EDGAR 10-K Filing

Company CIK: 1479094
Filing Year: 2022
Filename: 1479094_10-K_2022_0001479094-22-000006.json

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ITEM 1. BUSINESS
Item 1. Business
Certain Definitions
In this report:
We define “GAAP” as generally accepted accounting principles in the United States.
We define “total annualized base rental revenue” as the contractual monthly base rent as of December 31, 2021 (which differs from rent calculated in accordance with GAAP) multiplied by 12. If a tenant is in a free rent period as of December 31, 2021, the total annualized base rental revenue is calculated based on the first contractual monthly base rent amount multiplied by 12.
We define “occupancy rate” as the percentage of total leasable square footage for which either revenue recognition has commenced in accordance with GAAP or the lease term has commenced as of the close of the reporting period, whichever occurs earlier.
We define the “Value Add Portfolio” as properties that meet any of the following criteria: (i) less than 75% occupied as of the acquisition date; (ii) will be less than 75% occupied due to known move-outs within two years of the acquisition date; (iii) out of service with significant physical renovation of the asset; or (iv) development.
We define “Stabilization” for properties being redeveloped as the earlier of achieving 90% occupancy or 12 months after completion. With respect to properties acquired and immediately added to the Value Add Portfolio, (i) if acquired with less than 75% occupancy as of the acquisition date, Stabilization will occur upon the earlier of achieving 90% occupancy or 12 months from the acquisition date; or (ii) if acquired and will be less than 75% occupied due to known move-outs within two years of the acquisition date, Stabilization will occur upon the earlier of achieving 90% occupancy after the known move-outs have occurred or 12 months after the known move-outs have occurred.
We define the “Operating Portfolio” as all warehouse and light manufacturing assets that were acquired stabilized or have achieved Stabilization. The Operating Portfolio excludes non-core flex/office assets, assets contained in the Value Add Portfolio, and assets classified as held for sale.
We define a “Comparable Lease” as a lease in the same space with a similar lease structure as compared to the previous in-place lease, excluding new leases for space that was not occupied under our ownership.
We define “SL Rent Change” as the percentage change in the average monthly base rent over the term of the lease that commenced during the period compared to the Comparable Lease for assets included in the Operating Portfolio. Rent under gross or similar type leases are converted to a net rent based on an estimate of the applicable recoverable expenses, and this calculation excludes the impact of any holdover rent.
We define “Cash Rent Change” as the percentage change in the base rent of the lease commenced during the period compared to the base rent of the Comparable Lease for assets included in the Operating Portfolio. The calculation compares the first base rent payment due after the lease commencement date compared to the base rent of the last monthly payment due prior to the termination of the lease, excluding holdover rent. Rent under gross or similar type leases are converted to a net rent based on an estimate of the applicable recoverable expenses.
We define a “New Lease” as any lease that is signed for an initial term equal to or greater than 12 months for any vacant space, including a lease signed by a new tenant or an existing tenant that is expanding into new (additional) space.
We define “Renewal Lease” as a lease signed by an existing tenant to extend the term for 12 months or more, including (i) a renewal of the same space as the current lease at lease expiration, (ii) a renewal of only a portion of the current space at lease expiration, or (iii) an early renewal or workout, which ultimately does extend the original term for 12 months or more.
Overview
We are a REIT focused on the acquisition, ownership and operation of industrial properties throughout the United States. We seek to (i) identify properties for acquisition that offer relative value across all locations, industrial property types, and tenants through the principled application of our proprietary risk assessment model, (ii) operate our properties in an efficient, cost-effective manner, and (iii) capitalize our business appropriately given the characteristics of our assets. We are a Maryland corporation and our common stock is publicly traded on the New York Stock Exchange (“NYSE”) under the symbol “STAG.”
We are organized and conduct our operations to qualify as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”), and generally are not subject to federal income tax to the extent we currently distribute our income to our stockholders and maintain our qualification as a REIT. We remain subject to state and local taxes on our income and property and to U.S. federal income and excise taxes on our undistributed income.
As of December 31, 2021, we owned 544 buildings in 40 states with approximately 108.6 million rentable square feet, consisting of 459 warehouse/distribution buildings, 74 light manufacturing buildings, two flex/office buildings, and nine Value Add Portfolio buildings. We own both single- and multi-tenant properties, although the majority of our portfolio is single-tenant. As of December 31, 2021, our buildings were approximately 96.9% leased to 532 tenants, with no single tenant accounting for more than approximately 3.2% of our total annualized base rental revenue and no single industry accounting for more than approximately 11.3% of our total annualized base rental revenue. We intend to maintain a diversified mix of tenants to limit our exposure to any single tenant.
As of December 31, 2021, our Operating Portfolio was approximately 97.4% leased and our SL Rent Change on new and renewal leases together grew approximately 17.6% and 8.2% during the years ended December 31, 2021 and 2020, respectively and our Cash Rent Change on new and renewal leases together grew approximately 10.4% and 2.2% during the years ended December 31, 2021 and 2020, respectively.
We have a fully-integrated acquisition, leasing and asset management platform, and our senior management team has a significant amount of industrial real estate experience. Our mission is to continue to be a disciplined, relative value investor and a leading owner and operator of industrial properties in the United States. We seek to deliver attractive stockholder returns in all market environments by providing a covered dividend combined with accretive growth.
We are structured as an umbrella partnership REIT, also known as an UPREIT, and own all of our properties and conduct substantially all of our business through our Operating Partnership, which we control and manage. As of December 31, 2021, we owned approximately 98.1% of the common units of our Operating Partnership, and our current and former executive
officers, directors, employees and their affiliates, and third parties owned the remaining 1.9%. “Common units” are units of limited partnership interest in our Operating Partnership that are not designated as preferred with respect to distributions. We completed our initial public offering of common stock and related formation transactions, pursuant to which we succeeded our predecessor, on April 20, 2011.
Our Strategy
Our primary business objectives are to own and operate a balanced and diversified portfolio of binary risk investments (individual industrial properties) that maximize cash flows available for distribution to our stockholders, and to enhance stockholder value over time by achieving sustainable long-term growth in distributable cash flow from operations per share.
We believe that our focus on owning and operating a portfolio of individually-acquired industrial properties throughout the United States will, when compared to other real estate portfolios, generate returns for our stockholders that are attractive in light of the associated risks for the following reasons.
•Buyers tend to price an individual industrial property according to the binary nature of its cash flows; with only typically one potential tenant as many industrial properties are single-tenant, any one property is either generating revenue or not. Furthermore, tenants typically cover operating expenses at a property and when a property is not generating revenue, we, as owners, are responsible for paying these expenses. We believe the market prices these properties are based upon a higher risk profile due to the single-tenant nature of these properties and therefore applies a lower value relative to a diversified cash flowing investment.
•The acquisition and contribution of these primarily single-tenant properties to an aggregated portfolio of these individual binary risk cash flows creates diversification, thereby lowering risk and creating value.
•Industrial properties generally require less capital expenditure than other commercial property types and single-tenant properties generally require less expenditure for leasing, operating and capital costs per property than multi-tenant properties.
•Other institutional, industrial real estate buyers tend to focus on properties and portfolios in a select few primary markets. In contrast, we focus on individual properties across many markets. As a result, our typical competitors are local investors who often do not have the same access to debt or equity capital as us. In our fragmented, predominantly non-institutional environment, a sophisticated, institutional platform with access to capital has execution and operational advantages.
While our portfolio does consist primarily of single-tenant properties, this is not exclusive; we also own many multi-tenant properties, as a result of acquiring properties with more than one tenant or of originally single-tenant properties re-leasing to multiple tenants.
Regulation
General
We are subject to various laws, ordinances, rules and regulations of the United States and the states and local municipalities in which we own properties, including regulations relating to common areas and fire and safety requirements. We believe that we or our tenants, as applicable, have the necessary permits and approvals to operate each of our properties.
Americans with Disabilities Act
Our properties must comply with Title III of the Americans with Disabilities Act of 1990, as amended (the “ADA”) to the extent that such properties are “public accommodations” as defined under the ADA. Under the ADA, places of public accommodation must meet certain federal requirements related to access and use by disabled persons. The ADA may require removal of structural barriers to access by persons with disabilities in certain public areas of our properties where such removal is readily achievable. Although we believe that the properties in our portfolio in the aggregate substantially comply with current requirements of the ADA, and we have not received any notice for correction from any regulatory agency, we have not conducted a comprehensive audit or investigation of all of our properties to determine whether we are in compliance and therefore we may own properties that are not in compliance with the ADA.
ADA compliance is dependent upon the tenant’s specific use of the property, and as the use of a property changes or improvements to existing spaces are made, we will take steps to ensure compliance. Noncompliance with the ADA could result
in additional costs to attain compliance, the imposition of fines by the federal government or the award of damages or attorney’s fees to private litigants. The obligation to make readily achievable accommodations is an ongoing one, and we will continue to assess our properties and to make alterations to achieve compliance as necessary.
Environmental Matters
Our properties are subject to various federal, state and local environmental laws. Under these laws, courts and government agencies have the authority to require us, as the owner of a contaminated property, to clean up the property, even if we did not know of or were not responsible for the contamination. These laws also apply to persons who owned a property at the time it became contaminated, and therefore it is possible we could incur these costs even after we sell a property. In addition to the costs of cleanup, environmental contamination can affect the value of a property and, therefore, an owner’s ability to borrow using the property as collateral or to sell the property. Under applicable environmental laws, courts and government agencies also have the authority to require that a person who sent waste to a waste disposal facility, such as a landfill or an incinerator, pay for the clean-up of that facility if it becomes contaminated and threatens human health or the environment. We invest in properties historically used for industrial, light manufacturing and commercial purposes. Some of our properties contain, or may have contained, or are adjacent to or near other properties that have contained or currently contain, underground storage tanks used to store petroleum products and other hazardous or toxic substances, which create a potential for the release of petroleum products or other hazardous or toxic substances. We also own properties that are on or are adjacent to or near other properties upon which other persons, including former owners or tenants of our properties, have engaged, or may in the future engage, in activities that may generate or release petroleum products or other hazardous or toxic substances.
Environmental laws in the United States also require that owners of buildings containing asbestos properly manage and maintain the asbestos, adequately inform or train those who may come into contact with asbestos and undertake special precautions, including removal or other abatement, in the event that asbestos is disturbed during building renovation or demolition. These laws may impose fines and penalties on owners or who fail to comply with these requirements and may allow third parties to seek recovery from owners for personal injury associated with exposure to asbestos. Some of our buildings are known to have asbestos containing materials, and others, due to the age of the building and observed conditions, are suspected of having asbestos containing materials. We do not believe these conditions will materially and adversely affect us. In most or all instances, no immediate action was recommended to address the conditions.
Furthermore, various court decisions have established that third parties may recover damages for injury caused by property contamination. For instance, a person exposed to asbestos at one of our properties may seek to recover damages if he or she suffers injury from the asbestos. Lastly, some of these environmental laws restrict the use of a property or place conditions on various activities. An example would be laws that require a business using chemicals to manage them carefully and to notify local officials that the chemicals are being used.
We could be responsible for any of the costs discussed above. The costs to clean up a contaminated property, to defend against a claim, or to comply with environmental laws could be material and could adversely affect the funds available for distribution to our stockholders. All of our properties were subject to a Phase I or similar environmental assessment by independent environmental consultants at the time of acquisition. We generally expect to continue to obtain a Phase I or similar environmental assessment by independent environmental consultants on each property prior to acquiring it. However, these environmental assessments may not reveal all environmental costs that might have a material adverse effect on our business, assets, results of operations or liquidity and may not identify all potential environmental liabilities.
At the time of acquisition, we add each property to our portfolio environmental insurance policy that provides coverage for potential environmental liabilities, subject to the policy’s coverage conditions and limitations.
Compliance with these environmental laws, rules and regulations has not had, and is not expected to have, a material effect on our capital expenditures, results of operations and competitive position as compared to prior periods. We can make no assurances that future laws, ordinances or regulations will not impose material environmental liabilities on us, or the current environmental condition of our properties will not be affected by tenants, the condition of land or operations in the vicinity of our properties (such as releases from underground storage tanks), or by third parties unrelated to us.
Insurance
We carry comprehensive general liability, fire, extended coverage and rental loss insurance covering all of the properties in our portfolio under a blanket insurance policy. In addition, we maintain a portfolio environmental insurance policy that provides coverage for potential environmental liabilities, subject to the policy’s coverage conditions and limitations. Generally, we do not carry insurance for certain losses, including, but not limited to, losses caused by floods (unless the property is located in a
flood plain), earthquakes, acts of war, acts of terrorism or riots. We carry employment practices liability insurance that covers us against claims by employees, former employees or potential employees for various employment related matters including wrongful termination, discrimination, sexual harassment in the workplace, hostile work environment, and retaliation, subject to the policy’s coverage conditions and limitations. We carry comprehensive cyber liability insurance coverage that covers us against claims related to certain first party and third party losses including data restoration costs, crisis management expenses, credit monitoring costs, failure to implement and maintain reasonable security procedures, invasion of customer’s privacy and negligence, subject to the policy’s coverage conditions and limitations. We also carry directors and officers insurance. We believe the policy specifications and insured limits are appropriate and adequate given the relative risk of loss, the cost of the coverage and standard industry practice; however, our insurance coverage may not be sufficient to cover all of our losses.
Competition
In acquiring our target properties, we compete primarily with local or regional operators due to the smaller, single asset (versus portfolio) focus of our acquisition strategy. From time to time we compete with other public industrial property sector REITs, single-tenant REITs, income oriented non-traded REITs, and private real estate funds. Local real estate investors historically have represented our predominant competition for deals and they typically do not have the same access to capital that we do as a publicly traded institution. We also face significant competition from owners and managers of competing properties in leasing our properties to prospective tenants and in re-leasing space to existing tenants.
Operating Segments
We manage our operations on an aggregated, single segment basis for purposes of assessing performance and making operating decisions, and accordingly, have only one reporting and operating segment. See Note 2 in the accompanying Notes to Consolidated Financial Statements under “Segment Reporting.”
Corporate Responsibility Program
We are committed to having a robust corporate responsibility program that incorporates environmental, social and governance (“ESG”) strategies into our overall business strategy, investment decisions and asset management strategies to increase both the sustainability and the value of our portfolio. We are also committed to transparent reporting of our ESG initiatives. In December 2021, we published our inaugural 2020-2021 Environmental, Social and Governance Report, which includes information regarding our ESG policies and programs, historic results and performance targets, including a new long-term greenhouse gas (GHG) reduction goal as approved by the Science-Based Targets Initiative (SBTi). In addition, annually we participate in the public disclosure rating process of the Global Real Estate Sustainability Benchmark, which is an entity that provides a ranking system to evaluate and compared ESG efforts in the real estate industry.
Additional information regarding our corporate responsibility program will be included in our definitive Proxy Statement for our 2022 Annual Meeting of Stockholders and our 2020-2021 Environmental, Social and Governance Report is currently available under the “Corporate Responsibility” section of our website at www.stagindustrial.com. However, the information located on, or accessible from, our website, including our sustainability report, is not, and should not be deemed to be, part of this report or incorporated into any other filing that we submit to the Securities and Exchange Commission (“SEC”).
Human Capital Management
We believe that demonstrating strong financial performance while also promoting awareness and respect for fundamental human rights is important to long-term value creation, business continuity and corporate success. As part of our commitment to providing a work environment that attracts, develops and retains high-performing individuals and that treats employees with dignity and respect:
•We offer equal employment opportunities to all of our employees and seek to foster a diverse and vibrant workplace with employees who possess a broad range of experiences, backgrounds and skills. We continually assess and strive to enhance employee satisfaction and engagement. Our employees, many of whom have a relatively long tenure with our company, are offered regular opportunities to participate in personal growth and professional development programs and social or team building events. We seek to identify and develop future leaders within our company and periodically review with our Chief Executive Officer and board of directors the identity, skills and characteristics of those persons who could succeed to senior and executive positions.
•We endeavor to maintain a workplace free from discrimination or harassment on the basis of race, color, religion, creed, gender, gender identity or expression, sexual orientation, genetic information, national origin, ancestry, age, disability, military or veteran status, and political affiliate or activities, among others. We conduct training to prevent discrimination and harassment and monitor and address employee conduct.
•We are committed to compensating our employees well and at competitive industry rates while, at the same time, monitoring our compensation programs to ensure that we are continuously attracting and retaining top talent. We also provide our employees with highly competitive health and wellness benefits, including medical, dental, vision, life and short-term disability insurance, with the premiums therefor entirely paid by the Company. We also offer flexible spending accounts for medical and dependent care, a program to pay commuting and office parking costs with pre-tax income and a competitive vacation policy, including paid holidays, personal time off and a variety of leave benefits. In addition, throughout the COVID-19 pandemic, we have prioritized the health and safety of our employees and provided employees the option to work remotely with no disruption to our financial, operational, communications and other systems.
•We seek to foster a corporate culture where our many stakeholders, including our employees, engage in the topic of community development and collaborate to extend resources towards the advancement of this principle. In furtherance of this commitment, we partner with and support local charitable organizations that we believe are contributing to the growth and development of the community, particularly at-risk youth. In recent years, our employees have donated and coordinated substantial fundraising and have spent many hours volunteering to support children and young adults through a variety of charities with which we partner.
As of December 31, 2021, we employed 86 employees. None of our employees are represented by a labor union.
Additional information regarding our human capital programs and initiatives will be included in our definitive Proxy Statement for our 2022 Annual Meeting of Stockholders and is currently 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 report or incorporated into any other filing that we submit to the SEC.
Our Corporate Structure
We were incorporated in Maryland on July 21, 2010, and our Operating Partnership was formed as a Delaware limited partnership on December 21, 2009.
We are structured as an UPREIT; our publicly-traded entity, STAG Industrial, Inc., is the REIT in the UPREIT structure, and our Operating Partnership is the umbrella partnership. We own a majority, but not all, of our Operating Partnership. We also wholly own the sole general partner (the manager) of our Operating Partnership. Substantially all of our assets are held in, and substantially all of our operations are conducted through, our Operating Partnership. Shares of our common stock are traded on the NYSE under the symbol “STAG.” The common units in our Operating Partnership are not and cannot be publicly traded, although they may provide liquidity through an exchange feature described below. Our UPREIT structure allows us to acquire properties on a tax-deferred basis by issuing common units in exchange for the property.
The common units in our Operating Partnership correlate on a one-for-one economic basis to the shares of common stock in the REIT. Each common unit receives the same distribution as a share of our common stock, the value of each common unit is tied to the value of a share of our common stock and each common unit, after one year, generally may be redeemed (that is, exchanged) for cash in an amount equivalent to the value of a share of common stock or, if we choose, for a share of common stock on a one-for-one basis. When redeeming common units for cash, the value of a share of common stock is calculated as the average common stock closing price on the NYSE for the 10 trading days immediately preceding the redemption notice date.
The following is a simplified diagram of our UPREIT structure at December 31, 2021.
Additional Information
Our principal executive offices are located at One Federal Street, 23rd Floor, Boston, Massachusetts 02110. Our telephone number is (617) 574-4777.
Our website is www.stagindustrial.com. Our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and any amendments to any of those reports that we file with the SEC are available free of charge as soon as reasonably practicable through our website at www.stagindustrial.com. Also posted on our website, and available in print upon request, are charters of each committee of the board of directors, our code of business conduct and ethics and our corporate governance guidelines. Within the time period required by the SEC, we will post on our website any amendment to the code of business conduct and ethics and any waiver applicable to any executive officer, director or senior financial officer. The information found on, or otherwise accessible through, our website is not incorporated into, and does not form a part of, this report or any other report or document we file with or furnish to the SEC.
All reports, proxy and information statements and other information we file with the SEC are also available free of charge through the SEC’s website at www.sec.gov.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors
The following risk factors and other information included in this Annual Report on Form 10-K should be carefully considered. The risks and uncertainties described below are not the only risks we face. Additional risks and uncertainties not presently known to us or that we may currently deem immaterial also may impair our business operations.
Risks Related to Our Business and Operations
The COVID-19 pandemic or any future pandemic, epidemic or outbreak of infectious disease could have material and adverse effects on our business, operating results, financial condition and cash flows.
The COVID-19 pandemic has severely affected global economic activity, caused significant volatility and negative pressure in financial markets and has had adverse effects on almost every industry, directly or indirectly. The COVID-19 pandemic or any future pandemic, epidemic or outbreak of infectious disease could have material and adverse effects on our business, operating results, financial condition and cash flows due to, among other factors: (i) government authorities requiring the closure of offices or other businesses or instituting quarantines of personnel; (ii) disruption in global supply and delivery chains; (iii) a general decline in business activity and demand for real estate; (iv) the repurposing or redevelopment of retail properties made defunct by the pandemic into industrial properties; (v) reduced economic activity, general economic decline or recession, which may impact our tenants’ businesses and may cause one or more of our tenants to be unable to make rent payments to us timely, or at all, or to otherwise seek modifications of lease obligations; (vi) difficulty accessing debt and equity capital on attractive terms, or at all; and (vii) the potential negative impact on the health of our personnel or our ability to recruit and retain key employees, including as a result of any applicable federal, state or local vaccine mandates or other requirements, which may result in disruptions to certain operations. The extent to which the ongoing COVID-19 pandemic will ultimately affect our business, operating results, financial condition and cash flows will depend on many factors and future developments, including new information about COVID-19 and its variants, additional surges in infection rates, vaccine efforts and any new government regulations which may emerge to contain the virus, among others. Many risk factors set forth below should be interpreted as heightened risks because of the COVID-19 pandemic.
Adverse economic conditions may adversely affect our operating results and financial condition.
Our operating results and financial condition may be affected by market and economic challenges and uncertainties, which may result from a general economic downturn experienced by the nation as a whole, by the local economies where our properties are located or our tenants conduct business, or by the real estate industry, including the following: (i) poor economic conditions may result in tenant defaults under leases and extended vacancies at our properties; (ii) re-leasing may require concessions or reduced rental rates under the new leases due to reduced demand; (iii) adverse capital and credit market conditions may restrict our operating activities; and (iv) constricted access to credit may result in tenant defaults, non-renewals under leases or inability of potential buyers to acquire properties held for sale.
Also, to the extent we purchase real estate in an unstable market, we are subject to the risk that if the real estate market ceases to attract the same level of capital investment in the future, or the number of companies seeking to acquire properties decreases, the value of our investments may not appreciate or may decrease significantly below the amount we paid for these investments. Our operating results and financial condition could be negatively affected to the extent that an economic slowdown or downturn is prolonged or becomes more severe.
Our investments are concentrated in the industrial real estate sector, and we would be adversely affected by an economic downturn in that sector.
As of December 31, 2021, the majority of our buildings were industrial properties. This concentration may expose us to the risk of economic downturns in the industrial real estate sector to a greater extent than if our properties were more diversified across other sectors of the real estate industry.
