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Boston, Massachusetts 02110
TO BE HELD ON MAY 3, 20212, 2022
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2021
Our business strategy has resulted in a consistent track record of creating strong operational performance and long-term value for our stockholders.
| | PROVEN AND STRATEGIC GROWTH PROFILE | | |
| • Since our initial public offering in 2011, as of December 31, • | |||
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| | 5-Year Acquisition Volume | | |
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| | • During | | |
| | TOTAL STOCKHOLDER RETURN AND FINANCIAL PERFORMANCE | | |
| • We believe that the value creation produced from an investment in real estate should be assessed over a long-term period, and our strategy has focused on long-term value creation. | | | |
| Cumulative Total Stockholder Return (12/31/2018 through 12/31/2021) | | | |
| | | | |
| | We continue to execute on our operational goals and maintained strong occupancy •
As of and for the year ended December 31, ◦ | ||
Net income was approximately | ||||
◦ Funds from operations (“FFO”) was approximately | ||||
◦ Net operating income (“NOI”) was approximately • During 2021, we continued to increase our annual revenue by, among other matters, actively managing our portfolio, completing acquisitions in our robust investment pipeline and executing build-to-suit transactions. | | | ||
| | 5-Year Annual Revenue & Year-Over-Year Revenue Growth | | |
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| * FFO and NOI 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”). Please refer to Appendix A attached hereto for an explanation of why our management considers these measures, the historical amounts of these two measures and a reconciliation of the measures to the nearest measure under generally accepted accounting principles (“GAAP”). | | |
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| ✔We pay for performance | | | |
| • Approximately | | | |
| • Annual base salaries are intended to be less than 25% of total compensation | | | |
| • We do not guarantee annual base salary increases, | | |
| ✔Our | | | |
| • Bonuses are based on company performance goals (80%) and individual performance goals (20%) | | | |
| • Our | | | |
| • We do not guarantee bonuses of a minimum amount (bonuses can be zero) and do not provide uncapped bonuses | | |
| ✔Our | | | |
| • Performance units are based on our total stockholder return, defined as common stock price appreciation plus dividends, assuming reinvestment of dividends into additional shares of common stock (“TSR”), over a three-year period compared to both relative returns (TSR vs. three benchmarks) and an absolute return (we must achieve a cumulative 25% | | | |
| • Performance units will have zero value (no payout) for performance below the 30th percentile | | | |
| • We target outperformance; | | |
| ✔Stockholders have expressed support for our executive compensation practices | | | |
| • At the | | |
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| Annual election of directors to the board of directors (the “board”) | | ✔ | | |
| Majority voting standard for the election of directors (with a director resignation policy) | | ✔ | | |
| Regular executive sessions of independent directors | | ✔ | | |
| Independent board; eight of our nine directors are “independent” under New York Stock Exchange (“NYSE”) rules | | ✔ | | |
| Designation of lead independent director | | ✔ | | |
| All members of the audit committee, compensation committee and nominating and corporate governance committee are “independent” under NYSE rules | | ✔ | | |
| Four of the five members of the audit committee qualify as “audit committee financial experts” as defined by the SEC | | ✔ | | |
| Diverse | | ✔ | | |
| Annual board, committee and | | ✔ | | |
| Regular board review | | ✔ | | |
| Stockholder ability to amend bylaws | | ✔ | | |
| No stockholder rights plan (i.e., “poison pill”) without stockholder approval or ratification | | ✔ | | |
| Opted out of Maryland control share acquisition and business combination statutes and may not opt back in without stockholder approval | | ✔ | | |
| Robust stock ownership guidelines for directors and executive officers | | ✔ | | |
| Anti-hedging and anti-pledging policies | | ✔ | | |
| Code of business conduct and ethics for employees and directors | | ✔ | |
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| | | | | | | Green Lease Leader | | | | | | ||||||
| | | | | We achieved
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| | | | | | The U.S. Department of
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| | | | | Reflective Roofing | | | | | | | | Lighting Conversions | | | |||
| | | | | Since 2015, | | | | | | | | As of December 31, | | | | ||
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| | | | | Solar Panel Installations | | | | ||||||||||
| | | | | We pursue solar energy opportunities in our portfolio nationwide and have executed contracts for solar development or leasing in multiple states. As of December 31, Our building in Hampstead, Maryland hosts the nation’s largest rooftop solar project, which was completed last year. The 9.2 megawatts system is one of three systems on our properties that are part of Maryland’s community solar program providing low-cost renewable energy to | | | |
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| | | Charitable Action Committee | | | | | | | | Charitable Action Fund | | | | | | ||
| | | | | We established our Charitable Action Committee (the “CAC”) to promote quality interaction with our local community in Boston. The CAC is funded by our company and |
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activities | ||||||
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| | | | As an expression of our commitment to good corporate citizenship, we |
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• Stockholder Engagement. We provide institutional investors with many opportunities and events to provide feedback directly to our management team throughout the year, including formal events, one-on-one sessions and group meetings. During 2021, our management team attended (in-person and virtually) 11 investor conferences and numerous other individual investor meetings, where they met with more than 100 institutional investors. These meetings covered a range of topics, including our financial condition and results of operations, our business investment, finance and operation strategies, our stock price performance, economic, industry and market trends, ESG policies, corporate governance and executive compensation and other matters. In addition to, and apart from, our regular investor meetings, we speak exclusively about executive compensation and corporate governance with a number of our investors each year. • Enhancing board diversity. We are committed to diversity and recognize the benefits of having a diverse board. Women and minorities currently represent 33.3% of the board. We remain focused on appointing women and other diverse candidates to the board in the future as opportunities arise. • Management Succession Planning by the Board. As previously announced, pursuant to ongoing management succession planning by the board, we expect that, on July 1, 2022, Benjamin S. Butcher, our chief executive officer and chairman of the board, will become executive chairman of the board and William R. Crooker, our president, will be appointed chief executive officer and join the board. Over the next few months, Mr. Butcher will work closely with Mr. Crooker on transitioning to chief executive officer. After becoming executive chairman in July, Mr. Butcher’s responsibilities will include managing the business of the board, regularly consulting with the chief executive officer on key corporate matters and liaising between the board and the management team. In addition, on January 10, 2022, the board appointed Matt s S. Pinard as our executive vice president, chief financial officer and treasurer. |
For more information, see “Board of Directors and Its Committees” and “Corporate Responsibility” below.
Additional information regarding our corporate responsibility program is also included in our Sustainability Report, which is available under the “Corporate Responsibility” section of our website at www.stagindustrial.com. However, the information located on, or accessible from, our website is not, and should not be deemed to be, part of this proxy statement or incorporated into any other filing that we submit to the SEC.
| Proposal | | | Board Recommendation | | | |
| | Proposal 1: Election of Directors | | | FOR | | |
| | Proposal 2: Ratification of Appointment of Independent Registered Public Accounting Firm | | | FOR | | |
| | Proposal 3: Advisory (Non-Binding) Vote on Executive Compensation | | | FOR | | |
Q: Why did I receive these proxy materials? A: The board Pursuant to rules promulgated by the SEC, we are providing access to our proxy materials over the internet. On or about March 23, 2022, we are mailing to our stockholders of record as of March 10, 2022, either (i) a copy of this proxy statement, the accompanying proxy card, our annual report and the notice of internet availability of proxy materials (the “Notice”) or (ii) the Notice only. The Notice and this proxy statement summarize the information you need to know in order to vote by proxy or at the virtual annual meeting. Q: When was the Notice mailed? A: The Notice was mailed to stockholders beginning on or about March 23, 2022. Q: When and where is the annual meeting being held? A: The annual meeting will be held on Monday, May 2, 2022, at 1:00 p.m., Eastern Time, in a virtual-only meeting format. You will be able to attend the annual meeting by visiting www.virtualshareholdermeeting.com/STAG2022. Note that the decision to proceed with a virtual-only meeting again this year will not mean we will utilize a virtual-only format or any means of remote communication for future annual meetings. Q: Who can attend the annual meeting? A: You are entitled to attend the annual meeting if you were a common stockholder of record (i.e., stockholders holding shares of common stock directly in their name with our transfer agent) as of the close of business on March 10, 2022, the record date for the annual meeting, or hold a duly authorized proxy for the meeting provided by your broker, bank or other nominee. You do not need to attend the annual meeting in order to vote. Q: How do I attend the annual meeting? A: You will be able to attend the annual meeting online through live audio webcast at www.virtualshareholdermeeting.com/STAG2022. Online registration will begin 30 minutes before the meeting. To attend and vote at the annual meeting, you must login with your 16-digit control number included on your proxy card, voting instruction form or the Notice you previously received. Q: May stockholders ask questions at the annual meeting? A: Yes. Stockholders will be able to submit live questions during the virtual annual meeting online at www.virtualshareholdermeeting.com/STAG2022, however, all live questions will be subject to time restrictions and we will do our best to accommodate as many as possible. Q: What if I have trouble accessing the annual meeting virtually? A: The virtual meeting platform is fully supported across browsers (Internet Explorer, Firefox, Chrome and Safari) and devices (desktops, laptops, tablets and cell phones) running the most updated version of applicable software and plugins. Participants should ensure that they have a strong internet connection wherever they intend to participate in the annual meeting. We encourage you to access the | ||
platform prior to the start time. Please allow ample time for online check-in, which will begin at 12:30 p.m. Eastern Time. If you encounter any difficulties accessing the virtual meeting platform during the check-in time or during the annual meeting, please call the technical support number that will be posted on www.virtualshareholdermeeting.com/STAG2021.
