Edgar Filing: STAG Industrial, Inc.

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the Quarterly Period Ended September 30, 2012

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

For the transition period from to .

Commission file number 1-34907

STAG INDUSTRIAL, INC.

(Exact name of registrant as specified in its charter)

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

99 High Street, 28th Floor Boston, Massachusetts		02110
(Address of principal executive offices)		(Zip Code)

(617) 574-4777

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

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

Large accelerated filer o		Accelerated filer o

Non-accelerated filer x		Smaller reporting company o
(Do not check if a smaller reporting company)

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

Indicate the number of shares outstanding of each of the issuer’s classes of common and preferred shares as of the latest practicable date.

Class		Outstanding at November 7, 2012
Common Stock ($0.01 par value)		34,873,975
9.0 % Series A Cumulative Redeemable Preferred Stock ($0.01 par value)		2,760,000

Table of Contents

STAG INDUSTRIAL, INC.

Table of Contents

PART I.	Financial Information	3

Item 1.	Financial Statements (unaudited)	3

	Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011 for STAG Industrial, Inc.	3

	Consolidated and Combined Statements of Operations for STAG Industrial, Inc. for the Three and Nine Months Ended September 30, 2012 and for the Period from April 20 to September 30, 2011 and STAG Predecessor Group for the Period from January 1 to April 19, 2011	4

	Consolidated and Combined Statements of Comprehensive Income for STAG Industrial, Inc. for the Three and Nine Months Ended September 30, 2012 and for the Period from April 20 to September 30, 2011 and STAG Predecessor Group for the Period from January 1 to April 19, 2011	5

	Consolidated and Combined Statements of Stockholders’ Equity for STAG Industrial, Inc. for the Nine Months Ended September 30, 2012 and for the Period from April 20 to September 30, 2011 and STAG Predecessor Group for the Period from January 1 to April 19, 2011	6

	Consolidated and Combined Statements of Cash Flows for STAG Industrial, Inc. for the Nine Months Ended September 30, 2012 and for the Period from April 20 to September 30, 2011 and STAG Predecessor Group for the Period from January 1 to April 19, 2011	7

	Notes to Consolidated and Combined Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	37

Item 4.	Controls and Procedures	37

PART II.	Other Information	38

Item 1.	Legal Proceedings	38

Item 1A.	Risk Factors	38

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38

Item 3.	Defaults Upon Senior Securities	38

Item 4.	Mine Safety Disclosures	38

Item 5.	Other Information	38

Item 6.	Exhibits	38

	SIGNATURE	39

Table of Contents

Part I. Financial Information

Item 1. Financial Statements

STAG Industrial, Inc.

Consolidated Balance Sheets

(unaudited, in thousands, except share data)

	September 30, 2012			December 31, 2011

Assets
Rental Property:
Land	$	90,337		$	70,870
Buildings	517,030			394,822
Tenant improvements	31,586			25,056
Building and land improvements	16,836			11,510
Less: accumulated depreciation	(41,881		)	(30,004		)
Total rental property, net	613,908			472,254
Cash and cash equivalents	10,684			16,498
Restricted cash	5,768			6,611
Tenant accounts receivable, net	7,100			5,592
Prepaid expenses and other assets	5,706			1,355
Deferred financing fees, net	3,646			2,634
Leasing commissions, net	1,335			954
Goodwill	4,923			4,923
Due from related parties	375			400
Deferred leasing intangibles, net	150,466			113,293
Total assets	$	803,911		$	624,514
Liabilities and Stockholders’ Equity
Liabilities:
Mortgage notes payable	$	161,894		$	296,779
Credit facility	—			—
Unsecured credit facility	12,000			—
Unsecured term loan	100,000			—
Accounts payable, accrued expenses and other liabilities	8,179			6,044
Interest rate swaps	577			215
Tenant prepaid rent and security deposits	3,970			3,478
Dividends and distributions payable	12,772			6,160
Deferred leasing intangibles, net	5,513			1,929
Total liabilities	$	304,905		$	314,605
Commitments and contingencies
Stockholders’ Equity:
Preferred stock, par value $0.01 per share, 10,000,000 shares authorized, 2,760,000 shares (liquidation preference of $25.00 per share) issued and outstanding at September 30, 2012 and December 31, 2011	69,000			69,000
Common stock $0.01 par value, 100,000,000 shares authorized, 34,871,099 and 15,901,560 shares outstanding at September 30, 2012 and December 31, 2011, respectively	349			159
Additional paid-in capital	408,834			179,919
Common stock dividends in excess of earnings	(47,916		)	(18,385		)
Accumulated other comprehensive loss	(427		)	—
Total stockholders’ equity	429,840			230,693
Noncontrolling interest	69,166			79,216
Total equity	499,006			309,909
Total liabilities and equity	$	803,911		$	624,514

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

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STAG Industrial, Inc. and STAG Predecessor Group

Consolidated and Combined Statements of Operations

(unaudited, in thousands, except per share data)