We are subject to geographic and industry concentrations that make us susceptible to adverse events with respect to certain markets and industries.
We are subject to certain geographic and industry concentrations with respect to our properties. As a result of these concentrations, any adverse event or downturn in local economic conditions or industry conditions, changes in state or local governmental rules and regulations, acts of nature, epidemics, pandemics or other public health crises (including the COVID-19 pandemic) and actions taken in response thereto, and other factors affecting these markets or industries could adversely affect us and our tenants operating in those markets or industries. If any tenant is unable to withstand such adverse event or downturn or is otherwise unable to compete effectively in its market or business, it may be unable to meet its rental obligations, seek rental concessions, be unable to enter into new leases or forced to declare bankruptcy and reject our leases, which could materially and adversely affect us.
We have owned many of our properties for a limited time, and we may not be aware of characteristics or deficiencies involving any one or all of them.
Of the properties in our portfolio at December 31, 2021, 292 buildings totaling approximately 58.7 million rentable square feet have been acquired in the past five years. These properties may have characteristics or deficiencies unknown to us that could affect their valuation or revenue potential and such properties may not ultimately perform up to our expectations. We cannot assure you that the operating performance of the properties will not decline under our management.
Our growth depends upon future acquisitions of properties, and we may be unable to consummate acquisitions on advantageous terms and acquisitions may not perform as we expect.
The acquisition of properties entails various risks, including the risk that our investments may not perform as we expect. Our ability to continue to acquire properties in our pipeline that we believe to be suitable and compatible with our growth strategy may be constrained by numerous factors, including our ability to negotiate and execute a mutually-acceptable definitive purchase and sale agreement with the seller, our completion of satisfactory due diligence and the satisfaction of customary closing conditions, including the receipt of third-party consents and approvals. Further, we face competition for attractive investment opportunities from other well-capitalized real estate investors, including publicly-traded and non-traded REITs, private equity investors and other institutional investment funds that may have greater financial resources and a greater ability to borrow funds to acquire properties, the ability to offer more attractive terms to prospective tenants and the willingness to accept greater risk or lower returns than we can prudently manage. This competition may increase the demand for our target properties and, therefore, reduce the number of, or increase the price for, suitable acquisition opportunities, all of which could materially and adversely affect us. This competition will increase as investments in real estate become increasingly attractive relative to other forms of investment. In addition, we expect to finance future acquisitions through a combination of secured and unsecured borrowings, proceeds from equity or debt offerings by us or our Operating Partnership or its subsidiaries and proceeds from property contributions and divestitures which may not be available and which could adversely affect our cash flows.
We may face risks associated with acquiring properties in unfamiliar markets.
We have acquired, and may continue to acquire, properties in markets that are new to us. When we acquire properties located in these markets, we face risks associated with a lack of market knowledge or understanding of the local economy (including that competitors and counterparties may have much greater knowledge and understanding), forging new business relationships in the area and unfamiliarity with local government and laws.
A significant portion of our properties have leases that expire in the next two years and we may be unable to renew leases, lease vacant space or re-lease space on favorable terms
Our operating results, cash flows, cash available for distribution, and the market price of our securities would be adversely affected if we are unable to lease, on economically favorable terms, a significant amount of space in our properties. Our properties may have some level of vacancy at the time of our acquisition and may incur a vacancy either by the continued default of a tenant under its lease or the expiration of one of our leases. As of December 31, 2021, leases with respect to approximately 18.2% (excluding month-to-month leases) of our total annualized base rental revenue will expire before December 31, 2023. We cannot assure you that expiring leases will be renewed or that our properties will be re-leased at base rental rates equal to or above the current market rental rates. In addition, our ability to release space at attractive rental rates will depend on (i) whether the property is specifically suited to the particular needs of a tenant and (ii) the number of vacant or partially vacant industrial properties in a market or sub-market. In connection with a vacancy at one of our properties, we may face difficulty obtaining, or be unable to obtain, a new tenant for the vacant space. If the vacancy continues for a long period of time, we may suffer reduced revenue resulting in less cash available for distribution to stockholders and the resale value of the property could be diminished.
We face significant competition for tenants, which may negatively impact the occupancy and rental rates at our properties.
We compete with other owners, operators and developers of real estate, some of which own industrial properties in the same markets and sub-markets in which our properties are located. If our competitors offer space at rental rates below current market rates or below the rental rates we currently charge our tenants, we may lose potential tenants, and we may be pressured to lower our rental rates or to offer more substantial tenant improvements, early termination rights, below-market renewal options or other lease incentive payments to remain competitive. Competition for tenants could negatively impact the occupancy and rental rates of our properties.
Default by one or more of our tenants could materially and adversely affect us, and bankruptcy laws limit our remedies in the event of a tenant default.
Any of our tenants may experience an adverse event or downturn in its business at any time that may significantly weaken its financial condition or cause its failure, as has occurred during the pendency of the COVID-19 pandemic. As a result, such a tenant may fail to make rental payments when due, decline to extend or renew its lease upon expiration and/or declare bankruptcy and reject our lease. The default, financial distress or bankruptcy of a tenant could cause interruptions in the receipt of rental revenue and/or result in a vacancy, which is, in the case of a single-tenant property, likely to result in the complete reduction in the operating cash flows generated by the property and may decrease the value of that property. In addition, a majority of our leases generally require the tenant to pay all or substantially all of the operating expenses associated with the ownership of the property, such as utilities, real estate taxes, insurance and routine maintenance. Following a vacancy at a single-tenant property, we will be responsible for all of the operating costs at such property until it can be re-let, if at all.
The bankruptcy or insolvency of a tenant could diminish the income we receive from that tenant’s lease and we may not be able to evict a tenant solely because of its bankruptcy filing. On the other hand, a bankruptcy court might authorize the tenant to terminate its lease with us. If that happens, our claim against the bankrupt tenant for unpaid future rent would be an unsecured pre-petition claim, subject to statutory limitations, and therefore such amounts received in bankruptcy are likely to be substantially less than the remaining rent we otherwise were owed under the lease. In addition, any claim we have for unpaid past rent could be substantially less than the amount owed.
If our tenants are unable to obtain financing necessary to continue to operate their businesses and pay us rent, we could be materially and adversely affected.
Many of our tenants rely on external sources of financing to operate their businesses. The U.S. financial and credit markets may experience liquidity disruptions, resulting in the unavailability of financing for many businesses. If any of these tenants is unable to obtain financing necessary to continue to operate its business, it may be unable to meet its rental obligations, unable to enter into new leases or forced to declare bankruptcy and reject our leases, which could materially and adversely affect us.
Risks Related to Our Organization and Structure
Our growth depends on external sources of capital, which are outside of our control and affect our ability to finance acquisitions, take advantage of strategic opportunities, satisfy debt obligations and make distributions to stockholders.
In order to maintain our qualification as a REIT, we are generally required under the Code to annually distribute at least 90% of our net taxable income, determined without regard to the dividends paid deduction and excluding any net capital gain. In addition, we will be subject to federal income tax at regular corporate rates to the extent that we distribute less than 100% of our net taxable income, including any net capital gains. Because of these requirements, we may not be able to fund future capital needs, including acquisition financing, from operating cash flow and rely on third-party sources to fund our capital needs. Our access to third-party sources of capital depends, in part, on general market conditions, the market’s perception of our growth potential, our current debt levels, our current and expected future earnings, our cash flow and distributions and the market price of our common stock. If we cannot raise equity or obtain financing from third-party sources on favorable terms, or at all, we may not be able to acquire properties when opportunities exist, meet the capital and operating needs of our existing properties or satisfy our debt service obligations. To the extent that capital is not available to acquire properties, profits may not be realized or their realization may be delayed, which could result in an earnings stream that is less predictable than some of our competitors or a failure to meet our projected earnings and distributable cash flow levels in a particular reporting period. Further, in order to meet the REIT distribution requirements and avoid the payment of income and excise taxes, we may need to borrow funds on a short-term basis even if the then-prevailing market conditions are not favorable for these borrowings. These short-term borrowing needs could result from differences in timing between the actual receipt of cash and inclusion of income for federal income tax purposes or the effect of non-deductible capital expenditures, the creation of reserves, certain restrictions on distributions under loan documents or required debt or amortization payments.
Certain provisions of our governing documents and Maryland law may delay or prevent a transaction or a change of control that might be in the best interest of stockholders.
Our charter and bylaws, the Operating Partnership agreement and Maryland law contain provisions that may delay or prevent a transaction or a change of control, including, among other provisions, the following:
Our charter contains 9.8% ownership limits. Our charter, subject to certain exceptions, authorizes our directors to take such actions as are necessary and desirable to limit any person to actual or constructive ownership of no more than 9.8% in value or
in number of shares, whichever is more restrictive, of the outstanding shares of our capital stock and no more than 9.8% in value or in number of shares, whichever is more restrictive, of the outstanding shares of our common stock. While our board of directors, in its sole discretion, may exempt a proposed transferee from the ownership limits, it may not grant an exemption to any proposed transferee whose ownership could jeopardize our REIT status. These ownership limits may delay or prevent a transaction or a change of control that might be in the best interest of stockholders.
Our board of directors may create and issue a class or series of preferred stock without stockholder approval. Our board of directors may amend our charter, without stockholder approval, to (i) increase or decrease the aggregate number of shares of common stock or the number of shares of stock of any class or series, (ii) designate and issue from time to time one or more classes or series of preferred stock, (iii) classify or reclassify any unissued shares of stock, and (iv) determine the relative rights, preferences and privileges of any class or series of preferred stock. The issuance of preferred stock could have the effect of delaying or preventing a transaction or a change of control that might be in the best interests of stockholders.
Certain provisions in the Operating Partnership agreement may delay or prevent a change of control. Provisions in the Operating Partnership agreement could discourage third parties from making proposals involving an unsolicited acquisition or change of control transaction, although some stockholders might consider such proposals, if made, desirable. These provisions include, among others, redemption rights, transfer restrictions on the common units, the ability of the general partner to amend certain provisions in the Operating Partnership agreement without the consent of limited partners and the right of limited partners to consent to certain mergers and transfers of the general partnership interest. In addition, any potential change of control transaction may be further limited as a result of provisions related to the long-term incentive plan units in our Operating Partnership (“LTIP units”) granted under the STAG Industrial, Inc. 2011 Equity Incentive Plan, as amended and restated (the “2011 Plan”), which require us to preserve the rights of LTIP unit holders and may restrict us from amending the Operating Partnership agreement in a manner that would have an adverse effect on the rights of LTIP unit holders.
Certain provisions of Maryland law could delay or prevent a change in control. Title 8, Subtitle 3 of the Maryland General Corporation Law (“MGCL”), permits our board of directors, without stockholder approval and regardless of what is currently provided in our charter or bylaws, to implement takeover defenses, some of which (for example, a classified board) we do not currently have. These provisions and other provisions of Maryland law may have the effect of inhibiting a third party from making an acquisition proposal for our company or delaying or preventing a change of control under circumstances that might be in the best interest of stockholders.
Our board of directors can take many actions without stockholder approval.
Our board of directors has the general authority to oversee our operations and determine our major corporate policies. This authority includes significant flexibility and allows the board to take many actions, without stockholder approval, that could increase our operating expenses, impact our ability to make distributions or reduce the value of our assets. For example, our board of directors can, among other things, (i) change our investment, financing and borrowing strategies and our policies with respect to all other activities, including distributions, leasing, debt, capitalization and operations (including creditworthiness standards with respect to our tenants), (ii) subject to provisions in our charter, prevent the ownership, transfer and accumulation of shares in order to protect our status as a REIT or for any other reason deemed to be in the best interests of us and our stockholders, (iii) issue additional shares (which could dilute the ownership of existing stockholders) and increase or decrease the aggregate number of shares or the number of shares of any class or series or classify or reclassify any unissued shares, without obtaining stockholder approval, and (iv) determine that it is no longer in our best interests to continue to qualify as a REIT.
Our rights and the rights of our stockholders to take action against our directors and officers are limited.
Maryland law provides that a director or officer has no liability in that capacity if he or she performs his or her duties in good faith, in a manner he or she reasonably believes to be in our best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances. In addition, our charter eliminates our directors’ and officers’ liability to us and our stockholders for monetary damages, except for liability resulting from actual receipt of an improper benefit or profit in money, property or services or active and deliberate dishonesty established by a final judgment and which is material to the cause of action. Our bylaws require us to indemnify our directors and officers to the maximum extent permitted by Maryland law for liability actually incurred in connection with any proceeding to which they may be made, or threatened to be made, a party, except to the extent that the act or omission of the director or officer was material to the matter giving rise to the proceeding and was either committed in bad faith or was the result of active and deliberate dishonesty, the director or officer actually received an improper personal benefit in money, property or services, or, in the case of any criminal proceeding, the
director or officer had reasonable cause to believe that the act or omission was unlawful. Additionally, the Operating Partnership agreement limits our liability and requires our Operating Partnership to indemnify us and our directors and officers to the maximum extent permitted by Delaware law against all claims that relate to the operations of our Operating Partnership, except for actions taken in bad faith, or with gross negligence or willful misconduct. As a result, we and our stockholders may have more limited rights against our directors and officers than might otherwise exist under common law. In addition, we may be obligated to fund the defense costs incurred by our directors and officers.
Our fiduciary duties as sole member of the general partner of our Operating Partnership could create conflicts of interest, which may impede business decisions that could benefit our stockholders.
We have fiduciary duties to the other limited partners in our Operating Partnership, including members of our senior management team and board who are limited partners in our Operating Partnership through the receipt of common units or LTIP units, the discharge of which may conflict with the interests of our stockholders. In addition, those persons holding common units will have the right to vote on certain amendments to the Operating Partnership agreement. These voting rights may be exercised in a manner that conflicts with the interests of our stockholders. For example, we are unable to modify the rights of limited partners to receive distributions as set forth in the Operating Partnership agreement in a manner that adversely affects their rights without their consent, even though such modification might be in the best interest of our stockholders.
Conflicts also may arise when the interests of our stockholders and the limited partners of our Operating Partnership diverge, particularly in circumstances in which there may be an adverse tax consequence to the limited partners. As a result of unrealized built-in gain attributable to contributed properties at the time of contribution, some holders of common units, including members of our management team, may suffer more adverse tax consequences than our stockholders upon the sale or refinancing of certain properties, including disproportionately greater allocations of items of taxable income and gain upon a realization event. As those holders will not receive a correspondingly greater distribution of cash proceeds, they may have different objectives regarding the appropriate pricing, timing and other material terms of any sale or refinancing of certain properties, or whether to sell or refinance such properties at all.
We are subject to financial reporting and other requirements for which our accounting, internal audit and other systems and resources may not be adequately prepared and we may not be able to accurately report our financial results.
We are subject to reporting and other obligations under the Exchange Act, including the requirements of Section 404 of the Sarbanes-Oxley Act of 2002. Section 404 requires annual management assessments of the effectiveness of our internal controls over financial reporting and a report by our independent registered public accounting firm addressing these assessments. These reporting and other obligations place significant demands on our management, administrative, operational, internal audit and accounting resources and cause us to incur significant expenses. We may need to upgrade our systems or create new systems; implement additional financial and management controls, reporting systems and procedures; expand our internal audit function; or hire additional accounting, internal audit and finance staff. Any failure to maintain effective internal controls could have a material adverse effect on our business, operating results and market prices of our securities.
Risks Related to Ownership of Our Common Stock
The market price and trading volume of our common stock may be volatile.
The market price for our common stock, particularly at the beginning of the COVID-19 pandemic, has experienced significant price and volume fluctuations, often without regard to our operating performance. If the market price of our common stock declines significantly, you may be unable to sell your shares at or above the price at which you acquired them. A number of factors could negatively affect the market price or trading volume of our common stock, many of which are out of our control, including:
•actual or anticipated variations in our quarterly operating results or those of our competitors;
•publication of research reports about us, our competitors, our tenants or the real estate industry;
•changes in our distribution policy;
•increases in market interest rates that lead purchasers of our shares to demand a higher yield;
•the market’s perception of equity investments in REITs and changes in market valuations of similar REITs;
•difficulties or inability to access capital or extend or refinance existing debt or an adverse market reaction to any increased indebtedness we incur in the future;
•a change in credit ratings issued by analysts or nationally recognized statistical rating organizations;
•additions or departures of key management personnel;
•actions by institutional stockholders or speculation in the press or investment community; and
•general U.S. and worldwide market and economic conditions.
The cash available for distribution to stockholders may not be sufficient to make distributions at expected levels, nor can we assure you of our ability to make distributions in the future.
Distributions will be authorized and determined by our board of directors in its sole discretion from time to time and will depend upon a number of factors, including cash available for distribution, our operating results, operating expenses and financial condition (especially in relation to our anticipated future capital needs), REIT distribution requirements under the Code and other factors the board deems relevant. Consequently, our distribution levels may fluctuate. In addition, to the extent that we make distributions in excess of our current and accumulated earnings and profits, such distributions would generally be considered a return of capital for federal income tax purposes to the extent of the holder’s adjusted tax basis in its shares. A return of capital is not taxable, but it has the effect of reducing the holder’s adjusted tax basis in its investment. To the extent that distributions exceed the adjusted tax basis of a holder’s shares, they will be treated as gain from the sale or exchange of such stock. Further, if we borrow funds to make distributions, our future interest costs would increase, thereby reducing our earnings and cash available for distribution from what they otherwise would have been.
Future offerings of debt or equity securities may adversely affect the market prices of our securities.
In the future, we may attempt to increase our capital resources by making additional offerings of debt securities, which would be senior to our common stock upon liquidation (including commercial paper, medium-term notes and senior or subordinated notes), or equity securities, which would dilute our existing stockholders and may be senior to our common stock for the purposes of distributions. Upon liquidation, holders of our debt securities and shares of preferred stock and lenders with respect to other borrowings will receive a distribution of our available assets prior to the holders of our common stock. Additional equity offerings may dilute the holdings of our existing stockholders or reduce the market prices of our securities, or both. Holders of our common stock are not entitled to preemptive rights or other protections against dilution. Any future issuances of preferred stock will rank, senior to our common stock and will have, a preference upon our dissolution, liquidation or winding up of our affairs and a preference on distribution payments that could limit our ability to make distributions to holders of common stock. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, our stockholders bear the risk of our future offerings reducing the market prices of our securities and diluting their proportionate ownership.
The number of shares of our common stock available for future sale could adversely affect the market price of our common stock, and future sales of common stock may be dilutive to existing stockholders.
Sales of a substantial number of shares of our common stock (or the perception that such sales might occur), the vesting of equity awards granted under the 2011 Plan, the issuance of common stock or common units in connection with acquisitions and other issuances of common stock or common units could have an adverse effect on the market price of our common stock and may be dilutive to existing stockholders. The existence of common stock reserved for issuance under the 2011 Plan or upon exchange of common units may adversely affect the terms upon which we may be able to obtain additional capital through the sale of equity securities. We also file registration statements with the SEC allowing us to offer, from time to time, an indefinite amount of equity securities on an as-needed basis. Our board of directors has authorized us to issue shares of common stock in our at-the market (“ATM”) common stock offering program under our registration statements. Our ability to execute our business strategy depends on our access to an appropriate blend of debt financing, including unsecured lines of credit and other forms of secured and unsecured debt, and equity financing. No prediction can be made about the effect that future distributions or sales of our common stock will have on the market price of our common stock.
We have in the past entered, and may in the future enter, into forward sale transactions that subject us to certain risks.
We have previously entered into forward sale agreements and may in the future enter into additional forward sale agreements, including under our ATM common stock offering program or in follow-on offerings, that subject us to certain risks. As of December 31, 2021, we remained obligated to issue (subject to our right to elect cash settlement or net share settlement) a total of 1,200,000 shares of our common stock pursuant to outstanding forward sale agreements. These forward sale agreements subject us to the following risks:
Settlement of forward sale agreements could result in substantial dilution, substantial cash payment obligations and may be accelerated under certain circumstances. We generally expect that our forward sale agreements will be physically settled by
delivery of common stock. The future issuance of any shares of common stock upon settlement of any forward sale agreement will result in dilution to our earnings per share, return on equity, and dividends per share. If we elect cash settlement and the market value of our common stock during the relevant period is above the applicable forward sale price, we will pay the forward purchaser an amount in cash equal to the difference. The purchase of common stock in connection with the unwinding of the forward purchaser’s hedge position could cause our stock price to increase (or prevent a decrease) over such time, thereby increasing the amount of cash we would owe (or decreasing the amount of cash owed to us) upon a cash settlement. In addition, pursuant to each forward sale agreement, the relevant forward purchaser will have the right to accelerate the settlement of the forward sale agreement in connection with certain specified events. In such cases, we could be required to settle that particular forward sale agreement and issue common stock irrespective of our capital needs.
In the case of our bankruptcy or insolvency, forward sale agreements will automatically terminate. If we file or consent to a proceeding seeking a judgment in bankruptcy or insolvency or any other relief under any similar law affecting creditors’ rights, or we or a regulatory authority presents a petition for our winding-up or liquidation, and we consent to such a petition, any outstanding forward sale agreement will automatically terminate. In that that case, we would not be obligated to deliver to the relevant forward purchaser any common stock not previously delivered, and the relevant forward purchaser would be discharged from its obligation to pay the forward sale price in respect of any shares not previously settled.
The U.S. federal income tax treatment of the cash received from cash settlement is unclear. In the event that we elect to settle any forward sale agreements for cash and the settlement price is below the applicable forward sale price, we would be entitled to receive a cash payment from the relevant forward purchaser. Under Section 1032 of the Code, generally, no gains and losses are recognized by a corporation in dealing in its own shares, including pursuant to a “securities futures contract,” as defined in the Code. However, because it is not entirely clear whether a forward sale agreement qualifies as a “securities futures contract,” the U.S. federal income tax treatment of any cash settlement payment we receive is uncertain. In the event that we recognize a significant gain from the cash settlement of a forward sale agreement, we may not be able to satisfy the gross income requirements applicable to REITs under the Code and may not be able to rely upon the relief provisions under the Code. Even if the relief provisions apply, we would be subject to a tax based on the amount of non-qualifying income. In the event that these relief provisions were not available, we could lose our REIT status under the Code.
General Real Estate Risks
Our performance is subject to general economic conditions and risks associated with our real estate assets.