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Proposal 1: | The election of the director nominees must be approved by a majority of the votes cast. | |
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The ratification of the appointment of the independent registered public accounting firm requires a majority of the votes cast. Proposal 3: |
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Our company
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What does it mean if I receive more than one Notice? A: |
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| Total number of directors | | | 9 | |
| Percentage of independent directors | | | 89% | |
| Average age of independent directors | | 60 | | |
| Average tenure of independent directors (years) | | 8.5 | | |
| Lead independent director | | | Yes | |
| Percentage of independent directors with CEO experience | | | 50% | |
| Percentage of independent directors with CFO experience | | | 50% | |
| Percentage of audit committee members designated as “audit committee financial experts” | | | 80% | |
| Percentage of women and minorities on the board (two of our directors are | | | 33% | |
Director Nominees | Age | Principal Occupation | Director Since |
Benjamin S. Butcher | 67 | Chief Executive Officer, President and Chairman | 2010 |
Jit Kee Chin | 42 | Executive Vice President, Chief Data Officer and Chief Innovation Officer at Suffolk Construction | 2020 |
Virgis W. Colbert | 81 | Former Executive Vice President of Miller Brewing Company | 2014 |
Michelle S. Dilley | 49 | Chief Executive Officer of Awesome Leaders, NFP | 2018 |
Jeffrey D. Furber | 62 | Global Chief Executive Officer of AEW | 2011 |
Larry T. Guillemette | 65 | Former Chairman, Chief Executive Officer and President of Amtrol | 2011 |
Francis X. Jacoby III | 59 | Chief Financial Officer and Executive Vice President of Leggat McCall Properties, LLC | 2011 |
Christopher P. Marr | 56 | Chief Executive Officer and Trustee of CubeSmart | 2012 |
Hans S. Weger | 57 | Strategic Consultant | 2011 |
| Director Nominees | | | Age | | | Principal Occupation | | | Director Since | | ||||||
| Benjamin S. Butcher | | | | | 68 | | | | Chief Executive Officer and Chairman of the Board | | | | | 2010 | | |
| Jit Kee Chin | | | | | 43 | | | | Executive Vice President, Chief Data Officer and Chief Innovation Officer at Suffolk Construction | | | | | 2020 | | |
| Virgis W. Colbert | | | | | 82 | | | | Retired Executive Vice President of Miller Brewing Company | | | | | 2014 | | |
| Michelle S. Dilley | | | | | 50 | | | | Chief Executive Officer of Awesome Leaders, NFP | | | | | 2018 | | |
| Jeffrey D. Furber | | | | | 63 | | | | Global Chief Executive Officer of AEW | | | | | 2011 | | |
| Larry T. Guillemette | | | | | 66 | | | | Retired Chairman, Chief Executive Officer and President of Amtrol | | | | | 2011 | | |
| Francis X. Jacoby III | | | | | 60 | | | | Chief Financial Officer and Executive Vice President of Leggat McCall Properties, LLC | | | | | 2011 | | |
| Christopher P. Marr | | | | | 57 | | | | Chief Executive Officer and Trustee of CubeSmart | | | | | 2012 | | |
| Hans S. Weger | | | | | 58 | | | | Strategic Consultant | | | | | 2011 | | |
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| | Colbert | | | Dilley | | | Furber | | | Guillemette | | | Jacoby | | | Marr | | | Weger | | |||||||||||||||||||||||||||
| CEO/public company executive | | | | | | | | | | | • | | | | | | | | | | | | • | | | | | | • | | | | | | | | | | | | • | | | | | | • | | | ||||||
| Data analytics | | | | | | | | | | • | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Finance/accounting | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | • | | | | | | • | | | | | | • | | | | | | • | | | ||||
| Industrial operations | | • | | | | | | | | | | | • | | | | | | • | | | | | | | | | | | | • | | | | | | | | | | | | | | | | | | | | | ||||
| Logistics | | • | | | | | | • | | | | | | | | | | | | • | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||
| Real estate / construction / development / finance | | | | | • | | | | | | | | | | | | | | | | | | • | | | | | | | | | | | | • | | | | | | • | | | | | | • | | | ||||||
| Real estate or property technology | | | | | | | | | | • | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Risk management | | | | • | | | | | | • | | | | | | | | | | | | • | | | | | | • | | | | | | | | | | | | • | | | | | | • | | | |||||||
| Strategic planning | | • | | | | | | • | | | | | | • | | | | | | • | | | | | | • | | | | | | • | | | | | | • | | | | | | • | | | |||||||||
| Supply chain management | | • | | | | | | | | | | | | • | | | | | | • | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Benjamin S. Butcher Chief Executive Officer Committees: •
Investment (Chair) | | | | Mr. Butcher has served as our chief executive officer In light of his extensive company-specific operational, finance and market experience, his leadership abilities, his foundership of our company, and his expertise in the acquisition, ownership and management of single-tenant industrial properties, the board | | |
| | Jit Kee Chin Independent Director Committees: •
Audit | | | | Dr. Jit Kee Chin has served as executive vice president and chief data officer at Suffolk Construction Corporation Inc. (“Suffolk”), a national privately-held general contractor, since 2017 and additionally as chief innovation officer since 2019. In her roles, Dr. Chin is responsible for building a new capability for Suffolk, setting vision and strategy, driving business insight through analytics and operationalizing the data transformation. At Suffolk, she served on the enterprise steering committee from 2018 to 2020, which governs development and implementation of strategic initiatives. She is also part of the leadership team focused on disruptive technologies, leading Suffolk Technologies and its corporate venture program, which she set up in 2019. In that capacity, she In light of her extensive data, analytics and technology infrastructure expertise, including the development and implementation of strategic initiatives, the board | | |
| | Virgis W. Colbert Independent Director Committees: • Compensation
Nominating and Corporate Governance | | | | Mr. Colbert served in a variety of key leadership positions with Miller Brewing Company from 1979 until his retirement in 2005, including executive vice president of worldwide operations from 1997 to 2005 and senior vice president of operations from 1993 to 1997. As executive vice president, Mr. Colbert was responsible for plant operations, international operations, brewing, research and quality assurance, engineering, procurement, order production/planning and logistics. Since his retirement, he continues to serve as a senior advisor to MillerCoors LLC. In addition, Mr. Colbert currently serves on the board, including the audit committee thereof, In light of his extensive public company board and corporate governance experience and his significant operational experience including addressing logistics, plant operations and other issues common to our tenants, the board | | |
| | Michelle S. Dilley Independent Director Committees: • Compensation
Nominating and Corporate Governance | | | | Ms. Dilley has served as the chief executive officer of Awesome Leaders, NFP since July 2020. AWESOME (Achieving Women’s Excellence in Supply Chain Operations, Management and Education) is the supply chain industry’s most active and prominent organization focused on advancing and transforming the future of supply chain leadership. Prior to joining AWESOME, Ms. Dilley served as chief supply chain transformation officer and additionally as chief operating officer at DSC Logistics, Inc. (“DSC”), a logistics and supply chain management organization, from 2017 to 2020. In these roles, she led the vision for the company’s operating platform, implemented strategic initiatives to deliver continuous improvement and was directly responsible for DSC’s network of logistics centers and supply chain packaging operations throughout North In light of her significant supply chain, finance and operational experience, including experience in the development and implementation of strategic initiatives, and her recent experience with diversity initiatives in the supply chain industry, the board | | |
| | Jeffrey D. Furber Independent Director Committees: •
Compensation (Chair) •
Investment | | | | Mr. Furber serves as the global chief executive officer of AEW. As one of the leading real estate investment advisors, AEW currently manages $75 billion of real estate assets and securities on behalf of a global client base of public and corporate pension funds, sovereign wealth funds, endowments, foundations and high net worth investors. Mr. Furber has oversight responsibility for all of AEW’s operating business units in the United States, Europe and Asia. He chairs AEW’s management committee, which is responsible for AEW’s strategic direction and for managing the firm’s resources, and is a member of the firm’s risk management committee and the investment committees in North America, Europe and Asia. Mr. Furber joined AEW in 1997 from Winthrop Financial Associates (“Winthrop”), a wholly-owned subsidiary of Apollo Advisors, where he served as managing director of Winthrop and as president of Winthrop Management. In these capacities, he was responsible for acquisitions, asset management and capital markets activity, including the sourcing of equity and mezzanine debt investments. Mr. Furber is a member of the board of The Howard Hughes Corporation (NYSE: HHC) and Boston Children’s Hospital Trust. Mr. Furber holds a Bachelor of Arts degree from Dartmouth College and a Master of Business Administration degree from Harvard Business School. In light of his significant leadership, corporate governance and capital markets experience and his 34 years of real estate investment experience, including 21 years as chief executive officer of AEW, the board | | |
| | Larry T. Guillemette Lead Independent Director Committees: • Audit
Compensation | | | | Mr. Guillemette served as chairman of the board of directors, chief executive officer and president of Amtrol Inc., a multi-national pressure vessel manufacturer (“Amtrol”), from 2006 In light of his extensive leadership experience through his senior officer and director positions and his accounting and real estate experience, the board | | |
| | Francis X. Jacoby III Independent Director Committees: • Audit Investment
Nominating and Corporate Governance | | | | Since 2016, and from 1995 to 2001, Mr. Jacoby has served as executive vice president and chief financial officer of Leggat McCall Properties, LLC, a real estate development company. From 2013 to 2016, Mr. Jacoby served as an independent consultant providing real estate finance, development and disposition related services. From 2008 to 2013, he served as president of Kensington Investment Company, Inc., the wealth management office for a family that owns travel-related businesses and passenger ships and makes investments in real estate, private equity and venture capital. In addition, in 2012, Mr. Jacoby served as the chief financial officer of Grand Circle Corporation, an affiliate of Kensington Investment Company, Inc. From 2001 to 2008, Mr. Jacoby served as the senior vice president and chief financial officer for GID Investment Advisers LLC, a family wealth management office whose primary focus is developing, acquiring and managing apartment communities, suburban office properties and flex industrial business parks throughout the United States for its own account and for joint ventures with institutional investors. From 1983 to 1995, Mr. Jacoby held a variety of senior management positions in the acquisitions, asset management and finance departments of Winthrop Financial Associates, a real estate investment company which owned and managed multiple property types. Mr. Jacoby holds a Bachelor of Arts degree from Dartmouth College and a Master of Business Administration degree from Boston University. In light of his extensive investment and capital markets experience and his significant financial and real estate investment experience, including structuring, negotiating and closing complex transactions, the board | | |
| | Christopher P. Marr Independent Director Committees: • Audit
