UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2014
OR
☐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 |
|
(IRS Employer |
|
|
|
|
|
One Federal Street, 23rd Floor |
|
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 ☒ No ☐
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 ☒ No ☐
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 ☒ |
|
Accelerated filer ☐ |
|
|
|
|
|
Non-accelerated filer ☐ |
|
Smaller reporting company ☐ |
|
(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 ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common and preferred stock as of the latest practicable date.
|
Class |
|
Outstanding at October 30, 2014 |
|
|
Common Stock ($0.01 par value) |
|
64,434,852 |
|
|
9.0 % Series A Cumulative Redeemable Preferred Stock ($0.01 par value) |
|
2,760,000 |
|
|
6.625 % Series B Cumulative Redeemable Preferred Stock ($0.01 par value) |
|
2,800,000 |
|
STAG INDUSTRIAL, INC.
2
STAG Industrial, Inc.
(unaudited, in thousands, except share data)
|
|
|
September 30, |
|
December 31, |
|
||
|
|
|
2014 |
|
2013 |
|
||
|
|
|
|
|
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
Rental Property: |
|
|
|
|
|
|
|
|
Land |
|
$ |
169,808 |
|
$ |
134,399 |
|
|
Buildings and improvements |
|
|
1,141,478 |
|
|
944,647 |
|
|
Less: accumulated depreciation |
|
|
(96,849) |
|
|
(71,653) |
|
|
Total rental property, net |
|
|
1,214,437 |
|
|
1,007,393 |
|
|
Cash and cash equivalents |
|
|
5,290 |
|
|
6,690 |
|
|
Restricted cash |
|
|
6,668 |
|
|
6,806 |
|
|
Tenant accounts receivable, net |
|
|
15,371 |
|
|
13,790 |
|
|
Prepaid expenses and other assets |
|
|
21,656 |
|
|
16,526 |
|
|
Interest rate swaps |
|
|
2,192 |
|
|
3,924 |
|
|
Due from related parties |
|
|
150 |
|
|
185 |
|
|
Deferred leasing intangibles, net of accumulated amortization of $133,866 and $95,201, respectively |
|
|
235,226 |
|
|
214,967 |
|
|
Total assets |
|
$ |
1,500,990 |
|
$ |
1,270,281 |
|
|
Liabilities and Equity |
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
Mortgage notes payable |
|
$ |
222,192 |
|
$ |
225,591 |
|
|
Unsecured credit facility |
|
|
106,000 |
|
|
80,500 |
|
|
Unsecured term loans |
|
|
300,000 |
|
|
250,000 |
|
|
Unsecured notes |
|
|
50,000 |
|
|
— |
|
|
Accounts payable, accrued expenses and other liabilities |
|
|
24,304 |
|
|
18,574 |
|
|
Interest rate swaps |
|
|
228 |
|
|
— |
|
|
Tenant prepaid rent and security deposits |
|
|
10,005 |
|
|
8,972 |
|
|
Dividends and distributions payable |
|
|
6,565 |
|
|
5,166 |
|
|
Deferred leasing intangibles, net of accumulated amortization of $5,875 and $4,520, respectively |
|
|
7,586 |
|
|
6,914 |
|
|
Total liabilities |
|
|
726,880 |
|
|
595,717 |
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
|
Preferred stock, par value $0.01 per share, 10,000,000 shares authorized, |
|
|
|
|
|
|
|
|
Series A, 2,760,000 shares (liquidation preference of $25.00 per share) issued and outstanding at September 30, 2014 and December 31, 2013 |
|
|
69,000 |
|
|
69,000 |
|
|
Series B, 2,800,000 shares (liquidation preference of $25.00 per share) issued and outstanding at September 30, 2014 and December 31, 2013 |
|
|
70,000 |
|
|
70,000 |
|
|
Common stock, par value $0.01 per share, 100,000,000 shares authorized, 57,216,577 and 44,764,377 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively |
|
|
572 |
|
|
447 |
|
|
Additional paid-in capital |
|
|
783,518 |
|
|
577,039 |
|
|
Common stock dividends in excess of earnings |
|
|
(176,851) |
|
|
(116,877) |
|
|
Accumulated other comprehensive income |
|
|
1,627 |
|
|
3,440 |
|
|
Total stockholders’ equity |
|
|
747,866 |
|
|
603,049 |
|
|
Noncontrolling interest |
|
|
26,244 |
|
|
71,515 |
|
|
Total equity |
|
|
774,110 |
|
|
674,564 |
|
|
Total liabilities and equity |
|
$ |
1,500,990 |
|
$ |
1,270,281 |
|
The accompanying notes are an integral part of these consolidated financial statements.
