stag-20220503
0001479094false00014790942022-05-032022-05-03



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549


FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): May 3, 2022

STAG INDUSTRIAL, INC.
(Exact name of registrant as specified in its charter)
Maryland1-3490727-3099608
(State or Other Jurisdiction(Commission(IRS Employer
of Incorporation)File Number)Identification No.)
One Federal Street, 23rd Floor
Boston, Massachusetts 02110
(Address of principal executive offices, zip code)

Registrant’s telephone number, including area code: (617) 574-4777

Not applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common stock, $0.01 par value per shareSTAGNew York Stock Exchange
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities and Exchange Act of 1934 (§240.12b-2 of this chapter).

                                        Emerging growth company

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





ITEM 2.02.     RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On May 3, 2022, STAG Industrial, Inc. (the “Company”) issued a press release announcing its results of operations for the three months ended March 31, 2022, and its financial condition as of March 31, 2022. A copy of such press release is furnished as Exhibit 99.1 to this report. The press release referred to certain supplemental information that is available in the Investor Relations section of the Company’s website at www.stagindustrial.com.

As previously announced and as further detailed in the press release furnished with this report, the Company will conduct a conference call at 10:00 a.m. eastern time on Wednesday, May 4, 2022, to discuss its first quarter results of operations and financial condition.

The information in Item 2.02 of this report, including the information in the press release attached as Exhibit 99.1 to this report, is furnished pursuant to Item 2.02 of Form 8-K and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. Furthermore, the information in Item 2.02 of this report, including the information in the press release attached as Exhibit 99.1 to this report, shall not be deemed to be incorporated by reference in the filings of the registrant under the Securities Act of 1933, as amended.

ITEM 9.01.     FINANCIAL STATEMENTS AND EXHIBITS

(d) Exhibits.
Exhibit NumberDescription
99.1
104Cover Page Interactive Data File (embedded within the XBRL document)



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


STAG INDUSTRIAL, INC.
By:/s/ Jeffrey M. Sullivan
Jeffrey M. Sullivan
Executive Vice President, General Counsel
and Secretary
Dated: May 3, 2022




Document

http://api.rkd.refinitiv.com/api/FilingsRetrieval3/.67585906.0001479094-22-000011staglogoa031a24a.jpg.ashx
 
STAG INDUSTRIAL ANNOUNCES FIRST QUARTER 2022 RESULTS
 
Boston, MA — May 3, 2022 - STAG Industrial, Inc. (the “Company”) (NYSE:STAG), today announced its financial and operating results for the quarter ended March 31, 2022.

"As previously announced, I will be moving to the Executive Chair role on July 1st,” said Ben Butcher, Chief Executive Officer of the Company. “Bill Crooker, currently our President, will succeed me as CEO. I have full confidence in him, the rest of the STAG team and the direction of the Company."

First Quarter 2022 Highlights

Reported $0.30 of net income per basic and diluted common share for the first quarter of 2022, compared to $0.13 of net income per basic and diluted common share for the first quarter of 2021. Reported $52.8 million of net income attributable to common stockholders for the first quarter of 2022, compared to net income attributable to common stockholders of $20.9 million for the first quarter of 2021.

Achieved $0.53 of Core FFO per diluted share for the first quarter of 2022, an increase of 8.2% compared to first quarter 2021 Core FFO per diluted share of $0.49. Generated Core FFO of $97.1 million for the first quarter of 2022, compared to $79.8 million for the first quarter of 2021, an increase of 21.6%.

Produced Cash NOI of $122.9 million for the first quarter of 2022, an increase of 18.6% compared to the first quarter of 2021 of $103.7 million.

Produced Same Store Cash NOI of $103.6 million for the first quarter of 2022, an increase of 4.8% compared to the first quarter of 2021 of $98.8 million.

Produced Cash Available for Distribution of $82.4 million for the first quarter of 2022, an increase of 13.8% compared to the first quarter of 2021 of $72.5 million.

Acquired eight buildings in the first quarter of 2022, consisting of 1.8 million square feet, for $166.4 million, with a Cash Capitalization Rate of 5.0% and a Straight-Line Capitalization Rate of 5.2%.

