales of common stock of approximately ~~$210.1~~$24.1 million, ~~and~~ an increase of net cash inflow on our unsecured credit facility of approximately ~~$282.5~~$64.0 million, and increase in proceeds from unsecured term loans of approximately $100.0 million during the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 compared to the ~~six~~three months ended ~~June 30, 2018.~~March 31, 2019. These increases were partially offset by ~~a decrease in proceeds from unsecured term loans and unsecured notes~~an increase of approximately ~~$75.0~~$12.6 million ~~and $175.0 million, respectively, and an approximately $14.2 million increase~~ in dividends paid during the ~~six~~three months ended ~~June 30, 2019~~March 31, 2020 compared to the ~~six~~three months ended ~~June 30, 2018.~~March 31, 2019.

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.

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As of ~~June 30, 2019,~~March 31, 2020, we had total immediate liquidity of approximately ~~$545.1~~$596.9 million, comprised of ~~$5.1~~$324.9 million of cash and cash equivalents and ~~$540.0~~$272.0 million of immediate availability on our unsecured credit facility.

In response to the events surrounding the COVID-19 pandemic, in late March we drew the remaining $100.0 million of our Unsecured Term Loan F and drew $200.0 million of our unsecured credit facility. This resulted in a cash balance of approximately $324.9 million at March 31, 2020. When incorporating the remaining undrawn balance available on our unsecured credit facility, the approximately $136.3 million of forward equity proceeds available to us at our option, and ~~unsecured term loans.~~unused 1031 like-kind exchange proceeds, total liquidity as of March 31, 2020 stands at approximately $746.7 million dollars, with a material amount of that liquidity in cash. Additionally, on April 17, 2020 we refinanced our Unsecured Term Loan B and Unsecured Term Loan C, as discussed in “Indebtedness Outstanding” below.

In addition, we require funds for future dividends to be paid to our common and preferred stockholders and unit holders in the Operating Partnership. These distributions on our common stock are voluntary (at the discretion of our board of directors), to the extent we have satisfied distribution requirements in order to maintain our REIT status for federal income tax purposes, and may be reduced or stopped if needed to fund other liquidity requirements or for other reasons. The following table summarizes the dividends attributable to our outstanding common stock that had a record date during the ~~six~~three months ended ~~June 30, 2019.~~March 31, 2020.

Month Ended 2019 Declaration Date Record Date Per Share Payment Date
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 $ 0.715002

Month Ended 2020

Declaration Date

Record Date

Per Share

Payment Date

March 31

January 8, 2020

March 31, 2020

0.12

April 15, 2020

February 29

January 8, 2020

February 28, 2020

0.12

March 16, 2020

January 31

January 8, 2020

January 31, 2020

0.12

February 18, 2020

Total

0.36

On ~~July 15, 2019,~~April 9, 2020, our board of directors declared the common stock dividends for the months ending ~~July~~April 30, 2020, May 31, ~~2019, August 31, 2019~~2020, and ~~September~~June 30, ~~2019~~2020 at a monthly rate of ~~$0.119167~~$0.12 per share of common stock.

During the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, we declared quarterly cumulative dividends on the 6.875% Series C Cumulative Redeemable Preferred Stock (“Series C Preferred Stock”) at a rate equivalent to the fixed annual rate of $1.71875 per share. The following table summarizes the dividends on the Series C Preferred Stock during the ~~six~~three months ended ~~June 30, 2019.~~March 31, 2020.

Quarter Ended 2020

Declaration Date

Series C
Preferred Stock Per Share

Payment Date

March 31

January 8, 2020

0.4296875

March 31, 2020

Total

0.4296875

Quarter Ended 2019 Declaration Date Series C
Preferred Stock Per Share Payment Date
June 30 April 9, 2019 $ 0.4296875
July 1, 2019
March 31 January 10, 2019 0.4296875
April 1, 2019
Total $ 0.8593750

On ~~July 15, 2019,~~April 9, 2020, our board of directors declared the Series C Preferred Stock dividends for the quarter ending ~~September~~June 30, ~~2019~~2020 at a quarterly rate of $0.4296875 per share.

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Indebtedness Outstanding

The following table summarizes certain information with respect to our indebtedness outstanding as of ~~June 30, 2019.~~March 31, 2020


Loan	Principal Outstanding as of March 31, 2020 (in thousands)		Interest Rate⁽¹⁾⁽²⁾		Maturity Date	Prepayment Terms⁽³⁾
Unsecured credit facility:
Unsecured Credit Facility⁽⁴⁾	$	225,000	L + 0.90%		January 12, 2024	i
Total unsecured credit facility	225,000

Unsecured term loans:
Unsecured Term Loan C⁽⁵⁾	150,000		2.39	%	September 29, 2020	i
Unsecured Term Loan B⁽⁵⁾	150,000		3.05	%	March 21, 2021	i
Unsecured Term Loan A	150,000		3.38	%	March 31, 2022	i
Unsecured Term Loan D	150,000		2.85	%	January 4, 2023	i
Unsecured Term Loan E	175,000		3.92	%	January 15, 2024	i
Unsecured Term Loan F	200,000		L + 1.00%		January 12, 2025	i
Total unsecured term loans	975,000
Less: Total unamortized deferred financing fees and debt issuance costs	(3,299)
Total carrying value unsecured term loans, net	971,701