3
STAG Industrial, Inc.
Consolidated Statements of Operations
(unaudited, in thousands, except per share data)
|
|
|
Three months ended September 30, |
|
Nine months ended September 30, |
|
||||||||
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
|
||||
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental income |
|
$ |
36,774 |
|
$ |
30,171 |
|
$ |
106,095 |
|
$ |
84,210 |
|
|
Tenant recoveries |
|
|
5,399 |
|
|
4,265 |
|
|
17,094 |
|
|
11,399 |
|
|
Other income |
|
|
185 |
|
|
207 |
|
|
594 |
|
|
865 |
|
|
Total revenue |
|
|
42,358 |
|
|
34,643 |
|
|
123,783 |
|
|
96,474 |
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property |
|
|
7,694 |
|
|
6,299 |
|
|
24,285 |
|
|
17,182 |
|
|
General and administrative |
|
|
5,704 |
|
|
4,376 |
|
|
19,462 |
|
|
13,385 |
|
|
Property acquisition costs |
|
|
2,190 |
|
|
986 |
|
|
3,437 |
|
|
2,831 |
|
|
Depreciation and amortization |
|
|
21,983 |
|
|
17,261 |
|
|
62,606 |
|
|
48,903 |
|
|
Other expenses |
|
|
181 |
|
|
89 |
|
|
611 |
|
|
336 |
|
|
Total expenses |
|
|
37,752 |
|
|
29,011 |
|
|
110,401 |
|
|
82,637 |
|
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
3 |
|
|
3 |
|
|
11 |
|
|
9 |
|
|
Interest expense |
|
|
(6,462) |
|
|
(5,370) |
|
|
(17,941) |
|
|
(14,866) |
|
|
Gain on sales of real estate |
|
|
2,104 |
|
|
— |
|
|
2,153 |
|
|
— |
|
|
Total other income (expense) |
|
|
(4,355) |
|
|
(5,367) |
|
|
(15,777) |
|
|
(14,857) |
|
|
Net income (loss) from continuing operations |
|
$ |
251 |
|
$ |
265 |
|
$ |
(2,395) |
|
$ |
(1,020) |
|
|
Discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income attributable to discontinued operations |
|
|
— |
|
|
29 |
|
|
— |
|
|
248 |
|
|
Gain on sale of real estate |
|
|
— |
|
|
— |
|
|
— |
|
|
464 |
|
|
Total income attributable to discontinued operations |
|
$ |
— |
|
$ |
29 |
|
$ |
— |
|
$ |
712 |
|
|
Net income (loss) |
|
$ |
251 |
|
$ |
294 |
|
$ |
(2,395) |
|
$ |
(308) |
|
|
Less: loss attributable to noncontrolling interest after preferred stock dividends |
|
|
(90) |
|
|
(335) |
|
|
(784) |
|
|
(958) |
|
|
Net income (loss) attributable to STAG Industrial, Inc. |
|
$ |
341 |
|
$ |
629 |
|
$ |
(1,611) |
|
$ |
650 |
|
|
Less: preferred stock dividends |
|
|
2,712 |
|
|
2,712 |
|
|
8,136 |
|
|
6,783 |
|
|
Less: amount allocated to unvested restricted stockholders |
|
|
87 |
|
|
64 |
|
|
258 |
|
|
197 |
|
|
Net loss attributable to common stockholders |
|
$ |
(2,458) |
|
$ |
(2,147) |
|
$ |
(10,005) |
|
$ |
(6,330) |
|
|
Weighted average common shares outstanding — basic and diluted |
|
|
55,354,125 |
|
|
42,753,722 |
|
|
51,157,219 |
|
|
41,766,740 |
|
|
Loss per share — basic and diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations attributable to common stockholders |
|
$ |
(0.04) |
|
$ |
(0.05) |
|
$ |
(0.20) |
|
$ |
(0.16) |
|
|
Income from discontinued operations attributable to common stockholders |
|
|
— |
|
$ |
0.00 |
|
|
— |
|
$ |
0.01 |
|
|
Loss per share — basic and diluted |
|
$ |
(0.04) |
|
$ |
(0.05) |
|
$ |
(0.20) |
|
$ |
(0.15) |
|
The accompanying notes are an integral part of these consolidated financial statements.