Sold one building and one land parcel in the first quarter of 2022, consisting of 237,500 square feet for $36.1 million, resulting in a net gain of $24.0 million.

Achieved an Occupancy Rate of 96.9% on the total portfolio and 97.3% on the Operating Portfolio as of March 31, 2022.
 
Commenced Operating Portfolio leases of 3.1 million square feet for the first quarter of 2022, resulting in a Cash Rent Change and Straight-Line Rent Change of 15.2% and 25.1%, respectively.
 
Experienced 58.4% Retention for 3.4 million square feet of leases expiring in the quarter.

Subsequent to quarter end, on April 28, 2022, originated $400 million of fixed rate senior unsecured notes in a private placement offering.

Please refer to the Non-GAAP Financial Measures and Other Definitions section at the end of this release for definitions of capitalized terms used in this release.

The Company will host a conference call tomorrow, Wednesday, May 4, 2022 at 10:00 a.m. (Eastern Time), to discuss the quarter’s results and provide information about acquisitions, operations, capital markets and corporate activities. Details of the call can be found at the end of this release.
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Key Financial Measures
 
FIRST QUARTER 2022 KEY FINANCIAL MEASURES
 Three months ended March 31,
Metrics20222021% Change
(in $000s, except per share data)   
Net income attributable to common stockholders$52,764$20,931152.1 %
Net income per common share — basic $0.30$0.13130.8 %
Net income per common share — diluted$0.30$0.13130.8 %
Cash NOI$122,948$103,67818.6 %
Same Store Cash NOI (1)
$103,552$98,7834.8 %
Adjusted EBITDAre
$113,004$94,44919.6 %
Core FFO$97,105$79,83921.6 %
Core FFO per share / unit — basic$0.54$0.4910.2 %
Core FFO per share / unit — diluted$0.53$0.498.2 %
Cash Available for Distribution$82,444$72,45813.8 %
 (1) The Same Store pool accounted for 85.9% of the total portfolio square footage as of March 31, 2022.

Definitions of the above-mentioned non-GAAP financial measures, together with reconciliations to net income (loss) in accordance with GAAP, appear at the end of this release. Please also see the Company’s supplemental information package for additional disclosure.
Acquisition and Disposition Activity

For the three months ended March 31, 2022, the Company acquired eight buildings for $166.4 million with an Occupancy Rate of 96.4% upon acquisition. The chart below details the acquisition activity for the quarter:

FIRST QUARTER 2022 ACQUISITION ACTIVITY
MarketDate AcquiredSquare FeetBuildingsPurchase Price ($000s)W.A. Lease Term (Years)Cash Capitalization RateStraight-Line Capitalization Rate
Kansas City, MO1/6/2022702,0001$60,4285.0
Chicago, IL1/31/202272,49918,1287.1
Columbus, OH2/8/2022138,213111,4924.9
Cleveland, OH2/8/2022136,800113,0014.6
Nashville, TN3/10/2022109,807112,8103.7
Greenville/Spartanburg, SC3/10/2022289,103128,2745.1
Memphis, TN3/18/2022195,622115,8289.9
Greenville/Spartanburg, SC3/18/2022155,717116,3902.9
Total / weighted average1,799,7618$166,3515.35.0%5.2%

The chart below details the 2022 acquisition activity and Pipeline through May 3, 2022:

2022 ACQUISITION ACTIVITY AND PIPELINE DETAIL
Square FeetBuildingsPurchase Price ($000s)W.A. Lease Term (Years)Cash Capitalization RateStraight-Line Capitalization Rate
Q11,799,7618$166,3515.35.0%5.2%
Total / weighted average1,799,7618$166,3515.35.0%5.2%
As of May 3, 2022
Subsequent to quarter-end acquisitions1.0 million5$97.2 million
Pipeline29.8 million174$3.7 billion



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The chart below details the disposition activity for the three months ended March 31, 2022:

2022 DISPOSITION ACTIVITY
Square FeetBuildingsSale Price ($000s)
Q1237,5001$36,115
Total237,5001$36,115
Note: The chart above includes one parcel of land sold in the first quarter of 2022 for $190,000.

