STAG Industrial, Inc. [STAG] Filings

10-Q 1 stag-20220630.htm 10-Q stag-20220630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________________________________________________

FORM 10-Q

____________________________________________________________________________

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

For the Quarterly Period Ended June 30, 2022

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

For the transition period from to .

Commission file number 1-34907

____________________________________________________________________________

STAG Industrial, Inc.

(Exact name of registrant as specified in its charter)

____________________________________________________________________________


Maryland		27-3099608
(State or other jurisdiction of		(IRS Employer Identification No.)
incorporation or organization)

One Federal Street
23rd Floor
Boston,	Massachusetts	02110
(Address of principal executive offices)		(Zip code)

(617) 574-4777

(Registrant’s telephone number, including area code)

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


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common stock, $0.01 par value per share	STAG	New York Stock Exchange

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

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

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

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

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

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

The number of shares of common stock outstanding at July 26, 2022 was 179,215,896.

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STAG Industrial, Inc.

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PART I.	Financial Information	3

Item 1.	Financial Statements (unaudited)	3

	Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021	3

	Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2022 and 2021	4

	Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2022 and 2021	5

	Consolidated Statements of Equity for the Three and Six Months Ended June 30, 2022 and 2021	6

	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021	7

	Notes to Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	45

Item 4.	Controls and Procedures	46

PART II.	Other Information	47

Item 1.	Legal Proceedings	47

Item 1A.	Risk Factors	47

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47

Item 3.	Defaults Upon Senior Securities	47

Item 4.	Mine Safety Disclosures	47

Item 5.	Other Information	47

Item 6.	Exhibits	48

	SIGNATURES	49

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Part I. Financial Information

Item 1. Financial Statements

STAG Industrial, Inc.

Consolidated Balance Sheets

(unaudited, in thousands, except share data)


	June 30, 2022		December 31, 2021
Assets
Rental Property:
Land	$	636,274	$	617,297
Buildings and improvements, net of accumulated depreciation of $682,095 and $611,867, respectively	4,610,814		4,435,743
Deferred leasing intangibles, net of accumulated amortization of $311,916 and $282,038, respectively	551,061		567,658
Total rental property, net	5,798,149		5,620,698
Cash and cash equivalents	12,614		18,981
Restricted cash	3,233		4,215
Tenant accounts receivable	100,500		93,600
Prepaid expenses and other assets	66,903		60,953
Interest rate swaps	37,899		5,220
Operating lease right-of-use assets	32,237		29,582
Assets held for sale, net	57,773		—
Total assets	$	6,109,308	$	5,833,249
Liabilities and Equity
Liabilities:
Unsecured credit facility	$	116,000	$	296,000
Unsecured term loans, net	971,272		970,577
Unsecured notes, net	1,295,064		896,941
Mortgage notes, net	53,635		54,744
Accounts payable, accrued expenses and other liabilities	84,379		76,475
Interest rate swaps	—		17,052
Tenant prepaid rent and security deposits	37,549		37,138
Dividends and distributions payable	22,282		21,906
Deferred leasing intangibles, net of accumulated amortization of $24,066 and $21,136, respectively	36,084		35,721
Operating lease liabilities	35,894		33,108
Liabilities held for sale, net	654		—
Total liabilities	2,652,813		2,439,662
Commitments and contingencies (Note 11)
Equity:
Preferred stock, par value $0.01 per share, 20,000,000 shares authorized at June 30, 2022 and December 31, 2021; none issued or outstanding	—		—
Common stock, par value $0.01 per share, 300,000,000 shares authorized at June 30, 2022 and December 31, 2021, 179,211,738 and 177,769,342 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively	1,792		1,777
Additional paid-in capital	4,182,165		4,130,038
Cumulative dividends in excess of earnings	(838,437)		(792,332)
Accumulated other comprehensive income (loss)	36,895		(11,783)
Total stockholders’ equity	3,382,415		3,327,700
Noncontrolling interest	74,080		65,887
Total equity	3,456,495		3,393,587
Total liabilities and equity	$	6,109,308	$	5,833,249

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

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STAG Industrial, Inc.