The investment returns available from equity investments in real estate depend on the amount of income earned and capital appreciation generated by the properties, as well as the expenses incurred in connection with the properties. If our properties do not generate income sufficient to meet operating expenses, including debt service and capital expenditures, then our ability to make distributions to stockholders could be adversely affected. In addition, there are significant expenditures associated with an investment in real estate (such as mortgage payments, real estate taxes and maintenance costs) that generally do not decline when circumstances reduce the income from the property. Income from and the value of our properties may be adversely affected by, among other things:
•a global economic crisis that results in increased budget deficits and weakened financial condition of international, national and local governments, which may lead to reduced governmental spending, tax increases, public sector job losses, increased interest rates, currency devaluations, defaults on debt obligations or other adverse economic events;
•other periods of economic slowdown or recession, rising interest rates or declining demand for real estate, or the public perception that any of these events may occur;
•tenant turnover, the attractiveness of our properties to potential tenants and changes in supply of, or demand for, similar or competing properties in an area (including from general overbuilding or excess supply in the market);
•technological changes, such as reconfiguration of supply chains, autonomous vehicles, drones, robotics, 3D printing, online marketplaces for industrial space, or other developments;
•our ability to control rental rates and changes in operating costs and expenses, including costs of compliance with tax, real estate, environmental and zoning laws, rules and regulations and our potential liability thereunder;
•changes in the cost or availability of insurance, including coverage for mold or asbestos;
•unanticipated changes in costs associated with known adverse environmental conditions or retained liabilities for such conditions;
•periods of high interest rates and tight money supply;
•future terrorist attacks, which may result in declining economic activity, which could reduce the demand for, and the value of, our properties, and may adversely affect our tenants’ business and their ability to continue to honor their existing leases; and
•disruptions in the global supply chain caused by political, regulatory or other factors, including geopolitical developments outside the United States.
Real estate investments are not as liquid as other types of investments.
The lack of liquidity in real estate investments may limit our ability to vary our portfolio and react promptly to changes in economic or other conditions. In addition, significant expenditures associated with real estate investments, such as mortgage payments, real estate taxes and maintenance costs, are generally not reduced when circumstances cause a reduction in income from the investments. We intend to comply with the safe harbor rules relating to the number of properties that can be sold each year, the tax basis and the costs of improvements made to such sale properties, and other items that enable a REIT to avoid punitive taxation on property sales. Thus, our ability at any time to sell properties or contribute properties to real estate funds or other entities in which we have an ownership interest may be restricted.
Uninsured losses may adversely affect your returns.
There are certain losses, including losses from floods, earthquakes, acts of war, acts of terrorism or riots, that are not generally insured against or that are not generally fully insured against because it is not deemed economically feasible or prudent to do so. In addition, changes in the cost or availability of insurance could expose us to uninsured casualty losses. In the event that any of our properties incurs a casualty loss that is not fully covered by insurance, the value of our assets will be reduced by the amount of any such uninsured loss, we could experience a significant loss of invested capital and potential revenue in the property, we could remain obligated under any recourse debt associated with the property, and we may have no source of funding to repair or reconstruct the damaged property. Moreover, we may be liable for our Operating Partnership’s unsatisfied recourse obligations, including any obligations incurred by our Operating Partnership as the general partner of joint ventures.
Environmentally hazardous conditions may adversely affect our operating results.
Under various federal, state and local environmental laws, a current or previous owner of real property may be liable for the cost of remediation or removing hazardous or toxic substances on such property. Such laws often impose liability whether or not the owner knew of, or was responsible for, the presence of such hazardous or toxic substances. Even if more than one person may have been responsible for the contamination, each person covered by the environmental laws may be held responsible for all of the clean-up costs incurred. In addition, third parties may sue the property owner for damages based on personal injury, natural resources, property damage or other costs, including investigation and clean-up costs, resulting from the environmental contamination. The presence of hazardous or toxic substances on one of our properties, or the failure to properly remediate a contaminated property, could give rise to a lien in favor of the government for costs it may incur to address the contamination, or otherwise adversely affect our ability to sell or lease the property or borrow using the property as collateral. Environmental laws also may impose restrictions on the manner in which property may be used or businesses may be operated. A property owner who violates environmental laws may be subject to sanctions which may be enforced by governmental agencies or, in certain circumstances, private parties. In connection with the acquisition and ownership of our properties, we may be exposed to such costs. The costs of compliance with environmental regulatory requirements, defending against environmental claims or remediation of any contaminated property could materially adversely affect our business, operating results and cash available for distribution to stockholders.
Some of our properties contain asbestos-containing building materials. Environmental laws require owners of buildings containing asbestos properly manage and maintain the asbestos, adequately inform or train those who may come into contact with asbestos and undertake special precautions in the event that asbestos is disturbed during building renovation or demolition. These laws may impose fines and penalties on owners who fail to comply with these requirements and may allow third parties to seek recovery from owners for personal injury associated with exposure to asbestos. In addition, some of our properties contain, or may have contained, or are adjacent to or near other properties that have contained or currently contain, underground storage tanks used to store petroleum products and other hazardous or toxic substances, which create a potential for the release of petroleum products or other hazardous or toxic substances. We also own properties that are on or are adjacent to or near other properties upon which other persons, including former owners or tenants of our properties, have engaged, or may in the future engage, in activities that may release petroleum products or other hazardous or toxic substances.
Before acquiring a property, we typically obtain a preliminary assessment of environmental conditions at the property, often referred to as “Phase I environmental site assessment.” However, this environmental assessment does not include soil sampling
or subsurface investigations and typically does not include an asbestos survey. We may acquire properties with known adverse environmental conditions and/or material environmental conditions, liabilities or compliance concerns may arise after the environmental assessment has been completed. Further, in connection with property dispositions, we may agree to remain responsible for, and to bear the cost of, remediating or monitoring certain environmental conditions on the properties. Moreover, there can be no assurance that future laws, ordinances or regulations will not impose any material environmental liability, or the current environmental condition of our properties will not be affected by tenants, by the condition of land or operations in the vicinity of our properties (such as releases from underground storage tanks), or by third parties unrelated to us.
We are exposed to the potential impacts of future climate change and climate change-related risks.
Our properties may be exposed to rare catastrophic weather events, such as severe storms, floods or wildfires. If the frequency of extreme weather events increases due to climate change, our exposure to these events could increase. In addition, in connection with any development, redevelopment or renovation project, we may be harmed by potential changes to the supply chain or stricter energy efficiency standards for industrial buildings. To the extent climate change causes shifts in weather patterns, our markets could experience negative consequences, including declining demand for industrial space and our inability to operate our buildings. Climate change may also have indirect negative effects on our business by increasing the cost of, or decreasing the availability of, property insurance on terms we find acceptable and increasing the cost of energy, building materials and snow removal at our properties. In addition, compliance with new laws or regulations relating to climate change, including compliance with “green” building codes, may require us to make improvements to our existing properties or result in increased operating costs that we may not be able to effectively pass on to our tenants. Any such laws or regulations could also impose substantial costs on our tenants, thereby impacting the financial condition of our tenants and their ability to meet their lease obligations and to lease or re-lease our properties.
Compliance or failure to comply with the ADA and other regulations could result in substantial costs.
Under the ADA, places of public accommodation must meet certain federal requirements related to access and use by disabled persons. Noncompliance with these requirements could result in additional costs to attain compliance, the imposition of fines by the federal government or the award of damages or attorney’s fees to private litigants. If we are required to make unanticipated expenditures to comply with the ADA or other regulations, including removing access barriers, then our cash flows and cash available for distribution may be adversely affected. In addition, changes to the requirements set forth in the ADA or other regulations or the adoption of new requirements could require us to make significant unanticipated expenditures.
The ownership of properties subject to ground leases exposes us to certain risks.
We currently own and may acquire additional properties subject to ground leases, or leasehold interests in the land underlying the building. As lessee under a ground lease, we are exposed to the possibility of losing the property upon expiration, or an earlier breach by us, of the ground lease. Our ground leases may also contain provisions that limit our ability to sell the property or require us to obtain the consent of the landlord in order to assign or transfer our rights and obligations under the ground lease in connection with a sale of the property, which could adversely impact the price realized from any such sale. We also own properties that benefit from payment in lieu of tax (“PILOT”) programs or similar programs through leasehold interests with the relevant municipality serving as lessor. While we have the right to purchase the fee interests in these properties for a nominal purchase price, in the event of such a conversion of our ownership interests, any preferential tax treatment offered by the PILOT programs will be lost.
We may be unable to sell properties, including as a result of uncertain market conditions.
We expect to hold our properties until a sale or other disposition is appropriate given our investment objectives. Our ability to dispose of any property on advantageous terms depends on factors beyond our control, including competition from other sellers and the availability of attractive financing for potential buyers. Due to the uncertainty of market conditions that may affect future property dispositions, we cannot assure you that we will be able to sell our properties at a profit. Accordingly, the extent to which you will receive cash distributions and realize potential appreciation on our investments will be dependent upon fluctuating market conditions. Furthermore, we cannot assure you that we will have the funds that may be required to correct defects or to make improvements before a property can be sold.
If we sell properties and provide financing to purchasers, defaults by the purchasers would adversely affect our cash flows.
Under certain circumstances, we may sell properties by providing financing to purchasers. If we provide financing to purchasers, we will bear the risk that the purchaser may default, which could adversely affect our cash flows and ability to make distributions to stockholders and may result in litigation and increased expenses. Even in the absence of a purchaser default, the
reinvestment or distribution of the sales proceeds will be delayed until the promissory notes (or other property we may accept upon a sale) are actually paid, sold or refinanced.
Joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on co-venturers’ financial condition and disputes between us and our co-venturers.
We may in the future selectively acquire, own and/or develop properties through partnerships, joint ventures or other co-investment entities with third parties when we deem such transactions are warranted by the circumstances. In such event, we would not be in a position to exercise sole decision-making authority regarding the property, partnership, joint venture or other entity, involving risks not present were a third party not involved, including the possibility that partners or co-venturers might become bankrupt or fail to fund their share of required capital contributions, disputes and litigation. Partners or co-venturers may have economic or other business interests or goals which are inconsistent with our business interests or goals, and may be in a position to take actions contrary to our policies or objectives, and they may have competing interests in our markets that could create conflict of interest issues. Such investments may also have the potential risk of impasses on decisions, such as a sale, because neither we nor the partner or co-venturer would have full control over the partnership or joint venture. In addition, prior consent of our joint venture partners may be required for a sale or transfer to a third party of our interests in the joint venture, which would restrict our ability to dispose of our interest in the joint venture. In addition, we may in certain circumstances be liable for the actions of our third-party partners or co-venturers. Our joint ventures may be subject to debt and, in volatile credit markets, the refinancing of such debt may require equity capital calls.
Risks Related to Our Debt Financings
Our operating results and financial condition could be adversely affected if we are unable to make required payments on our debt.
Our charter and bylaws do not limit the amount of indebtedness we may incur, and we are subject to risks normally associated with debt financing, including the risk that our cash flows will be insufficient to meet required payments of principal and interest. There can be no assurance that we will be able to refinance any maturing indebtedness, that such refinancing would be on terms as favorable as the terms of the maturing indebtedness or that we will be able to otherwise obtain funds by selling assets or raising equity to make required payments on maturing indebtedness. In particular, loans obtained to fund property acquisitions may be secured by first mortgages on such properties. If we are unable to make our debt service payments as required, a lender could foreclose on the properties securing its debt, which would cause us to lose part or all of our investment. Certain of our existing secured indebtedness is, and future secured indebtedness may be, cross-collateralized and, consequently, a default on this indebtedness could cause us to lose part or all of our investment in multiple properties.
Increases in interest rates could increase our required debt payments and adversely affect our ability to make distributions to stockholders.
As of December 31, 2021, we had total outstanding debt of approximately $2.2 billion, including $296.0 million of debt subject to variable interest rates (excluding amounts that were hedged to fix rates), and we expect that we will incur additional indebtedness in the future. Interest we pay on outstanding debt reduces our cash available for distribution. Since we have incurred and may continue to incur variable rate debt, increases in interest rates by the Federal Reserve or changes in the London Interbank Offered Rate (“LIBOR”), or its replacement, would raise our interest costs, which reduces our cash flows and our ability to make distributions. If we are unable to refinance our indebtedness at maturity or meet our payment obligations, our financial condition and cash flows would be adversely affected, and we may lose the properties securing such indebtedness. In addition, if we need to repay existing debt during periods of rising interest rates, we could be required to sell one or more of our properties at times which may not permit realization of the maximum return on such investments.
We may be adversely affected by developments in the LIBOR market or the use of alternative reference rates.
As of December 31, 2021, approximately 57.1% or $1.3 billion of our outstanding debt had variable interest rates indexed to LIBOR. On March 5, 2021, the Financial Conduct Authority (the “FCA”), which regulates LIBOR, announced that U.S. dollar LIBOR will no longer be published after June 30, 2023. Additionally, banking regulators are encouraging banks to discontinue new LIBOR debt issuances by December 31, 2021. While there is no consensus on what rate or rates may become accepted alternatives to LIBOR, the U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprising large U.S. financial institutions, has identified the Secured Overnight Financing Rate (“SOFR”), a new index calculated by short-term repurchase agreements backed by U.S. Treasury securities, as its preferred alternative rate for LIBOR. While we expect LIBOR to be available in substantially its current form until June 30, 2023, it is possible that LIBOR will become unavailable prior to that date. For example, if sufficient banks decline to make submissions to the LIBOR
administrator, LIBOR may become unavailable and the risks associated with the transition to an alternative reference rate will be accelerated and magnified.
We are monitoring and evaluating the risks related to our debt indexed to LIBOR, which include interest on loans or amounts received and paid on derivative instruments. These risks arise in connection with transitioning contracts to an alternative rate, including any resulting value transfer that may occur, and are likely to vary by contract. The value of loans, securities, or derivative instruments tied to LIBOR, as well as interest rates on our current or future indebtedness, may also be impacted if LIBOR is limited or discontinued. For some instruments, the method of transitioning to an alternative reference rate may be challenging, especially if we cannot agree with the respective counterparty about how to make the transition.
As a result, there can be no assurance that any of the aforementioned developments or changes will not result in financial market disruptions, significant increases in benchmark interest rates, substantially higher financing costs or a shortage of available debt financing, any of which could have an adverse effect on us.
Our loan covenants could limit our flexibility and adversely affect our financial condition and ability to make distributions.
Our existing mortgage notes and unsecured loan agreements require us to comply with certain financial and other covenants, including loan-to-collateral-value ratios, debt service coverage ratios, leverage ratios, fixed charge coverage ratios and, in the case of an event of default, limitations on our ability to make distributions. In addition, our existing unsecured loan agreements contain, and future borrowing facilities may contain, certain cross-default provisions which are triggered in the event that other material indebtedness is in default. These cross-default provisions may require us to repay or restructure the facilities in addition to any mortgage or other debt that is in default. New indebtedness that we may incur in the future may contain financial or other covenants more restrictive than those in our existing loan agreements.
We are a holding company and conduct substantially all of our business through our Operating Partnership. As a result, we rely on distributions from our Operating Partnership to pay dividends (including distributions required to maintain our REIT status) and to meet our debt service and other obligations. The ability of our Operating Partnership to make distributions to us depends on the operating results of our Operating Partnership and its subsidiaries and on the terms of any loans that encumber the properties owned by them. Such loans may contain lock box arrangements, reserve requirements, financial covenants and other provisions that restrict the distribution of funds in the event of a default. For example, our mortgage notes prohibit, in the event of default, the distribution of any cash from the defaulting borrower subsidiary to our Operating Partnership. As a result, a default under any of these loans by the borrower subsidiaries could cause us to have insufficient cash to make the distributions and meet our debt service and other obligations.
If debt is unavailable at reasonable rates, we may not be able to finance acquisitions or refinance our existing debt.
If debt is unavailable at reasonable rates, we may not be able to finance acquisitions or refinance existing debt when the loans come due on favorable terms, or at all. Most of our financing arrangements require us to make a lump-sum or “balloon” payment at maturity. Our ability to make a balloon payment at maturity is uncertain and, in the event that we do not have sufficient funds to repay the debt at maturity, we will need to refinance this debt. If interest rates are higher when we refinance such debt, our net income could be reduced. If the credit environment is constrained at the time the balloon payment is due, we may not be able to refinance the existing financing on acceptable terms and may be forced to choose from a number of unfavorable options, including agreeing to unfavorable financing terms, selling one or more properties on disadvantageous terms or defaulting on the loan and permitting the lender to foreclose. In addition, we locked in our fixed-rate debt at a point in time when we were able to obtain favorable interest rates, principal amortization and other terms. When we refinance this debt, prevailing interest rates and other factors may result in paying a greater amount of debt service, which will adversely affect our cash flow, and, consequently, our cash available for distribution to stockholders.
Our hedging strategies may not be successful in mitigating our risks associated with interest rates.
Our various derivative financial instruments involve certain risks, such as the risk that the counterparties may fail to honor their obligations under these arrangements, that these arrangements may not be effective in reducing our exposure to interest rate changes and that a court could rule that such agreements are not legally enforceable. These instruments may also generate income that may not be treated as qualifying REIT income for purposes of REIT income tests. In addition, the nature, timing and costs of hedging transactions may influence the effectiveness of our hedging strategies. Poorly designed strategies or improperly executed transactions could actually increase our risk and losses. We cannot assure you that our hedging strategies and derivative financial instruments will adequately offset the risk of interest rate volatility or that such instruments will not result in losses that may adversely impact our financial condition.
Adverse changes in our credit ratings could negatively affect our financing activity.
The credit ratings of our unsecured debt are based on our operating performance, liquidity and leverage ratios, overall financial position and other factors employed by the credit rating agencies. Our credit ratings can affect the amount of capital we can access, as well as the terms and pricing of any debt we may incur. There can be no assurance that we will be able to maintain our current credit ratings, and in the event our credit ratings are downgraded, we would incur greater borrowing costs and may encounter difficulty in obtaining additional financing. Also, a downgrade in our credit ratings may trigger additional payments or other negative consequences under our unsecured credit facility and other debt instruments. Adverse changes in our credit ratings could harm our business and, in particular, our financing, refinancing and other capital market activities, ability to manage debt maturities, future growth and acquisition activity.
U.S. Federal Income Tax Risks
Failure to qualify as a REIT would reduce our net earnings available for investment or distribution.
Our qualification as a REIT will depend upon our ability to meet requirements regarding our organization and ownership, distributions of our income, the nature and diversification of our income and assets and other tests imposed by the Code. If we fail to qualify as a REIT for any taxable year after electing REIT status, we will be subject to federal income tax on our taxable income at regular corporate rates. In addition, we would generally be disqualified from treatment as a REIT for the four taxable years following the year in which we failed to qualify as a REIT. Losing our REIT status would reduce our net earnings available for investment or distribution to stockholders because of the additional tax liability. In addition, dividends to stockholders would no longer qualify for the dividends-paid deduction and we would no longer be required to make distributions. If this occurs, we might be required to borrow funds or liquidate some investments in order to pay the applicable tax.
Even if we maintain our qualification as a REIT for federal income tax purposes, we may be subject to other tax liabilities that reduce our cash flow and our ability to make distributions to stockholders.
Even if we maintain our qualification as a REIT for federal income tax purposes, we may be subject to some federal, state and local taxes.
For example, (i) we will be subject to federal corporate income tax on the undistributed income to the extent that we satisfy the REIT distribution requirements but distribute less than 100% of our REIT taxable income, (ii) we will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions we pay in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years, (iii) we will be subject to the highest corporate income tax rate if we have net income from the sale of foreclosure property that we hold primarily for sale to customers in the ordinary course of business or other non-qualifying income from foreclosure property, (iv) we will be subject to a 100% “prohibited transaction” tax on our gain from an asset sale, other than foreclosure property, that we hold primarily for sale to customers in the ordinary course of business, unless such sale were made by our taxable REIT subsidiary (“TRS”) or if we qualify for a safe harbor; and (v) our TRS will be subject to federal, state and local income tax at regular corporate rates on any income that it earns.
REIT distribution requirements could adversely affect our ability to execute our business plan.
From time to time, we may generate taxable income greater than our income for financial reporting purposes, or our taxable income may be greater than our cash available for distribution to stockholders. If we do not have other funds available in these situations, we could be required to borrow or raise equity on unfavorable terms, sell investments at disadvantageous prices, make taxable distributions of our stock or debt securities or find another alternative source of funds to distribute enough of our taxable income to satisfy the REIT distribution requirement and to avoid corporate income tax and the 4% excise tax in a particular year. These alternatives could increase our costs or reduce the value of our equity. In addition, to maintain our qualification as a REIT, we must satisfy certain tests on an ongoing basis concerning, among other things, the sources of our income, nature of our assets and the amounts we distribute to our stockholders. We may be required to make distributions to stockholders at times when it would be more advantageous to reinvest cash in our business or when we do not have funds readily available for distribution. Thus, compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits and the value of our stockholders’ investment.
Re-characterization of sale-leaseback transactions may cause us to lose our REIT status.
In certain circumstances, we expect to purchase properties and lease them back to the sellers of such properties. While we intend to structure such a sale-leaseback transaction such that the lease will be characterized as a “true lease” for tax purposes, we cannot assure you that the Internal Revenue Service (“IRS”) will not challenge such characterization. In the event that any such sale-leaseback transaction is challenged and re-characterized as a financing transaction or loan for federal income tax purposes, deductions for depreciation and cost recovery relating to such property would be disallowed. If a sale-leaseback transaction were so re-characterized, we might fail to satisfy the REIT qualification “asset tests” or “income tests” and, consequently, lose our REIT status effective with the year of re-characterization. Alternatively, the amount of our REIT taxable income could be recalculated which might also cause us to fail to meet the distribution requirement for a taxable year.
The prohibited transactions tax may limit our ability to engage in certain transactions.
A REIT’s net income from prohibited transactions is subject to a 100% tax. In general, prohibited transactions are dispositions of property, other than foreclosure property, held primarily for sale to customers in the ordinary course of business. Although a safe harbor to the characterization of a disposition as a prohibited transaction is available, we cannot assure you that we can comply with the safe harbor or that we will avoid owning property that may be characterized as held primarily for sale to customers in the ordinary course of business. Consequently, we may choose not to engage in certain dispositions or may conduct such dispositions through a TRS.
We may be subject to adverse legislative or regulatory tax changes.
Federal income taxation rules are constantly under review by the IRS, the U.S. Department of the Treasury and persons involved in the legislative process. Changes to tax laws, with or without retroactive application, through new legislation, Treasury Regulations, administrative interpretations or court decisions could adversely affect us or our stockholders, including by negatively affecting our ability to qualify as a REIT or the federal income tax consequences of such qualification, or reducing the relative attractiveness of an investment in a REIT compared to a corporation not qualified as a REIT. In addition, several proposals have been made that would make substantial changes to the federal income tax laws generally. We cannot predict whether any of the proposed changes will become law, and we cannot predict how such changes might affect us or our stockholders.
Other General Risks
We face risks associated with system failures through security breaches or cyber-attacks, as well as other significant disruptions of our information technology (“IT”) networks and related systems.