Leasing Activity
 
The chart below details the leasing activity for leases commenced during the three months ended March 31, 2022:
 
FIRST QUARTER 2022 OPERATING PORTFOLIO LEASING ACTIVITY
Lease TypeSquare FeetLease CountW.A. Lease Term (Years)Cash
Base Rent
$/SF
SL Base Rent
$/SF
Lease
Commissions
$/SF
Tenant Improvements $/SF
Cash Rent Change
SL Rent ChangeRetention
New Leases1,179,224107.1$6.04$6.44$2.46$1.1525.0%36.4%
Renewal Leases1,960,672195.9$4.97$5.32$0.51$0.448.9%17.9%58.4%
Total / weighted average3,139,896296.3$5.37$5.74$1.25$0.7115.2%25.1%

Additionally, for the three months ended March 31, 2022, leases commenced totaling 511,236 square feet related to Value Add assets and first generation leasing. These are excluded from the Operating Portfolio statistics above.

Capital Markets Activity
 
The chart below details the ATM program activity for the three months ended March 31, 2022:

2022 ATM ACTIVITY
2016 DISPOSITIONS
EquityShares IssuedPrice per Share (Weighted Avg)Gross Proceeds ($000s)Net Proceeds ($000s)
Q1128,335$45.03$5,779$5,721
Total / weighted average128,335$45.03$5,779$5,721

On March 29, 2022, the Company physically settled a forward sale agreement for 1,200,000 shares related to the over-allotment option from the November 2021 public common stock offering for net proceeds of $49.7 million.

As of March 31, 2022, net debt to annualized Run Rate Adjusted EBITDAre was 5.1x and Liquidity was $397.1 million.

On April 28, 2022, the Company entered into a note purchase agreement to issue $400 million of fixed rate senior unsecured notes in a private placement offering with an interest rate of 4.12% and a ten-year term maturing on June 28, 2032.

Conference Call
 
The Company will host a conference call tomorrow, Wednesday, May 4, 2022, at 10:00 a.m. (Eastern Time) to discuss the quarter’s results.  The call can be accessed live over the phone toll-free by dialing (877) 407-4018, or for international callers, (201) 689-8471.  A replay will be available shortly after the call and can be accessed by dialing (844) 512-2921, or for international callers, (412) 317-6671.  The passcode for the replay is 13728511.
 
Interested parties may also listen to a simultaneous webcast of the conference call by visiting the Investor Relations section of the Company’s website at www.stagindustrial.com, or by clicking on the following link:
 
http://ir.stagindustrial.com/QuarterlyResults

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Supplemental Schedule
 
The Company has provided a supplemental information package with additional disclosure and financial information on its website (www.stagindustrial.com) under the “Quarterly Results” tab in the Investor Relations section.