Unsecured notes:
Series F Unsecured Notes	100,000		3.98	%	January 5, 2023	ii
Series A Unsecured Notes	50,000		4.98	%	October 1, 2024	ii
Series D Unsecured Notes	100,000		4.32	%	February 20, 2025	ii
Series G Unsecured Notes	75,000		4.10	%	June 13, 2025	ii
Series B Unsecured Notes	50,000		4.98	%	July 1, 2026	ii
Series C Unsecured Notes	80,000		4.42	%	December 30, 2026	ii
Series E Unsecured Notes	20,000		4.42	%	February 20, 2027	ii
Series H Unsecured Notes	100,000		4.27	%	June 13, 2028	ii
Total unsecured notes	575,000
Less: Total unamortized deferred financing fees and debt issuance costs	(2,018)
Total carrying value unsecured notes, net	572,982

Mortgage notes (secured debt):
Wells Fargo Bank, National Association CMBS Loan	50,939		4.31	%	December 1, 2022	iii
Thrivent Financial for Lutherans	3,649		4.78	%	December 15, 2023	iv
Total mortgage notes	54,588
Add: Total unamortized fair market value premiums	37
Less: Total unamortized deferred financing fees and debt issuance costs	(336)
Total carrying value mortgage notes, net	54,289
Total / weighted average interest rate⁽⁶⁾	$	1,823,972	3.28	%

(1)Interest rate as of March 31, 2020. At March 31, 2020, the one-month LIBOR (“L”) was 0.99288%. The current interest rate is not adjusted to include the amortization of deferred financing fees or debt issuance costs incurred in obtaining debt or any unamortized fair market value premiums. The spread over the applicable rate for our unsecured credit facility and unsecured term loans is based on the our debt rating, as defined in the respective loan agreements.

(2)The unsecured term loans have a stated interest rate of one-month LIBOR plus a spread of 1.0%. As of March 31, 2020, one-month LIBOR for the Unsecured Term Loans A, B, C, D and E was swapped to a fixed rate of 2.38%, 2.05%, 1.39%, 1.85% and 2.92%, respectively. One-month LIBOR for the Unsecured Term Loan F will be swapped to a fixed rate of 2.11% effective July 15, 2020.

(3)Prepayment terms consist of (i) pre-payable with no penalty; (ii) pre-payable with penalty; (iii) pre-payable without penalty three months prior to the maturity date, however can be defeased; and (iv) pre-payable without penalty three months prior to the maturity date.

(4)The capacity of the unsecured credit facility is $500.0 million. The maturity date is January 15, 2023, or such later date as may be extended pursuant to two six-month extension options exercisable by the Company in its discretion upon advance written notice. Exercise of each six-month option is subject to the following conditions: (i) absence of a default immediately before the extension and immediately after giving effect to the extension, (ii) accuracy of representations and warranties as of the extension date (both immediately before and after the extension), as if made on the extension date, and (iii) payment of a fee. Neither extension option is subject to lender consent, assuming proper notice and satisfaction of the conditions.

(5)Subsequent to March 31, 2020, the Unsecured Term Loan B and Unsecured Term Loan C were repaid in full in connection with the new unsecured term loan agreement entered into on April 17, 2020, as discussed below.

(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 June 30, 2019 (in thousands)
Interest
Rate ⁽¹⁾⁽²⁾
Maturity Date
Prepayment Terms ⁽³⁾
Unsecured credit facility:
Unsecured Credit Facility ⁽⁴⁾
$ 129,000
L + 0.90%
Jan-15-2023 i
Total unsecured credit facility 129,000

Unsecured term loans:

Unsecured Term Loan C 150,000
2.39 % Sep-29-2020 i
Unsecured Term Loan B 150,000
3.05 % Mar-21-2021 i
Unsecured Term Loan A 150,000
2.70 % Mar-31-2022 i
Unsecured Term Loan D 150,000
2.85 % Jan-04-2023 i
Unsecured Term Loan E ⁽⁵⁾
—
3.92 % Jan-15-2024 i
Total unsecured term loans 600,000

Less: Total unamortized deferred financing fees and debt issuance costs (3,121 )
Total carrying value unsecured term loans, net 596,879

Unsecured notes:

Series F Unsecured Notes 100,000
3.98 % Jan-05-2023 ii
Series A Unsecured Notes 50,000
4.98 % Oct-1-2024 ii
Series D Unsecured Notes 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
4.98 % Jul-1-2026 ii
Series C Unsecured Notes 80,000
4.42 % Dec-30-2026 ii
Series E Unsecured Notes 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

Less: Total unamortized deferred financing fees and debt issuance costs (2,316 )
Total carrying value unsecured notes, net 572,684

Mortgage notes (secured debt):

Wells Fargo Bank, National Association CMBS Loan 52,312
4.31 % Dec-1-2022 iii
Thrivent Financial for Lutherans 3,738
4.78 % Dec-15-2023 iv
Total mortgage notes 56,050

Add: Total unamortized fair market value premiums 45

Less: Total unamortized deferred financing fees and debt issuance costs (436 )
Total carrying value mortgage notes, net 55,659

Total / weighted average interest rate ⁽⁶⁾
$ 1,354,222
3.55 %

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~~(1)~~

Interest rate as of June 30, 2019. At June 30, 2019, the one-month LIBOR (“L”) was 2.39800%. The interest rate is not adjusted to include the amortization of deferred financing fees or debt issuance costs incurred in obtaining debt or any unamortized fair market value premiums. The spread over the applicable rate for our unsecured credit facility and unsecured term loans is based on our debt rating, as defined in the respective loan agreements.


~~(2)~~	~~As of June 30, 2019, one-month LIBOR for the unsecured term loans A, B, C, D, and E was swapped to a fixed rate of 1.70%, 2.05%, 1.39%, 1.85%, and 2.92%, respectively.~~


~~(3)~~	Prepayment terms consist of (i) pre-payable with no penalty; (ii) pre-payable with penalty; (iii) pre-payable without penalty three months prior to the maturity date, however can be defeased; and (iv) pre-payable without penalty three months prior to the maturity date.