	STAG			STAG						STAG			STAG
	Industrial,			Industrial,			STAG			Industrial,			Predecessor
	Inc.			Inc.			Industrial,			Inc.			Group
	Three months Ended September 30, 2012			Three months Ended September 30, 2011			Inc. Nine months Ended September 30, 2012			Period from April 20 to September 30, 2011			Period from January 1 to April 19, 2011
Revenue
Rental income	$	19,261		$	13,394		$	52,448		$	23,018		$	6,866
Tenant recoveries	2,135			1,438			6,283			2,511			1,218
Other income	331			321			982			588			—
Total revenue	21,727			15,153			59,713			26,117			8,084
Expenses
Property	1,345			1,315			4,439			2,110			1,193
General and administrative	3,656			2,453			9,962			4,513			322
Real estate taxes and insurance	1,677			1,284			4,816			2,184			879
Asset management fees	—			—			—			—			170
Property acquisition costs	1,067			368			2,509			695			—
Depreciation and amortization	10,354			7,765			28,465			14,157			2,405
Loss on impairment	3,941			—			4,563			—			—
Other expenses	87			—			146			—			—
Total expenses	22,127			13,185			54,900			23,659			4,969
Other income (expense)
Interest income	9			6			17			15			1
Interest expense	(3,578		)	(4,330		)	(11,888		)	(7,446		)	(3,954		)
Gain on interest rate swaps	—			770			215			1,270			762
Formation transaction costs	—			(61		)	—			(3,789		)	—
Offering costs	—			(78		)	(68		)	(78		)	—
Loss on extinguishment of debt	(947		)	—			(929		)	—			—
Total other income (expense)	(4,516		)	(3,693		)	(12,653		)	(10,028		)	(3,191		)
Net loss from continuing operations	$	(4,916	)	$	(1,725	)	$	(7,840	)	$	(7,570	)	$	(76	)
Discontinued operations
Income (loss) attributable to discontinued operations	—			1,153			(184		)	1,099			(153		)
Gain on sale of real estate	—			—			219			—			—
Total income (loss) attributable to discontinued operations	—			1,153			35			1,099			(153		)
Net loss	$	(4,916	)	$	(572	)	$	(7,805	)	$	(6,471	)	$	(229	)
Less: loss attributable to noncontrolling interest	(1,248		)	(188		)	(3,244		)	(2,155		)
Net loss attributable to STAG Industrial, Inc.	$	(3,668	)	$	(384	)	$	(4,561	)	$	(4,316	)
Less: preferred stock dividends	1,553			—			4,659			—
Less: amount allocated to unvested restricted stockholders	41			—			81			—
Net loss attributable to common stockholders	$	(5,262	)	$	(384	)	$	(9,301	)	$	(4,316	)
Weighted average common shares outstanding — basic and diluted	29,752,057			15,815,282			21,716,590			15,524,807
Income (loss) per share — basic and diluted
Loss from continuing operations attributable to common stockholders	$	(0.18	)	$	(0.07	)	$	(0.43	)	$	(0.33	)
Income from discontinued operations attributable to common stockholders	$	—		$	0.05		$	0.00		$	0.05
Loss per share — basic and diluted	$	(0.18	)	$	(0.02	)	$	(0.43	)	$	(0.28	)
Dividends declared per common share	$	0.27		$	0.26		$	0.80		$	0.4657

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

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STAG Industrial, Inc. and STAG Predecessor Group

Consolidated Statements of Comprehensive Income

(unaudited, in thousands, except per share data)

	STAG			STAG			STAG						STAG
	Industrial,			Industrial,			Industrial,			STAG			Predecessor
	Inc.			Inc.			Inc.			Industrial,			Group
	Three months Ended September 30, 2012			Three months Ended September 30, 2011			Nine months Ended September 30, 2012			Inc. Period from April 20 to September 30, 2011			Period from January 1 to April 19, 2011

Net loss	$	(4,916	)	$	(572	)	$	(7,805	)	$	(6,471	)	$	(229	)
Other comprehensive loss:
Unrealized loss on interest rate swaps	(577		)	—			(577		)	—			—
Other comprehensive loss	(577		)	—			(577		)	—			—
Comprehensive loss	(5,493		)	(572		)	(8,382		)	(6,471		)	(229		)
Net loss attributable to noncontrolling interest	1,248			188			3,244			2,155
Other comprehensive loss attributable to noncontrolling interest	111			—			150			—
Comprehensive loss attributable to STAG Industrial, Inc.	$	(4,134	)	$	(384	)	$	(4,988	)	$	(4,316	)

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

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STAG Industrial, Inc. and STAG Predecessor Group

Consolidated and Combined Statements of Stockholders’ Equity

(unaudited, in thousands, except share data)

																							Noncontrolling
											Common Stock						Accumulated						Interest — Unit
								Additional			Dividends						Other			Total			Holders in
				Common Stock				Paid in			in Excess of			Predecessor’s			Comprehensive			Stockholder’s			Operating
	Preferred Stock			Shares		Amount		Capital			Earnings			Owner’s Deficit			Loss			Equity			Partnership			Total Equity
Nine months Ended September 30, 2012
Balance, December 31, 2011	$	69,000		15,901,560		$	159	$	179,919		$	(18,385	)	$	—		$	—		$	230,693		$	79,216		$	309,909
Proceeds from sale of common stock	—			17,537,500		176		237,392			—			—			—			237,568			—			237,568
Offering costs	—			—		—		(10,863		)	—			—			—			(10,863		)	—			(10,863		)
Issuance of restricted stock	—			87,025		1		(1		)	—			—			—			—			—			—
Issuance of common stock, net	—			9,790		—		—			—			—			—			—			—			—
Dividends and distributions, net	(4,659		)	—		—		—			(20,311		)	—			—			(24,970		)	(5,938		)	(30,908		)
Stock-based compensation	—			—		—		746			—			—			—			746			711			1,457
Issuance of units for acquisition fee	—			—		—		—			—			—			—			—			225			225
Conversion of operating partnership units to common stock	—			1,335,224		13		13,148			—			—			—			13,161			(13,161		)	—
Rebalancing of noncontrolling interest	—			—		—		(11,507		)	—			—						(11,507		)	11,507			—
Comprehensive loss	—			—		—		—			—			—			(427		)	(427		)	(150		)	(577		)
Net income (loss)	4,659			—		—		—			(9,220		)	—			—			(4,561		)	(3,244		)	(7,805		)
Balance, September 30, 2012	$	69,000		34,871,099		$	349	$	408,834		$	(47,916	)	$	—		$	(427	)	$	429,840		$	69,166		$	499,006

Period from January 1 to April 19, 2011 (STAG Predecessor Group)
Balance, December 31, 2010	$	—		—		$	—	$	—		$	—		$	(8,336	)	$	—		$	(8,336	)	$	—		$	(8,336	)
Contributions	—			—		—		—			—			4,420			—			4,420			—			4,420
Distributions	—			—		—		—			—			(9,900		)	—			(9,900		)	—			(9,900		)
Net loss	—			—		—		—			—			(229		)	—			(229		)	—			(229		)
Balance, April 19, 2011	$	—		—		$	—	$	—		$	—		$	(14,045	)	$	—		$	(14,045	)	$	—		$	(14,045	)
Period from April 20 to September 30, 2011 (STAG Industrial, Inc.)