Consolidated Statements of Operations

(unaudited, in thousands, except per share data)


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Revenue
Rental income	$	161,057	$	137,805	$	319,658	$	271,630
Other income	443		622		1,051		792
Total revenue	161,500		138,427		320,709		272,422
Expenses
Property	28,874		25,356		60,649		52,358
General and administrative	12,234		12,578		24,547		25,368
Depreciation and amortization	69,279		57,332		136,645		115,739

Other expenses	532		511		1,029		1,363
Total expenses	110,919		95,777		222,870		194,828
Other income (expense)
Interest and other income	23		30		57		62
Interest expense	(17,896)		(15,273)		(35,155)		(30,631)
Debt extinguishment and modification expenses	—		—		—		(679)

Gain on the sales of rental property, net	376		5,976		24,331		12,385
Total other income (expense)	(17,497)		(9,267)		(10,767)		(18,863)
Net income	$	33,084	$	33,383	$	87,072	$	58,731
Less: income attributable to noncontrolling interest after preferred stock dividends	708		733		1,870		1,206
Net income attributable to STAG Industrial, Inc.	$	32,376	$	32,650	$	85,202	$	57,525
Less: preferred stock dividends	—		—		—		1,289
Less: redemption of preferred stock	—		—		—		2,582
Less: amount allocated to participating securities	59		74		121		147
Net income attributable to common stockholders	$	32,317	$	32,576	$	85,081	$	53,507
Weighted average common shares outstanding — basic	179,049		159,736		178,442		159,086
Weighted average common shares outstanding — diluted	179,144		161,367		178,586		160,249
Net income per share — basic and diluted


Net income per share attributable to common stockholders — basic	$	0.18	$	0.20	$	0.48	$	0.34
Net income per share attributable to common stockholders — diluted	$	0.18	$	0.20	$	0.48	$	0.33

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

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STAG Industrial, Inc.

Consolidated Statements of Comprehensive Income

(unaudited, in thousands)


	Three months ended June 30,				Six months ended June 30,
	2022		2021		2022		2021
Net income	$	33,084	$	33,383	$	87,072	$	58,731
Other comprehensive income:
Income on interest rate swaps	12,509		1,432		49,746		13,582
Other comprehensive income	12,509		1,432		49,746		13,582
Comprehensive income	45,593		34,815		136,818		72,313
Income attributable to noncontrolling interest after preferred stock dividends	(708)		(733)		(1,870)		(1,206)
Other comprehensive income attributable to noncontrolling interest	(266)		(31)		(1,068)		(299)
Comprehensive income attributable to STAG Industrial, Inc.	$	44,619	$	34,051	$	133,880	$	70,808

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

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STAG Industrial, Inc.

Consolidated Statements of Equity

(unaudited, in thousands, except share data)


	Preferred Stock		Common Stock			Additional Paid-in Capital		Cumulative Dividends in Excess of Earnings		Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Equity		Noncontrolling Interest - Unit Holders in Operating Partnership		Total Equity
			Shares	Amount
Three months ended June 30, 2022
Balance, March 31, 2022	$	—	179,211,305	$	1,792	$	4,179,361	$	(805,400)	$	24,652	$	3,400,405	$	74,474	$	3,474,879
Proceeds from sales of common stock, net	—		—	—		(93)		—		—		(93)		—		(93)

Dividends and distributions, net	—		—	—		—		(65,413)		—		(65,413)		(1,910)		(67,323)
Non-cash compensation activity, net	—		433	—		2,071		—		—		2,071		1,368		3,439