We face risks associated with security breaches, whether through cyber-attacks, computer viruses, attachments to e-mails, phishing schemes, persons inside our organization or persons with access to systems inside of our organization, and other significant disruptions of our IT networks and related systems. The risk of a security breach or disruption, particularly through cyber-attack, has generally increased as the number, intensity and sophistication of attempted attacks from around the world have increased. There can be no assurance that our security measures taken to manage the risk of a security breach or disruption will be effective or that attempted security breaches or disruptions would not be successful or damaging. A security breach or disruption involving our IT networks and related systems could disrupt the proper functioning of our networks and systems; result in misstated financial reports, violations of loan covenants and/or missed reporting deadlines; result in our inability to monitor our compliance with REIT qualification rules and regulations; result in the unauthorized access to, and destruction, loss, theft, misappropriation or release of proprietary, confidential, sensitive or otherwise valuable information, which others could use to compete against us or for disruptive, destructive or otherwise harmful purposes; require significant management attention and resources to remedy any damages that result; subject us to claims for breach of contract or failure to safeguard personal information, damages, credits, penalties or termination of leases or other agreements; or damage our reputation among our tenants and investors generally. Additionally, we face potential heightened cybersecurity risks during the COVID-19 pandemic as our level of dependence on our IT networks and related systems has increased, stemming from employees working remotely, and the number of malware campaigns and phishing attacks has also increased.
We depend on key personnel; the loss of their full service could adversely affect us.
Our success depends to a significant degree upon the continued contributions of certain key personnel including, but not limited to, our executive officers, whose continued service is not guaranteed, and each of whom would be difficult to replace. Our ability to retain our management team or to attract suitable replacements should any members of the management team leave is
dependent on the competitive nature of the employment market. The loss of services from key members of the management team or a limitation in their availability could adversely impact our operating results, financial condition and cash flows. Further, such a loss could be negatively perceived in the capital markets. Each executive officer may terminate his employment at any time and, under certain conditions, may receive cash severance, immediate vesting of equity awards and other benefits under employment agreements, equity award agreements and our retirement vesting program. In addition, in the case of certain terminations, executive officers would not be restricted from competing with us after their departure. As of December 31, 2021, we have not obtained and do not expect to obtain key man life insurance on any of our key personnel. We also believe that, as we expand, our future success depends, in large part, upon our ability to hire and retain highly skilled managerial, investment, financing, operational and marketing personnel. Competition for such personnel is intense, and we cannot assure you that we will be successful in attracting and retaining such skilled personnel.
An increased focus on metrics and reporting related to corporate responsibility, specifically related to ESG factors, may impose additional costs and expose us to new risks.
Investors and other stakeholders have focused on how companies address a variety of ESG matters and look to rating systems developed by third party groups to allow comparisons between companies. Although we participate in some of these rating systems, we do not participate, and may not score well, in all of them. Further, the criteria used in these rating systems change frequently, and our scores may drop as the criteria changes. We supplement our participation in these ratings systems with public disclosures regarding our ESG activities, but investors and stakeholders may look for specific disclosures that we do not provide. Our failure to participate, or score well, in certain ratings systems or to provide certain ESG disclosures and engage in certain ESG initiatives could result in reputational harm and could cause certain investors to be unwilling to invest in our stock, which could impair our ability to raise capital.
Our compensation plans may not be tied to or correspond with our improved financial results or the market prices for our securities, which may adversely affect us.
The compensation committee of our board of directors is responsible for overseeing our compensation and employee benefit plans and practices, including our executive compensation plans and our incentive compensation and equity-based compensation plans. The compensation committee has significant discretion in structuring these compensation packages and may make compensation decisions based on any number of factors. As a result, compensation awards may not be tied to or correspond with improved financial results at our company or the market prices for our securities.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments
None.

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ITEM 2. PROPERTIES
Item 2. Properties
As of December 31, 2021, we owned the properties in the following table.
State City Number of
Buildings Asset Type Total Rentable
Square Feet
Alabama Birmingham 3 Warehouse / Distribution 295,748
Montgomery 1 Warehouse / Distribution 332,000
Moody 1 Warehouse / Distribution 595,346
Phenix City 1 Warehouse / Distribution 117,568
Arkansas Bryant 1 Warehouse/ Distribution 300,160
Rogers 1 Warehouse / Distribution 400,000
Arizona Avondale 1 Warehouse / Distribution 186,643
Chandler 1 Light Manufacturing 104,352
Gilbert 1 Warehouse / Distribution 41,504
Mesa 1 Light Manufacturing 71,030
Tucson 1 Warehouse / Distribution 129,047
California Lodi 1 Warehouse / Distribution 400,340
McClellan 1 Warehouse / Distribution 160,534
Morgan Hill 2 Light Manufacturing 107,126
Rancho Cordova 2 Warehouse / Distribution 106,663
Roseville 1 Warehouse / Distribution 114,597
State City Number of
Buildings Asset Type Total Rentable
Square Feet
Sacramento 6 Warehouse / Distribution 749,709
Sacramento 1 Light Manufacturing 130,000
San Diego 1 Warehouse / Distribution 205,440
Stockton 3 Warehouse / Distribution 263,716
Colorado Grand Junction 1 Warehouse / Distribution 82,800
Johnstown 1 Warehouse / Distribution 132,194
Longmont 1 Light Manufacturing 64,750
Loveland 2 Warehouse / Distribution 195,674
Connecticut Avon 1 Light Manufacturing 78,400
East Windsor 2 Warehouse / Distribution 271,111
Milford 2 Warehouse / Distribution 367,700
North Haven 3 Warehouse / Distribution 824,727
Wallingford 1 Warehouse / Distribution 105,000
Delaware New Castle 1 Warehouse / Distribution 485,987
Florida Daytona Beach 1 Light Manufacturing 142,857
Fort Myers 1 Warehouse / Distribution 260,620
Jacksonville 5 Warehouse / Distribution 1,256,750
Lake Worth 2 Warehouse / Distribution 157,758
Lake Worth 1 Light Manufacturing 42,158
Lakeland 1 Warehouse / Distribution 215,280
Ocala 1 Warehouse / Distribution 619,466
Orlando 1 Warehouse / Distribution 155,000
Orlando 1 Light Manufacturing 215,900
Tampa 1 Warehouse / Distribution 78,560
West Palm Beach 1 Light Manufacturing 112,353
Georgia Augusta 1 Warehouse / Distribution 203,726
Buford 1 Warehouse / Distribution 103,720
Calhoun 1 Warehouse / Distribution 151,200
Dallas 1 Warehouse / Distribution 92,807
Forest Park 1 Warehouse / Distribution 373,900
Norcross 1 Warehouse / Distribution 152,036
Savannah 1 Warehouse / Distribution 504,300
Shannon 1 Warehouse / Distribution 568,516
Smyrna 1 Warehouse / Distribution 102,000
Statham 1 Warehouse / Distribution 225,692
Stone Mountain 1 Warehouse / Distribution 78,000
Iowa Ankeny 2 Warehouse / Distribution 400,968
Council Bluffs 1 Warehouse / Distribution 90,000
Des Moines 2 Warehouse / Distribution 301,381
Marion 1 Warehouse / Distribution 95,500
Idaho Idaho Falls 1 Warehouse / Distribution 78,690
Illinois Bartlett 1 Warehouse / Distribution 207,223
Batavia 2 Warehouse / Distribution 204,642
Batavia 1 Light Manufacturing 56,676
Belvidere 9 Warehouse / Distribution 1,364,222
Cary 1 Warehouse / Distribution 79,049
Crystal Lake 4 Warehouse / Distribution 506,096
DeKalb 1 Warehouse / Distribution 146,740
Elgin 2 Warehouse / Distribution 383,856
Elgin 1 Light Manufacturing 41,007
Gurnee 1 Warehouse / Distribution 338,740
Harvard 1 Light Manufacturing 126,304
State City Number of
Buildings Asset Type Total Rentable
Square Feet
Hodgkins 2 Warehouse / Distribution 518,109
Itasca 3 Warehouse / Distribution 311,355
Libertyville 1 Flex Office 35,141
Lisle 1 Light Manufacturing 105,925
Machesney Park 1 Warehouse / Distribution 80,000
McHenry 2 Warehouse / Distribution 169,311
Montgomery 1 Warehouse / Distribution 584,301
Saint Charles 1 Light Manufacturing 102,000
Sauk Village 1 Warehouse / Distribution 375,785
Schaumburg 1 Warehouse / Distribution 67,817
Vernon Hills 1 Warehouse / Distribution 95,482
Waukegan 1 Warehouse / Distribution 131,252
West Chicago 1 Warehouse / Distribution 249,470
West Chicago 5 Light Manufacturing 305,874
West Dundee 1 Warehouse / Distribution 154,475
Wood Dale 1 Light Manufacturing 137,607
Woodstock 1 Light Manufacturing 129,803
Indiana Albion 2 Light Manufacturing 96,778
Elkhart 2 Warehouse / Distribution 170,100
Fort Wayne 1 Warehouse / Distribution 108,800
Goshen 1 Warehouse / Distribution 366,000
Greenwood 2 Warehouse / Distribution 600,940
Indianapolis 1 Warehouse / Distribution 78,600
Lafayette 3 Warehouse / Distribution 466,400
Lebanon 3 Warehouse / Distribution 2,065,393
Marion 1 Warehouse / Distribution 249,920
Portage 2 Warehouse / Distribution 786,249
South Bend 1 Warehouse / Distribution 225,000
Yoder 1 Warehouse / Distribution 764,177
Kansas Edwardsville 1 Warehouse / Distribution 270,869
Lenexa 3 Warehouse / Distribution 581,059
Olathe 2 Warehouse / Distribution 725,839
Wichita 3 Warehouse / Distribution 248,550
Kentucky Bardstown 1 Warehouse / Distribution 102,318
Danville 1 Warehouse / Distribution 757,047
Erlanger 1 Warehouse / Distribution 108,620
Florence 2 Warehouse / Distribution 641,136
Hebron 1 Warehouse / Distribution 109,000
Louisville 2 Warehouse / Distribution 499,217
Louisiana Baton Rouge 3 Warehouse / Distribution 532,036
Shreveport 1 Warehouse / Distribution 420,259
Massachusetts Chicopee 1 Warehouse / Distribution 217,000
Hudson 1 Light Manufacturing 128,000
Malden 2 Light Manufacturing 109,943
Middleborough 1 Light Manufacturing 80,100
Norton 1 Warehouse / Distribution 200,000
South Easton 1 Light Manufacturing 86,000
Sterling 1 Warehouse / Distribution 119,056
Stoughton 2 Warehouse / Distribution 258,213
Westborough 1 Warehouse / Distribution 121,700
Maryland Elkridge 1 Warehouse / Distribution 167,410
Hagerstown 3 Warehouse / Distribution 1,424,620
Hampstead 1 Warehouse / Distribution 1,035,249
Hunt Valley 1 Warehouse / Distribution 46,851
State City Number of
Buildings Asset Type Total Rentable
Square Feet
White Marsh 1 Warehouse / Distribution 102,000
Maine Biddeford 2 Warehouse / Distribution 265,126
Gardiner 1 Warehouse / Distribution 265,000
Lewiston 1 Flex Office 60,000
Portland 1 Warehouse / Distribution 100,600
Michigan Belleville 1 Light Manufacturing 160,464
Canton 1 Warehouse / Distribution 491,049
Chesterfield 4 Warehouse / Distribution 478,803
Grand Rapids 2 Warehouse / Distribution 445,137
Holland 1 Warehouse / Distribution 195,000
Kentwood 2 Warehouse / Distribution 370,020
Kentwood 1 Light Manufacturing 85,157
Lansing 4 Warehouse / Distribution 770,425
Livonia 2 Warehouse / Distribution 285,306
Marshall 1 Light Manufacturing 57,025
Novi 3 Warehouse / Distribution 685,010
Plymouth 1 Warehouse / Distribution 125,214
Redford 1 Warehouse / Distribution 135,728
Romulus 1 Warehouse / Distribution 303,760
Romulus 1 Light Manufacturing 274,500
Sterling Heights 1 Warehouse / Distribution 108,000
Walker 1 Warehouse / Distribution 210,000
Warren 4 Warehouse / Distribution 981,540
Wixom 1 Warehouse / Distribution 126,720
Zeeland 1 Warehouse / Distribution 230,200
Minnesota Blaine 1 Warehouse / Distribution 248,816
Bloomington 1 Light Manufacturing 145,351
Brooklyn Park 1 Warehouse / Distribution 200,720
Carlos 1 Light Manufacturing 196,270
Eagan 1 Warehouse / Distribution 276,550
Inver Grove Heigh 1 Warehouse / Distribution 80,655
Maple Grove 2 Warehouse / Distribution 207,875
Mendota Heights 1 Warehouse / Distribution 87,183
New Hope 1 Light Manufacturing 107,348
Newport 1 Warehouse / Distribution 83,000
Oakdale 2 Warehouse / Distribution 210,044
Plymouth 3 Warehouse / Distribution 357,085
Savage 1 Warehouse / Distribution 244,050
Shakopee 1 Light Manufacturing 136,589
South Saint Paul 1 Warehouse / Distribution 422,727
Saint Paul 1 Warehouse / Distribution 316,636
Missouri Berkeley 1 Warehouse / Distribution 121,223
Earth City 1 Warehouse / Distribution 116,783
Fenton 1 Warehouse / Distribution 127,464
Hazelwood 1 Warehouse / Distribution 305,550
O'Fallon 2 Warehouse / Distribution 186,854
Mississippi Southaven 1 Warehouse / Distribution 556,600
North Carolina Catawba 1 Warehouse / Distribution 137,785
Charlotte 3 Warehouse / Distribution 243,880
Durham 1 Warehouse / Distribution 80,600
Garner 1 Warehouse / Distribution 150,000
Greensboro 1 Warehouse / Distribution 128,287
Huntersville 1 Warehouse / Distribution 185,570
Lexington 1 Warehouse / Distribution 201,800
State City Number of
Buildings Asset Type Total Rentable
Square Feet
Mebane 2 Warehouse / Distribution 606,840
Mebane 1 Light Manufacturing 202,691
Mocksville 1 Warehouse / Distribution 129,600
Mooresville 2 Warehouse / Distribution 799,200
Mountain Home 1 Warehouse / Distribution 146,014
Newton 1 Warehouse / Distribution 217,200
Pineville 1 Light Manufacturing 75,400
Rural Hall 1 Warehouse / Distribution 250,000
Salisbury 1 Warehouse / Distribution 288,000
Smithfield 1 Warehouse / Distribution 307,845
Troutman 1 Warehouse / Distribution 301,000
Winston-Salem 1 Warehouse / Distribution 385,000
Youngsville 1 Warehouse / Distribution 365,000
Nebraska Bellevue 1 Warehouse / Distribution 370,000
La Vista 1 Warehouse / Distribution 178,368
Omaha 5 Warehouse / Distribution 465,448
New Hampshire Londonderry 1 Warehouse / Distribution 125,060
Nashua 1 Warehouse / Distribution 337,391
New Jersey Branchburg 1 Warehouse / Distribution 113,973
Burlington 2 Warehouse / Distribution 756,990
Franklin Township 1 Warehouse / Distribution 183,000
Lopatcong 1 Warehouse / Distribution 237,500
Lumberton 1 Light Manufacturing 120,000
Moorestown 2 Warehouse / Distribution 187,569
Mt. Laurel 1 Warehouse / Distribution 112,294
Pedricktown 1 Warehouse / Distribution 245,749
Swedesboro 1 Warehouse / Distribution 123,962
Westampton 1 Warehouse / Distribution 128,959
Nevada Fernley 1 Light Manufacturing 183,435
Las Vegas 1 Warehouse / Distribution 34,916
Las Vegas 1 Light Manufacturing 122,472
Paradise 2 Light Manufacturing 80,422
Reno 1 Light Manufacturing 87,264
Sparks 1 Warehouse / Distribution 161,986
New York Buffalo 1 Warehouse / Distribution 117,000
Cheektowaga 1 Warehouse / Distribution 121,760
Farmington 1 Warehouse / Distribution 149,657
Gloversville 3 Warehouse / Distribution 211,554
Johnstown 2 Warehouse / Distribution 117,102
Johnstown 1 Light Manufacturing 42,325
Rochester 2 Warehouse / Distribution 252,860
Ronkonkoma 1 Warehouse / Distribution 64,224
Ohio Bedford Heights 1 Warehouse / Distribution 173,034
Boardman 1 Warehouse / Distribution 168,111
Canal Winchester 2 Warehouse / Distribution 814,265
Columbus 3 Warehouse / Distribution 1,348,237
Dayton 2 Warehouse / Distribution 775,727
Etna 1 Warehouse / Distribution 1,232,149
Fairborn 1 Warehouse / Distribution 259,369
Fairfield 2 Warehouse / Distribution 364,948
Gahanna 1 Warehouse / Distribution 383,000
Groveport 1 Warehouse / Distribution 320,657
Hilliard 1 Warehouse / Distribution 237,500
Macedonia 1 Warehouse / Distribution 201,497
State City Number of
Buildings Asset Type Total Rentable
Square Feet
Maple Heights 1 Warehouse / Distribution 170,000
Mason 1 Light Manufacturing 116,200
North Jackson 2 Warehouse / Distribution 517,150
Oakwood Village 1 Warehouse / Distribution 75,000
Salem 1 Light Manufacturing 271,000
Seville 1 Warehouse / Distribution 75,000
Streetsboro 1 Warehouse / Distribution 343,416
Strongsville 2 Warehouse / Distribution 341,561
Toledo 1 Warehouse / Distribution 177,500
Twinsburg 2 Warehouse / Distribution 426,974
West Chester 1 Warehouse / Distribution 269,868
West Jefferson 1 Warehouse / Distribution 857,390
Oklahoma Oklahoma City 2 Warehouse / Distribution 303,740
Tulsa 2 Warehouse / Distribution 309,600
Oregon Salem 2 Light Manufacturing 155,900
Pennsylvania Allentown 1 Warehouse / Distribution 289,900
Burgettstown 1 Warehouse / Distribution 455,000
Charleroi 1 Warehouse / Distribution 119,161
Clinton 6 Warehouse / Distribution 1,131,972
Croydon 1 Warehouse / Distribution 101,869
Elizabethtown 1 Warehouse / Distribution 206,236
Export 1 Warehouse / Distribution 138,270
Hazleton 1 Warehouse / Distribution 589,580
Imperial 1 Warehouse / Distribution 315,634
Lancaster 1 Warehouse / Distribution 240,528
Langhorne 2 Warehouse / Distribution 180,000
Langhorne 2 Light Manufacturing 287,647
Lebanon 1 Warehouse / Distribution 211,358
Mechanicsburg 3 Warehouse / Distribution 747,054
Muhlenberg Township 1 Warehouse / Distribution 392,107
New Galilee 1 Warehouse / Distribution 410,389
New Kensington 1 Warehouse / Distribution 200,500
New Kingstown 1 Warehouse / Distribution 330,000
O'Hara Township 1 Warehouse / Distribution 887,084
Pittston 1 Warehouse / Distribution 437,446
Reading 1 Warehouse / Distribution 248,000
Warrendale 1 Warehouse / Distribution 179,394
Williamsport 1 Warehouse / Distribution 250,000
York 5 Warehouse / Distribution 1,306,834
South Carolina Columbia 1 Light Manufacturing 185,600
Duncan 3 Warehouse / Distribution 996,841
Edgefield 1 Light Manufacturing 126,190
Fountain Inn 2 Warehouse / Distribution 442,472
Fountain Inn 1 Light Manufacturing 203,000
Gaffney 1 Warehouse / Distribution 226,968
Goose Creek 1 Warehouse / Distribution 500,355
Greenwood 2 Light Manufacturing 175,055
Greer 7 Warehouse / Distribution 877,628
Laurens 1 Warehouse / Distribution 125,000
Piedmont 5 Warehouse / Distribution 942,736
Rock Hill 3 Warehouse / Distribution 720,120
Simpsonville 3 Warehouse / Distribution 1,138,494
Spartanburg 9 Warehouse / Distribution 1,802,623
Summerville 1 Warehouse / Distribution 88,583
Ware Shoals 1 Light Manufacturing 20,514
West Columbia 6 Warehouse / Distribution 1,163,822
State City Number of
Buildings Asset Type Total Rentable
Square Feet
West Columbia 1 Light Manufacturing 464,206
Tennessee Chattanooga 3 Warehouse / Distribution 646,200
Cleveland 1 Warehouse / Distribution 151,704
Clinton 1 Warehouse / Distribution 166,000
Jackson 1 Warehouse / Distribution 216,902
Knoxville 2 Warehouse / Distribution 335,550
Knoxville 1 Light Manufacturing 106,000
Lebanon 2 Warehouse / Distribution 407,552
Loudon 1 Warehouse / Distribution 104,000
Madison 1 Warehouse / Distribution 418,406
Mascot 1 Warehouse / Distribution 130,560
Mascot 1 Light Manufacturing 130,560
Memphis 1 Warehouse / Distribution 1,135,453
Murfreesboro 1 Warehouse / Distribution 102,505
Nashville 1 Warehouse / Distribution 154,485
Vonore 1 Warehouse / Distribution 342,700
Texas Arlington 2 Warehouse / Distribution 290,132
Cedar Hill 1 Warehouse / Distribution 420,000
Conroe 1 Warehouse / Distribution 252,662
El Paso 9 Warehouse / Distribution 2,179,393
Garland 1 Light Manufacturing 253,900
Grapevine 2 Warehouse / Distribution 202,140
Houston 8 Warehouse / Distribution 999,124
Houston 3 Light Manufacturing 597,935
Humble 1 Warehouse / Distribution 289,200
Katy 2 Warehouse / Distribution 244,903
Laredo 2 Warehouse / Distribution 462,658
McAllen 1 Warehouse / Distribution 301,200
Mission 1 Warehouse / Distribution 270,084
Rockwall 1 Warehouse / Distribution 389,546
Stafford 1 Warehouse / Distribution 68,300
Waco 1 Warehouse / Distribution 66,400
Utah Provo 1 Warehouse / Distribution 177,071
Virginia Chester 1 Warehouse / Distribution 100,000
Harrisonburg 1 Warehouse / Distribution 357,673
Independence 1 Warehouse / Distribution 120,000
N. Chesterfield 1 Warehouse / Distribution 109,520
Richmond 1 Light Manufacturing 78,128
Washington Ridgefield 1 Warehouse / Distribution 141,400
Wisconsin Appleton 1 Warehouse / Distribution 152,000
Caledonia 1 Light Manufacturing 53,680
Cudahy 1 Warehouse / Distribution 128,000
De Pere 1 Warehouse / Distribution 200,000
DeForest 1 Warehouse / Distribution 262,521
Delavan 2 Light Manufacturing 146,400
East Troy 1 Warehouse / Distribution 149,624
Elkhorn 1 Warehouse / Distribution 111,000
Elkhorn 1 Light Manufacturing 78,540
Franklin 1 Warehouse / Distribution 156,482
Germantown 4 Warehouse / Distribution 520,163
Hartland 1 Warehouse / Distribution 121,050
Hudson 1 Warehouse / Distribution 139,875
Janesville 1 Warehouse / Distribution 700,000
State City Number of
Buildings Asset Type Total Rentable
Square Feet
Kenosha 1 Light Manufacturing 175,052
Madison 2 Warehouse / Distribution 283,000
Mayville 1 Light Manufacturing 339,179
Mukwonago 1 Warehouse / Distribution 157,438
Muskego 1 Warehouse / Distribution 81,230
New Berlin 3 Warehouse / Distribution 590,663
Oak Creek 2 Warehouse / Distribution 232,144
Pewaukee 2 Warehouse / Distribution 288,201
Pleasant Prairie 1 Warehouse / Distribution 291,599
Pleasant Prairie 1 Light Manufacturing 105,637
Sun Prairie 1 Warehouse / Distribution 427,000
West Allis 4 Warehouse / Distribution 243,478
Yorkville 1 Warehouse / Distribution 98,151
544 108,554,840
Not reflected in the table above is one building under development located in West Sacramento, CA.