Nominating and Corporate Governance (Chair) | | | | Mr. Marr has served as chief executive officer and member of the board of trustees of CubeSmart (NYSE: CUBE), a real estate company that acquires, owns, operates and develops self-storage facilities in the United States, since 2014 and as president of CubeSmart since 2008. Previously, he served as chief operating officer of CubeSmart from 2012 to 2014 and as chief financial officer from June 2006 to November 2008 and as treasurer from 2006 to 2012. From 2002 to 2006, Mr. Marr served as senior vice president and chief financial officer of Brandywine Realty Trust (NYSE: BDN), an office REIT. Prior to joining Brandywine Realty Trust, Mr. Marr served as chief financial officer of Storage USA, Inc., a publicly-traded self-storage REIT, from 1998 to 2002. Mr. Marr holds a Bachelor of Arts degree from Loyola University. In light of his public company leadership, financial reporting and operations experience as an executive officer of two publicly-traded REITs, including chief executive officer experience, the board | | |
| | Hans S. Weger Independent Director Committees: •
Audit (Chair) • Compensation
Investment | | | | Mr. Weger provides consulting services to real estate and other companies. Prior to that, Mr. Weger served as chief financial officer of Focus Brands Inc., the franchisor and operator of restaurants and cafes in the United States, Puerto Rico and 63 foreign countries, from 2014 to 2016. From 2012 to 2014, Mr. Weger served as chief financial officer of Outrigger Enterprises Group, a privately-held leisure lodging and hospitality company. From 1998 to 2011, Mr. Weger served as chief financial officer, executive vice president and treasurer of LaSalle Hotel Properties (NYSE: LHO), a REIT focused on the acquisition, ownership, redevelopment and leasing of primarily upscale and luxury full-service hotels. In addition, Mr. Weger served as secretary of LaSalle Hotel Properties from 1999 to 2011. Mr. Weger was responsible for all of the company’s financial, accounting, human resources and information technology activities. Prior to joining LaSalle Hotel Properties, Mr. Weger served as vice president and treasurer for La Quinta Inns, Inc. where he was responsible for all financing activities. From 1992 until 1997, Mr. Weger served in various management roles with Harrah’s Entertainment, Inc. where he was responsible for strategic planning, mergers and acquisitions and project financing. Mr. Weger holds a Bachelor of Science degree from the University of Southern Mississippi and a Master of Business Administration degree from the University of Chicago. In light of his real estate and real estate financing knowledge and his financial reporting and operations experience as the chief financial officer of a publicly-traded real estate investment trust and a privately held company, the board | | |
Biographical Information Regarding Executive Officers Who Are Not Directors
| | William R. Crooker
President Age: | | | | Mr. Crooker has served as our | | |
| | Matts S. Pinard Executive Vice President, Chief Financial Officer and Treasurer Age: 39 | | | | Mr. Pinard has served as our executive vice president, chief financial officer and treasurer since January 2022. Mr. Pinard served as senior vice president of capital markets and investor relations from 2019 to 2022. Previously, Mr. Pinard served as our vice president of capital markets and investor relations group from 2015 until 2019. Prior to joining our company in 2013, Mr. Pinard held various positions within capital markets and portfolio management. Mr. Pinard holds a Bachelor of Arts degree from Tufts University and a Master of Business Administration degree from Boston College. | | |
| | Stephen C. Mecke Executive Vice President and Chief Operating Officer Age: | | | | Mr. Mecke has served as our chief operating officer and executive vice president since 2011. Prior to the formation of our company, Mr. Mecke served as chief investment officer for STAG Capital Partners, LLC and STAG Capital Partners III, LLC from 2004 to 2011, where he was responsible for all asset acquisition and asset management activities. Prior to joining our predecessor business, Mr. Mecke ran the acquisitions groups for M|P|A, a private real estate fund that represented a large east coast endowment fund, from 2001 to 2004. Mr. Mecke also worked at Meditrust Corporation, a publicly-traded REIT, as vice president of acquisitions and various other positions from 1992 to 2000. Mr. Mecke holds a Bachelor of Arts degree from Hobart College and a Master of Business Administration degree from Northeastern University. | | |
| | Jeffrey M. Sullivan Executive Vice President, General Counsel and Secretary Age: | | | | Mr. Sullivan has served as our executive vice president, general counsel and secretary since 2015. From 2012 to 2014, Mr. Sullivan was a partner in the corporate group of Hunton & Williams LLP, and from 2005 to 2012, Mr. Sullivan was a partner in the finance group of DLA Piper LLP (US). Before joining DLA Piper LLP (US), Mr. Sullivan was an associate and then partner in the corporate transactions and securities group of Alston & Bird LLP from 1998 to 2005. While in private practice, Mr. Sullivan focused on securities law, mergers and acquisitions, corporate governance matters and general corporate law, primarily involving REITs and other real estate companies, private equity funds and underwriters. Mr. Sullivan holds a Bachelor of Arts degree from University of North Carolina at Chapel Hill and a Juris Doctor degree from Vanderbilt University Law School. | ||
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pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Moreover, the compensation committee is composed exclusively of individuals intended to be, to the
Director | Investment | Audit | Compensation | Nominating and |
Benjamin S. Butcher | Chair | |||
Jit Kee Chin | ● | |||
Virgis W. Colbert | ● | ● | ||
Michelle S. Dilley | ● | ● | ||
Jeffrey D. Furber | ● | Chair | ||
Larry T. Guillemette | ● | ● | ||
Francis X. Jacoby III | ● | ● | ● | |
Christopher P. Marr | ● | Chair | ||
Hans S. Weger | ● | Chair | ● | |
Meetings Held in 2020 | 4 | 4 | 6 | 3 |
| Director | | | Investment Committee | | | Audit Committee | | | Compensation Committee | | | Nominating and Corporate Governance Committee | |
| Benjamin S. Butcher | | | Chair | | | | | | | | | | |
| Jit Kee Chin | | | | | | • | | | | | | | |
| Virgis W. Colbert | | | | | | | | | • | | | • | |
| Michelle S. Dilley | | | | | | | | | • | | | • | |
| Jeffrey D. Furber | | | • | | | | | | Chair | | | | |
| Larry T. Guillemette | | | | | | • | | | • | | | | |
| Francis X. Jacoby III | | | • | | | • | | | | | | • | |
| Christopher P. Marr | | | | | | • | | | | | | Chair | |
| Hans S. Weger | | | • | | | Chair | | | • | | | | |
| Meetings Held in 2021 | | | 6 | | | 4 | | | 6 | | | 4 | |
Investment Committee
Audit Committee
Compensation Committee
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Nominating and Corporate Governance Committee
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The nominating and corporate governance committee successfully completed our most recent board refreshment process in 2020 with the appointment of Dr. Chin to serve as an independent director.
oversight function. This oversight function is enhanced by the audit, compensation and nominating and corporate governance committees being comprised entirely of independent directors. A number of board and committee processes and procedures, including regular executive sessions of independent directors and a regular review of our executive officers’ performance, provide substantial independent oversight of our management’s performance. Finally, under our bylaws and corporate governance guidelines, the board has the ability to change its structure, should that be deemed appropriate and in the best interest of our company and our stockholders. The board believes that these factors provide the appropriate balance between the authority of those who oversee our company and those who manage it on a day-to-day basis.
board.
Overview
| BOARD OF DIRECTORS | | | |||||||||
| | One of the key functions of the board
• Strategic and operational risk management
• Information security risks (see “—Information Security”
• Management and board succession planning (see “—Management Succession Plans”
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| | Audit Committee | | | | Compensation Committee | | | | Nominating and Corporate
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| | • Financial risks, including our guidelines and policies to govern the process by which risk assessment and management is undertaken
• Compliance with legal and regulatory requirements
• Internal audit function | | | • Risks related to our compensation policies and programs, including whether any compensation program has the potential to encourage excessive risk taking |
| | | • Corporate governance risks, including
• ESG risks, including environmental sustainability risks, corporate social responsibility and related governance reporting |
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| | SENIOR MANAGEMENT TEAM | | | ||||||||
| | Our senior management team reviews and prioritizes significant risks, allocates resources for mitigation and provides the board | | |
| | Information Security Risks | | | | Disclosure Risks | | | | Environmental Risks | | |
| | Our chief operating officer, to whom our data analytics and technology team (including information technology) reports, presents an information security update at each quarterly board
| | | Our disclosure committee, consisting of certain executives and senior employees, reports to our chief financial | | | Our | | |
In addition, to the board of directors’ review of risks applicable to our company generally, as discussed above under the “—Board and Committee Evaluations” section above,, the board of directors conducts an annual self-evaluation in order to evaluate its performance for the purpose of improving board and committee processes and effectiveness.
succession of other key positions.
In
| Position Held | | | Annual Cash Fee(1) | | | Annual Equity Grant(2) | | ||||||
| Non-Management Director | | | | $ | 50,000 | | | | | $ | 100,000 | | |
| Lead Independent Director | | | | $ | 25,000 | | | | | | — | | |
| Audit Committee Chair | | | | $ | 20,000 | | | | | | — | | |
| Compensation Committee Chair | | | | $ | 15,000 | | | | | | — | | |
| Nominating and Corporate Governance Committee Chair | | | | $ | 12,500 | | | | | | — | | |
29
As mentioned above, wethe 2021 annual grant annualof equity awards to our non-management directors. In addition, anyat the time of grant. Any non-management director who joins the board of directors in the future receives an initial grant of LTIP units upon the commencement of his or her service. The LTIP units granted annually vest on January 1 of the following year, subject to the recipient’s continued service as a director. LTIP units can be converted to common units of our operating partnership, STAG Industrial Operating Partnership, L.P. (our “operating partnership”), on a one-for-oneone for one basis once a material equity transaction has occurred that results in the accretion of the member’s capital account to the economic equivalent of the common unit.
The board of directors (or a duly formed committee thereof) may revise our non-management directors’ compensation in its discretion.
2021:
Name | Fees Earned(1) | Stock Awards(2)(3) | Total | ||||
Jit Kee Chin | $50,000 | $99,992 | $149,992 | ||||
Virgis W. Colbert | $50,000 | $99,992 | $149,992 | ||||
Michelle S. Dilley | $50,000 | $99,992 | $149,992 | ||||
Jeffrey D. Furber | $65,000 | $99,992 | $164,992 | ||||
Larry T. Guillemette | $75,000 | $99,992 | $174,992 | ||||
Francis X. Jacoby III | $50,000 | $99,992 | $149,992 | ||||
Christopher P. Marr | $62,500 | $99,992 | $162,492 | ||||
Hans S. Weger | $70,000 | $99,992 | $169,992 |
| Name | | | Fees Earned(1) | | | Stock Awards(2)(3) | | | Total | | |||||||||
| Jit Kee Chin | | | | $ | 50,000 | | | | | $ | 100,002 | | | | | $ | 150,002 | | |
| Virgis W. Colbert | | | | $ | 50,000 | | | | | $ | 100,002 | | | | | $ | 150,002 | | |
| Michelle S. Dilley | | | | $ | 50,000 | | | | | $ | 100,002 | | | | | $ | 150,002 | | |
| Jeffrey D. Furber | | | | $ | 65,000 | | | | | $ | 100,002 | | | | | $ | 165,002 | | |
| Larry T. Guillemette | | | | $ | 75,000 | | | | | $ | 100,002 | | | | | $ | 175,002 | | |
| Francis X. Jacoby III | | | | $ | 50,000 | | | | | $ | 100,002 | | | | | $ | 150,002 | | |
| Christopher P. Marr | | | | $ | 62,500 | | | | | $ | 100,002 | | | | | $ | 162,502 | | |
| Hans S. Weger | | | | $ | 70,000 | | | | | $ | 100,002 | | | | | $ | 170,002 | | |
| Position Held | | | Annual Cash Fee | | | Annual Equity Grant | | ||||||
| Non-Management Director | | | | $ | 55,000 | | | | | $ | 110,000 | | |
| Nominating and Corporate Governance Committee Chair | | | | $ | 15,000 | | | | | | — | | |
www.stagindustrial.com.