Rebalancing of noncontrolling interest	—		—	—		826		—		—		826		(826)		—
Other comprehensive income	—		—	—		—		—		12,243		12,243		266		12,509
Net income	—		—	—		—		32,376		—		32,376		708		33,084
Balance, June 30, 2022	$	—	179,211,738	$	1,792	$	4,182,165	$	(838,437)	$	36,895	$	3,382,415	$	74,080	$	3,456,495
Three months ended June 30, 2021
Balance, March 31, 2021	$	—	159,082,448	$	1,591	$	3,443,787	$	(778,727)	$	(28,143)	$	2,638,508	$	59,608	$	2,698,116
Proceeds from sales of common stock, net	—		1,208,014	12		41,781		—		—		41,793		—		41,793

Dividends and distributions, net	—		—	—		—		(58,036)		—		(58,036)		(4,325)		(62,361)
Non-cash compensation activity, net	—		2,901	—		2,192		—		—		2,192		2,347		4,539
Redemption of common units to common stock	—		22,175	—		368		—		—		368		(368)		—
Rebalancing of noncontrolling interest	—		—	—		(1,186)		—		—		(1,186)		1,186		—
Other comprehensive income	—		—	—		—		—		1,401		1,401		31		1,432
Net income	—		—	—		—		32,650		—		32,650		733		33,383
Balance, June 30, 2021	$	—	160,315,538	$	1,603	$	3,486,942	$	(804,113)	$	(26,742)	$	2,657,690	$	59,212	$	2,716,902

Six months ended June 30, 2022
Balance, December 31, 2021	$	—	177,769,342	$	1,777	$	4,130,038	$	(792,332)	$	(11,783)	$	3,327,700	$	65,887	$	3,393,587
Proceeds from sales of common stock, net	—		1,328,335	13		54,870		—		—		54,883		—		54,883

Dividends and distributions, net	—		—	—		—		(130,527)		—		(130,527)		(3,384)		(133,911)
Non-cash compensation activity, net	—		49,061	1		(1,208)		(780)		—		(1,987)		7,105		5,118
Redemption of common units to common stock	—		65,000	1		1,216		—		—		1,217		(1,217)		—

Rebalancing of noncontrolling interest	—		—	—		(2,751)		—		—		(2,751)		2,751		—
Other comprehensive income	—		—	—		—		—		48,678		48,678		1,068		49,746
Net income	—		—	—		—		85,202		—		85,202		1,870		87,072
Balance, June 30, 2022	$	—	179,211,738	$	1,792	$	4,182,165	$	(838,437)	$	36,895	$	3,382,415	$	74,080	$	3,456,495
Six months ended June 30, 2021
Balance, December 31, 2020	$	75,000	158,209,823	$	1,582	$	3,421,721	$	(742,071)	$	(40,025)	$	2,716,207	$	54,845	$	2,771,052

Proceeds from sales of common stock, net	—		1,888,290	19		63,340		—		—		63,359		—		63,359
Redemption of preferred stock	(75,000)		—	—		2,573		(2,582)		—		(75,009)		—		(75,009)
Dividends and distributions, net	—		—	—		—		(116,864)		—		(116,864)		(5,761)		(122,625)
Non-cash compensation activity, net	—		98,091	1		(1,022)		(121)		—		(1,142)		8,954		7,812
Redemption of common units to common stock	—		119,334	1		1,990		—		—		1,991		(1,991)		—


Rebalancing of noncontrolling interest	—		—	—		(1,660)		—		—		(1,660)		1,660		—
Other comprehensive income	—		—	—		—		—		13,283		13,283		299		13,582
Net income	—		—	—		—		57,525		—		57,525		1,206		58,731
Balance, June 30, 2021	$	—	160,315,538	$	1,603	$	3,486,942	$	(804,113)	$	(26,742)	$	2,657,690	$	59,212	$	2,716,902

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

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STAG Industrial, Inc.