Balance, April 20, 2011	$	—		110		$	—	$	2		$	—		$	(14,045	)	$	—		$	(14,043	)	$	—		$	(14,043	)
Proceeds from sale of common stock	—			15,812,500		158		205,405			—			—			—			205,563			—			205,563
Redemption of initial capitalization of STAG Industrial, Inc.	—			(110	)	—		(2		)	—			—			—			(2		)	—			(2		)
Issuance of units for acquisition of properties	—			—		—		—			—			—			—			—			95,670			95,670
Exchange of owners’ equity for units	—			—		—		—			—			14,045			—			14,045			(14,045		)	—
Offering costs	—			—		—		(17,042		)	—			—			—			(17,042		)	—			(17,042		)
Issuance of restricted stock	—			80,809		1		(1		)	—			—			—			—			—			—
Issuance of common stock	—			3,281		—		—			—			—			—			—			—			—
Dividends and distributions				—		—		—			(7,402		)	—			—			(7,402		)	(3,628		)	(11,030		)
Stock-based compensation	—			—		—		142			—			—			—			142			234			376
Rebalancing of noncontrolling interest	—			—		—		(7,140		)	—			—			—			(7,140		)	7,140			—
Net loss	—			—		—		—			(4,316		)	—			—			(4,316		)	(2,155		)	(6,471		)
Balance, September 30, 2011	$	—		15,896,590		$	159	$	181,364		$	(11,718	)	$	—		$	—		$	169,805		$	83,216		$	253,021

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

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STAG Industrial, Inc. and STAG Predecessor Group

Consolidated and Combined Statements of Cash Flows

(unaudited, in thousands)

							STAG
							Predecessor
				STAG Industrial, Inc.			Group
	STAG Industrial, Inc. Nine months Ended September 30, 2012			Period from April 20 to September 30, 2011			Period from January 1 to April 19, 2011

Cash flows from operating activities:
Net loss	$	(7,805	)	$	(6,471	)	$	(229	)
Adjustment to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	28,486			14,778			2,459
Loss on impairment	4,563			—			—
Non-cash portion of interest expense	755			538			31
Intangible amortization in rental income, net	3,481			1,714			(2		)
Straight line adjustment, net	(1,733		)	(821		)	(16		)
Gain on interest rate swaps	(215		)	(1,270		)	(762		)
Loss on extinguishment of debt	929			—			—
Gain on sale of real estate	(219		)	—			—
Stock-based compensation expense	1,457			376			—
Issuance of units for acquisition fee	225			—			—
Change in assets and liabilities:
Tenant accounts receivable, net	(317		)	(126		)	88
Leasing commissions, net	(567		)	(819		)	(24		)
Restricted cash	(943		)	(551		)	—
Prepaid expenses and other assets	(716		)	(56		)	(87		)
Accounts payable, accrued expenses and other liabilities	2,308			1,902			106
Tenant prepaid rent and security deposits	492			1,217			169
Due from related parties	25			55			767
Due to related parties	—			91			(141		)
Total adjustments	38,011			17,028			2,588
Net cash provided by operating activities	30,206			10,557			2,359
Cash flows from investing activities:
Additions of land and building improvements	(159,951		)	(49,340		)	(39		)
Proceeds from sale of rental property, net	3,216			—			—
Restricted cash	3,339			(1,834		)	(542		)
Cash paid for contributed assets, net	—			(425		)	—
Cash paid for deal deposits, net	(3,675		)	(2,159		)	—
Additions to lease intangibles	(54,239		)	(18,266		)	—
Net cash used in investing activities	(211,310		)	(72,024		)	(581		)
Cash flows from financing activities:
Proceeds from issuance of common stock at initial public offering	—			205,563			—
Offering costs related to issuance of common stock	—			(17,042		)	—
Redemption of initial capitalization of STAG Industrial, Inc. shares	—			(2		)	—
Proceeds from notes payable to related parties	—			—			789
Repayment of notes payable to related parties	—			(10,366		)	—
Proceeds from credit facility	124,300			28,500			—
Repayment of credit facility	(124,300		)	(11,000		)	—
Proceeds from unsecured credit facility	12,000			—			—
Proceeds from unsecured term loan	100,000			—			—
Proceeds from mortgage notes payable	9,252			40,438			—
Repayment of mortgage notes payable	(143,985		)	(154,119		)	(1,180		)
Termination of swap contracts	—			(894		)	—
Payment of loan fees and costs	(2,833		)	(3,029		)	—
Dividends and distributions	(24,296		)	(4,871		)	(2,679		)
Proceeds from sale of common stock	237,568			—			—
Offering costs	(10,863		)	—			—
Restricted cash - escrow for dividends	(1,553		)	—			—
Net cash provided by (used in) financing activities	175,290			73,178			(3,070		)
Increase (decrease) in cash and cash equivalents	(5,814		)	11,711			(1,292		)
Cash and cash equivalents—beginning of period	16,498			277			1,567
Cash and cash equivalents—end of period	$	10,684		$	11,988		$	275

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

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STAG Industrial, Inc. and STAG Predecessor Group

Notes to Consolidated and Combined Financial Statements

(unaudited)

1. Organization and Description of Business

STAG Industrial, Inc. (the “Company”) is a fully-integrated, self-administered and self-managed real estate company focused on the acquisition, ownership and management of single-tenant industrial properties throughout the United States. The Company was formed as a Maryland corporation on July 21, 2010 and has elected to be treated as a real estate investment trust (“REIT”) under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”). The Company is structured as an umbrella partnership REIT, commonly called an UPREIT, and owns substantially all of its assets and conducts substantially all of its business through its operating partnership, STAG Industrial Operating Partnership, L.P., a Delaware limited partnership (the “Operating Partnership”). As of September 30, 2012 and December 31, 2011, the Company owned an 83.92% and 67.12%, respectively, limited partnership interest in the Operating Partnership. As used herein, the “Company” refers to STAG Industrial, Inc. and its consolidated subsidiaries and partnerships except where context otherwise requires.