4
STAG Industrial, Inc.
Consolidated Statements of Comprehensive Income (Loss)
(unaudited, in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
Nine months ended September 30, |
||||||||
|
|
|
2014 |
|
2013 |
|
2014 |
|
2013 |
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
251 |
|
$ |
294 |
|
$ |
(2,395) |
|
$ |
(308) |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on interest rate swaps |
|
|
1,300 |
|
|
(1,034) |
|
|
(1,959) |
|
|
2,632 |
|
Other comprehensive income (loss) |
|
|
1,300 |
|
|
(1,034) |
|
|
(1,959) |
|
|
2,632 |
|
Comprehensive income (loss) |
|
|
1,551 |
|
|
(740) |
|
|
(4,354) |
|
|
2,324 |
|
Net loss attributable to noncontrolling interest after preferred stock dividends |
|
|
90 |
|
|
335 |
|
|
784 |
|
|
958 |
|
Other comprehensive (income) loss attributable to noncontrolling interest |
|
|
(47) |
|
|
143 |
|
|
146 |
|
|
(355) |
|
Comprehensive income (loss) attributable to STAG Industrial, Inc. |
|
$ |
1,594 |
|
$ |
(262) |
|
$ |
(3,424) |
|
$ |
2,927 |
The accompanying notes are an integral part of these consolidated financial statements
5
STAG Industrial, Inc.
Consolidated Statements of Equity
(unaudited, in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock |
|
|
|
|
|
|
|
Interest — Unit |
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
Dividends |
|
Accumulated Other |
|
Total |
|
holders in |
|
|
|
|
|||||
|
|
|
Preferred |
|
Common Stock |
|
Paid-in |
|
in excess of |
|
Comprehensive |
|
Stockholders' |
|
Operating |
|
Total |
|
||||||||||
|
|
|
Stock |
|
Shares |
|
Amount |
|
Capital |
|
Earnings |
|
Income (Loss) |
|
Equity |
|
Partnership |
|
Equity |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2013 |
|
$ |
139,000 |
|
44,764,377 |
|
$ |
447 |
|
$ |
577,039 |
|
$ |
(116,877) |
|
$ |
3,440 |
|
$ |
603,049 |
|
$ |
71,515 |
|
$ |
674,564 |
|
|
Proceeds from sale of common stock |
|
|
— |
|
7,191,537 |
|
|
72 |
|
|
164,005 |
|
|
— |
|
|
— |
|
|
164,077 |
|
|
— |
|
|
164,077 |
|
|
Offering costs |
|
|
— |
|
— |
|
|
— |
|
|
(2,731) |
|
|
— |
|
|
— |
|
|
(2,731) |
|
|
|
|
|
(2,731) |
|
|
Issuance of restricted stock, net |
|
|
— |
|
101,934 |
|
|
1 |
|
|
(1) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Issuance of common stock |
|
|
— |
|
9,488 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Issuance of equity pursuant to outperformance program |
|
|
— |
|
43,657 |
|
|
1 |
|
|
(1,491) |
|
|
— |
|
|
— |
|
|
(1,490) |
|
|
1,015 |
|
|
(475) |
|
|
Dividends and distributions, net |
|
|
(8,136) |
|
— |
|
|
— |
|
|
— |
|
|
(50,227) |
|
|
— |
|
|
(58,363) |
|
|
(3,572) |
|
|
(61,935) |
|
|
Non-cash compensation |
|
|
— |
|
— |
|
|
— |
|
|
1,546 |
|
|
— |
|
|
— |
|
|
1,546 |
|
|
3,760 |
|
|
5,306 |
|
|
Redemption of common units to common stock |