While our tenants maintain operational control of the properties under our triple-net leases, we seek to (i) identify, assess and manage environmental risks and opportunities at our properties, (ii) collaborate with our tenants on sustainable strategies to optimize property performance and (iii) partner with our tenants to improve the efficiency of our properties through the implementation of strategic environmentally focused property practices and solutions. We have made progress on environmental issues in four primary areas – (i)areas:
31
| | | | 2021 ENVIRONMENTAL SUSTAINABILITY | | | | | | |||||||||
| | | | | | | | | | | | | | | | |||
| | | | Attractive GRESB Rating | | | | | | | | Green Lease Leader | | | | |||
| | | | | We achieved
| |
| | | | | | The U.S. Department of
| | | | ||
| | | | | | | | | | | | | | | | |||
| | | Reflective Roofing | | | | | | | | Lighting Conversions | | | | ||||
| | | | | Since 2015, | | | | | | | | As of December 31, | | | | ||
| | | | | | | | | | | | | | | ||||
| | | | | Solar Panel Installations | | | | ||||||||||
| | | | | We pursue solar energy opportunities in our portfolio nationwide and have executed contracts for solar Our building in
| | | |
32
In April 2020, the
Employee Engagement
In November 2020, we announced the establishment of
| Annual election of directors to the board | | ✔ | | |
| Majority voting standard for the election of directors (with a director resignation policy) | | ✔ | | |
| Regular executive sessions of independent directors | | ✔ | | |
| Independent board; eight of our nine directors are “independent” under NYSE rules | | ✔ | | |
| Designation of lead independent director | | ✔ | | |
| All members of the audit committee, compensation committee and nominating and corporate governance committee are “independent” under NYSE rules | | ✔ | | |
| Four of the five members of the audit committee qualify as “audit committee financial experts” as defined by the SEC | | ✔ | | |
| Diverse | | ✔ | | |
| Annual board, committee and director self-evaluations, assisted by outside counsel | | ✔ | | |
| Regular board review | | ✔ | | |
| Stockholder ability to amend bylaws | | ✔ | | |
| No stockholder rights plan (i.e., “poison pill”) without stockholder approval or ratification | | ✔ | | |
| Opted out of Maryland control share acquisition and business combination statutes and may not opt back in without stockholder approval | | ✔ | | |
| Robust stock ownership guidelines for directors and executive officers | | ✔ | | |
| Anti-hedging and anti-pledging policies | | ✔ | | |
| Code of business conduct and ethics for employees and directors | | ✔ | |
Vendor Code of Conduct
We engage with stockholders throughout the year in order to:
The insider trading policy prohibits our officers, directors, employees and their respective family members from, among other prohibited activities, (i) directly or indirectly engaging in strategies using puts, calls, equity swaps or other derivative securities on an exchange or in any other market in order to hedge or offset any decreases in the market value of any directly or indirectly owned securities of the company, (ii) engaging in short sale transactions or forward sale transactions or any short-term or speculative transactions in our securities or in other transactions in our securities that may lead to inadvertent violations of insider trading laws and (iii) pledging our securities as collateral for a loan or otherwise using our securities to secure a debt, including through the use of traditional margin accounts with a broker.
the board of directors consult the chairman of the board in advance of accepting an invitation to serve on another company’s board should there be a possible conflict and notify the nominating and corporate governance committee in writing of the outcome. Because the facts and circumstances regarding potential conflicts are difficult to predict, the board of directors has not adopted a written policy for evaluating conflicts of interests. If a conflict of interest arises, the board will review, among other things, the facts and circumstances of the conflict, our applicable corporate governance policies, the effects of any potential waivers of those policies, applicable state law, and the NYSE continued listing rules and regulations, and will consider the advice of counsel before making any decisions regarding the conflict.
Chairman
40
for 2021 are set forth below:
• |
The key components of compensation are designed to be flexible and complementary and to support, collectively, the goals and objectives of our executive compensation program.
Below are additionalkey features of our current executive compensation practices – practices—both the practices we believe drive performance and the practices we have not implemented because we do not believe they would serve the stockholders’ long-term interests:
| | What We Do | | | | What We Don’t Do | | |
| | We mitigate undue risk, including utilizing retention provisions, multiple performance targets and robust board and management processes to identify risk. | | | | ✘
We | | |
| | ✔ A substantial majority of compensation is tied to performance | | | | ✘ We do not guarantee annual base salary increases or bonuses of a minimum amount (bonuses can be zero). | | |
| | We measure performance against multiple metrics and indices to avoid the risk of poor correlation of performance and reward. | | | | ✘ We do not provide uncapped bonuses. | | |
| | ✔ We require | | | | We do not reprice stock options or stock appreciation rights without stockholder approval; exercise or base prices may not be less than grant date fair market value of our common stock. | | |
| | ✔ The 2011 Equity Incentive Plan generally requires a minimum one-year vesting period for stock options and stock appreciation rights. | | | | ✘ We prohibit liberal share recycling; we may not reuse shares withheld or delivered for tax withholdings or exercise prices or use “net share counting” for stock appreciation rights. | | |
| | We have reasonable
| | | |
Our employment agreements do not include tax gross-up provisions with respect to payments contingent upon a change of control. We do not have pension plans. | | |
| | ✔ We provide only modest perquisites that have a sound benefit to our business. | | | | We do not distribute dividends on unearned performance unit awards. | | |
| | ✔
The compensation committee benefits from its utilization of an independent compensation consulting firm. | | | | ✘ The compensation consulting firm did not provide any services to us not related to compensation, | | |
| | ✔ We have stock ownership guidelines for executive officers and directors. | | | | We prohibit hedging and pledging of our common stock by executive officers and directors. | | |
Historically we have issued performance units to our executive officers that may settle in shares of common stock (or other securities) depending on our relative TSR performance over a three-year measuring period compared to three benchmarks: (i) the TSR of companies in an industry peer group, (ii) the TSR of companies in a size-based peer group, and (iii) the TSR of companies in a major real estate company stock index. The performance units also have a significant absolute TSR as a condition to higher settlement, or payout, levels.
In connection with the adoption of our redesigned executive compensation program in 2019, the compensation committee determined that, effective for the performance units to be issued after year-end 2019, the threshold for a target payout would be increased from the 50th percentile to the 55th percentile. The compensation committee further determined that other terms of the performance units would be substantially similar to the terms of our historical performance units.
Below are the key terms of the new performance unit awards:
ü Performance units will have zero value (no payout) for performance below the 30th percentile
ü Must outperform to earn target award; threshold for target payout is the 55th percentile
ü Must achieve a cumulative 25% absolute TSR to receive a payout above target on 50% of the award
The compensation committee specifically considered whether the performance units should pay out above target or otherwise in instances where we have had strong relative TSR performance but a negative absolute TSR (i.e., outperformance among the three peer groups when they have had overall negative performance). The compensation committee continues to believe that competitive pay practices require that executive officers be compensated at a reasonable level for outperforming peers in difficult economic environments, even if absolute TSR is negative. In this regard, the compensation committee took note of the following:
thoughtful and creative stewardship and exhibiting outstanding performance. The specific objectives of the compensation program are to:
Final Results of 20182019 Performance Units – Units—Alignment of Pay and Performance
Benchmark | Performance Metrics | Performance Result(1) | Metric Payout Percentage | Weighting | Calculated | ||||||
30th Percentile | 50th Percentile | 75th Percentile | 95th Percentile | ||||||||
Size-Based Peer Group | 50% earned | 100% earned | 200% earned | N/A | 52nd percentile | 109.3% | 25% | 27.3% | |||
Industry Peer Group | 50% earned | 100% earned | 200% earned | N/A | 32nd percentile | 54.6% | 25% | 13.7% | |||
MSCI US REIT Index(3) | 50% earned | 100% earned | 200% earned | 300% earned | 75th percentile | 199.4% | 50% | 99.7% | |||
Total Calculated Payout Percentage: | 140.7% | ||||||||||
| | | | Performance Metrics | | | | Performance Result(1) | | | Metric Payout Percentage | | | | Weighting | | | Calculated Payout Percentage(2) | | | | | | |||||||||
| Benchmark | | | 30th Percentile | | | 50th Percentile | | | 75th Percentile | | | 95th Percentile | | | | ||||||||||||||||
| Size-Based Peer Group | | | 50% earned | | | 100% earned | | | 200% earned | | | N/A | | | | 74th percentile | | | 197.6% | | | | 25% | | | 49.4% | | | | ||
| Industry Peer Group | | | 50% earned | | | 100% earned | | | 200% earned | | | N/A | | | | 37th percentile | | | 67.1% | | | | 25% | | | 16.8% | | | | ||
| MSCI US REIT Index(3) | | | 50% earned | | | 100% earned | | | 200% earned | | | 300% earned | | | | 86th percentile | | | 253.3% | | | | 50% | | | 126.7% | | | | ||
| | | | | | | | | | | | | | | | | Total Calculated Payout Percentage: | | | 192.9% | | | |
Engagement of Compensation Consultant
| CoreSite Realty Corporation | | Lexington Realty Trust | | | Rexford Industrial Realty, Inc. | | |
| EastGroup Properties, Inc. | | | Physicians Realty Trust | | | STORE Capital Corporation | |
| EPR Propertes | | | PS Business Parks, Inc. | | | Terreno Realty Corporation | |
| First Industrial Realty Trust, Inc. | |||||||
QTS Realty Trust, Inc. | | | |
| Duke Realty Corporation | | | Monmouth Real Estate Investment Corporation | |
| EastGroup Properties, Inc. | | | PS Business Parks, Inc. | |
| First Industrial Realty Trust, Inc. | | | Rexford Industrial Realty, Inc. | |
| Lexington Realty Trust | | | Terreno Realty Corporation | |
Key Elements of Executive Compensation
Element | | | Description | | | Objectives | | | ||
| | Annual Cash Compensation | | | ||||||
| | Annual Base Salary | | | Fixed cash compensation. Reviewed and adjusted periodically. Annual base salaries for our executive officers are intended to be less than 25% of total compensation. |
| | • Attract and retain executives
• Provide steady source of income sufficient to permit executives to focus effectively on their professional responsibilities
• Help ensure that total cash compensation is competitive but not in excess of market | | |
| | Annual Cash Incentive Bonus Program | | | “At risk” variable cash compensation based on company performance goals and individual performance goals. |
| | • Encourage executives to achieve annual company and individual performance goals
• Align executives’ interests with the stockholders’ interests | | |
| | Equity Incentive Compensation Program | | | ||||||
| | LTIP Units | | | Awards vest in equal installments over multi-year periods, subject to continued service. Value of the award is “at risk” since (i) the award may never have any liquidation value in the absence of sufficient stock price appreciation and (ii) the value fluctuates with the company’s common stock price. LTIP unit awards should generally constitute approximately 40% or less of total annual equity incentive compensation. |
| | • Promote long-term equity ownership by executives
• Encourage the retention of executives
• Align executives’ interests with the stockholders’ interests | | |
| | Performance Units | | | “At risk” variable equity compensation based on company performance over three-year performance period. Awards are paid in common stock or LTIP units. Performance units should generally constitute approximately 60% or more of total annual equity incentive compensation. |
| | • Encourage executives to achieve long-term company performance goals
• Align executives’ interests with the stockholders’ interests
• Attract and retain executives | | |
Annual Cash Incentive Bonus Program
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| | Core FFO per Share | | | |||
| | | | Why we use this measure: We believe that Core FFO, which excludes items that by their nature are not comparable from period to period and tend to obscure actual operating results, is useful to compare our operating performance over a given time period to that of other companies and other time periods in a consistent manner. 2021 performance: For 2021, our Core FFO per Share was $2.06, or 3.0% greater than the maximum Core FFO per Share goal. As a result, our chief executive officer earned 93.8 percentage points and the other named executive officers earned 75.0 percentage points under this component. | | |
| | Acquisition Volume | | | |||
| | | | Why we use this measure: We are a growth-oriented company, and much of our growth is external, from acquisitions. Moreover, a significant portion of our employees and resources are directed toward acquisitions. Accordingly, our annual Acquisition Volume measures one of our core operations. 2021 performance: For 2021, our Acquisition Volume was approximately $1.4 billion, or 14.4% greater than the maximum Acquisition Volume goal. As a result, our chief executive officer earned 18.8 percentage points and the other named executive officers earned 15.0 percentage points under this component. | | |
| | Net Debt to Run Rate Adjusted EBITDAre | | | |||
| | | | Why we use this measure: We believe Net Debt to Run Rate Adjusted EBITDAre is an important measurement of the strength of our balance sheet, the strength or riskiness of our earnings and our ability to withstand negative economic trends (such as a decrease in our stock price). 2021 performance: For 2021, our Net Debt to Run Rate Adjusted EBITDAre was 5.0x, or 2.5% better than the target Net Debt to Run Rate Adjusted EBITDAre goal. As a result, our chief executive officer earned 14.6 percentage points and the other named executive officers earned 11.7 percentage points under this component. | | |
FFO is a widely recognized measure of the performance of REITs. We calculate FFO in accordance with the standards established by Nareit. FFO represents net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciable operating buildings, impairment write-downs of depreciable real estate, real estate related depreciation and amortization (excluding amortization of deferred financing costs and fair market value of debt adjustment) and after adjustments for unconsolidated partnerships and joint ventures. “Core FFO” excludes transaction costs, amortization of above and below market leases, net, loss on extinguishment of debt, gain (loss) on involuntary conversion, gain (loss) on swap ineffectiveness, and non-recurring other expenses. We believe that Core FFO, which excludes items that by their nature are not comparable from period to period and tend to obscure actual operating results, is useful to compare our operating performance over a given time period to that of other companies and other time periods in a consistent manner.