~~(4)~~	~~The capacity of the unsecured credit facility is $500.0 million.~~


~~(5)~~	~~The capacity was $175.0 million as of June 30, 2019. We funded the entire $175.0 million on July 25, 2019.~~


~~(6)~~	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 June 30, 2019, 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 ~~June 30, 2019~~March 31, 2020 was approximately ~~$540.0~~$272.0 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 12, 2019, we entered into a $200.0 million unsecured term loan agreement. The new unsecured term loan bears a current interest rate of LIBOR plus a spread of 1.00% based on the our debt rating, as defined in the loan agreement, and matures on January 12, 2025. On July 16, 2019, we entered into an interest rate swap with a total notional amount of $50.0 million, which in conjunction with the interest rate swaps entered into on May 2, 2019, fix LIBOR at 2.113575% on the new unsecured term loan. The interest rate swaps will become effective on July 15, 2020 and expire on January 15, 2025.

Our unsecured credit facility, unsecured term loans, unsecured notes, and mortgage notes are subject to ongoing compliance with a number of financial and other covenants. As of ~~June 30, 2019,~~March 31, 2020, we were in compliance with the applicable financial covenants.

On April 17, 2020, we entered into a $300.0 million unsecured term loan agreement. In connection with the new unsecured term loan agreement, the $150.0 million Unsecured Term Loan B and the $150.0 million Unsecured Term Loan C were repaid in full. The new unsecured term loan bears a current interest rate of LIBOR plus a spread of 1.5% based on our debt rating, as defined in the loan agreement, and subject to a minimum rate for LIBOR of 0.25%. The new unsecured term loan matures on April 16, 2021, subject to two one-year extension options at our discretion, and subject to certain conditions (other than lender discretion) such as the absence of default and the payment of an extension fee. On April 20, 2020, we entered into four interest rate swaps with a total notional amount of $300.0 million which fix LIBOR at 0.27725% on the new unsecured term loan. The interest rate swaps do not cover the interest rate floor. As a result, our effective interest rate will be 1.77725% plus the amount, if any, by which LIBOR is below 0.25%. The interest rate swaps become effective on September 29, 2020 and March 19, 2021 upon the maturity of the interest rate swaps previously designated to the Unsecured Term Loan B and Unsecured Term Loan C and mature on April 18, 2023.

The following table summarizes our debt capital structure as of ~~June 30, 2019.~~March 31, 2020.

Debt Capital Structure June 30, 2019
Total principal outstanding (in thousands) $ 1,360,050
Weighted average duration (years) 4.2
% Secured debt 4 %
% Debt maturing next 12 months — %
Net Debt to Real Estate Cost Basis ⁽¹⁾
35 %


~~(1)~~Debt Capital Structure	March 31, 2020
Total principal outstanding (in thousands)	$	1,829,588
Weighted average duration (years)	3.7

% Secured debt	3.0		%
~~We define~~ % Debt maturing next 12 months⁽¹⁾	16.4		%
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~~to Real Estate Cost Basis⁽²⁾	~~as the book value of rental property and deferred leasing intangibles, exclusive of the related accumulated depreciation and amortization.~~32.0		%

(1)Represents the Unsecured Term Loan B and Unsecured Term Loan C, which, subsequent to March 31, 2020, were repaid in full in connection with the new unsecured term loan agreement entered into on April 17, 2020, as previously discussed.

(2)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

The following table summarizes our outstanding preferred stock issuances as of ~~June 30, 2019.~~March 31, 2020.


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	%

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 %

~~On April 30, 2019, we filed Articles~~Table of ~~Amendment to our Articles of Amendment and Restatement to increase the number of authorized shares of our preferred stock from 15,000,000 to 20,000,000.~~Contents

Common Stock

The following table summarizes our at-the-market (“ATM”) common stock offering ~~programs~~program as of ~~June 30, 2019.~~March 31, 2020. We may from time to time sell common stock through sales agents under the program.

ATM Common Stock Offering Program Date Maximum Aggregate Offering Price (in thousands) Aggregate Common Stock Available as of
June 30, 2019 (in thousands)
2019 $600 million ATM February 14, 2019 $ 600,000
$ 427,729

~~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 summarizes the~~ There was no activity ~~for~~under the ATM common stock offering ~~programs~~program during the three ~~and six~~ months ended ~~June 30, 2019 (in thousands, except share data).~~March 31, 2020.


ATM Common Stock Offering Program	Date	Maximum Aggregate Offering Price (in thousands)		Aggregate Common Stock Available as of March 31, 2020 (in thousands)
2019 $600 million ATM	February 14, 2019	$	600,000	$	318,248

Three months ended June 30, 2019
ATM Common Stock Offering Program Shares
Sold Weighted Average Price Per Share Net
Proceeds
2019 $600 million ATM 705,794
$ 31.29
$ 21,861
Total/weighted average 705,794
$ 31.29
$ 21,861

Six months ended June 30, 2019
ATM Common Stock Offering Program Shares
Sold Weighted Average Price Per Share Net
Proceeds
2019 $600 million ATM 6,147,203
$ 28.02
$ 170,748
Total/weighted average 6,147,203
$ 28.02
$ 170,748

On ~~April 1, 2019,~~January 13, 2020, we completed an underwritten public offering of ~~7,475,000~~an aggregate 10,062,500 shares of common stock at a price to the underwriters of $30.9022 per share, consisting of (i) 5,600,000 shares offered directly by us and (ii) 4,462,500 shares offered by the forward dealer in connection with certain forward sale agreements (including ~~975,000~~1,312,500 shares ~~issued~~offered pursuant to the underwriters’ option to purchase additional ~~shares) at a price to the underwriters of $28.72 per share.~~shares, which option was exercised in full). The offering closed on ~~April 4, 2019~~January 16, 2020 and we received net proceeds from the sale of shares offered directly by us of approximately ~~$214.7~~$173.1 million. Subject to our right to elect cash or net share settlement, we have the ability to settle the forward sales agreements at any time through scheduled maturity date of the forward sale agreements of January 13, 2021.