Consolidated Statements of Cash Flows

(unaudited, in thousands)


	Six months ended June 30,
	2022		2021
Cash flows from operating activities:
Net income	$	87,072	$	58,731
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	136,645		115,739


Non-cash portion of interest expense	1,744		1,276
Amortization of above and below market leases, net	(113)		1,799
Straight-line rent adjustments, net	(8,089)		(8,887)


Gain on the sales of rental property, net	(24,331)		(12,385)
Non-cash compensation expense	6,686		9,154

Change in assets and liabilities:
Tenant accounts receivable	1,307		3,212

Prepaid expenses and other assets	(10,915)		(10,018)
Accounts payable, accrued expenses and other liabilities	771		864
Tenant prepaid rent and security deposits	411		2,888
Total adjustments	104,116		103,642
Net cash provided by operating activities	191,188		162,373
Cash flows from investing activities:
Acquisitions of land and buildings and improvements	(294,387)		(194,164)
Additions of land and building and improvements	(36,639)		(18,913)
Acquisitions of other assets	(2,134)		—

Acquisitions of operating lease right-of-use assets	(3,541)		—
Proceeds from sales of rental property, net	38,409		39,619

Acquisition deposits, net	593		(877)
Acquisitions of deferred leasing intangibles	(40,751)		(27,682)
Acquisitions of operating lease liabilities	3,541		—
Net cash used in investing activities	(334,909)		(202,017)
Cash flows from financing activities:

Proceeds from unsecured credit facility	871,000		765,000
Repayment of unsecured credit facility	(1,051,000)		(588,000)
Proceeds from unsecured term loans	—		300,000
Repayment of unsecured term loans	—		(300,000)
Proceeds from unsecured notes	400,000		—

Repayment of mortgage notes	(1,173)		(1,093)
Payment of loan fees and costs	(2,119)		(2,847)

Proceeds from sales of common stock, net	54,797		63,314
Redemption of preferred stock	—		(75,000)
Dividends and distributions	(133,537)		(122,212)
Repurchase and retirement of share-based compensation	(1,596)		(1,342)
Net cash provided by financing activities	136,372		37,820
Decrease in cash and cash equivalents and restricted cash	(7,349)		(1,824)
Cash and cash equivalents and restricted cash—beginning of period	23,196		20,339
Cash and cash equivalents and restricted cash—end of period	$	15,847	$	18,515
Supplemental disclosure:
Cash paid for interest, net of capitalized interest	$	33,105	$	29,574
Supplemental schedule of non-cash investing and financing activities




Additions to building and other capital improvements	$	(1,713)	$	—
Transfer of other assets to building and other capital improvements	$	1,713	$	—
Acquisitions of land and buildings and improvements	$	—	$	(4,239)
Acquisitions of deferred leasing intangibles	$	—	$	(703)


Change in additions of land, building, and improvements included in accounts payable, accrued expenses, and other liabilities	$	(7,064)	$	3,469
Additions to building and other capital improvements from non-cash compensation	$	(40)	$	—
Assumption of mortgage notes	$	—	$	5,103
Fair market value adjustment to mortgage notes acquired	$	—	$	(161)
Change in loan fees, costs, and offering costs included in accounts payable, accrued expenses, and other liabilities	$	27	$	1,016


Dividends and distributions accrued	$	22,282	$	19,803

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

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STAG Industrial, Inc.

Notes to Consolidated Financial Statements

(unaudited)

1. Organization and Description of Business

STAG Industrial, Inc. (the “Company”) is an industrial real estate operating company focused on the acquisition and operation of single-tenant, industrial properties throughout the United States. The Company was formed as a Maryland corporation and has elected to be treated and intends to continue to qualify as a real estate investment trust (“REIT”) under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended. The Company is structured as an umbrella partnership REIT, commonly called an UPREIT, and owns substantially all of its assets and conducts substantially all of its business through its operating partnership, STAG Industrial Operating Partnership, L.P., a Delaware limited partnership (the “Operating Partnership”). As of June 30, 2022 and December 31, 2021, the Company owned a 97.9% and 98.1%, respectively, common equity interest in the Operating Partnership. The Company, through its wholly owned subsidiary, is the sole general partner of the Operating Partnership. As used herein, the “Company” refers to STAG Industrial, Inc. and its consolidated subsidiaries, including the Operating Partnership, except where context otherwise requires.

As of June 30, 2022, the Company owned 559 industrial buildings in 40 states with approximately 111.5 million rentable square feet.