As of December 31, 2021, 25 of our 544 buildings were encumbered by mortgage indebtedness totaling approximately $55.0 million (excluding unamortized deferred financing fees, debt issuance costs, and fair market value premiums). See Note 4 in the accompanying Notes to the Consolidated Financial Statements and the accompanying Schedule III for additional information.
Portfolio Summary
The following table summarizes information relating to diversification by building type in our portfolio as of December 31, 2021.
Square Footage Annualized Base Rental Revenue
Building Type Number of Buildings Amount % Occupancy Rate Amount
(in thousands) %
Warehouse/Distribution 459 97,985,062 90.3 % 97.2 % $ 441,131 89.1 %
Light Manufacturing 74 8,721,979 8.0 % 99.2 % 47,029 9.5 %
Total Operating Portfolio/weighted average
533 106,707,041 98.3 % 97.4 % $ 488,160 98.6 %
Value Add/Other 9 1,752,658 1.6 % 66.3 % 6,392 1.3 %
Flex/Office 2 95,141 0.1 % 63.1 % 573 0.1 %
Total portfolio/weighted average
544 108,554,840 100.0 % 96.9 % $ 495,125 100.0 %
Geographic Diversification
The following table summarizes information about the 20 largest markets in our portfolio based on total annualized base rental revenue as of December 31, 2021.
Top 20 Markets(1)
% of Total Annualized Base Rental Revenue
Chicago, IL 7.9 %
Philadelphia, PA 6.7 %
Greenville/Spartanburg, SC 5.1 %
Milwaukee/Madison, WI 4.5 %
Detroit, MI 4.2 %
Columbus, OH 4.1 %
Minneapolis/St Paul, MN 3.9 %
Pittsburgh, PA 3.9 %
Houston, TX 3.0 %
Charlotte, NC 2.5 %
West Michigan, MI 2.4 %
Indianapolis, IN 2.3 %
El Paso, TX 2.3 %
Cincinnati/Dayton, OH 2.0 %
Boston, MA 1.9 %
Cleveland, OH 1.9 %
Westchester/So Connecticut, CT/NY 1.6 %
Washington, DC 1.6 %
Columbia, SC 1.6 %
Raleigh/Durham, NC 1.5 %
Total 64.9 %
(1) As defined by CoStar Realty Information, Inc.
Industry Diversification
The following table summarizes information about the 20 largest tenant industries in our portfolio based on total annualized base rental revenue as of December 31, 2021.
Top 20 Tenant Industries(1)
% of Total
Annualized Base Rental Revenue
Air Freight & Logistics 11.3 %
Containers & Packaging 8.8 %
Auto Components 7.2 %
Trading Companies & Distributors (Industrial Goods) 5.4 %
Commercial Services & Supplies 5.2 %
Internet & Direct Mkt Retail 5.0 %
Machinery 4.7 %
Household Durables 4.7 %
Distributors (Consumer Goods) 4.3 %
Food & Staples Retailing 3.8 %
Media 3.4 %
Building Products 3.3 %
Chemicals 2.4 %
Specialty Retail 2.3 %
Electronic Equip, Instruments 2.1 %
Food Products 2.0 %
Beverages 1.9 %
Road & Rail 1.9 %
Textiles, Apparel, Luxury Good 1.8 %
Household Products 1.7 %
Total 83.2 %
(1) Industry classification based on Global Industry Classification Standard methodology.
Tenant Diversification
The following table summarizes information about the 20 largest tenants in our portfolio based on total annualized base rental revenue as of December 31, 2021.
Top 20 Tenants(1)
Number of
Leases % of Total
Annualized Base
Rental Revenue
Amazon 7 3.2 %
Eastern Metal Supply, Inc. 5 1.0 %
GXO Logistics, Inc. 3 1.0 %
American Tire Distributors Inc 7 1.0 %
FedEx Corporation 4 0.9 %
Tempur Sealy International Inc 2 0.9 %
Lippert Component Manufacturing 5 0.8 %
Kenco Logistic Services, LLC 3 0.8 %
Penguin Random House LLC 1 0.8 %
Westrock Company 7 0.8 %
DS Smith North America 2 0.7 %
DHL Supply Chain 4 0.7 %
LKQ Corporation 4 0.7 %
Yanfeng US Automotive Interior 2 0.7 %
Costco Wholesale Corporation 2 0.7 %
Ford Motor Company 1 0.7 %
Hachette Book Group, Inc. 1 0.7 %
Carolina Beverage Group 3 0.7 %
Packaging Corp of America 5 0.7 %
Schneider Electric USA, Inc. 3 0.6 %
Total 71 18.1 %
(1) Includes tenants, guarantors, and/or non-guarantor parents.
Scheduled Lease Expirations
As of December 31, 2021, our weighted average lease term was approximately 5.1 years. We define weighted average lease term as the contractual lease term in years, assuming that tenants exercise no renewal options, purchase options, or early termination rights, weighted by square footage. The following table summarizes lease expirations for leases in place as of December 31, 2021, plus available space, for each of the ten calendar years beginning with 2022 and thereafter in our portfolio.
Lease Expiration Year Number of
Leases
Expiring Total Rentable
Square Feet % of Total
Occupied
Square Feet Total Annualized
Base Rental Revenue
(in thousands) % of Total Annualized
Base Rental Revenue
Available - 3,403,037 - $ - -
Month-to-month leases 4 121,097 0.1 % 558 0.1 %
2022 60 6,801,303 6.5 % 31,421 6.3 %
2023 103 13,774,659 13.1 % 59,180 11.9 %
2024 97 13,719,494 13.0 % 63,701 12.9 %
2025 85 12,567,456 12.0 % 55,972 11.3 %
2026 93 14,228,309 13.5 % 68,938 13.9 %
2027 62 9,845,704 9.4 % 46,835 9.5 %
2028 38 6,098,986 5.8 % 27,540 5.6 %
2029 36 6,574,891 6.2 % 31,521 6.4 %
2030 27 3,710,937 3.5 % 21,003 4.2 %
2031 37 7,003,482 6.7 % 33,503 6.8 %
Thereafter 39 10,705,485 10.2 % 54,953 11.1 %
Total/weighted average 681 108,554,840 100.0 % $ 495,125 100.0 %

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings
From time to time, we are a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of our business. We are not currently a party, as plaintiff or defendant, to any legal proceedings that, individually or in the aggregate, would be expected to have a material effect on our business, financial condition or results of operations if determined adversely to our company.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures
Not applicable.
PART II.

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Information about our equity compensation plans and other related stockholder matters is incorporated by reference to our definitive Proxy Statement for our 2022 Annual Meeting of Stockholders.
Market Information
Our common stock is listed on the NYSE and is traded under the symbol “STAG.”
Holders of Our Common Stock
As of February 15, 2022, we had 86 stockholders of record. This figure does not reflect the beneficial ownership of shares held in the nominee name.
Dividends
To maintain our qualification as a REIT, we must make annual distributions to our stockholders of at least 90% of our taxable net income (not including net capital gains). Dividends are declared at the discretion of our board of directors and depend on actual and anticipated cash from operations, our financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Code and other factors our board of directors may consider relevant.
Unregistered Sales of Equity Securities and Use of Proceeds
Recent Sales of Unregistered Equity Securities
All issuances of unregistered securities during the quarter ended December 31, 2021, if any, have previously been disclosed in filings with the SEC.
Issuer Purchases of Equity Securities
Period Total Number of Shares
Purchased(1)
Average Price Paid per
Share(1)
Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs Approximate Dollar
Value of Shares that
May Yet be Purchased
Under the Plans or
Programs
October 1, 2021 - October 31, 2021 - $ - - $ -
November 1, 2021 - November 30, 2021 - $ - - $ -
December 1, 2021 - December 31, 2021 1,886 $ 47.48 - $ -
Total/weighted average 1,886 $ 47.48 - $ -
(1)Reflects shares surrendered to the Company for payment of tax withholdings obligations in connection with the vesting of shares of common stock issued pursuant to the 2011 Plan. The average price paid reflects the average market value of shares withheld for tax purposes.
Performance Graph
The following graph provides a comparison of the cumulative total return on our common stock with the cumulative total return on the Standard & Poor’s 500 Index and the MSCI US REIT Index. The MSCI US REIT Index represents performance of publicly-traded REITs. Returns over the indicated period are based on historical data and should not be considered indicative of future returns. The graph covers the period from December 31, 2016 to December 31, 2021 and assumes that $100 was invested in our common stock and in each index on December 31, 2016 and that all dividends were reinvested.
This performance graph shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or incorporated by reference into any filing by us under the Securities Act, except as shall be expressly set forth by specific reference in such filing.

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. Reserved

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this report. For the definitions of certain terms used in the following discussion, refer to Item 1, “Business - Certain Definitions” included elsewhere in this Annual Report on Form 10-K.
Overview
We are a REIT focused on the acquisition, ownership, and operation of industrial properties throughout the United States. We seek to (i) identify properties that offer relative value across all locations, industrial property types, and tenants through the principled application of our proprietary risk assessment model, (ii) operate our properties in an efficient, cost-effective manner, and (iii) capitalize our business appropriately given the characteristics of our assets. We are a Maryland corporation and our common stock is publicly traded on the NYSE under the symbol “STAG.”
We are organized and conduct our operations to qualify as a REIT under Sections 856 through 860 of the Code, and generally are not subject to federal income tax to the extent we currently distribute our income to our stockholders and maintain our qualification as a REIT. We remain subject to state and local taxes on our income and property and to U.S. federal income and excise taxes on our undistributed income.
Our qualification and taxation as a REIT depend upon our ability to meet on a continuing basis, through actual annual operating results, qualification tests in the federal income tax laws. Those tests involve the percentage of income that we earn from specified sources, the percentage of our assets that falls within specified categories, the diversity of our capital stock ownership and the percentage of our earnings that we distribute.
As of December 31, 2021, we owned 544 buildings in 40 states with approximately 108.6 million rentable square feet, consisting of 459 warehouse/distribution buildings, 74 light manufacturing buildings, two flex/office buildings, and nine Value Add Portfolio buildings. We own both single- and multi-tenant properties, although the majority of our portfolio is single-tenant.
As of December 31, 2021, our buildings were approximately 96.9% leased to 532 tenants, with no single tenant accounting for more than approximately 3.2% of our total annualized base rental revenue and no single industry accounting for more than approximately 11.3% of our total annualized base rental revenue.
We own the interests in all of our properties and conduct substantially all of our business through our Operating Partnership. We are the sole member of the sole general partner of our Operating Partnership. As of December 31, 2021, we owned approximately 98.1% of the common units in our Operating Partnership, and our current and former executive officers, directors, senior employees and their affiliates, and other third parties owned the remaining 1.9% of the common units.
Factors That May Influence Future Results of Operations
Our ability to increase revenues or cash flow will depend in part on our (i) external growth, specifically acquisition activity, and (ii) internal growth, specifically occupancy and rental rates on our portfolio. A variety of other factors, including those noted below, also affect our future results of operations.
COVID-19 Pandemic
Since March 2020, the COVID-19 pandemic has severely harmed global economic activity and caused significant volatility and negative pressure in financial markets. The global impact of the pandemic continues to evolve and many countries, including the United States, continue to react by instituting quarantines, mandating business and school closures and restricting travel. As a result, the COVID-19 pandemic is negatively impacting almost every industry, including the real estate industry and the industries of our tenants, directly or indirectly. The rapid development and fluidity of the COVID-19 pandemic precludes any prediction as to the ultimate adverse impact the pandemic may have on our business, financial condition, results of operations and cash flows.
We did not incur significant disruptions from the COVID-19 pandemic during the year ended December 31, 2021. In addition, we did not enter into any rent deferral agreements during the year ended December 31, 2021. We 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 are we foregoing our contractual rights under our lease agreements.
The COVID-19 pandemic or a future pandemic, epidemic or outbreak of infectious disease affecting states or regions in which we or our tenants operate could have material and adverse effects on our business, financial condition, results of operations and cash flows due to, among other factors: health or other government authorities requiring the closure of offices or other businesses or instituting quarantines of personnel as the result of, or in order to avoid, exposure to a contagious disease; disruption in supply and delivery chains; a general decline in business activity and demand for real estate; reduced economic activity, general economic decline or recession, which may impact our tenants’ businesses, financial condition and liquidity and
may cause one or more of our tenants to be unable to make rent payments to us timely, or at all, or to otherwise seek modifications of lease obligations; difficulty accessing debt and equity capital on attractive terms, or at all, and a severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions, which may affect our access to capital necessary to fund business operations or address maturing liabilities on a timely basis; and the potential negative impact on the health of our personnel, particularly if a significant number of our employees are impacted, which would result in a deterioration in our ability to ensure business continuity during a disruption.
The extent to which the COVID-19 pandemic or any other pandemic, epidemic or disease impacts our operations and those of our tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. Nevertheless, the COVID-19 pandemic (or a future pandemic, epidemic or disease) presents material uncertainty and risk with respect to our business, financial condition, results of operations and cash flows.
Outlook
Our business is affected by the uncertainty regarding the current COVID-19 pandemic, the effectiveness of policies introduced to neutralize the disease, and the impact of those policies on economic activity. In June 2020, the National Bureau of Economic Research announced that the United States entered into a recession in February 2020. More recent economic measurements show that the U.S. economy is recovering. The ultimate shape of the recovery will depend on many factors, including the length and severity of the COVID-19 pandemic and its side-effects such as supply-chain bottlenecks and inflation. While the pandemic continues to evolve and impact our tenants, we believe we will continue to benefit from having a well-diversified portfolio across various markets, tenant industries, and lease terms. Additionally, we believe that the COVID-19 pandemic is accelerating a number of trends that positively impact industrial demand.
Over the course of the COVID-19 pandemic, the U.S. federal and state governments, as well as the Federal Reserve, responded to the profoundly uncertain outlook with a series of policies to ease the economic burden of COVID-19 closures on businesses and individuals. In March 2021, the U.S. congressional policy action known as the American Rescue Plan, allocated $1.9 trillion in federal aid focused on individuals and state and local governments. Then, in November 2021, a $1.0 trillion infrastructure bill was passed to support the economy and job growth. In addition to fiscal support, the Federal Reserve completed two emergency fed funds rate cuts in March 2020 to a range between 0% to 0.25% and continued to be accommodative throughout pandemic. Given recent high inflation levels and strong employment reports, we expect monetary policy to shift toward a tightening stance with higher interest rates. Fiscal policy is likely to remain accommodative, as needed, to counteract COVID-19 variants.
We believe that the current economic environment, while volatile, will provide us with an opportunity to demonstrate the diversification of our portfolio. Specifically, we believe our existing portfolio should benefit from competitive rental rates and strong occupancy. In addition to our diversified portfolio, we believe that certain characteristics of our business and capital structure should position us well in an uncertain environment, including the fact that we have minimal floating rate debt exposure (taking into account our hedging activities) and strong liquidity and access to capital, and that many of our competitors for the assets we purchase tend to be smaller local and regional investors who are likely to be more heavily impacted by interest rates and availability of capital.
Due to the COVID-19 pandemic and recent U.S. infrastructure bill, we expect acceleration in a number of industrial specific trends to support stronger long-term demand, including:
•the rise of e-commerce (as compared to the traditional retail store distribution model) and the concomitant demand by e-commerce industry participants for well-located, functional distribution space;
•the increasing attractiveness of the United States as a manufacturing and distribution location because of the size of the U.S. consumer market, an increase in overseas labor costs, a desire for greater supply chain resilience and redundancy and the overall cost of supplying and shipping goods (i.e. the shortening and fattening of the supply chain); and
•the overall quality of the transportation infrastructure in the United States.
Our portfolio continues to benefit from historically low availability throughout the national industrial market. The COVID-19 pandemic has caused both positive and negative impacts at varying levels across different industries and geographies. Ultimately, the acceleration in e-commerce brought on by the COVID-19 pandemic, actions taken by federal and state governments and the Federal Reserve in response to the pandemic, and the recent economic recovery has helped industrial space demand remain strong. We believe that the diversification of our portfolio by market, tenant industry, and tenant credit will prove to be a strength in this environment. Industrial development continues to be concentrated in the larger primary
markets, and after a brief deceleration it has returned to pre-COVID-19 pandemic levels. We will continue to monitor the supply and demand fundamentals for industrial real estate and assess its impact on our business.
Conditions in Our Markets
The buildings in our portfolio are located in markets throughout the United States. Positive or negative changes in economic or other conditions, new supply, adverse weather conditions, natural disasters, epidemics, and other factors in these markets may affect our overall performance.
Rental Income
We receive income primarily in the form of rental income from the tenants who occupy our buildings. The amount of rental income generated by the buildings in our portfolio depends principally on occupancy and rental rates.
Future economic downturns or regional downturns affecting our submarkets that impair our ability to renew or re-lease space and the ability of our tenants to fulfill their lease commitments, as in the case of tenant bankruptcies, including those brought on by the COVID-19 pandemic, could adversely affect our ability to maintain or increase rental rates at our buildings. Our ability to lease our properties and the attendant rental rate is dependent upon, among other things, (i) the overall economy, (ii) the supply/demand dynamic in our markets, (iii) the quality of our properties, including age, clear height, and configuration, and (iv) our tenants’ ability to meet their contractual obligations to us.
The following table summarizes our Operating Portfolio leases that commenced during the year ended December 31, 2021. Certain leases contain rental concessions; any such rental concessions are accounted for on a straight-line basis over the term of the lease.
Operating Portfolio Square Feet Cash
Basis Rent Per
Square Foot SL Rent Per
Square Foot Total Costs Per
Square
Foot(1)
Cash
Rent Change SL Rent Change Weighted Average Lease
Term(2)
(years)
Rental Concessions per Square Foot(3)
Year ended December 31, 2021
New Leases 4,257,914 $ 4.19 $ 4.33 $ 2.07 9.6 % 14.9 % 5.3 $ 0.48
Renewal Leases 9,448,145 $ 4.64 $ 4.83 $ 1.11 10.7 % 18.6 % 5.2 $ 0.16
Total/weighted average 13,706,059 $ 4.50 $ 4.67 $ 1.40 10.4 % 17.6 % 5.2 $ 0.26
(1)We define Total Costs as the costs for improvements of vacant and renewal spaces, as well as the contingent-based legal fees and commissions for leasing transactions. Total Costs per square foot represent the total costs expected to be incurred on the leases that commenced during the period and do not reflect actual expenditures for the period.
(2)We define weighted average lease term as the contractual lease term in years, assuming that tenants exercise no renewal options, purchase options, or early termination rights, weighted by square footage.
(3)Represents the total rental concessions for the entire lease term.
Additionally, for the year ended December 31, 2021, leases commenced totaling 385,150 square feet related to the Value Add Portfolio and first generation leasing and are excluded from the Operating Portfolio statistics above.
Property Operating Expenses
Our property operating expenses generally consist of utilities, real estate taxes, management fees, insurance, and site repair and maintenance costs. For the majority of our tenants, our property operating expenses are controlled, in part, by the triple net provisions in tenant leases. In our triple net leases, the tenant is responsible for all aspects of and costs related to the building and its operation during the lease term, including utilities, taxes, insurance and maintenance costs, but typically excluding roof and building structure. However, we also have modified gross leases and gross leases in our building portfolio. The terms of those leases vary and on some occasions we may absorb certain building related expenses of our tenants. In our modified gross leases, we are responsible for some building related expenses during the lease term, but the cost of most of the expenses is passed through to the tenant for reimbursement to us. In our gross leases, we are responsible for all costs related to the building and its operation during the lease term. Our overall performance will be affected by the extent to which we are able to pass-through property operating expenses to our tenants.
Scheduled Lease Expirations
Our ability to re-lease space subject to expiring leases will impact our results of operations and is affected by economic and competitive conditions in our markets and by the desirability of our individual buildings. Leases that comprise approximately 6.3% of our total annualized base rental revenue will expire during the period from January 1, 2022 to December 31, 2022,
excluding month-to-month leases. We assume, based upon internal renewal probability estimates, that some of our tenants will renew and others will vacate and the associated space will be re-let subject to downtime assumptions. Using the aforementioned assumptions, we expect that the rental rates on the respective new leases will generally be moderately higher than the rates under existing leases expiring during the period January 1, 2022 to December 31, 2022, thereby resulting in a moderate increase in revenue from the same space.
Critical Accounting Estimates
The preparation of our consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Certain estimates, judgments and assumptions are inherently subjective and based on the existing business and market conditions, and are therefore continually evaluated based upon available information and experience. The following items require significant estimation or judgement.
Purchase Price Accounting
We have determined that judgments regarding the allocation of the purchase price of properties based upon the fair value of the assets acquired and liabilities assume represents a critical accounting estimate that has the potential to be material in future periods and has been material in all periods presented in this Form 10-K. As discussed below in “Critical Accounting Policies,” we allocate the purchase price of properties based upon the fair value of the assets acquired and liabilities assumed, which generally consist of land, buildings, tenant improvements, mortgage debt assumed, and deferred leasing intangibles, which includes in-place leases, above market and below market leases, and tenant relationships, and is therefore subject to subjective analysis and uncertainty. The process for determining the allocation to these components requires estimates and assumptions, including rental rates, discount rates, exit capitalization rates, and land value per square foot. We do not believe that the conclusions we reached regarding the allocation of the purchase price of properties, in the current economic and operating environment, would result in a materially different conclusion within any reasonable range of assumptions that could have been applied. As discussed below, we continuously assess our portfolio for the impairment of tangible and intangible rental property and deferred leasing intangible liabilities.