As of September 30, 2012, the Company owned 134 properties in 31 states with approximately 23.5 million rentable square feet, consisting of 82 warehouse/distribution properties, 32 manufacturing properties and 20 flex/office properties. The Company’s properties were 96.3% leased to 116 tenants as of September 30, 2012.

The Company’s “predecessor” for accounting purposes is STAG Predecessor Group (or “Predecessor”), which is not a legal entity, but a collection of the real estate entities that were owned by STAG Investments III, LLC prior to the Company’s initial public offering in April 2011 (the “IPO”). Prior to the IPO, STAG Predecessor Group also was engaged in the business of owning, leasing and operating real estate consisting primarily of industrial properties located throughout the United States. The financial information contained in this report that relates to the time periods on or prior to April 19, 2011 is the Predecessor’s financial information; the financial information contained in this report for any time period on or after April 20, 2011 is the Company’s financial information. The Company did not have any operating activity before April 20, 2011 and, as a result of the Company’s IPO and related formation transactions, is substantially different from STAG Predecessor Group.

2. Summary of Significant Accounting Policies

Interim Financial Information

The accompanying interim financial statements have been presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and with the instructions to Form 10-Q of Regulation S-X for interim financial information. Accordingly, these statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, the accompanying interim financial statements include all adjustments, consisting of normal recurring items, necessary for their fair presentation in conformity with GAAP. Interim results are not necessarily indicative of results for a full year. The year-end consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the Company’s financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011.

Basis of Presentation

The Company’s consolidated financial statements include the accounts of the Company, the Operating Partnership and their subsidiaries. The equity interests of other limited partners in the Operating Partnership are reflected as noncontrolling interest. The combined financial statements of STAG Predecessor Group include the accounts of STAG Predecessor Group and all entities in which STAG Predecessor Group had a controlling interest. All significant intercompany balances and transactions have been eliminated in the combination of entities. The financial statements of the Company are presented on a consolidated basis, for all periods presented and comprise the consolidated historical financial statements of the transferred collection of real estate entities and holdings, upon the IPO. The combined financial information presented for periods on or prior to April 19, 2011 relate solely to STAG Predecessor Group. The financial statements for the periods after April 19, 2011 include the financial information of the Company, the Operating Partnership and their subsidiaries. Where the “Company” is referenced in comparisons of financial results for any date prior to and including April 19, 2011, the financial information for such period relates solely to STAG Predecessor Group, notwithstanding “Company” being the reference.

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Adoption of New Accounting Pronouncements

The Company adopted Accounting Standards Update (“ASU”) No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs issued by the Financial Accounting Standards Board (“FASB”) effective January 1, 2012 that amends measurement and disclosure requirements related to fair value measurements to improve consistency with International Financial Reporting Standards. The adoption of this guidance did not affect the Company’s financial position, results of operations or cash flows but did result in additional disclosure pertaining to fair value measurements.

In June 2011, the FASB issued ASU 2011-05, Presentation of Comprehensive Income, which requires an entity to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income, or in two separate but consecutive statements. ASU 2011-05 eliminates the option to present components of other comprehensive income as part of the statement of equity. In December 2011, the FASB issued ASU 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in ASU 2011-05, which deferred the new requirement to present components of reclassifications of other comprehensive income on the face of the income statement. Both ASU 2011-05 and ASU 2011-12 became effective for the Company on January 1, 2012. The Company’s adoption of this authoritative guidance did not have a material impact on its operating results or financial position.

Consolidated and Combined Statements of Cash Flows—Supplemental Disclosures

The following table provides supplemental disclosures related to the Consolidated and Combined Statements of Cash Flows (in thousands):

	STAG Industrial, Inc. (Nine months Ended September 30, 2012)			STAG Industrial, Inc. (Period from April 20 to September 30, 2011)			STAG Predecessor Group (Period from January 1 to April 19, 2011)
Supplemental cash flow information
Cash paid for interest	$	11,132		$	7,026		$	2,433
Supplemental schedule of noncash investing and financing activities
Acquisition of tangible assets	$	—		$	(211,501	)	$	—
Acquisition of goodwill upon formation transactions	$	—		$	(4,923	)	$	—
Acquisition of intangible assets upon formation transactions	$	—		$	(83,442	)	$	—
Assumption of mortgage notes payable	$	—		$	(197,723	)	$	—
Fair market value adjustment to mortgage notes payable acquired	$	—		$	(350	)	$	—
Assumption of related party notes payable upon formation transactions	$	—		$	4,466		$	—
Acquisition of intangible liabilities upon formation transactions	$	—		$	1,066		$	—
Acquisition of interest rate swaps upon formation transactions included in the purchase price allocation	$	—		$	420		$	—
Acquisition of other liabilities upon formation transactions	$	—		$	171		$	—
Issuance of units for acquisition of net assets upon formation transactions	$	—		$	95,670		$	—
Disposition of accrued lender fees upon formation transactions	$	—		$	—		$	4,420
Assumption of bridge loan for Option Properties upon formation transactions	$	—		$	—		$	(4,750	)
Assumption of note payable to related party for Option Properties upon formation transactions	$	—		$	—		$	(727	)
Assumption of interest rate swaps to related party for Option Properties upon formation transactions	$	—		$	—		$	(352	)
Noncash investing activities included in additions of land and building improvements	$	(377	)	$	(420	)	$	—
Dividends and distributions declared but not paid	$	12,772		$	6,159		$	—
Accrued distribution upon formation transactions	$	—		$	—		$	(1,392	)

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Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Restricted Cash

Restricted cash may include security deposits and cash held in escrow for real estate taxes and capital improvements as required in various mortgage loan agreements. As of September 30, 2012, restricted cash included $1.6 million, which amount was held by the Company’s transfer agent for preferred stock dividends and distributed subsequent to September 30, 2012. As of December 31, 2011, the preferred stock dividends for the three months ended December 31, 2011 were distributed; therefore, the transfer agent did not hold any restricted cash.