|
|
— |
|
5,105,584 |
|
|
51 |
|
|
54,681 |
|
|
— |
|
|
— |
|
|
54,732 |
|
|
(54,732) |
|
|
— |
|
|
Redemption of common units for cash |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(342) |
|
|
(342) |
|
|
Rebalancing of noncontrolling interest |
|
|
— |
|
— |
|
|
— |
|
|
(9,530) |
|
|
— |
|
|
— |
|
|
(9,530) |
|
|
9,530 |
|
|
— |
|
|
Other comprehensive loss |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,813) |
|
|
(1,813) |
|
|
(146) |
|
|
(1,959) |
|
|
Net income (loss) |
|
|
8,136 |
|
— |
|
|
— |
|
|
— |
|
|
(9,747) |
|
|
— |
|
|
(1,611) |
|
|
(784) |
|
|
(2,395) |
|
|
Balance, September 30, 2014 |
|
$ |
139,000 |
|
57,216,577 |
|
$ |
572 |
|
$ |
783,518 |
|
$ |
(176,851) |
|
$ |
1,627 |
|
$ |
747,866 |
|
$ |
26,244 |
|
$ |
774,110 |
|
|
Nine months ended September 30, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2012 |
|
$ |
69,000 |
|
35,698,582 |
|
$ |
357 |
|
$ |
419,643 |
|
$ |
(61,024) |
|
$ |
(371) |
|
$ |
427,605 |
|
$ |
61,855 |
|
$ |
489,460 |
|
|
Proceeds from sales of common stock |
|
|
— |
|
8,247,322 |
|
|
82 |
|
|
154,587 |
|
|
— |
|
|
— |
|
|
154,669 |
|
|
— |
|
|
154,669 |
|
|
Issuance of series B preferred stock |
|
|
70,000 |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
70,000 |
|
|
— |
|
|
70,000 |
|
|
Offering costs |
|
|
— |
|
— |
|
|
— |
|
|
(8,457) |
|
|
— |
|
|
— |
|
|
(8,457) |
|
|
— |
|
|
(8,457) |
|
|
Issuance of restricted stock, net |
|
|
— |
|
96,287 |
|
|
1 |
|
|
(1) |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Issuance of common stock |
|
|
— |
|
7,871 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Dividends and distributions, net |
|
|
(6,783) |
|
— |
|
|
— |
|
|
— |
|
|
(38,540) |
|
|
— |
|
|
(45,323) |
|
|
(6,334) |
|
|
(51,657) |
|
|
Non-cash compensation |
|
|
— |
|
— |
|
|
— |
|
|
1,020 |
|
|
— |
|
|
— |
|
|
1,020 |
|
|
1,207 |
|
|
2,227 |
|
|
Issuance of units |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
11,499 |
|
|
11,499 |
|
|
Redemption of common units to common stock |
|
|
— |
|
2,186 |
|
|
— |
|
|
23 |
|
|
— |
|
|
— |
|
|
23 |
|
|
(23) |
|
|
— |
|
|
Rebalancing of noncontrolling interest |
|
|
— |
|
— |
|
|
— |
|
|
(4,304) |
|
|
— |
|
|
— |
|
|
(4,304) |
|
|
4,304 |
|
|
— |
|
|
Other comprehensive income |
|
|
— |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2,277 |
|
|
2,277 |
|
|
355 |
|
|
2,632 |
|
|
Net income (loss) |
|
|
6,783 |
|
— |
|
|
— |
|
|
— |
|
|
(6,133) |
|
|
— |
|
|
650 |
|
|
(958) |
|
|
(308) |
|
|
Balance, September 30, 2013 |
|
$ |
139,000 |
|
44,052,248 |
|
$ |
440 |
|
$ |
562,511 |
|
$ |
(105,697) |
|
$ |
1,906 |
|
$ |
598,160 |
|
$ |
71,905 |
|
$ |
670,065 |
|
The accompanying notes are an integral part of these consolidated financial statements.
6
STAG Industrial, Inc.