Rental Property and Deferred Leasing Intangible Liabilities Impairment Assessment
We have determined that judgments regarding the impairment of tangible and intangible rental property and deferred leasing intangible liabilities represents a critical accounting estimate that has the potential to be material in future periods and has been material in certain periods presented in this Form 10-K. As discussed below in “Critical Accounting Policies,” we evaluate the carrying value of all tangible and intangible rental property assets and deferred leasing intangible liabilities (collectively, the “property”) held for use for possible impairment when an event or change in circumstance has occurred that indicates their carrying value may not be recoverable. The evaluation includes estimating and reviewing anticipated future undiscounted cash flows to be derived from the property. If such cash flows are less than the property’s carrying value, an impairment charge is recognized to the extent by which the asset’s carrying value exceeds the estimated fair value. Estimating future cash flows is highly subjective and is based in part on assumptions related to anticipated hold period, future occupancy, rental rates, capital requirements, and exit capitalization rates that could differ from actual results. The discount rate used to present value the cash flows for determining fair value is also subjective. We do not believe that the conclusions we reached regarding the assessment of our rental property assets for impairment, in the current economic and operating environment, would result in a materially different conclusion within any reasonable range of assumptions that could have been applied. Should economic conditions worsen, and the values of industrial assets decline in future periods, then the assumptions and estimates we may make in future impairment analyses, and potential future measurement of impairment charges, could be sensitive and could result in a material change in the range of potential outcomes.
Critical Accounting Policies
The preparation of financial statements in conformity with GAAP requires management to use judgment in the application of accounting policies, including making estimates and assumptions. We base our estimates on historical experience and on various other assumptions believed to be reasonable under the circumstances. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. If our judgment or interpretation of the facts and circumstances relating to various transactions had been different, it is possible that different accounting policies would have been applied resulting in a different presentation of our financial statements. From time to time, we evaluate our estimates and assumptions. In the event estimates or assumptions prove to be different from actual results, adjustments are made in subsequent periods to
reflect more current information. Below is a discussion of accounting policies that we consider critical in that they may require complex judgment in their application or require estimates about matters that are inherently uncertain.
Rental Property and Deferred Leasing Intangibles
Rental property is carried at cost less accumulated depreciation and amortization. Expenditures for maintenance and repairs are expensed as incurred. Significant renovations and betterments that extend the economic useful lives of assets are capitalized.
We capitalize costs directly and indirectly related to the development, pre-development, redevelopment, or improvement of rental property. Real estate taxes, compensation costs of development personnel, insurance, interest, and other directly related costs during construction periods are capitalized as incurred, with depreciation commencing with the date the property is substantially completed. Such costs begin to be capitalized to the development projects from the point we are undergoing the necessary activities to get the development project ready for its intended use and cease when the development projects are substantially completed and held available for occupancy. Interest is capitalized based on actual capital expenditures from the period when development or redevelopment commences until the asset is ready for its intended use, at the weighted average borrowing rate of our unsecured indebtedness during the period.
For properties classified as held for sale, we cease depreciating and amortizing the rental property and value the rental property at the lower of depreciated and amortized cost or fair value less costs to dispose. We present those properties classified as held for sale with any qualifying assets and liabilities associated with those properties as held for sale in the accompanying Consolidated Balance Sheets.
Using information available at the time of acquisition, we allocate the purchase price of properties acquired based upon the fair value of the assets acquired and liabilities assumed, which generally consist of land, buildings, tenant improvements, mortgage debt assumed, and deferred leasing intangibles, which includes in-place leases, above market and below market leases, and tenant relationships. The process for determining the allocation to these components requires estimates and assumptions, including rental rates, discount rates and exit capitalization rates, and land value per square foot, as well as available market information, and is therefore subject to subjective analysis and uncertainty. The fair value of the tangible assets of an acquired property considers the value of the property as if it were vacant. The portion of the purchase price that is allocated to above and below market leases is valued based on the present value of the difference between prevailing market rates and the in-place rates measured over a period equal to the remaining term of the lease term plus the term of any bargain renewal options. The purchase price is further allocated to in-place lease values and tenant relationships based on our evaluation of the specific characteristics of each tenant’s lease and its overall relationship with the respective tenant.
The above and below market lease values are amortized into rental income over the remaining lease term. The value of in-place lease intangibles and tenant relationships are amortized over the remaining lease term (and expected renewal period of the respective lease for tenant relationships) as increases to depreciation and amortization expense. The remaining lease terms are adjusted for bargain renewal options or assumed exercises of early termination options, as applicable. If a tenant subsequently terminates its lease, any unamortized portion of above and below market leases is accelerated into rental income and the in-place lease value and tenant relationships are accelerated into depreciation and amortization expense over the shortened lease term.
The purchase price allocated to deferred leasing intangible assets are included in rental property, net on the accompanying Consolidated Balance Sheets and the purchase price allocated to deferred leasing intangible liabilities are included in deferred leasing intangibles, net on the accompanying Consolidated Balance Sheets under the liabilities section.
In determining the fair value of the debt assumed, we discount the spread between the future contractual interest payments and hypothetical future interest payments on mortgage debt based on a current market rate. The associated fair market value debt adjustment is amortized through interest expense over the life of the debt on a basis which approximates the effective interest method.
We evaluate the carrying value of all tangible and intangible rental property assets and deferred leasing intangible liabilities (collectively, the “property”) held for use for possible impairment when an event or change in circumstance has occurred that indicates their carrying value may not be recoverable. The evaluation includes estimating and reviewing anticipated future undiscounted cash flows to be derived from the property. If such cash flows are less than the property’s carrying value, an impairment charge is recognized to the extent by which the property’s carrying value exceeds the estimated fair value. Estimating future cash flows is highly subjective and is based in part on assumptions regarding anticipated hold period, future occupancy, rental rates, capital requirements, and exit capitalization rates that could differ from actual results. The discount rate used to present value the cash flows for determining fair value is also subjective.
Depreciation expense is computed using the straight-line method based on the following estimated useful lives.
Description Estimated Useful Life
Building 40 Years
Building and land improvements (maximum) 20 years
Tenant improvements Shorter of useful life or terms of related lease
Leases
For leases in which we are the lessee, we recognize a right-of-use asset and corresponding lease liability on the accompanying Consolidated Balance Sheets equal to the present value of the fixed lease payments. In determining operating right-of-use asset and lease liability for our operating leases, we estimate an appropriate incremental borrowing rate on a fully-collateralized basis for the terms of the leases. We utilize a market-based approach to estimate the incremental borrowing rate for each individual lease. Since the terms under our ground leases are significantly longer than the terms of borrowings available to us on a fully-collateralized basis, the estimate of this rate required significant judgment, and considered factors such as yields on outstanding public debt and other market based pricing on longer duration financing instruments.
Goodwill
The excess of the cost of an acquired business over the net of the amounts assigned to assets acquired (including identified intangible assets) and liabilities assumed is recorded as goodwill. Our goodwill of approximately $4.9 million represents amounts allocated to the assembled workforce from the acquired management company, and is presented in prepaid expenses and other assets on the accompanying Consolidated Balance Sheets. Our goodwill has an indeterminate life and is not amortized, but is tested for impairment on an annual basis at December 31, or more frequently if events or changes in circumstances indicate that the asset might be impaired. We take a qualitative approach to consider whether an impairment of goodwill exists prior to quantitatively determining the fair value of the reporting unit in step one of the impairment test. We have recorded no impairments to goodwill as of December 31, 2021.
Use of Derivative Financial Instruments
We record all derivatives on the accompanying Consolidated Balance Sheets at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether we have elected to designate a derivative in a hedging relationship and apply hedge accounting, and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. We may enter into derivative contracts that are intended to economically hedge certain of its risks, even though hedge accounting does not apply or we elect not to apply hedge accounting.
In accordance with fair value measurement guidance, we made an accounting policy election to measure the credit risk of our derivative financial instruments that are subject to master netting arrangements on a net basis by counterparty portfolio. Credit risk is the risk of failure of the counterparty to perform under the terms of the contract. We minimize the credit risk in our derivative financial instruments by entering into transactions with various high-quality counterparties. Our exposure to credit risk at any point is generally limited to amounts recorded as assets on the accompanying Consolidated Balance Sheets.
Fair Value of Financial Instruments
Financial instruments include cash and cash equivalents, restricted cash, tenant accounts receivable, interest rate swaps, accounts payable, accrued expenses, unsecured credit facility, unsecured term loans, unsecured notes, and mortgage notes. See Note 4 in the accompanying Notes to Consolidated Financial Statements for the fair value of our indebtedness. See Note 5 in the accompanying Notes to Consolidated Financial Statements for the fair value of our interest rate swaps.
We adopted fair value measurement provisions for our financial instruments recorded at fair value. The guidance establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as
observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
Incentive and Equity-Based Employee Compensation Plans
We grant equity-based compensation awards to our employees and directors in the form of restricted shares of common stock, LTIP units, and performance units. See Notes 6, 7 and 8 in the accompanying Notes to Consolidated Financial Statements for further discussion of restricted shares of common stock, LTIP units, and performance units, respectively. We measure equity-based compensation expense based on the fair value of the awards on the grant date and recognize the expense ratably over the vesting period, and forfeitures are recognized in the period in which they occur.
On January 7, 2021, we adopted the STAG Industrial, Inc. Employee Retirement Vesting Program (the “Vesting Program”) to provide supplemental retirement benefits for eligible employees. For those employees who are retirement eligible or will become retirement eligible during the applicable vesting period under the terms of the Vesting Program, we accelerate equity-based compensation through the employee’s six-month retirement notification period or retirement eligibility date, respectively.
Revenue Recognition
All current leases are classified as operating leases and rental income is recognized on a straight-line basis over the term of the lease (and expected bargain renewal terms or assumed exercise of early termination options) when collectability is reasonably assured. Differences between rental income earned and amounts due under the lease are charged or credited, as applicable, to accrued rental income.
We determined that for all leases where we are the lessor, that the timing and pattern of transfer of the non-lease components and associated lease components are the same, and that the lease components, if accounted for separately, would be classified as an operating lease. Accordingly, we have made an accounting policy election to recognize the combined component in accordance with Accounting Standards Codification Topic 842 as rental income on the accompanying Consolidated Statements of Operations.
Rental income recognition commences when the tenant takes possession of or controls the physical use of the leased space and the leased space is substantially complete and ready for its intended use. In order to determine whether the leased space is substantially complete and ready for its intended use, we determine whether we or the tenant own the tenant improvements. When it is determined that we are the owner of the tenant improvements, rental income recognition begins when the tenant takes possession of or controls the physical use of the finished space, which is generally when our owned tenant improvements are completed. In instances when it is determined that the tenant is the owner of tenant improvements, rental income recognition begins when the tenant takes possession of or controls the physical use of the leased space.
When we are the owner of tenant improvements or other capital items, the cost to construct the tenant improvements or other capital items, including costs paid for or reimbursed by the tenants, is recorded as capital assets. For these tenant improvements or other capital items, the amount funded by or reimbursed by the tenants are recorded as deferred revenue, which is amortized on a straight-line basis as income over the shorter of the useful life of the capital asset or the term of the related lease.
Early lease termination fees are recorded in rental income on a straight-line basis from the notification date of such termination to the then remaining (not the original) lease term, if any, or upon collection if collection is not reasonably assured.
We evaluate cash basis versus accrual basis of rental income recognition based on the collectability of future lease payments.
Results of Operations
The following discussion of our results of our same store (as defined below) net operating income (“NOI”) should be read in conjunction with our Consolidated Financial Statements. For a detailed discussion of NOI, including the reasons management believes NOI is useful to investors, see “Non-GAAP Financial Measures” below. Same store results are considered to be useful to investors in evaluating our performance because they provide information relating to changes in building-level operating performance without taking into account the effects of acquisitions or dispositions. We encourage the reader to not only look at our same store results, but also our total portfolio results, due to historic and future growth.
We define same store properties as properties that were in the Operating Portfolio for the entirety of the comparative periods presented. The results for same store properties exclude termination fees, solar income, and revenue associated with one-time tenant reimbursements of capital expenditures. Same store properties exclude Operating Portfolio properties with expansions placed into service or transferred from the Value Add Portfolio to the Operating Portfolio after December 31, 2019. On December 31, 2021, we owned 412 industrial buildings consisting of approximately 83.9 million square feet, which represents approximately 77.3% of our total portfolio, that are considered our same store portfolio in the analysis below. Same store occupancy decreased approximately 0.6% to 97.1% as of December 31, 2021 compared to 97.7% as of December 31, 2020.
Discussions of selected operating information for our same store portfolio and our total portfolio for the comparison of the years ended December 31, 2020 and 2019 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on February 10, 2021.
Comparison of the year ended December 31, 2021 to the year ended December 31, 2020
The following table summarizes selected operating information for our same store portfolio and our total portfolio for the years ended December 31, 2021 and 2020 (dollars in thousands). This table includes a reconciliation from our same store portfolio to our total portfolio by also providing information for the years ended December 31, 2021 and 2020 with respect to the buildings acquired and disposed of and Operating Portfolio buildings with expansions placed into service or transferred from the Value Add Portfolio to the Operating Portfolio after December 31, 2019 and our flex/office buildings, Value Add Portfolio, and buildings classified as held for sale.
Same Store Portfolio Acquisitions/Dispositions Other Total Portfolio
Year ended December 31, Change Year ended December 31, Year ended December 31, Year ended December 31, Change
2021 2020 $ % 2021 2020 2021 2020 2021 2020 $ %
Revenue
Operating revenue
Rental income $ 450,345 $ 433,874 $ 16,471 3.8 % $ 92,527 $ 39,408 $ 16,560 $ 9,543 $ 559,432 $ 482,825 $ 76,607 15.9 %
Other income 385 367 18 4.9 % 198 150 2,144 69 2,727 586 2,141 365.4 %
Total operating revenue 450,730 434,241 16,489 3.8 % 92,725 39,558 18,704 9,612 562,159 483,411 78,748 16.3 %
Expenses
Property 83,833 76,135 7,698 10.1 % 19,999 10,567 4,154 2,657 107,986 89,359 18,627 20.8 %
Net operating income(1)
$ 366,897 $ 358,106 $ 8,791 2.5 % $ 72,726 $ 28,991 $ 14,550 $ 6,955 454,173 394,052 60,121 15.3 %
Other expenses
General and administrative 48,629 40,072 8,557 21.4 %
Depreciation and amortization 238,699 214,738 23,961 11.2 %
Loss on impairments - 5,577 (5,577) (100.0) %
Other expenses 2,878 2,029 849 41.8 %
Total other expenses 290,206 262,416 27,790 10.6 %
Total expenses 398,192 351,775 46,417 13.2 %
Other income (expense)
Interest and other income 121 446 (325) (72.9) %
Interest expense (63,484) (62,343) (1,141) 1.8 %
Debt extinguishment and modification expenses (2,152) (834) (1,318) 158.0 %
Gain on involuntary conversion - 2,157 (2,157) (100.0) %
Gain on the sales of rental property, net 97,980 135,733 (37,753) (27.8) %
Total other income (expense) 32,465 75,159 (42,694) (56.8) %
Net income $ 196,432 $ 206,795 $ (10,363) (5.0) %
(1)For a detailed discussion of NOI, including the reasons management believes NOI is useful to investors, see “Non-GAAP Financial Measures” below.
Net Income
Net income for our total portfolio decreased by $10.4 million or 5.0% to $196.4 million for the year ended December 31, 2021 compared to $206.8 million for the year ended December 31, 2020.
Same Store Total Operating Revenue
Same store total operating revenue consists primarily of rental income consisting of (i) fixed lease payments, variable lease payments, straight-line rental income, and above and below market lease amortization from our properties (“lease income”), and (ii) other tenant billings for insurance, real estate taxes and certain other expenses (“other billings”).
For a detailed reconciliation of our same store total operating revenue to net income, see the table above.
Same store rental income, which is comprised of lease income and other billings as discussed below, increased by $16.5 million or 3.8% to $450.3 million for the year ended December 31, 2021 compared to $433.9 million for the year ended December 31, 2020.
Same store lease income increased by $10.6 million or 2.9% to $375.5 million for the year ended December 31, 2021 compared to $364.9 million for the year ended December 31, 2020. Approximately $9.1 million of the increase was attributable to rental increases due to the execution of new leases and lease renewals with existing tenants, an increase of approximately $1.5 million due the to impact of inheriting the ownership of a solar panel array on one of our buildings, and a net decrease in the amortization of net above market leases of approximately $0.8 million. These increases were also attributable to an increase in rental income of approximately $3.3 million at properties in which, during the year ended December 31, 2020, we determined that the future collectability was not reasonably assured, and accordingly, we converted to the cash basis of accounting and reversed any accounts receivable and accrued rent balances into rental income and did not recognize revenue for payments that were not received from the tenants. These reversals of accounts receivable and accrued rent balances decreased during the the year ended December 31, 2021. These increases were partially offset by the reduction of base rent of approximately $4.1 million due to tenant vacancy.
Same store other billings increased by $5.8 million or 8.5% to $74.8 million for the year ended December 31, 2021 compared to $69.0 million for the year ended December 31, 2020. The increase was attributable to an increase of approximately $3.6 million related to other expense reimbursements due to an increase in corresponding expenses and changes to lease terms where we began paying the operating expenses on behalf of tenants that had previously paid its operating expenses directly to respective vendors. Additionally, there was an increase in real estate taxes levied by the taxing authority and changes to lease terms where we began paying the real estate taxes on behalf of tenants that had previously paid its taxes directly to the taxing authority of approximately $2.2 million.
Same Store Operating Expenses
Same store operating expenses consist primarily of property operating expenses and real estate taxes and insurance.
For a detailed reconciliation of our same store portfolio operating expenses to net income, see the table above.
Total same store operating expenses increased by $7.7 million or 10.1% to $83.8 million for the year ended December 31, 2021 compared to $76.1 million for the year ended December 31, 2020. This increase was primarily related to an increase in real estate taxes of approximately $2.9 million levied by the taxing authority and changes to lease terms where we began paying the real estate taxes on behalf of tenants that had previously paid its taxes directly to the taxing authority. The increase was also attributable to an increase of $1.8 million in repairs and maintenance expense, an increase in utility expense of $1.1 million, and an increase of $1.9 million related to insurance, snow removal, and other expenses.
Acquisitions and Dispositions Net Operating Income
For a detailed reconciliation of our acquisitions and dispositions NOI to net income, see the table above.
Subsequent to December 31, 2019, we acquired 111 buildings consisting of approximately 20.7 million square feet (excluding 11 buildings that were included in the Value Add Portfolio at December 31, 2021 or transferred from the Value Add Portfolio to the Operating Portfolio after December 31, 2019), and sold 29 buildings consisting of approximately 6.1 million square feet. For the years ended December 31, 2021 and 2020, the buildings acquired after December 31, 2019 contributed approximately
$69.5 million and $13.6 million to NOI, respectively. For the years ended December 31, 2021 and 2020, the buildings sold after December 31, 2019 contributed approximately $3.2 million and $15.4 million to NOI, respectively. Refer to Note 3 in the accompanying Notes to Consolidated Financial Statements for additional discussion regarding buildings acquired or sold.
Other Net Operating Income
Our other assets include our flex/office buildings, Value Add Portfolio, buildings classified as held for sale, and Operating Portfolio buildings with expansions placed in service or transferred from the Value Add Portfolio to the Operating Portfolio after December 31, 2019. Other NOI also includes termination, solar, and other income adjustments from buildings in our same store portfolio.
For a detailed reconciliation of our other NOI to net income, see the table above.
At December 31, 2021 we owned two flex/office buildings consisting of approximately 0.1 million square feet, nine buildings in our Value Add Portfolio consisting of approximately 1.8 million square feet, and 10 buildings consisting of approximately 2.1 million square feet that were Operating Portfolio buildings with expansions placed in service or transferred from the Value Add Portfolio to the Operating Portfolio after December 31, 2019. These buildings contributed approximately $11.2 million and $6.0 million to NOI for the years ended December 31, 2021 and 2020, respectively. Additionally, there was $3.4 million and $1.0 million of termination, solar, and other income adjustments from certain buildings in our same store portfolio for the years ended December 31, 2021 and December 31, 2020, respectively.
Total Other Expenses
Total other expenses consist of general and administrative expenses, depreciation and amortization, loss on impairments, and other expenses.
Total other expenses increased $27.8 million or 10.6% for the year ended December 31, 2021 to $290.2 million compared to $262.4 million for the year ended December 31, 2020. This is primarily a result of an increase in depreciation and amortization of approximately $24.0 million as a result of net acquisitions that increased the depreciable asset base. General and administrative expenses increased by approximately $8.6 million primarily due to the acceleration of equity-based compensation expense for certain eligible employees related to the adoption of the Vesting Program in the amount of approximately $2.3 million. Additionally, general and administrative expenses increased by approximately $2.1 million related to the severance costs of a former executive officer, as discussed in Note 7 in the accompanying Notes to Consolidated Financial Statements. General and administrative expenses also increased due to increases in compensation and other payroll costs. Other expenses also increased, and approximately $0.3 million of the increase was primarily due to the settlement of litigation related to a terminated acquisition contract during the COVID-19 pandemic. These increases were partially offset by a decrease in loss on impairments of approximately $5.6 million as there were no loss on impairments recognized during the year ended December 31, 2021.
Total Other Income (Expense)
Total other income (expense) consists of interest and other income, interest expense, debt extinguishment and modification expenses, gain on involuntary conversion, and gain on the sales of rental property, net. Interest expense includes interest incurred during the period as well as adjustments related to amortization of financing fees and debt issuance costs, and amortization of fair market value adjustments associated with the assumption of debt.
Total net other income decreased $42.7 million or 56.8% to $32.5 million total other income for the year ended December 31, 2021 compared to $75.2 million total other expense for the year ended December 31, 2020. This decrease is primarily the result of an decrease in gain on the sales of rental property, net of approximately $37.8 million and a decrease in gain on involuntary conversion of approximately $2.2 million related to an eminent domain taking of a portion of a parcel of land that occurred during the year ended December 31, 2020. There was also an increase in interest expense of approximately $1.1 million which was primarily attributable to the funding of unsecured term loans on September 28, 2021 and March 25, 2020. Debt extinguishment and modification expenses also increased approximately $1.3 million during the year ended December 31, 2021 that was primarily related to the refinance of the Unsecured Term Loans on October 26, 2021, as discussed in Note 4 of the accompanying Notes to Consolidated Financial Statements. Additionally, there was a decrease of approximately $0.3 million in interest and other income due to a decreased cash and cash equivalents balance during the year ended December 31, 2021 compared to the year ended December 31, 2020.
Non-GAAP Financial Measures
In this report, we disclose funds from operations (“FFO”) and NOI, which meet the definition of “non-GAAP financial measures” as set forth in Item 10(e) of Regulation S-K promulgated by the SEC. As a result, we are required to include in this report a statement of why management believes that presentation of these measures provides useful information to investors.
Funds From Operations
FFO should not be considered as an alternative to net income (determined in accordance with GAAP) as an indication of our performance, and we believe that to understand our performance further, FFO should be compared with our reported net income (loss) in accordance with GAAP, as presented in our consolidated financial statements included in this report.
We calculate FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts (“NAREIT”). FFO represents GAAP net income (loss), excluding gains (or losses) from sales of depreciable operating buildings, impairment write-downs of depreciable real estate, real estate related depreciation and amortization (excluding amortization of deferred financing costs and fair market value of debt adjustment) and after adjustments for unconsolidated partnerships and joint ventures.