With the 50% weighting of the Core FFO per Share component, our chief executive officer can earn between 31.3 percentage points (at the threshold level) and 93.8 percentage points (at the maximum level) and our other named executive officers can earn between 25.0 (at the threshold level) and 75.0 (at maximum level) under this performance goal component. As shown in the chart below, for 2020, our Core FFO per Share, assuming bonuses were paid at target levels, was $1.90, or 0.5% greater than the target Core FFO per Share goal. As a result, our chief executive officer earned 72.9 percentage points and the other named executive officers earned 58.3 percentage points under the Core FFO per Share performance goal component.
| | Same Store Cash NOI Growth | | | |||
| | | | Why we use this measure: Same Store Cash NOI Growth is a measurement of our internal growth and a primary measure for evaluating the core operating performance of our properties. Comparing Cash NOI on a “same store” basis (i.e., looking at the same set of stabilized properties over the applicable periods) allows for apples-to-apples comparisons. 2021 performance: For 2021, our Same Store Cash NOI Growth was 3.8%, or 26.7% greater than the maximum Same Store Cash NOI Growth goal. As a result, our chief executive officer earned 18.8 percentage points and the other named executive officers earned 15.0 percentage points under this component. | | |
Acquisition Volume
We are a growth-oriented company, and much of our growth is external, from acquisitions. Moreover, a significant portion of our employees and resources are directed toward acquisitions. Accordingly, our annual Acquisition Volume measures one of our core operations.
With the 10% weightingcalculation of the Acquisition Volume component, our chief executive officer can earn between 6.3 percentage points (at the threshold level) and 18.8 percentage points (at the maximum level) and our other named executive officers can earn between 5.0 (at the threshold level) and 15.0 (at maximum level)earned under thiseach company performance goal component. As shown in the chart below,Also, see Appendix A attached hereto for 2020, our Acquisition Volume was approximately $775.8 million, which was below the threshold Acquisition Volume goal. Due to the COVID-19 pandemic, related government shutdowns and other actions, the reactionsdefinitions of various market participants and the uncertainty of the
pandemic’s effects on pricing and leasing, for a full quarter of the year we were limited in our ability to source, underwrite and complete acquisitions. Despite this, we made significant efforts once acquisition market activity resumed that resulted in a near achievement of our Acquisition Volume goal. The compensation committee deliberated as to whether to adjust the Acquisition Volume goal in light of the challenges created by the COVID-19 pandemic, including whether to evaluate the metric on an annualized basis, which would have resulted in a payout under this performance component. Ultimately, the compensation committee concluded that maintaining the Acquisition Volume goal, as originally established, was appropriate. As a result, our named executive officers did not earn any percentage points under the Acquisition Volume performance goal component. See the table below under “—2020 Company Performance Results” for more detail on the calculation.
Core FFO, Net Debt, to Run Rate Adjusted EBITDAre
We define “Net Debt” as our total long-term indebtedness less cash and cash equivalents on hand. We define “EBITDAre” in accordance with the standards established by Nareit. EBITDAre represents net income (loss) (computed in accordance with GAAP) before interest income and expense, tax, depreciation and amortization, gains or losses on the sale of rental property, and loss on impairments. “Adjusted EBITDAre” further excludes transaction costs, termination income, solar income, revenue associated with one-time tenant reimbursements of capital expenditures, straight-line rent adjustments, non-cash compensation expense, amortization of above and below market leases, net, gain (loss) on involuntary conversion, loss on extinguishment of debt, and other non-recurring items. “Run Rate Adjusted EBITDAre” is Adjusted EBITDAre plus incremental Adjusted EBITDAre adjusted for a full period of acquisitions and dispositions. Run Rate Adjusted EBITDAre does not reflect our historical results and does not predict future results, which may be substantially different. We believe that EBITDAre, Adjusted EBITDAre and Run Rate Adjusted EBITDAre are helpful to investors as supplemental measures of the operating performance of a real estate company because they are direct measures of the actual operating results of our properties. We also use these measures in ratios to compare our performance to that of our industry peers, such as Net Debt to Run Rate Adjusted EBITDAre, which we view as an important measurement of the strength of our balance sheet, the strength or riskiness of our earnings and our ability to withstand negative economic trends such as a decrease in our stock price.
With the 10% weighting of the Net Debt to Run Rate Adjusted EBITDAre component, our chief executive officer can earn between 6.3 percentage points (at the threshold level) and 18.8 percentage points (at the maximum level) and our other named executive officers can earn between 5.0 (at the threshold level) and 15.0 (at maximum level) under this performance goal component. As shown in the chart below, for 2020, our Net Debt to Run Rate Adjusted EBITDAre was 4.6x, or 3.2% better than the maximum Net Debt to Run Rate Adjusted EBITDAre goal. As a result, our chief executive officer earned 18.8 percentage points and the other named executive officers earned 15.0 percentage points under the Net Debt to Run Rate Adjusted EBITDAre performance goal component. See the table below under “—2020 Company Performance Results” for more detail on the calculation.
Same Store Cash NOI GrowthNOI.
Same Store Cash NOI Growth is a measurement of our internal growth and a primary financial measure for evaluating the core operating performance of our properties. We define “NOI” as rental income, including reimbursements, less property expenses, which excludes depreciation, amortization, loss on impairments, general and administrative expenses, interest expense, interest income, transaction costs, gain (loss) on involuntary conversion, loss on extinguishment of debt, gain on sales of rental property, and other expenses. We define “Cash NOI” as NOI less straight-line rent adjustments and less intangible amortization of above and below market leases, net. We believe that NOI and Cash NOI are appropriate supplemental performance measures because they help investors and management understand the core operations of our buildings. Comparing Cash NOI on a “same store” basis (i.e., looking at the exact same set of stabilized properties over the periods being compared) allows for an apples-to-apples comparison. We also exclude lease termination fees, solar income and revenue associated with one-time tenant reimbursements of capital expenditures when calculating Cash NOI on a “same store” basis.
With the 10% weighting of the Same Store Cash NOI Growth component, our chief executive officer can earn between 6.3 percentage points (at the threshold level) and 18.8 percentage points (at the maximum level) and our other named executive officers can earn between 5.0 (at the threshold level) and 15.0 (at maximum level) under this performance goal component. As shown in the chart below, for 2020, our Same Store Cash NOI Growth was 1.7%, or 13.3% greater than the target Same Store Cash NOI Growth goal. As a result, our chief executive officer earned 15.0 percentage points and the other named executive officers earned 12.0 percentage points under the Same Store Cash NOI Growth performance goal component. See the table below under “—2020
2020 Company Performance Results
In January 2021,2022, the compensation committee evaluated our performance against the company performance goals, which are set forth in the table below.
Performance Metrics (Weighting) | Percentage Points Available | Performance Goals | Percentage Points (CEO / Other NEOs) | ||||||||||||
Threshold | Target (CEO / Other | Maximum | Threshold | Target | Maximum | ||||||||||
Core FFO per Share (50%) | 31.3 / 25.0 | 62.5 / 50.0 | 93.8 / 75.0 | $1.86 | $1.89 | $1.92 | 72.9 / 58.3 (33rd percentile between target and maximum)
| ||||||||
Actual $1.90 | |||||||||||||||
Acquisition Volume (10%) | 6.3 / 5.0 | 12.5 / 10.0 | 18.8 / 15.0 | $800 million | $900 million | $1 billion | 0.0 / 0.0 (below threshold) | ||||||||
Actual $775.8 million
| |||||||||||||||
Net Debt to Run Rate Adjusted EBITDAre (10%) | 6.3 / 5.0 | 12.5 / 10.0 | 18.8 / 15.0 | 6.00x | 5.38x | 4.75x | 18.8 / 15.0 (above maximum) | ||||||||
Actual 4.60x
| |||||||||||||||
Same Store Cash NOI Growth (10%) | 6.3 / 5.0 | 12.5 / 10.0 | 18.8 / 15.0 | 1.0% | 1.5% | 2.0% | 15.0 / 12.0 (40th percentile between target and maximum) | ||||||||
Actual 1.70% | |||||||||||||||
Total Percentage Points Earned (CEO / Other NEOs): | 106.7 / 85.3 | ||||||||||||||
legal and credit departments balanced against responsiveness to asset management and acquisitions, corporate governance developments (including succession matters), capital markets transactions and the achievement of department initiatives.
this component. Based on this assessment, the compensation committee determined that Mr. Butcher earned 34.2 percentage points and Messrs. Butcher, Crooker, Mecke and Sullivan and Kingeach earned 33.7, 28.0, 28.0, 27.0 and 27.027.5 percentage points respectively, under the individual performance goal component.
Executive | 2020 Base | 2020 Annual Cash Incentive Bonus Opportunity | Percentage Points Earned | 2020 Bonus | |||||
Below Threshold | Threshold | Target | Maximum | Company Performance | Individual Performance | Total | |||
Benjamin S. Butcher | $650,000 | $0 | $406,250 | $812,500 | $1,218,750 | 106.7 | 33.7 | 140.4 | $912,708 |
William R. Crooker | $400,000 | $0 | $200,000 | $400,000 | $600,000 | 85.3 | 28.0 | 113.3 | $453,333 |
Stephen C. Mecke | $450,000 | $0 | $225,000 | $450,000 | $675,000 | 85.3 | 28.0 | 113.3 | $510,000 |
Jeffrey M. Sullivan | $300,000 | $0 | $150,000 | $300,000 | $450,000 | 85.3 | 27.0 | 112.3 | $337,000 |
David G. King | $300,000 | $0 | $150,000 | $300,000 | $450,000 | 85.3 | 27.0 | 112.3 | $337,000 |
| | | | | | | | | | 2021 Annual Cash Incentive Bonus Opportunity | | | Percentage Points Earned | | | | | | | | ||||||||||||||||||||||||||||||||||||
| Executive | | | 2021 Base Salary | | | Below Threshold | | | Threshold | | | Target | | | Maximum | | | Company Performance | | | Individual Performance | | | Total | | | 2021 Bonus | | |||||||||||||||||||||||||||
| Benjamin S. Butcher | | | | $ | 650,000 | | | | | $ | 0 | | | | | $ | 406,250 | | | | | $ | 812,500 | | | | | $ | 1,218,750 | | | | | | 146.0% | | | | | | 34.2% | | | | | | 180.2% | | | | | $ | 1,171,354 | | |
| William R. Crooker | | | | $ | 466,667 | | | | | $ | 0 | | | | | $ | 233,334 | | | | | $ | 466,667 | | | | | $ | 700,001 | | | | | | 116.7% | | | | | | 27.5% | | | | | | 144.2% | | | | | $ | 672,778 | | |
| Stephen C. Mecke | | | | $ | 450,000 | | | | | $ | 0 | | | | | $ | 225,000 | | | | | $ | 450,000 | | | | | $ | 675,000 | | | | | | 116.7% | | | | | | 27.5% | | | | | | 144.2% | | | | | $ | 648,750 | | |
| Jeffrey M. Sullivan | | | | $ | 300,000 | | | | | $ | 0 | | | | | $ | 150,000 | | | | | $ | 300,000 | | | | | $ | 450,000 | | | | | | 116.7% | | | | | | 27.5% | | | | | | 144.2% | | | | | $ | 432,500 | | |
For 2022, the compensation committee determined that annual equity awards should consist of approximately 35% in LTIP units (subject to multi-year vesting) and 65% in performance units (with a multi-year measuring period) for all named executive officers.