Noncontrolling Interest

We own our interests in all of our properties and conduct substantially all of our business through the Operating Partnership. We are the sole member of the sole general partner of the Operating Partnership. As of ~~June 30, 2019,~~March 31, 2020, we owned approximately ~~97.0%~~97.5% of the Operating Partnership, and our current and former executive officers, directors, senior employees and their affiliates, and third parties who contributed properties to us in exchange for common units in our Operating Partnership, owned the remaining ~~3.0%~~2.5%.

Interest Rate Risk

We use interest rate swaps to fix the rate of our variable rate debt. As of ~~June 30, 2019,~~March 31, 2020, all of our outstanding variable rate debt, with the exception of our unsecured credit facility and Unsecured Term Loan F, was fixed with interest rate swaps through maturity. The Unsecured Term Loan F will be swapped to a fixed rate effective July 15, 2020 through maturity.

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

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

Table of Contents

The following table details our outstanding interest rate swaps as of ~~June 30, 2019.~~March 31, 2020.


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	$	103		1.3300	%	One-month L	Feb-14-2020
Capital One, N.A.	Jun-13-2013	Jul-01-2013	$	50,000	$	96		1.6810	%	One-month L	Feb-14-2020
Capital One, N.A.	Jun-13-2013	Aug-01-2013	$	25,000	$	44		1.7030	%	One-month L	Feb-14-2020
Regions Bank	Sep-30-2013	Feb-03-2014	$	25,000	$	(1	)	1.9925	%	One-month L	Feb-14-2020
The Toronto-Dominion Bank	Oct-14-2015	Sep-29-2016	$	25,000	$	125		1.3830	%	One-month L	Sep-29-2020	The Toronto-Dominion Bank	Oct-14-2015	Sep-29-2016	$	25,000	$	(116)	1.3830	%	One-month L	Sep-29-2020
PNC Bank, N.A.	Oct-14-2015	Sep-29-2016	$	50,000	$	246		1.3906	%	One-month L	Sep-29-2020	PNC Bank, N.A.	Oct-14-2015	Sep-29-2016	$	50,000	$	(234)	1.3906	%	One-month L	Sep-29-2020
Regions Bank	Oct-14-2015	Sep-29-2016	$	35,000	$	174		1.3858	%	One-month L	Sep-29-2020	Regions Bank	Oct-14-2015	Sep-29-2016	$	35,000	$	(163)	1.3858	%	One-month L	Sep-29-2020
U.S. Bank, N.A.	Oct-14-2015	Sep-29-2016	$	25,000	$	122		1.3950	%	One-month L	Sep-29-2020	U.S. Bank, N.A.	Oct-14-2015	Sep-29-2016	$	25,000	$	(118)	1.3950	%	One-month L	Sep-29-2020
Capital One, N.A.	Oct-14-2015	Sep-29-2016	$	15,000	$	73		1.3950	%	One-month L	Sep-29-2020	Capital One, N.A.	Oct-14-2015	Sep-29-2016	$	15,000	$	(71)	1.3950	%	One-month L	Sep-29-2020
Royal Bank of Canada	Jan-08-2015	Mar-20-2015	$	25,000	$	(6	)	1.7090	%	One-month L	Mar-21-2021	Royal Bank of Canada	Jan-08-2015	Mar-20-2015	$	25,000	$	(334)	1.7090	%	One-month L	Mar-21-2021
The Toronto-Dominion Bank	Jan-08-2015	Mar-20-2015	$	25,000	$	(7	)	1.7105	%	One-month L	Mar-21-2021	The Toronto-Dominion Bank	Jan-08-2015	Mar-20-2015	$	25,000	$	(334)	1.7105	%	One-month L	Mar-21-2021
The Toronto-Dominion Bank	Jan-08-2015	Sep-10-2017	$	100,000	$	(907	)	2.2255	%	One-month L	Mar-21-2021	The Toronto-Dominion Bank	Jan-08-2015	Sep-10-2017	$	100,000	$	(1,840)	2.2255	%	One-month L	Mar-21-2021
Wells Fargo, N.A.	Jan-08-2015	Mar-20-2015	$	25,000	$	(145	)	1.8280	%	One-month L	Mar-31-2022	Wells Fargo, N.A.	Jan-08-2015	Mar-20-2015	$	25,000	$	(775)	1.8280	%	One-month L	Mar-31-2022
The Toronto-Dominion Bank	Jan-08-2015	Feb-14-2020	$	25,000	$	(496	)	2.4535	%	One-month L	Mar-31-2022	The Toronto-Dominion Bank	Jan-08-2015	Feb-14-2020	$	25,000	$	(1,091)	2.4535	%	One-month L	Mar-31-2022
Regions Bank	Jan-08-2015	Feb-14-2020	$	50,000	$	(1,015	)	2.4750	%	One-month L	Mar-31-2022	Regions Bank	Jan-08-2015	Feb-14-2020	$	50,000	$	(2,204)	2.4750	%	One-month L	Mar-31-2022