Tenant Accounts Receivable, net

Tenant accounts receivable, net on the Consolidated Balance Sheets, includes both tenant accounts receivable, net and accrued rental income, net. The Company provides an allowance for doubtful accounts against the portion of tenant accounts receivable that is estimated to be uncollectible. As of September 30, 2012 and December 31, 2011, the Company had an allowance for doubtful accounts of $0.7 million and $0.5 million, respectively.

The Company accrues rental revenue earned, but not yet receivable, in accordance with GAAP. As of September 30, 2012 and December 31, 2011, the Company had accrued rental revenue of $5.4 million and $4.5 million, respectively, which is reflected in tenant accounts receivable, net on the accompanying Consolidated Balance Sheets. The Company maintains an allowance for estimated losses that may result from those revenues. If a tenant fails to make contractual payments beyond any allowance, the Company may recognize additional bad debt expense in future periods equal to the amount of unpaid rent and accrued rental revenue. As of September 30, 2012 and December 31, 2011, the Company had an allowance on accrued rental revenue of $0.1 million and $0.4 million, respectively.

As of September 30, 2012 and December 31, 2011, the Company had a total of approximately $3.3 million and $3.6 million, respectively, of total lease security deposits available in existing letters of credit; and $1.7 million and $1.2 million, respectively, of lease security deposits available in cash.

Deferred Costs

Deferred financing fees include costs incurred in obtaining debt that are capitalized. The deferred financing fees are amortized to interest expense over the life of the respective loans. Any unamortized amounts upon early repayment of mortgage notes payable are written off in the period of repayment. During the three and nine months ended September 30, 2012, the three months ended September 30, 2011, the period from April 20, 2011 to September 30, 2011 and the period from January 1, 2011 to April 19, 2011 amortization of deferred financing fees included in interest expense was $0.3 million, $0.9 million, $0.3 million, $0.5 million, and $31 thousand, respectively. Fully amortized deferred charges are removed upon maturity of the underlying debt.

Use of Derivative Financial Instruments

The Company follows authoritative guidance for disclosure requirements for derivatives and hedging activities with the intent to provide users of financial statements with an enhanced understanding of: (a) how and why an entity uses derivative instruments, (b) how the entity accounts for derivative instruments and related hedged items, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. Further, qualitative disclosures are required that explain the Company’s objectives and strategies for using derivatives, as well as quantitative disclosures about the fair value of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative instruments.

The Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has 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

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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. The Company may enter into derivative contracts that are intended to economically hedge certain of its risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting.

In accordance with the FASB’s fair value measurement guidance, the Company made an accounting policy election to measure the credit risk of its derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio.

Fair Value of Financial Instruments

Financial instruments include cash and cash equivalents, tenant accounts receivable, interest rate swaps, accounts payable, other accrued expenses, credit facility, unsecured credit facility, unsecured term loan and mortgage notes payable. The fair values of the cash and cash equivalents, tenant accounts receivable, accounts payable and other accrued expenses approximate their carrying or contract values because of the short term maturity of these instruments. See Note 5 for the fair values of the Company’s debt. See Note 6 for the fair values of the Company’s interest rate swaps.

Revenue Recognition

By the terms of their leases, certain tenants are obligated to pay directly the costs of their properties’ insurance, real estate taxes and certain other expenses and these costs are not reflected in the Company’s consolidated financial statements. To the extent any tenant responsible for these costs under its respective lease defaults on its lease or it is deemed probable that the tenant will fail to pay for such costs, the Company would record a liability for such obligation. The Company estimates that real estate taxes, which are the responsibility of these certain tenants, were approximately $1.9 million and $4.9 million for the three and nine months ended September 30, 2012, $1.4 million for the three months ended September 30, 2011, $2.4 million for the period from April 20, 2011 to September 30, 2011, and $0.5 million for the period from January 1, 2011 to April 19, 2011, and this would have been the maximum liability of the Company had the tenants not met their contractual obligations. The Company does not recognize recovery revenue related to leases where the tenant has assumed the cost for real estate taxes, insurance and certain other expenses.

Income Taxes

Prior to the IPO, STAG Predecessor Group was comprised primarily of limited partnerships and limited liability companies. Under applicable federal and state income tax rules, the allocated share of net income or loss from the limited partnerships and limited liability companies was reportable in the income tax returns of the respective partners and members.

The Company elected to qualify as a REIT under the Code commencing with the taxable year ended December 31, 2011. To continue to qualify as a REIT, the Company is required to distribute at least 90% of its REIT taxable income to its stockholders and meet the various other requirements imposed by the Code relating to such matters as operating results, asset holdings, distribution levels and diversity of stock ownership. Provided the Company qualifies for taxation as a REIT, the Company is generally not subject to corporate level income tax on the earnings distributed currently to its stockholders that it derives from its REIT qualifying activities. If the Company fails to qualify as a REIT in any taxable year, and is unable to avail itself of certain savings provisions set forth in the Code, all of the Company’s taxable income would be subject to federal income tax at regular corporate rates, including any applicable alternative minimum tax.

The Company will not be required to make distributions with respect to income derived from the activities conducted through subsidiaries that the Company elects to treat as taxable REIT subsidiaries (“TRS”) for federal income tax purposes. Certain activities that the Company undertakes must be conducted by a TRS, such as performing non-customary services for its tenants and holding assets that it cannot hold directly. A TRS is subject to federal and state income taxes. The Company’s TRS did not have any activity during the nine months ended September 30, 2012 and period from April 20, 2011 to December 31, 2011.