COVID-19 Pandemic

The Company and the real estate industry generally continue to face risks and uncertainties related to the ongoing public health crisis of the novel coronavirus disease (“COVID-19”) pandemic.

The Company closely monitors the effect of the COVID-19 pandemic on all aspects of its business, including how the pandemic will affect its tenants and business partners. The Company did not incur significant disruptions from the COVID-19 pandemic or enter into any rent deferral agreements during the three and six months ended June 30, 2022 and 2021. The Company will continue to evaluate tenant rent relief requests on an individual basis, considering a number of factors. Not all tenant requests will ultimately result in modified agreements, nor is the Company foregoing its contractual rights under its lease agreements.

The Company remains unable to predict the ultimate impact that the pandemic will have on its financial condition, results of operations and cash flows due to numerous uncertainties. The extent to which the COVID-19 pandemic affects the Company’s operations and those of its tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others.

2. Summary of Significant Accounting Policies

Interim Financial Information

The accompanying interim financial statements have been presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and with the instructions to Form 10-Q and Regulation S-X for interim financial information. Accordingly, these statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, the accompanying interim financial statements include all adjustments, consisting of normal recurring items, necessary for their fair statement in conformity with GAAP. Interim results are not necessarily indicative of results for a full year. The year-end consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Basis of Presentation

The Company’s consolidated financial statements include the accounts of the Company, the Operating Partnership, and their consolidated subsidiaries. Interests in the Operating Partnership not owned by the Company are referred to as “Noncontrolling Common Units.” These Noncontrolling Common Units are held by other limited partners in the form of common units (“Other Common Units”) and long term incentive plan units (“LTIP units”) issued pursuant to the STAG Industrial, Inc. 2011 Equity Incentive Plan, as amended and restated (the “2011 Plan”). All significant intercompany balances and transactions have been

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eliminated in the consolidation of entities. The financial statements of the Company are presented on a consolidated basis for all periods presented.

Restricted Cash

The following table presents a reconciliation of cash and cash equivalents and restricted cash reported on the accompanying Consolidated Balance Sheets to amounts reported on the accompanying Consolidated Statements of Cash Flows.


Reconciliation of cash and cash equivalents and restricted cash (in thousands)	June 30, 2022		December 31, 2021
Cash and cash equivalents	$	12,614	$	18,981
Restricted cash	3,233		4,215
Total cash and cash equivalents and restricted cash	$	15,847	$	23,196

Taxes

Federal Income Taxes

The Company’s taxable REIT subsidiary recognized net income (loss) of approximately $0, $0.1 million, $(4,000), and $(4,000) for the three and six months ended June 30, 2022 and 2021, respectively.

State and Local Income, Excise, and Franchise Tax

State and local income, excise, and franchise taxes in the amount of approximately $0.4 million, $0.9 million, $0.4 million, and $0.8 million have been recorded in other expenses on the accompanying Consolidated Statements of Operations for the three and six months ended June 30, 2022 and 2021, respectively.

Uncertain Tax Positions

As of June 30, 2022 and December 31, 2021, there were no liabilities for uncertain tax positions.

Concentrations of Credit Risk

Management believes the current credit risk of the Company’s portfolio is reasonably well diversified and does not contain any unusual concentration of credit risk.

3. Rental Property

The following table summarizes the components of rental property as of June 30, 2022 and December 31, 2021.


Rental Property (in thousands)	June 30, 2022		December 31, 2021
Land	$	636,274	$	617,297
Buildings, net of accumulated depreciation of $455,845 and $406,670, respectively	4,180,194		4,035,210
Tenant improvements, net of accumulated depreciation of $29,256 and $26,065, respectively	43,072		43,999
Building and land improvements, net of accumulated depreciation of $196,994 and $179,132, respectively	328,971		320,041
Construction in progress	58,577		36,493
Deferred leasing intangibles, net of accumulated amortization of $311,916 and $282,038, respectively	551,061		567,658
Total rental property, net	$	5,798,149	$