Capital One, N.A.	Jan-08-2015	Feb-14-2020	$	50,000	$	(1,072	)	2.5300	%	One-month L	Mar-31-2022	Capital One, N.A.	Jan-08-2015	Feb-14-2020	$	50,000	$	(2,259)	2.5300	%	One-month L	Mar-31-2022
The Toronto-Dominion Bank	Jul-20-2017	Oct-30-2017	$	25,000	$	(210	)	1.8485	%	One-month L	Jan-04-2023	The Toronto-Dominion Bank	Jul-20-2017	Oct-30-2017	$	25,000	$	(1,077)	1.8485	%	One-month L	Jan-04-2023
Royal Bank of Canada	Jul-20-2017	Oct-30-2017	$	25,000	$	(211	)	1.8505	%	One-month L	Jan-04-2023	Royal Bank of Canada	Jul-20-2017	Oct-30-2017	$	25,000	$	(1,079)	1.8505	%	One-month L	Jan-04-2023
Wells Fargo, N.A.	Jul-20-2017	Oct-30-2017	$	25,000	$	(211	)	1.8505	%	One-month L	Jan-04-2023	Wells Fargo, N.A.	Jul-20-2017	Oct-30-2017	$	25,000	$	(1,079)	1.8505	%	One-month L	Jan-04-2023
PNC Bank, N.A.	Jul-20-2017	Oct-30-2017	$	25,000	$	(209	)	1.8485	%	One-month L	Jan-04-2023	PNC Bank, N.A.	Jul-20-2017	Oct-30-2017	$	25,000	$	(1,077)	1.8485	%	One-month L	Jan-04-2023
PNC Bank, N.A.	Jul-20-2017	Oct-30-2017	$	50,000	$	(417	)	1.8475	%	One-month L	Jan-04-2023	PNC Bank, N.A.	Jul-20-2017	Oct-30-2017	$	50,000	$	(2,154)	1.8475	%	One-month L	Jan-04-2023
The Toronto-Dominion Bank	Jul-24-2018	Jul-26-2019	$	50,000	$	(2,828	)	2.9180	%	One-month L	Jan-12-2024	The Toronto-Dominion Bank	Jul-24-2018	Jul-26-2019	$	50,000	$	(4,890)	2.9180	%	One-month L	Jan-12-2024
PNC Bank, N.A.	Jul-24-2018	Jul-26-2019	$	50,000	$	(2,830	)	2.9190	%	One-month L	Jan-12-2024	PNC Bank, N.A.	Jul-24-2018	Jul-26-2019	$	50,000	$	(4,892)	2.9190	%	One-month L	Jan-12-2024
Bank of Montreal	Jul-24-2018	Jul-26-2019	$	50,000	$	(2,829	)	2.9190	%	One-month L	Jan-12-2024	Bank of Montreal	Jul-24-2018	Jul-26-2019	$	50,000	$	(4,892)	2.9190	%	One-month L	Jan-12-2024
U.S. Bank, N.A.	Jul-24-2018	Jul-26-2019	$	25,000	$	(1,415	)	2.9190	%	One-month L	Jan-12-2024	U.S. Bank, N.A.	Jul-24-2018	Jul-26-2019	$	25,000	$	(2,446)	2.9190	%	One-month L	Jan-12-2024
Wells Fargo, N.A.	May-02-2019	Jul-15-2020	$	50,000	$	(1,351	)	2.2460	%	One-month L	Jan-15-2025	Wells Fargo, N.A.	May-02-2019	Jul-15-2020	$	50,000	$	(4,195)	2.2460	%	One-month L	Jan-15-2025
U.S. Bank, N.A.	May-02-2019	Jul-15-2020	$	50,000	$	(1,349	)	2.2459	%	One-month L	Jan-15-2025	U.S. Bank, N.A.	May-02-2019	Jul-15-2020	$	50,000	$	(4,194)	2.2459	%	One-month L	Jan-15-2025
Regions Bank	May-02-2019	Jul-15-2020	$	50,000	$	(1,356	)	2.2459	%	One-month L	Jan-15-2025	Regions Bank	May-02-2019	Jul-15-2020	$	50,000	$	(4,195)	2.2459	%	One-month L	Jan-15-2025
Bank of Montreal												Bank of Montreal	Jul-16-2019	Jul-15-2020	$	50,000	$	(3,005)	1.7165	%	One-month L	Jan-15-2025


	Three months ended March 31,
	2020		2019
Cash flows from operating activities:
Net income	$	65,038	$	7,389
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	52,688		42,303
Loss on impairments	—		5,344

Non-cash portion of interest expense	676		618
Amortization of above and below market leases, net	984		961
Straight-line rent adjustments, net	(3,849)		(2,256)
Dividends on forfeited equity compensation	—		6


Gain on the sales of rental property, net	(46,759)		(1,274)
Non-cash compensation expense	2,852		2,278

Change in assets and liabilities:
Tenant accounts receivable	(509)		(859)

Prepaid expenses and other assets	(490)		(2,686)
Accounts payable, accrued expenses and other liabilities	390		(3,775)
Tenant prepaid rent and security deposits	(441)		(899)
Total adjustments	5,542		39,761
Net cash provided by operating activities	70,580		47,150
Cash flows from investing activities:
Acquisitions of land and buildings and improvements	(100,187)		(159,969)
Additions of land and building and improvements	(16,815)		(5,058)
Acquisitions of other assets	(450)		(1,049)