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CONSOLIDATED BALANCE SHEETS
STAG Industrial, Inc.
(unaudited, in thousands, except share data) 
 March 31, 2022December 31, 2021
Assets  
Rental Property:  
Land$626,385 $617,297 
Buildings and improvements, net of accumulated depreciation of $650,370 and $611,867, respectively4,535,725 4,435,743 
Deferred leasing intangibles, net of accumulated amortization of $288,640 and $282,038, respectively561,267 567,658 
Total rental property, net5,723,377 5,620,698 
Cash and cash equivalents34,830 18,981 
Restricted cash3,175 4,215 
Tenant accounts receivable98,320 93,600 
Prepaid expenses and other assets64,308 60,953 
Interest rate swaps27,696 5,220 
Operating lease right-of-use assets29,151 29,582 
Total assets$5,980,857 $5,833,249 
Liabilities and Equity  
Liabilities:  
Unsecured credit facility$384,000 $296,000 
Unsecured term loans, net970,925 970,577 
Unsecured notes, net897,058 896,941 
Mortgage notes, net54,190 54,744 
Accounts payable, accrued expenses and other liabilities72,726 76,475 
Interest rate swaps2,298 17,052 
Tenant prepaid rent and security deposits36,062 37,138 
Dividends and distributions payable22,282 21,906 
Deferred leasing intangibles, net of accumulated amortization of $22,245 and $21,136, respectively33,712 35,721 
Operating lease liabilities32,725 33,108 
Total liabilities2,505,978 2,439,662 
Equity:  
Preferred stock, par value $0.01 per share, 20,000,000 shares authorized at March 31, 2022 and December 31, 2021; none issued or outstanding— — 
Common stock, par value $0.01 per share, 300,000,000 shares authorized at March 31, 2022 and December 31, 2021, 179,211,305 and 177,769,342 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively1,792 1,777 
Additional paid-in capital4,179,361 4,130,038 
Cumulative dividends in excess of earnings(805,400)(792,332)
Accumulated other comprehensive income (loss)24,652 (11,783)
Total stockholders’ equity3,400,405 3,327,700 
Noncontrolling interest74,474 65,887 
Total equity3,474,879 3,393,587 
Total liabilities and equity$5,980,857 $5,833,249 
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CONSOLIDATED STATEMENTS OF OPERATIONS
STAG Industrial, Inc.
(unaudited, in thousands, except per share data)
Three months ended March 31,
 20222021
Revenue        
Rental income$158,601 $133,825 
Other income608 170 
Total revenue159,209 133,995 
Expenses  
Property31,775 27,002 
General and administrative12,313 12,790 
Depreciation and amortization67,366 58,407 
Other expenses497 852 
Total expenses111,951 99,051 
Other income (expense)  
Interest and other income 34 32 
Interest expense(17,259)(15,358)
Debt extinguishment and modification expenses— (679)
Gain on the sales of rental property, net23,955 6,409 
Total other income (expense)6,730 (9,596)
Net income$53,988 $25,348 
Less: income attributable to noncontrolling interest after preferred stock dividends1,162 473 
Net income attributable to STAG Industrial, Inc.$52,826 $24,875 
Less: preferred stock dividends— 1,289 
Less: redemption of preferred stock— 2,582 
Less: amount allocated to participating securities62 73 
Net income attributable to common stockholders$52,764 $20,931 
Weighted average common shares outstanding — basic177,827 158,430 
Weighted average common shares outstanding — diluted178,065 159,126 
Net income per share — basic and diluted  
Net income per share attributable to common stockholders — basic$0.30 $0.13 
Net income per share attributable to common stockholders — diluted$0.30 $0.13 
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RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES
STAG Industrial, Inc.
(unaudited, in thousands) 
Three months ended March 31,
20222021
NET OPERATING INCOME RECONCILIATION
Net income$53,988 $25,348 
General and administrative12,313 12,790 
Depreciation and amortization67,366 58,407 
Interest and other income(34)(32)
Interest expense17,259 15,358 
Debt extinguishment and modification expenses— 679 
Other expenses497 852 
Gain on the sales of rental property, net(23,955)(6,409)
Net operating income$127,434 $106,993 
Net operating income$127,434 $106,993 
Rental property straight-line rent adjustments, net(4,402)(4,789)
Amortization of above and below market leases, net(84)1,474 
Cash net operating income$122,948 $103,678 
Cash net operating income$122,948 
Cash NOI from acquisitions' and dispositions' timing and other(1,066)
Run Rate Cash NOI$121,882 
Same Store Portfolio NOI
Total NOI$127,434 $106,993 
Less: NOI non-same-store properties(19,922)(2,534)
Termination, solar and other adjustments, net(918)(337)
Same Store NOI$106,594 $104,122 
Less: straight-line rent adjustments, net(3,101)(5,638)
Plus: amortization of above and below market leases, net59 299 
Same Store Cash NOI$103,552 $98,783 
EBITDA FOR REAL ESTATE (EBITDAre) RECONCILIATION
Net income$53,988 $25,348 
Depreciation and amortization67,366 58,407 
Interest and other income(34)(32)
Interest expense17,259 15,358 
Gain on the sales of rental property, net(23,955)(6,409)
EBITDAre
$114,624 $92,672 
ADJUSTED EBITDAre RECONCILIATION
EBITDAre
$114,624 $92,672 
Straight-line rent adjustments, net(4,450)(5,734)
Amortization of above and below market leases, net(84)1,474 
Non-cash compensation expense3,249  4,615 
Non-recurring other items(335)743 
Debt extinguishment and modification expenses— 679 
Adjusted EBITDAre$113,004 $94,449 
Adjusted EBITDAre$113,004 
Adjusted EBITDAre from acquisitions' and dispositions' timing and other(386)
Run Rate Adjusted EBITDAre$112,618 
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RECONCILIATIONS OF GAAP TO NON-GAAP MEASURES
STAG Industrial, Inc.
(unaudited, in thousands, except per share data)
Three months ended March 31,
20222021
CORE FUNDS FROM OPERATIONS RECONCILIATION
Net income$53,988 $25,348 
Rental property depreciation and amortization67,313 58,339 
Gain on the sales of rental property, net(23,955)(6,409)
Funds from operations$97,346 $77,278 
Preferred stock dividends— (1,289)
Redemption of preferred stock— (2,582)
Amount allocated to restricted shares of common stock and unvested units(157)(237)
Funds from operations attributable to common stockholders and unit holders$97,189 $73,170 
Funds from operations attributable to common stockholders and unit holders$97,189 $73,170 
Amortization of above and below market leases, net(84)1,474 
Non-recurring dead deal costs and other
— 432 
Debt extinguishment and modification expenses— 679 
Redemption of preferred stock— 2,582 
Retirement plan adoption — 1,502 
Core funds from operations$97,105 $79,839 
Weighted average common shares and units
Weighted average common shares outstanding177,827 158,430 
Weighted average units outstanding3,660 3,132 
Weighted average common shares and units - basic181,487 161,562 
Dilutive shares238 696 
Weighted average common shares, units, and other dilutive shares - diluted181,725 162,258 
Core funds from operations per share / unit - basic$0.54 $0.49 
Core funds from operations per share / unit - diluted$0.53 $0.49 
CASH AVAILABLE FOR DISTRIBUTION RECONCILIATION
Core funds from operations$97,105 $79,839 
Non-rental property depreciation and amortization53 68 
Straight-line rent adjustments, net(4,450)(4,676)
Capital expenditures(7,386)(3,822)
Capital expenditures reimbursed by tenants(153)(368)
Lease commissions and tenant improvements(6,838)(3,685)
Non-cash portion of interest expense864 487 
Non-cash compensation expense3,249 4,615 
Cash available for distribution$82,444 $72,458 