Management uses FFO as a supplemental performance measure because it is a widely recognized measure of the performance of REITs. FFO may be used by investors as a basis to compare our operating performance with that of other REITs.
However, because FFO excludes depreciation and amortization and captures neither the changes in the value of our buildings that result from use or market conditions nor the level of capital expenditures and leasing commissions necessary to maintain the operating performance of our buildings, all of which have real economic effects and could materially impact our results from operations, the utility of FFO as a measure of our performance is limited. In addition, other REITs may not calculate FFO in accordance with the NAREIT definition, and, accordingly, our FFO may not be comparable to such other REITs’ FFO. FFO should not be used as a measure of our liquidity, and is not indicative of funds available for our cash needs, including our ability to pay dividends.
The following table summarizes a reconciliation of our FFO attributable to common stockholders and unit holders for the periods presented to net income, the nearest GAAP equivalent.
Year ended December 31,
Reconciliation of Net Income to FFO (in thousands) 2021 2020 2019
Net income $ 196,432 $ 206,795 $ 50,665
Rental property depreciation and amortization 238,487 214,464 185,154
Loss on impairments - 5,577 9,757
Gain on the sales of rental property, net (97,980) (135,733) (7,392)
FFO $ 336,939 $ 291,103 $ 238,184
Preferred stock dividends (1,289) (5,156) (5,156)
Redemption of preferred stock (2,582) - -
Amount allocated to restricted shares of common stock and unvested units (838) (756) (891)
FFO attributable to common stockholders and unit holders $ 332,230 $ 285,191 $ 232,137
Net Operating Income
We consider NOI to be an appropriate supplemental performance measure to net income (loss) because we believe it helps investors and management understand the core operations of our buildings. NOI is defined as rental income, which includes billings for common area maintenance, real estate taxes and insurance, less property expenses. 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 summarizes a reconciliation of our NOI for the periods presented to net income, the nearest GAAP equivalent.
Year ended December 31,
Reconciliation of Net Income to NOI (in thousands) 2021 2020 2019
Net income $ 196,432 $ 206,795 $ 50,665
General and administrative 48,629 40,072 35,946
Transaction costs 347 159 346
Depreciation and amortization 238,699 214,738 185,450
Interest and other income (121) (446) (87)
Interest expense 63,484 62,343 54,647
Loss on impairments - 5,577 9,757
Gain on involuntary conversion - (2,157) -
Debt extinguishment and modification expenses 2,152 834 -
Other expenses 2,531 1,870 1,439
Gain on the sales of rental property, net (97,980) (135,733) (7,392)
Net operating income $ 454,173 $ 394,052 $ 330,771
Cash Flows
Comparison of the year ended December 31, 2021 to the year ended December 31, 2020
The following table summarizes our cash flows for the year ended December 31, 2021 compared to the year ended December 31, 2020.
Year ended December 31, Change
Cash Flows (dollars in thousands) 2021 2020 $ %
Net cash provided by operating activities $ 336,154 $ 293,922 $ 42,232 14.4 %
Net cash used in investing activities $ 1,220,420 $ 554,623 $ 665,797 120.0 %
Net cash provided by financing activities $ 887,123 $ 269,176 $ 617,947 229.6 %
Net cash provided by operating activities increased $42.2 million to $336.2 million for the year ended December 31, 2021, compared to $293.9 million for the year ended December 31, 2020. The increase was primarily attributable to incremental operating cash flows from property acquisitions completed after December 31, 2020, and operating performance at existing properties. These increases were partially offset by the loss of cash flows from property dispositions completed after December 31, 2020 and fluctuations in working capital due to timing of payments and rental receipts.
Net cash used in investing activities increased by $665.8 million to $1,220.4 million for the year ended December 31, 2021, compared to $554.6 million for the year ended December 31, 2020. The increase was primarily attributable to the acquisition of 74 buildings during the year ended December 31, 2021 of approximately $1,365.8 million, compared to the acquisition of 48 buildings during the year ended December 31, 2020 of approximately $773.3 million. The increase is also attributable to an decrease in net proceeds from the sale of 22 buildings during the year ended December 31, 2021 for net proceeds of approximately $188.0 million, compared to the year ended December 31, 2020 where we sold seven buildings for net proceeds of approximately $273.6 million.
Net cash provided by financing activities increased $617.9 million to $887.1 million for the year ended December 31, 2021, compared to $269.2 million for the year ended December 31, 2020. The increase is primarily attributable to funding of the Series I Unsecured Notes and Series J Unsecured Notes (each as defined below) of $325.0 million, as well as a net cash inflow of approximately $228.0 million from our unsecured credit facility. The increase is also attributable to an increase of net proceeds from the sales of common stock of approximately $268.5 million. These increases were partially offset by the redemption of the Series C Preferred Stock (as defined below) of $75.0 million, and an increase of approximately $21.4 million in dividends paid during the year ended December 31, 2021 compared to the year ended December 31, 2020. Additionally, the funding of the Unsecured Term Loan F of $100.0 million did not recur during the year ended December 31, 2021 compared to the year ended December 31, 2020.
Liquidity and Capital Resources
We believe that our liquidity needs will be satisfied through cash flows generated by operations, disposition proceeds, and financing activities. Operating cash flow is primarily rental income, expense recoveries from tenants, and other income from operations and is our principal source of funds that we use to pay operating expenses, debt service, recurring capital expenditures, and the distributions required to maintain our REIT qualification. We look to the capital markets (common equity, preferred equity, and debt) to primarily fund our acquisition activity. We seek to increase cash flows from our properties by maintaining quality standards for our buildings that promote high occupancy rates and permit increases in rental rates while reducing tenant turnover and controlling operating expenses. We believe that our revenue, together with proceeds from building sales and debt and equity financings, will continue to provide funds for our short-term and medium-term liquidity needs.
Our short-term liquidity requirements consist primarily of funds to pay for operating expenses and other expenditures directly associated with our buildings, including interest expense, interest rate swap payments, scheduled principal payments on outstanding indebtedness, funding of property acquisitions under contract, general and administrative expenses, and capital expenditures for tenant improvements and leasing commissions.
Our long-term liquidity needs, in addition to recurring short-term liquidity needs as discussed above, consist primarily of funds necessary to pay for acquisitions, non-recurring capital expenditures, and scheduled debt maturities. We intend to satisfy our long-term liquidity needs through cash flow from operations, the issuance of equity or debt securities, other borrowings, property dispositions, or, in connection with acquisitions of certain additional buildings, the issuance of common units in our Operating Partnership.
Since the start of the COVID-19 pandemic in early-2020, we have worked to ensure that we maintain adequate liquidity. In February 2021 and October 2021, we refinanced our unsecured credit facility and several unsecured term loans and on September 28, 2021, we issued the Series I Unsecured Notes and Series J Unsecured Notes, as discussed in “Indebtedness Outstanding” below. As of December 31, 2021, we had total immediate liquidity of approximately $469.4 million, comprised of $19.0 million of cash and cash equivalents and $450.4 million of immediate availability on our unsecured credit facility. When incorporating the remaining undrawn balance available on our unsecured credit facility and the approximately $50.1 million of forward equity proceeds available to us at our option through November 3, 2022, our total liquidity as of December 31, 2021 was approximately $519.5 million.
In addition, we require funds for future dividends to be paid to our common stockholders and common unit holders in our Operating Partnership. These distributions on our common stock are voluntary (at the discretion of our board of directors), to the extent in excess of distribution requirements in order to maintain our REIT status for federal income tax purposes, and the excess portion may be reduced or stopped if needed to fund other liquidity requirements or for other reasons. The following table summarizes the dividends attributable to our common stock that were declared or paid during the year ended December 31, 2021.
Month Ended 2021 Declaration Date Record Date Per Share Payment Date
December 31 October 13, 2021 December 31, 2021 $ 0.120833 January 18, 2022
November 30 October 13, 2021 November 30, 2021 0.120833 December 15, 2021
October 31 October 13, 2021 October 29, 2021 0.120833 November 15, 2021
September 30 July 13, 2021 September 30, 2021 0.120833 October 15, 2021
August 31 July 13, 2021 August 31, 2021 0.120833 September 15, 2021
July 31 July 13, 2021 July 30, 2021 0.120833 August 16, 2021
June 30 April 12, 2021 June 30, 2021 0.120833 July 15, 2021
May 31 April 12, 2021 May 28, 2021 0.120833 June 15, 2021
April 30 April 12, 2021 April 30, 2021 0.120833 May 17, 2021
March 31 January 11, 2021 March 31, 2021 0.120833 April 15, 2021
February 28 January 11, 2021 February 26, 2021 0.120833 March 15, 2021
January 31 January 11, 2021 January 29, 2021 0.120833 February 16, 2021
Total $ 1.449996
On January 10, 2022, our board of directors declared the common stock dividends for the months ending January 31, 2022, February 28, 2022 and March 31, 2022 at a monthly rate of $0.121667 per share of common stock.
On March 31, 2021, we redeemed all 3,000,000 issued and outstanding shares of 6.875% Series C Cumulative Redeemable Preferred Stock, par value $0.01 per share (“Series C Preferred Stock”), at a cash redemption price of $25.00 per share, plus
accrued and unpaid dividends to, but excluding, the redemption date. The following table summarizes the dividends paid on the Series C Preferred Stock during the year ended December 31, 2021.
Quarter Ended 2021 Declaration Date Series C
Preferred Stock Per Share Payment Date
March 31 January 11, 2021 $ 0.4296875 March 31, 2021
Total $ 0.4296875
Indebtedness Outstanding
The following table summarizes certain information with respect to the indebtedness outstanding as of December 31, 2021.
Loan Principal Outstanding as of December 31, 2021 (in thousands) Interest
Rate(1)(2)
Maturity Date Prepayment Terms(3)
Unsecured credit facility:
Unsecured Credit Facility(4)
$ 296,000 L + 0.775% October 23, 2026 i
Total unsecured credit facility 296,000
Unsecured term loans:
Unsecured Term Loan D 150,000 2.85 % January 4, 2023 i
Unsecured Term Loan E 175,000 3.77 % January 15, 2024 i
Unsecured Term Loan F 200,000 2.96 % January 12, 2025 i
Unsecured Term Loan G 300,000 1.13 % February 5, 2026 i
Unsecured Term Loan A 150,000 3.23 % March 15, 2027 i
Total unsecured term loans 975,000
Total unamortized deferred financing fees and debt issuance costs (4,423)
Total carrying value unsecured term loans, net 970,577
Unsecured notes:
Series F Unsecured Notes 100,000 3.98 % January 5, 2023 ii
Series A Unsecured Notes 50,000 4.98 % October 1, 2024 ii
Series D Unsecured Notes 100,000 4.32 % February 20, 2025 ii
Series G Unsecured Notes 75,000 4.10 % June 13, 2025 ii
Series B Unsecured Notes 50,000 4.98 % July 1, 2026 ii
Series C Unsecured Notes 80,000 4.42 % December 30, 2026 ii
Series E Unsecured Notes 20,000 4.42 % February 20, 2027 ii
Series H Unsecured Notes 100,000 4.27 % June 13, 2028 ii
Series I Unsecured Notes 275,000 2.80 % September 29, 2031 ii
Series J Unsecured Notes 50,000 2.95 % September 28, 2033 ii
Total unsecured notes 900,000
Total unamortized deferred financing fees and debt issuance costs (3,059)
Total carrying value unsecured notes, net 896,941
Mortgage notes (secured debt):
Wells Fargo Bank, National Association CMBS Loan 46,610 4.31 % December 1, 2022 iii
Thrivent Financial for Lutherans 3,430 4.78 % December 15, 2023 iv
United of Omaha Life Insurance Company 4,943 3.71 % October 1, 2039 ii
Total mortgage notes 54,983
Net unamortized fair market value premium (discount) (136)
Total unamortized deferred financing fees and debt issuance costs (103)
Total carrying value mortgage notes, net 54,744
Total / weighted average interest rate(5)
$ 2,218,262 2.88 %
(1)Interest rate as of December 31, 2021. At December 31, 2021, the one-month LIBOR (“L”) was 0.10125%. The current interest rate is not adjusted to include the amortization of deferred financing fees or debt issuance costs incurred in obtaining debt or any unamortized fair market value premiums. The spread over the applicable rate for our unsecured credit facility and unsecured term loans is based on the our debt rating, as defined in the respective loan agreements.
(2)The unsecured term loans have a stated interest rate of one-month LIBOR plus a spread of 0.85%, with the exception of Unsecured Term Loan D which has a stated interest rate of one-month LIBOR plus a spread of 1.0%. As of December 31, 2021, one-month LIBOR for the Unsecured Term Loans A, D, E, F, and G was swapped to a fixed rate of 2.38%, 1.85%, 2.92%, 2.11%, and 0.28%, respectively. One-month LIBOR for the Unsecured Term Loan A will be swapped to a fixed rate of 1.30% effective April 1, 2022. One-month LIBOR for the Unsecured Term Loan G will be swapped to a fixed rate of 0.94% effective April 18, 2023.
(3)Prepayment terms consist of (i) pre-payable with no penalty; (ii) pre-payable with penalty; (iii) pre-payable without penalty three months prior to the maturity date, however can be defeased; and (iv) pre-payable without penalty three months prior to the maturity date.
(4)The capacity of the unsecured credit facility is $750.0 million. The initial maturity date is October 24, 2025, or such later date which may be extended pursuant to two six-month extension options exercisable by us in our discretion upon advance written notice. Exercise of each six-month option is subject to the following conditions: (i) absence of a default immediately before the extension and immediately after giving effect to the extension, (ii) accuracy of representations and warranties as of the extension date (both immediately before and after the extension), as if made on the extension date, and (iii) payment of a fee. Neither extension option is subject to lender consent, assuming proper notice and satisfaction of the conditions.
(5)The weighted average interest rate was calculated using the fixed interest rate swapped on the notional amount of $975.0 million of debt, and is not adjusted to include the amortization of deferred financing fees or debt issuance costs incurred in obtaining debt or any unamortized fair market value premiums or discounts.
The aggregate undrawn nominal commitments on the unsecured credit facility and unsecured term loans as of December 31, 2021 was approximately $450.4 million, including issued letters of credit. Our actual borrowing capacity at any given point in time may be less and is restricted to a maximum amount based on our debt covenant compliance.
Unsecured Credit Facility
On October 26, 2021, we entered into an amendment to the unsecured credit facility (the “October 2021 Credit Facility Amendment”). The October 2021 Credit Facility Amendment provides for an extension of the maturity date to October 24, 2025, with two six-month extension options, subject to certain conditions, and a reduced current interest rate of LIBOR plus a spread of 0.775% and facility fee of 0.15%, each based on our current debt rating (as defined in the credit agreement) and leverage level. As of December 31, 2021, the unsecured credit facility bore an interest rate of LIBOR plus a spread of 0.775% based on our debt rating, as defined in the loan agreement. In connection with the October 2021 Credit Facility Amendment, we incurred approximately $3.7 million in costs which are being deferred and amortized through the maturity date of the unsecured credit facility. We also incurred approximately $0.1 million of modification expenses which were recognized in debt extinguishment and modification expenses in the accompanying Consolidated Statements of Operations. Other than the maturity and interest rate provisions described above, the material terms of the unsecured credit facility remain unchanged.
On February 5, 2021, we entered into an amendment to the unsecured credit facility (the “February 2021 Credit Facility Amendment”). The Credit Facility Amendment provides for an increase in the aggregate commitments available for borrowing under the unsecured credit facility from $500 million to up to $750 million. In connection with the February 2021 Credit Facility Amendment, we incurred approximately $1.2 million in costs, which are being deferred and amortized through the maturity date of our unsecured credit facility. Other than the increase in the borrowing commitments, the material terms of our unsecured credit facility were not changed by the February 2021 Credit Facility Amendment.
Unsecured Term Loans
On October 26, 2021,we entered into an amendment to the Unsecured Term Loan A (the “Amendment to Unsecured Term Loan A”). The Amendment to Unsecured Term Loan A provides for an extension of the maturity date to March 15, 2027 and a reduced current interest rate of LIBOR plus a spread of 0.85% based on our current debt rating (as defined in the loan agreement) and leverage level. In connection with the Amendment to Unsecured Term Loan A, we incurred approximately $0.6 million in costs which are being deferred and amortized through the new maturity date of March 15, 2027. We also incurred approximately $0.2 million of modification expenses which were recognized in debt extinguishment and modification expenses in the accompanying Consolidated Statements of Operations. Other than the maturity and interest rate provisions described above, the material terms of the Unsecured Term Loan A remain unchanged.
On October 26, 2021, we entered into amendments to the Unsecured Term Loan E, the Unsecured Term Loan F, and the Unsecured Term Loan G (“Term Loan Amendments”) that provide for reduced current interest rates on each of the loans of LIBOR plus a spread of 0.85% based on our current debt rating (as defined in each loan agreement) and leverage level. In connection with the Term Loan Amendments, we incurred approximately $0.6 million in costs which are being deferred and amortized the respective maturity dates. We also incurred approximately $1.2 million of modification expenses which were recognized in debt extinguishment and modification expenses in the accompanying Consolidated Statements of Operations. Other than the interest rate provisions described above, the material terms of the Unsecured Term Loan E, the Unsecured Term Loan F, and the Unsecured Term Loan G remain unchanged.
On October 26, 2021, we entered into an amendment to the Unsecured Term Loan D to conform certain provisions of such loan agreement to the unsecured credit facility.
On February 5, 2021, we entered into an amendment to the Unsecured Term Loan G (the “Amendment to Unsecured Term Loan G”). The Amendment to Unsecured Term Loan G provides for an extension of the maturity date to February 5, 2026 and a reduced stated interest rate of one-month LIBOR plus a spread that ranges from 0.85% to 1.65% for LIBOR borrowings based on our debt ratings. The Amendment to Unsecured Term Loan G also amended the provision for a minimum interest rate, or floor, for LIBOR borrowings to 0.00% and for Base Rate borrowings to 1.00%. In connection with the Amendment to
Unsecured Term Loan G, we incurred approximately $1.6 million in costs, which are being deferred and amortized through the new maturity date of February 5, 2026. We also incurred approximately $0.7 million of modification expenses, which were recognized in debt extinguishment and modification expenses in the accompanying Consolidated Statements of Operations. Additionally, we reversed the previously accrued extension fees of approximately $1.1 million from an amendment to the Unsecured Term Loan G that was entered into on April 17, 2020, which resulted in a decrease to interest expense of approximately $0.3 million. Other than the maturity and interest rate provisions described above, the material terms of the Unsecured Term Loan G were not changed by the Amendment to Unsecured Term Loan G.
Unsecured Notes
On July 8, 2021, we entered into a note purchase agreement (the “July 2021 NPA”) for the private placement by our Operating Partnership of $275.0 million senior unsecured notes (the “Series I Unsecured Notes”) maturing September 29, 2031, with a fixed annual interest rate of 2.80%, and $50.0 million senior unsecured notes (the “Series J Unsecured Notes”) maturing September 28, 2033, with a fixed annual interest rate of 2.95%. The July 2021 NPA contains a number of financial covenants substantially similar to the financial covenants contained in our unsecured credit facility and other unsecured notes, plus a financial covenant that requires us to maintain a minimum interest coverage ratio of not less than 1.50:1.00. Our Operating Partnership issued the Series I Unsecured Notes and the Series J Unsecured Notes on September 28, 2021. The Company and certain wholly owned subsidiaries of our Operating Partnership are guarantors of the unsecured notes.
Mortgage Notes
On February 25, 2021, we assumed a mortgage note with United of Omaha Life Insurance Company of approximately $5.1 million in connection with the acquisition of the property located in Long Island, NY, which serves as collateral for the debt. The debt matures on October 1, 2039 and bears interest at 3.71% per annum. The assumed debt was recorded at fair value and a fair value discount of approximately $0.2 million was recorded. The fair value of debt was determined by discounting the future cash flows using the current rate of approximately 4.10% at which loans would be made to borrowers with similar credit ratings for loans with similar remaining maturities, terms, and loan-to-value ratios. The fair value of the debt is based on Level 3 inputs and is a nonrecurring fair value measurement.
The Wells Fargo Bank, National Association CMBS loan agreement is a commercial mortgage backed security that provides for a secured loan. There are 23 properties that are collateral for the CMBS loan. Our Operating Partnership guarantees the obligations under the CMBS loan.
The following table summarizes our debt capital structure as of December 31, 2021.
Debt Capital Structure December 31, 2021
Total principal outstanding (in thousands) $ 2,225,983
Weighted average duration (years) 4.6
% Secured debt 2.5 %
% Debt maturing next 12 months 2.1 %
Net Debt to Real Estate Cost Basis (1)
34.2 %
(1)We define Net Debt as our amounts outstanding under our unsecured credit facility, unsecured term loans, unsecured notes, and mortgage notes, less cash and cash equivalents. We define Real Estate Cost Basis as the book value of rental property and deferred leasing intangibles, exclusive of the related accumulated depreciation and amortization.
We regularly pursue new financing opportunities to ensure an appropriate balance sheet position. As a result of these dedicated efforts, we are confident in our ability to meet future debt maturities and building acquisition funding needs. We believe that our current balance sheet is in an adequate position at the date of this filing, despite possible volatility in the credit markets.
Our interest rate exposure as it relates to interest expense payments on our floating rate debt is managed through our use of interest rate swaps, which fix the rate of our long term floating rate debt. For a detailed discussion on our use of interest rate swaps, see “Interest Rate Risk” below.
Unsecured Credit Facility, Unsecured Term Loans, and Unsecured Notes
The unsecured credit facility provides for a facility fee payable by us to the lenders at a rate per annum of 0.1% to 0.3%, depending on our debt rating, as defined in the credit agreement, of the aggregate commitments (currently $750.0 million). The facility fee is due and payable quarterly.
Covenants: Our ability to borrow, maintain borrowings and avoid default under the unsecured credit facility, the unsecured term loans, and unsecured notes is subject to our ongoing compliance with a number of financial covenants, including:
•a maximum consolidated leverage ratio of not greater than 0.60:1.00;
•a maximum secured leverage ratio of not greater than 0.40:1.00;
•a maximum unencumbered leverage ratio of not greater than 0.60:1.00;
•a minimum fixed charge ratio of not less than or equal to 1.50:1.00; and
•a minimum unsecured interest coverage ratio of not less than or equal to 1.75:1.00.
The respective note purchase agreements additionally contain a financial covenant that requires us to maintain a minimum interest coverage ratio of not less than 1.50:1.00.
Pursuant to the terms of our unsecured debt agreements, we may not pay distributions that exceed the minimum amount required for us to qualify and maintain our status as a REIT if a default or event of default occurs and is continuing.
Our unsecured credit facility, unsecured term loans, unsecured notes, and mortgage notes are subject to ongoing compliance with a number of financial and other covenants. As of December 31, 2021, we were in compliance with the applicable financial covenants.