The Company and certain of its subsidiaries are subject to certain state and local income, excise and franchise taxes. Taxes in the amount of $0.1 million and $0.1 million have been recorded in other expenses in the accompanying Consolidated Statements of Operations for the three and nine months ended September 30, 2012, respectively.

The Company currently has no liabilities for uncertain tax positions.

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3. Real Estate

As part of the IPO and the related formation transactions, STAG Investments IV, LLC and STAG GI Investments, LLC contributed 100% of their real estate entities and operations in exchange for 7,320,610 common limited partnership units in the Operating Partnership (“common units”) valued at $13.00 per common unit. The members of STAG Capital Partners, LLC and STAG Capital Partners III, LLC (referred to, together, as the “Management Company” in this report), contributed 100% of those entities’ assets and liabilities in exchange for 38,621 common units valued at $13.00 per common unit. The contribution of interests in the Management Company was accounted for as an acquisition under the acquisition method of accounting and recognized at the estimated fair value of acquired assets and assumed liabilities on the date of such contribution. STAG Predecessor Group, which includes the entity that is considered the Company’s accounting acquirer, is part of the Company’s predecessor business and therefore the assets and liabilities of STAG Predecessor Group were accounted for at carryover basis.

The fair values assigned to identifiable intangible assets acquired were based on estimates and assumptions determined by the Company’s management. Using information available at the time an acquisition closed, the Company allocated the total consideration to tangible assets and liabilities, identified intangible assets and liabilities, and goodwill.

On April 18, 2012, the Company entered into an agreement with affiliates of Columbus Nova Real Estate Acquisition Group, Inc. (“Columbus Nova”) to source sale leaseback transactions for potential acquisitions by the Company. The agreement called for various fees to be paid to Columbus Nova for its services including acquisition fees and a one-time incentive fee if certain performance thresholds are met. On June 15, 2012, the Company acquired six industrial properties representing approximately 750,000 square feet in total for an aggregate purchase price of approximately $30.0 million from Columbus Nova. At the June 15, 2012 acquisition of these six industrial properties, the Company paid Columbus Nova an acquisition fee in the form of 15,789 common units with a fair value of approximately $0.2 million, which is included in property acquisition costs on the accompanying Consolidated Statements of Operations. The issuance of the common units was effected in reliance upon an exemption from registration provided by Section 4(2) under the Securities Act of 1933, as amended. The Company relied on the exemption based on representations given by the holders of the common units. For further details on the one-time incentive fee, refer to Note 10.

The following table summarizes the acquisitions of the Company since the IPO:

Nine months Ended September 30, 2012

Property Location	Date Acquired	Square Feet	Properties
East Windsor, CT	3/1/2012	145,000	1
South Bend, IN	3/8/2012	225,000	1
Lansing, MI	3/21/2012	129,325	1
Portland, ME	3/27/2012	100,600	1
Portland, TN	3/30/2012	414,043	1
Spartanburg, SC	4/5/2012	409,600	4
Franklin, IN	4/17/2012	703,496	1
Muhlenberg Township, PA	5/24/2012	394,289	1
Avon, CT	6/15/2012	78,400	1
Orlando, FL	6/15/2012	155,000	1
Pineville, NC	6/15/2012	75,400	1
Buffalo, NY	6/15/2012	117,000	1
Edgefield, SC	6/15/2012	126,190	1
Arlington, TX	6/15/2012	196,000	1
Bellevue, OH	7/18/2012	181,838	1
Atlanta, GA	8/1/2012	407,981	1
Huntersville, NC	8/6/2012	185,570	1
Simpsonville 1, SC	8/23/2012	204,952	1
Simpsonville 2, SC	8/23/2012	207,042	1
Dallas, GA	9/4/2012	92,807	1
Mebane 1, NC	9/4/2012	223,340	1
Mebane 2, NC	9/4/2012	202,691	1
De Pere, WI	9/13/2012	200,000	1
Duncan 1, SC	9/21/2012	474,000	1
Duncan 2, SC	9/21/2012	313,380	1
Buena Vista, VA	9/27/2012	172,759	1
Gurnee, IL	9/28/2012	223,760	1

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Period from April 20 to December 31, 2011

Property Location	Date Acquired	Square Feet	Properties
Various - Formation Transaction	4/20/2011	7,565,066	34
Lansing, MI	5/26/2011	231,000	1
Fort Worth, TX	6/30/2011	101,500	1
Gresham, OR	7/19/2011	420,690	1
Berkeley, MO	7/28/2011	305,550	1
Norton, MA	8/4/2011	200,000	1
Conyers, GA	9/2/2011	226,256	1
Louisville, KY	9/22/2011	497,820	2
Gahanna, OH	10/14/2011	383,000	1
Smithfield, NC	11/16/2011	191,450	1
North Jackson, OH	12/14/2011	307,315	1
Chippewa Falls, WI	12/15/2011	97,400	2
Rogers, AR	12/22/2011	400,000	1
Georgetown, KY	12/29/2011	97,500	1

The following table summarizes the allocation of the consideration paid during the nine months ended September 30, 2012 and the period from April 20, 2011 to December 31, 2011 for the acquired assets and liabilities in connection with the formation transactions and acquisitions of manufacturing and distribution facilities at the date of acquisition identified in the table above (in thousands):