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Non-GAAP Financial Measures and Other Definitions
 
Acquisition Capital Expenditures: We define Acquisition Capital Expenditures as capital expenditures identified at the time of acquisition. Acquisition Capital Expenditures also include new lease commissions and tenant improvements for space that was not occupied under the Company's ownership.

Cash Available for Distribution: Cash Available for Distribution represents Core FFO, excluding non-rental property depreciation and amortization, straight-line rent adjustments, non-cash portion of interest expense, non-cash compensation expense, and deducts capital expenditures reimbursed by tenants, capital expenditures, leasing commissions and tenant improvements, and severance costs.

Cash Available for Distribution should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of our performance, and we believe that to understand our performance further, these measurements should be compared with our reported net income or net loss in accordance with GAAP, as presented in our consolidated financial statements.

Cash Available for Distribution excludes, among other items, depreciation and amortization and capture neither the changes in the value of our buildings that result from use or market conditions of our buildings, all of which have real economic effects and could materially impact our results from operations, the utility of these measures as measures of our performance is limited. In addition, our calculation of Cash Available for Distribution may not be comparable to similarly titled measures disclosed by other REITs.

Cash Capitalization Rate: We define Cash Capitalization Rate as calculated by dividing (i) the Company’s estimate of year one cash net operating income from the applicable property’s operations stabilized for occupancy (post-lease-up for vacant properties), which does not include termination income, solar income, miscellaneous other income, capital expenditures, general and administrative costs, reserves, tenant improvements and leasing commissions, credit loss, or vacancy loss, by (ii) the GAAP purchase price plus estimated Acquisition Capital Expenditures. These Capitalization Rate estimates are subject to risks, uncertainties, and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties, and factors that are beyond our control, including those risk factors contained in our Annual Report on Form 10-K for the year ended December 31, 2021.

Cash Rent Change: We define Cash Rent Change as the percentage change in the base rent of the lease commenced during the period compared to the base rent of the Comparable Lease for assets included in the Operating Portfolio. The calculation compares the first base rent payment due after the lease commencement date compared to the base rent of the last monthly payment due prior to the termination of the lease, excluding holdover rent. Rent under gross or similar type leases are converted to a net rent based on an estimate of the applicable recoverable expenses.