Mecke for 2021 (and all named executive officers for 2022).
LTIP Units
share value appreciates, links executive compensation to our performance. Under the 2011 Equity Incentive Plan, each LTIP unit awarded will be equivalent to an award of one share of common stock reserved under the 2011 Equity Incentive Plan, thereby reducing the number of shares of common stock available for other equity awards on a one-for-one basis.
Executive | Date of Grant | Number of LTIP | Value of LTIP |
Benjamin S. Butcher | January 8, 2020 | 30,879 | $910,004 |
William R. Crooker | January 8, 2020 | 13,064 | $384,996 |
Stephen C. Mecke | January 8, 2020 | 14,252 | $420,006 |
Jeffrey M. Sullivan | January 8, 2020 | 10,180 | $300,005 |
David G. King | January 8, 2020 | 10,180 | $300,005 |
| Executive | | | Date of Grant | | | Number of LTIP Units Issued | | | Value of LTIP Unit Award | | ||||||
| Benjamin S. Butcher | | | January 7, 2021 | | | | | 32,350 | | | | | $ | 910,006 | | |
| William R. Crooker | | | January 7, 2021 | | | | | 13,686 | | | | | $ | 384,987 | | |
| Stephen C. Mecke | | | January 7, 2021 | | | | | 14,931 | | | | | $ | 420,009 | | |
| Jeffrey M. Sullivan | | | January 7, 2021 | | | | | 10,665 | | | | | $ | 300,006 | | |
| David G King(1) | | | January 7, 2021 | | | | | 10,665 | | | | | $ | 300,006 | | |
Performance Units
Percentile Ranking within Applicable Benchmark (Based on TSR)
(1) Awards above 100% for this benchmark require us to achieve a minimum absolute TSR of 25%. No dividends are paid to the recipient during the measuring period. At the end of the measuring period, if our TSR is such that the recipient earns shares of common stock or other securities (“Award Shares”), the recipient will receive additional common stock (or other securities) relating to dividends deemed to have been paid on the Award Shares. The additional shares are equal to the number of shares that the recipient would have acquired if the recipient held the Award Shares at the beginning of the measuring period and re-invested all dividends paid on the Award Shares over the measuring period into common stock on the dividend payment dates. In the discretion of the compensation committee, we may pay the cash value of the deemed dividends instead of issuing additional shares. The number of Award Shares is determined at the end of the measuring period. For performance units granted in 55 The following table sets forth the target number and value of the performance units granted to the named executive officers in January
(1) See “—Severance Arrangement with David G. King” below for more information about the vesting of shares of common stock underlying performance units held by Mr. King. In January Employee Benefits Our full-time employees, including the named executive officers, are eligible to participate in health and welfare benefit plans, which provide medical, dental, prescription, life insurance, disability insurance and related benefits. Employment Agreements We have entered into an employment agreement with each of the named executive officers. See “Potential Payments Upon Termination or Change in Control—Employment Agreements” below for more information. Severance Arrangement with David G. King On August 17, 2021, we and Mr. King, our former executive vice president and director of real estate operations, agreed that Mr. King’s employment would terminate effective September 17, 2021. Pursuant to the terms and conditions of the employment agreement and the several LTIP unit and performance unit award agreements, Mr. King received a severance package from us, including (i) a pro-rated annual cash incentive bonus for January 1, 2021 through September 17, 2021, (ii) a lump sum severance payment equal to two times the sum of Mr. King’s annual base salary and annual cash incentive bonus for the year ended December 31, 2020, (iii) payment of “COBRA” premiums for continuation of health and dental plan coverage for 18 months and continuation of disability and life insurance benefits for 18 months or the payment of the premiums therefor and (iv) immediate vesting of all outstanding LTIP units (which shall, in accordance with the applicable award agreement, remain subject to achieving parity with common units) and accelerated awarding and immediate vesting of a pro-rated number of shares of common stock underlying outstanding performance units. 56 Additional Compensation Components In the future, as we further formulate and implement our compensation program, we may provide different and/or additional compensation components, benefits and/or perquisites to the named executive officers, to ensure that we provide a balanced and comprehensive compensation structure. We believe that it is important to maintain flexibility to adapt our compensation structure when needed to properly attract, motivate and retain the top executive talent for which we compete.
57 Summary Compensation Table The following table sets forth the information required by Item 402 of Regulation S-K promulgated by the SEC. The table sets forth the base salary and other compensation that was paid to or earned by the named executive officers in
(1) For 2021, represents the total grant date fair value of LTIP units and performance units granted on January 7, 2021 under the 2011 Equity Incentive Plan, determined in accordance with ASC Topic 718. See Notes 7 and 8 to our consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2021, for a discussion of our accounting of LTIP units and performance units and the assumptions used. The grant date fair values for the following named executive officers relating to The grant date fair values for the named executive officers relating to
In connection with Mr. King’s separation from our company on September 17, 2021, pursuant to the several LTIP unit and performance unit award agreements, all of Mr. King’s outstanding LTIP units with an aggregate value of approximately $1.4 million immediately vested and shares of common stock underlying outstanding performance units with an aggregate value of approximately $2.4 million were earned and immediately vested (and paid on October 15, 2021). Each of the LTIP unit and performance unit award agreements provided for acceleration of vesting; the awards were not modified in connection with the separation. The grant date fair values of these awards have been reported in the “Stock Awards” column of our “Summary Compensation Table” for 2018 through 2021. The severance payments made to Mr. King pursuant to his employment agreement or otherwise are described in more detail above under “Executive Officer Compensation Discussion and Analysis—Severance Arrangement with David G. King.” (2) All other compensation for 2021 represents amounts paid for insurance premiums, 401(k) matching contributions, commuting/parking allowances and severance payments, as follows:
The severance payments made to Mr. King pursuant to his employment agreement or otherwise are described in more detail above under “Executive Officer Compensation Discussion and Analysis—Severance Arrangement with David G. King.” (3) Mr. Butcher served as our president until Mr. Crooker’s appointment on May 3, 2021. (4) Mr. Crooker became our president on May 3, 2021. Mr. Crooker also served as our chief financial officer and treasurer until Mr. Pinard’s appointment on January 10, 2022. (5) Mr. King’s employment ended on September 17, 2021. For more information about Mr. King’s severance arrangement, see “Executive Officer Compensation Discussion and Analysis—Severance Arrangement with David G. King” above. 59 2021 Grants of Plan-Based Awards The following table sets forth information with respect to plan-based awards granted in
(1) For the year ended December 31, 2021, the compensation committee approved annual cash incentive bonuses for Messrs. Butcher, Crooker, Mecke and Sullivan of $1,171,354, $672,778, $648,750 and $432,500, respectively. For more information regarding the company and individual performance goals for these annual cash incentive bonuses, see “Executive Officer Compensation Discussion and Analysis—Annual Cash Incentive Bonus Program.” (2) Equity incentive plan awards were made in the form of performance units. At the end of the three-year measuring period, the performance units convert into shares of common stock (or other securities) at a rate depending on our TSR over the measuring period as compared to three different benchmarks and on the absolute amount of our TSR. A recipient of performance units may receive as few as zero shares or as many as 250% of the number of target units, plus deemed dividends on earned shares. For more information regarding the performance criteria for these performance unit awards, see “Executive Officer Compensation Discussion and Analysis—Equity Incentive Compensation Program—Performance Units.” 60 (3) Stock awards were made in the form of LTIP units. The LTIP units will vest over four years in equal installments on a quarterly basis beginning on March 31, 2021, subject to continued service. For more information regarding the LTIP unit awards, see “Executive Officer Compensation Discussion and Analysis—Equity Incentive Compensation Program—LTIP Units.” (4) The amounts included in this column represent the full grant date fair value of the LTIP units and performance units, determined in accordance with ASC Topic 718. See Notes 7 and 8 to our consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2021, for a discussion of our accounting of LTIP units and performance units and the assumptions used. (5) Pursuant to the terms and conditions of his employment agreement and the several LTIP unit and performance unit award agreements, Mr. King received a severance package, including (i) a pro-rated annual cash incentive bonus for January 1, 2021 through September 17, 2021 of $240,055 and (ii) immediate vesting of all outstanding LTIP units and a pro-rated number of shares of common stock underlying outstanding performance units (which were paid on October 15, 2021). The severance payments made to Mr. King pursuant to his employment agreement or otherwise are described in more detail above under “Executive Officer Compensation Discussion and Analysis—Severance Arrangement with David G. King.” 61 Outstanding Equity Awards at Fiscal Year-End The following table sets forth information with respect to outstanding equity awards held by the named executive officers as of December 31,
(1) The following table summarizes the awards (time-based LTIP units and restricted stock) for which a portion of the awards remain unvested as of December 31, 2021. The table also provides information about the applicable vesting periods.
(2) Based on our common stock closing price of $47.96 on December 31, 2021. 62
(3) The following table summarizes the performance unit awards (at target amounts) for which a portion of the awards remain unearned and unvested as of December 31, 2021, assuming the performance unit awards are earned at the conclusion of the applicable measurement period. The table also provides information about the applicable vesting periods.