Consolidated Statements of Cash Flows
(unaudited, in thousands)
|
|
|
Nine months ended September 30, |
|
||||
|
|
|
2014 |
|
2013 |
|
||
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(2,395) |
|
$ |
(308) |
|
|
Adjustment to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
62,606 |
|
|
49,508 |
|
|
Non-cash portion of interest expense |
|
|
1,009 |
|
|
783 |
|
|
Intangible amortization in rental income, net |
|
|
4,600 |
|
|
4,399 |
|
|
Straight-line rent adjustments, net |
|
|
(2,314) |
|
|
(2,139) |
|
|
Dividends on forfeited equity compensation |
|
|
128 |
|
|
— |
|
|
Gain on sales of real estate |
|
|
(2,153) |
|
|
(464) |
|
|
Non-cash compensation expense |
|
|
5,337 |
|
|
2,227 |
|
|
Change in assets and liabilities: |
|
|
|
|
|
|
|
|
Tenant accounts receivable, net |
|
|
934 |
|
|
(1,399) |
|
|
Restricted cash |
|
|
(596) |
|
|
(764) |
|
|
Prepaid expenses and other assets |
|
|
(3,253) |
|
|
(3,064) |
|
|
Accounts payable, accrued expenses and other liabilities |
|
|
1,426 |
|
|
3,539 |
|
|
Tenant prepaid rent and security deposits |
|
|
1,033 |
|
|
2,270 |
|
|
Due from related parties |
|
|
35 |
|
|
626 |
|
|
Total adjustments |
|
|
68,792 |
|
|
55,522 |
|
|
Net cash provided by operating activities |
|
|
66,397 |
|
|
55,214 |
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Additions of land and building and improvements |
|
|
(233,101) |
|
|
(183,882) |
|
|
Proceeds from sale of rental property, net |
|
|
7,492 |
|
|
4,843 |
|
|
Restricted cash |
|
|
734 |
|
|
(549) |
|
|
Acquisition deposits, net |
|
|
(1,920) |
|
|
(460) |
|
|
Additions to lease intangibles |
|
|
(61,413) |
|
|
(54,842) |
|
|
Net cash used in investing activities |
|
|
(288,208) |
|
|
(234,890) |
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Proceeds from sale of Series B Preferred Stock |
|
|
— |
|
|
70,000 |
|
|
Redemption of common units for cash |
|
|
(342) |
|
|
— |
|
|
Proceeds from unsecured credit facility |
|
|
187,500 |
|
|
90,000 |
|
|
Repayment of unsecured credit facility |
|
|
(162,000) |
|
|
(169,300) |
|
|
Proceeds from unsecured term loans |
|
|
50,000 |
|
|
100,000 |
|
|
Proceeds from unsecured notes payable |
|
|
50,000 |
|
|
— |
|
|
Repayment of mortgage notes payable |
|
|
(3,321) |
|
|
(3,151) |
|
|
Payment of loan fees and costs |
|
|
(1,718) |
|
|
(1,511) |
|
|
Dividends and distributions |
|
|
(60,663) |
|
|
(47,671) |
|
|
Proceeds from sales of common stock |
|
|
164,077 |
|
|
154,669 |
|
|
Offering costs |
|
|
(2,647) |
|
|
(8,457) |
|
|
Withholding taxes for settlement of outperformance program |
|
|
(475) |
|
|
— |
|
|
Net cash provided by financing activities |
|
|
220,411 |
|
|
184,579 |
|
|
Increase (decrease) in cash and cash equivalents |
|
|
(1,400) |
|
|
4,903 |
|
|
Cash and cash equivalents—beginning of period |
|
|
6,690 |
|
|
19,006 |
|
|
Cash and cash equivalents—end of period |
|
$ |
5,290 |
|
$ |
23,909 |
|
|
Supplemental disclosure: |
|
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
16,286 |
|
$ |
14,096 |
|
|
Supplemental schedule of non-cash investing and financing activities |
|
|
|
|
|
|
|
|
Non-cash investing activities included in additions of land and building and improvements |
|
$ |
(3,913) |
|
$ |
(11,984) |
|
|
Issuance of units for additions of land and building and improvements |
|
$ |
— |
|
$ |
11,499 |
|
|
Non-cash financing activities included in payment of loan fees and costs and offering costs |
|
$ |
(159) |
|
$ |
— |
|
|
Dividends and distributions declared but not paid |
|
$ |
6,565 |
|
$ |
15,285 |
|
The accompanying notes are an integral part of these consolidated financial statements.
7
STAG Industrial, Inc.