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

Earnings before Interest, Taxes, Depreciation, and Amortization for Real Estate (EBITDAre), Adjusted EBITDAre, Annualized Adjusted EBITDAre, and Run Rate Adjusted EBITDAre: We define EBITDAre in accordance with the standards established by the National Association of Real Estate Investment Trusts (“NAREIT”). EBITDAre represents net income (loss) (computed in accordance with GAAP) before interest expense, interest and other income, tax, depreciation and amortization, gains or losses on the sale of rental property, and loss on impairments. Adjusted EBITDAre further excludes straight-line rent adjustments, non-cash compensation expense, amortization of above and below market leases, net, gain (loss) on involuntary conversion, debt extinguishment and modification expenses, and other non-recurring items.

We define Annualized Adjusted EBITDAre as Adjusted EBITDAre multiplied by four.

We define Run Rate Adjusted EBITDAre as Adjusted EBITDAre plus incremental Adjusted EBITDAre adjusted for a full period of acquisitions and dispositions. Run Rate Adjusted EBITDAre does not reflect the Company’s historical results and does not predict future results, which may be substantially different.


9


EBITDAre, Adjusted EBITDAre, and Run Rate Adjusted EBITDAre should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of our performance, and we believe that to understand our performance further, EBITDAre, Adjusted EBITDAre, and Run Rate Adjusted EBITDAre should be compared with our reported net income or net loss in accordance with GAAP, as presented in our consolidated financial statements. 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.

Funds from Operations (FFO) and Core FFO: We define FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts (“NAREIT”). FFO represents net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciable operating property, gains (losses) from sales of land, impairment write-downs of depreciable real estate, rental property 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 amortization of above and below market leases, net, debt extinguishment and modification expenses, gain (loss) on involuntary conversion, gain (loss) on swap ineffectiveness, and non-recurring other expenses.

None of FFO or Core FFO should be considered as an alternative to net income (determined in accordance with GAAP) as an indication of our performance, and we believe that to understand our performance further, these measurements should be compared with our reported net income or net loss in accordance with GAAP, as presented in our consolidated financial statements. We use FFO as a supplemental performance measure because it is a widely recognized measure of the performance of REITs. FFO may be used by investors as a basis to compare our operating performance with that of other REITs. We and investors may use Core FFO similarly as FFO.

However, because FFO and Core FFO exclude, among other items, depreciation and amortization and capture neither the changes in the value of our buildings that result from use or market conditions of our buildings, all of which have real economic effects and could materially impact our results from operations, the utility of these measures as measures of our performance is limited. In addition, other REITs may not calculate FFO in accordance with the NAREIT definition as we do, and, accordingly, our FFO may not be comparable to such other REITs’ FFO. Similarly, our calculation of Core FFO may not be comparable to similarly titled measures disclosed by other REITs.

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

Liquidity: We define Liquidity as the amount of aggregate undrawn nominal commitments the Company could immediately borrow under the Company’s unsecured debt instruments, consistent with the financial covenants, plus unrestricted cash balances.

Market: We define Market as the market defined by CoStar based on the building address. If the building is located outside of a CoStar defined market, the city and state is reflected.

Net operating income (NOI), Cash NOI, and Run Rate Cash NOI: 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, gain (loss) on involuntary conversion, debt extinguishment and modification expenses, gain on sales of rental property, and other expenses.

We define Cash NOI as NOI less rental property straight-line rent adjustments and less amortization of above and below market leases, net.

We define Run Rate Cash NOI as Cash NOI plus Cash NOI adjusted for a full period of acquisitions and dispositions, less cash termination income, solar income and revenue associated with one-time tenant reimbursements of capital expenditures. Run Rate Cash NOI does not reflect the Company’s historical results and does not predict future results, which may be substantially different.




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We consider NOI, Cash NOI and Run Rate Cash NOI to be appropriate supplemental performance measures to net income because we believe they help us, and investors understand the core operations of our buildings. None of these measures should be considered as an alternative to net income (determined in accordance with GAAP) as an indication of our performance, and we believe that to understand our performance further, these measurements should be compared with our reported net income or net loss in accordance with GAAP, as presented in our consolidated financial statements. Further, our calculations of NOI, Cash NOI and Run Rate NOI may not be comparable to similarly titled measures disclosed by other REITs.