(4) For performance units, value is based on our closing price of $47.96 on December 31, 2021. For the 2019 performance unit awards, the number and value set forth in the table is based on the amount that the named executive officers earned for the three-year performance period ended December 31, 2021. The compensation committee determined the number of shares of common stock and LTIP units earned under the 2019 performance unit awards on January 10, 2022. For the 2020 and 2021 performance unit awards, the number and value set forth in the table assumes that the named executive officers earn the target amounts of performance units. See footnote 3 above. (5) Mr. King’s employment ended on September 17, 2021. For more information about Mr. King’s severance arrangement, see “Executive Officer Compensation Discussion and Analysis—Severance Arrangement with David G. King” above. 63 2021 Option Exercises and Stock Vested The following table sets forth the aggregate number of LTIP units and
(1) Time-based LTIP units vest over four years in equal installments on a quarterly basis on March 31, June 30, September 30 and December 31 of each year. Vested LTIP units can be converted to common units in our operating partnership on a one-for-one basis once a material equity transaction has occurred that results in the accretion of the member’s capital account to the economic equivalent of the common unit. During 2021, there was a material equity transaction in our operating partnership which resulted in an accretion of the member’s capital account to the economic value equivalent of the common units. The LTIP units may be converted to common units. (2) Pursuant to the 2011 Equity Incentive Plan, on January 7, 2021, the compensation committee determined the number of LTIP units and shares of common stock to be issued pursuant to the January 2018 performance unit awards as follows: Mr. Butcher, 57,984 LTIP units that vested on the 64 issuance date and 43,595 LTIP units that vested on December 31, 2021; Mr. Crooker, 22,078 LTIP units that vested on the issuance date and 16,559 LTIP units that vested on December 31, 2021; Mr. Mecke, 27,658 shares of common stock that vested on the issuance date and 22,006 LTIP units that vested on December 31, 2021; Mr. Sullivan, 15,440 LTIP units that vested on the issuance date and 11,607 LTIP units that vested on December 31, 2021; and Mr. King, 15,440 LTIP units that vested on the issuance date and 11,607 LTIP units that were scheduled to vest on December 31, 2021. (3) Represents the vesting of outstanding LTIP units and shares of common stock underlying outstanding performance units in accordance with the applicable award agreements in connection with Mr. King’s separation from our company on September 17, 2021. The LTIP units vested immediately on September 17, 2021 and shares of common stock underlying the performance units were earned and immediately vested (and paid on October 15, 2021). The severance payments made to Mr. King pursuant to his employment agreement or otherwise are described in more detail above under “Executive Officer Compensation Discussion and Analysis—Severance Arrangement with David G. King.” Equity Compensation Plan Information The following table summarizes information, as of December 31,
(1) Consists entirely of LTIP units that, upon the satisfaction of certain conditions, are convertible into common units, which may then be redeemed for cash, or at our option, an equal number of shares of common stock, subject to certain restrictions. There is no exercise price associated with LTIP units. (2) 2011 Equity Incentive Plan. Pay Ratio Disclosure As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K promulgated by the SEC, we are providing the following information about the ratio of the median employee’s total annual compensation to the total annual compensation of our chief executive officer for the year ended December 31, 2021: • Median employee total annual compensation (excluding our chief executive officer)—$251,646 • Chief executive officer total annual compensation (as reported in the “Summary Compensation Table” presented above)—$4,449,298 • Ratio of chief executive officer to median employee total annual compensation—18:1 In determining the median employee, we prepared a list of all employees as of December 31, 65 were annualized for those employees that were not employed for the full year of employees included in the calculation. Because all employees are located in the United States, we did not make any cost-of-living adjustments in identifying the median employee. Once the median employee was identified, we combined all of the elements of such employee’s compensation for
66 POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL Employment Agreements We have entered into employment agreements with each of the named executive officers. We believe that the employment agreements benefit us by helping to retain the executives and by requiring the executive officers to devote the necessary business attention and time to our affairs. The current terms of the employment agreements with Messrs. Butcher, Crooker, Mecke Pursuant to the employment agreements, the named executive officers are eligible to receive awards of LTIP units and other equity awards, subject to the terms of the 2011 Equity Incentive Plan (or other then effective incentive plan) and the applicable award agreement and the discretion of the compensation committee. The employment agreements generally provide for immediate vesting of all outstanding equity-based awards held by the executive officers upon a change of control of us and their subsequent non-renewal within 12 months, or termination of the executive officer’s employment by us without “cause” or by the executive officer for “good reason.” In addition, each of Messrs. Butcher, Crooker, Mecke The employment agreement with Mr. Butcher provides that upon the termination of his employment either by us without “cause” or by the executive officer for “good reason,” or in the event that following a change of control we or our successor gives him a notice of non-renewal within 12 months following the change of control, Mr. Butcher will be entitled to the following severance payments and benefits, subject to his execution of a general release in our favor: • a lump-sum cash payment equal to three times the sum of (i) Mr. Butcher’s then-current annual base salary and (ii) the bonus paid to Mr. Butcher for the most recently completed fiscal year for which the amount of his bonus was determined; • our direct-to-insurer payment of any group health or other insurance premiums that Mr. Butcher would otherwise have been required to pay to obtain coverage under our group health and other insurance plans for a period of 18 months; and • immediate vesting of all outstanding equity-based awards held by Mr. Butcher. The employment agreements with Messrs. Crooker, Mecke • a lump-sum cash payment equal to two times the sum of (i) the executive officer’s then-current annual base salary and (ii) the bonus paid to the executive officer for the most recently completed fiscal year for which the amount of his bonus was determined; • our direct-to-insurer payment of any group health premiums or other insurance that the executive officer would otherwise have been required to pay to obtain coverage under our group health and other insurance plans for a period of 18 months; and • immediate vesting of all outstanding equity-based awards held by the executive officer. In addition, the employment agreements with Messrs. Butcher, Crooker, Mecke 67 officer will be entitled to receive his accrued and unpaid then-current annual base salary as of the date of his death or disability and the bonus pro-rated through the date of his death or disability. Messrs. Butcher, Crooker and Sullivan will also be entitled to receive our direct-to-insurer payment of any group health or other insurance premiums they would have otherwise been required to pay to obtain coverage under our group health and other insurance plans for 18 months. Pursuant to the employment agreements, Messrs. Butcher, Crooker, Mecke None of the employment agreements contains an excise tax gross-up provision under Section 280G of the Code. In some instances, the terms of the performance units modify the provisions of the employment agreements that otherwise provide for full vesting of all equity awards upon certain terminations. For example, in most terminations of employment, the performance units vest on a pro rata basis, rather than in full. Accelerated Vesting of Equity Awards LTIP Unit Agreements Under the LTIP unit agreements, the vesting of unvested LTIP units is accelerated upon a change in control (as defined in the applicable agreements) or termination of employment by reason of death or disability. Performance Unit Agreements Under the performance unit agreements, the awarding of unearned and unvested performance units is accelerated upon a change in control (as defined in the performance unit agreements). Upon a change in control of our company, the measuring period for the performance units ends, and performance is measured and the award calculated and made, without pro ration, based on TSR through the date of the change in control. Upon a termination of a recipient’s employment by reason of death or disability, by the company without “cause” Employee Retirement Vesting Program On January 7, 2021, the compensation committee adopted the STAG Industrial, Inc. Employee Retirement Vesting Program (the “Retirement Vesting Program”) to provide supplemental retirement benefits for eligible employees. The Retirement Vesting Program will be administered by the compensation committee. Under the Retirement Vesting Program, upon an eligible employee’s Qualifying Retirement (as defined below), the employee would be entitled measures). The 68 To be eligible to participate in the Retirement Vesting Program upon a Qualifying Retirement, an employee must satisfy certain terms and conditions, including the employee must (i) provide us with at least six months’ advance written notice of his or her retirement and (ii) sign and not revoke a general release and non-competition agreement, with ongoing non-competition and employee non-solicitation provisions that remain in effect for at least 12 months following termination of employment (which non-competition and employee non-solicitation provisions, in the discretion of the compensation committee, may be those already established in an employment agreement with us). For purposes of the Retirement Vesting Program, “Qualifying Retirement” means an employee’s voluntarily termination of employment (other than where grounds for “cause” exist) at or after having satisfied the “Rule of 70.” “Rule of 70” means when an employee’s years of service with us or our affiliates or predecessors (must be at least 10 years, based on 120 months of continuous employment, not calendar years) plus his or her age (must be at least 55 years old) on the date of termination of service equals or exceeds 70. An employee’s “service” for purposes of the Retirement Vesting Program will continue until he or she is no longer serving in the role as employee, director or consultant of our company or any affiliate. 69 Termination Payment Table The following table indicates the cash amounts and accelerated vesting that Messrs. Butcher, Crooker, Mecke
70
(1) Amounts in this column reflect accelerated vesting of unvested LTIP units and performance units granted pursuant to the 2011 Equity Incentive Plan. For purposes of this table, each LTIP unit and performance unit was valued at $47.96, the closing price of our common stock on the NYSE on December 31, 2021. (2) For a discussion of the vesting of equity awards upon the occurrence of certain triggering events, including a change in control, termination without cause and Qualifying Retirement, see “—Accelerated Vesting of Equity Awards” above. (3) Each of Messrs. Butcher and Mecke satisfied the “Rule of 70” requirements and were eligible to participate in the Retirement Vesting Program. (4) Upon death of the named executive officer, the executive officer will receive a prorated bonus for services performed during the year. The prorated bonus will be derived from the bonus paid in the previous fiscal year. Under the equity award agreements, the vesting of unvested LTIP units and unearned and unvested performance units is accelerated at death or disability. See “—Accelerated Vesting of Equity Awards” above. 71 COMPENSATION COMMITTEE REPORT The following is a report by the compensation committee submitted in connection with its review of the Compensation Discussion and Analysis section of this proxy statement prepared in connection with the annual meeting. The compensation committee has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K promulgated by the SEC. Based on such review and discussion, the compensation committee recommended to the board Submitted by the Compensation Committee of the Board Jeffrey D. Furber (Chair) Virgis W. Colbert Michelle S. Dilley Larry T. Guillemette Hans S. Weger
72 AUDIT COMMITTEE REPORT The following is a report by the audit committee submitted in connection with its review of our financial reports for the fiscal year ended December 31, The audit committee oversees our financial reporting process on behalf of the board, 2021. In addition, the audit committee has (i) discussed with the representatives of PricewaterhouseCoopers LLP the matters that are required to be discussed by the Statement on Auditing Standard No. 1301, “Communications with Audit Committees,” as adopted by the Public Company Accounting Oversight Board, (ii) discussed and received the written disclosures and the letter from PricewaterhouseCoopers LLP that are required by applicable requirements of the Public Company Accounting Oversight Board regarding PricewaterhouseCoopers LLP’s communications with the audit committee concerning independence and (iii) discussed with PricewaterhouseCoopers LLP the auditors’ independence from the company and management. Based on the reviews and discussions referred to above, the audit committee recommended to the board 16, 2022. The members of the audit committee have oversight responsibilities only and are not acting as experts in accounting and auditing. Members of the audit committee rely, without independent verification, on the information provided to them and on the representations made by management and the independent registered public accountants. Accordingly, the audit committee’s oversight does not provide an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, the audit committee’s considerations and discussions referred to above do not assure that the audit of our financial statements has been carried out in accordance with generally accepted auditing standards, that the financial statements are presented in accordance with GAAP or that PricewaterhouseCoopers LLP is in fact “independent.” Submitted by the Audit Committee of the Board Hans S. Weger (Chair) Jit Kee Chin Larry T. Guillemette Francis X. Jacoby III Christopher P. Marr 73 PROPOSAL 2:
Proposal The audit committee of the board A representative of PricewaterhouseCoopers LLP will be present at the annual meeting, will be given the opportunity to make a statement if he or she so desires and will be available to respond to appropriate questions. Fee Disclosure The following is a summary of the fees incurred or billed by PricewaterhouseCoopers LLP for professional services rendered for our company for the years ended December 31,
2020:
Audit Fees “Audit Fees” consist of fees and related expenses incurred for professional services rendered for the audit of the financial statements and services that are normally provided by PricewaterhouseCoopers LLP in connection with statutory and regulatory filings or engagements. For example, audit fees include fees for professional services rendered in connection with quarterly and annual reports, and the issuance of consents by PricewaterhouseCoopers LLP to be named in our registration statements and to the use of their audit report in the registration statements. Tax Fees “Tax Fees” consist of fees and related expenses incurred or billed for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal and state tax compliance and tax planning and structuring. Audit-Related Fees and All Other Fees “Audit-Related Fees” and “All Other Fees” consist of fees and related expenses for products and services other than services described under “Audit Fees” and “Tax Fees.” 74 Pre-Approval Policy All audit, tax and other services provided to us were reviewed and pre-approved by the audit committee or a member of the audit committee designated by the full committee to pre-approve such services. The audit committee or designated member concluded that the provision of such services by PricewaterhouseCoopers LLP was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions. Vote Required The affirmative vote of a majority of the votes cast at a meeting at which a quorum is present is required to ratify the appointment of our independent registered public accounting firm, which is considered a routine matter. For purposes of the vote on the ratification of the appointment of our independent registered public accounting firm, abstentions will not be counted as votes cast and will have no effect on the result of the vote. Recommendation The board 75 PROPOSAL 3:
Proposal Section 14A(a)(1) of the Exchange Act generally requires each public company to include in its proxy statement a separate resolution subject to a non-binding stockholder vote to approve the compensation of the company’s named executive officers, as disclosed in its proxy statement pursuant to Item 402 of Regulation S-K, not less frequently than once every three years. This is commonly known as a “say-on-pay” proposal or resolution. At the 2018 annual meeting of stockholders held on April 30, 2018, our stockholders voted on, among other matters, a proposal regarding the frequency of holding a non-binding, advisory vote on the compensation of the named executive officers. A majority of the votes cast on the frequency proposal were cast in favor of holding a non-binding, advisory vote on the compensation of the named executive officers every year, which was consistent with the recommendation of Accordingly, we are presenting the following proposal, which gives you as a stockholder the opportunity to endorse or not endorse our executive compensation program for the named executive officers by voting for or against the following resolution. “—RESOLVED, that the stockholders approve, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed in the Company’s proxy statement for the While this vote is advisory and not binding on us, it will provide information to us and the compensation committee regarding stockholder sentiment about our executive compensation philosophy, policies and practices, which the compensation committee will be able to consider when determining executive compensation for the remainder of Vote Required The affirmative vote of a majority of the votes cast at a meeting at which a quorum is present is required to approve, by non-binding vote, executive compensation. For purposes of this advisory vote, abstentions and broker non-votes will not be counted as votes cast and will have no effect on the result of the vote. Recommendation The board
76 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of the record date, March 10, 2022, the beneficial ownership of shares of our common stock and common units in our operating partnership for (i) each stockholder of our company that is known to us to be the beneficial owner of 5% or more of our common stock based upon filings made with the SEC, (ii) directors and named executive officers and (iii) all directors and named executive officers as a group. In accordance with SEC rules, each listed person’s beneficial ownership includes all shares the person actually owns beneficially or of record, all shares over which the person has or shares voting or dispositive control (such as in the capacity as a general partner of an investment fund), and all shares the person has the right to acquire within 60 days. Unless otherwise indicated, each person named in the table has sole voting and investment power with respect to all of the shares of common stock shown as beneficially owned by such person and none of the executive officers or directors has pledged shares of common stock as collateral. Furthermore, unless otherwise indicated, the business address for each of the identified stockholders is our principal executive office, One Federal Street, 23rd Floor, Boston, Massachusetts 02110.
* Represents ownership of less than 1.0%. (1) Ownership consists of shares of common stock, common units and LTIP units. Subject to certain restrictions, common units may be redeemed for cash, or at our option, an equal number of shares of common stock. Upon achieving parity with the common units and becoming “redeemable” in accordance with the terms of the partnership agreement of our operating partnership, LTIP units may be redeemed for cash, or at our option, an equal number of shares of common stock, subject to certain restrictions. (2) Based on 178,014,466 shares of common stock outstanding as of March 10, 2022. In computing the percentage ownership of a person or group, we have assumed that the common units and LTIP 77 units held by that person or the persons in the group have been redeemed for shares of common stock and that those shares are outstanding but that no common units or LTIP units held by other persons are redeemed for shares of common stock, notwithstanding that not all of the LTIP units have vested to date. (3) Based on 181,939,467 shares of common stock and units outstanding as of March 10, 2022 on a fully-diluted basis, comprised of 178,014,466 shares of common stock and 3,925,001 shares of common stock issuable upon exchange or conversion of outstanding common units and LTIP units of our operating partnership, respectively. (4) This information and the information in this footnote were obtained from a Schedule 13G/A filed with the SEC on January 27, 2022. BlackRock, Inc., in its capacity as a parent holding company or control person, is deemed to have sole power to vote or to direct the vote with respect to 17,313,428 shares of common stock and is deemed to have the sole power to dispose or direct the disposition with respect to 19,066,196 shares of common stock. The business address for BlackRock, Inc. is 55 East 52nd Street, New York, New York 10055. (5) The information and the information in this footnote were obtained from a Schedule 13G/A filed with the SEC on February 10, 2022. The Vanguard Group—23-1945930 (“Vanguard Group”), in its capacity as an investment adviser, is deemed to have shared power to vote or to direct the vote with respect to 314,774 shares of common stock, is deemed to have sole power to dispose or to direct the disposition with respect to 24,204,871 shares of common stock, and is deemed to have shared power to dispose or to direct the disposition with respect to 463,404 shares of common stock. The business address for Vanguard Group is 100 Vanguard Blvd., Malvern, Pennsylvania 19355. (6) Includes 814,227, 205,641, 314,213 and 210,389 LTIP units held by each of Messrs. Butcher, Crooker, Mecke and Sullivan, respectively, and 9,320 common units held by Mr. Butcher. Not all of the LTIP units have vested. (7) Includes 9,563, 17,321, 30,081, 45,222, 45,222, 45,222, 37,812 and 45,222 LTIP units held by each of Dr. Chin, Ms. Dilley and Messrs. Colbert, Furber, Guillemette, Jacoby, Marr and Weger, respectively. Not all of these LTIP units have vested. (8) Includes 32,206 shares of common stock held indirectly in a trust. Mr. Weger disclaims beneficial ownership of these shares of common stock. 78 CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS Review and Approval of Future Transactions with Related Persons The board Delinquent Section 16(a) Reports Section 16(a) of the Exchange Act (“Section 16(a)”) requires our executive officers and directors, and persons who own more than 10% of a registered class of our equity securities (“10% Holders”), to file reports of ownership and changes in ownership with the SEC. Officers, directors and 10% Holders are required by SEC regulations to furnish our company with copies of all Section 16(a) forms that they file. To our knowledge, based solely on review of the copies of such reports furnished to us, or written representations from reporting persons that all reportable transactions were reported, we believe that during the fiscal year ended December 31, 2021, the executive officers, directors and 10% Holders timely filed all reports they were required to file under Section 16(a), except for one report for each of our eight non-management directors with respect to one issuance of common stock on October 15, 2021, in lieu of quarterly director fees for the quarter ended September 30, 2021, later reported on February 14, 2022. Stockholder Proposals Stockholder proposals intended to be presented at the Our bylaws currently provide that in order for a proposal of a stockholder to be presented at the Additional Matters The board
Boston, Massachusetts March 79 Appendix A Certain Definitions In this proxy statement, we define: “net debt” as our total long-term indebtedness outstanding less cash and cash equivalents on hand; • “long-term indebtedness” as the principal outstanding on our unsecured credit facility, unsecured term loans, unsecured notes and mortgage notes; • “real estate cost basis” as the book value of rental property and deferred leasing intangibles, exclusive of the related accumulated depreciation and amortization; and • “enterprise value” as the market value of our common stock and operating partnership units (including LTIP units) outstanding (based on the period-end closing price on the New York Stock Exchange (“NYSE”)) plus the liquidation value of our preferred stock and amounts outstanding on our long-term indebtedness. FFO and Core FFO Funds from operations (“FFO”) should not be considered as an alternative to net income (determined in accordance with generally accepted accounting principles (“GAAP” 2021. We calculate FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts (“Nareit”). FFO represents GAAP net income (loss), excluding gains (or losses) from sales of depreciable operating buildings, impairment write-downs of depreciable real estate, real estate related depreciation and amortization (excluding amortization of deferred financing costs and fair market value of debt adjustment) and after adjustments for unconsolidated partnerships and joint ventures. Management uses FFO as a supplemental performance measure because it is a widely recognized measure of the performance of REITs. FFO may be used by investors as a basis to compare our operating performance with that of other real estate investment trusts (“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. “Core FFO” excludes transaction costs, amortization of above and below market leases, net, loss on extinguishment of debt, gain (loss) on involuntary conversion, gain (loss) on swap ineffectiveness, and non-recurring other expenses. We believe that Core FFO, which excludes items that by their nature are not comparable from period to period and tend to obscure actual operating results, is useful to compare our operating performance over a given time period to that of other companies and other time periods in a consistent manner. A-1 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.
We consider net operating income (“NOI”) to be an appropriate supplemental performance measure to net income (loss) because we believe it helps investors and management understand the core operations of our buildings. NOI is defined as rental income, which includes billings for common area maintenance, real estate taxes and insurance, less property expenses. NOI should not be viewed as an alternative measure of our financial performance since it excludes expenses which could materially impact our results of operations. Further, our NOI may not be comparable to that of other real estate companies, as they may use different methodologies for calculating NOI. The following table sets forth a reconciliation of our NOI for the periods presented to net income, the nearest GAAP equivalent.
We define “Cash NOI” as NOI less straight-line rent adjustments and less intangible amortization of above and below market leases, net. Comparing Cash NOI on a “same store” basis (i.e., looking at the exact same set of stabilized properties over the periods being compared) allows for an apples-to-apples comparison. We also exclude lease termination fees, solar income and revenue associated with one-time tenant reimbursements of capital expenditures when calculating Cash NOI on a “same store” basis. EBITDAre, Adjusted EBITDAre and Run Rate Adjusted EBITDAre We define “EBITDAre” in accordance with the standards established by Nareit. EBITDAre represents net income (loss) (computed in accordance with GAAP) before interest income and expense, tax, depreciation and amortization, gains or losses on the sale of rental property, and loss on impairments. “Adjusted EBITDAre” further excludes transaction costs, termination income, solar income, revenue associated with one-time tenant reimbursements of capital expenditures, straight-line rent adjustments, non-cash compensation expense, amortization of above and below market leases, net, gain (loss) on involuntary conversion, loss on extinguishment of debt, and other non-recurring items. “Run Rate Adjusted EBITDAre” is Adjusted EBITDAre plus incremental Adjusted EBITDAre adjusted for a full period of acquisitions and dispositions. Run Rate Adjusted EBITDAre does not reflect our historical results and does not predict future results, which may be substantially different. We believe that EBITDAre, Adjusted EBITDAre and Run Rate Adjusted EBITDAre are helpful to |