	Nine months Ended September 30, 2012			Weighted Average Amortization Period (years) Lease Intangibles	Period from April 20 to December 31, 2011			Weighted Average Amortization Period (years) Lease Intangibles
Land	$	20,062		N/A	$	46,806		N/A
Buildings	127,819			N/A	229,688			N/A
Tenant improvements	6,736			N/A	15,982			N/A
Building and land improvements	2,869
Cash escrow for capital additions	785			N/A	1,400			N/A
Above market leases	10,853			11.7	31,718			7.6
Below market leases	(4,149		)	8.0	(1,552		)	7.6
In place lease intangibles	34,111			7.6	54,801			6.5
Tenant relationships	13,424			9.4	32,327			8.3
Other liabilities	—			N/A	(171		)	N/A
Interest rate swaps	—			N/A	(420		)	N/A
Goodwill	—			N/A	4,923			N/A
Above/below market assumed debt adjustment	—			N/A	(675		)	N/A
Total aggregate purchase price	212,510				414,827
Less: Long-term liabilities assumed	—				(206,253		)
Net assets acquired	$	212,510			$	208,574

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The Company has included the results of operations for each of these acquired properties in its Consolidated Statements of Operations from the date of acquisition. The properties acquired during the three and nine months ended September 30, 2012 contributed $3.8 million and $5.9 million to total revenue and $0.1 million to net income and $0.6 million to net loss including property acquisition costs of $0.7 million and $2.0 million related to the acquisition of properties during the three and nine months ended September 30, 2012, respectively.

This pro forma information does not purport to represent what the actual results of operations of the Company would have been had the above occurred, nor do they purport to predict the results of operations of future periods.

Pro Forma	Nine months Ended September 30, 2012 (in thousands, except share data) (1)
Total revenue	$	70,485
Net income (loss) (2)	$	(2,948	)
Net income (loss) attributable to common stockholders	$	(5,708	)
Weighted average shares outstanding	21,716,590
Net loss per share attributable to common stockholders	$	(0.26	)

Pro Forma	Nine months Ended September 30, 2011 (in thousands, except share data) (3)
Total revenue	$	63,271
Net income (loss) (2)	$	373
Net income (loss) attributable to common stockholders	$	249
Weighted average shares outstanding	15,524,807
Net loss per share attributable to common stockholders	$	0.02

(1)		The unaudited pro forma information for the nine months ended September 30, 2012 is presented as if the properties acquired during the nine months ended September 30, 2012 had occurred at January 1, 2011.
(2)		The net income (loss) for the nine months ended September 30, 2012 excludes $2.0 million of property acquisition costs related to the acquisition of properties that closed during the nine months ended September 30, 2012. Net income (loss) for the nine months ended September 30, 2011 excludes $0.7 million of property acquisition costs related to the acquisition of properties that closed during the period from April 20, 2011 to September 30, 2011.
(3)		The unaudited pro forma information for the nine months ended September 30, 2011 is presented as if the properties acquired during the nine months ended September 30, 2012 and the properties acquired during the period from April 20, 2011 to September 30, 2011 had occurred at January 1, 2011 and January 1, 2010, respectively.

On April 20, 2012, the Company sold a vacant warehouse and distribution facility located in Youngstown, OH containing 153,708 net rentable square feet. The sales price was $3.4 million and the Company received net proceeds of $3.2 million. At closing, the Company recognized a gain on sale of real estate in the amount of $0.2 million under the full accrual method of gain recognition, which is included in income attributable to discontinued operations on the accompanying Consolidated Statements of Operations. With the property sale proceeds, the Company paid down a portion of its master loan with Wells Fargo Bank, N.A. (“Wells Fargo”) attributable to this property.

On December 22, 2011, the Company sold a flex/office property located in Amesbury, MA containing approximately 78,000 net rentable square feet. The sales price was approximately $4.8 million and the Company received net proceeds of $4.5 million. With the property sale proceeds, the Company paid down a portion of its master loan with Wells Fargo attributable to this property. The results of operations for this property are reflected in income attributable to discontinued operations on the accompanying Consolidated Statement of Operations.

The Company assesses its long-lived assets for impairments on a quarterly basis when certain triggering events are met. If events or changes in circumstances indicate that the carrying values of long-lived assets may be impaired, a recovery analysis is performed based on undiscounted future cash flows expected to be generated from the long-lived assets over the hold period. If the recovery analysis indicates the carrying value of the tested long-lived assets are not recoverable from estimated future cash flows, it is written down to its estimated fair value and an impairment loss is recognized.

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As previously disclosed, Fuller Brush Company, Inc., a tenant currently occupying the building located in Great Bend, KS, filed for bankruptcy on February 21, 2012. The Company tested the property for impairment at December 31, 2011 and no impairment was noted. The Company updated the impairment calculation quarterly for changes in assumptions as necessary. The Company tested the property for impairment as of September 30, 2012 utilizing a probability weighted recovery analysis of certain scenarios, and it was determined that the carrying value of the property was not recoverable from the estimated future undiscounted cash flows. Accordingly, the property was written down to its estimated fair value resulting in a loss on impairment of $3.9 million (of which $0.7 million related to lease intangibles) for the three and nine months ended September 30, 2012. Subsequent to the quarter, on October 31, 2012, the Company executed a purchase and sale agreement to sell the building for a purchase price of $4.0 million in an orderly transaction between market participants. At execution of the contract, the purchaser deposited $0.4 million in escrow to be credited to the purchase price at closing. The building was not marketed for sale as of September 30, 2012 but will now be sold “as is”.