Proceeds from sales of rental property, net	99,678		16,602

Acquisition deposits, net	500		(2,997)
Acquisitions of deferred leasing intangibles	(18,706)		(24,345)
Net cash used in investing activities	(35,980)		(176,816)
Cash flows from financing activities:



Proceeds from unsecured credit facility	387,000		208,000
Repayment of unsecured credit facility	(308,000)		(193,000)
Proceeds from unsecured term loans	100,000		—



Repayment of mortgage notes	(497)		(481)


Proceeds from sales of common stock, net	172,771		148,645


Dividends and distributions	(54,883)		(42,288)
Repurchase and retirement of share-based compensation	(1,472)		(1,444)

Net cash provided by financing activities	294,919		119,432
Increase (decrease) in cash and cash equivalents and restricted cash	329,519		(10,234)
Cash and cash equivalents and restricted cash—beginning of period	11,864		22,542
Cash and cash equivalents and restricted cash—end of period	$	341,383	$	12,308
Supplemental disclosure:
Cash paid for interest, net of capitalized interest	$	12,544	$	10,449
Supplemental schedule of non-cash investing and financing activities










Change in additions of land, building, and improvements included in accounts payable, accrued expenses, and other liabilities	$	(1,080)	$	(1,094)
Additions to building and other capital improvements from non-cash compensation	$	(8)	$	(14)


Change in loan fees, costs, and offering costs included in accounts payable, accrued expenses, and other liabilities	$	(62)	$	(116)

Leases cumulative effect adjustment	$	—	$	(214)
Dividends and distributions accrued	$	18,301	$	15,846



	Six months ended June 30,
	2019			2018
Cash flows from operating activities:
Net income	$	21,559		$	40,113
Adjustment to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	86,936			80,866
Loss on impairments	5,344			2,934
Non-cash portion of interest expense	1,236			1,081
Amortization of above and below market leases, net	2,102			2,056
Straight-line rent adjustments, net	(5,522		)	(5,449		)
Dividends on forfeited equity compensation	7			9
Gain on the sales of rental property, net	(1,591		)	(29,037		)
Non-cash compensation expense	4,815			4,435
Change in assets and liabilities:
Tenant accounts receivable	1,389			1,916
Prepaid expenses and other assets	(3,338		)	(5,155		)
Accounts payable, accrued expenses and other liabilities	(1,433		)	1,161
Tenant prepaid rent and security deposits	(933		)	2,391
Total adjustments	89,012			57,208
Net cash provided by operating activities	110,571			97,321
Cash flows from investing activities:
Acquisitions of land and buildings and improvements	(368,188		)	(222,366		)
Additions of land and building and improvements	(18,949		)	(13,610		)
Acquisitions of other assets	(1,049		)	—
Proceeds from sales of rental property, net	17,688			79,701
Acquisition deposits, net	2,142			(905		)
Acquisitions of deferred leasing intangibles	(76,188		)	(41,755		)
Net cash used in investing activities	(444,544		)	(198,935		)
Cash flows from financing activities:
Proceeds from unsecured credit facility	381,000			249,000
Repayment of unsecured credit facility	(352,500		)	(503,000		)
Proceeds from unsecured term loans	—			75,000
Proceeds from unsecured notes	—			175,000
Repayment of mortgage notes	(961		)	(922		)
Payment of loan fees and costs	(48		)	(1,073		)
Proceeds from sales of common stock, net	384,913			174,802
Dividends and distributions	(89,934		)	(75,742		)
Repurchase and retirement of share-based compensation	(1,444		)	(1,524		)
Net cash provided by financing activities	321,026			91,541
Decrease in cash and cash equivalents and restricted cash	(12,947		)	(10,073		)
Cash and cash equivalents and restricted cash—beginning of period	22,542			28,129
Cash and cash equivalents and restricted cash—end of period	$	9,595		$	18,056
Supplemental disclosure:
Cash paid for interest, net of capitalized interest	$	21,965		$	19,748
Supplemental schedule of non-cash investing and financing activities
Acquisitions of land and buildings and improvements	$	(72	)	$	—
Acquisitions of deferred leasing intangibles	$	(24	)	$	—
Change in additions of land, building, and improvements included in accounts payable, accrued expenses, and other liabilities	$	(7,351	)	$	(1,642	)
Additions to building and other capital improvements from non-cash compensation	$	(40	)	$	(9	)
Change in loan fees, costs, and offering costs included in accounts payable, accrued expenses, and other liabilities	$	(62	)	$	(41	)
Reclassification of preferred stock called for redemption to liability	$	—		$	70,000
Leases cumulative effect adjustment (Note 2)	$	(214	)	$	—
Dividends and distributions accrued	$	16,822		$	15,396



Rental Property (in thousands)	June 30, 2019		December 31, 2018
Land	$	397,193	$	364,023
Buildings, net of accumulated depreciation of $227,359 and $199,497, respectively	2,330,493		2,082,781
Tenant improvements, net of accumulated depreciation of $20,796 and $36,450, respectively	32,127		30,704
Building and land improvements, net of accumulated depreciation of $96,442 and $80,983, respectively	192,473		168,229
Construction in progress	19,653		3,949
Deferred leasing intangibles, net of accumulated amortization of $229,864 and $246,502, respectively	381,133		342,015
Total rental property, net	$	3,353,072	$	2,991,701


Rental Property (in thousands)	March 31, 2020		December 31, 2019
Land	$	443,427	$	435,923
Buildings, net of accumulated depreciation of $272,953 and $254,458, respectively	2,844,520		2,787,234
Tenant improvements, net of accumulated depreciation of $23,101 and $21,487, respectively	40,442		38,339
Building and land improvements, net of accumulated depreciation of $120,600 and $111,688, respectively	244,045		232,456
Construction in progress	26,737		29,406
Deferred leasing intangibles, net of accumulated amortization of $256,537 and $241,304, respectively	473,610		475,149
Total rental property, net	$	4,072,781	$	3,998,507