Occupancy Rate: We define Occupancy Rate as the percentage of total leasable square footage for which either revenue recognition has commenced in accordance with GAAP or the lease term has commenced as of the close of the reporting period, whichever occurs earlier.

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

Pipeline: We define Pipeline as a point in time measure that includes all of the transactions under consideration by the Company’s acquisitions group that have passed the initial screening process. The pipeline also includes transactions under contract and transactions with non-binding LOIs.

Renewal Lease: We define a Renewal Lease as a lease signed by an existing tenant to extend the term for 12 months or more, including (i) a renewal of the same space as the current lease at lease expiration, (ii) a renewal of only a portion of the current space at lease expiration, or (iii) an early renewal or workout, which ultimately does extend the original term for 12 months or more.

Retention: We define Retention as the percentage determined by taking Renewal Lease square footage commencing in the period divided by square footage of leases expiring in the period for assets included in the Operating Portfolio.

Same Store: We define Same Store properties as properties that were in the Operating Portfolio for the entirety of the comparative periods presented. Same Store GAAP NOI and Same Store Cash NOI exclude termination fees, solar income, and revenue associated with one-time tenant reimbursements of capital expenditures.

Stabilization: We define Stabilization for assets under development or redevelopment to occur as the earlier of achieving 90% occupancy or 12 months after completion. Stabilization for assets that were acquired and immediately added to the Value Add Portfolio occurs under the following:
if acquired with less than 75% occupancy as of the acquisition date, Stabilization will occur upon the earlier of achieving 90% occupancy or 12 months from the acquisition date;
if acquired and will be less than 75% occupied due to known move-outs within two years of the acquisition date, Stabilization will occur upon the earlier of achieving 90% occupancy after the known move-outs have occurred or 12 months after the known move-outs have occurred.

Straight-Line Capitalization Rate: We define Straight-Line Capitalization Rate as calculated by dividing (i) the Company’s estimate of average annual net operating income from the applicable property’s operations stabilized for occupancy (post-lease-up for vacant properties), which does not include termination income, solar income, miscellaneous other income, capital expenditures, general and administrative costs, reserves, tenant improvements and leasing commissions, credit loss, or vacancy loss, by (ii) the GAAP purchase price plus estimated Acquisition Capital Expenditures. These Capitalization Rate estimates are subject to risks, uncertainties, and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties, and factors that are beyond our control, including those risk factors contained in our Annual Report on Form 10-K for the year ended December 31, 2021.

Straight-Line Rent Change (SL Rent Change): We define SL Rent Change as the percentage change in the average monthly base rent over the term of the lease that commenced during the period compared to the Comparable Lease for assets included in the Operating Portfolio. Rent under gross or similar type leases are converted to a net rent based on an estimate of the applicable recoverable expenses, and this calculation excludes the impact of any holdover rent.


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Value Add Portfolio: We define the Value Add Portfolio as properties that meet any of the following criteria:
less than 75% occupied as of the acquisition date;
will be less than 75% occupied due to known move-outs within two years of the acquisition date;
out of service with significant physical renovation of the asset;
development.

Weighted Average Lease Term: We define Weighted Average Lease Term as the contractual lease term in years as of the lease start date weighted by square footage. Weighted Average Lease Term related to acquired assets reflects the remaining lease term in years as of the acquisition date weighted by square footage.




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Forward-Looking Statements

This earnings release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. STAG Industrial, Inc. (STAG) intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 and includes this statement for purposes of complying with these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe STAG’s future plans, strategies and expectations, are generally identifiable by use of the words “believe,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “should”, “project” or similar expressions. You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond STAG’s control and which could materially affect actual results, performances or achievements. Factors that may cause actual results to differ materially from current expectations include, but are not limited to, the risk factors discussed in STAG’s most recent Annual Report on Form 10-K for the year ended December 31, 2021, as updated by the Company’s subsequent reports filed with the Securities and Exchange Commission. Accordingly, there is no assurance that STAG’s expectations will be realized. Except as otherwise required by the federal securities laws, STAG disclaims any obligation or undertaking to publicly release any updates or revisions to any forward-looking statement contained herein (or elsewhere) to reflect any change in STAG’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.


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