Notes to Consolidated Financial Statements
(unaudited)
1. Organization and Description of Business
STAG Industrial, Inc. (the “Company”) is an industrial real estate operating company focused on the acquisition and 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 intends to continue to qualify as a REIT. 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, 2014 and December 31, 2013, the Company owned a 95.87% and 86.65%, 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, 2014, the Company owned 238 buildings in 35 states with approximately 44.5 million square feet, consisting of 168 warehouse/distribution buildings, 50 light manufacturing buildings and 20 flex/office buildings. The Company also owned two vacant land parcels adjacent to two of the Company’s buildings. The Company’s buildings were 94.8% leased to 212 tenants as of September 30, 2014.
2. Summary of Significant Accounting Policies
Interim Financial Information
The accompanying interim financial statements have been presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and with the instructions to Form 10-Q and Regulation S-X for interim financial information. Accordingly, these statements do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, the accompanying interim financial statements include all adjustments, consisting of normal recurring items, necessary for their fair 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 consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013.
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 held in the form of common units (“Noncontrolling Common Units”) are reflected as noncontrolling interest. The equity interests of the Company along with the Noncontrolling Common Units in the Operating Partnership are common units (“Common Units”). All significant intercompany balances and transactions have been eliminated in the consolidation of entities. The financial statements of the Company are presented on a consolidated basis, for all periods presented.
Reclassifications and New Accounting Pronouncements
Certain prior year amounts have been reclassified to conform to the current year presentation.
In August of 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-15, Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an
8
Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). ASU 2014-15 requires management to evaluate whether there are conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern, and to provide certain disclosures when it is probable that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued. ASU 2014-15 is effective for the annual period ended December 31, 2016 and for annual periods and interim periods thereafter with early adoption permitted. The adoption of ASU 2014-15 is not expected to materially impact the Company’s consolidated financial statements.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 is a comprehensive new revenue recognition model requiring a company to recognize revenue to depict the transfer of goods or services to a customer at an amount reflecting the consideration it expects to receive in exchange for those goods or services. Revenue from a lease contract with a tenant is not within the scope of this revenue standard. In adopting ASU 2014-09, companies may use either a full retrospective or a modified retrospective approach. Additionally, this guidance requires improved disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ASU 2014-09 is effective for the first interim period within annual reporting periods beginning after December 15, 2016, and early adoption is not permitted. The Company is currently in the process of evaluating the impact the adoption of ASU 2014-09 will have on the Company’s financial position or results of operations.
In April 2014, the FASB issued ASU 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which prospectively changed the definition of a discontinued operation to the disposal of a component or group of components that is disposed of or is classified as held for sale and represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results. The guidance also provides for additional disclosure requirements in connection with both discontinued operations and other dispositions not qualifying as discontinued operations. While the new guidance is not effective until annual periods beginning December 15, 2014, and interim periods within those years, companies are permitted to early adopt the provision. The Company has elected to early adopt this standard effective with the interim period beginning January 1, 2014. Prior to January 1, 2014, properties identified as held for sale and/or disposed of were presented in discontinued operations for all periods presented.
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 estimated losses on the portion of tenant accounts receivable that is estimated to be uncollectible. As of September 30, 2014 and December 31, 2013, the Company had an allowance for estimated losses on tenants account receivables of $64,000 and $19,000, respectively.
The Company accrues rental revenue earned, but not yet receivable, in accordance with GAAP. As of September 30, 2014 and December 31, 2013, the Company had accrued rental revenue of $11.8 million and $9.3 million, respectively. 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, 2014 and December 31, 2013, the Company had an allowance for estimated losses on accrued rental revenue of $0 and $0, respectively.
As of September 30, 2014 and December 31, 2013, the Company had a total of approximately $5.3 million and $4.9 million, respectively, of total lease security deposits available in existing letters of credit, which are not reflected on the Company’s Consolidated Balance Sheets; and $3.3 million and $3.0 million, respectively, of lease security deposits available in cash.