			Fair Market Measurements as of September 30, 2012 Using:
	September 30, 2012		Quoted Prices In Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)		Unobservable Inputs (Level 3)
Assets:
Rental property, net	$	4,005	—	$	—	$	4,005

4. Deferred Leasing Intangibles

Deferred leasing intangibles included in total assets consisted of the following (in thousands):

	September 30, 2012			December 31, 2011
In-place leases	$	85,436		$	56,221
Less: Accumulated amortization	(23,150		)	(13,741		)
In-place leases, net	62,286			42,480
Above market leases	44,970			34,425
Less: Accumulated amortization	(8,695		)	(4,722		)
Above market leases, net	36,275			29,703
Tenant relationships	48,496			35,373
Less: Accumulated amortization	(9,288		)	(4,673		)
Tenant relationships, net	39,208			30,700
Leasing commissions	18,153			14,326
Less: Accumulated amortization	(5,456		)	(3,916		)
Leasing commissions, net	12,697			10,410
Total deferred leasing intangibles, net	$	150,466		$	113,293

Deferred leasing intangibles included in total liabilities consisted of the following (in thousands):

	September 30, 2012			December 31, 2011
Below market leases	$	8,103		$	3,954
Less: Accumulated amortization	(2,590		)	(2,025		)
Total deferred leasing intangibles, net	$	5,513		$	1,929

Amortization expense related to in-place leases, lease commissions and tenant relationships of deferred leasing intangibles was $5.8 million and $15.9 million for the three and nine months ended September 30, 2012, respectively, and $4.8 million, $8.5 million, and $0.7 million inclusive of results from discontinued operations for the three months ended September 30, 2011, the period from April 20, 2011 to September 30, 2011 and the period January 1, 2011 to April 19, 2011, respectively. Rental income related to net amortization of above (below) market leases increased (decreased) by $(1.2) million and $(3.5) million for the three and nine months ended September 30, 2012, respectively, and $(0.8) million, $1.7 million and $2 thousand inclusive of results from discontinued operations for the three months ended September 30, 2011, the period from April 20, 2011 to September 30, 2011 and the period January 1, 2011 to April 19, 2011, respectively.

Amortization related to deferred leasing intangibles over the next five years is as follows (in thousands):

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	Estimated Net Amortization of In-Place Leases, Leasing Commissions and Tenant Relationships		Net Decrease (Increase) to Rental Income Related to Above and Below Market Leases
Remainder of 2012	$	6,108	$	1,241
2013	21,465		4,780
2014	19,452		4,419
2015	16,314		4,429
2016	13,817		4,134

The Company assesses deferred leasing intangibles for impairments on a quarterly basis when certain triggering events are met. If events or changes in circumstances indicate that the carrying values of certain deferred lease intangibles may be impaired, a recovery analysis is performed based on undiscounted future cash flows expected to be generated from the tenant over the remaining lease term. If the recovery analysis indicates the carrying value of the tested lease intangibles are not recoverable from estimated future cash flows, it is written down to its estimated fair value and an impairment loss is recognized. The fair value is determined based on the contractual lease rental payments over the remaining term discounted back to the current reporting period. On June 11, 2012, the Company received notice from a tenant that the tenant was exercising an option in their lease to downsize their space from approximately 190,000 to 60,000 rentable square feet effective March 31, 2013. After determining the carrying value was not recoverable based on the undiscounted cash flows, the Company calculated the fair value of the lease intangibles. Using the remaining contractual lease payments for the reduced space and discounting the cash flows at a risk adjusted return for a market participant of 11.4%, it was determined that the fair value of the lease intangibles was $0.4 million resulting in a noncash impairment loss of $0.6 million, which is reflected in the accompanying Consolidated Statements of Operations. The fair value calculation of the lease intangibles of $0.4 million was performed using Level 3 inputs, and this is a nonrecurring fair value measurement. The three-tier value hierarchy is explained in Note 6.

As discussed in Note 3 above, the Company recognized an impairment loss of $0.7 million during the three months ended September 30, 2012 related to lease intangibles at its property located in Great Bend, KS. The fair value calculation of the lease intangibles was performed using Level 3 inputs, and this is a nonrecurring fair value measurement. The three-tier value hierarchy is explained in Note 6.

5. Debt

Payments on mortgage notes are generally due in monthly installments of principal amortization and interest. The following table sets forth a summary of the Company’s outstanding indebtedness, including mortgage notes payable and borrowings under the Company’s secured corporate revolving credit facility (the “Credit Facility”), Unsecured Credit Facility and Unsecured Term Loan (each as defined below) as of September 30, 2012 and December 31, 2011 (dollars in thousands):

Loan	Interest Rate (1)	Principal outstanding as of September 30, 2012		Principal outstanding as of December 31, 2011		Current Maturity
Wells Fargo Master Loan—Fixed Amount	LIBOR + 3.00%	$	—	$	134,066	N/A
Credit Facility	LIBOR + 2.50%	—		—		N/A
Bank of America, N.A	7.05%	—		8,324		N/A
Sun Life Assurance Company of Canada (U.S.) (2)	6.05%	4,142		4,329		Jun-1-2016
Webster Bank National Association	4.22%	6,021		6,128		Aug-4-2016
Unsecured Credit Facility	LIBOR + 1.65% (3)	12,000		—		Sept-10-2016
Union Fidelity Life Insurance Co. (4)	5.81%	6,982		7,227		Apr-30-2017
Webster Bank National Association (5)	3.66%	3,223		—		May-29-2017
Webster Bank National Association (6)	3.64%	3,471		—		May-31-2017
Unsecured Term Loan	LIBOR + 1.65% (7)	100,000		—		Sept-10-2017
CIGNA-1 Facility	6.50%	59,831		60,369		Feb-1-2018
CIGNA-2 Facility	5.75%	61,074		59,186		Feb-1-2018
CIGNA-3 Facility	5.88%	17,150		17,150		Oct-1-2019
		$	273,894	$	296,779

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(1) Current interest rate as of September 30, 2012. At September 30, 2012 and December 31, 2011, the one-month LIBOR rate was 0.214% and 0.295%, respectively.

(2) Principal outstanding includes an unamortized fair market value premium of $0.3 million as of September 30, 2012 and December 31, 2011.

(3) The spread over LIBOR is based on the Company’s consolidated leverage ratio and will range between 1.65% and 2.25%.

(4) This loan was assumed at the acquisition of the Berkeley, MO property and the principal outstanding includes an unamortized fair market value premium of $0.2 million as of September 30, 2012 and December 31, 2011.

(5) This loan was entered into on May 29, 2012 with an outstanding principal amount of $3.25 million. The loan is collateralized by a property located in Portland, ME.