Acquired Assets and Liabilities	Purchase Price (in thousands)			Weighted Average Amortization Period (years) of Intangibles at Acquisition
Land	$	38,581		N/A
Buildings	292,663			N/A
Tenant improvements	4,054			N/A
Building and land improvements	30,930			N/A
Construction in progress	2,032			N/A
Other assets	1,049			N/A
Deferred leasing intangibles - In-place leases	45,457			10.7
Deferred leasing intangibles - Tenant relationships	19,431			13.2
Deferred leasing intangibles - Above market leases	13,485			14.3
Deferred leasing intangibles - Below market leases	(2,161		)	7.3
Total purchase price	$	445,521



	Three months ended June 30,						Six months ended June 30,
	2019			2018			2019			2018
Revenue
Rental income	$	96,362		$	84,866		$	191,977		$	167,993
Other income	284			608			371			764
Total revenue	96,646			85,474			192,348			168,757
Expenses
Property	16,955			16,124			36,466			33,623
General and administrative	8,587			7,978			17,799			16,726
Depreciation and amortization	44,633			40,901			86,936			80,866
Loss on impairments	—			—			5,344			2,934
Other expenses	427			350			826			641
Total expenses	70,602			65,353			147,371			134,790
Other income (expense)
Interest and other income	2			7			18			13
Interest expense	(12,193		)	(11,512		)	(25,027		)	(22,904		)
Gain on the sales of rental property, net	317			6,348			1,591			29,037
Total other income (expense)	(11,874		)	(5,157		)	(23,418		)	6,146
Net income	$	14,170		$	14,964		$	21,559		$	40,113
Less: income attributable to noncontrolling interest after preferred stock dividends	408			392			622			1,334
Net income attributable to STAG Industrial, Inc.	$	13,762		$	14,572		$	20,937		$	38,779
Less: preferred stock dividends	1,289			2,578			2,578			5,026
Less: redemption of preferred stock	—			2,661			—			2,661
Less: amount allocated to participating securities	79			69			158			140
Net income attributable to common stockholders	$	12,394		$	9,264		$	18,201		$	30,952
Weighted average common shares outstanding — basic	125,251			100,386			120,015			98,713
Weighted average common shares outstanding — diluted	125,560			100,733			120,306			99,037
Net income per share — basic and diluted
Net income per share attributable to common stockholders — basic	$	0.10		$	0.09		$	0.15		$	0.31
Net income per share attributable to common stockholders — diluted	$	0.10		$	0.09		$	0.15		$	0.31



Reconciliation of cash and cash equivalents and restricted cash (in thousands)	June 30, 2019		December 31, 2018
Cash and cash equivalents	$	5,092	$	7,968
Restricted cash	4,503		14,574
Total cash and cash equivalents and restricted cash	$	9,595	$	22,542



Results of Operations (in thousands)	Three months ended June 30, 2019		Six months ended June 30, 2019
Total revenue	$	5,497	$	6,691
Net income	$	957	$	812



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
Market⁽¹⁾	Buildings		Valuation technique utilized to estimate fair value		(in thousands)
Rapid City, SD	1	Change in estimated hold period	Discounted cash flows	(4)
Three months ended March 31, 2019					$	4,373	$	5,344
Six months ended June 30, 2019					$	4,373	$	5,344


~~(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)~~	~~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%.~~



	Three months ended June 30,				Six months ended June 30,
Deferred Leasing Intangibles Amortization (in thousands)	2019		2018		2019		2018
Net decrease to rental income related to above and below market lease amortization	$	1,146	$	849	$	2,113	$	2,056
Amortization expense related to other intangible lease assets	$	17,899	$	18,237	$	34,713	$	36,337



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	$	33,534	$	2,305
2020	$	57,911	$	4,292
2021	$	47,013	$	2,986
2022	$	38,654	$	2,176
2023	$	32,001	$	2,171



Loan	Principal Outstanding as of June 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⁾	$	129,000		$	100,500		L + 0.90%		Jan-15-2023	i
Total unsecured credit facility	129,000			100,500

Unsecured term loans:
Unsecured Term Loan C	150,000			150,000			2.39	%	Sep-29-2020	i
Unsecured Term Loan B	150,000			150,000			3.05	%	Mar-21-2021	i
Unsecured Term Loan A	150,000			150,000			2.70	%	Mar-31-2022	i
Unsecured Term Loan D	150,000			150,000			2.85	%	Jan-04-2023	i
Unsecured Term Loan E ⁽⁵⁾	—			—			3.92	%	Jan-15-2024	i
Total unsecured term loans	600,000			600,000
Less: Total unamortized deferred financing fees and debt issuance costs	(3,121		)	(3,640		)
Total carrying value unsecured term loans, net	596,879			596,360

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			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			100,000			4.27	%	Jun-13-2028	ii
Total unsecured notes	575,000			575,000
Less: Total unamortized deferred financing fees and debt issuance costs	(2,316		)	(2,512		)
Total carrying value unsecured notes, net	572,684			572,488

Mortgage notes (secured debt):
Wells Fargo Bank, National Association CMBS Loan	52,312			53,216			4.31	%	Dec-1-2022	iii
Thrivent Financial for Lutherans	3,738			3,795			4.78	%	Dec-15-2023	iv
Total mortgage notes	56,050			57,011
Add: Total unamortized fair market value premiums	45			50
Less: Total unamortized deferred financing fees and debt issuance costs	(436		)	(501		)
Total carrying value mortgage notes, net	55,659			56,560
Total / weighted average interest rate ⁽⁶⁾	$	1,354,222		$	1,325,908		3.55	%


~~(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 $2.8 million and $3.2 million is included in prepaid expenses and other assets on the accompanying Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018, respectively.