Events of Default: Our unsecured credit facility and unsecured term loans contain customary events of default, including but not limited to non-payment of principal, interest, fees or other amounts, defaults in the compliance with the covenants contained in the documents evidencing the unsecured credit facility and the unsecured term loans, cross-defaults to other material debt and bankruptcy or other insolvency events.
Borrower and Guarantors: Our Operating Partnership is the borrower under the unsecured credit facility, the unsecured term loans and is the issuer of the unsecured notes. The Company and certain of its subsidiaries guarantee the obligations under our unsecured debt agreements.
Equity
Preferred Stock
On March 31, 2021, we redeemed all 3,000,000 issued and outstanding shares of the Series C Preferred Stock at a cash redemption price of $25.00 per share, plus accrued and unpaid dividends to, but excluding, the redemption date. We have no outstanding preferred stock issuances as of December 31, 2021.
Common Stock
The following table summarizes our ATM common stock offering program as of December 31, 2021. We may from time to time sell common stock through sales agents under the ATM program. There was no activity under the ATM common stock offering program during the three months ended December 31, 2021.
ATM Common Stock Offering Program Date Maximum Aggregate Offering Price (in thousands) Aggregate Common Stock Available as of December 31, 2021 (in thousands)
2019 $600 million ATM February 14, 2019 $ 600,000 $ 76,482
Subsequent to December 31, 2021, we sold 128,335 shares under the ATM common stock offering program at a price of $45.03 per share, or $5.8 million, and $44.58 per share net of sales agent fees.
On November 3, 2021, we completed an underwritten public offering of an aggregate of 8,000,000 shares of common stock at a price to the underwriters of $41.99 per share, consisting of (i) 5,250,000 shares offered directly us and (ii) 2,750,000 shares offered by the forward dealer in connection with certain forward sale agreements. The offering closed on November 8, 2021 and we received net proceeds from the sale of shares offered directly by us of approximately $220.4 million. On December 1, 2021, the underwriters exercised their option to purchase an additional 1,200,000 shares for an offering price of $41.87 per share and the underwriters’ option closed on December 3, 2021. On December 27, 2021, we partially physically settled the forward sales agreements in full by issuing 2,750,000 shares of common stock and received net proceeds of approximately $115.0 million. Subject to the our right to elect cash or net share settlement, we have the ability to settle the remaining forward sales agreements at any time through scheduled maturity date of the forward sale agreements of November 3, 2022.
On April 5, 2021, we sold 1,446,760 shares on a forward basis under the ATM common stock offering program at a price of $34.56 per share, or $50.0 million, and $34.2144 per share net of sales agent fees. We did not initially receive any proceeds from the sale of shares on a forward basis. On September 29, 2021, we physically settled in full the forward sales agreements under the ATM common stock offering program by issuing 1,446,760 shares of common stock and received net proceeds of approximately $48.4 million, or $33.4585 per share.
Noncontrolling Interests
We own our interests in all of our properties and conduct substantially all of our business through our Operating Partnership. We are the sole member of the sole general partner of our Operating Partnership. As of December 31, 2021, we owned approximately 98.1% of the common units in our Operating Partnership, and our current and former executive officers, directors, senior employees and their affiliates, and other third parties owned the remaining 1.9% of the common units.
Interest Rate Risk
We use interest rate swaps to fix the rate of our variable rate debt. As of December 31, 2021, all of our outstanding variable rate debt, with the exception of our unsecured credit facility, was fixed with interest rate swaps through maturity.
We recognize all derivatives on the balance sheet at fair value. If the derivative is designated as a hedge, depending on the nature of the hedge, changes in the fair value of derivatives are either offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income (loss), which is a component of equity. Derivatives that are not designated as hedges must be adjusted to fair value and the changes in fair value must be reflected as income or expense.
We have established criteria for suitable counterparties in relation to various specific types of risk. We only use counterparties that have a credit rating of no lower than investment grade at swap inception from Moody’s Investor Services, Standard & Poor’s, Fitch Ratings, or other nationally recognized rating agencies.
The following table summarizes our outstanding interest rate swaps as of December 31, 2021.
Interest Rate Derivative Counterparty Trade Date Effective Date Notional Amount
(in thousands) Fair Value
(in thousands) Pay Fixed Interest Rate Receive Variable Interest Rate Maturity Date
Wells Fargo Bank, N.A. Jan-08-2015 Mar-20-2015 $ 25,000 $ (105) 1.8280 % One-month L Mar-31-2022
The Toronto-Dominion Bank Jan-08-2015 Feb-14-2020 $ 25,000 $ (143) 2.4535 % One-month L Mar-31-2022
Regions Bank Jan-08-2015 Feb-14-2020 $ 50,000 $ (289) 2.4750 % One-month L Mar-31-2022
Capital One, N.A. Jan-08-2015 Feb-14-2020 $ 50,000 $ (296) 2.5300 % One-month L Mar-31-2022
The Toronto-Dominion Bank Jul-20-2017 Oct-30-2017 $ 25,000 $ (353) 1.8485 % One-month L Jan-04-2023
Royal Bank of Canada Jul-20-2017 Oct-30-2017 $ 25,000 $ (354) 1.8505 % One-month L Jan-04-2023
Wells Fargo Bank, N.A. Jul-20-2017 Oct-30-2017 $ 25,000 $ (354) 1.8505 % One-month L Jan-04-2023
PNC Bank, N.A. Jul-20-2017 Oct-30-2017 $ 25,000 $ (353) 1.8485 % One-month L Jan-04-2023
PNC Bank, N.A. Jul-20-2017 Oct-30-2017 $ 50,000 $ (706) 1.8475 % One-month L Jan-04-2023
The Toronto-Dominion Bank Apr-20-2020 Sep-29-2020 $ 75,000 $ 299 0.2750 % One-month L Apr-18-2023
Wells Fargo Bank, N.A. Apr-20-2020 Sep-29-2020 $ 75,000 $ 295 0.2790 % One-month L Apr-18-2023
The Toronto-Dominion Bank Apr-20-2020 Mar-19-2021 $ 75,000 $ 299 0.2750 % One-month L Apr-18-2023
Wells Fargo Bank, N.A. Apr-20-2020 Mar-19-2021 $ 75,000 $ 294 0.2800 % One-month L Apr-18-2023
The Toronto-Dominion Bank Jul-24-2018 Jul-26-2019 $ 50,000 $ (2,128) 2.9180 % One-month L Jan-12-2024
PNC Bank, N.A. Jul-24-2018 Jul-26-2019 $ 50,000 $ (2,128) 2.9190 % One-month L Jan-12-2024
Bank of Montreal Jul-24-2018 Jul-26-2019 $ 50,000 $ (2,128) 2.9190 % One-month L Jan-12-2024
U.S. Bank, N.A. Jul-24-2018 Jul-26-2019 $ 25,000 $ (1,064) 2.9190 % One-month L Jan-12-2024
Wells Fargo Bank, N.A. May-02-2019 Jul-15-2020 $ 50,000 $ (1,827) 2.2460 % One-month L Jan-15-2025
U.S. Bank, N.A. May-02-2019 Jul-15-2020 $ 50,000 $ (1,826) 2.2459 % One-month L Jan-15-2025
Regions Bank May-02-2019 Jul-15-2020 $ 50,000 $ (1,825) 2.2459 % One-month L Jan-15-2025
Bank of Montreal Jul-16-2019 Jul-15-2020 $ 50,000 $ (1,022) 1.7165 % One-month L Jan-15-2025
U.S. Bank, N.A. Feb-17-2021 Apr-18-2023 $ 150,000 $ 2,014 0.9385 % One-month L Feb-5-2026
Wells Fargo Bank, N.A. Feb-17-2021 Apr-18-2023 $ 75,000 $ 1,009 0.9365 % One-month L Feb-5-2026
The Toronto-Dominion Bank Feb-17-2021 Apr-18-2023 $ 75,000 $ 1,010 0.9360 % One-month L Feb-5-2026
Regions Bank Oct-26-2021 Apr-01-2022 $ 50,000 $ (54) 1.3045 % One-month L Mar-15-2027
Bank of Montreal Oct-26-2021 Apr-01-2022 $ 50,000 $ (45) 1.3045 % One-month L Mar-15-2027
PNC Bank, N.A. Oct-26-2021 Apr-01-2022 $ 50,000 $ (52) 1.3045 % One-month L Mar-15-2027
The swaps outlined in the above table were all designated as cash flow hedges of interest rate risk, and all are valued as Level 2 financial instruments. Level 2 financial instruments are defined as significant other observable inputs. As of December 31, 2021, the fair value of seven of our interest rate swaps were in a asset position of approximately $5.2 million, including any adjustment for nonperformance risk related to these agreements. The remaining 20 interest rate swaps were in a liability position of approximately $17.1 million, including any adjustment for nonperformance risk related to these agreements.
As of December 31, 2021, we had $1,271.0 million of variable rate debt. As of December 31, 2021, all of our outstanding variable rate debt, with exception of our unsecured credit facility, was fixed with interest rate swaps through maturity. To the extent interest rates increase, interest costs on our floating rate debt not fixed with interest rate swaps will increase, which could adversely affect our cash flow and our ability to pay principal and interest on our debt and our ability to make distributions to our security holders. From time to time, we may enter into interest rate swap agreements and other interest rate hedging contracts, including swaps, caps and floors. In addition, an increase in interest rates could decrease the amounts third parties are willing to pay for our assets, thereby limiting our ability to change our portfolio promptly in response to changes in economic or other conditions.
Off-balance Sheet Arrangements
As of December 31, 2021, we had letters of credit related to development projects and certain other agreements of approximately $3.6 million. As of December 31, 2021, we had no other material off-balance sheet arrangements.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Our future income, cash flows and fair values relevant to financial instruments are dependent upon prevailing market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates. The primary market risk we are exposed to is interest rate risk. We have used derivative financial instruments to manage, or hedge, interest rate risks related to our borrowings, primarily through interest rate swaps.
As of December 31, 2021, we had $1,271.0 million of variable rate debt outstanding. As of December 31, 2021, all of our outstanding variable rate debt, with the exception of our unsecured credit facility which had a balance of $296.0 million, was fixed with interest rate swaps through maturity. To the extent we undertake additional variable rate indebtedness, if interest rates increase, then so will the interest costs on our unhedged variable rate debt, which could adversely affect our cash flow and our ability to pay principal and interest on our debt and our ability to make distributions to our security holders. Further, rising interest rates could limit our ability to refinance existing debt when it matures or significantly increase our future interest expense. From time to time, we enter into interest rate swap agreements and other interest rate hedging contracts, including swaps, caps and floors. While these agreements are intended to lessen the impact of rising interest rates on us, they also expose us to the risk that the other parties to the agreements will not perform, we could incur significant costs associated with the settlement of the agreements, the agreements will be unenforceable and the underlying transactions will fail to qualify as highly-effective cash flow hedges under GAAP. In addition, an increase in interest rates could decrease the amounts third parties are willing to pay for our assets, thereby limiting our ability to change our portfolio promptly in response to changes in economic or other conditions. In addition, an increase in interest rates could decrease the amounts third parties are willing to pay for our assets, thereby limiting our ability to change our portfolio promptly in response to changes in economic or other conditions. If interest rates increased by 100 basis points and assuming we had an outstanding balance of $296.0 million on our unsecured credit facility for the year ended December 31, 2021, our interest expense would have increased by approximately $3.0 million for the year ended December 31, 2021.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data
The required response under this Item is submitted in a separate section of this report. See Index to Consolidated Financial Statements on page.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As required by SEC Rule 13a-15(b), we have evaluated, under the supervision of and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, as of December 31, 2021. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures for the periods covered by this report were effective to provide reasonable assurance that information required to be disclosed by our Company in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control-Integrated Framework (2013), our management concluded that our internal control over financial reporting was effective as of December 31, 2021.
The effectiveness of our internal control over financial reporting as of December 31, 2021 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which appears on page of this Annual Report on Form 10-K.
Changes in Internal Controls
There was no change to our internal control over financial reporting during the fourth quarter ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information
None.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance
The information required by Item 10 will be included in the Proxy Statement to be filed relating to our 2022 Annual Meeting of Stockholders and is incorporated herein by reference.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation
The information required by Item 11 will be included in the Proxy Statement to be filed relating to our 2022 Annual Meeting of Stockholders and is incorporated herein by reference.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by Item 12 will be included in the Proxy Statement to be filed relating to our 2022 Annual Meeting of Stockholders and is incorporated herein by reference.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by Item 13 will be included in the Proxy Statement to be filed relating to our 2022 Annual Meeting of Stockholders and is incorporated herein by reference.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accountant Fees and Services
The information required by Item 14 will be included in the Proxy Statement to be filed relating to our 2022 Annual Meeting of Stockholders and is incorporated herein by reference.
PART IV.

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits and Financial Statement Schedules
1.Consolidated Financial Statements
The financial statements listed in the accompanying Index to Consolidated Financial Statements on page are filed as a part of this report.
2.Financial Statement Schedules
The financial statement schedules required by this Item are filed with this report and listed in the accompanying Index to Consolidated Financial Statements on page. All other financial statement schedules are not applicable.
3.Exhibits
The following exhibits are filed as part of this report:
Exhibit Number Description of Document
3.1 Articles of Amendment and Restatement (including all articles of amendment and articles supplementary) (incorporated by reference to the Quarterly Report on Form 10-Q filed with the SEC on July 30, 2019)
3.2 Third Amended and Restated Bylaws (incorporated by reference to the Current Report on Form 8-K filed with the SEC on May 1, 2018)
4.1 Form of Common Stock Certificate (incorporated by reference to the Registration Statement on Form S-11/A (File No. 333-168368) filed with the SEC on September 24, 2010.)
4.2 Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Exchange Act
10.1 Amended and Restated Agreement of Limited Partnership, dated as of April 20, 2011 (incorporated by reference to the Current Report on Form 8-K filed with the SEC on April 21, 2011)
10.2 First Amendment to the Amended and Restated Agreement of Limited Partnership, dated as of November 2, 2011 (incorporated by reference to the Current Report on Form 8-K filed with the SEC on November 2, 2011)
10.3 Second Amendment to the Amended and Restated Agreement of Limited Partnership, dated as of April 16, 2013 (incorporated by reference to the Current Report on Form 8-K filed with the SEC on April 16, 2013)
10.4 Third Amendment to the Amended and Restated Agreement of Limited Partnership, dated as of March 17, 2016 (incorporated by reference to the Current Report on Form 8-K filed with the SEC on March 18, 2016)
10.5 STAG Industrial, Inc. 2011 Equity Incentive Plan, effective April 1, 2011 (incorporated by reference to the Registration Statement on Form S-11/A (File No. 333-168368) filed with the SEC on April 5, 2011)*
10.6 Amendment to the 2011 Equity Incentive Plan, dated as of May 6, 2013 (incorporated by reference to the Current Report on Form 8-K filed with the SEC on May 6, 2013)*
10.7 Second Amendment to the 2011 Equity Incentive Plan, dated as of February 20, 2015 (incorporated by reference to the Annual Report on Form 10-K filed with the SEC on February 23, 2015)*
10.8 Amended and Restated STAG Industrial, Inc. 2011 Equity Incentive Plan, effective April 30, 2018 (incorporated by reference to the Current Report on Form 8-K filed with the SEC on May 1, 2018)*
10.9 Form of LTIP Unit Agreement (incorporated by reference to the Registration Statement on Form S-11/A (File No. 333-168368) filed with the SEC on April 5, 2011)*
10.10 Form of Performance Award Agreement (incorporated by reference to the Quarterly Report on Form 10-Q filed with the SEC on May 3, 2016)*
Exhibit Number Description of Document
10.11 STAG Industrial Inc. Employee Retirement Vesting Program, effective January 7, 2021 (incorporated by reference to the Current Report on Form 8-K filed with the SEC on January 13, 2021)*
10.12 Amended and Restated Executive Employment Agreement with Benjamin S. Butcher, dated May 4, 2015 (incorporated by reference to the Quarterly Report on Form 10-Q filed with the SEC on July 23, 2015)*
10.13 Executive Employment Agreement with William R. Crooker, dated February 25, 2016 (incorporated by reference to the Quarterly Report on Form 10-Q filed with the SEC on May 3, 2016)*
10.14 Executive Employment Agreement with Matts S. Pinard, dated January 10, 2022 (incorporated by reference to the Current Report on Form 8-K filed with the SEC on January 12, 2022)*
10.15 Executive Employment Agreement with Stephen C. Mecke, dated April 20, 2011 (incorporated by reference to the Current Report on Form 8-K filed with the SEC on April 21, 2011)*
10.16 Executive Employment Agreement with Jeffrey M. Sullivan, dated October 27, 2014 (incorporated by reference to the Quarterly Report on Form 10-Q filed with the SEC on October 31, 2014)*
10.17 Form of Indemnification Agreement (incorporated by reference to the Registration Statement on Form S-11/A (File No. 333-168368) filed with the SEC on February 16, 2011)*
10.18 Registration Rights Agreement, dated April 20, 2011 (incorporated by reference to the Current Report on Form 8-K filed with the SEC on April 21, 2011)
10.19 Unsecured Credit Facility: Credit Agreement, dated as of July 26, 2018 (incorporated by reference to the Current Report on Form 8-K filed with the SEC on July 31, 2018)
10.20 Unsecured Credit Facility: First Amendment to Credit Agreement, dated as of February 5, 2021 (incorporated by reference to the Quarterly Report on Form 10-Q filed with the SEC on May 4, 2021)
10.21 Unsecured Credit Facility: Second Amendment to Credit Agreement, dated as of October 26, 2021
10.22 Unsecured Term Loan A: Amended and Restated Term Loan Agreement, dated as of December 20, 2016 (incorporated by reference to the Current Report on Form 8-K filed with the SEC on December 27, 2016)
10.23 Unsecured Term Loan A: First Amendment to Amended and Restated Term Loan Agreement, dated as of July 28, 2017 (incorporated by reference to the Quarterly Report on Form 10-Q filed with the SEC on November 2, 2017)
10.24 Unsecured Term Loan A: Second Amendment to Amended and Restated Term Loan Agreement, dated as of July 26, 2018 (incorporated by reference to the Current Report on Form 8-K filed with the SEC on July 30, 2019)
10.25 Unsecured Term Loan A: Amendment to Amended and Restated Term Loan Agreement, dated as of October 26, 2021
10.26 Unsecured Term Loan D: Term Loan Agreement, dated as of July 28, 2017 (incorporated by reference to the Quarterly Report on Form 10-Q filed with the SEC on November 2, 2017)
10.27 Unsecured Term Loan D: First Amendment to Term Loan Agreement, dated as of July 26, 2018 (incorporated by reference to the Current Report on Form 8-K filed with the SEC on July 30, 2019)
10.28 Unsecured Term Loan D: Second Amendment to Term Loan Agreement, dated as of October 26, 2021
10.29 Unsecured Term Loan E: Term Loan Agreement, dated as of July 26, 2018 (incorporated by reference to the Current Report on Form 8-K filed with the SEC on July 31, 2018)
10.30 Unsecured Term Loan E: First Amendment to Term Loan Agreement, dated as of October 26, 2021
10.31 Unsecured Term Loan F: Term Loan Agreement, dated as of July 12, 2019 (incorporated by reference to the Current Report on Form 8-K filed with the SEC on July 30, 2019)
10.32 Unsecured Term Loan F: First Amendment to Term Loan Agreement, dated as of October 26, 2021
10.33 Unsecured Term Loan G: Term Loan Agreement, dated as of April 17, 2020 (incorporated by reference to the Quarterly Report on Form 10-Q filed with the SEC on July 28, 2020)
10.34 Unsecured Term Loan G: First Amendment to Term Loan Agreement, dated as of February 5, 2021 (incorporated by reference to the Quarterly Report on Form 10-Q filed with the SEC on May 4, 2021)
10.35 Unsecured Term Loan G: Second Amendment to Term Loan Agreement, dated as of October 26, 2021
10.36 Series A Unsecured Notes, Series B Unsecured Notes: Note Purchase Agreement, dated as of April 16, 2014 (incorporated by reference to the Current Report on Form 8-K filed with the SEC on April 22, 2014)
10.37 Series A Unsecured Notes, Series B Unsecured Notes: First Amendment to Note Purchase Agreement, dated as of December 18, 2014 (incorporated by reference to the Current Report on Form 8-K filed with the SEC on December 19, 2014)
10.38 Series A Unsecured Notes, Series B Unsecured Notes: Second Amendment to Note Purchase Agreement, dated as of December 1, 2015 (incorporated by reference to the Current Report on Form 8-K filed with the SEC on December 4, 2015)
Exhibit Number Description of Document
10.39 Series A Unsecured Notes, Series B Unsecured Notes: Third Amendment to Note Purchase Agreement, dated as of April 10, 2018 (incorporated by reference to the Current Report on Form 8-K filed with the SEC on April 13, 2018)
10.40 Series C Unsecured Notes, Series D Unsecured Notes, Series E Unsecured Notes: Note Purchase Agreement, dated as of December 18, 2014 (incorporated by reference to the Current Report on Form 8-K filed with the SEC on December 19, 2014)
10.41 Series C Unsecured Notes, Series D Unsecured Notes, Series E Unsecured Notes: First Amendment to Note Purchase Agreement, dated as of December 1, 2015 (incorporated by reference to the Current Report on Form 8-K filed with the SEC on December 4, 2015)
10.42 Series C Unsecured Notes, Series D Unsecured Notes, Series E Unsecured Notes: Second Amendment to Note Purchase Agreement, dated as of April 10, 2018 (incorporated by reference to the Current Report on Form 8-K filed with the SEC on April 13, 2018)
10.43 Series F Unsecured Notes: Note Purchase Agreement, dated as of December 1, 2015 (incorporated by reference to the Current Report on Form 8-K filed with the SEC on December 4, 2015)
10.44 Series F Unsecured Notes: First Amendment to Note Purchase Agreement, dated as of April 10, 2018 (incorporated by reference to the Current Report on Form 8-K filed with the SEC on April 13, 2018)
10.45 Series G Unsecured Notes, Series H Unsecured Notes: Note Purchase Agreement, dated as of April 10, 2018 (incorporated by reference to the Current Report on Form 8-K filed with the SEC on April 13, 2018)
10.46 Series I Unsecured Notes, Series J Unsecured Notes: Note Purchase Agreement, dated as of July 8, 2021 (incorporated by reference to the Quarterly Report on Form 10-Q filed with the SEC on October 28, 2021)
21.1 Subsidiaries of STAG Industrial, Inc.
23.1 Consent of PricewaterhouseCoopers LLP
24.1 Power of Attorney (included on signature page)
31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101 The following materials from STAG Industrial, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2021 formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income, (vi) the Consolidated Statements of Equity, (v) the Consolidated Statements of Cash Flows, and (vi) related notes to these consolidated financial statements.
104 Cover Page Interactive Data File (formatted in Inline XBRL and contained in Exhibit 101).
* Represents management contract or compensatory plan or arrangement.