Revenue Recognition
By the terms of their leases, certain tenants are obligated to pay directly certain of the costs of their buildings including insurance, real estate taxes, ground lease payments, and other costs that are not reflected on the Company’s Consolidated Financial Statements. To the extent any tenant responsible for these costs under its lease defaults on its lease or it is deemed probable that the tenant will fail to pay for such costs, the Company will record a liability for such obligations. The Company estimates that real estate taxes, which are the responsibility of these certain tenants, were approximately $2.6
9
million, $7.6 million, $2.4 million, and $7.0 million the three and nine months ended September 30, 2014 and September 30, 2013, respectively. This would have been the 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, ground lease payments and certain other expenses.
Taxes
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 income, assets, distribution levels and ownership. The Company is generally not subject to corporate level income tax on the earnings distributed to its stockholders that it derives from its REIT qualifying activities. If the Company fails to qualify as a REIT, 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 exceeding defined thresholds 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 three and nine months ended September 30, 2014 and September 30, 2013.
The Company and certain of its subsidiaries are subject to certain state and local income, excise and franchise taxes. Taxes in the amount of $0.2 million, $0.4 million, $0.1 million, and $0.3 million have been recorded in other expenses in the accompanying Consolidated Statements of Operations for the three and nine months ended September 30, 2014 and September 30, 2013, respectively.
Tax benefits of uncertain tax positions are recognized only if it is more likely than not that the tax position will be sustained based solely on its technical merits, with the taxing authority having full knowledge of all relevant information. The measurement of a tax benefit for an uncertain tax position that meets the “more likely than not” threshold is based on a cumulative probability model under which the largest amount of tax benefit recognized is the amount with a greater than 50% likelihood of being realized upon ultimate settlement with the taxing authority having full knowledge of all the relevant information. As of September 30, 2014 and December 31, 2013, there were no liabilities for uncertain tax positions.
3. Rental Property
The following table summarizes the components of rental property as of September 30, 2014 and December 31, 2013 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2014 |
|
December 31, 2013 |
|
||
|
Land |
|
$ |
169,808 |
|
$ |
134,399 |
|
|
Buildings |
|
|
1,043,421 |
|
|
871,422 |
|
|
Tenant improvements |
|
|
42,358 |
|
|
36,994 |
|
|
Building and land improvements |
|
|
55,699 |
|
|
36,231 |
|
|
Less: accumulated depreciation |
|
|
(96,849) |
|
|
(71,653) |
|
|
Total rental property, net |
|
$ |
1,214,437 |
|
$ |
1,007,393 |
|
10
Acquisitions
The following table summarizes the acquisitions of the Company during the nine months ended September 30, 2014 and the year ended December 31, 2013 (purchase price in millions):
Nine Months Ended September 30, 2014
|
Acquired during the three months ended |
Property Location |
Square Feet |
Buildings |
Purchase Price |
|||||
|
Allentown, PA |
289,900 |
1 |
$11.9 |
||||||
|
Nashua, NH |
337,391 |
1 |
11.6 |
||||||
|
Strongsville, OH |
161,984 |
1 |
8.1 |
||||||
|
Columbus, OH |
186,000 |
1 |
5.3 |
||||||
|
March 31 |
975,275 |
4 |
$36.9 |
||||||
|
Savannah, GA |
504,200 |
1 |
16.2 |
||||||
|
Garland, TX |
253,900 |
1 |
8.9 |
||||||
|
West Chester, OH |
245,000 |
1 |
11.6 |
||||||
|
Calhoun, GA |
151,200 |
1 |
4.1 |
||||||
|
Hebron, KY |
109,000 |
1 |
6.0 |
||||||
|
Houston, TX |
151,260 |
1 |
8.6 |
||||||
|
East Troy, WI |
149,624 |
1 |
6.9 |
||||||
|
Jefferson City, TN |
486,109 |
1 |
14.4 |
||||||
|
New Berlin, WI |
80,665 |
1 |
4.3 |
||||||
|
June 30 |
2,130,958 |
9 |
$81.0 |
||||||
|
Savage, MN |
244,050 |
1 |
9.3 |
||||||
|
Charlotte, NC |
101,591 |
1 |
4.1 |
||||||
|
Charlotte, NC |
166,980 |
1 |
5.0 |
||||||
|
Mountain Home, NC |
146,014 |
1 |
4.3 |
||||||
|
El Paso, TX |
211,091 |
1 |
13.0 |
||||||
|
El Paso, TX |
183,741 |
1 |
11.5 |
||||||