	Three months ended June 30,				Six months ended June 30,
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	$	618	$	547	$	1,236	$	1,081
Facility, unused, and other fees	$	387	$	314	$	770	$	653



	June 30, 2019					December 31, 2018
	Principal Outstanding			Fair Value		Principal Outstanding			Fair Value
Unsecured credit facility	$	129,000		$	129,000	$	100,500		$	100,500
Unsecured term loans	600,000			600,000		600,000			600,000
Unsecured notes	575,000			611,132		575,000			585,292
Mortgage notes	56,050			57,049		57,011			57,289
Total principal amount	1,360,050			$	1,397,181	1,332,511			$	1,343,081
Add: Total unamortized fair market value premiums	45					50
Less: Total unamortized deferred financing fees and debt issuance costs	(5,873		)			(6,653		)
Total carrying value	$	1,354,222				$	1,325,908


	March 31, 2020						December 31, 2019
Indebtedness (in thousands)	Principal Outstanding		Fair Value		Principal Outstanding		Fair Value
Unsecured credit facility	$	225,000	$	221,921	$	146,000	$	146,000
Unsecured term loans	975,000		962,764		875,000		875,000
Unsecured notes	575,000		574,121		575,000		614,493
Mortgage notes	54,588		53,471		55,085		56,021
Total principal amount	1,829,588		$	1,812,277	1,651,085		$	1,691,514
Add: Total unamortized fair market value premiums	37				39
Less: Total unamortized deferred financing fees and debt issuance costs	(5,653)				(6,111)
Total carrying value	$	1,823,972			$	1,645,013


Balance Sheet Line Item (in thousands)	Notional Amount March 31, 2020		Fair Value March 31, 2020		Notional Amount December 31, 2019		Fair Value December 31, 2019
Interest rate swaps-Asset	$	—	$	—	$	250,000	$	303
Interest rate swaps-Liability	$	975,000	$	(48,714)	$	850,000	$	(18,819)



Balance Sheet Line Item (in thousands)	Notional Amount June 30, 2019		Fair Value June 30, 2019			Notional Amount December 31, 2018		Fair Value December 31, 2018
Interest rate swaps-Asset	$	250,000	$	983		$	600,000	$	9,151
Interest rate swaps-Liability	$	800,000	$	(18,865	)	$	300,000	$	(4,011	)


			Fair Value Measurements as of March 31, 2020 Using
Balance Sheet Line Item (in thousands)	Fair Value March 31, 2020		Level 1		Level 2		Level 3
Interest rate swaps-Asset	$	—	$	—	$	—	$	—
Interest rate swaps-Liability	$	(48,714)	$	—	$	(48,714)	$	—



				Fair Value Measurements as of June 30, 2019 Using
Balance Sheet Line Item (in thousands)	Fair Value June 30, 2019			Level 1		Level 2			Level 3
Interest rate swaps-Asset	$	983		$	—	$	983		$	—
Interest rate swaps-Liability	$	(18,865	)	$	—	$	(18,865	)	$	—



				Fair Value Measurements as of December 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 December 31, 2019 Using
Balance Sheet Line Item (in thousands)	Fair Value December 31, 2019		Level 1		Level 2		Level 3
Interest rate swaps-Asset	$	303	$	—	$	303	$	—
Interest rate swaps-Liability	$	(18,819)	$	—	$	(18,819)	$	—



Quarter Ended 2019	Declaration Date	Series C Preferred Stock Per Share		Payment Date
June 30	April 9, 2019	$	0.4296875	July 1, 2019
March 31	January 10, 2019	0.4296875		April 1, 2019
Total		$	0.8593750



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


	Year ended December 31, 2019
ATM Common Stock Offering Program	Shares Sold	Weighted Average Price Per Share		Net Proceeds
2019 $600 million ATM	9,711,706	$	29.01	$	279,156
Total/weighted average	9,711,706	$	29.01	$	279,156



	Year ended December 31, 2018
ATM Common Stock Offering Program	Shares Sold	Weighted Average Price Per Share		Net Proceeds
2017 $500 million ATM ⁽¹⁾	14,724,614	$	26.52	$	386,407
Total/weighted average	14,724,614	$	26.52	$	386,407



Month Ended 2019	Declaration Date	Record Date	Per Share		Payment Date
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			$	0.715002



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


Unvested Restricted Shares of Common Stock	Shares			Unvested Restricted Shares of Common Stock	Shares
Balance at December 31, 2017	237,207
Granted	76,659		(1)
Vested	(112,405	)	(2)
Forfeited	(10,999	)
Balance at December 31, 2018	190,462			Balance at December 31, 2018	190,462
Granted	110,830		(1)	Granted	110,830	(1)
Vested	(78,431	)	(2)	Vested	(101,109)	(2)
Forfeited	(2,492	)		Forfeited	(7,138)
Balance at June 30, 2019	220,369
Balance at December 31, 2019				Balance at December 31, 2019	193,045
Granted				Granted	75,419	(1)
Vested				Vested	(78,010)	(2)
Forfeited				Forfeited	(542)
Balance at March 31, 2020				Balance at March 31, 2020	189,912


~~(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 six months ended June 30, 2019 and the year ended December 31, 2018, respectively.~~